An Overview of Selected Key Provisions and Their Application

On October 27, 1998, the U.S. Congress passed the Digital Millennium Copyright Act (the “Act” or the “DMCA”). The Act implements two 1997 World Intellectual Property Organization (WIPO) treaties designed to provide international standards for intellectual property protection for copyrighted works in the digital era while preserving well established defenses to claims of infringement, such as the fair use defense.

The DMCA consists of five separate titles, as follows:

Title I implements the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. It establishes a new prohibition on circumvention of technological measures designed by copyright owners to protect their works. There is also a new prohibition on tampering with so-called copyright management information, such as encoded copyright notices and warnings. New Sections 1201-1205 of the Copyright Act.

Title II creates limitations on the liability of online or Internet service providers for copyright infringement under certain circumstances. New Section 512 of the Copyright Act.

Title III allows those engaged in the maintenance or repair of a computer to copy computer programs where necessary in furtherance of those activities.

Title IV contains miscellaneous provisions dealing with certain activities of the U.S. Copyright Office, distance education, exemptions for libraries and for so-called “ephemeral recordings,” a royalty scheme for Internet webcasting of sound recordings, and the applicability of collective bargaining agreement obligations the case of transfers of motion picture rights.

Title V creates a new form of intellectual property protection for the design of vessel hulls.

This paper is not intended to be a comprehensive explication of the Act. Rather, we will focus solely on Title I and Title II of the Act, presenting a brief summary of their key provisions and noting certain developments in the case law since enactment of the DMCA. The reader is referred to the law review articles listed in the Appendix for more comprehensive treatments of the Act and, of course, to the statute itself.

1. CIRCUMVENTION OF COPYRIGHT PROTECTION SYSTEMS AND TAMPERING WITH COPYRIGHT MANAGEMENT INFORMATION

Copyright owners have been frantically trying to design technological security features to help protect their copyrighted works from the ease of copying which is inherent with new digital media. For these copyright owners, the DMCA provides explicit protection for copyright protection mechanisms and systems which copyright owners encode into their works or into machines designed to access or display the works (such as video game controllers) to control access to and copying of those works. 17 U.S.C. §1201. Subsection (a)(1) of Section 1201 is the “basic provision,” which prohibits the act of circumvention, such as decrypting an encrypted work or deactivating an anti-copying feature, regardless of whether the user has lawful access to the work. The effective date of this provision is delayed until October 28, 2000 in order the give the Copyright Office time to conduct a study and propose regulations to insure that persons needing to engage in circumvention for legitimate purposes, such as fair use of copyrighted materials by the media or for educational purposes, or other exempted activities, are not adversely affected by either the statute or the increasing proliferation of the security measures themselves. There is a continuing scheme of studies thereafter.

Subsection (a)(2) creates a ban on manufacturing or “trafficking” in any “technology, product, service, device, component or part thereof” that is primarily designed for circumvention purposes, or has only limited commercially significant purposes other than to circumvent or is marketed for use in circumvention. Subsection (b) of Section 1201 sets forth “additional violations” which effectively mirror the prohibitions of Subsection (a)(2). The distinction, according to the legislative history, apparently has to do with whether the violator was in lawful possession of the item containing the security measure that is being circumvented. See D. Nimmer, A Riff on Fair Use in the Digital Millennium Copyright Act, 148 U. Pa. L. Rev. 673, 688 (2000).

Section 1201 does not affect any rights, remedies, limitations or defenses to copyright infringement (such as fair use) which are provided in other sections of the Copyright Act. Indeed the section creates a right outside of traditional copyright law, and adds a new violation, which is not in and of itself copyright infringement. Also, any person who lawfully has the right to use a copy of a computer program may reverse engineer a security measure if the sole purpose of the activity is to identify and analyze those elements of the computer program which are necessary to achieve interoperability with other programs, provided that such activity does not constitute copyright infringement. 17 U.S.C. § 1201(f). See also 17 U.S.C. § 117.

With regard to the type of devices Congress had in mind, the legislative history indicates that the trafficking ban on items “primarily designed” for circumvention purposes was specifically meant to exclude devices such as personal computers or telecommunication switches that have commercially significant noninfringing uses.

See Nimmer, supra at 687.

New Section 1202 provides that no person shall knowingly, with the intent to induce, enable, facilitate or conceal infringement, provide or distribute “copyright management information” (i.e., information such as is normally found in copyright notices and terms and conditions for use of copyrighted works and other similar information) that is false. Nor shall any person intentionally remove or alter copyright management information or distribute a work knowing that the copyright management information has been removed or altered without authorization and knowing or, having reason to know, that it will induce, enable, facilitate or conceal infringement. This provision is of particular interest to the performing artists societies such as Broadcast Music Inc. (BMI) and the American Society of Composers, Authors and Publishers (ASCAP), which have developed a global digital identification and copyright management information system which, among other things, allows composers and publishers to encode each musical work with a unique digital identifier.

Any person violating either Section 1201 or 1202 is subject to criminal liability (17 U.S.C. §1204) (for willful violations for financial gain) or civil liability to any person injured by the violations (17 U.S.C. §1203). Potential remedies in a civil case include temporary and permanent injunctions, actual or statutory damages, which may be trebled for repeated violations, and attorneys’ fees. Statutory damages are set at between $200 and $2500 for each act of circumvention or device sold under Section 1201, and between $2500 and $25,000 for each falsification or removal of copyright management information under Section 1202.

One of the first cases brought under Section 1201 was Sony Computer Entertainment America Inc. v. GameMasters Inc., 54 USPQ2d 1401 (N.D. Cal. 1999). Defendant GameMasters operated a small retail store in California which specialized in video game controllers, accessories and media. Sony obtained a TRO and seizure order after its investigators determined that GameMasters was selling counterfeit goods and other violative goods. Some of the goods seized were so-called video game “enhancers” which allowed U.S. consumers to play CD-ROM video games on the Sony PlayStation console even though they were intended solely for distribution in Europe and Japan The Sony hardware and software contained a proprietary security system that prevented “non-territorial” games from being played, but the “enhancer” circumvented these security mechanisms. The court held that Sony was likely to succeed on the merits of its claim that GameMasters was trafficking in a device that violated 17 U.S.C. §1201 and issued a preliminary injunction.

On the other hand, in Kelly v. Arriba Soft Corp., 53 USPQ2d 1361 (C.D. Cal. 1999), the court denied the plaintiff’s motion for summary judgment of copyright infringement and violation of Section 1202. Defendant Arriba Soft used thumbnail versions of Kelly’s copyrighted photographic images without permission as part of a search engine. When a user of the search engine clicked on the photograph, he was taken to that portion of Kelly’s website that displayed the full-size version of the photograph. This “deep linking” (another hot issue in copyright law that remains largely unresolved) was also without Kelly’s authorization. The court held that Arriba’s admitted copying was a noninfringing fair use, primarily because it was transformative and did not affect the market for the copyrighted works. As to the deep linking issue, Kelly argued (as other plaintiffs in deep linking cases have argued) that he was harmed by this because it bypassed the front page of its web site so that users would be less likely to view advertisements and Kelly’s site’s own promotional message. But the court stated that Kelly had failed to submit evidence of this harm. For other deep linking decisions, see TicketMaster Corp., et al. v. Tickets.com, Inc., 54 USPQ2d 1344 (C.D. Cal. 2000) (Defendant’s deep linking to plaintiff’s web site does not constitute copyright infringement (motion to dismiss granted in part); TicketMaster Corp. v. Tickets.com, Inc., C.D. CAL, No. 99-7654 HLH (BQRx), 8/10/00, unpub. (Same case as above. Motion for preliminary injunction denied. Transitory copying by “spiders” of plaintiff’s web page in order to extract facts held to constitute fair use).

Finally, plaintiff Kelly contended held that the defendant’s actions violated 17 U.S.C. §1202 because the unauthorized thumbnail photos of the copyrighted works had been stripped of their copyright management information, i.e., their copyright notices. But, in a somewhat questionable result, the court held there was no violation of Section 1202 since the user could click on the thumbnail photos and then obtain the copyright information from Kelly’s web site. This case is on appeal to the Ninth Circuit.

RealNetworks, Inc. v. Stream Box, Inc., 2000 U.S. District Lexis 1889 (W.D. Wash. 2000), another Section 1201 case, was decided in January of this year. RealNetworks (“RN”) employed a variety of measures to prevent copying of its content providers’ copyrighted digital audio and video works. These works are streamed to users over the Internet in a non-downloadable format. The copyright owner makes its works available via a device on its computer called a RealServer. The RealServer will only stream its content to a user’s computer that has RealPlayer software installed, since there is a “Secret Handshake” authentication sequence that requires both devices. There is also a “Copy Switch” which allows the content provider to control which content it wants RN to allow end users to be able to download. This allows the providers to require repeat visits to their web sites (and exposure to ads and offers) if the user wants to enjoy the program again. A pay-per-play scenario is also possible.

Defendant Stream Box (“SB”) developed two software products designed to circumvent RN’s system. The Streambox VCR defeats RN’s Secret Handshake by mimicking a RealPlayer. It thereby gets access to the protected content and defeats the Copy Switch, allowing users to download the content and make and distribute as many perfect, digital copies of the programs as they wish. SB contended that its conduct should be permissible because there were fair use applications for its product. Relying on Sony Corp. v. Universal City Studios, Inc,, 464 U.S. 417 (1984), the Supreme Court’s Betamax VCR case, SB claimed that its users’ downloading of decoded content files for later use was a substantial non-infringing fair use akin to the time-shifting of television programs allowed in Sony. But the court distinguished Sony since, here, the content providers took express measures to disallow copying. Also, the court pointed out (citing the 1999 supplement to the treatise Nimmer on Copyright) that the DMCA was clearly intended to limit the future application of the Sony decision, since a device might qualify as promoting a fair use of a copyrighted work, so that the defendant would not be liable for copyright infringement, and yet still violate the DMCA. In this case, the court held that, under Section 1201(a), the mere act of circumventing RN’s security measures was a violation, to which fair use was not a valid defense. SB’s “trafficking” in the Streambox VCR was also held to violate Section 1201(b) of the Act. A preliminary injunction was thus appropriate.

Another issue in the RealNetworks case involved software called the Streambox Ripper, a file conversion application allowing the user to convert files from the RN format to .WAV, MP3, and other formats, or to convert other files between formats (e.g., convert a music CD-ROM to a compressed, MP3 format). The court found that this application did not violate 17 U.S.C. §1201 because there were substantial legitimate uses for it and there was no evidence that copyright owners had a problem with the file conversion or would suffer substantial injury thereby. It appears that the lack of evidence of harm was a substantial factor in this aspect of the decision. This case was settled and dismissed in September, 2000.

The Section 1201 case that has gotten the most press attention recently is Universal City Studios Inc. v. Reimerdes, 53 USPQ2d 1780 (S.D.N.Y. 2000) (preliminary injunction issued), 2000 WL 1160678 (S.D.N.Y.) (final judgment). The defendants include 2600 Enterprises, Inc., publisher of the hacker magazine 2600, and its owner, Eric Corley. The case involves software which circumvents the encryption code on digital versatile disks (“DVDs”), allowing them to be freely copied.

DVD movies are encoded with a copy protection application called Content Scramble System, or CSS. Last fall, a 15-year-old Norwegian student named Jon Johansen created a program to decrypt CSS, known as DeCSS. It is claimed that Mr. Johansen developed the program so he would be able to watch DVD movies on his computer that ran on the Linux operating system instead of Microsoft Windows. In a very short time, predictably, DeCSS began to be disseminated to hundreds and then thousands of users over the Internet, for free. Mr. Corley published the program on the 2600.com web site, as did many others. Suit was filed by eight film studios, members of the Motion Picture Association of America (“MPAA”). The court issued a preliminary injunction against the defendants on January 20, 2000 and a permanent injunction was entered on August 17, 2000 (opinion issued on August 19, 2000).

In its two opinions, the court held that the defendants violated the anti-trafficking provisions of the DMCA, Section 1201 (a)(2) of the Copyright Act, by distributing DeCSS software, since the software was primarily designed to circumvent a DVD’s anti-copying coding system. The plaintiffs were awarded court costs but not attorneys’ fees, as the court felt that the case raised important issues of first impression.

The defendants asserted a number of defenses. First, one defendant claimed that he was on online service provider and so should be protected under the “safe harbor” provisions of 17 U.S.C. §512 (discussed infra). The court stated that that provision was only a defense to a claim of copyright infringement, not a violation of the anti-circumvention law. Next, the defendants asserted that their conduct was permitted under the reverse engineering exemption, subsection (f) of Section 1201, since they were achieving interoperability of DVDs with other systems (i.e., Linux). The court rejected this defense for three reasons: (1) lack of supporting evidence; (2) since DeCSS can also run on Windows, interoperability of DVDs between Windows and Linux was not the sole purpose of the circumvention; and (3) the legislative history of the DMCA, according to the court, indicated that although the subsection (f) exemption permits reverse engineering of copyrighted computer programs, it “does not authorize circumvention of technological systems that control access to other copyrighted works, such as movies.” 53 USPQ2d 1780, 1786. The court also rejected defenses based on other statutory exemptions, i.e., encryption research (subsection (g) of Section 1201) and security testing (subsection (j)) due to lack of supporting evidence.

The defendants asserted a fair use defense as well. But the court noted that this was not a copyright infringement case, and held that there is no fair use defense to the violation of trafficking in circumvention devices. Finally, the defendants challenged the constitutionality of the DMCA on the grounds that it is an undue restriction on the free speech guaranteed by the First Amendment. The court held that the DMCA was a “necessary and proper” exercise of Congress’s power to make all laws necessary to execute and enforce U.S. copyright protection, which is also a constitutionally guaranteed right. This case is on appeal to the Second Circuit.

In its opinion supporting final judgment, the court noted that, after the preliminary injunction had issued in January, 2000, the defendants posted links on their web site to some 500 third party sites (by July, 2000) that in turn published the DeCSS program, as an act of public defiance of the MPAA. Since relief against this type of conduct had not been requested in the MPAA’s original motion for a preliminary injunction, the conduct was not restrained. But, in the permanent injunction, the court does prohibit the defendants from such linking, holding that it is the functional equivalent of “trafficking” in a prohibited device if the third party site either starts downloading DeCSS to the user’s computer immediately upon access or if there is virtually no other content on the third party site besides the violative program. As a result, a visitor to the 2600.com web site today (as of the date of publication of this paper) is greeted by a different sort of act of defiance: the user is told that if they are looking for a copy of DeCSS, they should “go to Disney’s search engine [a link is provided to Disney-owned go.com] and search for DeCSS. They will then LINK you to thousands of sites, something we’re no longer allowed to do.” See Appendix.

2. LIMITATIONS ON LIABILITY OF SERVICE PROVIDERS FOR COPYRIGHT INFRINGEMENT RELATING TO MATERIAL ON-LINE

The DMCA addresses and seeks to resolve the question of when an Internet service provider (“ISP”) can be held liable for copyright infringement. Specifically, the Copyright Act has been amended to add new Section 512, which sets forth five general categories of activities within which a qualifying ISP would be immune from liability for all monetary relief for copyright infringement by users (although there may be situations for which an ISP may be subject to injunctive relief. See 17 U.S.C. § 512(j)). These five categories of activities include: (1) where the ISP acts merely as a transitory digital network and infringing materials are transmitted through its network, in manner akin to a “common carrier” such as a telephone company; (2) where the ISP caches or makes a temporary copy of another party’s Internet web page that is infringing; (3) when information residing on the ISP’s network is kept there at the direction of a user and that information is infringing; (4) where the ISP provides information location tools, such as hyperlinks, to infringing materials; and (5) where the ISP removes or disables access to material claimed to be infringing (i.e., the ISP will be immune from suit by a party that claims its material was not infringing and thus wrongfully removed).

In order to qualify for this limitation of liability, the ISP must meet the conditions set forth under each of these areas. Specifically, Section 512 requires that the following conditions be met:

(1) Transitory Digital Network Communications

An ISP will not be held liable for copyright infringement when it acts merely as a transitory digital network and infringing materials are transmitted through its network, so long as the following criteria are present: (1) the ISP did not initiate the transmission of the material transmitted; (2) the transmission is carried out through an automatic technical process without selection of the material transmitted; (3) the ISP does not select the recipients; (4) no intermediate copy of the material is accessible by anyone other than the anticipated recipient of the transmission, and such copy is not maintained for a longer period than is reasonably necessary for the transmission; and (5) the material contained in the transmission is not modified.

(2)  System Caching

An ISP will not be liable for copyright infringement due to the act of caching or making a temporary copy of another party’s Internet page on its system or network so long as: (1) the material is made available on-line by a person other than the ISP; (2) such party transmits the material through the ISP system to a third party without modification; and (3) the storage of the material was carried out through an automatic technical process for the purpose of making the material available to other users.

There are a number of other requirements that an ISP must comply with in order to avoid liability for caching another party’s Internet page. The ISP must comply with the rules concerning the refreshing, reloading or other updating of the material as specified by the original web page owner in accordance with generally accepted industry standards. In addition, the ISP cannot interfere with any technology, such as “cookies,” that the original Internet page owner would have used to gather information regarding parties who have accessed its page. If the ISP is caching an Internet page on its server which requires the use of a password or the requirement of a payment of a fee, the ISP cannot permit access to that material without the users complying with such conditions. Finally, an ISP may not cache an Internet page that the owner of the page never made available for display or transmission to the public and for which the owner of the page informs the ISP that caching is not authorized. Once the ISP receives such a notice from the Internet page owner, the ISP must expeditiously act to remove or disable access to the material.

(3)  Information Residing on an ISP System or Network For Which The Copyrights Belong to One of The ISP’s Users

An ISP will not be liable for copyright infringement for infringing material that is stored on its network by one of its users so long as: (1) the ISP does not have actual knowledge that the material is infringing or is not aware of facts and circumstances from which infringing activity is apparent and expeditiously removes or disables access to the material once it has been properly notified of the infringement; (2) the ISP designates an agent to receive notification of any alleged copyright infringement and must provide the agent’s name, address, phone number and e-mail address on its web page as well as to the Copyright Office. The Register of Copyrights maintains a directory of all agents, which is available to the public for inspection via the Internet.

In order for an ISP to be properly notified of a claim of infringement, the complaining party must notify in writing the ISP’s designated agent and provide the following information: (1) a physical or electronic signature of a person authorized to act on behalf of the owner of an exclusive right that is being infringed; (2) identification of the copyrighted work claimed to have been infringed; (3) identification of the material that is allegedly infringing; (4) the complaining party’s address, telephone number and e-mail address; (5) a statement that the complaining party has a good-faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent or the law; and (6) a statement that the information in the notification is accurate and, under penalty of perjury, that the complaining party is authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.

If the complaining party’s notice has not substantially complied with all of the requirements set forth above, then the ISP has not been properly notified and cannot be considered as having actual knowledge or being aware of facts or circumstances from which the infringing activity is apparent. Nevertheless, if the complaining party has provided sufficient information which identifies the allegedly infringing material and provides an address by which it may be contacted, the ISP has a duty to attempt to contact the complaining party to request that the complaining party provide the additional information required under the statute.

(4)  Information Location Tools

An ISP will not be liable for copyright infringement resulting from having hyperlinks to web sites on the Internet containing infringing material so long as: (1) it does not have actual knowledge that the material is infringing or facts or circumstances pursuant to which infringing activity is apparent, and acts expeditiously to remove such material once it is aware of such infringement; (2) does not receive a financial benefit directly attributable to the infringing activity; and (3) the ISP expeditiously removes access to the material once it has been properly notified that the material is infringing.

(5)  ISP Liability For Removing or Disabling Access to Infringing Material Once it Has Been Properly Notified

An ISP will not be liable to any person for any claim of copyright infringement based on the ISP’s good faith disabling of access to, or removal of, material claimed to be infringing or from which infringing activity is apparent, regardless of whether the activity or material is ultimately determined to be infringing. However, with regard to material its users have stored on the ISP’s server, the ISP must: (1) take reasonable steps to promptly notify the subscriber that it has removed or disabled the access to the material; (2) upon receipt of a counter notification as described below, promptly provide the complaining party with a copy of the counter notification and inform the person that it will replace the removed material or cease disabling access to it in 10 business days; and (3) replace the removed material and cease disabling access to it in not less than 10 or not more than 14 business days following receipt of the counter notice, unless its designated agent receives from the complaining party notification that it has filed a lawsuit.

To be an effective counter notification, the user must provide in writing to the ISP’s designated agent a statement that substantially includes the following: (1) a physical or electronic signature of the subscriber; (2) identification of the material that has been removed or to which access has been disabled and a location at which the material appeared before it was removed or access to it was disabled; (3) a statement under penalty of perjury that the subscriber has a good faith belief that the material was removed or disabled as a result of mistake or misidentification; and (4) the subscriber’s name, address and telephone number and a statement that it consents to jurisdiction of the Federal District Court for the jurisdiction in which the address is located.

In addition, for an ISP to qualify for this limitation of liability, the ISP must adopt and implement a policy that provides for the termination of subscribers and account holders of the ISP’s system or network who are repeat infringers.

Pre-DMCA cases already established the principle that unknowing participation in transmission of infringing material by an ISP should not subject it to liability for contributory infringement. See Religious Technology Center v. Netcom On-Line Communication Services, Inc., 907 F. Supp. 1361 (N.D. Cal. 1995). In another case, however, Playboy Enterprises, Inc. v. Webbworld, Inc., 991 F. Supp. 543 (N.D. Tex. 1997), a web site operator which knowingly distributed unauthorized copies of copyrighted photographs was held liable for infringement.

The most famous currently ongoing U.S. case involving a defense where the accused infringer claims immunity as an ISP under Section 512 is A&M Records, Inc. v. Napster, Inc., 54 USPQ2d 1746 (N.D. Cal. 2000) (Nos. C99-5183MHP and C00-0074MHP) (denying Defendant’s motion for summary judgment); opinion supporting preliminary injunction order (stayed pending appeal) issued August 10, 2000, reprinted in Vol. 60, No. 1487, BNA’s Patent, Trademark & Copyright Journal.

Napster devised and implemented a unique system, currently available for free, which enables Internet users to share digital MP3 format music via “peer to peer” downloading, as opposed to connecting to a central web site. The system works as follows: A user first downloads and installs Napster’s software, called “MusicShare,” onto his or her computer’s hard drive. The user then connects to the Internet and opens the MusicShare program, without going back to Napster’s web site. The program immediately informs Napster’s central server that the user is online, and the server then tells the user what other parties are online and what music files are available for downloading. Napster maintains an index of all of these files on its servers, but not the files themselves. The users then communicate directly with each other’s computers, “peer to peer;” select which music they want to download; and commence the operation. As long as a user is online, his or her music files are, in turn, available to any other Napster user for downloading. The evidence presented in the case showed that approximately 87% of the music files transferred by Napster members were copyrighted, and that Napster was aware of this. As of the end of July, approximately 10,000 music files per second were being shared using Napster. According to a September 12, 2000 report in The Washington Post, Napster had nearly 5 million users as of the end of July, compared to 1.1 million users in February, 2000, and more than 6% of all PCs with modems used Napster at some point. The December 25, 2000 issue of The Washington Post reported that Napster had nearly 38 million users, with more simultaneous users in a single week than AOL had in all of 1999.

Napster was sued by A&M Records and other members of the Recording Industry Association of America and, in a separate but now consolidated suit, by music publishers and composers. One of Napster’s defenses, among many, is that it acts as an ISP, as defined under the DMCA (Section 512 of the Copyright Act), and is therefore immune from liability for contributory and vicarious copyright infringement. The court rejected this defense in its May opinion denying Napster’s motion for summary judgment, and again in its July 26 issuance of a preliminary injunction against the company (supported by an August 10, 2000 opinion but stayed by the U.S. Court of Appeals for the Ninth Circuit on July 28, 2000). The court found that the users of Napster’s system did not have a fair use defense to the RIAA’s infringement claim, so that Napster’s system knowingly facilitated massive copyright infringement. This, in turn, rendered Napster liable for contributory and vicarious infringement. As to Napster’s Section 512 defense, the court stated that Napster is not an ISP as defined by the statute because it is more than a mere conduit for the transfer of the infringing files. Rather, it offers search and directory functions. Also, although it facilitates connections between users, it does not provide the connections through its system. Additionally, the court held, Napster’s knowledge of the infringing activities means it cannot rely on the Netcom case, supra, and comparable provisions of Section 512.

In its appeal brief, filed August 29, 2000, Napster argues that it is an information location tool, so that it does qualify for Section 512 protection. Also, Napster states that it has now implemented a Section 512 policy on its web site that warns infringers that they will be terminated from membership and that it has actually terminated over 700,000 infringers of which it has received statutory notice. In its responsive appellate brief, filed September 8, 2000, the RIAA does not actively defend the lower court’s finding that Napster is not an ISP. Rather, the brief states that Napster is obligated to kick off of its system all infringers of which it has actual knowledge, and cannot wait for notice from the copyright owners or third parties in order to take action. It thus seems possible that the Ninth Circuit may indeed conclude that Napster is an ISP for Section 512 purposes. It is relevant to note that many online e-commerce ventures do consider themselves to fall under Section 512 even though they are not strictly Internet service providers. See, for example, the Section 512 notices and forms provided by the E Bay auction service on its web site, reprinted in the Appendix.

Of course, even if Napster is found to qualify as an ISP, there are many other factors that may still convince the Ninth Circuit to uphold the preliminary injunction, perhaps in a modified form. Also, it should be noted that Napster has asserted a host of other defenses, e.g., underlying substantial non-infringing activity and fair use under Section 107 of the Copyright Act and the Betamax case (some of the copying is alleged to be for personal “space-shifting purposes”); immunity under the Audio Home Recording Act of 1992, 17 U.S.C. §§1001 et seq.; First Amendment free speech immunity; and misuse of copyright by the RIAA members to stifle competition in the music industry. Clearly, the Ninth Circuit’s decision in this case, and subsequent court developments, will be anxiously awaited by the music industry and the entire copyright community, as well as by digital music entrepreneurs and users throughout the United States.

In the meantime, Napster is seeking to reinvent itself as a pay-for-play service, perhaps on a monthly or annual subscription basis. Under a deal with the German media giant Bertelsmann AG, Napster received a cash infusion of $50 million and a commitment that Bertelsmann will drop out of the RIAA’s lawsuit once a royalty payment system is in place.

CONCLUSION

The anti-circumvention and service provider provisions of the U.S. Digital Millennium Copyright Act of 1998 have already had a significant impact on commerce in the digital era, and will continue to do so. As affected parties continue to attempt to strike a fair and workable balance between the rights of copyright owners, entrepreneurs, and consumers, the courts and the U.S. Congress will undoubtedly be repeatedly called upon to help fine tune that balance. And the possibility that a completely different sort of balancing structure will become necessary in the not too distant future cannot be discounted.

APPENDIX

SELECTED STATUTES, CASE LAW, AND REFERENCES

STATUTES

Copyright Act of 1976, as amended, Pub. L. No. 94-554, 90 Stat. 2541, 17 U.S.C. §§101 et seq., October 19, 1976

Audio Home Recording Act of 1992, Pub. L. No. 102-563, 106 Stat. 4237, 17 U.S.C. §1001 et seq., October 28, 1992

Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No. 104-39, 109 Stat. 336 (amending, inter alia §114 and §115 of Title 17, U.S.C.), November 1, 1995

Digital Millennium Copyright Act, Pub. L. No. 105-304, 112 Stat. 2860, 2887 (Title IV amending §108, §112, §114, Chapter 7 and Chapter 8, of Title 17, U.S.C.), October 28, 1998. The Act also contains four separate acts within Titles I, II, III, and V amending Title 17, U.S.C., as follows:

• WIPO Copyright and Performances and Phonograms Treaties Implementation Act of 1998 (amending Title 17, U.S.C., to add Chapter 12)
• On-Line Infringement Liability Limitation Act (amending Title 17, U.S.C., to add §512)
• Computer Maintenance Competition Assurance Act (amending §117, Title 17, U.S.C.)
• The Vessel Hull Design Protection Act (adding Chapter 13 to Title 17, U.S.C.)

CASES

Circumvention of Access Control or Copyright Protection Mechanisms or Systems

Sony Computer Entertainment America Inc. v. GameMasters Inc., 54 USPQ2d 1401 (N.D. CAL. 1999). Preliminary injunction issued against “video game enhancer” that allows U.S. consumers to play CD-ROM video games on Sony PlayStation that were intended solely for distribution in Europe and Japan. Case still pending.

Kelly v. Arriba Soft Corp., 53 USPQ2d 1361 (C.D. Cal. 1999). Use of “thumbnail” versions of copyrighted photographic images without permission as part of a search engine held to constitute fair use and nonviolative of DMCA prohibition against separating copyrighted works from their copyright management information. On appeal to the Ninth Circuit.

RealNetworks, Inc. v. Stream Box, Inc., 2000 U.S. District Lexis 1889 (W.D. WASH. 2000). Two out of three devices held to violate §1201’s anti-circumvention provisions regarding downloadable digital audiovisual works. Preliminary injunction issued. Case settled and dismissed in September 2000.

Universal City Studios Inc. v. Reimerdes, 53 USPQ2d 1780 (S.D.N.Y. 2000) (preliminary injunction issued); 2000 WL 1160678 (S.D.N.Y.) (August 19, 2000) (final judgment and opinion). Defendants, including 2600 Enterprises, Inc., publisher of 2600 Magazine, enjoined from further distribution of DeCSS software, which was held to be a violation of 17 U.S.C. §1201. On appeal to the Second Circuit.

Service Provider Liability/Immunity

Religious Technology Center v. Netcom On-Line Communication Services, Inc., 907 F. Supp. 1361 (N.D. CAL. 1995) (pre-DMCA). Operator of computer bulletin board service and Internet access provider not liable for infringing activity by subscribers of which it had no knowledge.

Playboy Enterprises, Inc. v. Webbworld, Inc., 991 F. SUPP. 543 (N.D. Tex. 1997) (pre-DMCA). Web site operator which knowingly distributed unauthorized copies of copyrighted photographs held liable for infringement.

A&M Records, Inc. v. Napster, Inc., 54 USPQ2d 1746 (N.D. CAL. 2000) (denying Defendant’s motion for summary judgment). Distributor of software to enable peer-to-peer digital music sharing held not to qualify for DMCA “safe harbor” for service providers under 17 U.S.C. §512(a). Preliminary injunction issued July 26, 2000, stayed by the U.S. Court of Appeals for the 9th Circuit on July 28, 2000. Opinion supporting preliminary injunction order issued August 10, 2000, reprinted in Vol. 60, No. 1487, BNA’s Patent, Trademark & Copyright Journal (Appeal pending).

“Time Shifting”/”Copies for Personal Use”/Audio Home Recording Act of 1992

Sony Corp. v. Universal Studios, 464 US 417 (1984). Use of VCR by consumers to make home copies of programs for “time-shifting” purposes held to constitute a non-infringing fair use of copyrighted material. Since there existed a commercially significant noninfringing use, the manufacturer was not liable for contributory or vicarious infringement, even though some consumers also use the VCR for infringing activity.

Recording Industry Association of America v. Diamond Multimedia Systems, Inc., 180 F.3d 1072 (9th Cir. 1999). Rio MP3 portable music player held not to constitute a “digital audio recording device” and hence not required to employ a serial copyright management system (“SCMS”) or pay royalties to copyright holders.

A&M Records, Inc. v. Napster, supra. Napster contends, on appeal, inter alia, that it promotes “personal copying” which is permitted under the Audio Home Recording Act of 1992.

Other Pertinent Cases

Twentieth Century Film Corporation v. ICRAVETV, 53 USPQ2d 1831 (W.D. Penn. 2000). Preliminary injunction granted against Toronto-based ICRAVETV.com, an on-line TV webcaster which launched a service in December, 1999, which copied analog broadcasts from Buffalo, New York, and Toronto television stations and streamed them over its web site, without authorization. TRO granted January 28, 2000. Consolidated with National Football League v. TVRadioNow Corp., Dkt. # 2:00-CV-00121.

UMG Recordings, Inc. v. MP3.com, Inc., 92 F. Supp. 2d 349; 109 F. Supp. 2d 223 (S.D.N.Y 2000); 2000 U.S. Dist. LEXIS 17907 (S.D.N.Y Nov. 14, 2000) (final judgment). Summary judgment issued holding that the “mymp3.com” music sharing service constitutes copyright infringement and is not fair use. In a September 6, 2000, ruling, the Court concluded that the infringement was willful, entitling the remaining plaintiff, Universal Music Group, to statutory damages of $25,000 per infringed CD (defendant contended that there are no more than 4,700 CDs which qualify for statutory damages, for a total of $118,000,000, but plaintiff contended that more CDs were infringed. Final judgment of infringement and for statutory damages, costs and attorneys’ fees in the amount of $53,400,000 was entered on November 14, 2000, pursuant to a settlement.

Intellectual Reserve, Inc. v. Utah Lighthouse Ministry, 75 F. Supp. 2d 1290 (D. Utah 1999). Posting links to infringing web site held not to constitute contributory infringement.

Bernstein v. J.C. Penny, Inc., 50 USPQ 2d 1063 (C.D. Cal. 1998). Claim alleging contributory infringement by linking to an infringing web site dismissed.

TicketMaster Corp., et al. v. Tickets.com, Inc., 54 USPQ2d 1344 (C.D. Cal. 2000). Defendant’s “deep linking” to plaintiff’s web site does not constitute copyright infringement (motion to dismiss granted in part).

TicketMaster Corp. v. Tickets.com, Inc., 2000 U.S. Dist. LEXIS 12987 C.D. Cal. Aug. 10, 2000). Same case as above. Motion for preliminary injunction denied. Transitory copying by “spiders” of plaintiff’s web page in order to extract facts held to constitute fair use. Appeal pending.

LAW REVIEW ARTICLES

D. Nimmer, A Riff on Fair Use in the Digital Millennium Copyright Act, 148 U. Pa. L. Rev. 673 (2000)

S.E. Halpern, Note: New Protection for Internet Service Providers: An Analysis of “The Online Copyright Infringement Liability Limitation Act,” 23 Seton Hall Legis. J. 359 (1999)

R. Henriquez, Facing the Music on the Internet: Identifying Divergent Strategies for Different Segments of the Music Industry in Approaching Digital Distribution, 7 UCLA Ent. L. Rev. 57 (Fall, 1999)

A. Berschadsky, RIAA v. Napster: A Window onto the Future of Copyright Law in the Internet Age, 18 J. Comp. & Info. L. 101 (2000)

A. C. Yen, Internet Service Provider Liability for Subscriber Copyright Infringement, Enterprise Liability, and the First Amendment, 88 Geo. L. J. 1833 (2000) Copyright © 2000 by Sheldon H. Klein and Anthony V. Lupo. Sheldon H. Klein and Anthony V. Lupo are Technology Group partners in the Washington, D.C. office of Arent Fox Kintner Plotkin & Kahn PLLC.