44 Clev. St. L. Rev. 197 (1996)

George Smirnoff III

I. INTRODUCTION *

II. A REVIEW OF COPYRIGHT LAW PRINCIPLES *

III. CLARIFICATION OF TERMS *

IV. NII COPYRIGHT CASES LEADING UP TO THE WHITE PAPER *

V. THE WHITE PAPER'S RECOMMENDATIONS *

VI. ON-LINE SERVICE PROVIDER LIABILITY--THE WHITE PAPER'S WEAKNESS *

VII. CONCLUSION *

As new forms of expression become commercially important, copyright law is challenged to protect the exploitation of the technologies providing the new medium.[*1] The current technological challenge for American copyright law is the National Information Infrastructure ("NII").

The National Information Infrastructure is best described as a network of networks used to carry digital transmissions through thousands of computer networks using a common set of protocols.[*2] The most common perception of the NII is the Internet or Information Superhighway. The use of the term, National Information Infrastructure, is meant not only to describe the current structure of interconnected computer networks, but also to encompass the new forms the NII may take in the future.[*3]

Currently, the Copyright Act[*4] does not expressly include works created, copied, transmitted, or performed on the NII. Yet, because of the relative ease of copying works available on the NII and distributing them worldwide at little or no cost, there is a need to adapt the Copyright Act to afford protection for this new medium.

To meet this latest demand, in February, 1993, President Clinton formed the Information Infrastructure Task Force[*5] (hereinafter the "Working Group") "to articulate and implement the Administration's vision for the National Information Infrastructure."[*6] On September 5, 1995, the Working Group released the White Paper,[*7] officially entitled, "Intellectual Property and the National Information Infrastructure: The Report of the Working Group on Intellectual Property Rights."[*8] The White Paper addresses special intellectual property concerns and issues raised by the development and use of the NII.[*9]

The White Paper argues that transmissions and publications on the NII should be afforded copyright protection.[*10] It concludes that the current Copyright Act can accommodate the technological changes, and that only minor clarification and limited amendment is needed.[*11] The White Paper unquestionably makes solid strides in the direction of affording copyright protection to works transmitted on the NII. The primary problem with the report, however, is its self-admitted conservatism in refusing to make recommendations concerning issues that may prove to be a passing fad.[*12] The Working Group's shortsightedness causes its recommendations either to be overly-restrictive or to fail to meet the needs of authors currently using the NII.

The most glaring omission in the White Paper is its failure to make any concrete recommendation regarding the liability of on-line service providers for the copyright infringement of their subscribers.[*13] Because of the Working Group's omission, the courts are left to determine the application of the Copyright Act to the NII when they have traditionally been able to look toward Congress for guidance.[*14]

In this Note, analysis of the White Paper falls into three parts. First, a summary of the relevant principles underlying copyright law, including a survey of cases pertinent to an analysis of copyright protection on the NII, will be presented. Second, the actual changes recommended by the White Paper will be analyzed. Third, the White Paper's failure to set forth the law regarding the potential liability of on-line service providers will be examined using subsequent cases which have attempted to establish appropriate liability.

Copyright protection finds its basis in the United States Constitution which provides that Congress has the power to "promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries."[*15] Since George Washington signed into law the first Copyright Act in 1790,[*16] copyright law has gone through many revisions to keep up with technological advances. The most recent major revision occurred in 1976,[*17] which gives us our present form of copyright law.

There are three basic requirements of copyright protection: expression, originality, and fixation.[*18] The concepts of expression and originality stem from the statutory qualification that protection only extend to "original works of authorship."[*19] Copyright protection centers fundamentally upon the original expression of an idea. "The expression is the key because only the expression is protected."[*20] The author must be expressing something that is original; the expression must originate from within the author.[*21]

The requirement of fixation means that to be afforded copyright protection, the work must be fixed in a tangible medium of expression.[*22] Protection then automatically attaches to an eligible work at the moment of fixation.[*23] A work is fixed "when its embodiment in a copy or phonorecord ... is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration."[*24]

Once copyright is established, the holder is granted a bundle of rights,[*25] which together give the author control over his/her creation. The bundle of rights applies to eight enumerated categories which generally include all written, musical, and performance works.[*26] Copyright protection attaches to the expression of the author. It does not extend to the idea or concept being expressed,[*27] nor to works consisting entirely of information that is common property and which contain no original authorship.[*28] And, as a matter of law, copyright protection generally is not extended to the United States Government.[*29]

Copyright protection, once created,[*30] endures for a term consisting of the life of the author and fifty years after the author's death if the work was created after January 1, 1978.[*31] When the term of protection expires, the work becomes part of the public domain.

After 1989, the use of copyright notice has become permissive rather than required and as a result, no marking or symbol is required.[*32] Copyright registration is simply a legal formality intended to make a public record of the basic facts of a particular copyright and is not required[*33] for copyright protection.[*34]

Probably the most important area of copyright law as it relates to the NII is the doctrine of fair use.[*35] While this is a far from clear area of the law, fair use can be generally seen as the use of a copyrighted work that is permitted without permission of the copyright holder.[*36] The underlying premise of fair use is that certain minor uses of a work should be permitted.[*37] In determining what is fair use, the courts look to four factors set out in Section 107 of the Copyright Act:[*38] (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used; and (4) the effect of the use upon the potential market for or value of the copyrighted work.[*39] All four factors must be considered to determine whether a particular use is permissible as fair use. Through a careful balancing of these four factors, courts determine if there has been fair use.[*40]

Generally, anyone who violates any of the exclusive rights of the copyright owner, as provided by the Copyright Act, may be liable for copyright infringement.[*41] Copyright infringement is determined independent of intent, and innocent infringement is infringement nonetheless.[*42] To be liable, the taking or copying of the copyrighted work must be more than de minimus.[*43] The copying must be substantially similar to the original work and need not be taken verbatim.[*44]

The copyright holder may seek civil remedies such as a preliminary or permanent injunction to restrain infringement.[*45] At any time before the final judgment in a copyright infringement action, the copyright owner may elect to recover actual damages and the profits of the infringer, or be awarded statutory damages.[*46]

Additionally, a copyright infringer may be subject to criminal sanctions if the infringement was willful and for the purposes of commercial gain.[*47] The requirement of conduct being willful or for financial gain is often cited as one of the problems with the current requirements for criminal liability.[*48]

Some conflict exists between the terminology used in the White Paper and that used by the courts. The term National Information Infrastructure was created by the Clinton administration.[*49] This term is intended to be an all inclusive reference embodying the various perceptions of what constitutes the Information Superhighway, or the Internet. Understanding that these terms are basically one and the same is important to the analysis of current case law which speaks in terms of the Internet. Thus, a brief review of the more common understanding of these terms is appropriate.

The term Internet is used to identify any collection of networks into a larger Wide Area Network ("WAN").[*50] The popular understanding of the Internet itself is as "a conglomerate of thousands of computer networks utilizing a common set of technical protocols to create a worldwide communications medium."[*51] The Internet is an outgrowth of a project from the 1970's called the Advanced Research Projects Agency (ARPA) in the United States Department of Defense.[*52] The ARPA network used standard protocols for communicating with other computers on the network. These standards have been classified together as the TCP/IP[*53] protocol, which is still the underlying protocol used today.[*54] Most computers on the Internet act as either a bulletin board system ("BBS")[*55] for posting messages and information, or as an advanced database providing interactive communications with anyone who accesses that computer.

Quickly becoming the most popular mode of accessing the NII is the World Wide Web ("WEB").[*56] "The World Wide Web is a hypertext based information service. It provides access to multimedia and complex documents and databases."[*57] The WEB provides a graphical interface for accessing the Internet. Text, illustrations, sounds, and videos may all be accessed through the WEB.[*58] The WEB presents a challenge to copyright law because each illustration, text, or sound may be dynamically linked to other servers on the NII even though they appear to be originating from the server the user is accessing.[*59] Dynamic links on a WEB page could be used to display, copy, distribute, or perform works elsewhere on the Internet without the copyright owner's knowledge.[*60]

The White Paper relies primarily on three recent decisions relating to copyright infringement of digital works.

The first decision, MAI Systems Corp. v. Peak Computer, Inc.,[*61] was rendered in 1992. This case is significant because of its holding in regard to copying information into a computer's RAM.[*62] MAI Systems Corp. ("MAI") was a manufacturer of computer equipment and the software to run the equipment.[*63] Peak Computer ("Peak") was a company that maintained computer systems for its clients. More than fifty percent of Peak's business consisted of maintaining systems manufactured by MAI.[*64] When computers manufactured by MAI needed repair, it was customary for Peak to load the MAI system software, supplied with the computer purchased by Peak's client, into the computer's RAM.[*65] MAI contended that when Peak loaded the copyrighted software into the computer's RAM, Peak made copies in contravention of MAI's license agreement which did not allow the copying of its software by third parties such as Peak.[*66]

The Ninth Circuit held that the "loading of copyrighted computer software from a storage medium (hard disk, floppy disk, or read only[*sic] memory) into the memory of a central processing unit ('CPU') causes a copy to be made."[*67] Copies made into a computer's RAM are sufficiently fixed to qualify as a copy under the Copyright Act.[*68]

The second case of importance is Playboy Enterprises, Inc. v. Frena.[*69] Defendant Frena operated a subscription bulletin board service (BBS) which was available to subscribers through telephone access.[*70] Once logged onto Frena's BBS, subscribers could view or download any of 170 computerized photographs which were copyrighted by Playboy Enterprises ("Playboy").[*71] The photographs were uploaded by Frena's subscribers to the BBS.[*72]

The district court held that because Frena supplied the product containing the copyrighted works, he was liable for the public display and distribution of the photographs in violation of Playboy's copyright.[*73] The court determined that it was inconsequential that Frena did not make the copies himself.[*74]

Frena defended that the maintaining of copies of the photographs on his BBS should qualify as a fair use.[*75] When the court balanced the four factors used to evaluate whether the posting of the photographs qualified as a fair use,[*76] it found that Frena's use did not qualify.[*77] Because Frena's bulletin board was for profit, the court concluded that there was a presumption that the use was for a commercial purpose.[*78] The entertainment aspect of the photographs and the fact that the taking required the photographs be used in their entirety, both weighed against Frena.[*79] Most important, however, was the court's finding that if there is unrestricted widespread distribution through the NII, there would be a substantial adverse impact on Playboy's market for the photographs.[*80] Important to the court was not the limited scope of Frena's BBS, but the potential harm in the aggregate if the use was permitted.[*81]

The third principal case involving the copyright protection of digital works is Sega Enterprises Ltd. v. Maphia.[*82] Sega Enterprises ("Sega") makes video games which it distributes on read-only memory cartridges that could be accessed by game machines also manufactured by Sega.[*83] Maphia operated a computer bulletin board that was linked to a system of other bulletin boards.[*84] Maphia encouraged his subscribers to upload entire Sega games to his bulletin board system and then sometimes would charge a fee, or would barter, for their download to other subscribers.[*85] To copy the games, Maphia sold an electronic duplicator so that subscribers could copy the games and upload them to the bulletin board.[*86] Among other things, Sega claimed that Maphia's actions were in violation of its copyright.[*87]

The Sega court concluded that Maphia's actions constituted contributory infringement because he induced, caused, or materially contributed to the infringing conduct of another.[*88] The copying of the computer programs was a prima facie infringement of Sega's copyright.[*89] Similar to the Playboy decision, the court in Sega found that there was not a fair use defense because of the commercial nature of the bulletin board and the likelihood of market harm, should such use become widespread on the NII.[*90]

The recommendations of the Working Group fall within six broad categories:[*91] (1) the transmission of copies and phonorecords; (2) public performance right for sound recordings; (3) library exemptions; (4) reproduction for the visually impaired; (5) criminal offenses; and (6) technological protection and copyright management information.[*92] Each of these broad areas is discussed and explained in detail, usually with only minor changes recommended. A significant exception is the recommendation for the creation of a new Chapter of the Copyright Act for technological protection. At the end of the discussion, the Working Group proposed model legislation to implement its recommendations.[*93]

The first set of recommendations is probably the least controversial[*94] and is intended primarily to recognize that works that are transmitted over the NII should be afforded copyright protection. The Working Group suggests that the Copyright Act be amended "to expressly recognize that copies or phonorecords of works can be distributed to the public by transmission, and that such transmissions fall within the exclusive distribution of the copyright owner."[*95] To accomplish its goal, the Working Group recommended the changing of two key definitions; transmit and publication.

The word transmit is to be amended to include the definition of a transmission of a reproduction.[*96] The current Copyright Act only defines what it means to transmit a performance or display.[*97] It does not recognize distribution over the NII, and the proposed amendment is intended to correct this shortcoming. Since the courts are already using the term transmit as a means of describing distribution on the NII,[*98] the Working Group's recommended change to the word transmit will serve to clarify its meaning for future adjudication.

The definitional change to publication[*99] follows naturally from the recognition that works can be transmitted across the NII. Under current copyright law, there is a question as to whether the display of copyrighted material on the NII is actually a publication, because, while millions of people may view a work, it may not actually change hands, which is a basis of publication.[*100] "Thus, a work that is only displayed or performed via the NII would not be considered published ... because a material object--a copy of the work--does not change hands."[*101] For instance, when viewing a WEB page,[*102] a copyrighted work may be displayed without actually being transferred into the permanent storage of the accessing computer.

To accommodate this discrepancy, the Working Group recommended that the definition of publication be amended to recognize that a work may be published through the distribution of copies to the public by transmission.[*103] Again, the definitional amendment of publication seems appropriate because it reflects the definitional standards currently being used by the courts.[*104]

Even though these definitional changes are largely uncontroversial, they do fall short in one regard. There is a question as to when a transmission would implicate the right to public performance as well as reproduction.[*105] For instance, in Playboy Enterprises, Inc. v. Frena[*106] the court held that storage on the defendant's system of infringing copies and the retransmission to other servers was not a direct violation of the right to reproduce a work, but was a violation of the copyright holder's distribution right.[*107] However, because of the technological requirement that to display the work, it must necessarily be stored in the user's computer RAM[*108] or on his or her hard drive, a copy is also being sent and, therefore, has in essence been copied.[*109] Thus, the work could be actually copied, distributed, and publicly performed from one viewing of a transmission. Distinguishing between public performance and copying might present problems for both licensing and in determining which of the copyright holder's exclusive rights are actually implicated and to what extent.[*110]

Sound recordings can be sent digitally across the NII and even listened to through the NII. In a typical situation, a person could connect to a World Wide Web site and download a song or sample of a sound that could then be played through the user's sound-capable computer.[*111] The Working Group recognized that transmission of sound recording over the NII may be an important compliment to current forms of distribution for phonorecords and may, in fact, replace some existing forms.[*112] The White Paper, therefore, recommends a change in the definition of transmit to include the transmitting of phonorecords.[*113]

Sound recordings, however, stand on a different ground than other copyrighted works because the author does not generally exercise a right to public performance.[*114] This anomaly in the law is generally accepted by the recording artists because of the free advertising artists receive when their phonorecords are publicly played.[*115] The Working Group believes that there is an inequity in copyright law created by this anomaly and that "the copyright owners of sound recordings should be able to decide for themselves, as do all other copyright owners, if 'free advertising' is sufficient compensation for the use of their works."[*116]

The Working Group's call for performance rights to be afforded to the creators of sound recordings in the same manner as they are to all other copyright holders is consistent with the current state of technology. Because the transmission is in digital form, the user who is accessing the digital recording not only receives the performance, but also a copy of the actual work. With the millions of users on the NII, a work could conceivably be distributed digitally an unlimited number of times. Having sounds transmitted over the NII means that display rights necessarily go hand in hand with distribution rights. To date, there appear to be no cases involving infringement of the distribution right of sound recordings over the NII that were not specifically stored for downloading.[*117] However, as technology continues to increase so that users can easily and inexpensively convert digital recordings to more transportable media, such as cassette tapes, issues may arise not only as to whether an artist's display rights are being violated, but also as to whether his or her distribution right is also violated.

The White Paper proposes to expand the library exemption set forth in Section 108[*118] of the Copyright Act to accommodate digital copies that might be kept in a library's digital holdings.[*119] The proposed recommendations would permit libraries to maintain three digital copies[*120] of a work for the purpose of preservation and/or replacement of a published work. The present library exemption limits the making of copies for archival purposes to facsimile reproductions.[*121] Thus, in the most basic form, the Working Group's recommendation to expand Section 108 is consistent with the Section's purpose of allowing libraries special exemptions to save and to preserve the original published work.[*122]

There is some question, however, as to whether allowing three copies is appropriate.[*123] Currently, even though there is a statutory limit of one copy, the practice among libraries is to make three copies for archival purposes: one copy is made available to the public; one copy is a back-up copy; and the third is the doomsday copy stored in an off-site, secure location.[*124] Presumably, the same process would be required for proper archival of digital works.

The Working Group recognizes the need to store more than one copy, especially when considering the potential volatility of digital recordings. Their amendment, however, increases the exemption for both digital and non- digital works.[*125] While the proposed amendment codifies industry practice, it may in fact result in libraries increasing their copying for archival purposes. Thus, the proposed amendment might better serve its purpose if it is changed to apply expressly to digital copies.[*126]

Additionally, the Working Group recommends that libraries be permitted to omit the notice of copyright if that notice does not appear on the copy or phonorecord reproduced.[*127] This change is intended to reflect the recent changes in the Copyright Act that do not require that works give notice of their copyright protection.[*128] This amendment is not needed because of the recent technological advances brought on by the NII, but instead brings consistency to the Copyright Act. Yet, if made into law, whether it is meant to apply exclusively to digital works should be clarified.

The Working Group proposes an amendment to the Copyright Act that would create a new Section 108(A) for the purpose of taking advantage of the benefits new digital technology could offer to the visually impaired.[*129] The proposed Section 108(A) provides an exemption for the visually impaired by allowing non-profit organizations to reproduce and distribute, at a reasonable cost, "a Braille, large type, audio or other edition of a previously published literary work in a form intended to be perceived by the visually impaired" if the copyright owner has not entered into the market for such editions within one year after the work's first publication.[*130] While this exemption may seem well intentioned and reasonable on its face, it is not very well thought-out.

There are several questions raised by the proposed legislation. First, the proposed amendment does not clearly grant access to digitized versions of works. Where the Working Group has gone to exhaustive lengths to include the ability to transmit works in digitized form in the definitions,[*131] it is surprisingly left out here.[*132]

Second, the use of the term visually impaired is inconsistent with other federal laws providing access to works for this audience, as well as Section 710 of the Copyright Act, which utilizes the term blind and physically handicapped to define the class eligible for benefits.[*133] The White Paper's inconsistent terminology will only cause confusion.

Third, the one year waiting period[*134] may severely lessen the value of the exemption. Blind and physically handicapped readers have the same interest in obtaining prompt and timely publications as do non-handicapped individuals.

Fourth, currently, none of the major government and non-profit producers of alternative versions for the blind and physically handicapped readers prepares materials in large print.[*135] There is a growing commercial market for the production of such works, which are enjoyed by a large cross- section of readers, both handicapped and non-handicapped.[*136] The inclusion of only non-profit groups seems inappropriate.

Fifth, the amendment does not clarify what types of organizations should be counted as non-profit.[*137] Currently, more than 95% of the reading materials produced for the blind and physically handicapped are produced by the government.[*138] Under the proposed amendment, however, they may not be included as a non-profit organization. The Working Group should have either included the United States Government expressly or by definition.[*139]

The proposed amendment seems to be inadequate and inconsistent with the general thoroughness displayed elsewhere in the White Paper. The only possible explanation for this section is found in a footnote[*140] which indicates that the visually impaired were the only users with a disability who provided comments or testimony concerning a need for a narrow exemption. With this in mind, it appears that the Working Group has simply attempted to appease a limited group of individuals who spoke up. The result is an amendment that raises more questions than it answers, including the question of how well the report was researched.

There is a gap in the Copyright Act's ability to reach criminal offenders. To be criminally liable, one must infringe "a copyright willfully and for purposes of commercial advantage or private financial gain."[*141] The gap in the current statute is that an offender may willfully infringe upon a copyright, even to a large scale, destroying any commercial market for a copyrighted work, and not incur any criminal liability if he or she does not do it for a commercial advantage. This situation occurred in the context of the NII in the case of United States v. LaMacchia.[*142]

In LaMacchia, a twenty-one year old student at the Massachusetts Institute of Technology ("MIT") who was an alleged computer hacker, used MIT's computer network to gain entrance to the Internet. LaMacchia used pseudonyms and an encrypted address to set up an electronic bulletin board. He then encouraged his correspondents on the Internet to upload popular copyrighted software applications, which he transferred to a second BBS[*143] for downloading. LaMacchia successfully set up an international-scale copying and distribution system for commercially distributed and copyrighted software.[*144] His scheme allegedly caused losses in excess of one million dollars for the copyright holders.[*145] Unfortunately, because LaMacchia could not be shown to have sought personally to profit from the scheme to defraud, he was not convicted under the wire fraud statute[*146] nor under the Copyright Act.

In the White Paper, the Working Group embraced a comment by the court in LaMacchia that criminal and civil liability should attach to multiple infringements absent a commercial motive.[*147] The LaMacchia court, however, refused to attach such liability concluding that there is a substantial case history in which the courts have looked to Congress to mandate the copyright laws.[*148] From the LaMacchia court's comment, the Working Group sought to institute a recommendation that criminal liability should attach to willful copyright violation even absent a commercial purpose.[*149]

What the Working Group did not comment on was a different suggestion by the LaMacchia court. The court commented that expansion of criminal liability would serve to criminalize the conduct of not only persons like LaMacchia, but also the myriad of home computer users who succumb to the temptation to copy even a single software program for private use. It is not clear that making criminals of a large number of consumers of computer software is a result that even the software industry would consider desirable.[*150]

A general fear exists that tighter copyright laws and a stricter interpretation of fair use will criminalize the daily activities of everyone who uses the Internet to send their electronic messages.[*151] The underlying premise is that most users will be unable, or at least unwilling, to scrutinize their electronic messages for infringing materials. Indeed, enforcement of the letter of the law as proposed in the White Paper might succeed in criminalizing such behavior. The question lies, however, in how the Working Group's proposal of a $5,000 minimum retail value for criminal liability would be imposed.[*152]

To answer the fear of criminalizing what is commonly seen as normal behavior, there are at least two solutions, one of which may have been effectively provided for by the White Paper's proposal of a $5,000 minimum. The first possibility can only be acted upon by Congress. Instead of simply having the willfulness requirement applied to every case of copyright infringement, the statute should have a section for willfulness without commercial intent as a crime that requires a certain minimum distribution, or having a substantial[*153] economic harm. Then, the substantial economic harm could be defined as having a minimum threshold of $5,000.

The purpose of including a separate section for willfulness without criminal intent is that it leaves the possibility that criminal liability could be imposed as it would be under the current law. In other words, if the infringement is willful and for a commercial purpose, criminal liability would be imposed independent of the actual economic damage, even if less than $5,000.[*154] The purpose of this distinction is that there are instances where the entire commercial market is less than an arbitrary, unchanging amount of $5,000. For example, in a setting where the copyrighted work is for a limited audience,[*155] the law would protect against the taking of the entire market while supporting the incentive to create useful arts for the smaller market.[*156]

The setting of an arbitrary minimum does not promote the constitutional purpose of copyright law in protecting useful arts at all levels because there could be material infringement causing damages less than $5,000. If willfulness is punished when present, but a threshold minimum is required when willfulness is absent, fears would be eased because the innocent act of sending electronic messages over the NII would not be criminalized. As a result, electronic messaging across the NII would still be encouraged, while at the same time the principles of copyright would be protected.

The second possibility is simply to amend fair use[*157] by exempting the distribution of copyrighted works of a limited value for the purpose of personal communication. As the law of fair use now stands, it might very well allow for slight infringements such as the attaching of a copyrighted work to an electronic message for the limited purpose of passing information along to the person receiving the message.[*158] But, without amending the law there will always be questions as to what constitutes a commercial use and what would be a substantial impairment of future market value.[*159] Congress, therefore, could eliminate the potential confusion and the potential flood of court cases by setting forth what is acceptable in electronic messaging.[*160] By limiting the number of recipients and the scope of the taking, copyright law would spell out what is acceptable behavior in the NII. With the use of the NII surpassing 20 million users in the United States alone,[*161] an amendment to fair use specifically setting forth the allowance for electronic messaging on the NII would be appropriate.

The primary purpose of the Working Group's last two recommendations is to promote the publication of copyrighted information on the NII by giving the copyright holder adequate protection against infringement.[*162] To accomplish this goal, the Working Group proposes the addition of a Chapter 12 to the Copyright Act which would be composed of two sections. The first section would prohibit technology that could be used to bypass any encryption or other technology used to protect the copyrighted work, and the second section would prohibit the disturbance or alteration of copyright management information[*163] associated with the copyrighted work.[*164] The result of reading these two provisions together is that the copyright holder is offered protection under the Copyright Act and may control access to his or her copyrighted work on the NII. The underlying purpose of the revisions is to make copyright information easily available to users of the work to discourage copyright violation due to an inability to discover the protection of the work.[*165]

The first area of legislation builds off the basic assumption that technological means of protecting copyright will be used to prevent unwanted access to the author's work.[*166] The Working Group concluded that effective protection of copyright on the NII will have to be accomplished by a combination of both law and technology.[*167] Technological protection is needed to meet the challenges presented in the digital environment by the ease, speed, and accuracy of copying at multiple, anonymous locations.[*168]

The recommendation essentially prohibits the use of any technology whose "primary purpose is to avoid, bypass, remove, deactivate, or otherwise circumvent, without authority of the copyright owner or the law, any process, treatment, mechanism or system which prevents or inhibits the violation of any of the exclusive rights under Section 106."[*169] Such protection is not unprecedented under the Copyright Act. The Copyright Act already protects sound recordings and musical works by prohibiting the circumvention of any digital protection inhibiting the making of copies.[*170] The extension, thus, is a logical one for works that can be digitally altered, such as those available on the NII. The primary difficulty with this legislation is the question of what should be considered the primary purpose of the device.

The Supreme Court has already set a precedent by holding that works that might have the ability to infringe upon the exclusive rights of copyright holders may be imported and sold in the United States if the primary purpose is for non-infringing, legitimate purposes.[*171] Additionally, the Working Group noted that liability will not be imposed if an individual uses technology to circumvent digital copyright protection if it is permitted at law.[*172] Further, questions arise as to what should result when a work is in the public domain or can be legitimately used, but such use is not possible because of technological roadblocks.

There is also a question of who may bring an action for a violation of the proposed Chapter 12.[*173] The proposed legislation states that anyone who has been injured may bring the action.[*174] This potentially means that persons other than the copyright holder may bring the action. This could result in anyone who holds a license, or some limited use of the copyright, could bring an action in addition to the copyright holder.[*175] Instead of one case for copyright infringement, there would be the possibility of many suits, all for the same infringement. This is most likely not desired by anyone involved and would serve to contribute to our already overcrowded court system.

With the use of technological protection also comes the problem of limiting the fair use of the work because of the inability to access the copyrighted work. The Working Group considered the argument that fair use would be impeded with the use of technological protection techniques.[*176] It rationalized this compromise by noting that such a limitation is a necessary evil and that it would be acceptable for an individual to use a circumvention device because of the lawful purpose.[*177]

If works are going to be protected through encryption or other techniques, one of the necessary compromises is that the works will be limited for other purposes. But, the Working Group does not require that some protection technique be used, it only permits it.[*178] The courts support the principle of copyright law that the owner of a copyright has no obligation to make his work available to the public.[*179] The copyright holder, therefore, has the same choice he or she has always had. The new encryption techniques are only being protected by the Copyright Act because they are seen by the Working Group as the only form of protecting work distributed over the NII.[*180] Since encryption is the primary means, if not the only means, of protection, the law should support it in the same way it has done for phonorecords.[*181]

Once the Working Group provided for the protection of works on the NII, it focused on how copyright should be identified in digital works.[*182] To accomplish its goal, the Working Group recommends that copyright holders utilize various means of providing notice through the use of copyright management information.[*183] The purpose of supplying such information is so that the public may gain access to, and enjoy, works while respecting the rights of authors and other owners.[*184] Additionally, the best interest of the copyright holder demands easy access to information because without relative ease in obtaining such copyright information, people are more likely to forego the NII's benefits and resort to unauthorized uses.[*185] Any violation or alteration of the copyright management information would result in criminal liability.[*186]

This final recommendation is not novel. In fact, there is considerable, and possibly even confusing, overlap with current sections of the Copyright Act. The overlap occurs with Section 506(C) which makes it unlawful for any person to, "with fraudulent intent, place on any article a notice of copyright or words of the same purport that such person knows to be false,"[*187] or to publicly distribute or import for distribution, with fraudulent intent, "any article bearing such false notice or words."[*188] Further, Section 506(D) imposes criminal liability on "any person who, with fraudulent intent, removes or alters any notice of copyright appearing on a copy of a copyrighted work."[*189] These sections are generally broadened by the proposed amendments, which might be presumed to supersede current parts of Section 506.[*190]

Because of the overlap, when Congress eventually considers the legislation, it will be faced with the question of whether to include the new proposed criminal liability sections or to simply amend the current Section 506 to include the broader applications. Of course, the alternative may also be reasonable. Repeal Section 506 and build the remaining unduplicated sections into the proposed Section 1202. The Working Group seems to have failed to examine the implications even within the scope of existing sections of the Copyright Act.

Finally, there is also an inconsistency in having a criminal penalty for violating the integrity of copyright management information without having one for circumventing copyright protection technology.[*191] This inconsistency does not make sense when considering that the circumvention of copyright protection systems would potentially cost the copyright holder greater financial loss than simply having the notice corrupted. If the protection is circumvented, the work may be displayed, distributed and published, causing financial harm to the author, whereas altering the notice would not necessarily cause or result in copying to the author's financial disadvantage. Again, the inconsistency seems to indicate a lack of thoroughness in the proposal and will need attention by Congress to be corrected.

To the surprise of many, the White Paper did not introduce any recommendations for limiting on-line service provider liability.[*192] There is little denying the importance of on-line service providers in developing the NII. Instead of recognizing the important role service providers play in providing access to the NII, the Working Group determined that there should be no special provision in the Copyright Act regarding on-line service provider liability.[*193] The Working Group reasoned that the current law holding other similar industries[*194] strictly liable should be applied to the on- line service provider, thus holding on-line service providers strictly liable for direct infringement.[*195] The choice to do nothing was not what the industry sought.[*196] On-line service providers are generally considered to be different from other service providers because of the many different types of transmissions carried on the NII.

At the time the White Paper was released, there were two copyright cases pending that involved on-line service providers.[*197] Within two months after the White Paper was released, both were concluded.[*198] Where the White Paper refused to define a more limited liability position for on-line service providers, the courts have taken on the responsibility of creating the needed definition.

In Religious Technology Centers v. Netcom On-Line Communication Services, Inc. ("Netcom"),[*199] a collection of published and unpublished works of L. Ron Hubbard, the late founder of the Church of Scientology, were uploaded onto a BBS and were given access to the Internet through Netcom. The plaintiff brought an action against the uploader of the documents, Dennis Erlich ("Erlich"),[*200] the bulletin board system of which he was a member ("BBS"), and Netcom On-line Communications Services ("Netcom"), the on-line access provider giving the BBS access to the Internet.[*201] The infringing material was uploaded into a Usenet Newsgroup,[*202] which was distributed to other Usenet servers throughout the world. Erlich's "initial act of posting a message to the Usenet resulted in the automatic copying of[*defendant's] message from[*the BBS] onto Netcom's computer and onto other computers on the Usenet."[*203] Usenet servers maintained the postings from Newsgroups for a period of eleven days, and the BBS maintained the message for three days before deleting them from memory.[*204]

The court noted that Netcom was not like other on-line service providers, such as CompuServe, America Online, and Prodigy in that Netcom did not create or control any content of the information available to its subscribers.[*205] Netcom did, however, have the ability to suspend a user's access privileges when he or she violated one of Netcom's terms and conditions. When the plaintiff notified both Netcom and the BBS, neither took any action claiming that they could not shut out Erlich without shutting out all users of the BBS.[*206] With these facts, the court faced the issue of 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."[*207]

The court first addressed direct liability for copyright infringement. The key issue for direct infringement was whether Netcom had knowledge that the material was infringing. The court concluded that Netcom and the BBS were unaware of what their subscribers did while accessing the Internet.[*208] The court likened Netcom's act of creating a system that automatically and uniformly created temporary copies of all data sent though it as "not unlike that of the owner of a copying machine who lets the public make copies with it."[*209]

The Netcom court's decision not to hold an on-line service provider directly liable for copyright infringement appears to be contrary to the White Paper's recommendation.[*210] The Working Group relied on Playboy Enterprises, Inc. v. Frena[*211] concluding that the holding in Playboy was to make the BBS operator "directly liable for the display of unauthorized copies on the services, as well as the distribution of unauthorized copies to subscribers."[*212] The White Paper saw no reason not to hold all service providers to strict liability.[*213]

Instead, the court in Netcom distinguished Playboy, determining that while a BBS operator may be directly liable for distributing or displaying public works as in Playboy, "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 the infringing user."[*214]

The plaintiff also argued that Netcom and the BBS should be held strictly liable because they were imparted with knowledge of the infringement when they received a letter asking that the infringing material be removed.[*215] The court dismissed this argument because knowledge was not an element of direct infringement.[*216] Knowledge could only go to show contributory infringement.[*217]

Next, the court considered contributory infringement.[*218] The court held that Netcom and the BBS could be contributory liable if the plaintiff could prove that Netcom had knowledge of the defendant's infringing material, because either Netcom or the BBS could have canceled the defendant's infringing message and thereby stopped an infringing copy from being distributed worldwide.[*219] The ability of Netcom and the BBS to stop the message represented, in the court's view, substantial participation in the infringing activity.[*220]

The court's reliance on the knowledge of the activities of users is contrasted with the White Paper, which relied on the ability to control to conclude that on-line service providers should be held strictly liable.[*221] The White Paper reasoned that the only ones in a position to control such infringing material are the service providers.[*222] The Working Group ignored the knowledge requirement the court relied on and used this factor to justify direct infringement liability.[*223]

The court then considered the possibility of vicarious liability. Vicarious liability exists for 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.[*224] Whereas the court found that Netcom and the BBS operator did potentially have the power to control the infringer's acts,[*225] it reasoned that neither received any financial benefit from the infringer's acts and therefore neither could be vicariously liable.[*226]

A different conclusion is expressed in the White Paper.[*227] In the White Paper, the Working Group concluded that on-line service providers benefited from offering subscribers the ability to upload files, because that ability attracted subscribers and usage for which they are paid.[*228] The court, however, reasoned that the on-line service providers did not benefit from the actual transmission of the infringing material, and the ability to transmit infringing material was not used to attract or enhance the value of the services offered.[*229] The court's different conclusion of what constituted financial benefit led it to hold that an on-line service provider that does nothing more than provide access to the Internet cannot be vicariously liable.[*230]

Finally, the court considered whether Netcom had a fair use defense. The court began by pointing out that the fair use considerations should be focused on whether Netcom's actions qualified as fair use and not on whether Erlich himself engaged in fair use.[*231] Identifying the four factors to be considered to determine fair use,[*232] the court concluded that the first two factors, the nature of the copyrighted work and the amount and substantiality of the portion used, were to be regarded in Netcom's favor, because Netcom's use of copyrighted material served a completely different function than that of the plaintiff's.[*233] The third factor, the amount and substantiality of the portion used, was also held to be in Netcom's favor because in order for Netcom to fulfill its purpose as a Usenet provider, it had to copy the postings in their entirety.[*234]

The fourth factor, the effect of the use on the potential market for the work, was, however, found to be possibly in the plaintiff's favor and, therefore, an issue to be determined by the finder of fact.[*235] The court found compelling the plaintiff's evidence that although the Church currently faced no competition, there was potential that the infringing materials could be used in the future by the Church's competitors and therefore cause financial damage to the plaintiff.[*236]

The court concluded that there remained questions of fact as to whether Netcom knew, or should have known, of the infringing material from the plaintiff's letter, whether Netcom substantially participated in the infringement, and whether Netcom had a valid fair use defense.[*237] The court, however, did find that the plaintiff's claims of direct and vicarious infringement failed.[*238]

The Netcom court's heavy reliance on knowledge[*239] by an on-line service provider may have been the primary factor causing CompuServe to settle its class action in Frank Music Corp. v. CompuServe, Inc.[*240] In this case, the plaintiff, Frank Music, alleged that copyright rights for more than 900 songs owned by the publisher, members of the Harry Fox agency, were infringed and that CompuServe was responsible for the alleged infringement by letting its subscribers copy the songs without having its subscribers pay royalties to the copyright holders.[*241]

The settlement agreement entailed CompuServe's paying a cash settlement of $568,000, or $500 for each song alleged to have been infringed, and required the two parties to work together to assist CompuServe in setting up an electronic licensing mechanism under which forum operators[*242] would help arrange permission for downloading the copyrighted works.[*243] The initial mechanical rate was to be $6.95 per song or download.[*244] This marks the first time in which a major on-line service company has instituted a program for obtaining permission for use of copyrighted work.

CompuServe's active efforts to recognize the rights of copyright holders who upload information onto its system seems to recognize the distinction made by the court in Netcom.[*245] CompuServe and other major on-line service providers exhibit a great deal of control over the content of their services. Such knowledge and control might make them liable for direct copyright infringement, contributory infringement, and even vicarious infringement.[*246] In the end, the liability that would be imposed would not be all that different from the strict liability requirements that were recommended by the Working Group in the White Paper.[*247] The primary distinction drawn by the court in Netcom is the distinction between types of service providers based on the knowledge and control they may have over the use of their system for the copying of infringing works.[*248] On-line service providers will have to judge their own participation and knowledge of subscriber activity to determine what liability they might face.

Generally, the proposals made by the White Paper are consistent with the changes that are needed in the Copyright Act because of the NII. Unfortunately, the White Paper suffers from narrow vision. As a result, key revisions were omitted forcing the courts to make determinations normally left to the legislature. This lack of completeness by the Working Group becomes even more disappointing when coupled with the many inconsistencies and apparent lack of adequate consideration it exhibited in several of its recommendations.

The most glaring problem with the legislation proposed in the White Paper is the failure to address on-line service provider liability. On-line service providers are not given guidance in their role in developing the NII. The Working Group's conclusion that strict liability would be imposed is unacceptable because it fails to recognize the various roles different access providers play. While the courts appear to be going in the right direction by recognizing that strict liability is not appropriate for some on-line service providers, the legislature has a long way to go to assure that the Copyright Act addresses the questions presented by the NII.