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Copyright Protection and Management and Online Copyright Infringement Under the Digital Millennium Copyright Act

Lee T. Gesmer, Esq.
Jennifer Eilers, Esq.

December 2000

This outline was prepared in connection the 2000 MCLE Internet and Electronic Commerce Conference, held in Boston on December 5, 2000

TITLE I (CHAPTER 12) – COPYRIGHT PROTECTION AND MANAGEMENT SYSTEM

On December 20, 1996, delegates to the World Intellectual Property Organization (“WIPO”) Diplomatic Conference in Geneva adopted two treaties aimed at extending copyright protection in cyberspace, namely the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. WIPO Copyright Treaty, Dec. 20, 1996, available at <http://www.wipo.org/treaties/ip/wipo-copyright/index.html>; WIPO Performances and Phonograms Treaty, Dec. 20, 1996, available at <http://www.wipo.org/treaties/ip/wipo-performances/index.html> . The treaties will not become effective until at least 30 WIPO member states adopt legislation implementing them. WIPO Copyright Treaty at art. 20; WIPO Performances and Phonograms Treaty at ch. V, art. 29. Fewer than 20 countries have ratified the treaties as of the writing of this article. See listing at http://www.wipo.org/treaties/ip/wipo-copyright/index.html.

The events in Geneva came on the heels of major efforts in the United States to enact similar legislation, the National Information Infrastructure Copyright Protection Act of 1995 (the “NII Act”) and the Database Investment and Intellectual Property Antipiracy Act of 1996 (the “Database Act”), neither of which made it out of committee due to contentious domestic debate. Following the adoption of the WIPO treaties, however, the U.S. Congress pursued the adoption of implementation legislation, succeeding in 1998 with the enactment of the Digital Millennium Copyright Act of 1998 (“DMCA”). A copy of the provisions of the DMCA discussed in this paper is attached as Appendix 1.

I. PERFECT COPIES AND IMPERFECT PROTECTION TECHNOLOGIES – THE NEED FOR LEGISLATION

With the advent of digital publishing, the market for copyright-protected works has changed, and copyright owners have been faced with the fact that it is now possible for consumers to make nearly perfect, and in many cases perfect, copies of digital works with the click of a mouse. This realization has caused copyright owners to implement various technological protection measures both to restrict access to copyrighted works in an attempt to make it impossible to use copies without authorization (for example, requiring a password or decryption software to access the work) and to protect the copyrights by restricting the ability to make copies of works (for example, digital watermarking). As technology continues to evolve at a lightning pace, however, the developers of these “blocking” technologies cannot stay far enough ahead of the developers of “unlocking” technologies. Each time a new way of building a wall is introduced, someone develops a way of knocking it down.

The WIPO treaties attempt to address these concerns by requiring that member nations provide “adequate legal protections and effective legal remedies” against circumventing technological protection measures. WIPO Copyright Treaty at art. 11; WIPO Performances and Phonograms Treaty at ch. IV, art. 18. The DMCA responds to this requirement in a new Chapter 12 of the Copyright Act (17 U.S.C. § 101 et seq.

New Section 1201 prohibits:

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    • circumventing access control technology
    • trafficking in technology that is used to circumvent access control technology
    • trafficking in technology that is used to circumvent copyright protection technology.

Under this section, copyright infringement is not an element of the prohibited act.

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    A. Anti-Circumvention: Circumventing Access Control Technology (Section 1201(a)(1))

Section 1201(a)(1) targets the consumer by prohibiting the act of circumventing technology that controls access to copyright protected works.

Since the effective date of Section 1201(a)(1) was delayed by the law itself — it did not become effective until October 28, 2000 — there is, as yet, no case law applying its provisions. However, there has been much public debate regarding the effect of this section and the other prohibitions in Section 1201 on the first sale doctrine. The first sale doctrine, which is codified at Section 109(a) of the Copyright Act, restricts a copyright owners’ right to control distribution of a copy of a work to the first sale of that copy. Subsequent lending, sale or transfer of the copy does not constitute copyright infringement or require the copyright owner’s permission. Copyright Act of 1976, 17 U.S.C. §109. In the digital environment, protection technologies and the practical realities of use of digital works render the first sale doctrine useless in many situations.

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    • It is not uncommon today for a consumer to obtain a copy of a work (say, a video game) whose use requires a password unique to the user’s computer. Without circumventing the password protection mechanism (which would be a violation of Section 1201(a)(1)), it may impossible for the consumer to exercise his first sale right if it means having to transfer the copy to another computer.
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    • Even in the absence of protection technologies, the first sale doctrine can be incompatible with the transfer of digital works. Compare: A consumer who gives away a book gives away possession of the physical work without keeping a copy (this would generally be allowed by the first sale doctrine). However, in many cases, a consumer who wishes to give away a copy of adigital work must reproduce the copy owned by her and transfer the reproduction to another party. Copying the work alone violates the Copyright Act, and, even if the original purchaser destroys her original copy, the first sale doctrine does not apply.

The debates over the appropriateness and proper scope of the anti-circumvention provisions of the DMCA will continue, and some have proposed the creation of a new “first access doctrine” whereby a user would be allowed to circumvent access protection technology solely for the purpose of transferring the protected work, so long as the user does not retain a copy of the work. While no legislation has been passed to date, it is likely that the DMCA’s restrictions and exceptions will evolve in response to the impact of the DMCA on the distribution and use of copyright protected works in the marketplace.

B. Anti-Trafficking

The anti-trafficking provisions of Title I deal with two types of technological protection measures: access protection (for example, passwords or encryption) and copyright protection (for example, digital watermarking), for which there is not a corollary anti-circumvention prohibition.

Prior to the enactment of the DMCA, one of the key U.S. decisions examining technology and setting a standard for holding providers of technology liable for contributory copyright infringement was Sony Corporation of America v. Universal City Studios, Inc., 464 U.S. 417 (U.S. 1984). In Sony, the Supreme Court held that manufacturers of video cassette recorders were not liable for contributory infringement due to the fact that the devices at issue had a “substantial non infringing use.” Id. at 456. This doctrine is not incorporated into the DMCA and does not serve as a defense. Universal City Studios, Inc. v. Reimerdes, 11 F. Supp. 2d 294, 323-24 (S.D.N.Y. 2000) (citing House Committee on Judiciary, Section-by-Section Analysis of H.R. 2281 as Passed by the United States House of Representatives on August 4, 1998, at 9 (Comm. Print 1998)). The DMCA’s standard for escaping liability under its anti-trafficking rules is much more stringent and far-reaching than the Sony standard – what might have been excused from contributory infringement liability under the Sony doctrine can now be a violation of the DMCA. See, e.g., RealNetworks, Inc. v. Streambox, Inc., No. C99-2070P, 2000 WL 127311 at *8 (W.D.Wa. Jan. 18, 2000).

The DMCA prohibits trafficking in any technology that meets any one of the following three criteria as to the circumvention of either access control technology (Section 1201(a)(2)) or copyright protection technology (Section 1201(b)):

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    • It is primarily designed or produced for the purpose of circumvention; or
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    • It has only limited commercially significant purpose or use other than circumvention; or
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    • It is marketed for use in circumvention.

As noted above, although a person may be prohibited from trafficking in technologies that allow the circumvention of copyright protection technology (Section 1201(b)), the act of circumvention itself is not prohibited. However, the person circumventing the technologies would still be subject to copyright infringement laws.

C. Exemptions

The prohibitions in Section 1201 are subject to a number of complex exemptions, each with its own limitations. The list below highlights the categories of exemptions but does not examine the detailed criteria and restrictions.

The following entities or conduct are exempted from the prohibitions of Section 1201(a)(1):

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    • Persons designated in rulemakings. For successive three year periods, the prohibition in Section 1201(a)(1) will not apply to persons who make non infringing uses of particular classes of works, as designated in rules promulgated by the Library of Congress. The first set of rules designates the following classes of works as being covered by this exception (until October 28, 2003): (1) lists of websites blocked by filtering software applications, and (2) literary works (including software programs) whose access control technologies fails to permit access due to malfunction, damage or obsoleteness. Exemption to Prohibition on Circumvention of Copyright Protection Systems for Access Control Technologies; Final Rule, 65 Fed. Reg. 64,555 (2000) (to be codified at 37 CFR 201.40).
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    • Nonprofit library, archives or educational institution. These entities may circumvent access protection technology solely to determine whether to acquire an authorized copy of the work
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    • Protection of Personally Identifying Information. Acts of circumvention carried out solely to prevent the collection or dissemination of personally identifying information (e.g., deactivation of “cookies”) are permitted.

The following entities or conduct are exempted from the prohibitions of Section 1201(a)(1) and (2):

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    • Reverse engineering. Solely for interoperability purposes.
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    • Encryption Research. Solely for the identification and analysis of flaws of encryption technologies in the advancement of the field of encryption.
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    • Security Testing. Solely for the purpose of testing, investigating or correcting a security flaw.
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    • Protection of Minors. In the application of Section 1201(a), courts may give special consideration to technology that has the sole purpose of preventing the access of minors to material on the Internet.

The following entities or conduct are exempted from the prohibitions of Section 1201(a) and (b):

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    • Certain government activities. Section 1201 does not prohibit lawfully authorized investigative, protective, information security (defined as identifying and addressing vulnerabilities of a government computer, computer system or computer network) or intelligence activities.

Importantly, these exemptions address exclusion of liability under certain provisions of Chapter 12, but they do not provide defenses to claims of breach of contract to the extent the exempt party is bound by contract not to do something that would otherwise be permitted by virtue of the exemption.

For example, software licenses often prohibit the licensee from reverse engineering the licensed software. In this case, even if the act of reverse engineering would not constitute a violation of Section 1201(a)(1), the licensee performing the act would be liable for breach of contract. Particularly in light of the number of exceptions and possibility of future exceptions, licensors of technologies that include access control technology may be more likely to include terms restricting the licensee from circumventing such technology as a “belt and suspenders” strategy.

D. Cases

In the two years since the enactment of the DMCA, there have been two major cases invoking the anti-trafficking provisions of Chapter 12 that have attracted significant attention – RealNetworks, supra, and Universal City Studios, supra. While each presents a unique set of facts, the application of the DMCA to each was fairly straightforward. The exception to this is the Court’s examination of linking to third party websites in Universal, which may prove to include a precedent-setting analysis for purposes of the DMCA and Internet linking cases in general.

In addition, in each case, the Court denied defendants’ attempt to employ a “fair use” defense (Universal, 111 F. Supp. 2d at 324; see RealNetworks, at *8) and the Sony doctrine (RealNetworks, 2000 WL 127311 at *8;Universal, 111 F. Supp. 2d at 323-324, holding each to be inapplicable to violations of Section 1201.

RealNetworks, Inc. v. Streambox, Inc. In January 2000, the U.S. District Court for the Western District of Washington granted preliminary injunctive relief regarding two Streambox products, based on RealNetworks’ DMCA anti-trafficking and other copyright claims. 2000 WL 127311 at *12-13.

RealNetworks markets a suite of products that form a system for distributing, retrieving and playing digital audio and video content via the Internet. Using the RealNetworks products, a copyright owner can encode digital content into RealNetworks’ format and send the content to consumers through a “streaming” process. When content is streamed over the Internet, no trace of the content is left on the consumer’s computer, unless the content owner has permitted the consumer to download the file. The RealNetworks products implement various protection technologies to block both access to and copying of the streaming works. Id. at *1-3. The court found that RealNetworks was likely to show at trial that one of Streambox’s products circumvented these technologies in violation of Section 1201(a)(2) and 1201(b). Id. at *8-9. The other product subject to injunction was implicated in copyright violations outside of the DMCA.

RealNetworks and Streambox eventually settled this case, with Streambox agreeing to work with RealNetworks to honor the copyright protection technology while allowing Streambox to continue to develop and market technology that works with the RealNetworks products.

Universal City Studios, Inc. v. Reimerdes. Universal distributes copyrighted motion pictures for home viewing in digital form on digital versatile disks (DVDs). To protect against copying of the works, Universal uses an encryption system called CSS, which allows consumers to view the works only on devices that have licensed decryption technology. Reimerdes made available to the public a decryption program called DeCSS that enabled consumers to copy DVDs and view the motion pictures without the licensed decryption technology. Universal, 111 F. Supp. 2d at 308, 312. Universal won permanent injunctions barring Reimerdes from posting DeCSS on its own websites and from linking its websites to certain third party sites that post DeCSS. Id. at 343-345.

In barring Reimerdes from linking to third party sites, the Court stated that “the anti-trafficking provision of the DMCA is implicated where one presents, holds out or makes a circumvention technology or device available, knowing its nature, for the purpose of allowing others to acquire it.” Id. at 325. The Court further proscribed the criteria for prohibiting, under the DMCA, linking to a site containing circumvention technology. The plaintiff must show “clear and convincing evidence that those responsible for the link (a) know at the relevant time that the offending material is on the linked-to site, (b) know that it is circumvention technology that may not lawfully be offered and (c) create or maintain the link for the purpose of disseminating that technology.” Id. at 341. The Court acknowledged that this test would have to be applied to the relevant facts and circumstances of a case in order to avoid over-application (for example, the Court noted that a deep link to a page containing prohibited technology located on a site that contains a broad range of other content is more likely to be prohibited than would a link to the home page of that same site). Id. at 341 n. 257.

II. PROTECTION OF COPYRIGHT MANAGEMENT INFORMATION

The WIPO treaties further require that member nations protect the integrity of copyright management information (“CMI”). WIPO Copyright Treaty at art. 12; WIPO Performances and Phonograms Treaty at ch. IV, art. 19. In response to this requirement, the DMCA includes new Section 1202 of the Copyright Act, which prohibits falsification, removal and alteration of CMI, as further described below.

A. Statutory Prohibitions

CMI, as covered by Section 1202, is information that is accessible in conjunction with or appears with copyright protected works (but not including personally identifying information about a user or of a copy or display), and includes:

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    • title and other information identifying the work
    • name of author
    • name of copyright owner
    • name of writer or director (except for public performances by broadcast radio or TV and only as to audiovisual works)
    • name of performer (except for public performances by broadcast radio or TV)
    • identifying information about any of the foregoing
    • terms and conditions for use of the work
    • identifying numbers or symbols referring to such information or links to such information
    • other information prescribed by the Register of Copyrights

Section 1202 prohibits the falsification of CMI (Section 1202(a)) and the removal and alteration of CMI (Section 1202(b)).

More specifically, a person may not, under Section 1202(a), knowingly provide, distribute or import for distribution false CMI with the intent of facilitating infringement.

Under Section 1202(b), a person may not, with the knowledge or reasonable grounds to know that it is in furtherance of infringement:

(1) intentionally remove or alter CMI; or

(2) distribute or import for distribution CMI knowing it has beenremoved or altered; or

(3) distribute, import for distribution or publicly perform worksknowing that CMI has been removed or altered.

B. Exceptions

The exceptions to the Section 1202 restrictions are fewer in number than those afforded Section 1201 (there are only two). These exceptions are subject to restrictions that are included in detail in the statute.

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    • Certain government activities. Section 1202 does not prohibit lawfully authorized investigative, protective, information security (defined as identifying and addressing vulnerabilities of a government computer, computer system or computer network) or intelligence activities. This is the same exception as provided for Section 1201, discussed above.
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    • Radio and TV broadcasters, cable systems and persons who provide programming to such broadcasters or systems. Section 1202(b) does not apply to these classes of persons so long as the person does not intend to induce, enable, facilitate or conceal infringement and compliance with the section would cause harm (as further described in the statute). Congress recognized that there may be a time when there is a voluntary digital transmission standard for the placement of CMI for a category of works. In this scenario, Section 1202(b) would not apply with respect to the particular CMI addressed by the standard in the event a third party fails to follow that standard.

C. Cases

There has only been one significant case examining Section 1202, in which the Court found in favor of the defendant on narrow facts. The plaintiff has appealed the case to the Ninth Circuit, but the appeal bears only on a copyright infringement claim outside the purview of the DMCA.

Kelly v. Arriba Soft Corp., 77 F. Supp. 2d 1116 (C.D. Ca. 1999) Arriba (nowDitto.com, Inc.) has a “visual” search engine. Unlike traditional search engines that index descriptive text, Arriba’s search engine indexes (via an automated web crawler) thumbnail pictures of images on the Internet. Id.at 1117. Kelly, a photographer, filed suit claiming, among other things, that Arriba’s use of Kelly’s images in its search service violated Section 1202(b) because Arriba removed CMI. Kelly’s CMI was located in text surrounding the original images, and therefore when Arriba’s web crawler indexed the images, which it did by retrieving the image itself (and not any other content of the page on which the image is posted), it did not retrieve the CMI. Id. at 1122.

The Court first dismissed the application of Section 1202(b)(1) (prohibition on intentionally removing or altering CMI) stating that such provision applies only to the removal of CMI on a product or original work, unlike here, where the CMI was located adjacent to the work. Id. at 1122. In the alternative, the Court stated that Arriba’s acts were not intentional, since the separation of the CMI from the image was “merely an unintended side effect of the [web crawler’s] operation.” Id. at 1122. (Query whether a notification by the copyright owner of the side effect would trigger “intention” regarding future use of the image and, thus, require removal of the image or addition of the CMI to avoid liability.) Rather, the Court determined that, as to the DMCA, Section 1202(b)(3) was the only provision at issue. Id. at 1122. One might question why the same analysis the Court used as to Section 1202(b)(1) did not apply here, as well, but the Court does not explain why CMI must be located on a work for removal to be a violation under (b)(1) but not for removal to be a violation under (b)(3).See id. at 1122. Nonetheless, the Court found that Arriba did not have “reasonable grounds to know” it would facilitate infringement through its actions (noting in particular that there was no evidence of actual infringement that was brought to Arriba’s attention), and therefore could not be liable for a violation of Section 1202(b)(3) (note that this finding would also negate liability under Section 1202(b)(1)). Id. at 1122.

TITLE II – THE ONLINE COPYRIGHT INFRINGEMENT LIABILITY LIMITATION ACT

I. INTRODUCTION

Liability for online copyright infringement implicates a complex blend of legal and technical factors. Prior to enactment of the DMCA, the courts were forced to wrestle with application of traditional concepts of direct infringement, vicarious liability and contributory infringement in situations where the online service provider (“OSP”) played varying roles in publishing the offending materials.

Under the Copyright Act, but before enactment of the DMCA, the outcomes in cases of this sort were inconsistent, and there was widespread concern, on the part of OSPs, that they could be faced with expensive lawsuits and subject to liabilities under circumstances where they were not aware that they were transmitting, hosting or linking to infringing materials.

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    • Pre-DMCA Cases finding liability on the part of the OSP: Playboy Enterprises, Inc. v. Frena, 839 F. Supp. 1552 (M. D. Fla. 1993)(operator of bulletin board service liable for materials provided by customer despite lack of knowledge, in effect imposing strict liability on service); Sega Enterprises Ltd v. MAPHIA, 857 F.Supp. 679 (N.D. Cal. 1994)(bulletin board operate liable where it had solicited clients to upload copyrighted works to its system).
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    • Pre-DMCA Cases finding non-liability on the part of the OSP:Religious Technology Center v. Netcom On-Line Communication Services, Inc., 907 F. Supp. 1361 (N. D. Cal. 1995)(internet services provider who transmitted infringing material not strictly liable where ISP’s system used only to create a copy submitted by a third party, and ISP could not verify claim of infringement by plaintiff, even though infringing material kept on ISP’s system for several days); Marobie-FL, Inc. v. Nat. Assn. of Fire Equip. Distributors, 983 F. Supp. 1167 (N. D. Ill. 1997)(ISP who immediately transmitted data over Internet but did not maintain a copy, had made a copy, for purposes of copyright infringement determination, but court refused to impose liability for direct, contributory or vicarious liability, followingNetcom).

Recognizing that the issues of OSP liability under principles of contributory infringement and vicarious liability needed to be resolved in order to encourage the growth of the Internet, the DMCA created a new Section 512 to the Copyright Act which created a complex series of rules which would provide service providers with an exemption from liability.

II. TITLE II OF THE DMCA – THE ONLINE COPYRIGHT INFRINGEMENT LIABILITY LIMITATION ACT

Having considered the issues presented and approaches taken in thePlayboy, Netcom, Sega and Marobie-FL cases, Section 512 was designed to give service providers greater certainty by creating a safe harbor from liability for copyright infringement, while creating incentives for copyright owners and service providers to cooperate to discover and address copyright infringements that take place in digital networked environments such as the Internet.

Section 512 establishes four separate limitations on liability, addressing different types of functions: (i) transitory digital network communications, (ii) system caching, (iii) linking, and (iv) storage. Each of those four exemptions is summarized and discussed below. Because Section 512 is more than 4,000 words long and is highly complex, this summary does not delve into every detail of the law. Practitioners should consult the statute itself before advising clients on these issues.

A. Exemption 1 – Transitory Digital Network Communications

The first exemption, set forth in Section 512(a), addresses “Transitory Digital Network Communications.” In summary, Section 512(a) provides that a “service provider” is not liable for monetary relief for infringement of copyright if it transmits, routes or provides connections for infringing material (collectively “transmit”, “transmitting” or “transmission”), or if it provides “intermediate” or “transient” storage for the material, so long as certain conditions are met. This exemption is intended to cover service providers that process e-mail and entities that own routers or servers that transmit information on the Internet.

Section 512(a) sets the following conditions on this exemption:

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    • Another Poster. Another person (often called a “poster”) initiated the transmission;
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    • Automatic Process. The transmission is performed by a technically automatic process;
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    • Selection. The provider does not select the recipients of the material;
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    • Availability. The infringing material is not maintained on the network in a manner that would make it available to anyone other than the intended recipients, and it is not maintained any longer than is reasonably necessary to transmit the material to those recipients; and
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    • Modification. The content of the material is transmitted in unmodified fashion.

Thus, in essence, Section 512(a) permits a service provider to transmit material through its system, and permits intermediate or transient storage of the material, so long as the material originates with another, the material is transmitted automatically, the provider does not select the recipients, the material is not provided to anyone other than the intended recipients, the material is kept on the provider’s system no longer than necessary, and the content is not modified by the provider.

Clearly, this exemption is very broad, and it covers the vast majority of information transmitted by Internet service providers who provide “conduit-only” functions. Legislative history suggests that it covers “pull” as well as “push.” In other words, it protects service providers who respond to a request (a pull) by users (“requesters”) as well as materials sent (pushed) by posters. It permits copies to be made on a router or mail server, to the extent such copying is “reasonably necessary.” While the “content” may not be modified, there is no prohibition on modification of the format of the material.

Ambiguities in Implementation. There are some significant ambiguities created by this section of the law. A service provider is protected under the law only if it:

(A) has adopted, implemented and informed subscribers of a policy that provides for termination of repeat infringers. Section 512(i)(1)(A), and

(B) “accommodates and does not interfere with standard technical measures.” Section 512(i)(1)(B). (Emphasis added).

What is meant by “standard technical measures”? The law provides that these are technical measures used by copyright owners to identify or protect copyrighted works, and that these measures have been developed pursuant to a “broad consensus of copyright owners and service providers in an open, fair, multi-industry standards process.” Section 512(i)(2)(A). Additionally, these technical measures must be available to any person on “reasonable and nondiscriminatory terms,” and must not “impose substantial costs on service providers or substantial burdens on their systems or networks.” Section 512(i)(2)(B) and (C).

The law does not address a situation in which the “broad consensus” does not evolve, as is the case to date. According to the terms of the law, there is a reasonable argument that that service providers need not engage in monitoring for infringing conduct until standard technical measures are developed. However, a decision in the Napster case, discussed in detail below, suggests that implementation of a copyright compliance policy pursuant to Section 512(i)(1)(A) may be necessary for protection under 512(a), even in the absence of standard technical measures.

Definition of a “Service Provider” for Purposes of Section 512(a). Who qualifies for protection under this exemption? Section 512(k)(1) provides one definition of a “service provider” for the functions protected under Section 512(a), and another definition for the remaining functions protected under Section 512.

The definition for purposes of Section 512(a) defines a “service provider” to mean:

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

Definition of a “Service Provider” for Purposes of Section 512(b) and the Remaining Exemptions. The definition of a service provider under the remaining three exemptions (discussed below) is broader than is applicable to entities seeking the exemption under Section 512(a). Under the other exemptions, the definitions of a service provider includes the entities described in Section 512(a), but goes further to include “a provider of online services or network access, or the operator of facilities therefore . . ..” Section 512(k)(1)(B).

B. Exemption 2 – System Caching

Section 512(b) provides a complex set of rules that limit copyright infringement liability “by reason of the intermediate and temporary storage of material on a system or network controlled or operated by or for the service provider . . ..”

Under this section, unlike Section 512(a), the “intermediate and temporary storage” is not limited in time to a period reasonably necessary to forward or transmit it. This part of Section 512 permits “caching,” or storage to reduce network congestion or increase network performance.

Conditions. Once again, there are a series of complex conditions that a service provider must comply with to take advantage of this exemption. As was the case in Section 512(a), the material must be made available by a poster; storage must be carried out through an “automatic technical process”; and the content cannot be modified.

However, Section 512(b) imposes additional conditions.

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    • Refreshing/Reloading. The service provider must permit refreshing and reloading, within limits, and “in accordance with a generally accepted industry standard data communications protocol for the system or network.” Section 512(b)(2)(B).
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    • Returning Information Back to the Poster. The service provider may not, subject to certain sub-conditions, interfere with a process that would have provided information to the poster, had the material not been cached (for example, user hit counts). Section 512(b)(2)(C). Once again, one of the sub-conditions is that the caching or intermediate storage be “consistent with generally accepted industry standard communications protocols.” Section 512(b)(2)(C)(i).
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    • Removal. Lastly, should infringing material be posted, upon notice the service provider must, subject to certain conditions, “respond[] expeditiously to remove or disable access” to the material claimed to be infringing, if the notification complies with Section 512 (c)(3) of the statute (discussed below).
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    C. Exemption 3 – Information Residing On Systems Or Networks At Direction Of Users

Section 512(c) creates an exemption for service providers “by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider . . ..”

Thus, this section would protect a service provider providing service space for a web site or chat room.

Conditions. A service provider must satisfy three conditions to take advantage of the exemption provided by Section 512(c).

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    • Knowledge. First, the provider must lack knowledge that it is hosting infringing material. The provider must lack “actual knowledge” that the material is infringing, it must not be aware of “facts and circumstances from which infringing activity is apparent” (know as the “red flag” test), and finally, once the red flag is waived, it must “act[] expeditiously to remove, or disable access to, the material.” Section 512(c)(1)(A)(i) – (iii). Note the ambiguity involved in a “red flag” test – copyright owners need not provide notification (discussed below) to prevail under this section if they can establish that the provider ignored the “red flag.”
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    • Financial Benefit. Second, the provider cannot receive a “financial benefit directly attributable to the infringing activity” where the provider “has the right and ability to control such activity.” The legislative history suggests that set-up fees, monthly service charges, charges for connect time and the like should not be deemed “directly attributable” to infringing activity under this section. Section 512(c)(1)(B)
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    • Notice and Take-Down. Third, upon “notification” of claimed infringement, the provider must “respond[] expeditiously” to remove or disable access to the material. Section 512(c)(1)(C). This concept is often referred to as a “notice and take-down” procedure. The details of the notification provisions of the law are discussed below.

Notification and the Service Provider’s “Designated Agent”

As discussed above, the concept of notification, or “notice and take-down,” are critical to Section 512. The statute provides a detailed procedure for such notification and requires a service provider seeking protection under the law to appoint a designated agent for purposes of notice and register the agent with the U.S. Copyright Office.

Notification

To be effective, notification must be written and contain the following:

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    • Signature. The notification must be signed (either physically or electronically) by “a person authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.” 512(c)(3)(A)(i).
    • Identification of Material. The copyrighted work claimed to have been infringed must be identified, and the complaining party must identify the material claimed to be infringing and provide the service provider with information reasonably sufficient for the provider to locate the material (e.g., the web site address). 512(c)(3)(A)(ii-iii).
    • Contact Information. The complaining party must provide the service provider with information such as its address, telephone number and e-mail address. 512(c)(3)(A)(iv).
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    • Good Faith. The complaining party must state its 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.” 512(c)(3)(A)(v).
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    • Authorization. The notification must state, under penalties of perjury, that the complaining party is authorized to act on behalf the owner. 512(c)(3)(A)(i).

Although these elements are a required part of the notification, the statute does not require perfection, except with respect to the requirement that notification be in writing. “Substantial compliance” with the other requirements is adequate. The statute describes the criteria for partial notification in detail. 512(c)(3)(B)(i-ii).

Designate Agent

In order to rely on Section 512, a service provider must designate an agent to receive notification under the law. The provider must publicize its agents’ identity in two ways:

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    • Second, the service provider must provide the same information directly to the public, “through its service, including on its website in a location accessible to the public.” 512(c)(2).

A copy of a model form of agent designation is attached as Appendix 2.

D. Exemption 4 – Information Location Tools

“Information location tools,” more commonly known as “search engines,” are protected from copyright claims based on the fact that they may provide links to sites that, unbeknownst to them, contain infringing material. The exemption is for “infringement of copyright by reason of the provider referring or linking users to an on-line location containing infringing material or infringing activity, by using information location tools, including a directory, index, reference, pointer, or hypertext link.” 512(c)(2).

Conditions. This exemption is subject to conditions similar to the “information residing” exemption, discussed directly above.

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    • Lack of Knowledge. The service provider must lack “actual knowledge” of infringing material, and may not turn a blind eye to “red flags” of obvious infringement. This standard raises difficult (and as yet unresolved) questions where a search engine’s employees manually catalogue web sites. Section 512(d)(1)(A) and (B).
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    • Financial Benefit. The service provider loses the exemption if it “receives a financial benefit directly attributable to the infringing activity,” in instances where the provider has the “right and ability to control such activity.” Section 512(d)(2).

 

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    • Notice and Take-Down. The notice and take down issues are the same as for other sections, except that here the complaining party must identify the reference or link. Section 512(d)(3)

A & M Records v. Napster. In the only case to apply Section 512 to date, a federal judge refused to provide protection under the DMCA to the defendant, Napster, Inc., which is a peer-to-peer music file sharing service. A & M Records, Inc. v. Napster, Inc., 114 F. Supp. 2d 896 (N. D. Cal. 2000). The court rejected Napster’s claim that it was protected as an “information location tool” under Section 512(d), finding that Napster had “[a]ctual knowledge that the material or activity is infringing,” and that it “is aware of facts or circumstances from which infringing activity is apparent.” Id. at 919 n. 25, quoting Section 512(d)(1)(A) and 512(d)(1)(B). Rejecting Napster’s DMCA defenses, as well as a variety of other defenses, the court issued a preliminary injunction against Napster. The injunction was stayed pending appeal to the Court of Appeals for the 9th Circuit.

While the court provided only a brief discussion of issues under Section 512 in the decision discussed above, it engaged in a much more detailed discussion of the application of Section 512 to Napster in an earlier decision, A & M Records, Inc. v. Napster, Inc., 2000 WL 573136 (N.D. Cal. May 12, 2000). In that decision, which denied Napster’s motion for summary judgment under the DMCA, the court evaluated arguments based on both Sections 512(a) and (d). The court held that Section 512(a) was inapplicable to Napster because the MP3 files utilized by Napster went directly through the Internet from the host user to the requesting user without passing through the Napster servers. Accordingly, Napster does not “transmit[], rout[e], or provide[] connections” through its system or network. Section 512(a). Id. at *6. Because Section 512(a) was meant to apply only to service providers that played the role of “conduits” for the communications of others (id. at *8), Section 512(a) did not apply to Napster. Moreover, as discussed above, the court found that Napster had not complied with the DMCA’s copyright compliance policy with respect to repeat infringers.

MISCELLANEOUS ISSUES

Nonprofit Schools. Special rules apply when the service provider is a public or nonprofit institution of higher education. The statute describes situations in which the school does not receive the exemptions available to other service providers, when the conduct complained of is engaged in by faculty members and graduate students. See Section 512(e).

Effect of the DCMA on Pre-Existing Defenses to Copyright Infringement. The DMCA exemptions contained in Section 512 add to defenses that exist under the 1976 Copyright Act – they do not replace them. Section 512(l). Thus, the pro-provider approach adopted by the Netcom case, supra, remains good law following enactment of the DMCA.