Copyright in Cyberspace: Exclusive Rights and Infringement


Stacey L. Dogan
Northeastern University School of Law
Section One | Section Two | Section Three | Section Four | Section Five |

Section 106 of the Copyright Act defines the "exclusive rights" of copyright owners.  Subject to certain exceptions (including fair use, discussed in Section 4 below), copyright owners have the exclusive right to commit -- or to license others to commit -- any of the acts listed in Section 106.  Infringement occurs when a party acts in violation of a copyright owner's exclusive right.  See 17 U.S.C. § 501(a).  This Section will explore the scope of these exclusive rights in cyberspace.

17 U.S.C., § 106.  Exclusive rights in copyrighted works
Subject to sections 107 through 120, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:
(1) to reproduce the copyrighted work in copies or phonorecords [the "right to make copies"];
(2) to prepare derivative works based upon the copyrighted work [the "derivative work right"];
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending [the "distribution right"];
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly [the "public performance right"];
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly [the "right of public display"]; and
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission [the "digital performance right"].

A.    The Right to Make Copies

''Copies'' are material objects, other than phonorecords, in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term ''copies'' includes the material object, other than a phonorecord, in which the work is first fixed.

17 U.S.C. § 101.

What does it mean to "reproduce [a] work in copies"? Most people would agree that photocopying an entire work would qualify. What about sending an attachment via email? posting a work on a Web server? loading a program into a computer's hard drive? The advent of digital communications has required courts to address whether those who perform these acts without the copyright owner's permission have "reproduced ... copies" in violation of the owner's exclusive rights. A 1993 Ninth Circuit decision provided a controversial answer to that question.

MAI Systems Corp. v. Peak Computer, Inc.
991 F.2d 511 (9th Cir. 1993)

Brunetti, Circuit Judge:

Peak Computer, Inc. and two of its employees appeal the district court's order issuing a preliminary injunction pending trial as well as the district court's order issuing a permanent injunction following the grant of partial summary judgment.

I. FACTS

MAI Systems Corp., until recently, manufactured computers and designed software to run those computers. The company continues to service its computers and the software necessary to operate the computers. MAI software includes operating system software, which is necessary to run any other program on the computer.

Peak Computer, Inc. is a company organized in 1990 that maintains computer systems for its clients. Peak maintains MAI computers for more than one hundred clients in Southern California. This accounts for between fifty and seventy percent of Peak's business.

Peak's service of MAI computers includes routine maintenance and emergency repairs. Malfunctions often are related to the failure of circuit boards inside the computers, and it may be necessary for a Peak technician to operate the computer and its operating system software in order to service the machine.

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IV. COPYRIGHT INFRINGEMENT

The district court granted summary judgment in favor of MAI on its claims of copyright infringement and issued a permanent injunction against Peak on these claims. The alleged copyright violations include ... Peak's running of MAI software licensed to Peak customers....

A. Peak's running of MAI software licensed to Peak customers

To prevail on a claim of copyright infringement, a plaintiff must prove ownership of a copyright and a "`copying' of protectable expression" beyond the scope of a license. S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1085 (9th Cir. 1989).

MAI software licenses allow MAI customers to use the software for their own internal information processing.3 This allowed use necessarily includes the loading of the software into the computer's random access memory ("RAM") by a MAI customer. However, MAI software licenses do not allow for the use or copying of MAI software by third parties such as Peak. Therefore, any "copying" done by Peak is "beyond the scope" of the license.

It is not disputed that MAI owns the copyright to the software at issue here, however, Peak vigorously disputes the district court's conclusion that a "copying" occurred under the Copyright Act.

The Copyright Act defines "copies" as:

material objects, other than phonorecords, in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.

17 U.S.C. 101.

The Copyright Act then explains:

A work is "fixed" in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.

17 U.S.C. 101.

The district court's grant of summary judgment on MAI's claims of copyright infringement reflects its conclusion that a "copying" for purposes of copyright law occurs when a computer program is transferred from a permanent storage device to a computer's RAM. This conclusion is consistent with its finding, in granting the preliminary injunction, that: "the loading of copyrighted computer software from a storage medium (hard disk, floppy disk, or read only memory) into the memory of a central processing unit ("CPU") causes a copy to be made. In the absence of ownership of the copyright or express permission by license, such acts constitute copyright infringement." We find that this conclusion is supported by the record and by the law.

Peak concedes that in maintaining its customer's computers, it uses MAI operating software "to the extent that the repair and maintenance process necessarily involves turning on the computer to make sure it is functional and thereby running the operating system." It is also uncontroverted that when the computer is turned on the operating system is loaded into the computer's RAM. As part of diagnosing a computer problem at the customer site, the Peak technician runs the computer's operating system software, allowing the technician to view the systems error log, which is part of the operating system, thereby enabling the technician to diagnose the problem.

Peak argues that this loading of copyrighted software does not constitute a copyright violation because the "copy" created in RAM is not "fixed." However, by showing that Peak loads the software into the RAM and is then able to view the system error log and diagnose the problem with the computer, MAI has adequately shown that the representation created in the RAM is "sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration."

After reviewing the record, we find no specific facts (and Peak points to none) which indicate that the copy created in the RAM is not fixed. While Peak argues this issue in its pleadings, mere argument does not establish a genuine issue of material fact to defeat summary judgment. ...

The law also supports the conclusion that Peak's loading of copyrighted software into RAM creates a "copy" of that software in violation of the Copyright Act. In Apple Computer, Inc. v. Formula Int'l, Inc., 594 F.Supp. 617, 621 (C.D.Cal. 1984), the district court held that the copying of copyrighted software onto silicon chips and subsequent sale of those chips is not protected by 117 of the Copyright Act. Section 117 allows "the `owner'5 of a copy of a computer program to make or authorize the making of another copy" without infringing copyright law, if it "is an essential step in the utilization of the computer program" or if the new copy is "for archival purposes only." 17 U.S.C. 117 (Supp. 1988).6 One of the grounds for finding that 117 did not apply was the court's conclusion that the permanent copying of the software onto the silicon chips was not an "essential step" in the utilization of the software because the software could be used through RAM without making a permanent copy. The court stated:

RAM can be simply defined as a computer component in which data and computer programs can be temporarily recorded. Thus, the purchaser of [software] desiring to utilize all of the programs on the diskette could arrange to copy [the software] into RAM. This would only be a temporary fixation. It is a property of RAM that when the computer is turned off, the copy of the program recorded in RAM is lost.

Apple Computer at 622.

While we recognize that this language is not dispositive, it supports the view that the copy made in RAM is "fixed" and qualifies as a copy under the Copyright Act.

We have found no case which specifically holds that the copying of software into RAM creates a "copy" under the Copyright Act. However, it is generally accepted that the loading of software into a computer constitutes the creation of a copy under the Copyright Act. See e.g. Vault Corp. v. Quaid Software Ltd., 847 F.2d 255, 260 (5th Cir. 1988) ("the act of loading a program from a medium of storage into a computer's memory creates a copy of the program"); 2 Nimmer on Copyright, 8.08 at 8-105 (1983) ("Inputting a computer program entails the preparation of a copy."); Final Report of the National Commission on the New Technological Uses of Copyrighted Works, at 13 (1978) ("the placement of a work into a computer is the preparation of a copy"). We recognize that these authorities are somewhat troubling since they do not specify that a copy is created regardless of whether the software is loaded into the RAM, the hard disk or the read only memory ("ROM"). However, since we find that the copy created in the RAM can be "perceived, reproduced, or otherwise communicated," we hold that the loading of software into the RAM creates a copy under the Copyright Act. 17 U.S.C. 101. We affirm the district court's grant of summary judgment as well as the permanent injunction as it relates to this issue.

Footnotes

3. A representative MAI software license provides in part:

4. Software License.
(a) License. . . . Customer may use the Software (one version with maximum of two copies permitted - a working and a backup copy) . . . solely to fulfill Customer's own internal information processing needs on the particular items of Equipment . . . for which the Software is configured and furnished by [MAI]. The provisions of this License . . . shall apply to all versions and copies of the Software furnished to Customer pursuant to this Agreement. The term "Software" includes, without limitation, all basic operating system software. . . .
(b) Customer Prohibited Acts. . . . Any possession or use of the Software . . . not expressly authorized under this License or any act which might jeopardize [MAI]'s rights or interests in the Software . . . is prohibited, including without limitation, examination, disclosure, copying, modification, reconfiguration, augmentation, adaptation, emulation, visual display or reduction to visually perceptible form or tampering. . .
(c) Customer Obligations. Customer acknowledges that the Software is [MAI]'s valuable and exclusive property, trade secret and copyrighted material. Accordingly, Customer shall . . . (i) use the Software . . . strictly as prescribed under this License, (ii) keep the Software . . . confidential and not make [it] available to others. . . . .
A representative diagnostic license agreement provides in part:
6. Access/Non-Disclosure.
Licensee shall not give access nor shall it disclose the Diagnostics (in any form) . . . to any person . . . without the written permission of [MAI]. Licensee may authorize not more than three (3) of its bona fide employees to utilize the Diagnostics . . . if, and only if, they agree to be bound by the terms hereof.

5. Since MAI licensed its software, the Peak customers do not qualify as "owners" of the software and are not eligible for protection under 117.

6. The current 117 was enacted by Congress in 1980, as part of the Computer Software Copyright Act. This Act adopted the recommendations contained in the Final Report of the National Commission on New Technological Uses of Copyrighted Works ("CONTU") (1978). H.R.Rep. No. 1307, 96th Cong., 2d Sess., pt. 1, at 23. The CONTU was established by Congress in 1974 to perform research and make recommendations concerning copyright protection for computer programs. The new 117 reflects the CONTU's conclusion that: "Because the placement of a work into a computer is the preparation of a copy, the law should provide that persons in rightful possession of copies of programs be able to use them freely without fear of exposure to copyright liability." Final Report at 13.

Comments, notes, and questions

  1. Review again the definitions of "copies" and "fixation" in Section 101. Is the Ninth Circuit correct that temporary storage of a computer program in a computer's RAM is sufficiently "fixed" to constitute a "copy" for purposes of copyright infringement? What characteristics of RAM copies does the court rely upon in finding the "fixation" requirement satisfied? Do you find the court's reasoning persuasive?
  2. MAI's holding that loading a program into RAM constitutes the making of a "copy" met a hostile reception among scholars. See, e.g., Mark Lemley, Dealing with Overlapping Copyrights on the Internet, 22 Dayton L. Rev. 547, 550-52 (1997); Charles R. McManis, Taking TRIPS on the Information Superhighway: International Intellectual Property Protection and Emerging Computer Technology, 41 Vill. L. Rev. 207, 264-66 (1996) (describing Ninth Circuit's reasoning as "bizarre"); Jessica Litman, The Exclusive Right to Read, 13 Cardozo Arts & Ent. L. J. 29, 39-43 (1994); Bradley J. Nicholson, The Ghost in the Machine: MAI Systems Corp. v. Peak Computer Inc. and the Problem of Copying in RAM, 10 High Tech. L. J. 147 (1995) (explaining technology of RAM storage and arguing that RAM copies are not "fixed").
  3. Most courts since MAI, on the other hand, have agreed with the Ninth Circuit that RAM copies are sufficiently "fixed" to invoke a copyright owner's exclusive rights. See, e.g., Stenograph LLC v. Bossard Assoc., Inc., 144 F.3d 96, 102 (D.C. Cir. 1998); Triad Systems v. Southeastern Express Co., 64 F.3d 1330 (9th Cir. 1995).

  4. Think about the implications of MAI for the following hypotheticals:
  1. As these hypotheticals illustrate, if the loading of software into RAM makes a "copy," a user could arguably infringe on a software developer's copyright merely by turning on her computer. In part to avoid this result, Congress included a new § 117 in the Copyright Act of 1976, authorizing "owners" of computer software to make certain limited copies of the software:
§ 117. Limitations on exclusive rights: Computer programs
Notwithstanding the provisions of § 106, it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided:
(1) that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner, or (2) that such new copy or adaptation is for archival purposes only and that all archival copies are destroyed in the event that continued possession of the computer program should cease to be rightful. ...

The MAI v. Peak court found this section inapplicable because MAI had licensed, rather than sold, its software to its customers. Thus, the customers were not "owners" who could, under § 117, "authorize the making of [a] copy" of the program as an essential step in the utilization of the program in conjunction with a machine. 991 F.2d at 518 n.5. Considering that virtually all commercially available software is "licensed," rather than sold, does this result make sense? In DSC Communications Corp. v. Pulse Communications Inc., 170 F.3d 1354 (Fed. Cir. 1999), the Federal Circuit described the Peak court's conclusion as overly simplistic; according to the Federal Circuit, the fact that a transaction is characterized as a software license does not mean that the purchaser does not rightfully "own" a copy of the software. Nonetheless, after reviewing the contract at issue in that case, the DSC court concluded the numerous restrictions in the contract meant that the transaction was a license rather than a sale. See id. at 1361-62.

Congress, of course, could have extended the § 117 rights to all "rightful possessors" of a computer program; indeed, the CONTU commission, which Congress appointed to study the copyrightability of computer programs, recommended just this language. Congress, however, rejected this language in favor of the "rightful owner" language that now appears in § 117. The legislative history offers no explanation for the change. Both the Ninth Circuit and the Federal Circuit found this change in language relevant to their decision not to extent § 117 protection to mere licensees of computer software.

The recently-enacted Digital Millennium Copyright Act of 1998 extends an extremely limited privilege to licensees to authorize repair of their machines. Congress revised § 117 slightly to allow lessees, like owners, to authorize others to make copies of their software for extremely limited purposes. Digital Millennium Copyright Act Title III. Under the new § 117, a lessee may authorize others to make a copy of licensed software only to the extent necessary to repair the hardware of a machine. While this would change the result in MAI v. Peak, does it address the underlying problem of that case?

  1. ISP Liability for Copying Initiated by Subscribers

1. The cases:

Most courts have held that individuals who upload copyrighted material onto a Bulletin Board Service or Web site without the copyright owner's permission have committed copyright infringement. See, e.g., Religious Technology Ctr v. Lerma, 40 U.S.P.Q.2d 1569, 1996 WL 633131 (E.D. Va. Oct. 4, 1996) (user who published Scientology documents over Internet violated exclusive right to reproduce); see also Marobie-FL, Inc. v. National Assoc. of Fire Equipment Distributors, 983 F. Supp. 1167, 1173 (1997) (placing copyrighted clip art onto a web page by copying it onto the hard drive of a Web server "constitute[s] a violation of plaintiff's exclusive right to reproduce the clip art"); Scientology Wins A Battle to Halt Flow of Church Information, Law St. J., May 20, 1998, at http://www.lawstreet.com/Journal/art980520scientology.html(reporting $75,000 jury award against defendants for posting a document describing Church of Scientology rituals over the Internet).

But what about the Bulletin Board Service or Internet Service Provider that some individuals use as a conduit to make the materials available to the public? In many cases, these access providers use servers that automatically post or transfer materials submitted by their users. Can a plaintiff hold these facilitators liable for infringement initiated by their subscribers? The following case explores the legal and policy implications of this question.

Religious Technology Ctr. v. Netcom On-Line Communication Services, Inc.
907 F. Supp. 1361 (N.D. Cal. 1995)

Whyte, District Judge.

This case concerns an issue of first impression regarding intellectual property rights in cyberspace. Specifically, this order addresses whether the operator of a computer bulletin board service ("BBS"), and the large Internet access provider that allows that BBS to reach the Internet, should be liable for copyright infringement committed by a subscriber of the BBS.

Plaintiffs Religious Technology Center ("RTC") and Bridge Publications, Inc. ("BPI") hold copyrights in the unpublished and published works of L. Ron Hubbard, the late founder of the Church of Scientology ("the Church"). Defendant Dennis Erlich ("Erlich")3 is a former minister of Scientology turned vocal critic of the Church, whose pulpit is now the Usenet newsgroup4 alt.religion.scientology ("a.r.s."), an on-line forum for discussion and criticism of Scientology. Plaintiffs maintain that Erlich infringed their copyrights when he posted portions of their works on a.r.s. Erlich gained his access to the Internet through defendant Thomas Klemesrud's ("Klemesrud's") BBS "support.com." Klemesrud is the operator of the BBS, which is run out of his home and has approximately 500 paying users. Klemesrud's BBS is not directly linked to the Internet, but gains its connection through the facilities of defendant Netcom On-Line Communications, Inc. ("Netcom"), one of the largest providers of Internet access in the United States.

After failing to convince Erlich to stop his postings, plaintiffs contacted defendants Klemesrud and Netcom. Klemesrud responded to plaintiffs' demands that Erlich be kept off his system by asking plaintiffs to prove that they owned the copyrights to the works posted by Erlich. However, plaintiffs refused Klemesrud's request as unreasonable. Netcom similarly refused plaintiffs' request that Erlich not be allowed to gain access to the Internet through its system. Netcom contended that it would be impossible to prescreen Erlich's postings and that to kick Erlich off the Internet meant kicking off the hundreds of users of Klemesrud's BBS. Consequently, plaintiffs named Klemesrud and Netcom in their suit against Erlich, although only on the copyright infringement claims.

On June 23, 1995, this court heard the parties' arguments on eight motions, three of which relate to Netcom and Klemesrud and are discussed in this order: (1) Netcom's motion for summary judgment; (2) Klemesrud's motion for judgment on the pleadings; and (3) plaintiffs' motion for a preliminary injunction against Netcom and Klemesrud. For the reasons set forth below, the court grants in part and denies in part Netcom's motion for summary judgment and Klemesrud's motion for judgment on the pleadings and denies plaintiffs' motion for a preliminary injunction.

I. NETCOM'S MOTION FOR SUMMARY JUDGMENT OF NONINFRINGEMENT

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B. Copyright Infringement

To establish a claim of copyright infringement, a plaintiff must demonstrate (1) ownership of a valid copyright and (2) 'copying' of protectable expression by the defendant. Baxter v. MCA, Inc. 812, F.2d 421, 423 (9th Cir.), cert. denied, 484 U.S. 954 (1987) ... The court has already ... found plaintiffs likely to succeed on their claim that defendant Erlich copied [plaintiff's copyrighted] works and was not entitled to a fair use defense. Plaintiffs argue that, although Netcom was not itself the source of any of the infringing materials on its system, it nonetheless should be liable for infringement, either directly, contributorily, or vicariously. Netcom disputes these theories of infringement and further argues that it is entitled to its own fair use defense.

1. Direct Infringement

Infringement consists of the unauthorized exercise of one of the exclusive rights of the copyright holder delineated in § 106. 17 U.S.C. § 501. Direct infringement does not require intent or any particular state of mind, although willfulness is relevant to the award of statutory damages. 17 U.S.C. § 504(c).

a. Undisputed Facts

The parties do not dispute the basic processes that occur when Erlich posts his allegedly infringing messages to a.r.s. Erlich connects to Klemesrud's BBS using a telephone and a modem. Erlich then transmits his messages to Klemesrud's computer, where they are automatically briefly stored. According to a prearranged pattern established by Netcom's software, Erlich's initial act of posting a message to the Usenet results in the automatic copying of Erlich's message from Klemesrud's computer onto Netcom's computer and onto other computers on the Usenet. In order to ease transmission and for the convenience of Usenet users, Usenet servers maintain postings from newsgroups for a short period of time--eleven days for Netcom's system and three days for Klemesrud's system. Once on Netcom's computers, messages are available to Netcom's customers and Usenet neighbors, who may then download the messages to their own computers. Netcom's local server makes available its postings to a group of Usenet servers, which do the same for other servers until all Usenet sites worldwide have obtained access to the postings, which takes a matter of hours. Unlike some other large on-line service providers, such as CompuServe, America Online, and Prodigy, Netcom does not create or control the content of the information available to its subscribers. It also does not monitor messages as they are posted. It has, however, suspended the accounts of subscribers who violated its terms and conditions, such as where they had commercial software in their posted files. Netcom admits that, although not currently configured to do this, it may be possible to reprogram its system to screen postings containing particular words or coming from particular individuals. Netcom, however, took no action after it was told by plaintiffs that Erlich had posted messages through Netcom's system that violated plaintiffs' copyrights, instead claiming that it could not shut out Erlich without shutting out all of the users of Klemesrud's BBS.

b. Creation of Fixed Copies

The Ninth Circuit addressed the question of what constitutes infringement in the context of storage of digital information in a computer's random access memory ("RAM"). MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511, 518 (9th Cir. 1993). .... MAI established that the loading of data from a storage device into RAM constitutes copying because that data stays in RAM long enough for it to be perceived. MAI Systems, 991 F.2d at 518.

In the present case, there is no question after MAI that "copies" were created, as Erlich's act of sending a message to a.r.s. caused reproductions of portions of plaintiffs' works on both Klemesrud's and Netcom's storage devices. Even though the messages remained on their systems for at most eleven days, they were sufficiently "fixed" to constitute recognizable copies under the Copyright Act. See Information Infrastructure Task Force, Intellectual Property and the National Information Infrastructure: The Report of the Working Group on Intellectual Property Rights 66 (1995) ("IITF Report").

c. Is Netcom Directly Liable for Making the Copies?

Accepting that copies were made, Netcom argues that Erlich, and not Netcom, is directly liable for the copying. MAI did not address the question raised in this case: whether possessors of computers are liable for incidental copies automatically made on their computers using their software as part of a process initiated by a third party. Netcom correctly distinguishes MAI on the ground that Netcom did not take any affirmative action that directly resulted in copying plaintiffs' works other than by installing and maintaining a system whereby software automatically forwards messages received from subscribers onto the Usenet, and temporarily stores copies on its system. Netcom's actions, to the extent that they created a copy of plaintiffs' works, were necessary to having a working system for transmitting Usenet postings to and from the Internet. Unlike the defendants in MAI, neither Netcom nor Klemesrud initiated the copying. The defendants in MAI turned on their customers' computers thereby creating temporary copies of the operating system, whereas Netcom's and Klemesrud's systems can operate without any human intervention. Thus, unlike MAI, the mere fact that Netcom's system incidentally makes temporary copies of plaintiffs' works does not mean Netcom has caused the copying.11 The court believes that Netcom's act of designing or implementing a system that automatically and uniformly creates temporary copies of all data sent through it is not unlike that of the owner of a copying machine who lets the public make copies with it.12 Although some of the people using the machine may directly infringe copyrights, courts analyze the machine owner's liability under the rubric of contributory infringement, not direct infringement. See, e.g., RCA Records v. All-Fast Systems, Inc., 594 F.Supp. 335 (S.D.N.Y. 1984); 3 Melville B. Nimmer & David Nimmer, NIMMER ON COPYRIGHT s 12.04[A][2][b], at 12-78 to -79 (1995) ("NIMMER ON COPYRIGHT"); Elkin-Koren, supra, at 363 (arguing that "contributory infringement is more appropriate for dealing with BBS liability, first, because it focuses attention on the BBS-users relationship and the way imposing liability on BBS operators may shape this relationship, and second because it better addresses the complexity of the relationship between BBS operators and subscribers"). Plaintiffs' theory would create many separate acts of infringement and, carried to its natural extreme, would lead to unreasonable liability. It is not difficult to conclude that Erlich infringes by copying a protected work onto his computer and by posting a message to a newsgroup. However, plaintiffs' theory further implicates a Usenet server that carries Erlich's message to other servers regardless of whether that server acts without any human intervention beyond the initial setting up of the system. It would also result in liability for every single Usenet server in the worldwide link of computers transmitting Erlich's message to every other computer. These parties, who are liable under plaintiffs' theory, do no more than operate or implement a system that is essential if Usenet messages are to be widely distributed. There is no need to construe the Act to make all of these parties infringers. Although copyright is a strict liability statute, there should still be some element of volition or causation which is lacking where a defendant's system is merely used to create a copy by a third party.

Plaintiffs point out that the infringing copies resided for eleven days on Netcom's computer and were sent out from it onto the "Information Superhighway." However, under plaintiffs' theory, any storage of a copy that occurs in the process of sending a message to the Usenet is an infringement. While it is possible that less "damage" would have been done if Netcom had heeded plaintiffs' warnings and acted to prevent Erlich's message from being forwarded, this is not relevant to its direct liability for copying. The same argument is true of Klemesrud and any Usenet server. Whether a defendant makes a direct copy that constitutes infringement cannot depend on whether it received a warning to delete the message. See D.C. Comics, Inc. v. Mini Gift, 912 F.2d 29, 35 (2d Cir. 1990). This distinction may be relevant to contributory infringement, however, where knowledge is an element. See infra part I.B.2.a.

The court will now consider two district court opinions that have addressed the liability of BBS operators for infringing files uploaded by subscribers.

d. Playboy Case

Playboy Enterprises, Inc. v. Frena involved a suit against the operator of a small BBS whose system contained files of erotic pictures. 839 F.Supp. 1552, 1554 (M.D.Fla. 1993). A subscriber of the defendant's BBS had uploaded files containing digitized pictures copied from the plaintiff's copyrighted magazine, which files remained on the BBS for other subscribers to download. Id. The court did not conclude, as plaintiffs suggest in this case, that the BBS is itself liable for the unauthorized reproduction of plaintiffs' work; instead, the court concluded that the BBS operator was liable for violating the plaintiff's right to publicly distribute and display copies of its work. Id. at 1556-57.

In support of their argument that Netcom is directly liable for copying plaintiffs' works, plaintiffs cite to the court's conclusion that "[t]here is no dispute that [the BBS operator] supplied a product containing unauthorized copies of a copyrighted work. It does not matter that [the BBS operator] claims he did not make the copies [him]self." Id. at 1556. It is clear from the context of this discussion that the Playboy court was looking only at the exclusive right to distribute copies to the public, where liability exists regardless of whether the defendant makes copies. Here, however, plaintiffs do not argue that Netcom is liable for its public distribution of copies. Instead, they claim that Netcom is liable because its computers in fact made copies. Therefore, the above-quoted language has no bearing on the issue of direct liability for unauthorized reproductions. Notwithstanding Playboy's holding that a BBS operator may be directly liable for distributing or displaying to the public copies of protected works, this court holds that the storage on a defendant's system of infringing copies and retransmission to other servers is not a direct infringement by the BBS operator of the exclusive right to reproduce the work where such copies are uploaded by an infringing user. Playboy does not hold otherwise.16

e. Sega Case

A court in this district addressed the issue of whether a BBS operator is liable for copyright infringement where it solicited subscribers to upload files containing copyrighted materials to the BBS that were available for others to download. Sega Enterprises Ltd. v. MAPHIA, 857 F.Supp. 679, 683 (N.D. Cal. 1994). The defendant's "MAPHIA" BBS contained copies of plaintiff Sega's video game programs that were uploaded by users. Id. at 683. The defendant solicited the uploading of such programs and received consideration for the right to download files. Id. Access was given for a fee or to those purchasing the defendant's hardware device that allowed Sega video game cartridges to be copied. Id. at 683-84. The court granted a preliminary injunction against the defendant, finding that plaintiffs had shown a prima facie case of direct and contributory infringement. Id. at 687. The court found that copies were made by unknown users of the BBS when files were uploaded and downloaded. Id. Further, the court found that the defendant's knowledge of the infringing activities, encouragement, direction and provision of the facilities through his operation of the BBS constituted contributory infringement, even though the defendant did not know exactly when files were uploaded or downloaded. Id. at 686-87.

This court is not convinced that Sega provides support for a finding of direct infringement where copies are made on a defendant's BBS by users who upload files. Although there is some language in Sega regarding direct infringement, it is entirely conclusory:

Sega has established a prima facie case of direct copyright infringement under 17 U.S.C. § 501. Sega has established that unauthorized copies of its games are made when such games are uploaded to the MAPHIA bulletin board, here with the knowledge of Defendant Scherman. These games are thereby placed on the storage media of the electronic bulletin board by unknown users. Id. at 686.

The court's reference to the "knowledge of Defendant" indicates that the court was focusing on contributory infringement, as knowledge is not an element of direct infringement. Perhaps, Sega's references to direct infringement and that "copies ... are made" are to the direct liability of the "unknown users," as there can be no contributory infringement by a defendant without direct infringement by another. See 3 NIMMER ON COPYRIGHT § 12.04[A][3][a], at 12-89. Thus, the court finds that neither Playboy nor Sega requires finding Netcom liable for direct infringement of plaintiffs' exclusive right to reproduce their works. 17

f. Public Distribution and Display?

Plaintiffs allege that Netcom is directly liable for making copies of their works. They also allege that Netcom violated their exclusive rights to publicly display copies of their works. There are no allegations that Netcom violated plaintiffs' exclusive right to publicly distribute their works. However, in their discussion of direct infringement, plaintiffs insist that Netcom is liable for "maintain[ing] copies of [Erlich's] messages on its server for eleven days for access by its subscribers and 'USENET neighbors'" and they compare this case to the Playboy case, which discussed the right of public distribution. Opp'n at 7. Plaintiffs also argued this theory of infringement at oral argument. Because this could be an attempt to argue that Netcom has infringed plaintiffs' rights of public distribution and display, the court will address these arguments.

Playboy concluded that the defendant infringed the plaintiff's exclusive rights to publicly distribute and display copies of its works. 839 F.Supp. at 1556-57. The court is not entirely convinced that the mere possession of a digital copy on a BBS that is accessible to some members of the public constitutes direct infringement by the BBS operator. Such a holding suffers from the same problem of causation as the reproduction argument. Only the subscriber should be liable for causing the distribution of plaintiffs' work, as the contributing actions of the BBS provider are automatic and indiscriminate. Erlich could have posted his messages through countless access providers and the outcome would be the same: anyone with access to Usenet Newsgroups would be able to read his messages. There is no logical reason to draw a line around Netcom and Klemesrud and say that they are uniquely responsible for distributing Erlich's messages. Netcom is not even the first link in the chain of distribution--Erlich had no direct relationship with Netcom but dealt solely with Klemesrud's BBS, which used Netcom to gain its Internet access. Every Usenet server has a role in the distribution, so plaintiffs' argument would create unreasonable liability.

Where the BBS merely stores and passes along all messages sent by its subscribers and others, the BBS should not be seen as causing these works to be publicly distributed or displayed. Even accepting the Playboy court's holding, the case is factually distinguishable. Unlike the BBS in that case, Netcom does not maintain an archive of files for its users. Thus, it cannot be said to be "suppl[ying] a product." In contrast to some of its larger competitors, Netcom does not create or control the content of the information available to its subscribers; it merely provides access to the Internet, whose content is controlled by no single entity. Although the Internet consists of many different computers networked together, some of which may contain infringing files, it does not make sense to hold the operator of each computer liable as an infringer merely because his or her computer is linked to a computer with an infringing file. It would be especially inappropriate to hold liable a service that acts more like a conduit, in other words, one that does not itself keep an archive of files for more than a short duration. Finding such a service liable would involve an unreasonably broad construction of public distribution and display rights. No purpose would be served by holding liable those who have no ability to control the information to which their subscribers have access, even though they might be in some sense helping to achieve the Internet's automatic "public distribution" and the users' "public" display of files.

g. Conclusion

The court is not persuaded by plaintiffs' argument that Netcom is directly liable for the copies that are made and stored on its computer. Where the infringing subscriber is clearly directly liable for the same act, it does not make sense to adopt a rule that could lead to the liability of countless parties whose role in the infringement is nothing more than setting up and operating a system that is necessary for the functioning of the Internet. Such a result is unnecessary as there is already a party directly liable for causing the copies to be made. Plaintiffs occasionally claim that they only seek to hold liable a party that refuses to delete infringing files after they have been warned. However, such liability cannot be based on a theory of direct infringement, where knowledge is irrelevant. The court does not find workable a theory of infringement that would hold the entire Internet liable for activities that cannot reasonably be deterred. Billions of bits of data flow through the Internet and are necessarily stored on servers throughout the network and it is thus practically impossible to screen out infringing bits from noninfringing bits. Because the court cannot see any meaningful distinction (without regard to knowledge) between what Netcom did and what every other Usenet server does, the court finds that Netcom cannot be held liable for direct infringement. Cf. IITF Report at 69 (noting uncertainty regarding whether BBS operator should be directly liable for reproduction or distribution of files uploaded by a subscriber).19

2. Contributory Infringement

Netcom is not free from liability just because it did not directly infringe plaintiffs' works; it may still be liable as a contributory infringer. Although there is no statutory rule of liability for infringement committed by others, "[t]he absence of such express language in the copyright statute does not preclude the imposition of liability for copyright infringement on certain parties who have not themselves engaged in the infringing activity. For vicarious liability is imposed in virtually all areas of the law, and the concept of contributory infringement is merely a species of the broader problem of identifying the circumstances in which it is just to hold one individual accountable for the actions of another." Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 435, 104 S.Ct. 774, 785, 78 L.Ed.2d 574 (1984) (footnote omitted). Liability for participation in the infringement will be established where the defendant, "with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another." Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir. 1971).

a. Knowledge of Infringing Activity

Plaintiffs insist that Netcom knew that Erlich was infringing their copyrights at least after receiving notice from plaintiffs' counsel indicating that Erlich had posted copies of their works onto a.r.s. through Netcom's system. Despite this knowledge, Netcom continued to allow Erlich to post messages to a.r.s. and left the allegedly infringing messages on its system so that Netcom's subscribers and other Usenet servers could access them. Netcom argues that it did not possess the necessary type of knowledge because (1) it did not know of Erlich's planned infringing activities when it agreed to lease its facilities to Klemesrud, (2) it did not know that Erlich would infringe prior to any of his postings, (3) it is unable to screen out infringing postings before they are made, and (4) its knowledge of the infringing nature of Erlich's postings was too equivocal given the difficulty in assessing whether the registrations were valid and whether Erlich's use was fair. The court will address these arguments in turn.

Netcom cites cases holding that there is no contributory infringement by the lessors of premises that are later used for infringement unless the lessor had knowledge of the intended use at the time of the signing of the lease. See, e.g. Deutsch v. Arnold, 98 F.2d 686, 688 (2d Cir. 1938). The contribution to the infringement by the defendant in Deutsch was merely to lease use of the premises to the infringer. Here, Netcom not only leases space but also serves as an access provider, which includes the storage and transmission of information necessary to facilitate Erlich's postings to a.r.s. Unlike a landlord, Netcom retains some control over the use of its system. See infra part I.B.3.a. Thus, the relevant time frame for knowledge is not when Netcom entered into an agreement with Klemesrud. It should be when Netcom provided its services to allow Erlich to infringe plaintiffs' copyrights. Cf. Screen Gems-Columbia Music, Inc. v. Mark-Fi Records, Inc., 256 F.Supp. 399, 403 (S.D.N.Y. 1966) (analyzing knowledge at time that defendant rendered its particular service). It is undisputed that Netcom did not know that Erlich was infringing before it received notice from plaintiffs. Netcom points out that the alleged instances of infringement occurring on Netcom's system all happened prior to December 29, 1994, the date on which Netcom first received notice of plaintiffs' infringement claim against Erlich. See Pisani Feb. 8, 1995 Decl., P 6 & Exs. (showing latest posting made on December 29, 1994); McShane Feb. 8, 1995 Decl.; FAC PP 36-38 & Ex. I. Thus, there is no question of fact as to whether Netcom knew or should have known of Erlich's infringing activities that occurred more than 11 days before receipt of the December 28, 1994 letter.

However, the evidence reveals a question of fact as to whether Netcom knew or should have known that Erlich had infringed plaintiffs' copyrights following receipt of plaintiffs' letter. Because Netcom was arguably participating in Erlich's public distribution of plaintiffs' works, there is a genuine issue as to whether Netcom knew of any infringement by Erlich before it was too late to do anything about it. If plaintiffs can prove the knowledge element, Netcom will be liable for contributory infringement since its failure to simply cancel Erlich's infringing message and thereby stop an infringing copy from being distributed worldwide constitutes substantial participation in Erlich's public distribution of the message. Cf. R.T. Nimmer, THE LAW OF COMPUTER TECHNOLOGY P 15.11B, at S15-42 (2d ed. 1994) (opining that "where information service is less directly involved in the enterprise of creating unauthorized copies, a finding of contributory infringement is not likely").

Netcom argues that its knowledge after receiving notice of Erlich's alleged infringing activities was too equivocal given the difficulty in assessing whether registrations are valid and whether use is fair. Although a mere unsupported allegation of infringement by a copyright owner may not automatically put a defendant on notice of infringing activity, Netcom's position that liability must be unequivocal is unsupportable. ... Where works contain copyright notices within them, as here, it is difficult to argue that a defendant did not know that the works were copyrighted. To require proof of valid registrations would be impractical and would perhaps take too long to verify, making it impossible for a copyright holder to protect his or her works in some cases, as works are automatically deleted less than two weeks after they are posted. The court is more persuaded by the argument that it is beyond the ability of a BBS operator to quickly and fairly determine when a use is not infringement where there is at least a colorable claim of fair use. Where a BBS operator cannot reasonably verify a claim of infringement, either because of a possible fair use defense, the lack of copyright notices on the copies, or the copyright holder's failure to provide the necessary documentation to show that there is a likely infringement, the operator's lack of knowledge will be found reasonable and there will be no liability for contributory infringement for allowing the continued distribution of the works on its system. Since Netcom was given notice of an infringement claim before Erlich had completed his infringing activity, there may be a question of fact as to whether Netcom knew or should have known that such activities were infringing. Given the context of a dispute between a former minister and a church he is criticizing, Netcom may be able to show that its lack of knowledge that Erlich was infringing was reasonable. However, Netcom admits that it did not even look at the postings once given notice and that had it looked at the copyright notice and statements regarding authorship, it would have triggered an investigation into whether there was infringement. These facts are sufficient to raise a question as to Netcom's knowledge once it received a letter from plaintiffs on December 29, 1994.

b. Substantial Participation

Where a defendant has knowledge of the primary infringer's infringing activities, it will be liable if it "induces, causes or materially contributes to the infringing conduct of" the primary infringer. Gershwin Publishing, 443 F.2d at 1162. Such participation must be substantial. Apple Computer, Inc. v. Microsoft Corp., 821 F.Supp. 616, 625 (N.D.Cal. 1993), aff'd, 35 F.3d 1435 (9th Cir. 1994); Demetriades v. Kaufmann, 690 F.Supp. 289, 294 (S.D.N.Y. 1988).

Providing a service that allows for the automatic distribution of all Usenet postings, infringing and noninfringing, goes well beyond renting a premises to an infringer. See Fonovisa, Inc. v. Cherry Auction, Inc., 847 F.Supp. 1492, 1496 (E.D.Cal. 1994) (finding that renting space at swap meet to known bootleggers not "substantial participation" in the infringers' activities). It is more akin to the radio stations that were found liable for rebroadcasting an infringing broadcast. See, e.g., Select Theatres Corp. v. Ronzoni Macaroni Corp., 59 U.S.P.Q. 288, 291 (S.D.N.Y. 1943). Netcom allows Erlich's infringing messages to remain on its system and be further distributed to other Usenet servers worldwide. It does not completely relinquish control over how its system is used, unlike a landlord. Thus, it is fair, assuming Netcom is able to take simple measures to prevent further damage to plaintiffs' copyrighted works, to hold Netcom liable for contributory infringement where Netcom has knowledge of Erlich's infringing postings yet continues to aid in the accomplishment of Erlich's purpose of publicly distributing the postings. Accordingly, plaintiffs do raise a genuine issue of material fact as to their theory of contributory infringement as to the postings made after Netcom was on notice of plaintiffs' infringement claim.

3. Vicarious Liability

Even if plaintiffs cannot prove that Netcom is contributorily liable for its participation in the infringing activity, it may still seek to prove vicarious infringement based on Netcom's relationship to Erlich. A defendant is liable for vicarious liability for the actions of a primary infringer where the defendant (1) has the right and ability to control the infringer's acts and (2) receives a direct financial benefit from the infringement. See Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304, 306 (2d Cir. 1963). Unlike contributory infringement, knowledge is not an element of vicarious liability. 3 NIMMER ON COPYRIGHT § 12.04[A][1], at 12-70.

a. Right and Ability To Control

The first element of vicarious liability will be met if plaintiffs can show that Netcom has the right and ability to supervise the conduct of its subscribers. Netcom argues that it does not have the right to control its users' postings before they occur. Plaintiffs dispute this and argue that Netcom's terms and conditions, to which its subscribers must agree, specify that Netcom reserves the right to take remedial action against subscribers. Plaintiffs argue that under "netiquette," the informal rules and customs that have developed on the Internet, violation of copyrights by a user is unacceptable and the access provider has a duty take measures to prevent this; where the immediate service provider fails, the next service provider up the transmission stream must act. Further evidence of Netcom's right to restrict infringing activity is its prohibition of copyright infringement and its requirement that its subscribers indemnify it for any damage to third parties. Plaintiffs have thus raised a question of fact as to Netcom's right to control Erlich's use of its services.

Netcom argues that it could not possibly screen messages before they are posted given the speed and volume of the data that goes through its system. Netcom further argues that it has never exercised control over the content of its users' postings. Plaintiffs' expert opines otherwise, stating that with an easy software modification Netcom could identify postings that contain particular words or come from particular individuals. Plaintiffs further dispute Netcom's claim that it could not limit Erlich's access to Usenet without kicking off all 500 subscribers of Klemesrud's BBS. As evidence that Netcom has in fact exercised its ability to police its users' conduct, plaintiffs cite evidence that Netcom has acted to suspend subscribers' accounts on over one thousand occasions. See Ex. J (listing suspensions of subscribers by Netcom for commercial advertising, posting obscene materials, and off-topic postings). Further evidence shows that Netcom can delete specific postings. Whether such sanctions occurred before or after the abusive conduct is not material to whether Netcom can exercise control. The court thus finds that plaintiffs have raised a genuine issue of fact as to whether Netcom has the right and ability to exercise control over the activities of its subscribers, and of Erlich in particular.

b. Direct Financial Benefit

Plaintiffs must further prove that Netcom receives a direct financial benefit from the infringing activities of its users. For example, a landlord who has the right and ability to supervise the tenant's activities is vicariously liable for the infringements of the tenant where the rental amount is proportional to the proceeds of the tenant's sales. Shapiro, Bernstein, 316 F.2d at 306. However, where a defendant rents space or services on a fixed rental fee that does not depend on the nature of the activity of the lessee, courts usually find no vicarious liability because there is no direct financial benefit from the infringement. See, e.g., Roy Export Co. v. Trustees of Columbia University, 344 F.Supp. 1350, 1353 (S.D.N.Y. 1972) (finding no vicarious liability of university because no financial benefit from allowing screening of bootlegged films); Fonovisa, 847 F.Supp. at 1496 (finding swap meet operators did not financially benefit from fixed fee); see also Kelly Tickle, Comment, The Vicarious Liability of Electronic Bulletin Board Operators for the Copyright Infringement Occurring on Their Bulletin Boards, 80 IOWA L.REV. 391, 415 (1995) (arguing that BBS operators "lease cyberspace" and should thus be treated like landlords, who are not liable for infringement that occurs on their premises).

Plaintiffs argue that courts will find a financial benefit despite fixed fees. In Polygram International Publishing, Inc. v. Nevada/TIG, Inc., 855 F.Supp. 1314, 1330-33 (D.Mass. 1994), the court found a trade show organizer vicariously liable for the infringing performance of an exhibitor because, although the infringement did not affect the fixed rental fee received by the organizers, the organizers benefitted from the performances, which helped make the show a financial success. But see Artists Music, Inc. v. Reed Publishing, Inc., 31 U.S.P.Q.2d 1623, 1994 WL 191643, at (S.D.N.Y. 1994) (finding no vicarious liability for trade show organizers where revenues not increased because of infringing music performed by exhibitors). ... Plaintiffs' cases are factually distinguishable. Plaintiffs cannot provide any evidence of a direct financial benefit received by Netcom from Erlich's infringing postings. Unlike Shapiro, Bernstein, and like Fonovisa, Netcom receives a fixed fee. There is no evidence that infringement by Erlich, or any other user of Netcom's services, in any way enhances the value of Netcom's services to subscribers or attracts new subscribers. Plaintiffs argue, however, that Netcom somehow derives a benefit from its purported "policy of refusing to take enforcement actions against its subscribers and others who transmit infringing messages over its computer networks." Plaintiffs point to Netcom's advertisements that, compared to competitors like CompuServe and America Online, Netcom provides easy, regulation-free Internet access. Plaintiffs assert that Netcom's policy attracts copyright infringers to its system, resulting in a direct financial benefit. The court is not convinced that such an argument, if true, would constitute a direct financial benefit to Netcom from Erlich's infringing activities. See Fonovisa, 847 F.Supp. at 1496 (finding no direct financial benefit despite argument that lessees included many vendors selling counterfeit goods and that clientele sought "bargain basement prices"). Further, plaintiffs' argument is not supported by probative evidence. ... Because plaintiffs have failed to raise a question of fact on this vital element, their claim of vicarious liability fails. See Roy Export, 344 F.Supp. at 1353.

4. First Amendment Argument

Netcom argues that plaintiffs' theory of liability contravenes the first amendment, as it would chill the use of the Internet because every access provider or user would be subject to liability when a user posts an infringing work to a Usenet newsgroup. While the court agrees that an overbroad injunction might implicate the First Amendment, see In re Capital Cities/ABC, Inc., 918 F.2d 140, 144 (11th Cir. 1990), imposing liability for infringement where it is otherwise appropriate does not necessarily raise a First Amendment issue. The copyright concepts of the idea/expression dichotomy and the fair use defense balance the important First Amendment rights with the constitutional authority for "promot[ing] the progress of science and useful arts," U.S. CONST. art. I, § 8, cl. 8; 1 NIMMER ON COPYRIGHT § 1.10[B], at 1- 71 to -83. Netcom argues that liability here would force Usenet servers to perform the impossible--screening all the information that comes through their systems.

However, the court is not convinced that Usenet servers are directly liable for causing a copy to be made, and absent evidence of knowledge and participation or control and direct profit, they will not be contributorily or vicariously liable. If Usenet servers were responsible for screening all messages coming through their systems, this could have a serious chilling effect on what some say may turn out to be the best public forum for free speech yet devised. See Jerry Berman & Daniel J. Weitzner, Abundance and User Control: Renewing the Democratic Heart of the First Amendment in the Age of Interactive Media, 104 YALE L.J. 1619, 1624 (1995) (praising decentralized networks for opening access to all with no entity stifling independent sources of speech); Rose, supra, at 4.25 Finally, Netcom admits that its First Amendment argument is merely a consideration in the fair use argument.... [The fair use argument is discussed in Section 4 of this module.]

Footnotes
3. Issues of Erlich's liability were addressed in this court's order of September 22, 1995. That order concludes in part that a preliminary injunction against Erlich is warranted because plaintiffs have shown a likelihood of success on their copyright infringement claims against him. Plaintiffs likely own valid copyrights in Hubbard's published and unpublished works and Erlich's near-verbatim copying of substantial portions of plaintiffs' works was not likely a fair use. To the extent that Netcom and Klemesrud argue that plaintiffs' copyrights are invalid and that Netcom and Klemesrud are not liable because Erlich had a valid fair use defense, the court previously rejected these arguments and will not reconsider them here.

4.

The Usenet has been described as a worldwide community of electronic BBSs that is closely associated with the Internet and with the Internet community. The messages in Usenet are organized into thousands of topical groups, or "Newsgroups".... as a Usenet user, you read and contribute ("post") to your local Usenet site. Each Usenet site distributes its users' postings to other Usenet sites based on various implicit and explicit configuration settings, and in turn receives postings from other sites. Usenet traffic typically consists of as much as 30 to 50 Mbytes of messages per day.
Usenet is read and contributed to on a daily basis by a total population of millions of people.... There is no specific network that is the Usenet. Usenet traffic flows over a wide range of networks, including the Internet and dial-up phone links.

Dern, supra, at 196-97.

11. One commentator addressed the difficulty in translating copyright concepts, including the public/private dichotomy, to the digitized environment. See Niva Elkin-Koren, Copyright Law and Social Dialogue on the Information Superhighway: The Case Against Copyright Liability of Bulletin Board Operators, 13 CARDOZO ARTS & ENT.L.J. 346, 390 (1993). This commentator noted that one way to characterize a BBS operation is that it "provides subscribers with access and services. As such, BBS operators do not create copies, and do not transfer them in any way. Users post the copies on the BBS, which other users can then read or download." Id. at 356.

12. Netcom compares itself to a common carrier that merely acts as a passive conduit for information. In a sense, a Usenet server that forwards all messages acts like a common carrier, passively retransmitting every message that gets sent through it. Netcom would seem no more liable than the phone company for carrying an infringing facsimile transmission or storing an infringing audio recording on its voice mail. As Netcom's counsel argued, holding such a server liable would be like holding the owner of the highway, or at least the operator of a toll booth, liable for the criminal activities that occur on its roads. Since other similar carriers of information are not liable for infringement, there is some basis for exempting Internet access providers from liability for infringement by their users. The IITF Report concluded that "[i]f an entity provided only the wires and conduits--such as the telephone company, it would have a good argument for an exemption if it was truly in the same position as a common carrier and could not control who or what was on its system." IITF Report at 122. Here, perhaps, the analogy is not completely appropriate as Netcom does more than just "provide the wire and conduits." Further, Internet providers are not natural monopolies that are bound to carry all the traffic that one wishes to pass through them, as with the usual common carrier. See id. at 122 n. 392 (citing Federal Communications Commission v. Midwest Video Corp., 440 U.S. 689, 701, 99 S.Ct. 1435, 1442, 59 L.Ed.2d 692 (1979)). Section 111 of the Copyright Act codifies the exemption for passive carriers who are otherwise liable for a secondary transmission. 3 Melville B. Nimmer & David Nimmer, NIMMER ON COPYRIGHT s 12.04[B][3], at 12-99 (1995). However, the carrier must not have any direct or indirect control over the content or selection of the primary transmission. Id.; 17 U.S.C. s 111(a)(3). Cf. infra part I.B.3.a. In any event, common carriers are granted statutory exemptions for liability that might otherwise exist. Here, Netcom does not fall under this statutory exemption, and thus faces the usual strict liability scheme that exists for copyright. Whether a new exemption should be carved out for online service providers is to be resolved by Congress, not the courts. Compare Comment, "Online Service Providers and Copyright Law: The Need for Change," 1 SYRACUSE J.LEGIS. & POL'Y 197, 202 (1995) (citing recommendations of online service providers for amending the Copyright Act to create liability only where a "provider has 'actual knowledge that a work that is being or has been transmitted onto, or stored on, its system is infringing,' and has the 'ability and authority' to stop the transmission, and has, after a reasonable amount of time, allowed the infringing activity to continue' ") with IITF Report at 122 (recommending that Congress not exempt service providers from strict liability for direct infringements).

16. The court further notes that Playboy has been much criticized. See, e.g., L. Rose, NETLAW 91-92 (1995). The finding of direct infringement was perhaps influenced by the fact that there was some evidence that defendants in fact knew of the infringing nature of the works, which were digitized photographs labeled "Playboy" and "Playmate."

17. To the extent that Sega holds that BBS operators are directly liable for copyright infringement when users upload infringing works to their systems, this court respectfully disagrees with the court's holding for the reasons discussed above. Further, such a holding was dicta, as there was evidence that the defendant knew of the infringing uploads by users and, in fact, actively encouraged such activity, thus supporting the contributory infringement theory. Id. at 683.

19. Despite that uncertainty, the IITF Report recommends a strict liability paradigm for BBS operators. See IITF Report at 122-24. It recommends that Congress not exempt on-line service providers from strict liability because this would prematurely deprive the system of an incentive to get providers to reduce the damage to copyright holders by reducing the chances that users will infringe by educating them, requiring indemnification, purchasing insurance, and, where efficient, developing technological solutions to screening out infringement. Denying strict liability in many cases would leave copyright owners without an adequate remedy since direct infringers may act anonymously or pseudonymously or may not have the resources to pay a judgment. Id.; see also Hardy, supra.

25. Netcom additionally argues that plaintiffs' theory of liability would have a chilling effect on users, who would be liable for merely browsing infringing works. Browsing technically causes an infringing copy of the digital information to be made in the screen memory. MAI holds that such a copy is fixed even when information is temporarily placed in RAM, such as the screen RAM. The temporary copying involved in browsing is only necessary because humans cannot otherwise perceive digital information. It is the functional equivalent of reading, which does not implicate the copyright laws and may be done by anyone in a library without the permission of the copyright owner. However, it can be argued that the effects of digital browsing are different because millions can browse a single copy of a work in cyberspace, while only one can read a library's copy at a time. Absent a commercial or profit-depriving use, digital browsing is probably a fair use; there could hardly be a market for licensing the temporary copying of digital works onto computer screens to allow browsing. Unless such a use is commercial, such as where someone reads a copyrighted work online and therefore decides not to purchase a copy from the copyright owner, fair use is likely. Until reading a work online becomes as easy and convenient as reading a paperback, copyright owners do not have much to fear from digital browsing and there will not likely be much market effect. Additionally, unless a user has reason to know, such as from the title of a message, that the message contains copyrighted materials, the browser will be protected by the innocent infringer doctrine, which allows the court to award no damages in appropriate circumstances. In any event, users should hardly worry about a finding of direct infringement; it seems highly unlikely from a practical matter that a copyright owner could prove such infringement or would want to sue such an individual.

Comments, notes, and questions

1. What exactly is the court's holding with respect to direct infringement? The court begins by describing the Copyright Act as a strict liability statute that does not require knowledge or intent, and it repeats throughout the opinion that knowledge is irrelevant to direct liability. Ultimately, however, the court refuses to find direct infringement despite the fact that defendants' servers admittedly make "copies" of the plaintiff's copyrighted work. What link does the court find missing here? Is there any difference between the approach taken by the court and an approach that would require knowledge as a requisite for direct infringement? In pondering these issues, you may want to review Sections 106 and 501 of the Copyright Act.

2. Can you think of any circumstances in which an internet service provider might be found liable under the RTC standard for direct infringement? In Playboy Enterprises, Inc. v. Russ Hardenburgh, Inc., 982 F. Supp. 503 (N.D. Oh. 1997), the court, while agreeing with the RTC standard, found direct infringement given defendants' "policies of active participation in the infringing activities":

"As a legal matter, the court would agree with Judge Whyte that a finding of direct copyright infringement requires some element of direct action or participation, for two primary reasons. First, the statute is cast in terms of activities which are reserved to copyright owners. 17 U.S.C. � 106. It follows that an infringer must actually engage in one of those activities in order to directly violate the statute. Setting up a computer bulletin board is not one of those activities. Merely encouraging or facilitating those activities is not proscribed by the statute. Second, it is the area of contributory liability which allows "the imposition of liability on certain parties who have not themselves engaged in the infringing activity." Sony Corp. v. Universal Studios, Inc., 464 U.S. 417, 435, 104 S.Ct. 774, 785, 78 L.Ed.2d 574 (1984) (footnote omitted). There would be no reason to bifurcate copyright liability into the separate categories of direct and contributory if any remote causal connection to copyright infringement could be analyzed under theories of direct infringement.
That being said, the facts in this case, unlike Frena, Sega, and Netcom, are sufficient to establish that Defendants themselves engaged in two of the activities reserved to copyright owners under 17 U.S.C. � 106. The court finds that Defendants distributed and displayed copies of PEI photographs in derogation of PEI's copyrights. This finding hinges on two crucial facts: (1) Defendants' policy of encouraging subscribers to upload files, including adult photographs, onto the system, and (2) Defendants' policy of using a screening procedure in which RNE employees viewed all files in the upload file and moved them into the generally available files for subscribers.
These two facts transform Defendants from passive providers of a space in which infringing activities happened to occur to active participants in the process of copyright infringement. Defendants admit that they were operating a service where the quantity of adult files available to customers increased the attractiveness of the service. Defendants actively encouraged their subscribers to upload such files. Defendants had control over which files were discarded and which files were moved into the general system. Defendants knew that there was a possibility that PEI photographs were being uploaded onto the system, but failed to adopt procedures which ensured that any and all PEI photographs would be discarded. It is inconsistent to argue that one may actively encourage and control the uploading and dissemination of adult files, but cannot held liable for copyright violations because it is too difficult to determine which files infringe upon someone else's copyrights."

982 F. Supp. at 512-513. Would the RTC court have agreed that these facts require a finding of direct liability? See also Playboy Enterprises, Inc. v. Chuckleberry Publishing, Inc., 939 F. Supp. 1032, 1039 (S.D.N.Y. 1996) (finding direct infringement by distribution, when (a) defendant "provides its own services, PLAYMEN Lite and PLAYMEN Pro, and supplies the content for these services," (b) "these pictorial images can be downloaded to and stored upon the computers of subscribers to the service," and (c) "Defendant actively invites such use: the Internet site allows the user to decide between viewing and downloading the images"); Playboy Enterprises, Inc. v. Webbworld, Inc., 968 F. Supp. 1171, 1175 (N.D. Tex. 1997) (Web site that exists "to provide its subscribers with adult images which are contained in the storage devices of its computers" found infringing the copyright in those images).

3. Consider the court's treatment of Playboy v. Frena. In Frena, the district court found a bulletin board operator liable under a direct infringement theory for infringement initiated by its users. The court did not address the right to reproduce, but focused exclusively on the rights of distribution and public display. The Frena court clearly held, however, that direct infringement does not require intent or knowledge:

"There is irrefutable evidence of direct infringement in this case. It does not matter that Defendant Frena may have been unaware of the copyright infringement. Intent to infringe is not needed to find copyright infringement. Intent or knowledge is not an element of infringement, and thus even an innocent infringer is liable for infringement; rather, innocence is significant to a trial court when it fixes statutory damages, which is a remedy equitable in nature."

839 F. Supp. at 1559.
Does the RTC court effectively distinguish this case? You should review the court's discussion of Playboy in both the section on copying and the section on public distribution.

4. As discussed by the RTC court, the two prior cases considering the question -- Playboy v. Frena and Sega v. MAPHIA -- had suggested that bulletin board operators and internet service providers could be liable for direct infringement based on postings initiated by their users. The MAPHIA decision cited by Judge Whyte involved a motion for preliminary injunction. On the plaintiff's later motion for permanent injunction, the MAPHIA court backed off from its strong language on direct infringement, clarifying that its earlier ruling had granted relief based on contributory infringement. 948 F. Supp. 923, 932 n.5 (N.D. Cal. 1997). The court agreed with RTC that a BBS operator could not directly infringe unless it "directly caused the copying to occur..." Id. at 932. The court found liability, however, based on a theory of contributory infringement.
Other decisions since RTC have generally followed its lead in finding no direct infringement absent some more active involvement by the defendant in its subscriber's infringement. See, e.g., Marobie-FL, Inc. v. National Assoc. of Fire Equipment Distributors, 983 F. Supp. 1167 (N.D. Ill. 1997) (no direct infringement when defendant "only provided the means to copy, distribute or display plaintiff's works," but "did not actually engage in any of these activities itself"); Playboy v. Hardenburgh (discussed supra); see also Lockheed Martin Corp. v. NSI, 985 F. Supp. 949, 962 n.7 (C.D. Ca. 1997) (noting in dictum: "Even though service providers directly provide the storage and communications facilities for Internet communications, they cannot be held liable merely for failing to monitor the information posted on their computers for tortious conduct.").

5. As a policy matter, should internet service providers risk liability for direct infringement whenever their users send or upload infringing copies? As discussed in Frena, the Clinton Administration's "White Paper" recommended that Congress not exempt on-line service providers from strict liability, at least at this early stage in the development of the Internet. Information Infrastructure Task Force, Intellectual Property and the National Information Infrastructure: The Report of the Working Group on Intellectual Property Rights 122-24 (1995) ("White Paper"). The drafters of the report believed that strict liability would give ISPs incentive to develop policies to minimize the risk of infringement by their users; the report also reflects a concern that if ISPs were exempt from liability, injured copyright owners might have no remedy for infringement committed by anonymous or pseudonymous posters or by posters with no resources to pay a judgment. Id. On the other hand, many commentators have criticized a strict liability regime, contending that it would unduly inhibit the development of Internet communications. See, e.g., Nina Elkin-Koren, Copyright Law and Social Dialogue on the Information Superhighway: the Case against Copyright Liability of Bulletin Board Operators, 13 Cardozo Arts & Ent. L. J. 345 (1995); cf. Ian C. Ballon, Pinning the Blame in Cyberspace: Towards a Coherent Theory for Imposing Vicarious Copyright, Trademark, and Tort Liability for Conduct Occurring over the Internet, 18 Hastings Comm./Ent. L. J. 729 (1996)(contending that "direct .. liability should not be imposed on an access or content provider unless there is some element of volition or causation present," but arguing that the facts in Frena and MAPHIA both met the test for direct infringement).

If you were the czar of federal copyright policy, would you make ISPs liable for direct infringement initiated by their users? Under some conditions? Never? Why or why not?

6. The court noted that vicarious liability is justified when a defendant "(1) has the right and ability to control the infringer's acts and (2) receives a direct financial benefit from the infringement." The court found a dispute of fact as to Netcom's ability to control its users acts, but found no evidence that it received a direct financial benefit from the infringement.
(a) Right and ability to control. What must a plaintiff show under RTC to establish that a defendant had a right and ability to control its users' acts? What acts by Netcom does the court find sufficient to raise a question of fact on this issue? What kinds of incentives does the court's standard create for internet service providers? Suppose, for example, that a BBS has from time to time removed infringing materials that its employees happen to notice. How might this affect its potential vicarious liability in future cases?
(b) Direct financial benefit. The court held that, primarily because Netcom charged a fixed fee, it did not "financially benefit" from infringement by its subscribers. What does this imply about ISPs that allocate charges on something other than a fixed fee basis? Does RTC suggest that an ISP that charges its users a certain amount per download, or a certain amount per posting, would be found to "receive[] a direct financial benefit" from their users' infringement?

7. Under RTC's contributory infringement rule, what should an ISP do if it (a) receives notice that infringing material has been posted on its server, but (b) believes that its user's posting is protected by the fair use doctrine? What advice would you give a client who faced such a situation and wanted to minimize its costs and potential exposure?

2. The Digital Millennium Copyright Act and ISP Liability

Title II of the Digital Millennium Copyright Act, which President Clinton signed into law on October 28, 1998, added a new section to the Copyright Act to provide certain optional "safe harbors" for Internet Service Providers. [Note: the DMCA refers to the amendment as Section 512; because Congress had added a new Section 512 in other legislation passed the same month, it subsequently passed a technical amendment to move the DMCA provision to Section 513.] You should read the relevant excerpts from the Copyright Office's Summary of the DMCA, and skim Title II of the DMCA, before considering the following questions.

1. Which of the safe harbors -- 512(a), 512(b), and/or 512(c) -- might have applied to the conduct at issue in RTC v. Netcom? Under the facts as we know them, would the applicable safe harbor(s) have exempted Netcom from liability? If so, why? If not, what would Netcom have had to do to enjoy the benefits of the safe harbor exemption(s)?

2. Are the ISP provisions of the DMCA really necessary? Does the DMCA give ISPs any protection that they did not have under existing law? On the flipside, does it impose any additional hardships on ISPs that wish to take advantage of its exemptions?
Suppose that a client -- the general counsel of an ISP -- approached you and asked whether she should take any action to ensure that she qualifies for the safe harbor provisions of the DMCA. What would you advise her? What might you want to know about her operations to help you answer her question? What characteristics can you identify of ISPs that are likely to benefit from the Act?

HYPO:
You are the general counsel for X, a fledgling ISP. X has consistently, and diligently, acted to remove all infringing materials from its servers upon notification, and has cut off all repeat infringers. X has also designated an agent, pursuant to section 512(c)(2), to receive notification of claimed infringement.
Just this morning, you received a letter from Author A, claiming that one of your users had posted infringing material on X's server. After investigating the claim, you found that the user had posted a critical commentary of one of A's recent books. You feel strongly that the user's commentary is protected by the fair use doctrine and does not infringe A's copyright in the book. Your CEO, however, is extremely wary of legal battles and wants to take a safe course. What options do you have (and what are the pros and cons of using those options) under the DMCA? Under RTC v. Netcom?

C. The Exclusive Right to Prepare Derivative Works

Section 101 of the Copyright Act defines a derivative work as:

a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgement, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a "derivative work."

17 U.S.C. section 101.

Derivative works appear in two contexts in the Copyright Act. Under Section 103, an author who creates a derivative work may obtain copyright protection for her new creation, as long as she had the legal right to use the underlying work. Id. section 103(a). The copyright in the derivative work "extends only to the material contributed by the author of such work, as distinguished from the preexisting material employed in the work, and does not imply any exclusive right in the preexisting material." Id. section 103(b). Derivative works, like any original work of authorship, must be "fixed" to qualify for copyright protection. Id. section 102(a).

This Section introduces the other role of derivative works: as one of the exclusive rights of copyright owners. Along with the rights of reproduction, distribution, and public display, Section 106 of the Copyright Act gives the copyright owner the exclusive right "to prepare derivative works based upon the copyrighted work." Id. section 106(2). A writer who translates a copyrighted novel, a musician who re-writes a song in a different musical style, and a filmmaker who adapts a novel into a movie all run the risk of infringement if they create their works without the permission of the underlying copyright owner. Id. If a court finds that they have infringed, moreover, these authors can claim no copyright in any improvements that they make to the underlying work. Id. section 103(a).

To infringe, a derivative work must "incorporate in some form a portion of the copyrighted work" and must bear "substantial similarity" to the original. Litchfield v. Spielberg, 736 F.2d 1352, 1357 (9th Cir.1984), cert. denied, 470 U.S. 1052 (1985); see also Vault Corp. v. Quaid Software Ltd., 847 F.2d 255, 267 (5th Cir. 1988). While fixation is required for a derivative work to qualify for copyright protection, at least one court has suggested that infringing derivative works need not satisfy the statutory definition; to infringe, however, a work must "incorporate[ the] protected work in some concrete or permanent form." Lewis Galoob Toys, Inc. v. Nintendo of Am., Inc., 964 F.2d 965, 967 (9th Cir. 1992).

Galoob v. Nintendo. Galoob involved an infringement claim by Nintendo against the makers of the "Game Genie," a device manufactured by Galoob, which allows players to alter features of Nintendo games. Players can, for example, change the number of lives allowed each character, the speed of the game, and the position of the character on the screen.

"The Game Genie functions by blocking the value for a single data byte sent by the game cartridge to the central processing unit in the Nintendo Entertainment System and replacing it with a new value. If that value controls the character's strength, for example, then the character can be made invincible by increasing the value sufficiently. The Game Genie is inserted between a game cartridge and the Nintendo Entertainment System. The Game Genie does not alter the data that is stored in the game cartridge. Its effects are temporary."

Id. at 967.

Nintendo claimed that the Game Genie created a "derivative work" of its game software by altering the game system's audiovisual display. The Ninth Circuit rejected Nintendo's claims. The court first held that derivative works need not satisfy the "fixation" definition to infringe. Id. at 968 ("[a] derivative work must be fixed to be protected under the Act, see 17 U.S.C. § 102(a), but not to infringe"). Nonetheless, the court held that an infringing derivative work "must incorporate a protected work in some concrete or permanent form." Id. at 967. Because the Game Genie "merely enhances the audiovisual displays (or underlying data bytes) that originate in Nintendo game cartridges," and given that "[t]he altered displays do not incorporate a portion of a copyrighted work in some concrete or permanent form," the court found that the Game Genie did not infringe Nintendo's copyright. Id. at 968.

Micro Star v. Formgen Inc., 154 F.3d 1107 (9th Cir. 1998). In 1998, the Ninth Circuit decided a case that called into question what it means to "incorporate a protected work in some concrete or permanent form." Micro Star, like Galoob, involved software that affected the appearance of a copyrighted video game, in this case Formgen's Duke Nukem 3D ("D/N-3D"). The allegedly infringing software, Nuke-It ("N/I"), contained "MAP" files that manipulated the images that D/N-3D sent to the computer screen. The Ninth Circuit described the interaction between the two programs:

"In order to understand FormGen's claims, one must first understand the way D/N-3D works. The game consists of three separate components: the game engine, the source art library and the MAP files. The game engine is the heart of the computer program; in some sense, it is the program. It tells the computer when to read data, save and load games, play sounds and project images onto the screen. In order to create the audiovisual display for a particular level, the game engine invokes the MAP file that corresponds to that level. Each MAP file contains a series of instructions that tell the game engine (and, through it, the computer) what to put where. For instance, the MAP file might say scuba gear goes at the bottom of the screen. The game engine then goes to the source art library, finds the image of the scuba gear, and puts it in just the right place on the screen. The MAP file describes the level in painstaking detail, but it does not actually contain any of the copyrighted art itself; everything that appears on the screen actually comes from the art library. Think of the game's audiovisual display as a paint-by-numbers kit. The MAP file might tell you to put blue paint in section number 565, but it doesn't contain any blue paint itself; the blue paint comes from your palette, which is the low-tech analog of the art library, while you play the role of the game engine. When the player selects one of the N/I levels, the game engine references the N/I MAP files, but still uses the D/N-3D art library to generate the images that make up that level." Id. at 1110.

Micro Star invoked Galoob in arguing that its MAP files were not derivative works: "Micro Star argues that, because the audiovisual displays in Galoob didn't meet the 'concrete or permanent form' requirement, neither do N/I's." The court disagreed:

"[W]hereas the audiovisual displays created by Game Genie were never recorded in any permanent form, the audiovisual displays generated by D/N-3D from the N/I MAP files are in the MAP files themselves. In Galoob, the audiovisual display was defined by the original game cartridge, not by the Game Genie; no one could possibly say that the data values inserted by the Game Genie described the audiovisual display. In the present case the audiovisual display that appears on the computer monitor when a N/I level is played is described -- in exact detail -- by a N/I MAP file.
"This raises the interesting question whether an exact, down to the last detail, description of an audiovisual display (and - by definition - we know that MAP files do describe audiovisual displays down to the last detail) counts as a permanent or concrete form for purposes of Galoob. We see no reason it shouldn't. What, after all, does sheet music do but describe in precise detail the way a copyrighted melody sounds? ... [T]he N/I MAP files describe the audiovisual display that is to be generated when the player chooses to play D/N-3D using the N/I levels. Because the audiovisual displays assume a concrete or permanent form in the MAP files, Galoob stands as no bar to finding that they are derivative works."

Id. at 1111-12.

Finally, the court quickly disposed of the argument that the MAP files did not in fact incorporate any of D/N-3D's expression:

"Micro Star makes much of the fact that the N/I MAP files reference the source art library, but do not actually contain any art themselves. Therefore, it claims, nothing of D/N-3D's is reproduced in the MAP files. In making this argument, Micro Star misconstrues the protected work. The work that Micros Star infringes is the D/N-3D story itself - a beefy commando type named Duke who wanders around post-Apocalypse Los Angeles, shooting Pig Cops with a gun, lobbing hand grenades, searching for medkits and steroids, using a jetpack to leap over obstacles, blowing up gas tanks, avoiding radioactive slime. A copyright owner holds the right to create sequels, ... and the stories told in the N/I MAP files are surely sequels, telling new (though somewhat repetitive) tales of Duke's fabulous adventures. A book about Duke Nukem would infringe for the same reason, even if it contained no pictures." Id. at 1112.

Comments, notes, and questions

1. Is the Ninth Circuit's reasoning in Micro Star persuasive? As the court explains, the N/I MAP files direct the location of copyrighted images on a screen, but do not themselves contain (or even describe) the artwork that comprises those images. At best, the MAP files invoke the images and direct them to a location on the computer screen. Do you agree with the court, then, that "whereas the audiovisual displays created by Game Genie were never recorded in any permanent form, the audiovisual displays generated by D/N-3D from the N/I MAP files are -- in the MAP files themselves"?

2. Consider an analogy. Suppose Claire starts a Web site called MONSTERZZZZ.com, and creates a monster character along with comic strips that tell the story of that monster's life. Suppose Mark comes along and develops his own Web site telling his own story of a monster-like character that includes hyperlinks to the strips in Claire's site. Mark's site does not have a copy of Claire's comic strip in it, but he clearly invokes her site (with the expression in it) in the course of his own skeletal story. Has Mark created an infringing derivative work? Does his work incorporate Claire's expression in some "concrete or permanent form"? Under the Duke Nukem case? Under your own view of the correct result? Why or why not?

3.Consider a non-cyberlaw analogy. You love music, and in your spare time at home, you enjoy "sampling" - creating mixes by playing overlapping snatches of various songs. You do not record these mixes; you simply enjoy playing them for your listening pleasure. You like one of these mixes so much that you send emails to fifty of your friends, with instructions to others on how to replicate the mix. They say something like, "play song X, seconds 1-15; at second 10 of song X, begin playing song Y simultaneously. After the 15 seconds of song X, start playing song Z, with song Y still playing. Switch from song Y to song A after another 30 seconds�." When the user follows your instructions, she ends up with the same "song" that you originally mixed. Have you, by writing your instructions, created a derivative work? The song as played is not embodied in any concrete or permanent form, but anyone hearing it can certainly recognize the expression of the writers of X, Y, and Z (indeed, their precise expression is used in the performance). And your instructions are embodied in a concrete or permanent form, but do they incorporate X, Y, or Z's protected expression?

REAL-WORLD HYPOTHETICAL: THIRD VOICE

"Third Voice" describes itself as a "free browser companion service that allows users to express thoughts and opinions through inline notes on any Web page." According to its developers: "Unlike existing forms of Web communication (e-mail, chat, instant messaging or message boards) and Web sites with read-only content, Third Voice empowers users to form inline discussions that weave together their opinions with existing content making the Web more meaningful." After signing up with the Third Voice service, users can post comments to be viewed on a particular spot on a Web site. Third Voice does not alter the code of the underlying Web site, nor does it replicate the original site on its server; instead, it stores the user comments on its server, along with location indicators for where the comments should appear when users view them in conjunction with a site. When a Third Voice user opens the notes on a Web page, it will see the Web page with comments overlaid.

Does Third Voice create infringing derivative works of the sites on which its users comment? How does the Third Voice technology compare to the MAP files in Micro Star?

In addition to its Web browsing capability, Third Voice allows users to print annotated Web pages. According to Third Voice: "if you open Third Voice notes on a Web page, those notes will be seen when you print the page. If you do not wish to print Third Voice notes, then you should turn the Third Voice client off before you print a Web page." Does this capability affect your view on the derivative work question? If so, why? Has Third Voice itself created a derivative work?

  1. Browsing, Linking, and Framing as Copyright Infringement

Can a user commit copyright infringement simply by browsing through Web sites on the Internet? MAI v. Peak certainly suggests the possibility; if a user makes a "copy" each time she loads a Web page into her desktop's RAM, she is arguably violating the site owner's exclusive right to reproduce. The RTC court acknowledged this possibility, but dismissed it as a threat to Web browsers:

"Absent a commercial or profit-depriving use, digital browsing is probably a fair use; there could hardly be a market for licensing the temporary copying of digital works onto computer screens to allow browsing. Unless such a use is commercial, such as where someone reads a copyrighted work online and therefore decides not to purchase a copy from the copyright owner, fair use is likely. Until reading a work online becomes as easy and convenient as reading a paperback, copyright owners do not have much to fear from digital browsing and there will not likely be much market effect. Additionally, unless a user has reason to know, such as from the title of a message, that the message contains copyrighted materials, the browser will be protected by the innocent infringer doctrine, which allows the court to award no damages in appropriate circumstances. In any event, users should hardly worry about a finding of direct infringement; it seems highly unlikely from a practical matter that a copyright owner could prove such infringement or would want to sue such an individual."
RTC v. Netcom, 907 F. Supp. at 1378 n.25.
Other commentators have suggested that Web site owners, in posting their works over the Internet, grant an implied license for users to access (and temporarily "copy") the materials in their sites. See, e.g., Eric Schlachter, The Intellectual Property Renaissance in Cyberspace: Why Copyright Law Could Be Unimportant on the Internet, 12 Berkeley Tech. L. J. 15, 49 (1997); see generally Maureen A. O'Rourke, Fencing Cyberspace: Drawing Borders in a Virtual World, 82 Minn. L. Rev. 609, 658-661 (1998) (discussing pros and cons of implied license approach to liability for linking).
Whether or not site owners would consider suing a user who happens to come upon their site, several site owners have taken action against parties that provide unauthorized deep links or framed links to their sites. "Deep links" occur when a party links users directly to an internal Web page, thereby bypassing the welcome page or "home page" for the site. Site owners dislike this practice because it prevents users from viewing the advertisements on their opening page; it also deprives the site owners of home page "hits," which often form the basis for advertising revenues. Out-of-date internal links may also malfunction, harming the site owner's goodwill among Internet users. See O'Rourke, Fencing Cyberspace, at 644. "Framing" is the practice of linking to another party's site, while maintaining a "frame" with the linking party's advertising and/or other materials surrounding the linked site. Frames often cut off the advertising and other content on the linked party's site, thereby again annoying the framed site's owner.

No U.S. court has yet addressed the legality of "deep linking" under the copyright laws. Only one case, in the Central District of California, has considered liability for framing:

Futuredontics, Inc. v. Applied Anagramics, Inc.
45 U.S.P.Q.2D (BNA) 2005, 1998 U.S. Dist. LEXIS 2265, 1998 WL 132922 (C.D. Cal. 1998)

COLLINS, District Judge

After reviewing the materials submitted by the parties and the case file, it is hereby ORDERED that [Defendants'] Motion to Dismiss is DENIED.

I. Procedural Background

Plaintiff filed its First Amended Complaint ("FAC") on December 2, 1997. Plaintiff's FAC alleged causes of action for: (1) violation of the Lanham Act, 15 U.S.C. � 1125(a); violation of California Business and Professions Code §§17200 and 17500; and (3) copyright infringement. On December 18, 1997, Defendants filed the instant Motion to Dismiss, or in the alternative, for Judgment on the Pleadings against Plaintiff's Third Claim for Relief. * * *

II. Plaintiff's Allegations

Plaintiff's FAC in general alleges that Plaintiff operates a dental referral business utilizing the anagramatic phone number "1-800-DENTIST." � In early 1996, Plaintiff decided to establish an Internet site to advertise its dental referral business. Plaintiff's site consists of a number of web pages containing graphics and text, which are copyrightable subject matter. Plaintiff registered its copyrighted web pages.

AAI established its own site sometime after March 25, 1997.

The AAI web site includes a "link" through which AAI reproduces web pages from the Futuredontics Site within a "frame" ("AAI Frame Page"). The AAI Frame Page includes a frame around a reproduction of the web page from the Futuredontics Site. The frame includes AAI's logo, information on AAI, and "links to all of AAI's other web pages. . . . Futuredontics has never authorized AAI to reproduce the Futuredontics Site on the AAI Frame Page.

* * * Plaintiff specifically alleges that Futuredontics is the owner of the copyrighted material comprising the web pages on the Futuredontics Site. Plaintiff also alleges that AAI and the other defendants "are willfully infringing Futuredontics' copyright in the material on its web pages by copying that material to the AAI Frame Page and reproducing it there without the permission of Futuredontics."

III. Discussion

C. Analysis

To establish copyright infringement, Plaintiff must prove (1) that Plaintiff owned the copyrights, and (2) that Defendants copied Plaintiff's copyrighted work. Smith v. Jackson, 84 F.3d 1213, 1218 (9th Cir. 1996). A copyright is infringed when a person other than the owner violates any of the exclusive rights conferred by copyright. 17 U.S.C. � 501(a). A copyright owner has several exclusive rights, including the exclusive right to "prepare derivative works based upon the copyrighted works." 17 U.S.C.� 106(2).

Defendants contend that Plaintiff's copyright infringement claim should be dismissed because the framed link does not create a derivative work.

The Copyright Act defines a "derivative work" as:

a work based upon one or more preexisting works such as . . . art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a "derivative work."

17 U.S.C. � 101.

The parties sharply dispute what function AAI's framed link serves. Defendants contend that AAI's window or frame provides a "lens" which enables Internet users to view the information that Plaintiff itself placed on the Internet. Plaintiff's complaint, however, alleges that defendants reproduce its copyrighted web page by combining AAI material and Plaintiff's web site. ("The AAI web site includes a "link" through which AAI reproduces web pages from the Futuredontics Site within [the AAI Frame Page]. The AAI Frame Page includes a frame around a reproduction of the web page from the Futuredontics Site.").

The parties cite to several cases which purportedly support their interpretation of the function AAI's framed link serves. None of these cases, however, is directly on point.

The parties discuss the applicability of Mirage Editions, Inc. v. Albuquerque A.R.T. Co., 856 F.2d 1341, 1343 (9th Cir. 1988). In Mirage, the Ninth Circuit held that transferring and affixing art images with glue to ceramic tiles constituted "the creation of a derivative work in violation of the copyright laws." Id. at 1343-44. * * * Mirage is distinguishable from the present case. In this case, AAI has not affixed an image to a ceramic tile, rather AAI appears to have placed an electronic frame or border around Plaintiff's web page.

Defendants primarily rely on Louis Galoob Toys, Inc. v. Nintendo of America, Inc., 964 F.2d 965, 968 (9th Cir. 1992). In that case, the Ninth Circuit held that a Game Genie which merely enhances audiovisual displays which originate in Nintendo game cartridges does not constitute a derivative work because, in part, it does "not incorporate a portion of a copyrighted work in some concrete or permanent form." Id. at 968 (emphasis added). The Court also noted that the Game Genie could not duplicate or recast a Nintendo game's output. Galoob did distinguish Mirage and noted that the Mirage decision would have been different had the plaintiff "distributed lenses that merely enabled users to view several art works simultaneously." Id.

Nevertheless, Galoob, like Mirage, is distinguishable from the instant case. Galoob does not foreclose Plaintiff from establishing that AAI's web page incorporates Futuredontic's web page in some "concrete or permanent form" or that AAI's framed link duplicates or recasts Plaintiff's web page. Id.

For these reasons, the Court finds that the cases cited by the parties do not conclusively determine whether Defendants' frame page constitutes a derivative work.*** Therefore, the Court determines that Plaintiff's Third Claim for Relief sufficiently alleges a claim for copyright infringement.3

IV. Conclusion

For all these reasons, the Court hereby DENIES Defendants' motion to dismiss Plaintiff's copyright infringement claim and DENIES Defendant's alternative motion for judgment on the pleadings with respect to that claim.

Footnotes:

3 Because the Court finds that Plaintiff's complaint sufficiently alleges a copyright infringement claim, the Court need not consider Plaintiff's alternative claim that the complaint alleges copyright infringement based on unauthorized reproduction. Opposition at 9-10; see also 15 U.S.C. � 101 (defining "copies" as "material objects . . . in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term "copies" includes the material object . . . in which the work is first fixed").

Comments, notes, and questions

1. Does a framed link create an unauthorized derivative work in violation of &Sect; 106? Do Galoob and Formgen shed any light on the question?
2. Another recent case that promised to resolve the framing question disappeared when the parties settled out of court. In Washington Post Co. v. Total News, Inc., No. 97 Civ. 1190 (PKL) (S.D.N.Y. complaint filed February 20, 1997), Washington Post and a number of other news agencies sued the operators of the Web site totalnews.com for copyright infringement and a host of other claims, based on Total News' use of framed link to connect to the plaintiffs' news stories. According to the complaint:

"At the heart of Defendants' wrongful conduct is a practice known as "framing" that causes Plaintiffs' websites to appear not in the form that Plaintiffs intended, but in an altered form designed by Defendants for their own economic advantage. The totalnews.com website consists of lists of numerous "name-brand" news sources, including the famous trademarks exclusively associated with Plaintiffs in the public mind. When a user of totalnews.com "clicks" on one of those famous trademarks with the computer mouse, the user accesses a Plaintiff's corresponding website. (In Internet parlance, the trademarks here function as "hyperlinks": areas on the screen that, when clicked on, take the user directly to another website.) Plaintiff's site, however, does not then fill the screen as it would had the user accessed Plaintiff's site either directly or by means of a hyperlink from a website that does not "frame" linked sites. Nor does Plaintiff's URL appear at the top of the screen as it normally would. Instead, part of Plaintiff's site is inserted in a window designed by Defendants to occupy only a portion of the screen. Masking part of Plaintiff's site is the totalnews.com "frame," including, inter alia, the "Total News" logo, totalnews.com URL, and advertisements that others have purchased from Defendants." Id. � 30.

In June 1997, the parties settled the case, with the news organizations agreeing to allow defendants to continue to link to their sites and the defendant agreeing to stop its practice of framing. Under the settlement:

"Defendants agree permanently not to directly or indirectly cause any Plaintiff's website to appear on a user's computer screen with any material (e.g. Universal Resource Locator (URL), text, graphics, pop-up window, audio, video or other) supplied by or Associated with Defendants or any third party, such as an advertiser, acting in privity with Defendants are under Defendants' direct or indirect control; in particular, Defendants agree permanently to cease the practice of "framing" Plaintiffs' websites as that practice is described in the complaint in this case." Settlement � 3.

    1. In Shetland Times v. Shetland News, the Shetland Times operated a news-oriented Web site. Its competitor, the Shetland News, began to "include[ ] among the headlines on their front page a number of headlines appearing in recent issues of The Shetland Times as reproduced on the [Shetland Times] web site. These headlines are verbatim reproductions of the [Times] headlines as so reproduced. A caller accessing the [News] web site may, by clicking on one of those headlines appearing on the [News] front page, gain access to the relative text as published and reproduced by the [Times]. Access is so gained and subsequent access to other such headlines also gained without the caller requiring at any stage to access the [Times'] front page [and the advertisements that appear therein]."
    2. The court granted an injunction, not based on a finding of derivative work infringement, but because it found the Times' headlines protected against copying. Because the News had copied the Times headlines onto its site, it had infringed on the Times' exclusive rights. The court thus avoided the more difficult question of whether the links alone could provide a basis for liability. This case, like TotalNews, settled before the court issued a final judgment. Under the settlement, the News was allowed to link to Times stories if it met three conditions: (a) links to individual stories must be accompanied by a legend 'A Shetland Times Story' below the headline, in the same size as the headline; (b) a button must appear next to each headline, showing the Shetland Times masthead logo; and (c) the legend and the button must each be hypertext links to the Times headline page [where its advertisements appear].

    3. Another controversial practice nearly came before a court when Ticketmaster sued Microsoft for "deep-linking" to its web pages listing particular performances, thereby enabling users to bypass the Ticketmaster home page. Ticketmaster v. Microsoft, too, settled, with Microsoft agreeing to cease its deep-linking practices. See Bob Tedeschi's article about the settlement in the San Jose Mercury News web site.
    4. How would you decide these cases? Might an aggrieved site operator have a valid copyright claim against a party that frames or deep-links to its site? What would be the basis for such a claim? Keep these questions in mind as you study the fair use materials in the next section.
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