NET COPYRIGHT: LIMITING LIABILITY OF ONLINE SERVICE PROVIDERS
By Edward Samuels

17 NO. 2 Cable TV & New Media L. & Fin. 1
April, 1999

Copyright 1999 Leader Publications, a division of The New York Law Publishing Company; Edward Samuels

       Last month's article reviewed the history of the Digital Millennium Copyright Act (DMCA), Title I, which extends legal protection to technological systems for protecting copyrighted digital works and embedded copyright management information. This article reviews Title II of the DMCA, the "Online Copyright Infringement Liability Limitation Act"; Title III, the "Computer Maintenance Competition Assurance Act"; Title IV, "Miscellaneous Provisions"; and Title V, the "Vessel Hull Design Protection Act." A concluding section briefly reviews other recent copyright amendments, the "Sonny Bono Copyright Term Extension Act" and the dubiously titled "Fairness in Music Licensing Act."

Limitation of Liability for Online Service Providers

       One of the hottest issues for the Internet is the potential liability of online service providers for the infringing activities of their customers. A handful of early cases, though very much flavored by their specific facts, found that bulletin board operators and Internet service providers could be found liable for copyright infringement for the uploading and downloading of infringing works on their systems. In some cases, it was clear that the operators and service providers were encouraging and even economically benefiting from such activity; but in other cases, operators and service providers were held liable even though they had no knowledge of the specific infringing activities. Needless to say, Internet service providers became concerned about their potential liability for infringements on the Internet, and took their case to Congress.

       The Working Group had earlier recommended against any specific exceptions for online service providers. With hindsight, that position, as much as anything else, led to Congressional reluctance to pass the White Paper proposals as submitted.

       As finally passed, the DMCA specifically protects online service providers in several carefully described circumstances. The provisions don't grant the blanket exemption the service providers sought; instead, they represent a compromise. For example, if a customer posts information so that it "resides on a system or network" run by the service provider, without the service provider's knowledge that the information is infringing, then the service provider is generally not liable. However, if the service provider is notified of a claimed infringement, the provider must generally respond "expeditiously to remove, or disable access to, the material that is claimed to be infringing." (The DMCA requires that service providers, in order to qualify for protection, must file with the Copyright Office a designation of the agent authorized to receive such notices.) Furthermore, a copyright owner may obtain a subpoena from an appropriate court requiring a service provider to reveal the identity of any of its subscribers accused of violating the copyright. Such procedures ought to allow the copyright owner to proceed against the proper party, and deter customers from relying too much on their presumed anonymity on the Internet. The service provider must also adopt and reasonably implement a policy of terminating the accounts of subscribers who are repeat infringers.

       There are special rules adapting the above principles to nonprofit educational institutions that maintain online services. In particular, an educational institution is not liable for the potentially infringing postings of its faculty members and graduate students in postings that are part of their teaching or research activities. In order to assure their exemption, however, educational institutions must meet several stringent conditions, such as registering an agent to receive notices of infringement; denying posting privileges to faculty members who are the subject of repeat notices of infringement; prohibiting online access to course materials required in the previous three years (!); and providing "to all users of its system or network informational materials that accurately describe, and promote compliance with, the laws of the United States relating to copyright."

       Service providers are not liable for "transitory digital network communications" that they simply forward "through an automatic technical process without selection of the material by the service provider" from a customer to its intended destination. (Service providers thus aren't generally liable for forwarding infringing e-mail.) They are also not liable for providing hyperlinks, online directories, search engines, or other information location tools that connect customers to information, on condition that the service providers not know of the infringing nature of the material, not receive a financial benefit from the link, and take down or block access to the material upon receiving notice of a claimed infringement.

The System Cache

       Another exception protects the process know as "system caching." Most computers have their own built in "caches"; that is, the computer programs, such as Web browsers, automatically store copies in RAM of recently accessed images and materials, so that if the customer wants to go back to a site that's already been accessed, the images and information can be reloaded virtually instantaneously. System providers use similar caching systems. When a customer clicks on a Web page, effectively requesting the service provider to connect the customer to a specific address, the service provider usually connects directly to that location. However, for many sites that are frequently accessed by lots of customers, it is faster for the service provider to set up a "cache"--a copy of the requested site--so that the cached information can be accessed more quickly.

       The service providers argue that such system caches speed their services, and actually reduce congestion on the Internet by allowing many requests for information to be satisfied using the system provider's cache instead of going back repeatedly to the Internet. Some copyright owners have objected that such caching systems constitute copyright infringement, since they result in the making of copies that the copyright owner does not control. Congress, however, agreed with the service providers that system caching should be allowed, by creating an exception to specifically exempt such systems. However, there are circumstances in which system caching might in fact cause problems. For example, if a Website constantly updates material, requests for information that are satisfied by routing the request to a previously stored system cache might fail to update the information as frequently as is necessary, and result in the customer's receiving dated information. Or if a Website makes money by charging advertisers for the number of "hits" to the site, the use of system caching might result in an undercount in the number of hits, if "hits" to the cache are not detected. Therefore, there are elaborate provisions in the DMCA requiring that the system providers comply with "rules concerning the refreshing, reloading, or other updating of the material when specified by the person making the material available online in accordance with a generally accepted industry standard data communications protocol for the system or network."

Miscellaneous Provisions

       Title III of the DMCA provides a special exception for the copying of programs in the course of computer maintenance or repair, but only if the computer already contains an authorized copy of the program. (The amendment responds to at least one case that had held a service company liable for copyright infringement for "reproducing" a copyrighted computer program in the course of repairing the computer.)

       Title V for the first time extends federal protection to the design of certain boat hulls (original designs for boats up to 200 feet in length). The new protection fills a void left by the Supreme Court's holding in Bonito Boats, Inc. v. Thunder Craft Boats, Inc. (1989) that state laws protecting such boat designs were preempted by the federal patent laws. The new protection lasts for only ten years, and is subject to legislative sunset in two years unless Congress chooses to extend the protection.

       Miscellaneous provisions in Title IV expand the exception for certain ephemeral recordings made in the course of authorized transmissions by broadcasters; expand the exemption for nonprofit libraries and archives to make limited copies of works, particularly allowing digital copies, or copies of works in new formats if the original format becomes obsolete; and expand the scope of "nonsubscription transmissions" that qualify for the compulsory license set up by the Digital Performance Right in Sound Recordings Act of 1995. This last section amends the elaborate provisions of section 114 of the copyright act after only four years of operation, because it was unclear whether "webcasting" of music using audio streaming technology qualified for the compulsory license provided for "noninteractive subscription" services. The short shelf life of this 1995 law proves just how difficult it is to legislate clear rules in the fast-changing world of the Internet.

       Anticipating this fast-changing environment, the DMCA has numerous provisions for further studies and rulemaking by the Librarian of Congress, the Register of Copyrights, and the Assistant Secretary of Commerce for Communications and Information. Of particular interest is a scheduled report by the Copyright Office making recommendations to Congress about the promotion of distance education through digital technologies.

Other Recent Copyright Amendments

       I have avoided the temptation to comment about the complexity of many of these provisions, or to point out that many of my summaries are necessarily superficial explanations of complicated statutory provisions that go on for page after page of text. I don't know how law professors are going to cover this new material. But something of the beauty of copyright has been lost in this attempt to bring the law into the digital age.

       I therefore choose to conclude with two other amendments that were just as controversial as the DMCA, but are at least relatively easy to understand. In the Sonny Bono Term Extension Act, Congress expanded the duration of copyright, from the life of the author plus fifty years, to the life of the author plus seventy years (or from a total of 75 years for existing copyrights and certain categories of works, to a total of 95 years). Critics and cynics have suggested that the amendment was a money grab by large corporations and the nonproductive heirs of deceased authors. But the legislation was arguably warranted by the United States' interest in bringing our laws into conformity with the laws of most other industrialized countries, and thus gaining for American authors reciprocal rights that they might not otherwise enjoy in those other countries.

       At least certain authors had to pay a price for the extension of their copyrights. A coalition of various interest groups managed to hold copyright term extension hostage to the "Fairness In Music Licensing Act." That Act limits the licensing powers of ASCAP, BMI, and other music licensing organizations in several ways. Most importantly, it creates an exemption for restaurants and certain small businesses that previously had to pay the licensing organizations for the privilege of playing the radio on their premises. The immediate effect of the amendments is that the licensing rights organizations will see their expenses increase and their revenues decrease. In theory, the music owners' decrease in revenue per year will be offset by the longer period they now have to receive those revenues.

       I'm hard pressed to think of a single other example in the two-hundred year history of copyright in which already established rights have been taken away from copyright owners, or significantly diminished. This development reminds us is that copyright is ultimately not a natural right at all, but a right governed entirely by Congress, responding ultimately to the give and take of the legislative process.

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