Reproduced courtesy of the American Enterprise Institute.
Volume 9, Number 12 December 2005
COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY
BRUCE G. JOSEPH SCOTT E. BAIN © 2005 National Legal Center for the Public Interest ISSN 1089-9820 ISBN 0-937299-46-4 ISBN 1-930742-72-X Published December 2005
NATIONAL LEGAL CENTER FOR THE PUBLIC INTEREST 1600 K Street, N.W., Suite 800 Washington, D.C. 20006 Tel: (202) 466-9360 Fax: (202) 466-9366 E-mail: [email protected] Please visit our Web site at www.nlcpi.org
The National Legal Center for the Public Interest is a tax-exempt, nonprofit public interest law and educational foundation, duly incor- porated under the law of the District of Columbia to provide nonpartisan legal information and services to the public at large. NLCPI is qualified to receive tax-deductible contributions under I.R.C. Sec. 501(c)(3). TABLE OF CONTENTS
THE MISSION OF THE NATIONAL LEGAL CENTER ...... Inside Front Cover
PREFACE RICHARD A. HAUSER ...... vii
COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY BRUCE G. JOSEPH and SCOTT E. BAIN ...... 1
I. INTRODUCTION TO BASIC COPYRIGHT PRINCIPLES ...... 3 A. The Constitutional Underpinnings of Copyright Law . . . 3 B. U.S. Copyright Law ...... 6 1. Copyright Rights ...... 6 2. Limitations on the Copyright Rights ...... 9 3. Ownership of Copyright and Licensing ...... 12 4. Copyright Infringement Theories of Liability . . . . . 13 5. Copyright Infringement Remedies ...... 14 C. Basic Principles of International Copyright ...... 17 D. “Paracopyright:” The Legal Protection of Technological Means Used To Protect Copyrighted Works ...... 19 1. Prohibitions ...... 20 2. Exceptions and Limitations ...... 22 3. Remedies ...... 24
II. THE DIGITAL COPYRIGHT DILEMMA—IS THE BALANCE CORRECT? ...... 24 A. Important Characteristics of Copyright and the Digital Environment ...... 26 B. Are Copyright Rights Properly Analogized to Tangible Property Rights?...... 28 C. Should Copyright Owners Be Permitted to Exercise Granular Control over Private Use? ...... 29
iii TABLE OF CONTENTS
III. MAJOR ISSUES IN DIGITAL COPYRIGHT ...... 33 A. Secondary and Intermediary Liability ...... 33 1. Judicial Creation of Secondary Liability ...... 38 2. The Betamax Doctrine ...... 39 3. Peer-to-Peer Applications and the Grokster Case: The Battle over Betamax ...... 43 a. Napster and Aimster—The First Cases ...... 44 b. The Grokster Case in the Lower Courts ...... 46 c. The Grokster Case in the Supreme Court . . . . . 48 d. Unanswered Questions ...... 53 i. “Capable of Substantial Noninfringing Use” ...... 53 ii. What Is “Intentional Inducement”? ...... 55 4. Title II of the DMCA: Independent Limitations of Remedies ...... 57 a. Operation of the Safe Harbors and Basic Requirements for Qualification ...... 60 b. Developing Issues Regarding Scope and Application of the Section 512 Safe Harbors ...... 64 i. Effect of DMCA on Infringement Liability . 64 ii. Applicability of the Takedown Process and Special DMCA Subpoenas to the Conduit Function ...... 65 iii. Implementation and Communication of a Policy for Termination of Subscribers in “Appropriate Circumstances” ...... 66 5. Concluding Thoughts Concerning Secondary Liability ...... 69 B. Protection and Control of Copyrighted Works through the Use of Technological Protection Measures and Title I of the DMCA ...... 69 1. The Legal Framework for Enforcing TPM Complianc7e2 a. The Mandate Paradigm ...... 73 b. The Licensing Paradigm ...... 74 c. Mandates versus Licenses—Important Differences ...... 76
iv TABLE OF CONTENTS
2. Issues Raised by the DMCA and the Increasing Use of Technological Protection Measures ...... 80 a. The Effect of Section 1201 and TPMs on Fair Use ...... 80 b. Potential Effects on Speech ...... 85 c. Misuse of the DMCA to Stifle Competition . . . 88 d. Copyright Management Information and Lawful Use ...... 89 3. Concluding Thoughts Concerning Technological Protection Measures ...... 90
IV. CONCLUSION ...... 91
ABOUT THE AUTHORS ...... 93
v PREFACE
Perhaps no area of law has been affected by the rapid expansion of digital technology and the Internet more than copyright. With personal computers and broadband Internet connections at the fingertips of millions of Americans at home and at work, it is easier than ever to create, distribute, and obtain music, films, photographs, books, articles, software, and other creative content—quickly, conveniently, and in high quality. Digital technology has fueled, and can continue to fuel, enormous economic growth in industries built upon technology and in industries built upon the creation of copyrighted works. However, digital technology presents substantial challenges for the copyright system. News stories describing “pirates” and other commercial bad actors allegedly pillaging the major copyright industries—particularly the U.S. film and record industries—have become commonplace. In other cases, individuals, acting for their own noncommercial purpose in the privacy of their home, have found infringement preferable to paying for large collections of copyrighted works. At the same time, most of the rights granted by copyright law were defined decades ago in a decidedly nondigital environment. All digital communications and computing technologies make “copies” that could be challenged by copyright owners. Moreover, the law contains potentially broad doctrines of secondary infringement liability that frequently have led to attacks on the technologies themselves. The U.S. Supreme Court recently recognized that “the more artistic protection is favored, the more technological innovation may be discouraged” and that copyright law is often “an exercise in managing the trade-off” between the two. From the time that the Constitution granted Congress the power to create copyright law, that law has been based upon the desire to further the overall public good, not simply to compensate creators of copyrighted works. Now, more than ever, consideration and application of copyright law and policy requires an understanding and careful balancing of the various interests at stake and the goals of copyright. In this Briefly, authors Bruce Joseph and Scott Bain provide a basic primer on copyright law, followed by thoughts on basic copyright policy considerations arising in the digital environment, and analysis and advice regarding some of the key issues of copyright law now facing business, Congress, and the courts. These issues include the extent to which product manufacturers and service providers have been
vii PREFACE and should be held responsible for copyright infringement committed by the users of their products or services, and the use of new “technical protection measures,” or digital locks, that (along with laws related to their use) expand the content industries’ ability to control access to and use of their copyrighted works, above and beyond traditional copyright law. Blending observations, legal analyses, and policy suggestions, the authors provide an illuminating view of copyright law that should prove useful to copyright novices as well as experts, and legal practitioners as well as policy makers. This monograph, like all others published by the National Legal Center, is presented to encourage greater understanding of the law, including how and why it has developed to its present state and where it may be headed in the future. The Briefly is intended for educational purposes only and is not a substitute for the advice of counsel as to any particular legal problem or issue faced by the reader. The views expressed herein do not necessarily reflect the opinions of the advisers, officers, or directors of the Center, nor of the authors’ firm or clients.
Richard A. Hauser President National Legal Center
viii COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY
BRUCE G. JOSEPH SCOTT E. BAIN
The rapid evolution and expansion of digital technology has touched virtually all aspects of life, transforming the way Americans communi- cate, do business, experience the world, preserve their memories, handle their personal finances, and entertain themselves. The Internet, digital music and video, digital television and radio, digital electronics devices, and personal computers have played leading roles in this transformation. It is not surprising that such profound changes in culture have had important ramifications throughout the legal system, affecting numerous areas of law, ranging from communications and privacy law to contract law and laws governing Internet fraud. There are few subjects, however, that have been affected as profoundly as copyright law. Long an arcane field known primarily to the relatively few who practiced it, copyright issues now appear on the front pages of major newspapers and in water-cooler discussions. Basic copyright principles have been questioned, and title 17 of the United States Code, the home of the Copyright Act and related laws, has blossomed in size and complexity. The advent of digital communication and entertainment technology has created new means of large-scale and potentially damaging copy- right infringement that can occur easily, in private, and in ways that are difficult to detect. Conversely, the rights included in a copyright and the broad theories of secondary liability developed by the courts were defined many years ago, in a nondigital environment. Those rights were defined to prohibit third parties from taking certain commercially significant actions, such as making and distributing copies, but to permit other actions that were considered to be outside of the appro- priate control of the copyright owner, such as reading a novel or an article, viewing a photograph, or watching a movie. But digital tech- nology, by its nature, often requires the making of copies to facilitate uses previously beyond the copyright owner’s control. Should those uses be subject to copyright owner control in the digital environment?
1 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY
Moreover, in the Digital Millennium Copyright Act of 1998 (DMCA), Congress enacted an entirely new regime of laws prohibiting the circumvention of technologies used to protect copyrighted works. Those laws have granted additional powers to copyright owners to control the use of their works. The significance of these changes must be evaluated against the purpose and nature of copyright. The Constitution gives Congress the power to grant copyright rights to authors in order to provide incentives for the creation of copyrighted works. The primary goal of copyright law is to enhance public welfare by increasing the public’s access to creative works and the information and expression contained in those works. Thus the Copyright Act reflects a careful balance intended to maximize the public’s gain, not the author’s. Copyright rights have never been absolute or near-absolute property rights in the same manner as rights in tangible personal property or real estate. The rights are limited by doctrines designed to promote subsequent creation and expression, the wide public availability of ideas, and other uses of works that are considered beneficial to the public. Because copyright is primarily a creature of federal statutory law, it falls to Congress in the first instance to strike the balance of incentive and use that best serves the public interest. To the extent courts have filled statutory interstices with common law doctrines, it falls to the courts to interpret those doctrines in ways that give effect to the balance struck by Congress and further serve the public interest. Calibrating the balance to best serve the public interest is no easy task. Legal and economic principles applicable to tangible property cannot easily be applied to copyright, for “intellectual property” is fundamentally different from tangible property. A copyrighted work, unlike tangible property, may be used and enjoyed by many without depleting the work or depriving others of their own enjoyment. Further, as a practical matter, it is difficult and costly to prevent others from using the work. Combined, these two characteristics suggest that dissemination and wide use of copyrighted works are socially beneficial and impose few social costs, while efforts to limit dissemination and widespread use impose substantial costs. At the same time, unlike tangible goods, the costs of creating copyrighted works are incurred in advance of reproduction and distribution, so efforts to price property
2 BRUCE G. JOSEPH AND SCOTT E. BAIN on the basis of the marginal cost of each additional copy (effectively zero) will not provide sufficient compensation or incentive for creation. While these characteristics do not determine the correct calibration of incentive and permitted use, they suggest that casting the policy debate in terms used to discuss tangible property will likely lead to results that miss the mark. The fundamental changes wrought by the advent of the Digital Age may have skewed the copyright balance set in an analog world. This Briefly explores digital copyright in three parts. We first provide a basic introduction to copyright and the new doctrines applicable to technological protection measures. Second, we introduce broad policy questions about the appropriate scope of copyright in digital environ- ments. Specifically, we ask whether it is appropriate to analyze copyright rights in the same manner as rights in tangible property and to what extent the law should empower copyright owners to exercise control over a wide array of private uses of copyrighted works. Third, we address two of the most difficult and contentious subjects that are facing courts and policy makers—(i) the appropriate level of secondary liability, particularly that imposed on the providers of technological products and services for infringement committed by users of that technology and (ii) the recently adopted statutory prohibitions against circumventing technologies used by copyright owners to protect their works. Throughout this monograph, we ask the reader to keep in mind the ultimate question for the makers of copyright policy: Is it time to reconsider and possibly redefine the appropriate scope of copyright rights to accommodate the digital world? Although we do not offer the answer to that question, we believe it deserves serious consideration.
I. INTRODUCTION TO BASIC COPYRIGHT PRINCIPLES
A. The Constitutional Underpinnings of Copyright Law
The Constitution grants Congress 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
3 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY and Discoveries.”1 The Supreme Court has explained that “[t]he monopoly privileges that Congress may authorize are neither unlimited nor primarily designed to provide a special private benefit. Rather, the limited grant is a means by which an important public purpose may be achieved.”2 That purpose is to provide an incentive “to stimulate artistic creativity for the general public good” and to foster access to creative works.3 Accomplishing that goal requires a “delicate balance” between achieving the desired incentive for authors and furthering the public’s interest in the free flow of ideas and information and the benefits that obtain from permitting the public to use and build upon creative works.4 The Supreme Court has declared that, in enacting copyright law, Congress must consider “the varied permutations of competing interests,”5 observing that “the policies served by the Copyright Act are more complex, more measured, than simply maximizing the number of meritorious suits for copyright infringement.”6
1 U.S. CONST. art. I, § 8, cl. 8. 2 Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 429 (1984); cf. Eldred v. Ashcroft, 537 U.S. 186, 212 n.18 (2003) (noting that reward to authors and promotion of progress are “complementary” and that “the two ends are not mutually exclusive”). 3 Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975); Fogerty v. Fantasy, Inc., 510 U.S. 517, 527 (1994) (“[C]opyright law ultimately serves the purpose of enriching the general public through access to creative works.”). 4 See, e.g., Stewart v. Abend, 495 U.S. 207, 230 (1990) (referring to “the delicate balance Congress has labored to achieve”); Sony, 464 U.S. at 429 (stating that Congress’s task of delineating copyright law “involves a difficult balance between the interests of authors and inventors in the control and exploitation of their writings and discoveries on the one hand, and society’s competing interest in the free flow of ideas, information, and commerce on the other hand”); New York Times Co. v. Tasini, 533 U.S. 483 (2001) (“Copyright law is . . . a carefully struck balance between the need to create incentives for authorship and the interests of society in the broad accessibility of ideas.”). 5 Sony, 464 U.S. at 431. 6 Fogerty, 510 U.S. at 526. Within this structure, however, “it is generally for Congress, not the courts, to decide how best to pursue the Copyright Clause’s objectives.” Eldred, 537 U.S. at 212.
4 BRUCE G. JOSEPH AND SCOTT E. BAIN
Building on this constitutional premise, the Supreme Court has held that copyright law is wholly statutory, and is not based on common law or natural right.7 The Supreme Court has, accordingly, tended to defer to Congress when new technologies create the need to expand copyright law to provide additional protection.8 Congress, for its part, has frequently looked to those affected by the copyright system (including, typically, the major copyright industries, affected technology industry groups, and, at times, other affected industry groups) to work out their differences, typically in negotiations conducted under congressional supervision, and to propose legislation that can muster sufficient support for passage.9 The supervised, private
7 Wheaton v. Peters, 33 U.S. (8 Pet.) 591, 659-64, 667-68 (1834) (holding that the right “does not exist at common law—it originated, if at all, under the acts of Congress” and remanding for determination of whether all statutory conditions were satisfied); White-Smith Music Publ’g Co. v. Apollo Co., 209 U.S. 1, 15 (1908) (“[I]t is perfectly well settled that the protection given to copyrights in this country is wholly statutory.”); Sony, 464 U.S. at 429 n.10 (noting that copyright law “is not based upon any natural right that the author has,” and describing the balance between stimulating the producer and “the evils of the temporary monopoly” (quoting H.R. REP. NO. 2222, 60th Cong., 2d Sess. 7 (1909)). In recent years, however, the Court has appeared more willing to embrace the judicial development of copyright rights within the existing statutory framework. See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 125 S. Ct. 2764, 2776 (2005) (“Although the Copyright Act does not expressly render anyone liable for infringement committed by another, these doctrines of secondary liability emerged from common law principles and are well established in the law.”) (internal quotations and citations omitted). 8 The Supreme Court has stated: “Sound policy, as well as history, supports our consistent deference to Congress when major technological innovations alter the market for copyrighted materials. Congress has the constitutional authority and the institutional ability to accommodate fully the varied permutations of competing interests that are inevitably implicated by such new technology.” Sony, 464 U.S. at 431. 9 See Marci A. Hamilton, Copyright at the Supreme Court: A Jurisprudence of Deference, 47 J. COPYRIGHT SOC’Y U.S.A. 317, 325 (2000) (Congress filters views “to arrive at determinations that are supposed to be in the best interest of the polity as a whole” through a process of “compromise and
5 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY negotiation process has been used for most of the recent amendments to copyright law.
B. U.S. Copyright Law
1. Copyright Rights
Pursuant to its constitutional authority, Congress has granted the author certain limited exclusive rights in “works of authorship.” The concept of “works of authorship” embraces a wide range of forms in which expression may be presented, including
– literary works, broadly meaning works expressed in words, symbols, and numbers (such as novels, articles, texts, poems, and computer programs) – musical works (the notes and lyrics written by songwriters) – dramatic works (such as plays) – pantomimes and choreographic works – pictorial, graphic, and sculptural works (including photographs and drawings) – motion pictures and other audiovisual works (such as tele- vision programs and home movies) – sound recordings (the captured sounds made by the performing artist and record company) – architectural works – compilations and databases of the foregoing and of other material (to the extent they reflect original “authorship” in the selection or arrangement of elements)
debate.”); JESSICA LITMAN, DIGITAL COPYRIGHT 61 (2001) (describing legislative process as accommodation of complex competing interests).
6 BRUCE G. JOSEPH AND SCOTT E. BAIN
The limiting principle is that the work must be “original” with the author, that is, it cannot itself be a copy, and it must contain at least some relatively modest level of new intellectual content.10
The copyright comprises the exclusive rights to do or to authorize others to (i) reproduce the work in copies, (ii) adapt or create “derivative works” based on the work, and (iii) distribute copies or phonorecords11 of the work to the public, and also, for certain works, to (iv) display the work publicly, and (v) make public performances of the work.12 “Public” performances and displays are defined to include transmissions to the public, regardless of “whether the members of the public capable of receiving the performance or display receive it in the
10 However, the work need not be “novel” or even “non-obvious” in the sense those terms are used in patent law. Compare 17 U.S.C. § 102 (“Copyright protection subsists . . . in original works of authorship fixed in any tangible medium of expression.”) with 35 U.S.C. §§ 101, 102(a), and 103(a) (invention must be “novel” (new), must not have been “known or used by others in this country,” and must not “have been obvious at the time the invention was made to a person having ordinary skill” in the field); see also Feist Publ’ns, Inc. v. Rural Tel. Service Co., 499 U.S. 340, 345 (1991) (“The sine qua non of copyright is originality. To qualify for copyright protection, a work must be original to the author. Original, as the term is used in copyright, means only that the work was independently created by the author (as opposed to copied from other works), and that it possesses at least some minimal degree of creativity. . . . Originality does not signify novelty; a work may be original even though it closely resembles other works so long as the similarity is fortuitous, not the result of copying.”) (citations omitted). 11 The terms “copies” and “phonorecords” refer to material objects in which copyrighted works are fixed. Both terms include the object in which the work is first fixed, so there is no implication of reproduction. The term “phonorecord” is the special name given to copies of sound recordings—in other words, sounds fixed in a material object. 17 U.S.C. § 101 (definitions of “copies” and “phonorecords”). The Copyright Act distinguishes between copyrighted works and the material object in which they are fixed. For example, ownership of a copy of a work (e.g., a book) does not confer any ownership interest in the copyright in the “literary work” embodied in the book. 17 U.S.C. § 202. 12 17 U.S.C. § 106.
7 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY
same place or in separate places and at the same time or at different times.”13 A copyrightable work is protected by copyright automatically, from the moment it is fixed in any “tangible medium of expression” (such as paper, film, or a computer disk or memory) from which it can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. For example, copyright attaches to a motion picture as soon as the image is captured on film or tape and to a literary work such as an article or a novel as soon as the author writes it on paper or types it onto a computer’s random access memory. No other act or process need take place. Copyright law does not require the author to comply with any formalities to have copyright protection. The author need not register his or her right with the Copyright Office, and even where registration is made, the Copyright Office does not undertake to evaluate whether a work is original or was created by the author. Rather, it conducts a facial review of the work to determine if the work appears to be copyrightable subject matter and examines the application to ensure that it contains the requisite information. Similarly, since 1989, copyright notice has not been required.14 There are, however, substantial benefits that encourage authors to register and place copyright notices on their works. Certain important remedies are reserved for works registered prior to infringement or within three months of first publication, including the availability of powerful statutory damages (of up to $150,000 per infringed work) and attorneys’ fees. Where copyright notice was placed on the infringed work, the defendant cannot claim “innocent” infringement,
13 Id. § 101 (definition of “To perform or display a work ‘publicly’”). 14 Works first published without notice before January 1, 1978, are, with certain exceptions relating to the nature of the “publication,” in the public domain, and works published without notice between 1978 and March 1, 1989, were subject to a requirement that publication without notice be cured within five years by registration plus the application of notice where reasonably possible. Copyright notice usually consists of the familiar symbol ©, the name of the copyright holder, and the date of copyright.
8 BRUCE G. JOSEPH AND SCOTT E. BAIN
which otherwise could reduce statutory damages.15 Further, a work of U.S. origin must be registered prior to the commencement of an infringement action in court.16 Copyright protection lasts for a very long time, notwithstanding the Constitution’s requirement of “limited Times.” Moreover, Congress has, in recent years, shown a penchant for increasing the copyright term just as certain well known works of the 1920s have neared the end of their protection. Thus copyright terms of fifty-six years were extended in 1978 and again, by twenty years, in 1998.17 Precise determination of the term applicable to any particular work requires consideration of a number of complex rules that have changed over time, but, as a general rule, works first published before January 1, 1978, are protected for ninety-five years from the date of first publication, or 120 years from the date of creation, whichever is longer. Works first published after January 1, 1978, by identified authors are generally protected for the life of the author plus seventy years, unless the work was “made for hire” (itself a technical term of art), in which case, the 95/120 year rule applies. It is generally safe to assume that works published in 1922 or before are now in the public domain. Later-published works through 1963 may also be in the public domain if their copyrights were not renewed (a requirement until 1992). However, as a result of the 1998 term extension, additional copyrights will not expire until the end of 2018.
2. Limitations on the Copyright Rights
The limited nature of copyright manifests itself in a number of ways. Copyright protects the “expression” in a work, but does not protect the ideas contained in the work. Nor does it protect facts, concepts, discoveries, principles, processes, procedures, systems, or methods of
1517 U.S.C. §§ 401(d), 402(d); see, e.g., Matthew Bender & Co. v. West Publ’g Co., 240 F.3d 116, 123 (2d Cir. 2001). 17 U.S.C. § 504(c)(2) provides that statutory damages may be reduced to $200 per work for innocent infringement. 16 17 U.S.C. § 412. 17 The constitutionality of the 1998 term extension was challenged but upheld in Eldred, 537 U.S. 186.
9 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY
operation disclosed or contained in the work.18 These all may be extracted from a work and freely used without imposing copyright liability. In addition, the Copyright Act contains a number of specific exceptions to and limitations on copyrights that are designed to strike the “delicate balance” between creation of an incentive and the other benefits to the public that obtain from widespread use and enjoyment of copyrighted works. Perhaps the most significant of these is the fair use doctrine embodied in section 107 of the Copyright Act. That doctrine holds that fair use of a copyrighted work is not copyright infringement, regardless of whether the user performs any of the conduct that falls within the exclusive rights of the copyright owner. The Act does not specifically define fair use. Rather, it provides a nonexclusive, illustrative list of uses, including “criticism, comment, news reporting, teaching (including multiple copying for classroom use), scholarship or research.”19 It then sets forth four factors that courts must consider in assessing whether any particular use is fair. These factors include (i) the purpose and character of the use, including, whether such use is of a commercial nature or for nonprofit educational purposes; (ii) the nature of the copyrighted work; (iii) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (iv) the effect of the use on the potential market for or value of the copyrighted work. Another important limitation on copyright rights, called the “first sale” doctrine, provides (with certain exceptions) that the owner of a particular lawful copy of a work may dispose of that copy by sale, rental, lease, or otherwise.20 The owner of a particular lawful copy of
18 See 17 U.S.C. § 102(b). 19 See id. U.S.C. § 107. 20 Id. § 109. In other words, for example, if you own a book, you may sell or give away that particular book. The first sale doctrine does not permit the rental, lease, or lending of phonorecords or copies of computer programs, other than by nonprofit libraries (or, in the case of phonorecords, nonprofit educational institutions), because of copyright owners’ concerns that such actions could facilitate unauthorized copying of such works. Id. There has been substantial debate about the scope and extent of the first sale doctrine in connection with the transmission of digital copies from one user to another.
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a work may also display that copy, either directly or by the projection of no more than one image at a time. Other provisions of the Act provide specific exceptions for certain copies made by libraries and archives,21 numerous specific types of public performances,22 certain transmissions, for example, by passive carriers of content,23 certain copies made to facilitate licensed or exempt public performances,24 certain public performances of sound recordings,25 and loading a computer program on a machine to operate or maintain the machine.26 In many cases, the limitations and conditions on these exceptions are complex and deserve careful review. The Act also contains numerous “statutory licenses”—provisions that deem certain actions licensed, subject to certain conditions and payment of a prescribed fee. Many of the statutory licenses (sometimes called “compulsory” licenses) are relevant to the digital environment, including licenses for public performances of sound recordings by digital transmission and the copies from which those performances are made,27 reproductions of musical works, including copies made in digital downloads,28 and retransmissions of broadcast transmissions by
See generally United States Copyright Office, DMCA Section 104 Report: A Report of the Register of Copyrights Pursuant to §104 of the Digital Millennium Copyright Act 19-25, 33-48, 78-105 (2001), available at
11 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY cable and satellite services.29 The fees for most of these licenses are set by negotiation or, failing agreement, by arbitration before three Copyright Royalty Judges.30
3. Ownership of Copyright and Licensing
The initial owner of the copyright in a work is the “author” of the work. While the author generally is the individual or individuals who created the work, that is not always the case. Under the “work made for hire” doctrine, the “author” of a work created by an employee acting within the scope of his or her employment is the employer.31 For these purposes, independent contractors are not treated as “employees.” Works created by independent contractors are subject to their own special rules. The author of a work that has been “specially ordered or commissioned” from a contractor is the contractor, unless the parties have agreed in writing that the work is a “work made for hire” and the work falls within one of nine enumerated categories.32 Sound recordings, musical works, pictorial, graphic and sculptural works, most literary works, and many software and Internet-related works do not fall into these enumerated categories, so if the party that commissioned the work from a contractor desires copyright ownership, ownership must be obtained by contract of assignment. Failure to do so, wrongly assuming that a work will be deemed a “work made for
29 Id. §§ 111(c), 119(b). 30 17 U.S.C. §§ 801-804 (2004). The Copyright Royalty Judge system, adopted by Congress in 2004, is the third attempt to develop an efficient method for determining royalties, following the Copyright Arbitration Royalty Panel system and the Copyright Royalty Tribunal. 31 17 U.S.C. § 101 (defining “work made for hire”). A work prepared by an officer or employee of the U.S. government as part of that person’s official duties is not protected by copyright. 17 U.S.C. § 101 (definition of “work of the United States Government”), § 105. 32 Id. (listing contributions to collective works, parts of a motion picture or other audiovisual work, translations, supplementary works, compilations, instructional text, tests, answer materials for a test, or atlases).
12 BRUCE G. JOSEPH AND SCOTT E. BAIN hire,” is a common and sometimes costly mistake of parties that work with consultants and contractors. Ownership of a copyright or of any of the exclusive rights under a copyright may be transferred, in whole or in part, by the author. Such a transfer must be in writing, signed by the transferor. Transfers of at least part of the copyright are common when a work is to be published, as publishers often seek ownership of the copyright, or at least of the exclusive right to distribute copies of the work within the United States and certain other rights. Each of the exclusive rights is infinitely divisible, and partial transfers may include, among other things, exercise of the right for a defined period of time, in a defined geographic area, or in certain defined manners. A “license” is a grant of rights to a third party to exercise all or any part of one or more of the copyright rights. Again, the rights are infinitely divisible across numerous parameters for purpose of licensing. Licenses may be “exclusive” or “nonexclusive.” Exclusive licenses are treated under the law as “transfers” of ownership. Nonexclusive licenses grant rights that may also be granted to others or retained by the grantor. Nonexclusive licenses need not be in writing; they may be oral and may even be implied.
4. Copyright Infringement Theories of Liability
Violation of one of the exclusive rights of the copyright owner, absent authorization or an applicable exception, is called “infringement.” The Copyright Act permits copyright owners to bring civil lawsuits in federal court against infringers to prevent infringement and to remedy harm caused by infringement. The owner of a relevant right (or portion of a right) is permitted to sue. Courts have recognized three theories of liability for copyright infringement. They are subject to different requirements, which, at times, have been construed broadly to find liability. “Direct infringement” is the doctrine that applies to the party that actually did the act that violates the copyright owner’s exclusive rights. Often, this doctrine has been extended to apply to acts of employees acting within the scope of their employment. The doctrine is one of “strict liability,” meaning that a defendant is liable whether or not he
13 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY
or she knew that the work was copyrighted and whether or not he or she intended to infringe or knew that his or her conduct was infringing. However, courts have required that there be a volitional action by the defendant as opposed, for example, to third-party use of a machine or system owned by the defendant.33 “Contributory infringement” is the doctrine that applies to a party that, with knowledge of an act of infringement, induced, caused, or materially contributed to the act of infringement. Courts have held that providing significant facilities used for infringement can count as material contribution.34 Different courts have construed the requisite “knowledge” differently, with some requiring actual knowledge and others finding liability if the alleged contributory infringer knew or should have known that the infringing act was occurring. Most recently, in the Grokster case, the Supreme Court described the doctrine to require “intent,” stating, “[o]ne infringes contributorily by intentionally inducing or encouraging direct infringement.”35 “Vicarious liability” may be imposed on one who obtains a direct financial benefit from an act of infringement and has the right and ability to control the infringing conduct.36 Again, courts vary on the nature of financial benefit and the level of control that may give rise to liability.
5. Copyright Infringement Remedies
The Copyright Act includes unique and powerful civil remedies, as well as substantial criminal penalties for certain types of infringement. Both its civil and criminal remedies have been enhanced by Congress
33 See, e.g., Religious Tech. Ctr. v. Netcom Online Commc’n Services, 907 F. Supp. 1361 (N.D. Cal. 1995) (third-party use of defendant’s digital network does not constitute volitional act by defendant); CoStar Group, Inc. v. Loopnet, Inc., 373 F.3d 544 (4th Cir. 2004) (third-party use of defendant’s Internet service does not constitute volitional act by defendant). 34 See, e.g., Gershwin Publishing Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159 (2d Cir. 1971); Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 264 (9th Cir. 1996). 35 Grokster, 125 S. Ct. at 2776. 36 See Fonovisa, 76 F.3d at 263-64.
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in recent years in response to actual and potential infringement of digital works and on digital networks.37 Some headline-grabbing awards have recently highlighted the potential magnitude of the Act’s remedies in the digital era.38 The Copyright Act’s remedies include the issuance of preliminary and permanent injunctions to prevent or restrain infringement, impounding of infringing articles, and the possibility of substantial monetary recovery.39 Monetary damages are available in several forms. The copyright owner may elect to recover his or her actual damages resulting from the infringement along with the infringer’s profits, to the extent such profits were not already taken into account in determining the owner’s damages. As an alternative, the owner may elect to recover certain special damages, called “statutory damages,” for each copyrighted work that was registered with the Copyright Office before infringe- ment began or within three months of publication in the case of a published work. The amount of statutory damages applicable to any infringement is set by the jury (or the judge if no jury was requested) after consideration of the circumstances, within certain prescribed ranges. For ordinary, nonwillful infringement, the Copyright Act provides for statutory damages “as the court [or jury] considers just” between $750 and $30,000 per infringed work (not per infringing act or copy). The amount may be increased to up to $150,000 per infringed work in a case of willful infringement or reduced to not less than $200 per work if the infringement was innocent. Courts have considered, and permitted juries to be instructed on, a variety of factors
37 No Electronic Theft (NET) Act, Pub. L. No. 105-147, 111 Stat. 2678 (1997); Digital Theft Deterrence and Copyright Damages Improvement Act of 1999, Pub. L. No. 106-160, 113 Stat. 1774 (1999). 38 See, e.g., Lowry’s Reports, Inc. v. Legg Mason, Inc., 302 F. Supp. 2d 455 (D. Md. 2004) (financial institution assessed $20 million in damages for consistent internal copying of a small newsletter); UMG Recordings, Inc. v. MP3.com, Inc., 56 U.S.P.Q.2d 1376, 1381 (S.D.N.Y. 2000) (online business found liable for ruinous statutory damages resulting from business model built on making multiple, complete copies of thousands of sound recordings and musical works). 39 17 U.S.C. §§ 502-504.
15 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY
relating to the nature and economic effect of the infringement, the nature of the work, punishment, and deterrence in determining the statutory damage amount in a given case. Where numerous works are infringed by a given course of conduct (e.g., regularly making musical performances or downloading music, films, periodicals, or other files on the Internet), these numbers can quickly add up to very large liability. Infringement involving digital works and digital networks have therefore yielded some striking statutory damage awards. For example, a large financial institution’s practice of e-mailing and posting on its internal network each issue of a financial newsletter to which one of its employees subscribed recently resulted in more than 200 statutory damage awards totaling nearly $20 million.40 In addition, where an infringed work was registered in a way that qualifies for statutory damages, a prevailing copyright owner may recover his or her attorneys’ fees incurred in bringing the infringement action. Prevailing defendants also may recover their attorneys’ fees where the court considers it appropriate.41 Finally, the Copyright Act also provides for criminal liability in cases of willful infringement (i) “for purposes of commercial advantage or private financial gain,” (ii) by distribution or reproduction of works “which have a total retail value of more than $1,000,” or (iii) by distributing a work “being prepared for commercial distribution, by making it available on a computer network accessible to members of the public,” if the infringer knew or should have known of the intent to commercialize.42 Penalties (recently enhanced in light of the perceived problem of digital infringement) include substantial fines and up to five years in prison for a first offense.43
40 See Lowry’s Reports, 302 F. Supp. 2d 455, supra note 38. 41 17 U.S.C. § 505. 42 17 U.S.C. § 506(a)(1). 43 18 U.S.C. § 2319. Note that criminal liability does not preclude civil liability to the copyright owner, including statutory damages.
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C. Basic Principles of International Copyright
Although a detailed examination of international copyright law is beyond the scope of this Briefly, it is important to understand the international framework into which U.S. copyright law fits. Copyright law is territorial. Generally speaking, U.S. law applies to infringement occurring within the United States or, in some circumstances, infringing acts abroad that resulted from acts in the United States.44 In addition, the United States adheres to several multilateral treaties that impose international obligations related to copyright, as well as a multitude of bilateral agreements.45 The multilateral conventions attempt to harmonize significant international differences in the underlying premises of copyright protection. As described previously, the copyright laws of the United States, like the laws of other English- tradition common law countries, are based on a principle of economic incentives for creation and eschew any normative principle of “natural rights.” The laws of much of continental Europe spring from a very different theory—a theory of the natural “rights of the author” as the creator of the work. These different premises can, and for many years did, lead to fundamental differences in approach to such issues as formalities (registration and notice), term of protection, the status of an entity as author, and the appropriate scope of exceptions and limitations to the copyright rights.46
44 See Update Art, Inc. v. Modiin Publ’g, Ltd., 843 F.2d 67, 73 (2d Cir. 1988); De Bardossy v. Puski, 763 F. Supp. 1239, 1243 (S.D.N.Y. 1991). 45 See, e.g., Berne Convention for the Protection of Literary and Artistic Works (“Berne Convention”), July 24, 1971, amended 1979, S. Treaty Doc. No. 99-27 (1986), 1161 U.N.T.S. 3 (also reprinted at 17 U.S.C. § 104); Universal Copyright Convention, July 24, 1971, 25 U.S.T. 1341, 943 U.N.T.S. 178; Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”), Jan. 1, 1995, 1869 U.N.T.S. 299, 33 I.L.M. 1125; World Intellectual Property Organization Copyright Treaty, Dec. 20, 1996, S. Treaty Doc. No. 105-17 (1997), 36 I.L.M. 65 (1997) (“WIPO Copyright Treaty”). 46 They also led to differences with respect to the so-called moral rights of the author, embodied in Article 6bis of the Berne Convention. These rights of the author to object to prejudicial distortions or changes of the work (the right of “integrity”) and to insist on accurate credit for the work (the right of
17 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY
The most important of the multilateral agreements are the Berne Convention for the Protection of Literary and Artistic Works, administered by the World Intellectual Property Organization (WIPO), and the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The Berne Convention imposes obligations on the member states to provide certain minimum levels of copyright protection, including the granting of the rights of reproduction, adaptation, and translation, certain rights of public performance, certain rights to authorize broadcasting of works, defined minimum terms of protection, and prohibitions on copyright formalities such as registration and notice. Berne also establishes a principle of “national treatment,” obligating each member state to protect the authors of other member states in the same manner that they protect their own authors. The TRIPS agreement adopts the Berne standards and certain other minimum obligations, including copyright protection for computer programs and compilations and protection for performers giving live performances, and establishes a mechanism for enforcement with trade sanctions against member states whose laws do not meet their treaty obligations. A more recent multilateral treaty, the WIPO Copyright Treaty, was negotiated in 1996 to address certain issues relating to digital copyright. That treaty, strongly advocated by the United States, requires signatories to grant rights not required by the Berne Convention, including the rights of distribution to the public and communication to the public, and rental rights in favor of computer software, sound recordings, and, in certain circumstances, motion pictures. It also imposes an obligation on signatories to prohibit the circumvention of technological methods applied by copyright owners to protect their works, a prohibition the major copyright industries had sought unsuccessfully from Congress prior to 1996. Specifically, the WIPO Copyright Treaty requires signatories to provide “adequate legal protection and effective legal remedies against the circumvention of effective technological measures that are used by authors in connection
“paternity”) did not exist in the United States and exist today only in limited form. See 17 U.S.C. § 106A (applicable to certain works of “visual art”).
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with the exercise of their rights.”47 The United States implemented this obligation in U.S. law in 1998 in Title I of the Digital Millennium Copyright Act (DMCA), 17 U.S.C. §§ 1201-1205, described further below. The treaties also contain limitations on the exceptions to the copyright rights that a member state may provide. These limitations, based on Article 9.2 of the Berne Convention, prohibit exceptions that “conflict with a normal exploitation of the work [or] unreasonably prejudice the legitimate interests of the author.”48
D. “Paracopyright”: The Legal Protection of Technological Means Used To Protect Copyrighted Works
One of the most significant and potentially wide-reaching additions to recent copyright law is not really “copyright” at all, in that it does not directly establish rights in copyrighted works themselves. Rather, it provides legal protection for technologies and information that assist copyright owners in protecting and exploiting their works. Dubbed by some “paracopyright,”49 these protections are being used increasingly by copyright owners in the face of the challenges posed by the digital environment. Title I of the DMCA establishes a new prohibition against “circumventing” a technological protection measure (or TPM) applied by a copyright owner to prevent access to his or her work. It also establishes new prohibitions against distributing certain tools that are
47 WIPO Copyright Treaty, art. 11; see H.R. REP. NO. 105-551, Pt. 2, at 63 (1998). The WIPO Copyright Treaty was adopted with another WIPO treaty dealing with sound recordings and performances. See WIPO Performances and Phonograms Treaty (WPPT) (Dec. 20, 1996). 48 Berne Convention, art. 9.2 (concerning reproduction right); TRIPS, art. 13 (“Members shall confine limitations or exceptions to exclusive rights to certain special cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder.”); WIPO Copyright Treaty, art. 10. 49 See Definition of “Paracopyright,”
19 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY designed or marketed to facilitate the circumvention of such access controls or other technological measures designed to protect rights of the copyright owner (often called “copy controls”). Section 1202, also part of DMCA, title I, provides new protections for “copyright management information,” or “CMI”—certain information conveyed by the copyright owner in connection with the work.
1. Prohibitions
Section 1201 is directed to two different actions. The statute first addresses the act of circumvention, providing that “no person shall circumvent a technological measure that effectively controls access to a work protected” under the copyright laws.50 A “technological measure that effectively controls access to a work” is, in layman’s terms, a digital lock, such as encryption. The statute defines it as a measure that “requires the application of information, or a process or a treatment, with the authority of the copyright owner, to gain access to the work.”51 To “circumvent” the technological measure means to break the lock, that is, “to descramble a scrambled work, to decrypt an encrypted work, or otherwise avoid, bypass, remove, deactivate, or impair a technological measure, without the authority of the copyright owner.”52 This prohibition on the act of circumvention does not extend to TPMs other than access control technologies. Section 1201 also includes prohibitions relating to distribution of tools for circumvention, such as decryption programs, “black boxes,” and unauthorized copies of keys. The statute prohibits the “manu- facture, import, offer to the public, or trafficking in any technology, product, service, device, component, or part thereof” that (A) is “primarily designed” or produced for the purpose of “circumventing” a technological measure that effectively controls access to a copy- righted work or “protects a right of a copyright owner”; (B) has only “limited commercially significant purpose or use other than to
50 17 U.S.C. § 1201(a)(1). 51 Id. § 1201(a)(3)(B). 52 Id. § 1201(a)(3)(A).
20 BRUCE G. JOSEPH AND SCOTT E. BAIN circumvent” such technological protection measures; or (C) is “marketed for use in circumventing” such technological protection measures.53 Thus this prohibition applies not only to access controls, but also to copy controls that operate other than by controlling access to the work, such as technologies that rely on marks included within or accompanying the work that are read by recording or playback devices or other devices in the content usage chain.54 Section 1202 prohibits anyone from “knowingly and with the intent to induce, enable, facilitate, or conceal infringement,” providing, distributing, or importing false copyright management information. Copyright management information is defined as “information conveyed in connection with copies or phonorecords of a work or performances or displays of a work,” consisting, among other things, of the title and other information identifying the work, the name of the author and other identifying information about the author, the name of the copyright owner and other information identifying the copyright owner, and the terms and conditions for use of the work.55 The law provides that no person shall (1) “intentionally remove or alter copyright management information,” (2) “distribute or import” copyright management information known to have been altered, and (3) distribute, import, or publicly perform works knowing that copy- right management information was removed or altered, knowing or having reasonable grounds to know that the above acts would “induce, enable, facilitate, or conceal an infringement.”56
53 Id. § 1201(a)(2), (b). 54 One example of a nonaccess control TPM is the “Serial Copy Management System,” a system of digital bits that accompany certain digital audio files (including those on prerecorded compact disks) and that signal whether the copy is an original or a first generation copy. The system was adopted in the Audio Home Recording Act of 1992, codified at chapter 10 of title 17. Watermarks, or digital information embedded in the work, may be another type of nonaccess control TPM when coupled with an effective obligation. 55 17 U.S.C. § 1202(c). 56 Id. § 1202(a), (b).
21 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY
2. Exceptions and Limitations
Section 1201 includes a laundry list of exceptions and limitations, some of which can only be explained by the nature of the political process that led to enactment of the DMCA. In some cases, particular interest groups attempted to alleviate their concerns about the new legal regime. In others, certain members of Congress sought to address concerns raised by the newly burgeoning Internet, such as privacy and the protection of minors. In many cases, the exceptions are drafted narrowly, with express conditions and limitations. Thus there are exceptions for (i) nonprofit libraries, archives, and educational institutions “solely in order to make a good faith determination of whether to acquire a copy of that work”;57 (ii) certain law enforcement, intelligence and government activities;58 (iii) reverse engineering in order to achieve “interoperability of an independently created computer program” as long as the person has lawfully obtained the right to copy the program;59 (iv) certain encryption research on a lawfully obtained encrypted copy of a work, as long as the person made a good faith effort to obtain authorization to conduct the circumvention;60 (v) devices with the “sole purpose to prevent the access of minors material on the Internet”;61 (vi) a person’s circumven- tion to prevent collection of “personally identifying information” about that person or his or her online activities;62 and (vii) good faith “testing, investigating, or correcting a security flaw or vulnerability” in a computer system.63 One exception, the so-called no mandate provision, marks an important distinction between circumvention and the normal operation of devices that handle copyrighted materials. That clause provides that
57 Id. § 1201(d). The copy, however, cannot be retained longer than necessary for that purpose. 58 Id. § 1201(e). 59 Id. § 1201(f). 60 Id. § 1201(g). 61 Id. § 1201(h). 62 Id. § 1201(i). 63 Id. § 1201(j).
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“[n]othing in this section shall require that the design of, or design and selection of parts and components for, a consumer electronics, telecommunications, or computing product provide for a response to any particular technological measure.”64 In other words, circumvention is not the same as a nonresponse. This provision is particularly relevant to nonaccess control marking technologies where the content is in the clear (like an audio compact disk or an over-the-air television broadcast) and the technology only works if a device reads and responds to the mark. The provision was included because of manufacturers’ concerns that their products not be obligated to respond to every possible mark that any copyright owner might choose to use. Those marks might not only be unknowable, but the marks could be inconsistent—the copyright owner of one work might encode a single bit to mean “do not copy” when it is set to a value of 1 and “copy freely” when it is set to a value of 0, while the owner of a different work may use the same bit, on the same kind of media, to mean the opposite. Even absent any direct conflicts, and even if it were possible to build devices to respond to every conceivable TPM, the cost would be prohibitively expensive for consumers. Section 1201 also provides for a triennial rulemaking by the Librarian of Congress (conducted by the Copyright Office) to determine additional exceptions for the act of circumventing access control measures protecting specific classes of works for which users “are, or are likely to be . . . adversely affected” in their ability to make noninfringing uses of that class of works.65 This provision was initially thought to be significant for preserving fair use for a wide variety of works to which access protection could be applied, thereby “locking up” the works. Many hundreds of comments were received by the Copyright Office in the initial 2000 rulemaking, requesting a variety of exceptions for certain works—such as academic and scholarly writings, databases, and other fact-intensive works—that were likely to be, and were, used for fair use purposes. The Librarian, however, on recommendation from the Copyright Office, adopted only a few
64 Id. § 1201(c)(3). 65 Id. § 1201(a)(1)(C).
23 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY
narrow, relatively insignificant exceptions,66 applying a rigorous burden of proof on proponents of exceptions. This interpretation has decreased the perceived importance and usefulness of the provision. The copyright management information provisions of section 1202 also have several exceptions and liability limitations, related to law enforcement and transmissions by broadcasters or cable systems. For example, there is a grandfather clause precluding CMI liability for certain analog broadcasts and cable transmissions where it is not “technically feasible” or would create “undue financial hardship” to make the system accommodate the copyright management information.67
3. Remedies
Sections 1201 and 1202 are subject to remedies that broadly resemble the remedies for copyright infringement. Section 1203 provides for civil remedies, including injunction, impoundment of devices involved in a violation, the recovery of attorneys’ fees, and actual and statutory damages. In addition, section 1204 creates criminal offenses for willful violation of sections 1201 and 1202 for commercial advantage or private financial gain.
II. THE DIGITAL COPYRIGHT DILEMMA— IS THE BALANCE CORRECT?
The public interest goal established by the Constitution for copyright law requires Congress to strike a careful balance between the competing interests of providing the desired incentive to create copyrightable works, on the one hand, and furthering the free flow of ideas and information and permitting the public to use and build upon creative works, on the other.68 The balance embodied in the 1976 Copyright Act, despite extensive tweaking, however, is still funda- mentally based on the world that existed in 1976, at the dawn of
66 For example, “computer programs protected by dongles that prevent access due to malfunction or damage and which are obsolete.” 67 17 U.S.C. § 1202(e)(1). 68 See Part I.A, supra.
24 BRUCE G. JOSEPH AND SCOTT E. BAIN personal computers and long before the Internet, most digital content, and digital communications. Is that balance still valid today? Moreover, the goal of providing an incentive begs a second critical question—how much of an incentive should be provided? In the words of one author, “What we want . . . is not merely an incentive but the right incentive.”69 On the one hand, an activity must generate sufficient return to direct appropriate amounts of talent, investment, and other resources into the activity. On the other hand, providing too great a return can be as bad as or worse than providing too little return. Providing excessive returns to an activity can lead to inefficiency and allocation of too many resources to that activity, thereby diverting those resources from other, more necessary activities and reducing society’s overall welfare.70 Are there attributes of the digital environment that suggest this has become the case with Congress’s grant of copyright rights? These questions are exquisitely difficult. Full consideration would require extensive economic analysis beyond the scope of this mono- graph. However, there are characteristics of copyright law and the digital environment that suggest that the law as it exists today does not strike the proper balance. Consideration of these characteristics should inform the policy debate about today’s digital copyright issues.
69 DAVID D. FRIEDMAN, LAW’S ORDER 135 (2000), quoted in Mark A. Lemley, Property, Intellectual Property and Free Riding, 83 TEX. L. REV. 1031, 1059 (2005). 70 Glynn S. Lunney, Jr., Reexamining Copyright’s Incentives-Access Paradigm, 49 VAND. L. REV. 483, 488-92, 576-77 (1996) (“[T]o create these additional works, we must strip the resources from other sectors of the economy. As a result, broadening copyright imposes a second critical cost [beyond the loss of access to existing or future works]: the lost value society would have associated with the alternative investments to which these resources would otherwise have been devoted.”). Lemley (supra note 69, at 1059-64) identifies four additional social costs imposed by overcompensation: (i) static inefficien- cies and deadweight loss as a result of increasing prices above the competitive norm, resulting in under-use of works; (ii) interference with the ability of improvers to create improvements on the work; (iii) encouraging socially wasteful rent-seeking behavior (such as the readily observed petitioning of the government for even greater rights); and (iv) the imposition of added administrative costs, most notably the costs of additional enforcement.
25 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY
A. Important Characteristics of Copyright and the Digital Environment
There are several characteristics of copyright law and the digital environment that are relevant to calibration of the copyright balance and consideration of the policy issues that arise in that environment. It is worth highlighting them here. Copyright law provides automatic protection for just about everything that is communicated. Text, pictures, graphics, music, recorded sound, video and computer programs are all protected by copyright. Protection is automatic. There is no need for the copyright owner to identify protected subject matter or to register his or her claim with any governmental body. As a result, virtually everyone is a copyright owner, with the ability to invoke the remedies of copyright law, without regard to the quality or desirability of the work.71 The law gives the copyright owner the right to control five broadly defined activities with respect to protected subject matter, including the making of copies.72 Although there are important exceptions to these rights and limitations on their exercise, courts and the Copyright Office often declare that the exceptions and limitations are to be construed narrowly on the ground that they are in derogation of the “exclusive rights” granted by Congress. The law imposes strict liability for conduct that itself performs any of the controlled activities, without regard to knowledge or intent. Further, despite the lack of a clear statutory basis, the courts have created doctrines of secondary liability that have at times been applied broadly.
71 Curiously, purveyors of pornography have been among the most litigious copyright owners. See, e.g., ALS Scan, Inc. v. Remarq Communities, Inc., 239 F.3d 619 (4th Cir. 2001); Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F. Supp. 2d 1146 (C.D. Cal. 2002); Compl., Perfect 10, Inc. v. Google, Inc., No. 04-9484 (C.D. Cal. filed Nov. 19, 2004) (“Perfect 10 Compl.”); Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, No. C-04-0371, 2004 WL 1773349 (N.D. Cal. Aug. 5, 2004); Playboy Enters., Inc. v. Davidson, No. 97-2787, 1999 WL 246739 (N.D. Ohio Apr. 12, 1999); Playboy Enters., Inc. v. Webbworld, Inc., 991 F. Supp. 543 (N.D. Tex. 1997); Playboy Enters., Inc. v. Russ Hardenbaugh, Inc., 982 F. Supp. 503 (N.D. Ohio 1997). 72 See Part I.B.1, supra.
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Direct and secondary violations both are subject to potentially enormous monetary liability under the Act’s statutory damage provisions. Unlike analog technology, digital technology operates by making copies. Computers make copies in their random access memory when content is loaded for use. Digital networks make copies or partial copies of content throughout the transmission process. Viewing a site on the World Wide Web requires a copy of the content of the site to be transmitted using technology that makes copies in routers, caches complete copies in service provider servers, makes a copy of the content in the recipient’s random access memory, and typically makes a second automatic copy on the recipient’s hard drive to promote efficient recall. Conversely, the digital environment permits efficient and hard to detect unauthorized reproduction and dissemination of copyrighted material to large numbers of persons or even to the public at large. Infringing copies typically are high quality and such infringement is often hard to detect. Thus the digital environment has likely spawned an increase in infringing conduct.73 It has also spawned new business models allegedly built on the exploitation of infringement.
73 The major copyright owners believe that the increase in infringing activity has caused enormous economic harm to their industries. See, e.g., Recording Industry Association of America, What the RIAA Is Doing About Piracy, available at
27 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY
B. Are Copyright Rights Properly Analogized to Tangible Property Rights?
Major copyright owners and their supporting organizations in the public policy debates have analogized intellectual property to tangible property, and have urged that it should be treated as such when considering the appropriate level of protection.74 There are reasons to believe, however, that the analogy to tangible property overstates the societal benefits of intellectual property protection, and should be approached with caution when considering how to calibrate the copyright balance.75 Tangible property differs from intellectual property in several important respects. Most fundamentally, a copyrighted work, unlike tangible property, may be used and enjoyed by many without depleting the work or depriving others of their own enjoyment. This characteristic, referred to in the literature as “non-rivalrous consumption,”76 suggests society is likely to obtain greater benefits, with little if any incremental cost, from broad use of the work. Tangible property, in contrast, is characterized by rivalrous consumption. If one person uses the property, others cannot use it at
74 See, e.g., Recording Industry Association of America, Old as the Barbary Coast, New as the Internet, available at
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the same time. Moreover, use tends to deplete the value of the property. Thus the net benefit to society from sharing tangible property is likely to be substantially less than the benefit from sharing intellectual property. Second, because information is easily shared (and digital files are easily copied), it is difficult and costly to prevent others from using the work. Tangible property is far more easily “owned” and controlled. This characteristic, referred to in economic literature as “non- excludability,”77 suggests that society will spend more to impose comparable controls over intellectual property than tangible property. Goods characterized by both non-rivalrous consumption and non- excludability are referred to as “public goods.” The economics of public goods differ significantly from the economics of other types of goods.78 Indeed, subjecting copyrighted works to property rights comparable to those applicable to tangible property could cause society to lose in two ways—less benefit from sharing and the imposition of greater costs to prevent sharing. At minimum, these potential losses suggest that analyzing copyrights as tangible property will misstate the appropriate analysis and lead to a result that does not maximize social welfare.
C. Should Copyright Owners Be Permitted To Exercise Granular Control over Private Use?
In the world of 1976, the rights granted under copyright law mirrored commercially important means of exploiting copyrighted works. Reproduction and distribution rights mirrored the publication
77 Id. at 1049. 78 See, e.g., Lemley, supra note 69, at 1051 (“[R]ather than a tragedy [as in the case of real and tangible property], an information commons is a ‘comedy’ in which everyone benefits.”); id. at 1055 (“Intellectual property, then, is not a response to allocative distortions resulting from scarcity, as real property law is. Rather, it is a conscious decision to create scarcity in a type of good in which it is ordinarily absent in order to artificially boost the economic returns to innovation.”); Wikipedia,
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and sale of books, records, magazines, photographs, and many other types of expression. Public performance rights mirrored the broad- casting of musical works and audiovisual works, live concert performances of music, and theatrical exhibition of motion pictures. A commercial entity interested in exploiting a copyrighted work typically needed to obtain a relatively well understood and defined set of rights to engage in that exploitation.79 Conversely, private enjoyment of copyrighted works could be undertaken without implicating the rights of the copyright owner. An individual did not need the permission of the copyright owner to read a book, view a painting or photograph, listen to a record or the radio, or watch television or a home video. The digital environment changes the calculus. Many private uses of copyrighted works in the digital environment arguably implicate rights that were not implicated in the analog world. Viewing video, listening to music, or reading an article on a computer now requires the making of a copy. Viewing text and photographs by surfing the World Wide Web similarly causes multiple copies to be made. Moreover, the application of technological protection measures enables copyright owners to further subdivide the usage rights provided to users.80 Thus, for example, a copy of a video may be acquired in a form that allows the user to watch it only a limited number of times or for a limited period of time. Copies of recorded music already are made available in a form usable for only the period of time that a subscription fee is paid. Should the copyright owner be permitted to exercise such granular control of the use of a work? Copyright owners argue that granular control enables pricing that is more accurately related to the value of a use. This argument holds that, if a copyright owner is able to charge
79 See also Lunney, supra note 70, at 501 (“Until the early part of the twentieth century, actual copying would constitute an infringing appropriation only if it amounted to an unfair use of the plaintiff’s work in that ‘so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially to an injurious extent appropriated by another.’”) (citations omitted). 80 See, Part III.B, infra.
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less for a copy that includes only the right to view a video once and more for a copy with unlimited viewing rights, consumers will be better off—the person that wants to watch only once will pay less than he or she would pay for a copy with unlimited rights in a world where granular control was not possible. Such pricing is a form of price discrimination, in which the price difference between the two offerings exceeds the cost difference in making the offerings.81 Economists generally believe that the theoretical economic model of perfect price discrimination leads to the socially efficient allocation of scarce resources, just as the theoretical economic model of perfect competition.82 Others disagree, and argue that perfect price discrimination, like perfect competition, cannot exist, and that the price discrimination model will lead to different, and perhaps less desirable, types of works.83 But whatever its effect on efficient resource allocation, the net effect of price discrimination is that consumers spend more in the aggregate and producers earn more than in a competitive market.84 Consumer surplus is redistributed to producers and turned into
81 See, e.g., Michael J. Meurer, Copyright Law and Price Discrimination, 23 CARDOZO L. REV. 55, 58 (2001). 82 See, e.g., id. at 69 (“Perfect price discrimination . . . maximizes total surplus . . . . This is the same total surplus that would be achieved in a competitive market.”); William W. Fisher III, Property and Contract on the Internet, 73 CHI.-KENT L. REV. 1203, 1240 (arguing that partial price discrimination reduces social welfare losses). 83 See, e.g., Julie E. Cohen, Copyright and the Perfect Curve, 53 VAND. L. REV. 1799 (2000) (arguing that the price discrimination model will lead to qualitatively less desirable works); id. at 1812 (“[T]he contractual price discrimination model rests on a logical impossibility. As a result, it is unlikely to foster the sort of competition that its adherents claim is necessary for it to work.”). 84 See, e.g., id. at 1802-04; Meurer, supra note 81, at 91 (“Recall the seller always gains from price discrimination. Discrimination is voluntary. Thus, the seller would not discriminate unless it was profitable.”).
31 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY producer surplus.85 Thus it is not surprising that copyright owners strongly advocate economic and legal models that permit granular differential pricing. Which way is society better off? Which way are consumers better off? Evaluation of those issues requires both theoretical and empirical economic analyses beyond the scope of this monograph. We may, however, draw some insights from the economic treatment of tangible property. The discussion in Part II.B, supra, suggests that society will be better off if copyrighted works, as public goods, are subjected to less restrictive property rights than tangible property. In the world of tangible property, producers typically are not able to charge prices based on the extent of use. Consumers purchase a product and are free to use that product as much as they want without paying more. Those that use a product more likely value it more, but they pay no more. It therefore appears counterintuitive to grant the ability to engage in granular price discrimination in copyright markets, when that ability typically is not present in markets for tangible property. Moreover, permitting producers of certain types of products to capture consumer surplus, while producers of other types of products are precluded from price discrimination, could drive additional resources into production of the product that may be sold with granular, discriminatory pricing. That may distort resource allocation and lead to a reduction of society’s overall welfare.86 This discussion is not intended to be conclusive; it is intended only to stimulate discussion. It does suggest, however, that careful scrutiny should be applied to arguments that intellectual property should be treated just like tangible property and that society is best served by granular price differentiation for each use of copyrighted works.
85 See, e.g., Meurer, supra note 81, at 69 (“[P]erfect price discrimination distributes the entire surplus to the seller, competition distributes the entire surplus to buyers.”). 86 See, e.g., Lunney, supra note 70, at 633 (“[G]ranting authors more extensive control over derivative uses, with a correspondingly greater ability to price discriminate, would lead the market to overproduce works of authorship and to underproduce non-work products.”).
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III. MAJOR ISSUES IN DIGITAL COPYRIGHT
The digital environment has spawned an array of difficult and contentious issues and significant new legislation. Neither space nor time permits an extended discussion of them all. We focus on two areas that have received the greatest attention. We first discuss the extent of liability imposed on providers of technological products and services for infringement by the users of those products and services. This discussion addresses both the recent Supreme Court Grokster decision and the array of issues relating to the liability limitations enacted in 1998 to protect network service providers. We then discuss the increasing use of technological protection measures and the legal issues arising under the DMCA’s prohibition of circumvention.87
A. Secondary and Intermediary Liability
Many of the recent debates and controversies surrounding digital copyright have related to the extent to which technology providers and communications service providers may be held liable for infringement committed by users of the technologies and services. These have
87 Another set of issues that has generated significant recent attention relates to the complex array of rights in musical works and sound recordings and the statutory provisions related to licensing those rights. There is widespread agreement that at least some of these provisions are not adequate for the digital environment and need modernization, but there is little consensus on a solution. See, e.g., Music Licensing Reform: Hearing Before the Subcomm. on Intellectual Property, S. Comm. on the Judiciary, 109th Cong., (July 12, 2005) (statement of Marybeth Peters, the Register of Copyrights), available at
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included issues surrounding the liability of Internet service providers, website operators, manufacturers of consumer electronics equipment, including such popular devices as MP3 players and digital video recorders, and software providers, including providers of controversial peer-to-peer software, such as Napster, Grokster, and Streamcast. Because these providers generally do not themselves perform infringing acts, the discussion typically is couched in the language of secondary liability, rather than direct, strict liability.88 These debates have been highly charged, as they implicate not only the interests of copyright owners and users, but broader issues of technology policy and the public’s interest in the continued robust development of digital technology. Thus the recent Grokster case in the Supreme Court attracted more than sixty amicus briefs (more amicus briefs than any other case last year) from a wide range of copyright and technology industry groups, public interest groups, professors, and others. Many of those briefs expressed concerns that overly broad doctrines of secondary copyright liability could severely chill the development of technology; others expressed concerns that unreasonably narrow doctrines of secondary liability could foster infringement and undermine the incentive to create copyrighted works. It should by now be obvious that the development of digital technology has revolutionized almost every aspect of life, from the way people do business to the way they receive information, communicate, express themselves, experience the world, and preserve their memories. The Supreme Court has described the Internet as “a
88 This fact has not stopped certain copyright owners from attempting to characterize actions taken by users of service providers’ systems to be actions of the service provider (acting through its system or network), and seeking to impose strict liability. See, e.g., Playboy Enters., Inc. v. Frena, 839 F. Supp. 1552 (M.D. Fla. 1993); Religious Tech. Ctr. v. Netcom Online Communc’n Services, 907 F. Supp. 1361 (N.D. Cal. 1995); CoStar Group, Inc. v. Loopnet, 373 F.3d 544 (4th Cir. 2004); Playboy Enters., Inc. v. Netscape Commc’ns Corp., 354 F.3d 1020 (9th Cir. 2004). The courts ultimately rejected these efforts and made clear that direct infringement requires a volitional act on the part of the defendant to infringe. Netcom, 907 F. Supp. 1361. This doctrine was recently confirmed in the face of efforts to hold a website operator strictly liable for the conduct of its users. CoStar, 373 F.3d 544.
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unique and wholly new medium of worldwide human communication,” and a “new marketplace of ideas” containing “vast democratic forums,” from which “any person with a phone line can become a town crier with a voice that resonates farther than it could from any soapbox.”89 In another arena, the digital video recorder (DVR) has so changed how the public experiences television that Michael Powell, then Chairman of the Federal Communications Commission, described the pioneering TiVo as “God’s Machine.”90 At the same time, digital technologies are both threatened by and uniquely susceptible to claims by copyright owners that they foster copyright infringement. Like many other technologies, digital technology can be used for both lawful and unlawful purposes. By their nature, digital technologies and products operate by making copies of information. Personal computers, for example, are enormous copying machines with immense storage capacity. As discussed previously, the same is true of the Internet and other digital communications technologies. Thus they are particularly susceptible to claims that they foster infringement, particularly if infringement is defined broadly to include noncommercial, personal uses of copyrighted materials. Moreover, copyright owners often are reluctant to sue the members of the public who are directly engaging in copyright infringement, because those individuals may be their “customers” or it may be impractical or inefficient to sue. Some copyright owners thus have relied on copyright law to challenge entire technologies and features of those technologies to which they object, rather than focusing on particular infringing acts themselves. A classic example is the suit against Sony’s Betamax analog videocassette recorder discussed later in this monograph. There are, however, more recent examples of challenged digital technologies:
1. Starting in 1985, major copyright owners delayed for seven years the introduction of digital audio recording technology using
89 Reno v. ACLU, 521 U.S. 844, 850, 868, 870, 885 (1997). 90 Jim Krane, FCC’s Powell Declares TiVo ‘God’s Machine,’ TULSA WORLD, Jan. 11, 2003, at E3.
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lawsuits, lobbying, and a refusal to produce pre-recorded tapes.91 The impasse was broken only after lengthy negotiations among electronics manufacturers and copyright owners resulted in the Audio Home Recording Act of 1992 (AHRA), which immunized the sale and use of digital audio recording devices from suit and separately imposed a duty to use mandatory copy limitation technology and make statutory payments. 2. In 1999, copyright owners tried to enjoin the manufacture and sale of MP3 players, now among the most popular consumer electronics devices on the market. The recording industry’s trade association, the Recording Industry Association of America (RIAA), sued Diamond Multimedia on the basis of the company’s Rio product, an early portable MP3 player.92 RIAA asserted that demand for these devices would be nonexistent without infringe-ment and maintained that the devices had to be redesigned to comply with the AHRA.93 The Ninth Circuit disagreed, holding that MP3 players designed primarily to copy from computers were not subject to the AHRA, and noting with foresight that the popularity of the devices was driven in part by a “burgeoning” legitimate trade in Internet music.94 3. In 2001, the movie industry sued a major manufacturer of DVRs, separately challenging their consumer-friendly storage and indexing capabilities, as well as features facilitating the skipping of material and permitting remote access.95 The defendants, ReplayTV and its
91 Ariel B. Taitz, Note, Removing Road Blocks Along the Information Superhighway: Facilitating the Dissemination of New Technology by Changing the Law of Contributory Copyright Infringement, 64 GEO. WASH. L. REV. 133, 147 (1995). 92 Recording Indus. Ass'n of Am., Inc. v. Diamond Multimedia Sys., Inc., 180 F.3d 1072 (9th Cir. 1999). 93 Id. at 1075. 94 Id. at 1074, 1081. 95 MGM Compl. ¶¶ 24-25, MGM Studios, Inc. v. ReplayTV, Inc., No. 01- 09801 (C.D. Cal. filed Nov. 14, 2001) (including separate count for storage, indexing, and playback as “inducement” to infringement); Time-Warner Compl., id. (filed Nov. 9, 2001).
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parent, could not afford to defend and were forced into bankruptcy.96 4. In 2004, the self-described distributor of nude photographs of “the world’s most beautiful natural women” sued Internet search engine Google as well as MasterCard and Visa for providing links to allegedly infringing photographs and for providing services to allegedly infringing websites.97
The lack of clarity in the law and the magnitude of threatened statutory damages liability often make it expensive and risky to defend such suits. When technologies are capable of handling thousands or tens of thousands of separate works, even the mandatory minimum statutory damages award of $750 per infringed work could impose massive liability should any such claim succeed. Technological innovation requires substantial investment in capital, time, and ingenuity. If the risk of secondary liability is too great, that investment will not be made. On the other hand, creators of copyrighted works, or those that fund them, can reasonably argue that if they are not paid, they will not create or fund creation. Some works, such as major motion pictures, require extensive investment and entail substantial risk. Further, it may be difficult to seek out and sue each individual direct infringer. The developer or marketer of a technology that is made and sold with the intent to profit from the destruction of the creator’s primary market (e.g., theatrical exhibition or the distribution of copies) has little claim on sympathy. The trick is finding a balance that provides adequate protection for major copyright markets without unduly stifling the
96 See Benny Evangelista, Piracy Suits Chill Valley, Moves Peril Profits, Techies Say, S.F. CHRON., Feb. 20, 2003, at B-1 (“Sonicblue Chief Executive Officer Greg Ballard said his company is spending $3 million per quarter on legal fees to defend itself [in the ReplayTV case]. Ballard said the legal costs are in turn preventing Sonicblue from hiring about 120 employees who could drive future innovations for the company.”). 97 See, e.g., Compl., Perfect 10, Inc. v. Google, Inc., No. 04-9484 (C.D. Cal. filed Nov. 19, 2004); Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, No. C-04- 0371, 2004 WL 1773349 (N.D. Cal. Aug. 5, 2004).
37 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY growth of valuable technology, a balance that raises the policy issues discussed in Part II of this monograph.
1. Judicial Creation of Secondary Liability
The Copyright Act does not explicitly state that anyone may be held liable for contributing to or benefiting from the infringing conduct of third parties. However, courts have developed and applied concepts of secondary liability for infringement, citing the statutory protection of the right “to authorize” activities within the exclusive rights of section 106, and common law tort and master-servant liability principles.98 Thus courts have found defendants liable for contributory infringement when, with knowledge of the infringing activity, they induce, cause, or materially contribute to the infringing conduct of another.99 Similarly, they have found defendants vicariously liable for infringement when they possess the right and ability to supervise the infringing conduct of the direct infringer and have an obvious and direct financial interest in the exploitation of the copyrighted materials.100 Some courts have construed the elements of these doctrines very broadly. For example, one court found that “support services” such as parking and utilities at a swap meet where infringing copies were sold
98 In other contexts, the Supreme Court has held that secondary liability will not be associated with a statutory cause of action unless the statute clearly provides for such liability. See, e.g., Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164 (1994) (rejecting aiding and abetting liability under section 10(b) of the Securities Exchange Act of 1934); Mertens v. Hewitt Assocs., 508 U.S. 248, 254-55 (1993) (rejecting nonfiduciary liability under ERISA). 99 See, e.g., Gershwin Publ’g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159 (2d Cir. 1971). 100 See, e.g., A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1022-24 (9th Cir. 2001); Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 264 (9th Cir. 1996); Nelson-Salabes, Inc. v. Morningside Dev., LLC, 284 F.3d 505, 513-14 (4th Cir. 2004).
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were “material contributions.”101 Another case, involving an Internet service provider, found providing access to the computer system used for infringement to be a material contribution and that control for vicarious liability could be theoretical and indirect, on the basis of a contractual relationship. Nevertheless, the court found that contributory infringement required knowledge at a time when it was possible for the service provider to take action to prevent the infringement.102 In the most extreme case to date, the Ninth Circuit imputed “knowledge” from one e-mail the defendant never received, found “material contribution” from automated copying incidental to providing online access to newsgroups, and determined that, for vicarious liability, drawing added customers was sufficient benefit and that there is “no requirement that the draw be ‘substantial.’”103 Such broad constructs seem to stretch the reasonable bounds of the statute and impose liability beyond that which traditionally exists at common law. These constructs may be limited by the Supreme Court’s recent discussion of secondary liability in the Grokster case, discussed infra, subpart 3, though the precise effects of that case remain to be determined. In Grokster, the Supreme Court described the relevant standard for contributory infringement as “intentionally inducing or encouraging direct infringement.”104 The Court applied the requirement of intent to distinguish the Betamax doctrine, to which we now turn.
2. The Betamax Doctrine
In the early 1980s, the movie studios objected to a new product called the Betamax, a videocassette recorder designed by Sony to record television programs. Jack Valenti, then-President of the Motion Picture Association of America, compared the device to “millions of
101 Fonovisa, 76 F.3d at 264. 102 Religious Tech. Ctr. v. Netcom On-Line Commc’n Services, Inc., 907 F. Supp. 1361, 1377-75 (N.D. Cal. 1995). 103 Ellison v. Robertson, 357 F.3d 1072, 1078-79 (9th Cir. 2004). 104 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster Ltd., 125 S. Ct. 2764, 2776 (2005).
39 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY tapeworms eating away at the very heart and essence of the most precious asset the copyright owner has,”105 and declared that “the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone.”106 In the face of this perceived threat, the studios sued Sony, alleging it was liable under theories of secondary liability for the infringement committed by users of the Betamax when they recorded television programs. The studios sought monetary damages, an accounting of Sony’s VCR profits, and an injunction against further sale of the Betamax. After a trial court decision in favor of Sony and a court of appeals decision in favor of the studios, the case arrived at the Supreme Court. The Supreme Court, in a 5-4 decision, held that the marketing of the Betamax did not give rise to liability for infringement because the device was “capable of substantial noninfringing uses.”107 The Court observed that
[i]f vicarious liability108 is to be imposed on [Sony] in this case, it must rest on the fact that it has sold equipment with
105 Copyright Infringements (Audio and Video Recorders): Hearing on S. 1758 Before the S. Comm. on the Judiciary, 97th Cong. 459 (1982) (testimony of Jack Valenti, President, Motion Picture Association of America, Inc.). 106 Home Recording of Copyrighted Work: Hearing on H.R. 4783 et al. Before the Subcomm. on Courts, Civil Liberties, and the Administration of Justice, H. Comm. on the Judiciary, 97th Cong. 4, 8 (1982) (testimony of Jack Valenti, President, MPAA). Of course, the infamous strangler did not create a lucrative new market for the women of Boston. By the mid-1990s, film industry revenue from videocassette distribution exceeded revenue from theatrical exhibition. See HAROLD L. VOGEL, ENTERTAINMENT INDUSTRY ECONOMICS: A GUIDE FOR FINANCIAL ANALYSIS 62 (5th ed. 2001). 107 Sony Corp. v. Universal Studios, Inc., 464 U.S. 417, 442 (1984). 108 The Court used “vicarious liability” in the general sense of secondary liability rather than in the sense used by lower courts and discussed in Part I.B.4, supra. The Court had previously noted that the plaintiffs had relied on a claim of “contributory infringement,” but had observed that the lines among the various theories of liability “are not clearly drawn.” Sony Corp., supra note 107, at 435 n.17.
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constructive knowledge of the fact that [its] customers may use that equipment to make unauthorized copies of copyrighted material. There is no precedent in the law of copyright for the imposition of vicarious liability on such a theory.109
The Court noted the public’s interest in access to an article of commerce that has both infringing and noninfringing uses and looked to patent law, which includes a doctrine that permits the imposition of contributory liability for distribution of such articles only when they are “unsuited for any commercial noninfringing use.”110 The Court then went on to identify two bases for finding the Betamax to be “capable of substantial noninfringing use.” First, the Court found that many television program copyright owners were willing to allow private recording to facilitate “time-shifting” of their programs, so they could be watched at a time different from the time broadcast.111 The Court concluded that the “seller of the equipment that expands [the] audiences [of program producers that do not object to time-shifting] cannot be a contributory infringer if, as is true in this case, it has no direct involvement with any infringing activity.”112 The Court then examined unauthorized time-shifting of broadcast television and found it to be noninfringing fair use.113
109 Sony Corp., supra note 107, at 439. 110 Id. at 440-42. 111 Id. at 443-44 (citing statements of the district court that “constitute a finding that the evidence concerning ‘sports, religious, educational, and other programming’ was sufficient to establish a significant quantity of broadcasting whose copying is now authorized, and a significant potential for future authorized copying”). 112 Id. at 446-47. 113 Id. at 447-55. This second conclusion responded to the concern that millions of Betamax users might be branded infringers by virtue of their private time-shifting. Id. at 456 (“One may search the Copyright Act in vain for any sign that the elected representatives of the millions of people who watch television every day have made it unlawful to copy a program for later viewing at home.”). It also responded to the dissent, which concluded, “[I]f a significant portion of the product’s use is noninfringing, the manufacturers and sellers cannot be held contributorily liable for the product's infringing
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By providing protection from claims of copyright liability, the Betamax doctrine helped foster the growth of computers, digital consumer electronics, and digital communications technologies, among others. Technology industry advocates have argued that the Betamax doctrine has been an important element in fostering the growth of the digital age.114 On the other hand, many copyright owner advocates have criticized the doctrine as overly broad and having the potential to foster infringement, and have sought ways to limit it.115
uses. If virtually all of the product’s use, however, is to infringe, contributory liability may be imposed; if no one would buy the product for noninfringing purposes alone, it is clear that the manufacturer is purposely profiting from the infringement, and that liability is appropriately imposed.” Id. at 491 (Blackmun, J., dissenting). It is noteworthy that the Betamax dissent would provide more latitude for the development of technology than many of the tests urged by the plaintiffs and their amici in the recent Grokster case. See Part III.A.3, infra. 114 See, e.g., Protecting Innovation and Art While Preventing Privacy: Hearing Before the S. Comm. on the Judiciary, 108th Cong. (2004) (statement of Gary Shapiro, Chief Executive Officer of the Consumer Electronics Assoc. and Chairman of the Home Recording Rights Coalition) (stating that “[w]e have long referred to [the Betamax] holding as the Magna Carta for our industry”); Brief of Amici Curiae Consumer Electronics Assoc., The Computer and Comm’n Ind. Assoc., and the Home Recording Rights Coalition at 7, No. 04-480, 2005 WL 520498 (Mar. 1, 2005) (“It is no overstatement to say that the Digital Age owes its existence to the Betamax doctrine.”); Brief of Cellular Telecommunications Industry Association et al. (“Brief of Internet Amici”) at 1-2, No. 04-480, 2005 WL 508115 (Mar. 1, 2005). 115 See, e.g., Brief for Motion Picture Studio and Recording Company Pet’rs at 26-28, No. 04-480, 2005 WL 166587 (Jan. 24, 2005) (“Pet’rs Br.”) (arguing that Sony’s “capable of substantial non-infringing uses” test should be narrowly construed, and should not protect defendants who encourage infringement); Cary Sherman, Perspective: Honest Talk About Downloads, Oct. 16, 2002, available at
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3. Peer-to-Peer Applications and the Grokster Case: The Battle over Betamax
The advent of peer-to-peer (“P2P”) computer applications— programs that enable computer users to share files over the Internet directly with each other’s computer without the need for an intermediary—provided the major copyright industries with the opportunity they had long sought to limit the Betamax doctrine. Cases against the distributors of P2P software presented unsympathetic defendants that were alleged and appeared to have developed their software and built their businesses entirely on the basis of facilitating and promoting widespread, geometrically expanding dissemination of infringing copies of copyrighted works (mostly sound recordings, computer programs, television programs, and motion pictures). Moreover, the greatly predominant use of the software in each case was infringing dissemination of copyrighted works indiscriminately to members of the public without regard to their relationship to, or even their acquaintance with, the disseminators. The recording, music, and motion picture industries argued that, unchecked, the software would lead to the destruction of their industries.116 Peer-to-peer applications create a virtual network among individuals online that are using the software at any given time, and allow each user to identify and exchange copies of files that others are making available. Such software typically may be used for both noninfringing and infringing purposes. Because of their efficiency and security, peer-
116 See, e.g., Pet’rs Br. at 12 (“Respondents’ services inflict massive and irreparable harm because of the viral distribution they make possible. . . . Empirical studies confirm that services like respondents’ have caused a sharp decline in sales of music.”); Protecting Innovation and Art While Protecting Privacy: Hearing Before the S. Comm. on the Judiciary, 108th Cong. (2004) (statement of Mitch Bainwol, Chairman and Chief Executive Officer of the RIAA) (“While the free-for-all nature of illicit P2P services is alluring to users in the short term, it will ultimately drain the well dry—and faster than anyone thinks. Jobs in the music industry are down by about a third over the last several years. Families have suffered. And so has the music. Artist rosters have had to be slashed as cost cuts continue. Fewer dreams are being funded and this creative product is lost forever.”).
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to-peer applications are used by businesses, universities, and government agencies to store and distribute files.117 Public P2P applications are used to exchange materials that are in the public domain as well as copyrighted works for which sharing has been authorized.118 It is reasonable to conclude, however, that at present the great majority of use of many of the publicly distributed P2P applications has been the infringing uploading and downloading of copyrighted sound recordings, computer software, and audiovisual works.119
a. Napster and Aimster—The First Cases
The first peer-to-peer application challenged by the recording industry and the music industry was Napster, an application designed specifically for the sharing of audio files in the MP3 compression format. The Napster software used a central server operated by Napster to perform the function of indexing available files. The Ninth Circuit Court of Appeals found Napster liable under theories of contributory infringement and vicarious liability. It construed Sony as standing only for the proposition that the knowledge required to sustain a finding of contributory infringement could not be inferred by virtue of the fact that the Napster software “may be used to infringe plaintiffs’ copyrights.”120 But the court found that no such inference was needed in light of the district court’s finding that there was direct evidence that Napster had “actual knowledge that specific infringing material is available using its system, that it could block access to the system by suppliers of the infringing material, and that it failed to remove the
117 Grokster, 125 S. Ct. at 2770. 118 Id. at 2789 (Breyer, J., concurring) (citing Project Gutenberg, public domain software, “open content” works collected by Creative Commons, authorized copies of music by artists such as Janis Ian, Pearl Jam, and the Dave Matthews Band, and licensed video content, among others). Even unauthorized downloads may sometimes be for fair use purposes such as news reporting, commentary, and school reports. 119 Napster, 239 F.3d at 1013-14; Grokster, 125 S. Ct. at 2772. 120 Napster, 239 F.3d at 1020-21.
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material.”121 The court also concluded that the Betamax doctrine did not apply to the theory of vicarious liability. It therefore affirmed the issuance of an injunction requiring Napster to use its indexing function to block access to infringing files.122 Napster subsequently was shut down after it was unable to conform to the requirements of the injunction and the trademark was purchased by one of the major record companies.123 Other P2P applications had been developed during the pendency of the Napster case, and quickly became popular among those seeking a new source of “shared” material. Notable among them was an application called “Aimster,” which piggybacked on instant messaging software to allow its users to search for and share copyrighted music with each other. The files themselves were hosted on the users’ computers and, like Napster, Aimster’s central server functioned as a “stock exchange” matching users with each other.124 In upholding a district court’s preliminary injunction that effectively put Aimster out of business, the Seventh Circuit ruled that Aimster was contributorily liable for its users’ infringements. Although acknowledging that Aimster potentially could be used for a variety of noninfringing purposes, and acknowledging that potential noninfringing use may preclude liability under Betamax, the court held that Aimster put forth no actual evidence of such noninfringing use and, therefore, the court must “assume for purposes of [the injunction] that no such evidence exists.”125 Moreover, the court emphasized that Aimster knew of and encouraged widespread infringement through its “tutorials” provided to users.126
121 Id. at 1021. 122 Id. at 1027-28. 123 The Napster mark now is used for a subscription-based music service, offering music that has been licensed by the copyright owners and is protected using digital rights management technologies. 124 See In re Aimster Copyright Litig., 334 F.3d 643, 647 (7th Cir. 2003). 125 Id. at 653. 126 Id. at 651-53 (“It is not enough, as we have said, that a product or service be physically capable, as it were, of a noninfringing use. Aimster has failed to produce any evidence that its service has ever been used for a noninfringing use, let alone evidence concerning the frequency of such uses.”).
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Dicta in the decision attracted the most attention. In its infringement analysis, the court of appeals discussed Aimster’s encryption feature and expressed the view that Aimster could have better “monitored” its system for infringement by eliminating that feature. Going beyond Betamax, the court stated that “if the infringing uses are substantial then to avoid liability as a contributory infringer the provider of the service must show that it would have been disproportionately costly for him to eliminate or at least reduce substantially the infringing uses.”127 The court believed that plaintiffs had presented evidence of substantial infringement, and Aimster was unable to meet the shifted burden as a result of its “self-inflicted wound,” that is, the inability to search the communications using its service because they were encrypted.128 These dicta became a focal point of briefing by the technology companies in the Supreme Court’s consideration of Grokster and were addressed in the Court’s decision.
b. The Grokster Case in the Lower Courts
Among the applications that were developed during the pendency of Napster was software marketed by two companies, Grokster and StreamCast. These applications, based on a newer generation of peer- to-peer technology, decentralized all functions, including the indexing function on which the Napster injunction had been based. The motion picture, recording, and music industries sued Grokster and StreamCast, alleging contributory and vicarious liability for infringement. Plaintiffs alleged, among other things, that the defendants had actively recruited infringing users of the defunct Napster service, the overwhelming majority of users and uses of the applications were infringing, defendants knew about and contributed to that infringe-
127 Id. (emphasis added). 128 Id. at 654. The court pointed to the DMCA as suggesting some obligation to monitor, id. at 648. As discussed in Part III.A.4, infra, however, the DMCA does not require service providers to monitor their services for infringement in order to qualify for the safe harbors—only to remove specific infringing materials brought to their attention by a prescribed notice process or where infringing activity is apparent.
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ment, defendants profited from the infringement, encouraged the infringement, and had designed their software to make it impossible for them to control or limit the infringement. Defendants countered, among other things, that they did not know when specific infringing files were exchanged, could not limit or control the use of their software, and that the software was capable of substantial non- infringing use and, therefore, was protected from liability by the Betamax doctrine. The parties cross-moved for summary judgment on a number of issues. The district court denied plaintiffs’ motion and granted defendants’ motion in part, denying injunctive relief against the distribution of the then-current version of the software. The court had little trouble finding that the current software was “capable of substantial noninfringing uses” on the basis of present and “potential future noninfringing uses,”129 and thus reasoned that the Betamax doctrine applied to the distribution of the software. It then reasoned that defendants lacked knowledge of specific infringing files at a time that they could “use that knowledge to stop the particular infringe- ment” and that the Betamax doctrine precluded imputation of such knowledge from the general knowledge that the software was used to infringe.130 The court reasoned that defendants’ alleged contributions other than the distribution of the software related to past conduct and deferred judgment on that past conduct for later proceedings in the case. It further found that defendants’ alleged failure to design the software to enable control over the users’ infringing activity did not give rise to vicarious liability.131 The Ninth Circuit affirmed the grant of partial summary judgment in favor of defendants. The court followed reasoning similar to that of the district court, finding that, because the software was capable of
129 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 259 F. Supp. 2d 1029, 1035-36 (C.D. Cal. 2003). 130 Id. at 1037. In this reasoning, the court was bound to follow the Ninth Circuit’s construction of the Betamax doctrine in the Napster case. 131 Id. at 1044-46 (“The doctrine of vicarious infringement does not contemplate liability based upon the fact that a product could be made such that it is less susceptible to unlawful use.”).
47 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY substantial noninfringing use, the Betamax doctrine required actual proof of knowledge of specific infringing uses and failure to act to prevent such uses.132 The court also reasoned that the software distributors did not make a material contribution to the infringement because by providing software they did not “provide [ ] the site and facilities for infringement.”133 The court found that
while Grokster and StreamCast . . . may seek to be the “next Napster,” the peer-to-peer file sharing technology at issue is not simply a tool engineered to get around the holdings of Napster. . . . The technology has numerous other uses, significantly reducing the distribution costs of public domain and permissively shared art and speech, as well as reducing the centralized control of that distribution.134
The court also rejected the claim of vicarious liability, holding that the software distributors lacked the right and ability to control the infringing use, and that there is no separate theory of liability for “turning a blind eye” to infringement.135
c. The Grokster Case in the Supreme Court
The plaintiffs filed petitions for certiorari supported by numerous amicus briefs, and the Supreme Court agreed to hear the case. Briefing centered largely on the meaning and application of the Betamax doctrine. The content industries, and the Solicitor General as amicus, argued variously that (i) Betamax did not apply because defendants had actively encouraged and promoted (i.e., “induced”) infringement; (ii) the correct standard for protection under Betamax was not “capable of substantial noninfringing use” but, rather, actual predominant use and whether the product would be “commercially viable” but for
132 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster Ltd., 380 F.3d 1154, 1160-62 (9th Cir. 2004). 133 Id. at 1163. 134 Id. at 1164. 135 Id. at 1166.
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infringing uses; and (iii) the Betamax doctrine does not extend to vicarious liability, and defendants should not be absolved from vicarious liability by virtue of having engineered their software to make it impossible to supervise infringing uses.136 Defendants and technology industry amici argued that the Betamax doctrine was critically important to innovation and the development of technology, that the doctrine applied to defendants’ software, and that defendants were not liable because their software was capable of substantial noninfringing use. They further argued that there was no duty to design products to minimize infringement and that there was no evidence that defendants actively induced infringement by any conduct related to the distribution of the software before the Court. As noted previously, the case generated enormous interest and the filing of more than sixty amicus briefs. The Court ruled 9-0 that the lower courts had erred in granting partial summary judgment in favor of defendants. To reach this result, the Court articulated, for the first time, a theory of liability for “intentional inducement of infringement” by virtue of the distribution of a product—a theory not subject to the Betamax doctrine. The Court held that “one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.”137 The Court focused on the culpability of defendants—their actual intent to do wrong—with strong overtones of the desire to impose liability on “a defendant whose conduct was intended to do harm, or
136 The Solicitor General rejected the view that product design could independently give rise to vicarious liability, but urged the Court to consider failure “to take easily available steps to reduce the infringing uses or to focus on legitimate uses” as a factor in assessing whether defendant was engaged in a business “substantially unrelated” to copyright infringement. Brief for the United States as Amicus Curiae Supporting Petitioners at 5-6, 13-17, 19-21 & n.3, No. 04-480, 2005 WL 154148 (Jan. 24, 2005). 137 Grokster, 125 S. Ct. at 2770, 2780 (holding repeated twice, verbatim).
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was morally wrong.”138 The Court reasoned that contributory infringement applies to one “intentionally inducing or encouraging direct infringement,”139 and that Sony “was never meant to foreclose rules of fault-based liability derived from the common law” or to require “courts to ignore evidence of intent if there is such evidence.”140 Rather, the Court declared that the point of Sony was to prohibit courts from “imputing culpable intent as a matter of law from the characteristics or uses of a distributed product” or from “knowledge that it may be put to infringing uses.”141 Thus the Court reasoned that liability may be imposed on the distributor of a product, notwithstanding Sony, if “the evidence . . . shows statements or actions directed to promoting infringement.” “The inducement rule . . . premises liability on purposeful, culpable expression and conduct.”142 The Court recognized the potentially inverse relationship between copyright protection and technological development, noting that “the more artistic protection is favored, the more technological innovation may be discouraged” and explaining that “the administration of copyright law is an exercise in managing the trade-off.”143 Thus, the Court expressed concern for the effect of copyright liability on the development of technology, saying it was “of course, mindful of the
138 Id. at 17-19, quoting W. KEETON ET AL., PROSSER AND KEETON ON LAW OF TORTS 37 (5th ed. 1984) (“There is a definite tendency to impose greater responsibility upon a defendant whose conduct was intended to do harm, or was morally wrong.”). 139 Grokster, 125 S. Ct. at 2786. 140 Id. at 2779, 2786. 141 Id. at 2779. The Court said that the Ninth Circuit erred by converting Sony from a case “about liability resting on imputed intent to one about liability on any theory.” Id. at 2778. Query whether this is an accurate reading of Sony. Although the Sony decision does expressly reject the imputation of intent from constructive knowledge of a product’s uses, it appears on its face to reach this result by establishing a broad rule, applicable to liability on any theory (not just intent), on the basis of the Court’s view of the appropriate reach of copyright liability into products that are capable of substantial noninfringing use. 142 Id. at 2780 (emphasis added). 143 Id. at 2775.
50 BRUCE G. JOSEPH AND SCOTT E. BAIN need to keep from trenching on regular commerce or discouraging the development of technologies with lawful and unlawful potential.”144 Accordingly, the Court found that neither “knowledge of infringing potential or of actual infringing uses” nor “ordinary acts incident to product distribution, such as offering customers technical support or product updates,” would support liability.145 The Court highlighted three “features” of the evidence of intent that it deemed “particularly notable” in demonstrating the culpability of Grokster and StreamCast:146
• First, it pointed to the evidence that both Grokster and StreamCast “showed [themselves] to be aiming to satisfy a known source of demand for copyright infringement, the market comprising former Napster users.”147
• Second, the Court noted that this evidence was given added significance by the showing that “neither company attempted to develop filtering tools.”148 In contrast to the court of appeals in Aimster, however, the Supreme Court provided an important caveat—a court would not be permitted to find liability “merely based on a failure to take affirmative steps to prevent infringement” if the device otherwise was capable of substantial noninfringing use. The Court found that “[s]uch a holding would tread too close to the Sony safe harbor.”149
• Third, the Court pointed to the fact that Grokster and StreamCast based their business on the sale of advertising and that revenues were directly related to the volume of use of the software. Thus “the commercial sense of their enterprise turns
144 Id. at 2780. 145 Id. 146 Id. at 2781. 147 Id. 148 Id. 149 Id. at 2781 n.12.
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on high-volume use, which the record shows is infringing.”150 The Court again noted, however, that “[t]his evidence alone would not justify an inference of unlawful intent,” pointing instead to the “context of the entire record.”151
It is apparent from the three “features” cited by the Court that the linchpin of the decision is the first “feature,” the intentional effort of defendants to base their business on satisfying the demands of a market driven by infringement—the unserved market of former Napster users. The Court made clear that the other two evidentiary “features” standing alone could not give rise to infringement liability without treading on the development of technology and the Sony “safe harbor.” Nor, it seems apparent, could those two features combined give rise to liability, as revenue based on use is a common business model, whether driven by advertising, direct usage fees, or number of subscribers. Coupling such a business model with the failure to take affirmative steps would also seem to “tread too close” to the Sony safe harbor. Without the first feature, the other two features would fail to demonstrate the purposeful, wrongful conduct that the Court considered the basis for a finding of intentional inducement.152 The Grokster decision and the intentional inducement doctrine are likely to be a significant weapon for copyright owners in their effort to curb the development of new businesses built by bad actors around the promotion and monetization of clearly infringing conduct. The decision also appears already to have had an effect on existing P2P software providers. Grokster has announced that it will stop distributing and maintaining its software and will pay $50 million to settle record-company claims, and another provider, eDonkey, has
150 Id. at 2782. 151 Id. 152 While the first feature appears to have been necessary, it may not be sufficient to give rise to liability. The Court implies that a business model not based on usage volume or taking steps to limit infringement could negate evidence of wrongful intent.
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announced that it will take steps to prevent the exchange of copyrighted material by individuals using its software.153
d. Unanswered Questions
i. “Capable of Substantial Noninfringing Use”
The Court chose not to address the primary question raised by the parties and the great majority of amici—how to construe the Betamax “capable of substantial noninfringing use” standard—leaving consideration of that question “for a day when that may be required.”154 Six justices, however, chose to confront the issue directly in two sharply contrasting concurring opinions. Justice Ginsburg, joined by Chief Justice Rehnquist and Justice Kennedy, wrote an opinion indicating disagreement with the lower courts’ construction of the Betamax standard, and implicitly arguing for a more limited exception to contributory infringement based on the distribution of a product. To these three justices, the record before the lower courts did not justify a grant of summary judgment that the software was capable of substantial or “commercially significant” noninfringing use. Justice Ginsburg argued that the evidence relied upon by the lower courts for that proposition was “anecdotal,” “second-hand,” and “hearsay.”155 Rather, she argued that even a substantial number of noninfringing uses must be viewed in light of the evidence that the software was, and for some time had been, “overwhelmingly used to infringe” and that the “overwhelming source of revenue” was infringement. She stopped short, however, of offering a construction of the Betamax standard, saying only that the lower courts should reconsider the issue “on a fuller record.”156
153 See Associated Press, Grokster Downloading Service to Shut Down,
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Justice Breyer, joined by Justices Stevens and O’Connor, disagreed, and argued that the lower courts had properly construed Sony. They pointed out that the Sony court had found that “authorized” time- shifting, which constituted only about 9% of the use of the Betamax, “alone constituted a sufficient basis for rejecting the imposition of secondary liability.157 They also pointed to the importance of the word “capable” indicating “the appropriateness of looking to potential future uses of the product.”158 More fundamentally, Justice Breyer asked whether the Betamax doctrine has “worked to protect new technology” and whether a modification would weaken that protection or provide benefits to copyright protection that outweighed any such weakening.159 He concluded that “Sony’s rule, as I interpret it, has provided entre- preneurs with needed assurance that they will be shielded from copyright liability as they bring valuable new technologies to market.”160 He further concluded that weakening of the Betamax standard would “undercut the protection,” citing the added evidentiary burden, uncertainty, and the risk of large statutory damage awards.161 Finally, he concluded that the copyright owners had not demonstrated that a change in the Sony standard would provide gains in copyright protection to offset the added risks to technology. For now, the Betamax doctrine remains a standard based on whether a product is “capable of substantial noninfringing use.” The resignation of Justice O’Connor and passing of Chief Justice Rehnquist will leave only two justices supporting each of the concurrences. The views of the other five justices are unknown.
157 Id. at 2788 (Breyer, J., concurring). 158 Id. at 2789 (Breyer, J., concurring). 159 Id. at 2791 (Breyer, J., concurring). 160 Id. Justice Breyer then describes Sony as “clear,” “strongly technology protecting,” “forward looking,” and “mindful of the limitations facing judges where matters of technology are concerned.” Id. at 2791-92 (Breyer, J., concurring). 161 Id. at 2786-87 (Breyer, J., concurring).
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ii. What Is “Intentional Inducement?”
The Court’s opinion leaves significant uncertainty about the scope of the theory of liability identified as “inducement of infringement” and its effect on copyright rights and the development of technology. Lower courts applying the doctrine in future cases will have much to say about how copyright law manages the “trade-off” between “artistic protection” and “technological innovation.” The Grokster decision announces and applies the inducement doctrine in the context of the distribution of a product with a specific proscribed objective. Does the doctrine have application in other contexts? The Court describes contributory infringement as “intentionally inducing or encouraging direct infringement,”162 and says, “[t]he classic instance of inducement is by advertisement or solicitation that broadcasts a message designed to stimulate others to commit violations.”163 Might such inducement give rise to liability for others than those who distribute products with the proscribed intent? While such a reading is possible, the better view is that the Court defined a doctrine directed to those who distribute a product with the specific proscribed intent. The Court took pains to announce its holding in precisely the same language twice in the opinion—a holding limited to “one who distributes a device with the object of promoting its use.”164 The discussions of “active steps . . . taken to encourage direct infringement,”165 the patent law roots of inducement,166 and advertisement and solicitation167 are all presented in the context of product distribution and usage. The Court does not explore the significance or potential breadth of an inducement theory in contexts other than product distribution, or how application of such a theory might affect speech or other important values. Courts should,
162 Id. at 2776. 163 Id. at 2768. 164 Id. at 2770, 2780. 165 Id. at 2779. 166 Id. at 2780. 167 Id.
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for example, be hesitant to chill technology reviews that describe product uses. More fundamentally, when the Court speaks of intentional inducement or of promoting a product’s “use to infringe copyright,” must the alleged inducer know or intend that the allegedly induced act is infringement? This question is critically important in the digital environment, where the precise boundaries of infringement and noninfringing use, including fair use, are not always clear, and where the cost of guessing incorrectly is, as Justice Breyer notes, “large statutory damages” of “up to $30,000 per infringed work.”168 The Grokster opinion appears to limit liability under the theory of intentional inducement to situations where the promoted acts are clearly infringing. The opinion hinges on the relationship between the Betamax doctrine and fault. The Court’s focus is on “culpable intent,” and the Court cites tort doctrine based on conduct “intended to do harm” or “morally wrong.”169 The Court, expressing concern about the potential chilling of technology, stresses that the inducement rule “premises liability on purposeful, culpable expression and conduct.” That is why it “does nothing to compromise legitimate commerce or discourage innovation.”170 Liability based on the inducement of conduct that is arguably lawful is not “culpable,” “intended to do harm,” or “morally wrong.” Moreover, for the reasons discussed by Justice Breyer in his concurring opinion,171 application of the inducement doctrine to conduct that arguably was lawful when promoted would chill the development of technology whenever a challenge was raised by a group of copyright owners able to raise the specter of sufficiently large statutory damages. The Court’s opinion evinces a desire not to so burden the development of technology. Indeed, discussing the Sony case, itself, the Court explained that Sony’s ads promoting the building
168 Id. at 2793 (Breyer, J. concurring) (emphasis in original). 169 Id. at 2780. 170 Id. at 2768. 171 See id. at 2793 (Breyer, J., concurring).
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of a “library” of favorite shows did not give rise to liability for inducement because the use was not “necessarily infringing.”172
4. Title II of the DMCA: Independent Limitations of Remedies
Concerns over the potential effect of unlimited copyright liability on the development of technology have not been limited to the judicial arena and the Betamax doctrine. In the 1998 DMCA, Congress addressed concerns that copyright liability could stifle the development of the Internet. These concerns were heightened by early cases that found bulletin board operators strictly liable as direct infringers for the conduct of users of the service. For example, in Playboy Enterprises, Inc. v. Frena,173 the district court granted summary judgment against a defendant who claimed he did not make the infringing copies and swore he did not know that his board was used for infringing material.174 The court held, “[t]here is no dispute that Defendant Frena supplied a product containing unauthorized copies of a copyrighted work. It does not matter that Defendant Frena claims he did not make the copies itself.”175 Further, the court concluded, “[i]t 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.”176 This
172 Id. at 2777; compare id. at 2787 (Breyer, J., concurring) (building libraries was infringing). 173 839 F. Supp. 1552 (M.D. Fla. 1993). 174 On summary judgment, the court was obligated to view disputed facts in the light most favorable to the nonmoving party—there, the defendant. Because it was clear the defendant in fact knew about the infringement, the court’s reasoning may have been an attempt to avoid the need for a trial on the allegedly contested issue. 175 Frena at 1556. 176 Id. at 1559.
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approach was followed in a preliminary decision involving another bulletin board operator, Sega Enterprises, Ltd. v. MAPHIA.177 By 1995, the law had taken a more rational turn. The district court in Religious Technology Center v. Netcom On-Line Communications Services concluded that direct liability for infringement required defendant to perform a volitional act to actually “do” the infringement, and that providing a service for use by third parties should not give rise to strict liability.178 Rather, it should be analyzed under theories of secondary liability.179 The court echoed the concerns that service providers had voiced after Frena:
[t]he 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.180
Other cases followed the Netcom approach and analyzed potential service provider liability under doctrines of contributory and vicarious liability.181 Although the law was moving away from the Frena approach, service providers remained concerned about both the possible application of theories of direct infringement and the manner in which
177 857 F. Supp. 679 (N.D. Cal. 1994) (“Sega I”). Later decisions in the case rejected the approach. Sega Enters., Ltd. v. MAPHIA, 948 F. Supp. 923, 931- 32 (N.D. Cal. 1996) (“Sega II”) (following the Netcom analysis). 178 907 F. Supp. 1361 (N.D. Cal. 1995). 179 Id. at 1371-73. 180 Id. at 1372-73. 181 See Marobie-FL, Inc. v. Nat’l Ass’n of Fire Equip. Distribs., 983 F. Supp. 1167, 1178 (N.D. Ill. 1997); Sega II, 948 F. Supp. at 931-32.
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doctrines of secondary liability might be applied. Once again, the issue implicated important questions of how the copyright balance should be struck. Thus, as the major copyright industries pressed for the adoption of the anticircumvention principles of the WIPO Copyright Treaty (discussed in Parts I.D and III.B), service providers argued that it was equally important to ensure that the growth of the Internet was not stifled by copyright liability. As the Senate Report on the DMCA described:
[i]n the ordinary course of their operations service providers must engage in all kinds of acts that expose them to potential copyright infringement liability. For example, service providers must make innumerable electronic copies by simply transmitting information over the Internet. Certain electronic copies are made to speed up the delivery of information to users. Other electronic copies are made in order to host World Wide Web sites. Many service providers engage in directing users to sites in response to inquiries by users or they volunteer sites that users may find attractive. Some of these sites might contain infringing material. In short, by limiting the liability of service providers, the DMCA ensures that the efficiency of the Internet will continue to improve and that the variety and quality of services on the Internet will continue to expand.182
The resulting law, passed as title II of the DMCA and codified at 17 U.S.C. § 512, protects service providers from monetary relief and greatly limits the scope and availability of injunctions in certain circumstances in which users of a provider’s system or network engage in copyright infringement. Section 512, which was negotiated in great detail by representatives of copyright owners and service providers,183 defines four specific “safe harbors.” Each applies to a particular kind of service provider conduct. If, as is usually the case, a service provider is performing multiple functions, each function must be
182 The Digital Millennium Copyright Act of 1998, S. REP. NO. 105-190, at 8 (1998) (hereinafter the “DMCA Senate Report”). 183 DMCA Senate Report at 9.
59 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY evaluated separately under the applicable safe harbor. Qualifying for one safe harbor as to one function does not provide blanket immunity to a service provider for its other activities. Conversely, performing activities beyond the scope of a particular safe harbor does not vitiate the protection from that safe harbor. The protections of the safe harbors extend to all theories of copyright liability, including direct liability, contributory infringe-ment, and vicarious liability. Moreover, the safe harbors do not redefine any theory of liability or limit the other defenses available to a service provider charged with infringement. Rather, the safe harbors only come into play after it is first determined that a service provider is liable for infringement. Viewed the other way, both the statute and the legislative history make clear that failure to qualify for one of the safe harbors does not imply that a service provider is liable for infringement.184
a. Operation of the Safe Harbors and Basic Requirements for Qualification
Section 512 includes safe harbors for the following functions:
1. The “Conduit” Function, § 512(a). This provision grants broad protection for “transmitting, routing, or providing connections for, material through a system or network controlled or operated by or for the service provider.” It is intended to mimic the protection applicable to common carriers, such as telephone companies, for the billions of bits of information transiting a service provider’s network. Knowledge, intent, financial benefit, and right and ability to control the infringement are all irrelevant. Further, there is no provision for notice and removal of infringing material.185
184 See 17 U.S.C. § 512(l); DMCA Senate Report at 40, 55 (“Even if a service provider’s activities fall outside the limitations on liability specified in the bill, the service provider is not necessarily an infringer.”). 185 In A&M Records Inc. v. Napster, 54 U.S.P.Q.2d 1746 (N.D. Cal. May 12, 2000), aff’d, 239 F.3d 1004 (9th Cir. 2001), the court rejected the applicability of the conduit safe harbor to the operator of the indexing function for peer-to- peer file-sharing software because the infringing material (stored on Internet users’ computers) was transferred directly from user to user over the Internet,
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2. The Caching Function, § 512(b). This provision grants broad protection for the specifically defined function of “caching” by network servers to facilitate access to material that has been requested online by others. Although there are some conditions applicable to this safe harbor, they are mostly technological limitations on the caching function. Knowledge, intent, financial benefit, and control are irrelevant, but there is a procedure conditioning the safe harbor on the removal or “taking down” of material that is identified by the copyright owner or its agent as infringing in a specific type of notice.
3. The Storage or Hosting Function, § 512(c). This provision grants protection for storage, at the direction of a user, of material on the provider’s system or network. The safe harbor is conditioned on a number of factors, including lack of actual knowledge of the infringement (or awareness of facts and circumstances from which infringement is “apparent”), lack of direct financial benefit from conduct that the service provider is able to control, and compliance with a defined “notice and takedown” procedure for removal of allegedly infringing material upon receipt of a statutorily prescribed notice from the copyright owner.
4. Providing Links, Directories, and other Information Location Tools, § 512(d). This provision applies to “information location tools” such as links or directories to infringing information, again, subject to several defined conditions.
To qualify for any of the safe harbors, a service provider needs to meet a number of additional requirements. To begin with, it must be
not through any Napster servers or facilities. Although Napster did provide address and routing information to permit users to transfer files to one another, the court held that such conduct was not protected under the conduit safe harbor. A similar result was reached in Aimster. In re Aimster Copyright Litig., No. 01-C-8933, 2002 WL 31006142 (N.D. Ill. Sept. 4, 2002), aff’d, 334 F.3d 642 (7th Cir. 2003).
61 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY a “service provider” as defined by the statute. The statute defines “service provider” in two ways, each applicable to different safe harbors. For purposes of the conduit provision, the definition has little relevance, as a “service provider” is any entity performing the activity that is the subject of the safe harbor—“an entity offering the transmission, routing or providing of connections for digital online communications, between or among points specified by a user, of material of the user’s choosing, without modification to the content of the material as sent or received.”186 For all of the other subsections, a “service provider” is more broadly defined as “a provider of online services or network access, or the operator of facilities therefore,” expressly including a service provider that meets the conduit definition.187 The definition is sufficiently broad to encompass, for example, businesses that provide network access to their employees and universities that provide access to their students. Further, Congress intended (and both definitions are broad enough) to encompass not only current Internet Service Providers (ISPs), but also providers of new services as new technologies emerge. In addition to meeting one of the definitions of “service provider,” a service provider must take a number of steps to qualify for certain safe harbors. First, to qualify for any safe harbor, the service provider must have “adopted and reasonably implemented, and inform[ed] subscribers and account holders of . . . a policy for the termination in appropriate circumstances of . . . repeat infringers.”188 This requirement is discussed in greater detail in Part III.A.4.b.iii, infra. Second, another condition of all of the safe harbors is a requirement to accommodate “standard” technical measures used by copyright owners to protect copyrighted works.189 Standard measures are defined as those developed pursuant to a broad consensus of service providers and copyright owners in an open, fair, and voluntary multi-industry
186 17 U.S.C. § 512(k)(1)(A). 187 Id. § 512(k)(1)(B). 188 Id. § 512(i)(1)(A). 189 See Part III.B, infra.
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standards process and that meet several other conditions.190 To date, no such process has been undertaken and no such measures exist. Third, to qualify for the safe harbor for storage and hosting, the service provider must designate an agent for receipt of notice of infringement, by filing a form with the U.S. Copyright Office and by identifying the agent on the provider’s website. The U.S. Copyright Office website has an example of the form and instructions.191 The storage safe harbor carefully defines an elaborate process by which copyright owners may notify a service provider’s agent of infringing material appearing on its system or network. If the service provider receives a notice that complies with the statutory require- ments, the service provider may either remove the material or not, but will lose the protection of the safe harbor if the material is not removed. Further, the service provider is protected from a claim of wrongful conduct by the user that posted the allegedly infringing material if the service provider provides the user with notice of the receipt of the takedown notice and provides the user with an opportunity to provide a counternotification that the material is not infringing. Upon receipt of a counternotification, the service provider may replace the material without loss of the safe harbor.192 Both a notice and a counternotification have detailed, statutorily defined requirements that must be met for the notice to be valid.193 Similar
190 17 U.S.C. § 512(i)(1)(B), (i)(2). 191 The caching and information location tool safe harbors also include a notice and takedown provision, but do not expressly require designation of an agent. No court has yet considered whether these safe harbors are conditioned on the designation of an agent. 192 17 U.S.C. § 512(g) (counternotification provisions). 193 The Act requires only “substantial” compliance with these requirements. But the statutory detail, coupled with the fact that the Act promotes compliance by expressly precluding consideration of a defective notice in assessing a service provider’s knowledge, 17 U.S.C. § 512(c)(3)(B), suggests that the standard for substantial compliance should be rigorous. For example, the Senate Report explains that the substantial compliance standard . . . [is intended to] be applied so that technical errors (such as misspelling a name, supplying an outdated area code if the phone number is accompanied by an accurate address, or
63 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY takedown procedures are included in the caching and information location tools safe harbors. No similar procedure is included in the conduit provision. Section 512 also provides a streamlined means for copyright owners to obtain subpoenas requiring service providers to identify subscribers that are storing infringing material on their systems.
b. Developing Issues Regarding Scope and Application of the Section 512 Safe Harbors
A number of issues have arisen since passage of the DMCA in 1998. In some cases, the courts have responded correctly. In others, the results have been questionable.
i. Effect of the DMCA on Infringement Liability
As section 512 and its legislative history make clear,194 the safe harbors provide an additional layer of liability protection beyond traditional copyright defenses and must be analyzed independently. For example, in CoStar Group, Inc. v. Loopnet, Inc.,195 the Fourth Circuit held that “[i]t is clear that Congress intended the DMCA’s safe harbor for ISPs to be a floor, not a ceiling, of protection” for service providers, in addition to existing defenses.196 Thus, among other things, the CoStar court reaffirmed the Netcom rule that direct
supplying an outdated name if accompanied by an e-mail address that remains valid for the successor of the prior designated agent or agent of a copyright owner) do not disqualify service providers and copyright owners from the protections afforded under subsection (c). DMCA Senate Report at 47. But see ALS Scan, Inc. v. Remarq Communities, Inc., 239 F.3d 619 (4th Cir. 2001) (applying a more lenient standard for substantial compliance). 194 17 U.S.C. § 512(l) (“The failure of a service provider’s conduct to qualify for limitation of liability under this section shall not bear adversely upon consideration of a defense by the service provider that the service provider’s conduct is not infringing under this title or any other defense.”); DMCA Senate Report at 40, 55. 195 373 F.3d 544 (4th Cir. 2004). 196 Id. at 555.
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infringement required a volitional act by the defendant, not merely the operation of a system used by third parties.197 Plaintiffs in CoStar argued that Frena had properly applied copyright law and that Netcom had been a special judicial response to the needs of the Internet. The CoStar plaintiffs further argued that the DMCA had superseded and codified the Netcom rule by defining the circumstances in which service provider liability could be avoided and, therefore, that a service provider that did not qualify for the DMCA safe harbor should be held strictly liable for direct infringement. The Fourth Circuit disagreed, holding that the DMCA was not intended to alter the underlying law of copyright liability and, in any event, that Netcom, not Frena, had correctly applied existing copyright law to the new medium of the Internet.198 Most other courts have correctly recognized that the DMCA liability limitation should be evaluated as a question separate from the underlying issue of infringement. They have, however, differed on whether to evaluate liability issues first (and therefore avoid the DMCA issues) or the reverse (therefore avoiding potentially difficult infringement issues).199
ii. Applicability of the Takedown Process and Special DMCA Subpoenas to the Conduit Function
Unlike the other three safe harbors, the conduit safe harbor is not conditioned on any takedown procedure. Nevertheless, copyright owners have served tens of thousands of notices claiming to be takedown notices directed to conduit activity, the great majority of which have involved users of P2P applications. The service provider’s role in connection with P2P software is typically that of a conduit, as the material is stored on the user’s own computer, not on the service
197 Id. at 551. 198 Id. at 549. 199 See A&M Records, 239 F.3d 1004, 1024 (defenses to secondary liability evaluated separately from DMCA liability limitations); Hendrickson v. eBay, Inc., 165 F. Supp. 2d 1082, 1087-88 (C.D. Cal. 2001).
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provider’s system or network. Such notices are not authorized by the DMCA, and are properly viewed as requests for voluntary assistance. Some service providers have voluntarily attempted to respond to and act upon such notices. However, failure to respond should not affect the service provider’s eligibility for the conduit safe harbor in section 512. Along with a notice and takedown request, copyright owners may serve a special subpoena on the service provider to identify the user that the copyright owner believes is infringing.200 The DMCA subpoena process was intended to be an adjunct to the takedown process in order to provide a fast and inexpensive way for copyright owners to identify and directly pursue online infringers that were storing material on the service provider’s system. To obtain a DMCA subpoena, copyright owners need only submit to a court (i) a copy of a takedown notice, (ii) the proposed subpoena, and (iii) a signed declaration that the subpoena is sought and will be used solely to identify an infringer in order to protect copyright rights. Although certain copyright owners attempted to serve DMCA subpoenas to identify users of P2P applications, the courts have confirmed the close link between the special DMCA subpoenas and the take-down process and have refused to enforce the subpoenas where the service provider is performing the conduit function.201 In those circumstances, copyright owners have successfully filed thousands of John Doe and Jane Doe lawsuits to identify and pursue direct infringers.
iii. Implementation and Communication of a Policy for Termination of Subscribers in “Appropriate Circumstances”
An emerging and potentially contentious issue arising under section 512 is the scope of the termination policy requirement. Copyright owners, lacking a takedown process applicable to P2P activity, have
200 17 U.S.C. § 512(h). 201 See Recording Indus. Ass’n of Am., Inc. v. Verizon Internet Services, 351 F.3d 1229 (D.C. Cir. 2004); In re Charter Commc’ns, Inc., 393 F.3d 771 (8th Cir. 2005).
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argued that repeat notices about infringement by the same person trigger a service provider’s duty to terminate the alleged infringer— even if the service provider was acting only as a conduit (as will often be the case when the infringer is using P2P software). Service providers, concerned about the potential burden of tracking thousands of otherwise invalid notices, their inability to determine the validity of allegations contained in the notices, and the threat to their users’ Internet access, have resisted this view. Moreover, the existence and sufficiency of the requisite policy for the termination of repeat infringers has figured in several of the early cases interpreting section 512. In both the Napster and Aimster cases, the courts observed that even if the conduct in question had fallen within the scope of one of the safe harbors, neither defendant would have been eligible for protection because each failed to implement a reasonable termination policy. In Napster, the company claimed to have a policy, but did not present evidence it had informed any users of that policy until after the lawsuit was filed. The district court in Aimster was more blunt, calling Aimster’s alleged policy a “mirage.”202 The appeals court affirmed, and in dicta suggested an even more rigorous standard than the statute requires, stating that “the service provider must do what it can reasonably be asked to do to prevent the use of its service by ‘repeat infringers.’”203 In Ellison v. Robertson,204 the Ninth Circuit curiously linked the termination policy requirement to the notification procedure in section 512(c). Robertson, an AOL user, posted several scanned books by science fiction author Harlan Ellison on a USENET newsgroup that was among those “mirrored” by AOL. AOL asserted both the conduit (512(a)) and hosting (512(c)) safe harbors. The district court granted summary judgment to AOL as to vicarious liability and the applicability of section 512(a), but the appeals court partially reversed. AOL had changed its e-mail address for DMCA infringement notifications and had not revised this information in its Copyright Office records (thus it claimed it never received Ellison’s notice). The
202 In re Aimster Copyright Litig., 252 F. Supp. 2d 634, 659 n.18 (N.D. Ill. 2003). 203 334 F.3d at 655. 204 357 F.3d 1072 (9th Cir. 2004).
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court held that AOL’s failure to revise its registration with the Copyright Office created a triable issue of whether it had reasonably implemented a policy for terminating repeat infringers.205 Unfortunately, the Ellison court did not explain the relationship between the takedown notice and the repeat infringer policy or discuss the circumstances under which a notice might trigger a duty to terminate. This absence of analysis is particularly puzzling, and the result particularly troubling, as the court found that AOL’s provision of newsgroups fell within the scope of the conduit safe harbor, for which there is no such thing as a valid takedown notice and no obligation in the first place to register an agent with the Copyright Office. It is unlikely that Congress would have determined that no agent designation is required for protection under the conduit safe harbor, but would have required a correct agent designation as part of the requisite policy for termination of repeat infringers. Moreover, as Professor David Nimmer has persuasively argued, a claim of infringement in an untested takedown notice is not the same as a judicial determination of infringement sufficient to trigger the termination obligation—the Act differentiates between claims and allegations of infringement and actual “repeat infringers.”206 Notices, particularly invalid notices served for conduit activities, should not give rise to an obligation to terminate. Similarly, there is no support for the Aimster court’s assertion that the obligation to implement a policy of termination extends to doing what a service provider reasonably can be asked to do to “prevent use.” Rather, the legislative history of the Act suggests that the concept of “appropriate circumstances” was intended to provide substantial flexibility for service providers to adopt suitable policies. The Senate Report on the Act notes that “there are different degrees of online copyright infringement, from the inadvertent to the noncommercial, to
205 See also Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F. Supp. 2d 1144 (C.D. Cal. 2002) (defendant does not qualify for safe harbors because, among other things, it did not “reasonably implement” a policy for terminating the accounts of repeat infringers). 206 See David Nimmer, Repeat Infringers, 52 J. COPYRIGHT SOC’Y U.S.A. 167 (2005).
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the willful and commercial” indicating that a service provider is not obligated to treat all infringers the same. Moreover, the Report stresses that the termination policy should not be read to imply “that a provider must investigate possible infringements, monitor its service, or make difficult judgments as to whether conduct is or is not infringing.”207
5. Concluding Thoughts Concerning Secondary Liability
Issues of secondary liability will remain controversial, as they go to the heart of defining the appropriate level of copyright protection and striking the balance between copyright protection and the growth of technology. Courts are likely to see a substantial increase in infringement claims based on theories of “intentional inducement.” How they resolve those claims will do much to determine how the copyright balance will be struck and how technology will develop in the coming years. Moreover, the broad construction of secondary liability given by some courts in the digital environment may be another reason for Congress to reassess the balance. The service provider provisions of the DMCA were developed to provide substantial protection to service providers for conduct by system users that otherwise could give rise to liability for infringement. While the law largely appears to be having this effect, courts are likely to continue to be challenged to construe the sometimes complex provisions.
B. Protection and Control of Copyrighted Works through the Use of Technological Protection Measures and Title I of the DMCA
We now turn our attention to a second significant set of issues—those related to title I of the DMCA and the law related to technological measures used by copyright owners to protect their works. The increasing use of encryption-based technological protection measures (TPMs), or digital locks, is likely both to increase copyright owners’ ability to prevent infringement and to enable
207 DMCA Senate Report at 52.
69 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY copyright owners to exercise more granular control over the use and enjoyment of copyrighted works. Use of such TPMs has been made more effective by the DMCA’s title I prohibitions against circumventing those measures. One’s view of this trend is likely to depend on how one views the nature of copyright, the relationship between traditional concepts of fair use and the granularization of the exploitation of works, and the likely effects of copyright owners offering differential prices on the basis of use. Just as consumers are obtaining the ability to create home digital networks and transfer content they have acquired among devices throughout their home, to remote locations while traveling, and to friends and relatives, copyright owners are relying more and more on TPMs and on the legal rights granted under the DMCA to protect (or, detractors would say, increase control over the use of) their works. Today, TPMs are applied to many “mass-market” digital works, including movies and television shows on DVD or transmitted through cable set-top boxes, e-books, and sound recordings on new physical media such as SACD, or from download services. The first generation TPMs of choice have been access control technologies, such as encryption, which copyright owners have viewed as more secure, and which receive greater legal protection against circumvention under the DMCA. Non-access control technologies, such as marking and other copy control technologies, need the recording device or the playback or rendering device to read and correctly respond to indications in or accompanying the work. The DMCA, however, provides that a device has no obligation to respond to any particular copy control technology. Once a potential user obtains in-the-clear access to content, he or she need only find a device (such as a personal computer) that does not respond to the copy control technology in order to enjoy the work or to make copies. Access controls, by contrast, typically limit use of the protected content to devices that have access to decryption keys. The keys are typically
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provided under license, which, in turn, requires the device to comply with certain defined restrictions on the use of the content.208 The most common early TPMs typically implemented only a limited set of usage rights, such as allowing the work to be played (performed) but never copied, or allowing copying but requiring the copies to be encrypted to prevent redistribution, or allowing “one generation” of copies (i.e., the original may be copied, but the copies cannot be copied). Standard rules have been developed over years of negotiations among the consumer electronics, motion picture, and computer industries that copyright owners will not restrict the copying of over- the-air broadcast television, except possibly to require that it be protected against certain forms of redistribution,209 may prohibit second generation copying, but not first generation copying of subscription pay television (e.g., HBO and Showtime) and basic cable television (e.g., ESPN, USA, and CNN), and may prevent any copying of pay-per-view, video-on-demand, physical distributed product or content received at the user’s convenience over an interactive system. Encryption-based technologies capable of implementing more refined and detailed sets of usage rights have been developed in recent years, particularly, but not exclusively, in the context of works delivered over the Internet. For example, the consumer may download a work and be given 48 hours to play it as many times as desired; or be
208 As discussed in Part III.B.2, infra, access control technologies are subject to their own weaknesses. To be effective, a system of access controls requires the content to remain encrypted at all times. Analog outputs cannot be encrypted, and hacks of encryption systems are common, if not inevitable. Once in the clear, the content is wholly unprotected against unauthorized use. 209 The FCC defined the permitted limitations as those directed to preventing only indiscriminate redistribution of digital broadcast television over the Internet or through similar means. In re Digital Broadcast Content Protection, Report and Order, 18 F.C.C.R. 23550, ¶ 10 (2003) (hereinafter “FCC Broadcast Flag Report and Order”). However, the major studios have sought to prevent other forms of redistribution, as well. See, e.g., Opposition to the Application of TiVo for Interim Authorization by the Motion Picture Association of America et al., FCC MB Dkt. No. 04-63, at 3 (Apr. 3, 2004) (opposition to approval of technology that would permit forwarding of content to individual while traveling).
71 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY allowed to play the work once; or be given unlimited playback but only on a particular computer. The use of encryption-based TPMs to provide detailed usage rights has given rise to the term “Digital Rights Management” (DRM), a term that is now often equated and used interchangeably with the broader concept of TPMs. Before discussing the issues raised by this increasing use of digital locks, we first describe in somewhat greater detail the legal framework in which they operate. We then turn to a discussion of important issues raised by this trend.
1. The Legal Framework for Enforcing TPM Compliance
Technological protection measures only provide protection if the devices capable of using the protected work adhere to the rules and limitations imposed by the copyright owner or technology licensor.210 Although the DMCA prohibits the circumvention of certain TPMs and the distribution of circumvention tools, it does not mandate a response to TPMs. How are devices made to comply? There are two basic legal paradigms for enforcing obligatory responses to TPMs. One relies on encryption and the licensing of the keys to decrypt. This approach, however, does not work when encryption is not used and the content is distributed in the clear (e.g., for over-the-air broadcast television and digital audio material contained on compact disks). If the content can be accessed on general-purpose digital devices, or on a variety of special purpose devices that are not themselves controlled by licenses that dictate content protection, TPM response must be enforced by legal mandate, in law or regulation. These two paradigms have significantly different characteristics, and offer different advantages and disadvantages. They have been applied in different situations.
210 This is also true with respect to encrypted works, which are protected while encrypted, but which must be decrypted for use. The devices capable of handling the work while decrypted must adhere to the applicable rules; otherwise, protection is lost.
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a. The Mandate Paradigm
The mandate model relies upon a government order—statute, rule, or some other proclamation with legal force—imposing an obligation on certain devices to respond to certain TPMs in particular ways to protect content or limit its use. The model is typically used when the content to be protected is unencrypted. An example of a TPM implemented by mandate is the Serial Copy Management System (SCMS) that is mandated by the Audio Home Recording Act. Digital audio recording devices, as defined in the Act, are required by section 1002(a) of the Act to read and respond to SCMS bits accompanying digital audio files. SCMS operates by informing the recording device whether the file is an original or is, itself, a copy. The recording device is programmed to be allowed to copy originals but must refuse to copy copies. The statutory mandate is backed up by significant civil sanctions, including statutory damages.211 One of the difficulties of the mandate approach is that the mandated TPM offers little protection if the mandate is not sufficiently broad. This, too, is illustrated by SCMS and the Audio Home Recording Act (the AHRA). The Act does not impose any mandate on general- purpose computers to respond to or to transmit SCMS codes, as computers do not meet the Act’s definition of “digital audio recording device.” This was not an unintended loophole—it was a by-product of the fact that the AHRA was negotiated among the consumer electronics, music, and recording industries, which recognized that computers were not then generally used to record music and that a mandate on general-purpose computers would be resisted. With the advent of the MP3 compression format, computers increasingly were used to play and to copy (or “rip”) digital audio files. The AHRA does not impose an obligation to prevent this activity.
211 See 17 U.S.C. § 1009(d)(1)(B) (up to $2500 per offending device, $25 per offending digital music recording, or $10,000 per offending transmission or communication); see also Part I.B.5, supra (discussing potency of aggregated copyright statutory damages).
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Another form of marking technology that would need a response mandate to be effective is watermark technology. Unlike SCMS, which uses digital data associated with, but not part of, the sound data, watermarks consist of digital information actually encoded in the audio or video data itself. While associated signaling data can easily be stripped from the data traveling with the content, embedded watermarks are much more difficult to remove. Thus they offer a more robust form of signaling technology.
b. The Licensing Paradigm
Content that is encrypted needs no mandate to prevent its use—it cannot be used until it is decrypted. Instead of a government mandate, encryption-based systems typically rely on licenses to regulate content use. To install the keys necessary to decrypt the content or to make the software or hardware necessary to permit the use of those keys, the manufacturer of a device must sign a license. That license typically imposes a detailed set of obligations, often called “compliance rules” that govern how the device is permitted to handle the decrypted content. Among the obligations commonly imposed are prohibitions on the use of unencrypted digital outputs and on the making of unencrypted removable digital recordings, and requirements that only approved encryption technologies be used on encrypted digital outputs or to make removable digital copies (when copies are permitted).212 The concept is to keep the content locked into a box of encryption as it makes its way from its source to ultimate consumption. While it would be possible to create a system where only the last device decrypts the content, the more common approach is a “link protection” approach, where each digital interface between devices and each digital copy on a medium that can be moved from one device to another is separately encrypted as a link in a chain. Each link may use a different encryption technology, as long as it is one that has been approved by the technology that provides the content.
212 Analytically, a digital interface and a digital recording on a removable medium are equivalent. They both represent a means by which the content may be moved from one device to another.
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A good example of this type of system is the system in place for prerecorded DVDs. Most commercially distributed DVDs are encrypted using a technology called “CSS,” or the “Content Scramble System.” That system is licensed by a multi-industry consortium called the “DVD Copy Control Association” (DVDCCA). Each manufacturer of DVD players and computer DVD drives must sign the DVDCCA license to obtain keys to decrypt the encrypted DVDs. That license contains a set of compliance rules, called the “Procedural Specifications.” The most notable rules are that the player (i) must not record the DVD content; (ii) must not allow the content to leave the playback device over unencrypted digital outputs; (iii) may allow the content to leave the device over digital outputs only if protected using an encryption technology approved by the DVDCCA; and (iv) may allow the content to leave the device over analog outputs only if certain conditions are met and certain analog protection technologies are used, where available. The system gets interesting (and somewhat complicated) when the next link in the chain is considered. To send the content over a digital output, the device must encrypt the content using a technology other than CSS. To obtain that capability, the manufacturer of the player must sign a license for that other encryption technology, such as DTCP, licensed by the “Digital Transmission License Administrator,” or Windows Media DRM, licensed by Microsoft. These technologies, in turn, must be decrypted by the device on the other end of the link (e.g., a television set or a computer). The manufacturer of the receiving (or “sink”) device must have signed a license to obtain the relevant keys—a license that, in turn, contains rules and restrictions that are comparable to the rules applicable to CSS.213 One characteristic of these licensing chains is that the licensing organizations typically assert the right to approve downstream encryption technologies. This right potentially gives the organizations considerable power over competing technologies. A technology that
213 Cable set-top boxes sold at retail operate under a similar structure through the DFAST license, administered by CableLabs. Cable content is allowed to leave the box only at approved interfaces. Digital interfaces must be encrypted using an approved encryption technology.
75 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY is not approved is cut off from upstream content. For a variety of reasons, many of these TPM licensing regimes often are created and implemented by multicompany consortia. Care must be taken to ensure that competition in the market for content protection technology is not adversely affected, particularly when one competitor has established an early leading position in the market. Another characteristic of the licensing paradigm is that decisions must be made about the level of protection that is to be provided to different types of content. In some instances, the content provider may be given a free hand in deciding whether and under what conditions restrictions on use are to be allowed. In other contexts, the licensors may establish rules, sometimes called “encoding rules,” that define when the technology may be used and what level of protection is to be applied. These encoding rules often are established in negotiations with content providers in advance of the content provider agreeing to make content available for use with the technology. These rules can raise important questions of public policy and the scope of copyright protection and fair use.
c. Mandates versus Licenses—Important Differences
The mandate and licensing models can be better understood by a quick review of some of their differences. Each of the two models has particular advantages over the other, and is likely to work better in different contexts.
• Extent of government involvement. Mandates require government involvement. Licenses require little or no government. Many question the government’s ability to judge technologies and urge the government to “leave it to the market.” However, the selection of content protection technology involves many considerations, including considerations of public policy. Further, it is not clear how or if the market for content protection functions. It is overly simplistic to consider copyright owners the “buyers” and tech- nology developers the “sellers.” The technologies must be implemented (and purchased) by device manufacturers and affect consumers, who may or may not find the devices that implement the technologies to be attractive. While a copyright owner might seek
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a very restrictive protection technology, consumer complaints about the restrictions are likely to have a more direct impact on the device manufacturer than on the copyright owner. Further, the networked nature of content protection, where one technology must interact with others, can create significant risks to competition.
• Extent of control given to private parties (including potential competitors). This is the flip side of the extent of government involvement. The chained licensing model permits the TPM licensor (and content providers) to decide what other technologies are approved (e.g., for downstream obligations) and what rules govern those technologies and the use of content. The licensing model thus can lead to control being vested in a small group of companies interested in advancing their own interests.
• Extent and assignment of burdens and costs. Mandates apply to selected devices—typically at the user’s end point. However, to be effective, the obligation may need to be applied to a broad array of multipurpose devices, some of which may never be used for the purpose the TPM is intended to regulate. For example, all digital computers can make copies of audio files. Should all computers be required to search for and respond to SCMS in every digital file they encounter? Licenses apply only to those devices that are designed expressly to handle the content. However, in the chained model discussed above, multiple encryption and decryption technologies must be licensed throughout the distribution chain.
• Determination of public policy. Who should decide public policy issues, such as when consumers are to be allowed to make and transfer copies of copyrighted content? Under the licensing model, the licensors (in concert with the content owners, who typically are given a say in changes to the content usage rules) decide the functions that are to be approved for licensed devices. That policy may, in turn, be applied to an entire industry or industries. Some observers are uncomfortable with that scenario, and believe that issues of public policy, such as the scope of permissible use of copyrighted works, should be determined by Congress. Balanced
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consideration of public policy is more likely (though not necessarily assured) in a mandate model.
• Effect on competition. Because of the control over devices provided by the licensing model, and the fact that TPM licensors have typically been competitors in the relevant device markets, concerns have been expressed that the licensing model confers competitive advantage in device markets on TPM licensors.214 In addition, because of the power to control downstream approvals, competitive concerns have been expressed about the effect of chained licenses in the market for content protection technology.215 Should a potential new competitor in a market need the approval of entrenched competitors to enter the market?
• Efficacy. The two approaches control content at different places in the delivery chain and are effective at different tasks. The licensing paradigm is particularly effective at regulating compliant, licensed devices. Thus it allows the content provider to exercise control over the use of his or her content by lawful consumers. Moreover, because it relies on encryption, an access control approach, it obtains the greatest protection against circumvention under the existing law, and does not require additional legislation or regulatory change.
Further, participation by the largest content providers in the process of approving downstream technologies gives the content owners a say, if not an outright veto, over what those technologies are permitted to allow consumers to do with the content. As a result, the licensing paradigm has been preferred by the major motion picture studios for
214 See, e.g., Reply Comments of the American Antitrust Institute, FCC MB Dkt. No. 02-230, at 9-15 (Feb. 19, 2003) (“AAI Reply Comments”); Reply Comments of Philips Electronics North America Corp., FCC MB Dkt. No. 02- 230, at 24-29 (Feb. 18, 2003) (“Philips Reply Comments”); Comments of Hewlett-Packard Co., FCC MB Dkt. No. 04-64 (Apr. 6, 2004) (concerning Digital Transmission Content Protection). 215 AAI Reply Comments at 9-15; Philips Reply Comments at 24-29.
78 BRUCE G. JOSEPH AND SCOTT E. BAIN use with prerecorded video media, cable (through the set-top box licenses offered by CableLabs), and broadcast content, through the broadcast flag regulation adopted by the FCC but subsequently vacated by the Court of Appeals for the D.C. Circuit.216 The major recording studios are also seeking similar control through a request that the FCC order all receiving devices to encrypt digital audio broadcasts. The licensing paradigm, however, is not effective once content leaves the encrypted box. Once in the clear beyond the controlled device, keys are no longer needed and the content may be freely played, copied, and distributed from one device to another, including over the Internet.217 Moreover, there are many ways in which content can leave the encrypted box. Most notably, virtually all existing home audio and video devices rely heavily on analog connections. To
216 The broadcast flag rule was an interesting hybrid of mandate and licensing. Because over-the-air broadcast television is transmitted in the clear, content protection based on encryption requires a mandate at some point in the distribution chain. The major film studios sought a mandate on all receiving devices. The FCC issued a rule requiring all receiving devices to follow certain compliance rules, which included permission to transfer the content over digital outputs only if those outputs used an encryption technology approved by the FCC and permission to make digital recordings on removable media only if the recordings were made using an encryption technology approved by the FCC. See FCC Broadcast Flag Report and Order, supra note 209. By interposing itself in the technology approval process, the FCC wisely sought to ensure that the market remained open and outside of the control of any particular industry or licensing consortium. See id. at 23575, ¶ 52. Among the other rules the FCC set on technology approval was a presumption that any technology approved by the FCC would, in turn, be approved for downstream use by other approved technologies. See Broadcast Flag Technology Approvals, Report and Order, 33 C.R. 368, ¶¶ 81-83 (2004). The FCC rule, however, was vacated by the U.S. Court of Appeals for the D.C. Circuit, which concluded that the FCC lacked jurisdiction to regulate receiving devices. See Am. Library Ass’n v. FCC, 406 F.3d 689 (D.C. Cir. 2005). 217 This characteristic, coupled with the ability of P2P applications to propagate copies geometrically (one copy quickly becomes 10, which quickly become 100, which quickly become 1000, etc.), raises questions about the efficacy of the encryption model in diminishing indiscriminate Internet redistribution.
79 COPYRIGHT IN THE DIGITAL WORLD: BASICS, LAW, AND POLICY interact with most existing television sets, stereo systems, and speakers, the content must be sent from the encrypted digital world by analog outputs to devices. These analog connections cannot be encrypted, and it is a relatively simple matter to reconvert the analog signal to in-the-clear digital form, suitable for Internet retransmission. This gap in protection has come to be known as the “analog hole.” The analog hole is not the only gap in the “encrypt-the-world” approach to content protection. Hackers have viewed content protection systems as fair game, and have made fast work of some of the systems, including CSS, hacked shortly after the release of encrypted DVDs.218 Once the hack is disseminated on the Internet, decryption on computers is simple. The mandate to respond to marked content typically applies at the end point of the distribution chain, where the consumer uses the content. A system may be designed to work at playback devices, recording devices, display devices, or some combination of usage points. In theory, it will not matter how the content reaches the display as long as the mark is intact and the device looks for the mark. The mandate-marking model, however, requires government intervention to ensure a level playing field among competing device manufacturers. Systems developed under this model thus may be more difficult to adapt when there are changes in technology.
2. Issues Raised by the DMCA and the Increasing Use of Technological Protection Measures
a. The Effect of Section 1201 and TPMs on Fair Use
The most contentious issue surrounding section 1201 and the growth of TPMs is the effect of this trend on fair use and the copyright balance. Critics have argued that, as copyright owners apply techno- logical protection measures to more and more of their content, it will become increasingly difficult to make uses of that content for purposes reserved by the Copyright Act to the public. If the content is available
218 The system was hacked by a sixteen-year-old Norwegian named Jon Johansen and other online contributors who were never identified. Mr. Johansen was tried in Norway for the act and acquitted.
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for use at all, it will be available only in inferior analog form. Copyright owners have countered that fair use has never extended to obtaining access—one does not have a right to break into a bookstore to make fair use of a book contained therein.219 Moreover, they argue, if circumvention devices are made available, it would be impossible to ensure that their use was limited to fair use. The trend toward encryption of content has amplified this debate. The DMCA addressed fair use concerns in several provisions. One provision of section 1201, section 1201(c)(1), states that “nothing in this section shall affect rights, remedies, limitations, or defenses to copyright infringement, including fair use, under this title.”220 While this provision reflects solicitude towards fair use, it is somewhat deceiving. Section 1201 violations are not “copyright infringement.”221 The Copyright Office triennial rulemaking, discussed above,222 also was intended to provide exceptions from the prohibition on the circumvention of access control technologies for classes of works where the prohibition was likely to interfere with fair use. This rulemaking, however, does not provide an exception from any prohibition related to copy control technologies. Nor does it apply to the prohibition against distributing circumvention devices or performing circumvention services, both of which may be needed to enable authorized circumvention. As discussed above,223 some content industries have relied increasingly on access controls to control not only access, but also to impose detailed controls over use. Further, the
219 This argument relies on a questionable analogy—the law’s protection of real property against trespass and the protection of technological measures used, in turn, to protect copyrighted works. See generally Part II.B, supra. Further, as a matter of assessing the copyright balance, it misses the point. In the analog world in which the fair use doctrine developed, exploitation of a work typically required granting the public access. Exploitation without “access” (e.g., by distribution of encrypted digital copies) fundamentally alters that balance. 220 17 U.S.C. §1201(c)(1). 221 In addition, many of the specific exemptions in section 1201 are related to fair use. See Part I.B.2, supra. 222 See Part I.D.2, supra. 223 See Part III.B.1.b, supra.
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construction of the applicable burden of proof in this rulemaking has diminished the usefulness of this exercise. Several cases have addressed the relationship between fair use and the DMCA. One of the first involved a suit brought by the movie studios against websites that posted the DeCSS hack for the CSS technology used to protect DVDs.224 The website operators argued that they were posting the hack to permit lawfully purchased DVDs to be played on Linux-based systems, for which no DVD players or drives had yet been authorized. The court rejected defendants’ fair use defense, holding that a section 1201 violation was not copyright infringement and that Congress did not create a general fair use defense for section 1201 in section 1201(c)(1).225 The Second Circuit affirmed, expressing the view that section 1201(c)(1) was not a general introduction of a fair use defense into section 1201, but that it “ensures that the DMCA is not read to prohibit the fair use of information just because that information was obtained in a manner made illegal by the DMCA.”226 In two suits involving another manufacturer of a DVD copying program (321 Studios), the courts again rejected the notion that fair use applies to section 1201. 321 Studios claimed that it commercially distributed its software for the purpose of making “backup copies” of lawfully purchased DVDs, which it argued was a fair use under copyright law. In 321 Studios v. MGM Studios, Inc.,227 the court rejected the defendants’ argument that there is a constitutional fair use right to make a backup copy and that section 1201 impermissibly burdens that right. Noting that users could still make analog copies in certain circumstances, the court stated that “the doctrine of fair use does not guarantee copying by the optimum method or in the identical format of the original.”228 The court found the defendants liable under
224 Universal City Studios, Inc. v. Reimerdes, 82 F. Supp. 2d 211 (S.D.N.Y. 2000), aff’d sub nom. Universal City Studios, Inc. v. Corley, 273 F.3d 429 (2d Cir. 2001). 225 Reimerdes, 82 F. Supp. 2d at 219. 226 Corley, 273 F.3d at 443. 227 307 F. Supp. 2d 1085 (N.D. Cal. 2004). 228 Id. at 1104.
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both subsections (a) and (b) of section 1201, and enjoined further distribution of the product. A subsequent case against 321 in New York followed that result.229 Two opinions from the Court of Appeals from the Federal Circuit have expressed a somewhat different view. Both cases involved attempts to use section 1201 to inhibit competition for products other than copyrighted works. In Chamberlain Group, Inc. v. Skylink Technologies, Inc.,230 the plaintiff, Chamberlain, a manufacturer of garage door openers, argued that section 1201 prevented a competing manufacturer, Skylink, from making after-market transmitters that opened Chamberlain’s garage doors. The district court dismissed Chamberlain’s claim, and the Federal Circuit agreed. The court held that the Skylink transmitters did not violate section 1201(a) because they simply enabled a legitimate, noninfringing use of the copyrighted software embedded in the transmitters and doors—an analysis seemingly at odds with Corley. In response to language in Corley, the court stated that Congress did not intend to “wrest[ ] the concept of ‘access’ from its context within the Copyright Act.”231 “Chamberlain’s proposed construction of § 1201(a) implies that in enacting the DMCA, Congress attempted to ‘give the public appropriate access’ to copyrighted works by allowing copyright owners to deny all access to the public. Even under the substantial deference due Congress, such a redefinition borders on the irrational.”232 The court further asserted that Chamberlain’s construc- tion would “flatly contradict” section 1201(c)(1).233 However, the court included a footnote stating that it was not deciding that fair use is a
229 Paramount Pictures Corp. v. 321 Studios, 2004 U.S. Dist. LEXIS 3306, at *3, 69 U.S.P.Q.2d 2023 (S.D.N.Y. 2004) (noting that, although it also could be used for restoration and preservation of damaged DVDs, DeCSS was “primarily designed” to circumvent CSS); accord RealNetworks, Inc. v. Streambox, Inc., No. C99-2070, 2000 WL 127311 (W.D. Wash. Jan. 18, 2000). 230 381 F.3d 1178 (Fed. Cir. 2004). 231Chamberlain, 381 F.3d at 1199. 232 Id. at 1200. 233 Id.
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defense to circumvention—only that a violation of section 1201 will not be found if the “protection measure” only prevents conduct that is permitted to the public.234 In a more recent decision, Storage Technology Corp. v. Custom Hardware Engineering & Consulting, Inc.,235 the Federal Circuit carried the reasoning of Chamberlain one step further. Like Chamberlain, the StorageTek case involved an effort to use the DMCA to inhibit competitive products or services. In StorageTek, the defendant was an independent service organization that circumvented protections built into StorageTek storage libraries to perform computer maintenance. Before reaching the DMCA issue, the court held that defendant’s actions did not constitute copyright infringement. The court then held that
to the extent [the alleged circumventer’s] activities do not constitute copyright infringement, StorageTek is foreclosed from maintaining an action under the DMCA. That result follows because the DMCA must be read in the context of the Copyright Act, which balances the rights of the copyright owner against the public’s interest in having appropriate access to the work. Therefore, courts generally have found a violation of the DMCA only when the alleged access was intertwined with a right protected by the Copyright Act. To the extent that StorageTek’s rights under copyright law are not at risk, the DMCA does not create a new source of liability.236
234 Id. at 1199, 1200 n.14 (“We leave open the question as to when § 107 might serve as an affirmative defense to a prima facie violation of § 1201.”). The court also held that Chamberlain’s sale of the garage doors and openers granted its customers authority to use the code embedded in its transmitters, and thus implicitly granted authority to use other transmitters to open the doors. The court reasoned that, because there could be no section 1201(a)(1) violation (act of circumvention of access control), Chamberlain’s claim under section 1201(a)(2) (trafficking of access control circumvention tools) must likewise fail. Id. at 1204. 235 421 F.3d. 1307 (Fed. Cir. 2005) (hereinafter “StorageTek”). 236 Id. slip op. at 19-20 (citations omitted).
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The jury remains out on both the legal and practical effects of the DMCA on fair use. The analog hole and the availability of users to obtain copies of copyrighted works in unprotected forms have thus far ameliorated many of the potential impediments to fair use. On the other hand, the content industries have announced an intention to seek legislation to “plug” the analog hole and to sunset analog interfaces,237 and more and more content is being released subject to access control. Thus the possibility that the DMCA will limit fair use deserves serious consideration.
b. Potential Effects on Speech
Another concern raised by title I of the DMCA is its effect on speech. In Corley, defendants argued that the DMCA could not constitutionally be construed to prohibit their distribution of DeCSS, because the code was “speech” entitled to First Amendment protection. The Second Circuit agreed that DeCSS was speech,238 but noted that computer programs have, by their very nature, strong “non-speech” (i.e., functional) attributes necessary to their interaction with computers. It then found that section 1201 is targeted at regulating the nonspeech aspect of decryption software—the capacity to instruct computers to decrypt encrypted materials. Thus the court held that the statute was a content-neutral regulation with an incidental effect on speech, applied the more lenient “substantial interest” test, and found an “unquestionably substantial” governmental interest in preventing unauthorized access to encrypted copyrighted materials. The court concluded that while the statute may not be the least restrictive means
237 See, e.g., Motion Picture Assoc. of Am., Content Protection Status Report, available at
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of accomplishing this goal, it does not burden “substantially more speech than is necessary,” and thus does not offend the Constitution. After the Reimerdes/Corley defendants had been prohibited from distributing DeCSS by a preliminary injunction, they engaged in what they termed “electronic civil disobedience” by continuing to use their websites to encourage others to offer DeCSS for downloading, and maintaining a list of hyperlinks to other sources of DeCSS.239 The district court had enjoined this conduct as well, but applied a higher burden of proof in light of the greater threat such an injunction posed to legitimate speech.240 The Second Circuit upheld this part of the injunction against First Amendment challenge, reasoning that, like code, hyperlinks have both speech and nonspeech, functional attributes. The court concluded that “[u]nder the circumstances amply shown by the record, the injunction's linking prohibition validly regulates the Appellants' opportunity instantly to enable anyone, anywhere to gain unauthorized access to copyrighted movies on DVDs.”241 The decision, however, displayed a certain amount of judicial angst. The court noted that the reality of the Internet and the possibility of instantaneous Internet dissemination of the banned software
obliges courts considering First Amendment claims in the context of the pending case to choose between two unattractive alternatives: either tolerate some impairment of communication in order to permit Congress to prohibit decryption that may lawfully be prevented, or tolerate some decryption in order to avoid some impairment of communication. Although the parties dispute the extent of impairment of communication if the injunction is upheld
239 Id. at 441 (quoting Universal Studios, Inc. v. Reimerdes, 111 F. Supp. 2d 294, 303 (S.D.N.Y. 2000)). 240 The court required a showing, by clear and convincing evidence, that defendants (a) knew at the relevant time that the offending material was on the linked-to site, (b) knew that it is circumvention technology that could not lawfully be offered, and (c) created or maintained the link for the purpose of disseminating that technology. Universal Studios, 111 F. Supp. 2d at 341. 241 Corley, 273 F.3d at 457.
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and the extent of decryption if it is vacated, and differ on the availability and effectiveness of techniques for minimizing both consequences, the fundamental choice between impairing some communication and tolerating decryption cannot be entirely avoided.242
It is not clear how the court would have responded had defendants posted nonfunctional lists of URLs offering DeCSS, or the names of organizations or website operators that could easily be located using sophisticated search engines. The court appeared to rely significantly on the “functional” capability of hyperlinks, a function that is attenuated in the case of a URL list and nonexistent in the case of a list of organizations or website operators. Of greater concern to speech is the prospect that future cases might expand the concept of “trafficking” to cover the providing of information or develop a concept of “inducing” trafficking or “inducing” circumvention to cover such situations. The potential threat to speech of such a development is best shown by the situation faced by Professor Edward Felten of Princeton University, a leading computer science professor, as he prepared to present a peer-reviewed academic paper at a digital watermarking conference describing certain weaknesses in a TPM being considered for use with audio CDs. The interindustry consortium (the “Secure Digital Music Initiative” (SDMI)) that was evaluating the TPM had offered a public challenge to test the TPM, in which Professor Felten and his team participated. Professor Felten received a letter from the Recording Industry Association of America, warning him that “any disclosure of information gained from participating in the Public Challenge [of the SDMI watermark] would be outside of the scope of the activities permitted by the [SDMI challenge] Agreement and could subject you and your research team to actions under the Digital Millennium Copyright Act (‘DMCA’).”243 Rather than face potentially
242 Id. at 457-58. 243 Letter from Matthew J. Oppenheim, Esq., RIAA, to Professor Edward Felten (Apr. 9, 2001), available at
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costly litigation, Professor Felten acceded to the threat and declined to present his paper. He subsequently joined others, however, in filing a declaratory judgment suit against the industry. The suit was eventually dismissed, and the record companies permitted Felten to present his paper, but the force of the DMCA, and its potential threat to speech, had been demonstrated.
c. Misuse of the DMCA To Stifle Competition
The DMCA has been used a number of times by the manufacturers of products other than copyrighted works to inhibit competition. Thus far, the efforts have failed, although in one case, the lower court entered a preliminary injunction that kept the competitive product off the market for a substantial period of time. In Lexmark International, Inc. v. Static Control Components, Inc.,244 a printer manufacturer (Lexmark) sought and received a preliminary injunction on the basis of section 1201 against the manufacturer of replacement printer toner cartridges, Static Control. Lexmark’s authorized cartridges contained a computer program that included an authentication routine necessary for the cartridge to work with Lexmark printers. Lexmark used the program to prevent “unauthorized” after-market cartridges (i.e., those other than its own or its licensees’) from being used with Lexmark printers. Static Control’s cartridges copied the program in order to emulate the authentication process. Lexmark alleged that Static Control’s copying of the computer program was both copyright infringement and a violation of section 1201. The district court agreed and entered an injunction that remained in force for more than eighteen months. The Sixth Circuit reversed and vacated the injunction.245 The court held that the program likely contained limited if any copyrightable “expression” above and beyond its underlying (uncopyrightable) ideas and (uncopyrightable) function as a “lock-out” mechanism. Moreover,
244 253 F. Supp. 2d 943 (E.D. Ky. Feb. 27, 2003), rev’d, 387 F.3d 522 (6th Cir. 2004). 245 Lexmark Int’l, Inc. v. Static Control Components, Inc., 387 F.3d 522 (6th Cir. 2004).
88 BRUCE G. JOSEPH AND SCOTT E. BAIN the court held that the DMCA anticircumvention laws cannot be used to prevent functionality, as opposed to protecting expression. The court noted that the Lexmark programs did not function to prevent access to the copyrightable expression “as expression.” Rather, the expression (the program) was fully visible. The alleged access control simply stopped the program from functioning. The court found that was not what Congress meant by “access control” in section 1201. The Federal Circuit reached a similar result with different reasoning in the Skylink and Storage Technology cases discussed in Part III.B.2.a, supra. These cases suggest, however, that until the construction of section 1201 is settled, the section will be invoked for purposes far beyond those for which it was intended.
d. Copyright Management Information and Lawful Use
There have been comparatively few cases interpreting the prohibitions of section 1202 relating to copyright management information. Thus courts have yet to grapple with the scope of the prohibition and how it might be applied to a multitude of noninfringing uses of copyrighted works. For example, if one makes a lawful use of a portion of a work, does section 1202 require the user to carry all copyright management information (CMI) that might appear elsewhere in the work or be associated with the work? Such an obligation, if imposed, would seem to place an enormous burden on lawful uses of copyrighted works, particularly in the digital environment, where much lawful activity is performed automatically.246 Nothing in the legislative history suggests Congress intended to impose such a burden, and it is unlikely Congress would have so fundamentally altered the copyright balance in silence. Do the prohibitions apply to copies of works created by the
246 Consider, for example, Internet search engines and directories that reproduce small parts of a copyrighted work. See, e.g., First Amended Complaint, Agence France Presse v. Google Inc. (D.D.C. filed Apr. 27, 2005) (alleging infringement based on Google’s automated use of headlines, lead sentences, and thumbnails of photographs to link to allegedly copyrighted AFP news stories on the Internet; and further alleging violation of section 1202 for alleged failure to reproduce CMI in connection with those links).
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user, or only to the original as distributed by the copyright owner? When will a user have reasonable grounds to know that the acts will “induce, enable, facilitate or conceal an infringement?” One court has analyzed the copyright management prohibitions under section 1202. In Kelly v. Arriba Soft Corp.,247 defendant’s search engine employed a Web “crawler” to find photographs, and reproduced them in thumbnail form with links back to the original photo. The copyright owner claimed defendant’s process had removed CMI by failing to import, along with the photographs, copyright information found in nearby text. The court held that defendant’s actions were not a DMCA violation, because the defendant did not remove copyright management information from plaintiff’s product or original work, but, rather, took the work out of the context of nearby CMI.248 As an alternative, the Kelly court also emphasized that the scienter requirement of section 1202 goes beyond knowingly removing CMI—it also requires that the defendant know or have reason to know that the removal would “induce, enable, facilitate, or conceal an infringement.” It held that the defendant’s actions did not meet this requirement.
3. Concluding Thoughts Concerning Technological Protection Measures
Technological Protection Measures, and the DMCA prohibitions on circumvention, offer copyright owners powerful new tools to limit the use of their works by consumers and to monetize specific uses by those consumers. It is not clear, however, that the measures will meaningfully constrain widespread infringement by those who are not law-abiding consumers. Policy makers asked to sanction particular TPMs should be careful to ensure that the TPM is matched to the desired goal.
247 77 F. Supp. 2d 1116 (C.D. Cal. 1999), aff’d in relev. part, 336 F.3d 811 (9th Cir. 2003). 248 This interpretation was recently followed in Monotype Imaging, Inc. v. Bitstream, Inc., slip op. at 21 (N.D. Ill. July 25, 2005) (“Section 1201(b)(1) applies only to the removal of copyright management information on (or from) a plaintiff’s product or original work.”).
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Moreover, the move toward ubiquitous encryption of copyrighted works carries risks. As more and more works are released in protected forms, the ability to use those works in ways that benefit society may be unduly constrained. Moreover, the DMCA anticircumvention provisions are written in broad terms that are susceptible to abuse. It has thus far fallen to the courts to reject attempts to abuse the provisions. As more experience is gained, Congress should consider whether sections 1201 and 1202 need more precise crafting.
IV. CONCLUSION
The widespread adoption of digital technology has had a profound effect on copyright law and policy. Copyright doctrines developed over centuries in the analog world may provide both too much and too little protection for copyrighted works in the digital environment. Copyright owners have found it difficult to keep pace with the challenges of easy, hard to detect copying and mass distribution over digital networks. At the same time, they are asserting unprecedented rights and implementing an unprecedented ability to regulate private use. In short, the balance that copyright law seeks to strike between the incentive to create and the benefits that accrue from the free flow of information and the use of copyrighted works has at least been fundamentally altered, if not skewed beyond repair, by a law that is premised on the regulation of copying. There are, of course, enormous difficulties inherent in legislating a major overhaul of the copyright system. Thus it is far more likely that the law will continue to develop in small increments, in response to the perception of immediate need. As these changes are considered, it will be critical to keep in mind the perils of both overprotection and underprotection and the policies that copyright law seeks to advance.
91 ABOUT THE AUTHORS
BRUCE G. JOSEPH is a partner in the law firm of Wiley Rein & Fielding LLP in Washington, DC, and is chair of its Copyright Practice, with over 20 years’ experience in copyright law. He has been deeply involved with copyright issues pertaining to digital technology for most of his career. He represented Internet service providers in connection with the 1996 WIPO treaties and actively participated in the debates and negotiations leading to the Digital Millennium Copyright Act. He has participated in many of the interindustry activities concerning digital content protection technology, including the recording industry’s “Secure Digital Music Initiative,” the “Copy Protection Technical Working Group” and the “Broadcast Protection Discussion Group.” Mr. Joseph played a significant role in the negotiations leading to the Audio Home Recording Act of 1992, the 2002 TEACH Act, and the 2002 Small Webcaster Settlement Act. He has participated in numerous recent cases addressing digital copyright issues, including RIAA v. Verizon, CoStar v. Loopnet, Napster, Diamond Multimedia, ALS Scan, and Ellison v. Robertson. Most recently, he was Counsel of Record on the amicus brief of the Consumer Electronics Association, Computer & Communications Industry Association, and Home Recording Rights Coalition before the Supreme Court in MGM v. Grokster. Mr. Joseph is a member of the Advisory Board of BNA’s Patent, Trademark and Copyright Journal. He serves as Treasurer of the Washington Chapter of the Copyright Society of the USA, and has been President of the Chapter and a Trustee of the national organization. He received his B.A. and B.S. summa cum laude from the University of Pennsylvania in 1976, and his J.D. magna cum laude from Harvard Law School in 1979, where he was also an editor of the Harvard Law Review. Mr. Joseph clerked for the Honorable James Hunter, III, of the U.S. Court of Appeals for the Third Circuit in 1979-80.
SCOTT E. BAIN also is a partner in Wiley Rein & Fielding LLP at its Washington, DC, office. He specializes in the litigation, licensing, and acquisition of copyright and other intellectual property rights in the fields of publishing, entertainment, broadcasting, software, consumer electronics, and education. His clients often are at the forefront of legal debates and disputes regarding new technologies,
93 ABOUT THE AUTHORS in particular, the Internet, and represent a wide spectrum of copyright owners, copyright users, third-party technology providers, and others. In recent years, Mr. Bain helped a publisher obtain one of the largest copyright statutory damage verdicts in history, in a widely reported case, Lowry’s Reports, Inc. v. Legg Mason, Inc. (2004) supra note 38, which tested the limits and application of copyright damages law in the digital environment. He has since resolved many similar cases. Mr. Bain is a frequent author and speaker on copyright and other intellectual property issues, and as Co-Chairman of the ABA Intellectual Property Committee in the Section of International Law, he participates in the analysis and formation of policy regarding international harmonization of copyright laws. Prior to his legal career, Mr. Bain was a software engineer, and graduated from the University of Minnesota with a bachelor’s degree in electrical engineering. He attended Boalt Hall School of Law at the University of California, Berkeley, where he was managing editor of the Berkeley Technology Law Journal. After receiving his J.D. in 1997, he clerked for the Honorable Randall R. Rader of the U.S. Court of Appeals for the Federal Circuit.
The authors thank Matthew Astle, Margaret Crawford, and David Hirsch for assistance in preparation of this monograph.
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