I. Introduction

The Internet has given people the power to transmit and reproduce vast amounts of information, including copyrighted works, such as books, [p32] articles, music, graphics, and even streaming digital video. The automatic reproduction processes of networked computers, along with the fact that any computer in the world can easily and inexpensively access such works through the Internet, has led to copyright infringement on a more widespread scale than anyone could have anticipated even five years ago.

Internet Service Providers [1] (ISPs) often give their subscribers the means to make documents available to the public. For example, an ISP may give its subscribers the right to upload web pages to the ISPs publicly accessible servers, in addition to providing email accounts and Internet access. These web pages may then be accessed and automatically copied by computers belonging to any other individual with access to the Internet. Problems arise when subscribers abuse this privilege and post material that violates copyright law.

ISPs themselves arguably infringe copyright owners’ exclusive rights of reproduction and distribution every time one of their subscribers uploads or downloads a copyrighted work without permission. Transmitting information over the Internet requires the passive reproduction and distribution of material over computers. For example, when an ISPs subscriber uploads material to web pages, the ISPs computer makes and stores a copy of the uploaded material. After that, each time anyone accesses the subscriber’s web page, the ISPs server makes a copy and sends the copy to the person viewing the web page. Similarly, if a subscriber downloads information from the Internet, the ISP has made a copy of the material in sending it to the subscriber.

If the ISP were liable for copyright infringement in connection with these passive activities, copyright holders would likely be more inclined to sue the ISP than the person directly responsible for the infringement. There are a few reasons for this. First, it is much easier to locate an ISP for service of process. Many ISPs are corporate entities with easily identifiable places of business, whereas copyright infringers may be individuals who are difficult to find. Second, infringers are likely to lack the financial resources to pay a substantial liability judgment, whereas ISPs have deeper pockets.

In an effort to limit the potential liability for ISPs while avoiding a deterioration in online copyright protection, Congress passed the Digital Millennium Copyright Act (DMCA) in 1998. [2] This article focuses on Title II of the DMCA, the “Online Copyright Infringement Liability Limitation [p33] Act.” Before Title II was enacted, an ISP might have been required to aggressively monitor its servers for copyright infringements to avoid the threat of copyright liability. This type of monitoring would have had severe drawbacks. Systematic policing of content threatened subscriber privacy and freedom from online censorship. Additionally, an ISP often stores so much information on its servers that reviewing this information regularly would be problematic and costly. Even if the ISP were able to review the data regularly, it would often be difficult, if not impossible, to identify infringing material. As a result, the ISP may have either failed to remove infringing material or removed material that appeared to be infringing but was not.

The DMCA establishes “safe harbors” from liability for those ISPs that comply with elaborate procedures, but does not otherwise change ISP liability under common law. As discussed in greater detail in Section IV.C., these procedures vary according to the type of service offered by the ISP. For example, if an ISP is simply acting as a “passive conduit,” protection from liability is almost automatic. On the other hand, if an ISP provides some type of storage, such as web hosting, hyperlinking or caching, the ISP must comply with a “notice and take-down” procedure.

This article will explain the confusing legal environment before the DMCA was enacted and Congress’ reasons for passing the legislation. It will then discuss the DMCA’s tumultuous legislative history and Congress’ attempt to balance the interests of copyright owners and ISPs. It will conclude with a discussion about whether this legislation was necessary and the cases which have thus far interpreted Title II.

II. Theories of Liability Applicable to ISPs Under Pre-DMCA Case Law

Before the DMCA was enacted, relatively few cases addressed the issue of ISP copyright infringement liability. There are three theories under which ISPs are potentially liable for their subscribers’ copyright infringement: direct, vicarious or contributory infringement. Pre-DMCA cases addressing each type of liability are discussed below.

A. Pre-DMCA Cases Considering Direct Copyright Infringement by ISPs

A finding of direct copyright infringement is based on two factors: 1) the plaintiff’s ownership of a valid copyright and 2) a defendant’s violation of one of the plaintiff’s exclusive rights. The 1976 Copyright Act [p34] imposes strict liability for direct copyright infringement, but knowledge is relevant to an award of statutory damages. [3]

In 1993, a Florida court issued the first reported decision addressing copyright infringement online. [4] Playboy Enterprises v. Frena involved a service, called a Bulletin Board System (BBS), [5] which was very popular before the creation of the World Wide Web. Fee-paying subscribers could upload and download photographs on the BBS. Playboy owned exclusive copyrights for many of these photographs, and Playboy sued the BBS operator for direct copyright infringement. The court found the BBS operator liable for direct copyright infringement because “[it] supplied a product containing unauthorized copies of a copyrighted work. It does not matter that [defendant] claims it did not make the infringing copies itself.” [6] The court, citing the Copyright Act’s strict liability standard, rejected the BBS operator’s argument that it was unaware of the infringement. [7]

A couple of years later, a California federal court reached a different conclusion in Religious Technology Center v. Netcom On-Line Communications Services, Inc. [8] The plaintiffs owned copyrights in the writings of the founder of the Church of Scientology, L. Ron Hubbard. A former member of the Church, Erlich, posted messages to a BBS that contained excerpts of the copyrighted works. Erlich had contracted with the BBS operator for the right to post messages on the BBS. The BBS operator in turn had obtained Internet access from an ISP, Netcom. Thus, Netcom had an attenuated connection to Erlich, the actual infringer.

When Erlich transmitted a message to the BBS operator, the operator’s computer temporarily stored the message. In addition, through Netcom’s software, Erlich’s message was automatically copied onto Netcom’s computer. His message was then stored for three days on the BBS operator’s computer and for eleven days on Netcom’s computer so that others could access it. [9]

[p35] Plaintiffs sued the operator of the BBS and Netcom on grounds of direct liability. [10] The court rejected the notion that either the BBS operator or Netcom was directly liable for Erlich’s infringement. [11] The court reasoned that holding as such would result in many separate acts of infringement by others: “It does not make sense to adopt a rule that could easily lead to the liability of countless parties whose role in the infringement is nothing more than setting up and operating a system that is necessary for the functioning of the Internet.” [12] Despite the strict liability standard in the Copyright Act, the court read into it an exception for purely passive acts by third parties and noted that some element of volition or causation should be required. [13]

The following year, that same court, relying on its earlier decision in Netcom, again refused to find a BBS operator liable for direct infringement. [14] In Sega Enterprises Ltd. v. MAPHIA (“Sega II”), the court stressed that the BBS operator did not upload or download the infringing files himself and thus did not directly cause the copying. [15] Interestingly, at an earlier stage of the same proceeding, the court had determined that Sega, an owner of copyrighted video game programs, had established a prima facie case of direct infringement. [16] After Netcom was decided, however, the court clarified its earlier holding: “[w]hether [the BBS operator] knew his BBS users were infringing on Sega's copyright, or encouraged them to do so, has no bearing on whether [the BBS operator] directly caused the copying to occur.” [17] Since Sega had not shown that the BBS operator directly caused the copying, the BBS operator was held not liable for direct infringement. [18]

B. Pre-DMCA Cases Considering Vicarious Infringement by ISPs

Although the Copyright Act does not explicitly recognize vicarious liability, courts have imposed it when the plaintiff has proven that a third [p36] party defendant: 1) had the right and ability to control the direct infringer and 2) received a direct or indirect financial benefit from the infringement of the copyrighted work. [19] Of course, a court must first determine that direct infringement has occurred.

The Netcom court considered the issue of whether the ISP, Netcom, and the BBS operator were vicariously liable for Erlich’s direct infringement. [20] As to Netcom, the plaintiffs argued that it had the ability to supervise Erlich and had a direct financial interest in the infringement. [21] Netcom’s subscriber agreement specifically prohibited copyright infringement, gave Netcom the right to suspend subscribers who engaged in commercial advertising, posted obscenity or “off-topic” material, and required subscribers to indemnify Netcom for third party damages. [22] The court found that Netcom may have had the ability to supervise, but it did not have the requisite direct financial interest. [23] Thus, Netcom was not held vicariously liable. [24] The court did not impose vicarious liability on the BBS operator either, because there were insufficient factual allegations to support such liability. [25] Specifically, plaintiffs failed to show that the BBS operator had the right and ability to control Erlich's activities and had a direct financial interest in Erlich's infringement. [26]

Before the DMCA was enacted, only one other court had considered the issue of vicarious liability for ISPs. In Marobie-FL, Inc. v. National Association of Fire Equipment Distributors (NAFED), [27] a fire equipment association had a web page hosted by its ISP, Northwest Nexus. NAFED copied plaintiff’s copyrighted clip art onto its web page. Those who accessed NAFED’s web page could view or download the clip art. The plaintiff, Marobie, sued NAFED for direct infringement and Northwest Nexus for direct, vicarious and contributory infringement.

[p37] Unlike Netcom, Northwest Nexus had a contractual relationship with the infringer. [28] Nevertheless, the court denied Marobie’s motion for summary judgment on the vicariously liability issue, finding that the flat fee paid by NAFED to Northwest Nexus made a finding of direct financial interest impossible, notwithstanding the possible right and ability to supervise NAFED. [29]

In the aftermath of the Netcom and Marobie decisions, courts were not likely to impose vicarious liability on ISPs that received only a flat fee for Internet access and had no control over subscriber uploads and downloads. [30]

C. Pre-DMCA Cases Considering Contributory Infringement by ISPs

The Copyright Act grants copyright owners not only the right to exercise exclusive rights, but also the right to “authorize” the exercise of those rights. [31] The authorization right was “intended to avoid any question as to the liability of contributory infringers”- those who do not exercise the copyright owner’s rights themselves, but authorize others to do so. [32] Other than the reference to the “authorization” right, the Copyright Act does not mention or define “contributory infringement.” [33] Nevertheless, courts have considered whether an ISP can be liable as a contributory infringer based on its provision of the services or equipment related to the direct infringement. As discussed below, for a court to hold an ISP contributorily liable, it first must find that that the ISP knew of the infringement and substantially participated in it. [34]

Only a few pre-DMCA cases considered the possibility that an ISP could be liable for contributory infringement. Thus, before the DMCA was enacted, the law was far from settled on this issue. In Netcom, the court considered and rejected Netcom’s motion for summary judgment on a [p38] contributory infringement claim. [35] The court ruled that Netcom could be liable for contributory infringement if plaintiffs could prove that Netcom knew the infringing material resided on its system and substantially participated in contributing to the infringing conduct of the primary infringer. There were questions of fact on these issues since Erlich continued to post infringing material even after Netcom was notified of the infringement claim. In addition, the court considered whether Netcom, by offering a service which allows for automatic distribution of all postings, infringing or noninfringing, substantially assisted Erlich’s desire to publicly distribute the infringing postings by not taking action to remove them. [36] These issues were never resolved since the case subsequently settled. [37]

In Sega II, the court found the BBS operator liable for contributory infringement because 1) he knew that BBS subscribers were copying Sega’s video games [38] and 2) his operation of the BBS constituted “substantial participation” in the direct infringements. [39] In addition to providing, monitoring, and operating the BBS software, hardware, and phone lines necessary for the users to upload and download games, the BBS operator actively solicited users to upload unauthorized games. He also sold video game copiers, referred to as "Super Magic Drives," to facilitate playing the downloaded games. [40]

Another pre-DMCA case, Fonovisa, Inc. v. Cherry Auction, Inc., [41] expanded the scope of third party contributory infringement, albeit in a non-Internet context. [42] Plaintiff Fonovisa owned copyrights in music recordings. Defendant operated a swap meet and rented space to vendors selling various products. Some of these vendors sold recordings that infringed Fonovisa’s copyrights. A sheriff notified defendant of this infringement, thereby satisfying the “knowledge” prong of the [p39] contributory infringement test. As to the ‘substantial participation’ prong of the contributory infringement test, the court found that the defendants’ provision of space, utilities, parking, advertising, and customers to any and all vendors materially contributed to the direct infringement of the individual vendors. The court reasoned that “providing the site and facilities for known infringing activity is sufficient to establish contributory liability.” [43]

III. The White House Information Infrastructure Task Force Report (“White Paper”)

Against this backdrop of developing case law, copyright owners started focusing attention on ISPs. As Internet use began to flourish in the mid-90s, copyright owners argued that ISPs helped to provide the facilities (network and access) and audience (users) for direct infringers and financially benefited from the traffic and fees generated by infringing bulletin boards, newsgroups and web sites. [44] From the copyright owners’ perspective, ISPs had the ability to determine whether infringing material was being transmitted over their networks and stored on their servers. [45] The ISPs, on the other hand, argued that the volume of material transmitted over their systems was too large to monitor; that even if an ISP were willing and able to monitor material on its own system, it could not necessarily identify infringing material; [46] and that failure to protect ISPs from liability would slow down networks and impair communications, ultimately driving ISPs out of business. [47]

In 1995, in response to widespread complaints from the entertainment and computer software industry, the Clinton administration (through a working group chaired by Bruce Lehman, the Commissioner of Patents and Trademarks, and Ronald Brown, the former Secretary of Commerce) proposed legislation in a report called Intellectual Property and the National Information Infrastructure (White Paper). [48] The Working Group considered the arguments from both sides, and concluded that it was [p40] premature to enact legislation that would reduce the liability of ISPs.[49]

The Working Group recognized that “trillions of bits representing millions of messages and files travel through networks each day” and it is “virtually impossible for operators of large systems to contemporaneously review every message transmitted or file uploaded.” [50] Nevertheless, the Working Group analogized ISPs to photo finishers, book and record stores, newsstands and computer software retailers, all of whom are subject to strict liability as distributors if they sell infringing copies. [51] Further, the Working Group reasoned, online service providers can investigate and take appropriate action when notified that infringing material resides on their networks, thereby reducing liability for damages. [52] In sum, according to the White Paper, the risk of infringement liability is a legitimate cost of doing business for online service providers. [53]

If implemented, the legislation proposed in the White Paper would have made ISPs strictly liable for any copyright infringement by any subscriber. [54] To succeed in court, a copyright holder would have simply had to show that an infringing work was transmitted across the ISPs network. [55] The White Paper relied heavily upon the Sega I and Playboy decisions in reaching its conclusions. [56]

IV. The Online Copyright Infringement Liability Limitation Act--What Did Congress Intend to Accomplish?

A. The Debate over ISP Liability

Fearing that courts would use Playboy, Fonovisa and Sega I as precedent to impose liability, ISPs began to lobby legislators during the 104^th Congress (1995-96) for legislation to clarify that certain judicially created doctrines discussed above should not apply in the digital environment. [57] ISPs argued that the enormous amount of traffic on the [p41] Internet made it impractical to monitor the activities of their subscribers. [58] In addition, they argued that if online service providers were faced with strict liability for the infringements of their subscribers, they would pass the cost of this liability onto the subscribers in the form of higher access fees. [59]

At the same time, Congress faced an equally strong lobby, supported by the White Paper, against creating a statutory exemption for ISPs. The motion picture and recording industries argued that shielding ISPs from liability would remove any incentive for them to prevent infringing content from being transmitted over the Internet. In addition, these industries proposed that ISPs providing web hosting and search engines should require that subscribers providing web pages guarantee that these pages are free from infringing content. These industries also contended that judicially created doctrines of vicarious and contributory liability fairly and reasonably determined when ISPs can be held responsible for copyright infringements directly committed by their subscribers.

The testimony of Jack Valenti, President of the Motion Picture Association of America, is illustrative:

Of those few cases that have gone to court, none has resulted in the imposition of debilitating damage awards on an "innocent" OSP or ISP that had no involvement, other than providing network services, in infringing activity. Where providers have been held liable, it's [sic] quite clear…that they were well aware of, or were even active participants in, the violations enabled by their services. As for the assertion that the threat of infringement liability is a dagger pressed against the jugular of the Internet, well, the best that can be said is that it simply is not so. The growth rates of the business of providing access to the Internet are astronomical…. Before jumping straight to legislative "fixes" of the online liability "problem," Congress must specifically identify what -- if anything -- is broken in the current law…. If it does so, I believe it will conclude that any change in the statute on this issue is, at best, premature. [60]

[p42] Representative Bob Goodlatte spent months leading negotiation sessions between copyright owners and ISPs, telephone companies, libraries, and universities. [61] Eventually, after several bills were introduced and amended in both Houses, a legislative compromise was reached. [62] The compromise became Title II of the DMCA, the Online Copyright Infringement Liability Limitation Act. [63] Title II codified a liability system based on the existing core of case law regarding ISP copyright liability, while narrowing and clarifying [64] the law in other respects. [65]

B. The DMCA’s Origins: House Bill 2281 and Its Predecessors

In July 1997 Representative Howard Coble, [66] along with Representatives Henry Hyde, John Conyers and Barney Frank, introduced H.R. 2281, the bill which eventually became the DMCA. This bill, called the World Intellectual Property Organization Copyright Treaty and Performances and Phonograms Treaty Implementation Act, proposed to add a new Section 1201 to the Copyright Act prohibiting the manufacture or import of products that circumvent technologies that restrict access to unauthorized works. [67] The same month, Representative Coble introduced House Bill 2180 which proposed to exempt ISPs that are merely passive conduits to the Internet from direct or vicarious liability, subject to certain conditions. [68] Representative Coble remarked that the bill was meant to be a “new starting point for discussion among the groups affected by its [p43] provisions.” [69] As a result of Representative Goodlatte’s negotiations with copyright holders and ISPs, H.R. 2180 was eventually substituted with H.R. 3209. [70] The latter bill was eventually incorporated into H.R. 2281. [71]

After several amendments, H.R. 2281 passed the House on August 4, 1998. [72] The Senate then received H.R. 2281 and struck all language after the Enacting Clause, substituting the language of its own bill, S. 2037. During the fall of that year, H.R. 2281, as amended, went to conference. [73] As a result of the conference, the Senate essentially receded to the House bill, which contains the current language of Title II. [74]

C. Title II: The Online Copyright Infringement Liability Limitation Act

Title II limits liability for four general categories of ISP activity: 1) transitory digital network communications, [75] 2) system caching, [76] 3) information residing on systems or networks at direction of users [77] and 4) information location tools. [78] In order to qualify for any of these liability limitations, or safe harbors, an ISP must meet the following eligibility requirements. [79] First, it must adopt, reasonably implement and inform subscribers of a policy for terminating repeat copyright infringers. [80] Second, it must accommodate, and not interfere with, standard technical measures. [81] A standard technical measure is a technology, subject to certain conditions, used by copyright owners to identify or protect [p44] copyrighted works. [82] In addition to these basic eligibility requirements, ISPs must meet the specific criteria listed below for each of the four safe harbors.

The first type of safe harbor, transitory digital network communications, can be characterized as “passive conduit” activity. For purposes of this safe harbor, a service provider is defined as “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.” [83] The types of ISPs that would normally fall under this definition are those that run a backbone network, provide an email server, or provide Internet access. If the conditions listed below are satisfied, these ISPs would qualify for the “passive conduit” safe harbor even if the form of material is modified by their systems during transmission, as long as the content is not modified. [84] For example, a mere change in form might result in an email transmission appearing to the recipient without bolding or italics.

The following conditions apply to the “passive conduit” safe harbor. The ISP must not have selected the recipients of the infringing content. [85] In addition, the content must have been transmitted through an automatic technical process [86] and the ISP must not retain intermediate copies of the content for longer than necessary to transmit the information. [87] If the ISP satisfies these conditions, it receives immunity from monetary damages. [88] The second type of safe harbor, system caching, refers to a process whereby the ISP retains a temporary copy of frequently accessed Internet material so that subsequent requests for the material [p45] can be retrieved from that retained copy instead of having to be retrieved from the original source. [89] To qualify for the “system caching” safe harbor, the material must have been placed online by someone other than the ISP and passively transmitted by the ISP to the subscriber at his or her request. [90] The ISP must not modify the content of the material, [91] must comply with the content provider’s rules about “refreshing, reloading or other updating of the material” [92] and must not interfere with the technology that returns ‘hit’ information to the content provider. [93] In addition, the ISP must limit access to the material in accordance with the content provider’s conditions, such as payment of a fee or provision of a password. [94] Finally, the ISP must disable access to or take down infringing material only if it receives a notice that states such material has been taken down or blocked at the original source. [95] This requirement prevents situations in which taking down the cached infringing material would be fruitless because the material will simply be re-cached from the originating source. [96]

The third type of safe harbor activity is storing material for subscribers on a system or network controlled or operated by the service provider. [97] Examples of such storage include providing server space for a user’s web site (web hosting) or for a chat room. [98] These ISPs do not qualify for the “passive conduit” safe harbor, even if they also provide Internet access, since they host content on their servers or control content on others’ servers. [99]

In order to qualify for this safe harbor, an ISP cannot have actual knowledge of the infringing content or be aware of “facts and circumstances from which the infringing activity is apparent.” [100] In addition, the ISP cannot receive any direct financial benefit from the infringing activity. [101] Charging a flat fee for Internet access would not be deemed a financial benefit directly attributable to infringing activity. [102] This section also provides a ‘notice and take down’ procedure. [103] Upon [p46] being notified of alleged infringement, the ISP must expeditiously remove or block access to the material. [104] Finally, the ISP must designate an agent to receive DMCA notices, file that person’s contact information with the Register of Copyrights, and publish its procedure for processing DMCA notices on its web site. [105]

Providing information location tools is the fourth type of activity which qualifies for the limitation of liability. [106] An information location tool is equivalent to a search engine or hypertext link. [107] The conditions for qualifying for this safe harbor are identical to those that apply to web hosting providers except for the notice and take down procedure. In order for the ISPs compliance to be mandatory, the copyright owner must provide the ISP with a DMCA notice that identifies the hyperlink or search engine linking to the infringing material. [108] Although this safe harbor does not specify that an agent must be designated for receipt of DMCA notices, as is specified for the web hosting safe harbor, it is a wise idea for ISPs to do so anyway.

D. Congress’ Attempt to Balance the Interests of Copyright Holders and ISPs

Title II was enacted to preserve strong incentives for both service providers and copyright owners to cooperate in detecting and dealing with copyright infringements that take place in the digital networked environment. [109] Title II’s safe harbors are intended to provide greater certainty to ISPs concerning their legal exposure for infringements that may occur on their systems. The House Conference Report accompanying H.R. 2281 notes that Title II “offers the advantage of incorporating and building on those judicial applications of existing copyright law to the digital environment that have been widely accepted as fair and reasonable.” [110] At the same time, Congress did not intend to determine whether or not an ISP would be liable for conduct that fails to qualify for [p47] one of the safe harbors. In those situations, the doctrines of existing law would apply, and liability would attach to the extent that a court finds that: 1) the requirements of direct infringement, contributory infringement or vicarious liability have been met, 2) the conduct is not excused by any other exception or limitation and 3) monetary remedies are appropriate. [111] Finally, although Title II does not mandate monitoring, it is not intended to discourage an ISP from monitoring its service for infringing material. [112] An ISP does not lose eligibility for the liability limitations simply because it engaged in a monitoring program before being notified of a potential infringement. [113]

The “passive conduit” safe harbor, Section 512(a), [114] codifies the Netcom decision. [115] This section overrules the suggestion in the Playboy case that passive, automatic acts of ISPs could constitute direct infringement, and instead provides certainty that Netcom and its progeny will be the law. Thus, Congress intended to preserve immunity for ISPs that do nothing more than automatically transmit messages between users and move packets of information to and from the Internet, regardless of whether these ISPs are aware of infringing activity. [116]

Congress intended to subject other (non-passive) ISPs to a more stringent knowledge standard. Congress contemplated that ISPs providing web hosting, chat rooms or information location tools, such as hypertext linking, would have to abide by a “red flag” test to qualify for limited liability. Although generally these ISPs would not need to monitor their service for infringing activity, if one of these ISPs became aware of a “red flag” from which infringing activity is apparent, it would lose the liability limitation if it took no action.

The “red flag”test has both a subjective and an objective element. It is based on the ISPs subjective awareness of facts and circumstances demonstrating infringement, as well as whether the infringement would have been apparent to a reasonable person operating under the same or similar circumstances. Congress expected that once these ISPs became aware of a “red flag,” signaling apparent infringement, or actually knew of infringing activity, they would have to act expeditiously to remove or disable access to the infringing material. [117] Finally, Congress did not [p48] intend that actual knowledge or awareness of a “red flag” would be imputed to any ISP based on information from the copyright owner that does not substantially comply with the notification provisions of Section 512(c)(3). [118]

Title II, as enacted, does not require web hosting ISPs to abide unconditionally by the “red flag” test. [119] These ISPs avoid liability for taking down infringing material only if they promptly notify the subscriber and give the subscriber the opportunity to submit a counter-notification. If the subscriber submits a counter-notification, the ISP must replace the removed material unless the copyright owner has filed a court action against the alleged infringer for injunctive relief. [120]

V. Was the DMCA the Right Solution?

A. Was Legislation Really Necessary?

Some commentators do not think legislation limiting the liability of online service providers was necessary. Before the DMCA was enacted, these commentators argued that such legislation would be a “solution in search of a problem.” [121] For example, Michael Kirk, Executive Director of the American Intellectual Property Law Association, argued that it was better to wait and see how the case law developed. During the House hearings on the Online Copyright Liability Limitation Act, he testified: “[i]t is difficult to identify jurisprudence which makes the issue of online liability a real problem as opposed to a perceived problem.” [122]

Another commentator, Daniel Cahoy, suggested that there were “at least two important reasons why legislation was not needed: 1) courts had not yet interpreted copyright law in a manner which would have a chilling effect on ISPs and 2) legislation constrains the courts at the very time they need the most room to develop ISP liability doctrine.” [123] In his opinion, courts, not legislatures, are more likely to analyze liability in a manner that [p49] is “fluid and responsive to changes in technology.” [124] Further, he argued that the then-pending legislation would have excessively limited ISP liability. [125] For example, in his view, Senate Bill 1146 would have eliminated ISPs’ incentive to curb infringement and would have tilted the balance strongly in favor of ISPs. [126] Similarly, although both H.R. 2180 and H.R. 3209 allowed copyright owners to obtain injunctive relief, in his opinion both bills gave little incentive to ISPs to “take any action to prevent infringement” because they would not be liable for any monetary damages resulting from the infringement. [127]

Others argue that the DMCA is flawed. One commentator suggests that “Congress’ decision to leave the underlying law of OSP [ISP] liability unchanged creates a complicated scheme that goes too far in encouraging ISPs to advance the interests of content providers by removing alleged copyright infringements from the Internet.” [128] In addition, he argues that the DMCA fails to clarify the underlying law, leaving open the possibility that courts will impose broad ISP liability. [129]

This is not the prevailing view, however. Most commentators agree that legislation was necessary and the DMCA, albeit imperfect, was a feasible solution. [130] As pointed out by one commentator, “ just because a small handful of district court judges had held unknowing [ISPs] not liable does not mean that the trend would have continued.” [131] Absent the DMCA, not all courts may have been willing to follow Netcom. Other courts may have adopted the Playboy rationale, holding ISPs liable even when they are unaware of infringing activity by their subscribers. This would have meant [p50] that some ISPs would have had to police their networks for infringing activity, while others operating in different jurisdictions would have been exempt from strict liability. In addition, allowing courts to develop a piecemeal case-by-case approach would have left ISPs uncertain as to which precautionary measures to adopt to prevent infringement.

Some may argue that ISPs could have achieved certainty through contract law. [132] For example, Internet Service Agreements can (and most probably do) require subscribers to indemnify the ISP if the ISP is found directly, contributorily or vicariously liable for copyright infringement. This was not an ideal solution, however, because many subscribers would not have the ability to pay large damage awards. Thus, some other solution was necessary.

B. The First Cases Considering DMCA Defenses to ISP Liability

To date, only a few courts have considered a DMCA safe harbor defense to copyright infringement.

1. The Napster Litigation

In the first of a series of cases involving the now infamous Napster service, Napster moved for partial summary judgment as to the applicability of the Section 512(a) “passive conduit” safe harbor. [133] Napster argued that the entire Napster system falls within that safe harbor and hence the plaintiffs were not entitled to monetary damages or injunctive relief except as narrowly specified by Title II. [134] U.S. District Court Judge Marilyn Hall Patel denied the motion. In order to understand why, it is necessary to briefly explain how the Napster service works.

Napster owns proprietary “MusicShare” software, which it makes freely available for Internet users to download. Users who obtain Napster’s software can then share MP3 music files [135] with others logged onto the Napster system. Napster allows users to locate and directly exchange MP3 files stored on others’ hard drives without paying a fee. [136] Napster provides a directory and index of MP3 files that users who are logged on [p51] wish to share, but does not store any of the MP3 files on its servers. [137] When the requesting user clicks on the name of an MP3 file listed in Napster’s directory, the Napster server routes the request to the “host” user’s [138] browser. The host user’s browser responds that it either can or cannot supply the file. If the host user can supply the file, the Napster server communicates the host’s Internet Protocol (IP) address and routing information to the requesting user’s browser. [139] The MP3 file is actually transmitted over the Internet directly between requesting and host users, but the connection could not take place without the Napster server. [140]

In response to Napster’s argument that it is entitled to Section 512(a) protection, plaintiffs argued that Napster is not a passive conduit but rather provides information location tools covered by the more stringent eligibility requirements of Section 512(d). [141] Judge Patel did not rule upon plaintiffs’ Section 512(d) argument, [142] and analyzed the 512(a) argument as follows. [143] She assumed that Napster is a “service provider” under the broader definition of subsection 512(k)(1)(A); that is, the court assumed Napster transmits information without modifying the content. [144] Nevertheless, she held, with what the author believes to be persuasive reasoning, that Napster’s role in the transmission of MP3 files was not entitled to Section 512(a) protection because such transmission does not occur through Napster’s system. [145]

With regard to whether Napster provides connections for material through its system (and thus may be entitled to Section 512(a) protection), Judge Patel’s reasoning is more troublesome. [146] The plaintiffs conceded that Napster’s servers, and the MusicShare browsers on its users’ computers, are all part of Napster’s system. [147] However, it is not clear that Congress intended to exclude this type of activity from liability protection, especially because it used the terms “providing connections” and “transmitting” disjunctively. [148] Although Napster does not transmit material, if one assumes that its servers and its users’ browsers are all part [p52] of the same system, Napster does appear to be “providing connections” through its system by conveying address information between requesting users and host users. Nevertheless, Judge Patel found that Napster does not provide connections through its system. [149]

In addition, Judge Patel ruled Napster was not entitled to the DMCA’s safe harbor protections for another reason. [150] Plaintiffs had raised a genuine issue of material fact as to whether Napster complied with Section 512’s general eligibility requirements. [151] Judge Patel found that Napster did not demonstrate that it had reasonably implemented a policy of terminating repeat infringers, as required by Section 512(i)(1)(A), before the suit was filed. [152]

Subsequently, in July 2000, Judge Patel granted the RIAA's request for a preliminary injunction and ordered Napster to shut down. Two days later, the U.S. Circuit Court of Appeals for the Ninth Circuit (“Ninth Circuit”) temporarily stayed Judge Patel’s injunction pending a hearing on the merits. [153]

In February 2001, the Ninth Circuit released its long-awaited decision. [154] The court held that Napster must prevent users from gaining access to copyrighted content through the lists of songs archived by its users. [155] As to the DMCA “safe harbor” defense, the Ninth Circuit disagreed with Judge Patel’s finding that Section 512(d) cannot shield contributory infringers from liability. [156] Instead, the court left open the possibility that Section 512 may protect Napster at trial. [157] Nevertheless, the court expressed reservations as to whether: 1) Napster is a “service provider” as defined in Section 512(d); 2) copyright owners must give a service provider “official” notice of infringing activity in order for it to have the requisite knowledge of infringement; and 3) Napster complies with the DMCA’s requirement that a service provider must establish a detailed copyright compliance policy. [158]

The Ninth Circuit remanded the case to the district court for a more narrowly crafted injunction. [159] According to the court, an injunction [p53] against the song-swapping service was “not only warranted but required.” [160]

2. ALS Scan v. RemarQ Communities

In February 2001, the U.S. Court of Appeals for the Fourth Circuit (“Fourth Circuit”) decided its first case interpreting Title II. [161] The case presented an issue of first impression for the court-- whether an ISP enjoys a safe harbor from copyright infringement liability when it receives an “imperfect” notice of infringement activity on its system. [162]

ALS Scan owns copyrights for "adult" photographs displayed on the Internet to paying subscribers and sold on CD ROMs and videotapes. [163] RemarQ Communities (“RemarQ”) is an ISP that provides access to over 30,000 newsgroups which cover thousands of subjects. [164] Two of RemarQ’s newsgroups included ALS Scan's name in the titles. These newsgroups contained hundreds of postings that infringe ALS Scan's copyrights. The postings were placed in these newsgroups by RemarQ's subscribers. [165] Upon discovering that RemarQ databases contained material that infringed ALS Scan's copyrights, ALS Scan sent a letter to RemarQ identifying the newsgroups but failing to identify the particular images protected by ALS’ copyrights. [166] RemarQ responded by refusing to comply with ALS Scan's demand, but advising ALS Scan that RemarQ would eliminate individual infringing images if ALS Scan identified them "with sufficient specificity." [167]

ALS sued RemarQ for direct and contributory copyright infringement. Recognizing that Title II codifies the seminal Netcom decision, the Fourth Circuit affirmed the district court’s ruling that RemarQ could not be held liable for direct copyright infringement merely because it provided access to a newsgroup containing infringing material. [168]

The Fourth Circuit also considered RemarQ’s DMCA “safe harbor” defense.[169] RemarQ argued it qualifies for the liability limitation set forth in Section 512(c) (the “web hosting” safe harbor). [170] As to the [p54] “knowledge” requirement in that section, the Fourth Circuit found that RemarQ did have actual knowledge of the infringing material even before being contacted by ALS Scan. [171] In addition, the Fourth Circuit held that ALS Scan had substantially complied with the “notice” requirement. [172] Although Title II requires a copyright owner to give the ISP a detailed notice of infringement, the copyright holder must only provide information that is "reasonably sufficient" to permit the service provider to locate the allegedly infringing material. The court correctly noted that the DMCA requires only “substantial” compliance with Section 512(c)’s notice requirements. [173] Since ALS Scan’s letter referred RemarQ to two web addresses where RemarQ could find pictures of ALS Scan's models and obtain ALS Scan's copyright information, and virtually all photographs on the web sites identified in the letter were infringing, the letter “substantially complied” with the DMCA. [174] Thus, RemarQ was not entitled to a safe harbor defense. [175]

3. Other Cases Interpreting Title II

In Universal City Studios, Inc. v. Reimerdes, [176] defendants were distributing, via the Internet, a software utility called DeCSS which enables users to break an encryption-based access control and copy prevention system for movies in DVD format. One defendant sought protection under Section 512(c). However, the court held that defendant could not invoke that safe harbor because plaintiffs claimed violations of Section 1201(a), which applies to anti-circumvention products and technologies, not copyright infringement. [177]

Finally, in Costar Group, Inc. v. LoopNet, Inc., [178] the court noted in passing that the defendant, an Internet-based commercial real estate listing service, might be entitled to DMCA liability protection. [179] The plaintiff alleged that LoopNet posted on its web site several photographs from the plaintiff’s databases, thereby infringing plaintiff's copyright in the photographs and was therefore liable for direct and contributory copyright infringement. The court did not reach the issue of whether the defendant [p55] was entitled to a DMCA safe harbor, because the case was dismissed for lack of personal jurisdiction. [180]

VI. Conclusion

Title II attempts to strike a balance between copyright holders’ interests and ISPs’ interests by protecting ISPs from monetary liability while allowing copyright holders to obtain injunctive relief. [181] As explained above, copyright holders can stop infringing activity if they properly notify the infringer’s ISP. [182] Non-passive ISPs cannot ignore a DMCA-compliant notice of claimed infringement, or facts and circumstances that indicate potential infringement, or actual knowledge of infringement. [183] Although “passive conduit” ISPs do not have the ability to take down infringing material because it does not reside on their networks, they are subject to a court order obtained by the copyright holder requiring them to terminate the infringer’s account. [184] And, since the DMCA provides a good faith defense for taking down or disabling access to infringing material, [185] it encourages even “passive conduit” ISPs to do so.

Bob Goodlatte, the Congressman who led the pre-DMCA negotiations, feels that Title II is working just as Congress intended. Speaking at a congressional forum after the Ninth Circuit’s February Napster ruling, Representative Goodlatte said the decision affirms the strong protections afforded to artists and record labels under the DMCA. "The court should be praised for allowing the DMCA to do its work. This was a carefully written law that was faced with the amazingly difficult task of adjusting to changes in technology." [186] But some critics of the DMCA argue that it gives copyright holders an unfair advantage because it is too expensive and time-consuming for ISPs to challenge or appeal copyright holders’ requests to take down allegedly infringing material. [187]

[p56] The battle is not over yet. Copyright owners are expected to lobby Congress to pass legislation requiring ISPs to pay for the unauthorized use of copyrighted material on Web sites they host, even if they have no prior knowledge that the content violated a copyright. [188] If the DMCA is amended, ISPs, already struggling financially, could be liable for millions of dollars in royalties or will have to spend time and money closely monitoring every Web site they host. [189]

In the author’s opinion, Title II should not be amended until the case law is further developed. To date, only two federal appellate courts have analyzed safe harbor protection under Title II. When Representative Coble introduced the legislation that ultimately resulted in Title II, his goals were to exempt conduct where ISP liability does not seem appropriate because of a low level of participation, control and knowledge, while ensuring that ISPs have adequate incentives to assist copyright owners in preventing infringement. He and other members of Congress clearly intended to advance a policy of encouraging ISPs to provide service to many individuals without having to police the massive amounts of data which would consequently travel over their systems. [190] It is simply to early to tell whether these goals have been achieved.