The Digital Millennium Copyright Act: A Retrospective After Three Years

The Internet poses fundamental challenges to traditional copyright law due to the way it works. The standard operation of the Internet potentially creates broad liability under copyright law both for a company's own acts and for acts by unrelated third parties. The Internet was originally designed as a decentralized network for use by military and academics; engineering efficiency rather than potential legal issues were the focus of its designers. As the Internet has become a mass medium, the legal issues have become of critical importance. The Digital Millennium Copyright Act ("DMCA") was enacted to strike a balance between content owners and users in this new medium. This article will review the results of three of the most important cases under the DMCA.

To understand the scope of the problem, a brief review of copyright law is useful. Copyright law imposes "absolute liability" for violation of the five traditional copyright rights: reproduction, distribution, modification, public performance and public display. Such liability is described as "absolute" because the copyright owner can receive both injunctive relief (a court order to stop the infringement) and monetary damages whether or not the person violating such rights did so intentionally or by accident. For example, if a company uses Madonna's recording of "Material Girl" as background music for its product demonstration at a trade show, the company has violated the public performance right (as well as probably the reproduction right) in the song, whether or not it intended to do so.

Copyright law also imposes liability for actions of third parties in certain circumstances; this liability consists of two different types: vicarious or contributory infringement. "Vicarious infringement" liability is imposed when someone has infringed the copyright owner's rights and the party being sued ("Defendant") has a relationship with the actual infringer which makes it unfair not to impose liability on the Defendant. Typically, the Defendant must have the "right and ability to supervise" the infringer and an "obvious and direct financial interest" in the infringement. The most common type of vicarious liability is a nightclub owner who benefits financially by selling more tickets when a band performs music in his nightclub. If the band fails to obtain a "public performance" license for its songs, the band is liable for "direct" infringement of the public performance right of the musical composition. But is the nightclub owner liable? Even though the nightclub owner does not play the songs or control which songs are played, he is a "vicarious infringer" because he benefits financially through increased attendance at his nightclub and he has the ability to control the band. "Contributory infringement" liability is imposed when the defendant knowingly induces, causes or materially contributes to the infringing conduct. Examples of "contributory infringement" tend to be less common than vicarious infringement: one example was a bulletin board operator who encouraged members to "upload" pirated versions of videogames for "credit" to download other videogames.1

The Internet can potentially impose all three types of liability on the numerous intermediary parties (such as Internet service providers, web hosting companies and website operators) because of its method of operation. For example, a message posted to a Usenet group is "copied" by the thousands of servers owned by different parties who participate in distributing such messages. If a Usenet message includes copyrightable material without the permission of the copyright owner, the owner of each server might be liable for direct copyright infringement by permitting a copy of the message to be copied on its server. Some of these parties might also be liable for vicarious and contributory infringement. These issues were raised in the Religious Technology Center v. Netcom case.2

The Church of Scientology through its Religious Technology Center sued three parties: an individual who posted a copy of one of their internal documents to a Usenet group (Ehrlich), the bulletin board operator who accepted the posting (Klemesrud) and the Internet service provider which provided the bulletin board operator access to the Internet (Netcom). The judge refused to find Klemesrud or Netcom liable for direct and vicarious infringement but left open the possibility of liability for contributory liability. The case against the intermediaries (Klemesrud and Netcom) later settled. Ehrlich was found liable for direct infringement.

The legal status of several other common Internet practices under copyright law is uncertain: many parties "cache" whole websites to make access to commonly used websites more rapid and many websites link to other websites. The DMCA was enacted in part to provide limited "safe harbors" for these problems.

I. Digital Millennium Copyright Act ("DMCA")

1. Overview. The DMCA was signed into law on October 28, 1998. The DMCA is the most important copyright legislation since the accession of the United States to the Berne Convention in 1988. The DMCA implements the terms of two World Intellectual Property Organization ("WIPO") treaties (The WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty, both signed in Geneva in December of 1996) and establishes certain safe harbors for common Internet activities.3 It has both immediate and long term effects: it provides immediate relief from monetary liability for certain common Internet activities through "safe harbor" provisions and establishes a legal framework for automated distribution of digital works in the future through its "black box" and copyright management information provisions. The provisions of the DMCA will be important to any company which does business on the Internet or provides products in digital form.

2. Internet Safe Harbors.

   2.1 Summary of Safe Harbors. The section of the DMCA of broadest interest is new Section 512 (section references refer to Title 17 of the U.S. Code) which provides for a number of limitations on liability for certain categories of online service provider ("SP") activity. These "safe harbors" provide strong incentives for SPs to assist copyright owners in detecting and dealing with copyright infringements that take place in the digital networked environment. They also provide greater certainty to SPs concerning their legal exposure for monetary damages due to infringement by third parties that may occur in the course of an SP's activities.

   Unfortunately, the scope of many of these safe harbors is far from clear. The exemptions from liability that the DMCA creates are additional to any defense that an SP might have under copyright law or any other law. However, even if its activity does not come within the bounds of a safe harbor, an SP is not necessarily an infringer and can raise other traditional defenses such as fair use. Congress also noted that the existence of a safe harbor is not meant to suggest that the activity is an infringement.

   2.2 Effect of Safe Harbors. If an SP's activity qualifies for any of the safe harbors in the DMCA, then it is not liable for any monetary relief for claims of direct, vicarious or contributory copyright infringement based on that activity. Monetary relief includes damages, court costs, attorney's fees, and any other form of monetary payment. These concerns about potential monetary liability for actions of third parties has been a core concern of Internet service providers and telecommunication providers. The DMCA permits limited injunctions against such activity instead of such monetary liability.

3. Safe Harbors: Summary. The conditions of these safe harbors are very complicated and the following is a brief summary of the nature of the safe harbor which are discussed in more detail below:

   3.1 Conduit Functions. This safe harbor applies to an SP providing transmitting, routing or connections through a network (and intermediate and transient storage) of materials.4 The conditions are that the transmission was initiated by a third party, the functions were carried out automatically (without selection by the SP), a copy is maintained only so long as is reasonably necessary to perform these functions and the material is unchanged.

   3.2 System Caching. This safe harbor applies to an SP who provides temporary or intermediate storage of materials on a network.5 The conditions are that the material be posted by a third party, that the process of storage and providing access to the stored material be automatic (without selection by the SP), the material must be unchanged, the material must be updated if required by the originating site (and if the technology meets certain standards), limited access to the material based on meeting certain conditions (such as payment or password) must be maintained and the "caching" must not interfere with providing information to the originating site (such as hits) if the technology for reporting such information meets certain criteria. The SP must also remove this material or disable access to it under certain circumstances if the originating site does not have the right to make the material available.

   3.3 User Storage. This safe harbor applies to a SP which provides storage on its system for material at the request of a user.6 The conditions are that the SP must not have actual knowledge or reason to know that the material is infringing, does not receive a direct financial benefit from the infringing material residing on its system and promptly removes or disables access to the infringing material upon proper notice of potential infringement. The SP must have a designated agent on its website (and provide the name of the agent to the Copyright Office) to receive these notices. The safe harbor has detailed descriptions of the contents of the notice needed to trigger the "take down"...