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Advanced copyright issues on the internet

Fenwick & West LLP

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USA March 10 2014

ADVANCED COPYRIGHT ISSUES ON THE INTERNET

David L. Hayes, Esq.*

FENWICK & WEST LLP

Partner and past Chairman of the Intellectual Property Practice Group, Fenwick & West LLP, Mountain View

& San Francisco, California. B.S.E.E. (Summa Cum Laude), Rice University (1978); M.S.E.E., Stanford University (1980); J.D. (Cum Laude), Harvard Law School (1984). An early version of this work appeared in David L. Hayes, “Advanced Copyright Issues on the Internet,” 7 Tex. Intell. Prop. L.J. 1 (Fall 1998). The author expresses appreciation to Matthew Becker for significant contributions to Section III.E (“Streaming and Downloading”).

© 1997-2014 David L. Hayes. All Rights Reserved. (Updated as of February 2014)

TABLE OF CONTENTS

I.

INTRODUCTION

13

II.

RIGHTS IMPLICATED BY TRANSMISSION AND USE OF WORKS ON THE INTERNET

14

The Right of Reproduction                                                                                             14

The Ubiquitous Nature of “Copies” on the Internet                                                15 Whether Images of Data Stored in RAM Qualify as “Copies”                               15 The WIPO Treaties & the European Copyright Directive Are Unclear With

Respect to Interim “Copies”                                                                                    22

Introduction to the WIPO Treaties & the European Copyright

Directive                                                                                                          22

The WIPO Copyright Treaty                                                                           24 The WIPO Performances and Phonograms Treaty                                         27 The Requirement of Volition for Direct Liability                                                    29

The Netcom Case                                                                                            30 The MAPHIA Case                                                                                         32 The Sabella Case                                                                                             33 The Frena Case                                                                                                34 The Webbworld Case                                                                                      35 The Sanfilippo Case                                                                                        36 The Free Republic Case                                                                                   37 The MP3.com Cases                                                                                        39 The CoStar Case                                                                                              42 The Ellison Case                                                                                              43 Perfect 10 v. Cybernet Ventures                                                                     43 Field v. Google                                                                                                44 Parker v. Google                                                                                              45 The Cablevision Case                                                                                       45 Arista Records v. Usenet.com                                                                         48 Quantum Systems v. Sprint Nextel                                                                 49 Arista Records v. Myxer                                                                                 50 Disney Enterprises v. Hotfile                                                                          51 Perfect 10 v. Megaupload                                                                               52 Wolk v. Kodak Imaging Network                                                                  54 Fox Broadcasting v. Dish Network                                                                54 Perfect 10 v. Giganews                                                                                   58 Capitol Records v. ReDigi                                                                              60 Summary of Case Law                                                                                    62

The Reproduction Right Under WIPO Implementing Legislation                          63

United States Legislation                                                                                63

The Digital Millennium Copyright Act                                                   64 Legislation Not Adopted                                                                        64

The European Copyright Directive                                                                  65 Peer-to-Peer File Sharing                                                                                         71

BMG Music v. Gonzalez                                                                                 71 Columbia Pictures v. Bunnell                                                                          72 Sony BMG Music Entertainment v. Tenenbaum                                            72 Capitol Records v. Thomas-Rasset                                                                  77

The Immunity of the Audio Home Recording Act (AHRA)                                  80

The Napster Cases                                                                                           80 The Aimster Case                                                                                            81 Atlantic Recording Corp. v. XM Satellite Radio                                            81

The Right of Public Performance                                                                                    84

Isochronous Versus Asynchronous Transmissions                                                  85 The Meaning of “Publicly”                                                                                      86 Live Nation Motor Sports v. Davis                                                                         86 United States v. ASCAP                                                                                         87 The Cablevision Case                                                                                               89 Ringtones – In re Application of Cellco Partnership                                               90 Arista Records v. Myxer                                                                                          92 Warner Bros. v. WTV Systems                                                                                92 Capitol Records v. MP3tunes                                                                                  95 The Aereo Case                                                                                                        96 The BarryDriller Case                                                                                            104 The FilmOn Case                                                                                                   106

The Right of Public Display                                                                                          107

1.

The Frena, Marobie-FL, Hardenburgh and Webbworld Cases

108

2.

Kelly v. Arriba Soft

109

3.

Ticketmaster v. Tickets.com

113

4.

Perfect 10 v. Google (aka Perfect 10 v. Amazon)

113

5.

Healthcare Advocates, Inc. v. Harding, Earley, Follmer & Frailey

125

6.

ICG-Internet Commerce Group, Inc. v. Wolf

126

D.

7.

The

Perfect 10 v. Yandex

Right of Public Distribution

126

128

The Requirement of a “Copy”                                                                               129

Cases Addressing Whether Mere Posting Is a Distribution                          129

(1)    Cases Holding That Mere Posting Is a Distribution

130

(2)    Cases Holding That Mere Posting Is Not a Distribution

135

(3)    Cases Refusing To Decide the Issue

143

2.

The Requirement of a “Public” Distribution

144

3.

The Requirement of a Rental or Transfer of Ownership

144

4.

The Right of Distribution Under the WIPO Treaties

145

5.

The Right of Distribution Under WIPO Implementing Legislation

146

(a)    United States Legislation

146

E.

The

(b)    The European Copyright Directive

Right of Importation

146

147

The New Right of Transmission and Access Under the WIPO Treaties                      148

The Right of Communication to the Public in the WIPO Copyright Treaty         148 The Right of Making Available to the Public in the WIPO Performances

and Phonograms Treaty                                                                                          150

The Right of Transmission and Access Under WIPO Implementing

Legislation                                                                                                             151

United States Legislation                                                                              151 The European Copyright Directive                                                                152

New Rights and Provisions Under The Digital Millennium Copyright Act, the  European Copyright Directive & Legislation That Did Not Pass                                                                                  154

Circumvention of Technological Measures and Rights Management

Information Under the DMCA                                                                             154

Circumvention of Technological Protection Measures                                   155

Prohibition on Conduct                                                                         155

Exemptions Adopted by the Librarian of Congress                 156

Scope of the Network Connection Exemption – The

TracFone Cases                                                                       166

Epic Games v. Altmeyer                                                           169 Facebook v. Power Ventures                                                    169 Bose v. Zavala                                                                           170 MGE UPS Systems v. GE                                                        170 Granger v. One Call Lender Services                                       171 Eyepartner v. Kor Media Group                                               171 Prohibition on Devices                                                                          172

Sony Computer Entertainment America v. Gamemasters         173 The DirecTV Cases                                                                   173

DirecTV, Inc. v. Borow                                                          173 DirecTV, Inc. v. Carrillo                                                         174

Sony Computer Entertainment America v. Divineo                 174 Ticketmaster L.L.C. v. RMG Technologies, Inc.                      175 The Tracfone Cases                                                                   176 Movida Communications, Inc. v. Haifa                                    176 Microsoft Corp. v. EEE Business Inc.                                      177 MDY Industries v. Blizzard Entertainment                              177 Coupons, Inc. v. Stottlemire                                                     182 CoxCom, Inc. v. Chafee                                                           183 The DISH Network Cases                                                        184

Dish Network v. Sonicview                                                   184 Dish Network v. SatFTA                                                       184 Dish Network v. Dimarco                                                      185 Dish Network v. Sonicview                                                   186 Dish Network v. Alejandri                                                     186

Realnetworks v. DVD Copy Control Association.                   187 Apple v. Psystar                                                                        189

Blizzard Entertainment v. Reeves                                             191 The Craigslist Cases                                                                  192

Craigslist v. Naturemarket                                                      192 Craigslist v. Mesiab                                                                192 Craigslist v. Hubert                                                                 193 Craigslist v. Branley                                                               194 Craigslist v. Kerbel                                                                 194

Echostar v. Viewtech                                                                194 Adobe Systems v. Feather                                                        195 What Constitutes an Effective Technological Measure                        195

Auto Inspection Services v. Flint Auto Auction                      195 Healthcare Advocates, Inc. v. Harding, Earley, Follmer &

Frailey                                                                                       196

Apple v. Psystar                                                                        198 No Requirements With Respect to Design of a Product                      198 Other Rights Not Affected                                                                   199 Exemption for Nonprofit Organizations and Law Enforcement          200 Reverse Engineering for Interoperability                                              200

Universal City Studios Inc. v. Reimerdes                                 205 Storage Technology Corporation v. Custom Hardware

Engineering & Consulting                                                         206

Chamberlain Group, Inc. v. Skylink Technologies, Inc.           206 Lexmark International, Inc. v. Static Control Components,

Inc.                                                                                            207

Davidson Assocs. v. Internet Gateway                                    207 Sony Computer Entertainment America v. Divineo                 212 Encryption Research                                                                             212 Protection of Minors                                                                             212 Protection of Personally Identifying Information                              212 Security Testing                                                                                  213 Copy Restrictions To Be Built Into VCRs and Camcorders              213 Other Cases Filed Under the Anti-Circumvention Provisions            214

Sony Computer Entertainment, Inc. v. Connectix, Inc.           214 RealNetworks, Inc. v. Streambox Inc.                                      215 Universal City Studios, Inc. v. Reimerdes                                219 A Related DVD Case Involving Trade Secret Claims –

DVD Copy Control Association, Inc. v. McLaughlin (the  Bunner case)         224

A Related DVD Case – Norwegian Prosecution of Jon

Johansen                                                                                    227

Another Challenge to the DMCA – The Felten Case.              227 Pearl Investments, LLC v. Standard I/O, Inc.                          228 321 Studios v. Metro Goldwyn Mayer Studios, Inc.               229 I.M.S. Inquiry Management Systems, Ltd. v. Berkshire

Information Systems, Inc.                                                         231

(x)

Paramount Pictures Corp. v. 321 Studios.

231

(xi)

Macrovision Corp. v. 321 Studios

232

(xii)

Comcast of Illinois X v. Hightech Electronics, Inc.

232

(xiii)

Davidson & Assocs. v. Internet Gateway

233

(xiv)

Agfa Monotype Corp. v. Adobe Sys.

233

(xv)

Egilman v. Keller & Heckman

235

(xvi)

Macrovision v. Sima Products Corp.

236

(xvii)

Nordstrom Consulting, Inc. v. M&S Technologies, Inc.

237

(xviii)

R.C. Olmstead v. CU Interface

237

(xix)

Avaya v. Telecom Labs

238

(xx)

Actuate v. IBM

238

(xxi)

Navistar v. New Baltimore Garage

239

(xxii)

Dice Corp. v. Bold Technologies

240

Criminal Prosecutions Under the DMCA                                             240

(i)

The Sklyarov/Elcomsoft Case

240

(ii)

Other Criminal Prosecutions Under the DMCA

241

Other Uses of the Anti-Circumvention Provisions as a Sword            242

(i)

Lexmark International, Inc. v. Static Control Components,

Inc.

243

(ii)

Chamberlain Group, Inc. v. Skylink Technologies, Inc.

249

(iii)

In re Certain Universal Transmitters for Garage Door

Openers

255

(iv)

Storage Technology Corporation v. Custom Hardware

Engineering & Consulting

255

(14)

(15)

Integrity of Copyright Management Information                                         260

Definition of CMI                                                                                 260

Cases Requiring CMI to be Part of a Technological

System or Process                                                                     261

The IQ Group, Ltd. v. Wiesner Publishing, LLC                   261 Textile Secrets Int’l, Inc. v. Ya-Ya Brand Inc.                      263 Jacobsen v. Katzer                                                                  264 Silver v. Lavadeira                                                                  265 Cases Not Requiring CMI to be Part of a Technological

System or Process                                                                     266

McClatchey v. The Associated Press                                     266 Associated Press v. All Headline News Corp.                       266 Fox v. Hildebrand                                                                  267 Faulkner Press v. Class Notes                                                 267 Agence France Presse v. Morel                                              268 Murphy v. Millennium Radio                                                 270 William Wade Waller Co. v. Nexstar Broadcasting               271 Prohibitions on False CMI and Removal/Alteration of CMI               271

Cases re Removal or Alteration of CMI                                   272

Kelly v. Arriba Soft Corp.                                                      272 Thron v. Harper Collins Publishers                                         273

Gordon v. Nextel Communications                                        273 Monotype Imaging, Inc. v. Bitstream Inc.                             274 Keogh v. Big Lots Corp.                                                        276 Goldman v. Healthcare Management Systems                       277 Thomas M Gilbert Architects v. Accent Builders                  277 Banxcorp v. Costco                                                                277 Agence France Presse v. Morel                                              278 Scholz Design v. Custom Homes                                           279 Personal Keepsakes v. PersonalizationMall.com                     279 Cases re False CMI                                                                   280

Schiffer Publishing, Ltd. v. Chronicle Books, LLC               280 Agence France Presse v. Morel                                              281 Personal Keepsakes v. PersonalizationMall.com                     282

Exceptions and Limitations                                                                   282 Remedies for Violations of Sections 1201 and 1202                                    282

Statutory Damages and Disgorgement of Profits for Violations of

(i)

Sony Computer Entertainment America v. Filipiak

283

(ii)

Sony Computer Entertainment v. Divineo

284

(iii)

Stockwire Research Group v. Lebed

284

(iv)

MDY Industries, LLC v. Blizzard Entertainment, Inc.

285

(v)

Nexon America v. Kumar

285

(vi)

Point 4 Data Corp. v. Tri-State Surgical Supply

285

Section 1201                                                                                         283

(i)

McClatchey v. The Associated Press

289

(ii)

Goldman v. Healthcare Management Systems

290

(iii)

Stockwire Research Group v. Lebed

290

(iv)

Stockart.com v. Engle

290

(v)

Granger v. One Call Lender Services

291

(vi)

Pacific Stock v. MacArthur & Co.

292

(vii)

Agence France Presse v. Morel

292

Statutory Damages and Disgorgement of Profits for Violations of Section 1202       289

Jurisdictional Issues – Blueport Co. v. United States                           293 Alternative Approaches to the DMCA That Did Not Pass                          293 The Battle Between Content Owners and Technology Companies Over

Built-In Technological Measures                                                                   294

Anticircumvention Provisions Under the European Copyright Directive               295 Anti-Circumvention Provisions in Other Foreign Countries                                 298 Fair Use                                                                                                                  299

United States Legislation That Did Not Pass                                               299 The European Copyright Directive                                                                299

Expansion of Library/Archives Exemptions                                                           300 Distance Education                                                                                                301 Copying in the Course of Computer Maintenance or Repair                                301 Other Provisions of the DMCA                                                                             302

(a)

Evaluation of Impact of Copyright Law on Electronic Commerce

302

(b)

Clarification of the Authority of the Copyright Office

303

(c)

(d)

Ephemeral Recordings

Statutory Licenses With Respect to Performances of Sound

303

(e)

Recordings

Assumption of Contractual Obligations Related to Transfers of Rights

304

in Motion Pictures

304

(f)

Protection of Certain Industrial Designs

305

Protection of Designs Embodied in Useful Articles                            305 Originality                                                                                             306 Exclusions from Protection                                                                   306 Adaptations of Unprotectable Elements                                               307 Duration of Protection and Design Notice                                           307 Rights of a Design Owner and Limitations                                          307 Standard of Infringement                                                                     308 Benefit of Foreign Filing Date                                                             308 Vesting and Transfer of Ownership                                                     308 Remedies of Injunctive Relief, Damages, Attorneys’ Fees and

Destruction                                                                                           309

Private Rights of Action Against Pirated Designs                               309 Relation to Design Patents and Retroactive Effect                              309

Limitation of Liability of Online Service Providers                                      309 Subpoenas to Service Providers                                                                    309

Jurisdictional Issues                                                                              310 RIAA v. Verizon Internet Services                                                      311 The Charter Communications Litigation                                               314 Fatwallet v. Best Buy                                                                           315 In re Subpoena to University of North Carolina at Chapel Hill           315 Subpoenas in John Doe Actions                                                           316 Interscope Records v. Does 1-7                                                            316 In re Maximized Living                                                                        317

Proposed Limitation of Scope of Shrinkwrap and Clickwrap Licenses That

Did Not Pass                                                                                                          317

APPLICATION OF COPYRIGHT RIGHTS TO SPECIFIC ACTS ON THE

INTERNET                                                                                                                        318

Browsing                                                                                                                       318 Caching                                                                                                                         321

Types of Caching                                                                                                   321 The Detriments of Caching                                                                                    322 The Netcom Case and Application of the Fair Use Doctrine                                323

Purpose and Character of the Use                                                                 324 Nature of the Copyrighted Work                                                                  325 Amount and Substantiality of the Portion Used                                           325 Effect of Use on the Potential Market                                                          326

Cases Adjudicating Caching Under the Fair Use and Implied License

Doctrines                                                                                                                327

Field v. Google                                                                                              327 Perfect 10 v. Google (aka Perfect 10 v. Amazon)                                        331 Ticketmaster L.L.C. v. RMG Technologies, Inc.                                          332 Parker v. Yahoo!, Inc.                                                                                   333

5.         Other Caching Cases                                                                                             334

Facebook v. Power Ventures                                                                        334

C.     Liability of Online Service Providers                                                                            334

Direct Liability                                                                                                       334

Louis Vuitton v. Akanoc Solutions                                                               336 Flava Works v. Gunter                                                                                  336

2.         Contributory Liability                                                                                            337

The Netcom Case                                                                                          338 The MAPHIA Case                                                                                       339 The Peer-to-Peer Filing Sharing Cases                                                          340

(1)        The Napster Cases                                                                                 340

The Scour.com Lawsuit                                                                        375

(3)        The Aimster/Madster Lawsuits                                                             376

The StreamCast/Kazaa/Grokster Lawsuits                                           382

(5)        The Supreme Court’s Grokster Decision                                              389

The Grokster Decision on Remand                                                       404

The Ruling on Liability                                                             404 The Permanent Injunction                                                         408

(7)        The Audiogalaxy Case                                                                          411

The Hummer Winblad/Bertelsmann Litigation                                     412

(9)        Arista Records v. Lime Group                                                              415

The CoStar Case                                                                                            415 Ellison v. Robertson                                                                                      416 Perfect 10 v. Cybernet Ventures                                                                   417 Perfect 10 v. Visa International                                                                    418 Parker v. Google                                                                                            420 MDY Industries v. Blizzard Entertainment                                                  420 Louis Vuitton v. Akanoc Solutions, Inc.                                                      423 Arista Records v. Usenet.com                                                                       426 Hermeris v. Brandenburg                                                                              426 Flava Works v. Gunter                                                                                  428 Perfect 10 v. Giganews                                                                                 430 Masck v. Sports Illustrated                                                                           432 Summary                                                                                                       432

3.         Vicarious Liability                                                                                                 434

The Netcom Case and its Progeny                                                                434 The Napster Cases                                                                                         435 Ellison v. Robertson                                                                                      435 Perfect 10 v. Cybernet Ventures                                                                   435

(e)

The Aimster/Madster Lawsuits

436

(f)

The StreamCast/Kazaa/Grokster Lawsuits

437

(g)

Perfect 10 v. Visa International

439

(h)

Parker v. Google

441

(i)

Louis Vuitton v. Akanoc Solutions

441

(j)

Live Face on Web v. Howard Stern Productions

442

(k)

Arista Records v. Usenet.com

442

(l)

Corbis v. Starr

443

(m)

Arista Records v. Lime Group

444

(n)

Hermeris v. Brandenburg

444

(o)

Luvdarts v. AT&T Mobility

444

(p)

Flava Works v. Gunter

445

(q)

Perfect 10 v. Giganews

446

(r)

Masck v. Sports Illustrated

446

(s)

Disney Enterprises v. Hotfile

446

Inducement Liability                                                                                             447

The Supreme Court’s Grokster Decision                                                       447 Arista Records v. Usenet.com                                                                       447 Columbia Pictures v. Fung                                                                            448 Arista Records v. Lime Group                                                                      454 Flava Works v. Gunter                                                                                  459 Disney Enterprises v. Hotfile                                                                        459 Adequacy of Pleadings of Secondary Liability Against Service Providers          461

Miller v. Facebook                                                                                         461 Williams v. Scribd                                                                                         462

Limitations of Liability of Online Service Providers in the DMCA                     463

History of the Various Legislative Efforts                                                    463 The OSP Liability Provisions of the DMCA                                                464

Safe Harbors – Definition of a “Service Provider”                               465

Acting as a Mere Conduit for Infringing Information –

Section 512(a)                                                                           466

The Napster Case                                                                    467 Ellison v. Robertson                                                               469 The Aimster/Madster Lawsuits                                              474 Perfect 10 v. CCBill                                                               475 Columbia Pictures v. Fung                                                     483 Caching – Section 512(b)                                                          484

Field v. Google                                                                       486 Parker v. Google                                                                     487 Perfect 10 v. Google                                                               487

Innocent Storage of Infringing Information – Section

512(c)                                                                                        492

The ALS Scan Case – What Constitutes a

“Substantially” Compliant Notice                                          494

Hendrickson v. eBay          498

c.

CoStar v. LoopNet

502

d.

Perfect 10 v. Cybernet Ventures

510

e.

The Aimster/Madster Lawsuits

513

f.

Hendrickson v. Amazon.com

513

g.

Rossi v. MPAA

515

h.

Perfect 10 v. CCBill

516

i.

Corbis Corp. v. Amazon.com, Inc.

518

j.

Tur v. YouTube, Inc.

524

k.

Io Group v. Veoh Networks

524

l.

UMG Recordings v. Veoh Networks

529

m.

Perfect 10 v. Amazon

543

n.

Louis Vuitton v. Akanoc Solutions

545

o.

Viacom v. YouTube

545

p.

Perfect 10 v. Google

556

q.

Wolk v. Kodak Imaging Network

557

r.

Arista Records v. Myxer

560

s.

Flava Works v. Gunter

563

t.

Capitol Records v. MP3tunes

564

u.

Obodai v. Demand Media

571

v.

Agence France Presse v. Morel

572

w.

Columbia Pictures v. Fung

577

x.

Disney Enterprises v. Hotfile

580

y.

Capitol Records v. Vimeo

582

Referral or Linking to Infringing Material (Information

Location Tools) – Section 512(d)                                             588

The Napster Case                                                                    589 Perfect 10 v. Cybernet Ventures                                            591 The MP3Board Case                                                              591 The Aimster/Madster Lawsuits                                               591 The Diebold Lawsuit                                                              592 Perfect 10 v. CCBill                                                               594 Columbia Pictures v. Fung                                                     595 Perfect 10 v. Google                                                               596 Perfect 10 v. Yandex                                                              596 General Requirements for Limitations of Liability                               598 Special Provisions for Nonprofit Educational Institutions                   598 Filing of False DMCA Notices – Section 512(f)                                  599

(i)

Rossi v. MPAA

599

(ii)

Online Policy Group v. Diebold, Inc.

600

(iii)

Dudnikov v. MGA Entertainment

600

(iv)

Novotny v. Chapman

600

(v)

BioSafe-One, Inc. v. Hawks

601

(vi)

Lenz v. Universal Music Corp.

601

(vii)

UMG Recordings v. Augusto

607

(viii)

Capitol Records v. MP3tunes

608

(ix)

Brave New Films v. Weiner

609

(x)

Design Furnishings v. Zen Path

610

(xi)

Amaretto Ranch Breedables v. Ozimals

610

(xii)

Shropshire v. Canning

610

(xiii)

Rock River Communications v. Universal Music Group

611

(xiv)

Smith v. Summit Entertainment

612

(xv)

Ouellette v. Viacom

613

(xvi)

Tuteur v. Crosley-Corcoran

614

(xvii)

Flava Works v. Gunter

615

(xviii)

Disney Enterprises v. Hotfile

616

(xix)

Flynn v. Siren-Bookstrand

617

Other Provisions                                                                                    617 Injunctions Against Service Providers                                                   618 Designation of Agent to Receive Notification of Claimed

Infringement                                                                                         618

CoStar v. Loopnet                                                                     619 Wolk v. Kodak Imaging Network                                            620 Perfect 10 v. Yandex                                                                620 Whether the Safe Harbors Apply to Pre-1972 Sound Recordings       621 Limitations of Liability of Online Service Providers under the

Communications Decency Act                                                                               623

Stoner v. eBay                                                                                               623 Perfect 10 v. CCBill                                                                                      625 Secondary Liability of Investors                                                                           625

The Hummer Winblad/Bertelsmann Litigation                                              625 UMG Recordings v. Veoh Networks                                                           625

Class Actions                                                                                                         627 Linking and Framing                                                                                                  627

The Shetland Times Case                                                                                       630 The Total News Case                                                                                             631 The Seattle Sidewalk Case                                                                                    633 The Futuredontics Case                                                                                          634 The Bernstein Case                                                                                                635 The Intellectual Reserve Case                                                                                636 Ticketmaster v. Tickets.com                                                                                   637 The MP3Board Case                                                                                              640 Kelly v. Arriba Soft                                                                                               643 Batesville Services, Inc. v. Funeral Depot, Inc.                                                     643 Live Nation Sports v. Davis                                                                                  645 Perfect 10 v. Google (aka Perfect 10 v. Amazon)                                                 645 Pearson Education v. Ishayev                                                                                645

Streaming and Downloading                                                                                     646

The Digital Performance Right – The Section 114(d)(1) Exemption and

Streaming by FCC-Licensed Broadcasters                                                            647

The Digital Performance Right – Statutory Licenses Under Section 114 for

Certain Nonsubscription and Subscription Services                                              650

Preexisting Subscription Services                                                                  653 Eligible Nonsubscription Services (Webcasters)                                           656 New Subscription Services                                                                            665 The Digital Performance Right – What Constitutes an “Interactive” Service       669

Arista Records v. Launch Media                                                                  671

The Reproduction Right – Mechanical Licenses and

Streaming/Downloading                                                                                        673

Applicability of the Section 115 Compulsory License to Streaming            675 The Copyright Office’s Position – The 2001 DMCA Report and

Comment Proceedings                                                                                  676

The NMPA/HFA/RIAA Agreement of 2001                                               679 The Interactive Streaming and Limited Download Agreement of 2008      681 2008 Interim Regulation re Compulsory DPD License                                682 Applicability of the Section 115 Compulsory License to Ringtones            683 The Section 111 Compulsory License for Cable Systems                                     684

WPIX v. ivi                                                                                                   684

International Licensing Efforts                                                                              685 First Sales in Electronic Commerce                                                                              685

Capitol Records v. ReDigi                                                                                     688

Pop-Up Advertising                                                                                                      689

The Gator Litigations                                                                                             689 The WhenU Litigations                                                                                         690

U-Haul v. WhenU.com                                                                                 691 Wells Fargo v. WhenU.com                                                                          692 1-800 Contacts v. WhenU.com                                                                     694

The MetroGuide Litigation                                                                                    697 The D Squared Litigation                                                                                      697 International Decisions                                                                                          698

Harvesting of Web Data                                                                                               698

The FatWallet Dispute                                                                                           698 Nautical Solutions Marketing v. Boats.com                                                          698 Craigslist v. 3Taps                                                                                                  699

CONCLUSION

I. INTRODUCTION

Over the years, the Internet has become the basic foundational infrastructure for the

global movement of data of all kinds. With continued growth at a phenomenal rate, the Internet

has moved from a quiet means of communication among academic and scientific research circles

into ubiquity in both the commercial arena and private homes. The Internet is now a major

global data pipeline through which large amounts of intellectual property are moved. As this

pipeline is increasingly used in the mainstream of commerce to sell and deliver creative content

and information across transnational borders, issues of intellectual property protection for the

material available on and through the Internet have taken on great importance.

Copyright law provides one of the most important forms of intellectual property

protection on the Internet for at least two reasons. First, much of the material that moves in

commerce on the Internet is works of authorship, such as musical works, multimedia works,

audiovisual works, movies, software, database information and the like, which are within the

usual subject matter of copyright. Second, because the very nature of an electronic online

medium requires that data be “copied” as it is transmitted through the various nodes of the

network, copyright rights are obviously at issue.

Traditional copyright law was designed to deal primarily with the creation, distribution

and sale of protected works in tangible copies.1 In a world of tangible distribution, it is generally

easy to know when a “copy” has been made. The nature of the Internet, however, is such that it

is often difficult to know precisely whether a “copy” of a work has been made and, if so, where it

resides at any given time within the network. As described further below, information is sent

through the Internet using a technology known as “packet switching,” in which data is broken up

into smaller units, or “packets,” and the packets are sent as discrete units. As these packets pass

through the random access memory (RAM) of each interim computer node on the network, are

“copies” of the work being made?

The case of MAI Systems Corp. v. Peak Computer2 held that loading a computer program

into the RAM of a computer constituted the making of a “copy” within the purview of copyright

law. This case has been followed by a number of other courts. Under the rationale of this case, a

“copy” may be created under United States law at each stage of transmission of a work through

the Internet. The language of two treaties discussed extensively in this paper – the WIPO

Copyright Treaty3 and the WIPO Performances and Phonograms Treaty4 – leave unclear the

1 For example, under United States law, copyright protection subsists only in “works of authorship fixed in any

tangible medium of expression, now known or later developed, from which they can be perceived, reproduced,

or otherwise communicated, either directly or with the aid of a machine or device.” 17 U.S.C. § 102(a).

2 991 F.2d 511 (9th Cir. 1993), cert. dismissed, 114 S. Ct. 672 (1994).

3 World Intellectual Property Organization Copyright Treaty, Apr. 12, 1997, S. Treaty Doc. No. 105-17 (1997).

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crucial question whether the MAI approach will be internationalized. In any event, these two

treaties would strengthen copyright holders’ rights of “distribution” and would create new rights

of “making available to the public” a copyrighted work, both of which are implicated by

transmissions through the Internet nearly as broadly as the right of reproduction.

The ubiquitous nature of “copying” in the course of physical transmission gives the

copyright owner potentially very strong rights with respect to the movement of copyrighted

material through the Internet, and has moved copyright to the center of attention as a form of

intellectual property on the Internet. If the law categorizes all interim and received transmissions

as “copies” for copyright law purposes, or treats all such transmissions as falling within the right

of distribution of the copyright owner, then activities that have been permissible with respect to

traditional tangible copies of works, such as browsing and transfer, may now fall within the

control of the copyright holder.

This work discusses the multitude of areas in which copyright issues arise in an online

context. Although the issues will, for simplicity of reference, be discussed in the context of the

Internet, the analysis applies to any form of online usage of copyrighted works. Part II of this

work discusses the various copyright rights that may be implicated by transmissions and use of

works on the Internet, including new rights and remedies, as well as certain limitations on

liability for online service providers afforded under federal statutes. Part III then analyzes the

application of those rights to various activities on the Internet, such as browsing, caching,

operation of an online service or bulletin board, linking to other sites, creation of derivative

works, and resale or subsequent transfer of works downloaded from the Internet. Part III also

analyzes the application of the fair use doctrine and the implied license doctrine to various

Internet activities. Because the law is still developing with respect to many of these issues,

considerable uncertainty is likely to exist as the issues are worked out over time through the

courts and the various relevant legislative bodies and industry organizations.

II. RIGHTS IMPLICATED BY TRANSMISSION AND USE

OF WORKS ON THE INTERNET

This Part discusses the various rights of the copyright holder – the right of reproduction,

the right of public performance, the right of public display, the right of public distribution, the

right of importation, and the new rights of transmission and access – that are implicated by the

transmission and use of works on the Internet.

A. The Right of Reproduction

The single most important copyright right implicated by the transmission and use of

works on the Internet is the right of reproduction. As elaborated below, if the law categorizes all

interim and received transmissions as “copies” for copyright law purposes, then a broad range of

4 World Intellectual Property Organization Performances and Phonograms Treaty, Apr. 12, 1997, S. Treaty Doc.

No. 105-17 (1997).

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ordinary activities on the Internet, such as browsing, caching, and access of information, may fall

within the copyright holder’s monopoly rights.

1. The Ubiquitous Nature of “Copies” on the Internet

Under current technology, information is transmitted through the Internet using a

technique known broadly as “packet switching.” Specifically, data to be transmitted through the

network is broken up into smaller units or “packets” of information, which are in effect labeled

as to their proper order. The packets are then sent through the network as discrete units, often

through multiple different paths and often at different times. As the packets are released and

forwarded through the network, each “router” computer makes a temporary (ephemeral) copy of

each packet and transmits it to the next router according to the best path available at that instant,

until it arrives at its destination. The packets, which frequently do not arrive in sequential order,

are then “reassembled” at the receiving end into proper order to reconstruct the data that was

sent.5 Thus, only certain subsets (packets) of the data being transmitted are passing through the

RAM of a node computer at any given time, although a complete copy of the transmitted data

may be created and/or stored at the ultimate destination computer, either in the destination

computer’s RAM, on its hard disk, or in portions of both.

To illustrate the number of interim “copies,” in whole or in part, that may be made when

transmitting a work through the Internet, consider the example of downloading a picture from a

website. During the course of such transmission, no less than seven interim copies of the picture

may be made: the modem at the receiving and transmitting computers will buffer each byte of

data, as will the router, the receiving computer itself (in RAM), the Web browser, the video

decompression chip, and the video display board.6 These copies are in addition to the one that

may be stored on the recipient computer’s hard disk.7

2. Whether Images of Data Stored in RAM Qualify as “Copies”

Do these interim and final copies of a work (many of which are only partial) being

transmitted through the Internet qualify as “copies” within the meaning of United States

copyright law? The copyright statute defines “copies” as:

material objects, other than phonorecords, in which a work is fixed by any method

now known or later developed, and from which the work can be perceived,

reproduced, or otherwise communicated, either directly or with the aid of a

5 If any packet is lost along the way, the originating computer automatically resends it, likely along a different

path than the lost packet was originally sent.

6 Mark A. Lemley, “Dealing with Overlapping Copyrights on the Internet,” 22 U. Dayton L. Rev. 547, 555

(1997).

7 Even if a complete copy of the picture is not intentionally stored on the recipient computer’s hard disk, most

computers enhance performance of their memory by swapping certain data loaded in RAM onto the hard disk to

free up RAM for other data, and retrieving the swapped data from the hard disk when it is needed again. Some

of this swapped data may be left on the hard disk when the computer is turned off, even though the copy in

RAM has been destroyed.

- 16 -

machine or device. The term “copies” includes the material object, other than a

phonorecord, in which the work is first fixed.8

The language of the definition raises two issues concerning whether images9 of

transmitted data in RAM qualify as “copies.” First, depending upon where the data is in transit

through the Internet, only a few packets – or indeed perhaps only a single byte – of the data may

reside in a given RAM at a given time. For example, the modem at the receiving and

transmitting computers may buffer only one or a few bytes of data at a time. A node computer

may receive only a few packets of the total data, the other packets being passed through a

different route and therefore a different node computer’s RAM. Should the law consider these

partial images a “copy” of the work? Should the outcome turn on whether all or most of the

packets of data comprising the work pass through a given RAM, or only a portion? How can

interim partial images of data stored in RAM be deemed a “copy” of a work, in the case where

there is no point in time at which the entire work is available in a single RAM?

The White Paper published by the Working Group on Intellectual Property Rights of

President Clinton’s Information Infrastructure Task Force (referred to herein as the “NII White

Paper”) implicitly suggests that at least interim, partial copies of a work created in RAM in

interim node computers during transmission may not themselves constitute a “fixed” copy:

A transmission, in and of itself, is not a fixation. While a transmission may result

in a fixation, a work is not fixed by virtue of the transmission alone. Therefore,

“live” transmissions via the NII [National Information Infrastructure] will not

meet the fixation requirement, and will be unprotected by the Copyright Act,

unless the work is being fixed at the same time as it is being transmitted.10

The second general issue raised by the definition of “copies” is whether images of data

stored in RAM are sufficiently “permanent” to be deemed “copies” for copyright purposes. The

definition of “copies” speaks of “material objects,” suggesting an enduring, tangible embodying

medium for a work. With respect to an image of data stored in RAM, is the RAM itself to be

considered the “material object”? The image of the data in RAM disappears when the computer

is turned off. In addition, most RAM is “dynamic” (DRAM), meaning that even while the

computer is on, the data must be continually refreshed in order to remain readable. So the data is

in every sense “fleeting.” Is its embodiment in RAM sufficiently permanent to be deemed a

“copy”?

The legislative history of the Copyright Act of 1976 would suggest that data stored in

RAM is not a “copy.” As noted above, a “copy” is defined as a material object in which a work

is “fixed.” The statute defines a work to be “fixed in a tangible medium of expression when its

8 17 U.S.C. § 101.

9 The word “image” is being used here to refer to an image of data stored in RAM to avoid use of the word

“copy,” which is a legal term of art. Whether an image of data in RAM should be deemed a “copy” for

copyright law purposes is the question at issue.

10 Information Infrastructure Task Force, “Intellectual Property and the National Information Infrastructure: The

Report of the Working Group on Intellectual Property Rights” at 27 (1995).

- 17 -

embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently

permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a

period of more than transitory duration.”11 The legislative history states:

[T]he definition of “fixation” would exclude from the concept purely evanescent

or transient reproductions such as those projected briefly on a screen, shown

electronically on a television or other cathode ray tube, or captured momentarily

in the “memory” of a computer.12

This language suggests that images of data temporarily stored in RAM do not constitute

“copies.”13

Several cases, however, have held to the contrary. The leading case is MAI Systems

Corp. v. Peak Computer, Inc.,14 which held that loading an operating system into RAM for

maintenance purposes by an unlicensed third party maintenance organization created an illegal

“copy” of the program fixed in RAM.15 When the MAI decision first came down, it was unclear

whether that decision would support a legal principle that any storage of a copyrighted work in

RAM, no matter how transiently, constituted a “copy” within the purview of copyright law, for

the Ninth Circuit’s opinion in MAI seemed somewhat qualified. The court in MAI noted that the

“copy” of the operating system was stored in RAM for several minutes (rather than only a few

seconds). In addition, the court emphasized that while in RAM, output of the program was

viewed by the user, which confirmed the conclusion that the RAM “copy” was capable of being

perceived with the aid of a machine:

[B]y showing that Peak loads the software into the RAM and is then able to view

the system error log and diagnose the problem with the computer, MAI has

adequately shown that the representation created in the RAM is “sufficiently

permanent or stable to permit it to be perceived, reproduced, or otherwise

communicated for a period of more than transitory duration.”16

In addition, a decision from the Seventh Circuit handed down shortly after MAI, NLFC,

Inc. v. Devcom Mid-Am., Inc.,17 although somewhat unclear on both the facts involved in the

case and whether the court really understood the issue, contains language that may suggest that

11 17 U.S.C. § 101 (definition of “fixed in a tangible medium of expression”).

12 H.R. Rep. No. 94-1476, at 53 (1976), reprinted in U.S.C.C.A.N. 5659, 5666.

13 But see R. Nimmer, Information Law ¶ 4.02[2], at 4-6 (2001) (“This language refers to subject matter

protection and not whether particular acts create an infringing copy. The exclusion of transient works refers to

the work itself, not a copy. It presumes that there was no copy of the work other than the transient display or

memory.”)

14 991 F.2d 511 (9th Cir. 1993), cert. dismissed, 114 S. Ct. 672 (1994).

15 Id. at 518.

16 991 F.2d at 518.

17 45 F.3d 231 (7th Cir. 1995).

- 18 -

merely proving that the defendant has remotely accessed the plaintiff’s software through a

terminal emulation program is not sufficient to prove that a “copy” has been made.18 Moreover,

an earlier Ninth Circuit decision in the case of Lewis Galoob Toys, Inc. v. Nintendo of America,

Inc.19 implied that an image of data stored in RAM may not qualify as a “copy.” At issue in that

case was whether a device that altered certain bytes of data of a video game “on the fly” as such

information passed through RAM created an infringing derivative work. The court held that it

did not, because although a derivative work need not be fixed, it must have some “form” or

“permanence,” which were lacking in the enhanced displays created by the device. The court

stated, however, that even if a derivative work did have to be fixed, the changes in the displayed

images wrought on the fly by the accused device did not constitute a fixation because the

transitory images it created were not “embodied” in any form.

Notwithstanding these earlier decisions, however, a great many courts have now followed

MAI,20 and some earlier decisions also support its conclusion.21 Although the opinion in one of

18 Id. at 236.

19 964 F.2d 965 (9th Cir. 1992).

20 See Carson v. Verismart Software, 2012 U.S. Dist. LEXIS 4166 at *8-9 (N.D. Cal. Mar. 27, 2012) (pleading

alleging that defendants were “using” plaintiff’s software without authorization was sufficient to state a

copyright claim because the software had to be loaded into RAM to run, which constitutes the making of a fixed

copy under MAI); Costar Realty Information, Inc. v. Field, 2010 U.S. Dist. LEXIS 135016 at *19 (D. Md. Dec.

20, 2010) (copies of web pages stored automatically in a computer’s cache or RAM upon a viewing of the web

page fall within the definition of “copy”); DocMagic, Inc. v. Ellie Mae, Inc., 745 F. Supp. 2d 1148 (N.D. Cal.

2010) (unauthorized loading of software into RAM constitutes an act of copying and thus of infringement);

Apple, Inc. v. Psystar Corp., 673 F. Supp. 2d 931, 935 (N.D. Cal. 2009) (turning on computers that loaded into

RAM copies of Apple’s Mac OS X operating system containing unauthorized modifications constitute direct

infringement of Apple’s reproduction right); Quantum Sys. Integrators, Inc. v. Sprint Nextel Corp., 2009 U.S.

App. LEXIS 14766 at *18-19 (4th Cir. July 7, 2009) (loading of software into RAM from unauthorized copies

on hard disk was sufficiently fixed for purposes of copyright infringement); SimplexGrinnell LP v. Integrated

Sys. & Power, Inc., 2009 U.S. Dist. LEXIS 30657 at *42 (S.D.N.Y. Apr. 8, 2009) (embodiment requirement is

satisfied when a program is loaded for use into a computer’s RAM and the duration requirement is satisfied

when the program remains in RAM for several minutes or until the computer is shut off); MDY Industries, LLC

v. Blizzard Entertainment, Inc., 2008 U.S. Dist. LEXIS 53988 (D. Ariz. July 14, 2008) (under MAI, copying

software into RAM constitutes making a “copy” within the purview of copyright law, so that if a person is not

authorized by the copyright holder through a license or by law (e.g. Section 117) to copy the software to RAM,

the person commits copyright infringement when using the software in an unauthorized way); Ticketmaster

L.L.C. v. RMG Technologies, Inc., 507 F. Supp. 2d 1096, 1005 (C.D. Cal. 2007) (copies of web pages stored in

a computer’s cache or RAM upon a viewing of the web page fall within the Copyright Act’s definition of a

“copy”); Storage Technology Corp. v. Custom Hardware Engineering & Consulting, Inc., 2004 U.S. Dist.

LEXIS 12391 at *11-12 (D. Mass. July 2, 2004) (unauthorized copying of a program into RAM for use of the

program infringes the copyright in the program); Lowry’s Reports, Inc. v. Legg Mason, Inc., 271 F. Supp. 2d

737, 745 (D. Md. 2003) (“Unauthorized electronic transmission of copyrighted text, from the memory of one

computer into the memory of another, creates an infringing ‘copy’ under the Copyright Act.”); Stenograph

L.L.C. v. Bossard Assocs., 144 F.3d 96 (D.C. Cir. 1998) (holding that an infringing copy of a computer

program was made when that program was loaded into RAM upon boot up and used for its principal purposes);

Triad Sys. v. Southeastern Express Co., 64 F.3d 1330 (9th Cir. 1995), cert. denied, 116 S. Ct. 1015 (1996);

Intellectual Reserve, Inc. v. Utah Lighthouse Ministry, Inc., 53 U.S.P.Q.2d 1425 (D. Utah 1999); Tiffany

Design, Inc. v. Reno-Tahoe Specialty, Inc., 55 F. Supp. 1113 (D. Nev. 1999); Marobie-FL Inc. v. National

Association of Fire Equipment Distributors, 45 U.S.P.Q.2d 1236 (N.D. Ill. 1997); Advanced Computer Servs. v.

- 19 -

these decisions suggests that only copies that exist for several minutes should constitute a “copy”

within the purview of copyright law,22 the others appear not to focus on how transitorily an

image may be stored in RAM in ruling that such an image constitutes a “copy” for purposes of

copyright law.

One of these decisions, Intellectual Reserve, Inc. v. Utah Lighthouse Ministry, Inc.,23 was

the first decision to focus on whether the act of browsing on the Internet involves the creation of

“copies” that implicate the copyright owner’s rights. In that case, the court, citing the MAI

decision, flatly stated, “When a person browses a website, and by so doing displays the

[copyrighted material], a copy of the [copyrighted material] is made in the computer’s random

access memory (RAM), to permit viewing of the material. And in making a copy, even a

temporary one, the person who browsed infringes the copyright.”24 This decision, although quite

direct in its holding, appears to address only the final “copy” that is made in the RAM of a Web

surfer’s computer in conjunction with viewing a Web page through a browser. It does not

address the trickier issue of whether whole or partial interim copies made in RAM of node

computers during the course of transmission through the Internet also constitute “copies” within

the purview of a copyright owner’s copyright rights.

However, a 2004 decision from the Fourth Circuit, CoStar v. Loopnet,25 held that

transient copies made by an OSP acting merely as a conduit to transmit information at the

instigation of others does not create fixed copies sufficient to make it a direct infringer of

copyright. “While temporary electronic copies may be made in this transmission process, they

would appear not to be ‘fixed’ in the sense that they are ‘of more than transitory duration,’ and

the ISP therefore would not be a ‘copier’ to make it directly liable under the Copyright Act.”26

The court drew a distinction between the final copy of a work made in the RAM of the ultimate

user’s computer, and the transient copies made by an OSP in the course of transmitting such

copies:

In concluding that an ISP has not itself fixed a copy in its system of more than

transitory duration when it provides an Internet hosting service to its subscribers,

we do not hold that a computer owner who downloads copyrighted software onto

a computer cannot infringe the software’s copyright. See, e.g., MAI Systems

MAI Sys., 845 F. Supp. 356 (E.D. Va. 1994); see also 2 M. Nimmer & D. Nimmer, Nimmer on Copyright §

8.08[A][1], at 8-114 (1999) (suggesting that RAM copies are fixed).

21 See Vault Corp. v. Quaid Software Ltd., 847 F.2d 255, 260 (5th Cir. 1988) (“the act of loading a program from

a medium of storage into a computer’s memory creates a copy of the program”); Apple Computer, Inc. v.

Formula Int’l, 594 F. Supp. 617, 621 (C.D. Cal. 1984) (noting that copying a program into RAM creates a

fixation, albeit a temporary one); Telerate Sys. v. Caro, 8 U.S.P.Q.2d 1740 (S.D.N.Y. 1988) (holding that the

receipt of data in a local computer constituted an infringing copy).

22 Advanced Computer Services v. MAI Systems, 845 F. Supp. 356, 363 (E.D. Va. 1994).

23 53 U.S.P.Q.2d 1425 (D. Utah 1999).

24 Id. at 1428.

25 373 F.3d 544 (4th Cir. 2004).

26 Id. at 551.

- 20 -

Corp. v. Peak Computer, Inc., 991 F.2d 511, 518-19 (9th Cir. 1993). When the

computer owner downloads copyrighted software, it possesses the software,

which then functions in the service of the computer or its owner, and the copying

is no longer of a transitory nature. See, e.g., Vault Corp. v. Quaid Software, Ltd.,

847 F.2d 255, 260 (5th Cir. 1988). “Transitory duration” is thus both a qualitative

and quantitative characterization. It is quantitative insofar as it describes the

period during which the function occurs, and it is qualitative in the sense that it

describes the status of transition. Thus, when the copyrighted software is

downloaded onto the computer, because it may be used to serve the computer or

the computer owner, it no longer remains transitory. This, however, is unlike an

ISP, which provides a system that automatically receives a subscriber’s infringing

material and transmits it to the Internet at the instigation of the subscriber.27

A 2008 decision of the Second Circuit, The Cartoon Network LP v. CSC Holdings,

Inc.,28 addressed the issue of RAM copying in considerable detail, ruling that buffer copies in

RAM made by Cablevision Systems Corp. in the course of converting channels of cable

programming from the head end feed into a format suitable for storage of individual programs by

a network digital video recording service upon customer demand were not fixed for sufficient

duration to constitute “copies.”29 Cablevision made the buffer copies in conjunction with

offering its “Remote Storage” Digital Video Recorder (RS-DVR) service that enabled

Cablevision customers to record copies of particular programs, like a normal DVR, but to store

the recorded programs on Cablevision’s servers rather than on a DVR device at their homes.

Cablevision created buffer copies, one small piece at a time, of the head end programming in two

buffers – a primary ingest buffer and a Broadband Media Router (BMR) buffer – even if no

customer requested that a copy of particular programming be stored on its behalf in the RS-DVR

service. The primary ingest buffer held no more than 0.1 seconds of each incoming channel’s

programming at any moment. The data buffer in the BMR held no more than 1.2 seconds of

programming at any time. The plaintiffs argued that these buffer copies made Cablevision a

direct infringer of their copyrights.30

The lower court found Cablevision a direct infringer largely in reliance on MAI and cases

following it.31 The Second Circuit, however, reversed. The court noted that to satisfy the

statutory definition of “copies,” two requirements must be met – an “embodiment” requirement

(embodiment in a tangible medium from which it can be perceived or reproduced) and a

“duration” requirement (embodiment for a period of more than transitory duration). The Second

27 Id.

28 536 F.3d 121 (2d Cir. 2008), cert. denied sub nom. CNN, Inc. v. CSC Holdings, Inc., 557 U.S. 946 (2009).

29 Id. at 129-30.

30 Id. at 123-24, 127.

31 Twentieth Century Fox Film Corp. v. Cablevision Sys. Corp., 478 F. Supp. 2d 607, 621-22 (S.D.N.Y. 2007).

- 21 -

Circuit found that the district court had mistakenly limited its analysis to the embodiment

requirement, and that its reliance on MAI and cases following it was misplaced.32

In general, those cases conclude that an alleged copy is fixed without addressing

the duration requirement; it does not follow, however, that those cases assume,

much less establish, that such a requirement does not exist. Indeed, the duration

requirement, by itself, was not at issue in MAI Systems and its progeny.…

Accordingly, we construe MAI Systems and its progeny as holding that loading a

program into a computer’s RAM can result in copying that program. We do not

read MAI Systems as holding that, as a matter of law, loading a program into a

form of RAM always results in copying.33

Turning to the facts of the case at hand, the Second Circuit ruled that, although the

embodiment requirement was satisfied by the buffers because the copyrighted works could be

copied from them,34 the duration requirement had not been satisfied. The court noted that no bit

of data remained in any buffer for more than a fleeting 1.2 seconds, unlike the data in cases like

MAI, which remained embodied in the computer’s RAM until the user turned the computer off.35

“While our inquiry is necessarily fact-specific, and other factors not present here may alter the

duration analysis significantly, these facts strongly suggest that the works in this case are

embodied in the buffer for only a ‘transitory’ period, thus failing the duration requirement.”36

Accordingly, the acts of buffering in the operation the RS-DVR did not create “copies” for which

Cablevision could have direct liability.37

The court in Costar Realty Information, Inc. v. Field38 ruled that an allegation that the

defendant accessed a password-protected database without authorization, which contained the

plaintiff’s copyrighted photographic images, raised a genuine dispute of material fact as to

whether the defendant engaged in direct copyright infringement when he viewed the copyrighted

work on a website that he did not have proper authorization to enter.39 Citing the Intellectual

Reserve case, the court ruled that “simply browsing a website that contains copyrighted material

32 Cartoon Network, 536 F.3d 121 at 127.

33 Id.

34 Id. at 129. “The result might be different if only a single second of a much longer work was placed in the buffer

in isolation. In such a situation, it might be reasonable to conclude that only a minuscule portion of a work,

rather than ‘a work’ was embodied in the buffer. Here, however, where every second of an entire work is

placed, one second at a time, in the buffer, we conclude that the work is embodied in the buffer.” Id.

35 Id.

36 Id.

37 Id. at 130.

38 2010 U.S. Dist. LEXIS 86567 (D. Md. Aug. 23, 2010).

39 Id. at *37-38.

- 22 -

is sufficient to constitute copyright infringement because a copy of the work is made in the

computer’s RAM to enable the images to display on the computer monitor.”40

3. The WIPO Treaties & the European Copyright Directive Are Unclear

With Respect to Interim “Copies”

The language of two copyright treaties adopted during 1996 by the World Intellectual

Property Organization (WIPO)41 leaves open the issue of whether transitory images of data

stored in RAM constitute “copies.”42

(a) Introduction to the WIPO Treaties & the European Copyright

Directive

The WIPO treaties were adopted as a result of the Diplomatic Conference on Certain

Copyright and Neighboring Rights Questions hosted by WIPO in Geneva on December 2-20,

1996. More than 700 delegates from approximately 160 countries attended this Conference,

which was aimed at tightening international copyright law to respond to issues arising from

worldwide use of the Internet. The Conference was also designed to bring existing legislation on

copyrights more in line with the provisions of the Trade Related Intellectual Property (TRIPS)

sections of the Uruguay Round trade agreement, which in 1994 set up the World Trade

Organization (WTO).43

Three new treaties were considered, only two of which were adopted: the “WIPO

Copyright Treaty” and the “WIPO Performances and Phonograms Treaty.”44 The WIPO

Copyright Treaty strengthens the Berne Convention for the Protection of Literary and Artistic

Works (the “Berne Convention”),45 established in 1886, which was the first international

copyright treaty. The WIPO Performances and Phonograms Treaty strengthens the International

Convention for the Protection of Performers, Producers of Phonograms and Broadcasting

Organizations, completed in Rome in 1961 (the “Rome Convention”).46

40 Id. at *38

41 WIPO is a United Nations organization which handles questions of copyrights and trademarks.

42 The treaties enter into force three months after 30 instruments of ratification or accession by member States

have been deposited with the Director General of WIPO.

43 Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement

Establishing the World Trade Organization, Annex 1C, Legal Instruments – Results of the Uruguay Round vol.

31; 33 I.L.M. 81 (1994).

44 The proposed WIPO Treaty on Intellectual Property in Respect of Databases generated huge controversy, and

was not adopted at the Conference. “WIPO Delegates Agree on Two Treaties,” 2 BNA’s Electronic Info. Pol’y

& L. Rep. 22, 22 (1997).

45 Berne Convention for the Protection of Literary and Artistic Works, Sept. 9, 1886, 828 U.N.T.S. 221.

46 International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting

Organizations, Oct. 26, 1961, 496 U.N.T.X. 43.

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Each of the treaties required 30 nations to accede to it before it would enter into force.

On Dec. 5, 2001, Gabon became the 30th nation to accede to the WIPO Copyright Treaty, and on

Feb. 20, 2002, Honduras became the 30th nation to accede to the WIPO Performances and

Phonograms Treaty. Accordingly, each of those treaties entered into force ninety days thereafter,

on March 6, 2002 and May 20, 2002, respectively.47 The treaties are not self executing under

United States law, and implementing legislation will have to be passed by Congress.

The two adopted treaties will effect important substantive changes in international

copyright law that have potentially far reaching implications for the Internet, and the relevant

provisions of these treaties will be discussed throughout this paper. The legislative history to the

WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty took the form of

several “Agreed Statements.” Under the Vienna Convention, an Agreed Statement is evidence

of the scope and meaning of the treaty language.48 Relevant portions of the Agreed Statements

will also be discussed in this paper.

Each of the signatories to the WIPO treaties was required to adopt implementing

legislation to conform to the requirements of the treaties. The scope of legislation required in

any particular country depends upon the substantive extent of that country’s copyright law

existing at the time of the treaty, as well the country’s own views concerning whether its existing

laws already conform to the requirements of the treaties. As discussed in detail below, WIPO

implementation legislation in the United States took a largely minimalist view of the changes to

United States copyright law required to conform to the WIPO treaties. It is curious that all the

implementing legislation introduced in Congress implicitly took the position that U.S. law

already contains most of the rights required under the WIPO treaties, in view of the fact that, as

analyzed below, much of the language describing mandatory copyright rights in the WIPO

treaties appears to go beyond the correlative rights in current United States law or to set up new

rights entirely. The possibility that other countries would adopt legislation implementing the

WIPO treaty rights in their seemingly broader form raises the prospect of varying scopes of

rights in different countries, a situation that the WIPO treaties were intended to avoid in the first

place.49

In contrast to the United States implementing legislation, the European Commission’s

“European Copyright Directive on the Harmonization of Certain Aspects of Copyright and

Related Rights in the Information Society”50 to update and harmonize member state copyright

laws (which will be referred to herein as the “European Copyright Directive”) seems to take a

more expansive view, although individual member states are free to interpret the extent to which

47 “WIPO Copyright Treaty Enters Into Force As Gabon Becomes 30th Nation to Accede,” BNA’s Electronic

Commerce & Law Report (Dec. 12, 2001) at 1224; “U.N. Announces Music Piracy Pact” (Feb. 21, 2002),

available as of Feb. 21, 2002 at http://news.com.com/2100-1023-842169.html.

48 Vienna Convention on the Law of Treaties, May 23, 1969, art. 31(2), 1155 U.N.T.S. 331.

49 WIPO Copyright Treaty, Preamble, at 4; WIPO Performances and Phonograms Treaty, Preamble, at 22.

50 The text of the European Copyright Directive may be found at

http://europa.eu.int/servlet/portail/RenderServlet?search=DocNumber&lg=en&nb_docs=25&domain=Legislati

on&coll=&in_force=NO&an_doc=2001&nu_doc=29&type_doc=Directive (available as of January 1, 2002).

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their own copyright laws already conform to the dictates of the European Copyright Directive in

adopting legislation in response to it.51 The WIPO implementation legislation in the United

States and the European Copyright Directive will be discussed at length throughout this paper as

they relate to the various issues treated herein.

(b) The WIPO Copyright Treaty

Article 7 of an earlier draft of the WIPO Copyright Treaty would apparently have

adopted the approach of MAI to the question of whether RAM copies fall within the

reproduction right of the copyright holder.52 The proposed Article 7(1) provided:

(1) The exclusive right accorded to authors of literary and artistic works in

Article 9(1) of the Berne Convention of authorizing the reproduction of their

51 The European Copyright Directive was first circulated for comments among European legal experts. It was

then officially published at the end of 1997 for a more public debate of its provisions. The European Parliament

approved a final draft of the Directive on February 14, 2001. The European Commission, acting through the

European Union ministers, accepted the final draft of the Directive on April 9, 2001.

52 The WIPO Copyright Treaty contains a number of important provisions relevant to the Internet that are not

discussed elsewhere in this paper. Article 2 codifies the idea/expression dichotomy of copyright law:

“Copyright protection extends to expressions and not to ideas, procedures, methods of operation or

mathematical concepts as such.” Article 4 expressly extends copyright protection to computer programs in all

forms as literary works: “Computer programs are protected as literary works within the meaning of Article 2 of

the Berne Convention. Such protection applies to computer programs, whatever may be the mode or form of

their expression.”

Article 5 adopts the approach of the Supreme Court’s decision in Feist Publications, Inc. v. Rural Telephone

Serv., 499 U.S. 340 (1991), which held that only the selection or arrangement of a compilation of facts such as a

database, and not the facts themselves, can be protected under copyright. Article 5 provides: “Compilations of

data or other material, in any form, which by reason of the selection or arrangement of their contents constitute

intellectual creations, are protected as such. This protection does not extend to the data or the material itself and

is without prejudice to any copyright subsisting in the data or material contained in the compilation.” The

proposed WIPO Treaty on Intellectual Property in Respect of Databases would have extended protection to the

information itself in a database where such database was the fruit of substantial labor to compile. Basic

Proposal for the Substantive Provisions of the Treaty on Intellectual Property in Respect of Databases to be

Considered by the Diplomatic Conference, art. 1(1), WIPO Doc. CRNR/DC/6 (Aug. 30, 1996)

<www.wipo.org/eng/diplconf/6dc_all.htm>. The controversy generated by this Treaty precluded its adoption

by WIPO.

Article 7(1) provides that authors of computer programs, cinematographic works, and works embodied in

phonograms shall enjoy the exclusive right of authorizing commercial rental to the public of the originals or

copies of their works. Under Article 7(2), this rental right does not apply “in the case of computer programs

where the program itself is not the essential object of the rental” or “in the case of cinematographic works,

unless such commercial rental has led to widespread copying of such works materially impairing the exclusive

right of reproduction.” The Agreed Statement for Articles 6 and 7 notes that the expressions “copies” and

“original and copies,” being subject to the right of rental, “refer exclusively to fixed copies that can be put into

circulation as tangible copies.”

Article 6 of an earlier draft of the treaty would have required Contracting Parties to abolish non-voluntary

broadcasting licenses within seven years of ratifying or acceding to the Treaty. This Article was deleted in the

final adopted version.

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works, in any manner or form, includes direct and indirect reproduction of their

works, whether permanent or temporary.

The reference to “temporary” reproductions would have seemed to cover copies in RAM.

The reference to “indirect” reproductions, particularly when coupled with the inclusion of

“temporary” reproductions, might have been broad enough to cover interim, partial

reproductions in RAM in the course of transmission of a work through the Internet, as well as

complete copies of a work made in RAM and/or on a hard disk at the receiving computer.

In addition, proposed Article 7(2) of the treaty seemed to recognize the possibility that

the language of Article 7(1) might be read to cover interim, partial reproductions during

transmission, for it would have allowed signatory members (referred to as “Contracting Parties”

in the treaty) to limit the right of reproduction in those instances:

(2) Subject to the conditions under, and without prejudice to the scope of

applicability of, Article 9(2) of the Berne Convention, it shall be a matter for

legislation in Contracting Parties to limit the right of reproduction in cases where

a temporary reproduction has the sole purpose of making the work perceptible or

where a temporary reproduction is of a transient or incidental nature, provided

that such reproduction takes place in the course of use of the work that is

authorized by the author or permitted by law in accordance with the Berne

Convention and this Treaty.53

53 Although this provision apparently was designed to ameliorate the potential mischief that might result from

deeming all interim copies of a work in the course of transmission to be within the copyright owner’s rights, it

suffered from a number of potential problems. First, it would have left the issue up to the individual

Contracting Parties whether to legislate exemptions. Thus, some Contracting Parties could have legislated such

exemptions, while others did not, and the scope of the exemptions could have varied from country to country.

As a result, whether interim copies during the course of transmission constitute infringement could have turned

on the countries through which the transmission path passes, which is arbitrary under the current transmission

technology of the Internet.

Second, Article 7(2) stated that the exemptions would apply only to transient or incidental reproductions taking

place in the course of an authorized use of a work. Thus, if the transmission itself is unauthorized, the

exemptions would not have applied, and there could still have been potential liability for the interim

reproductions. Yet the operators of the node computers in which the interim copies are made would have no

way of knowing whether any particular packet passing through the node is part of an authorized transmission.

Article 7(2) therefore was flawed.

Article 10(1) of the adopted version affords a more generic vehicle for the adoption of exemptions or exceptions

to rights conferred in the Treaty: “Contracting Parties may, in their national legislation, provide for limitations

of or exceptions to the rights granted to authors of literary and artistic works under this Treaty to an extent

consistent with exceptions or limitations provided for in the Berne Convention in certain special cases that do

not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of

the author.”

The requirement that exceptions “not unreasonably prejudice the legitimate interests of the author” provides

little guidance as to where the boundaries should lie around exceptions that Contracting Parties may wish to

adopt in implementing legislation. The Agreed Statement concerning Article 10 does nothing to clarify the

uncertainty: “It is understood that the provisions of Article 10 permit Contracting Parties to carry forward and

appropriately extend into the digital environment limitations and exceptions in their national laws which have

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The proposed Article 7, and the subject of interim transmission copies in general,

generated a lot of controversy at the Conference. Telecommunications companies and Internet

providers particularly objected to Article 7 because they feared that protection for temporary

copying would impose liability for the interim copying that inherently occurs in computer

networks. On the other hand, content providers such as the software, publishing and sound

recording industries, opposed any open-ended approach that would permit all temporary

copying.54

To resolve the controversy, the proposed Article 7 was ultimately simply deleted entirely

from the adopted version of the treaty.55 The Agreed Statement pertaining to the right of

reproduction (Previous Article 7) provides:

The reproduction right, as set out in Article 9 of the Berne Convention, and the

exceptions permitted thereunder,56 fully apply in the digital environment, in

particular to the use of works in digital form. It is understood that the storage of a

protected work in digital form in an electronic medium constitutes a reproduction

within the meaning of Article 9 of the Berne Convention.

The Assistant Secretary of Commerce and Commissioner of Patents and Trademarks at

the time, Bruce Lehman, who headed the U.S. delegation to the Conference, stated at the end of

the Conference that the Agreed Statement was intended to make clear that the reproduction right

includes the right to make digital copies, but also that certain copying, e.g., for temporary digital

storage, will be permitted. Commissioner Lehman further expressed the view that the treaty

language is broad enough to permit domestic legislation that would remove any liability on the

part of network providers where the copying is simply the result of their functioning as a conduit

for network services.57 However, the Agreed Statement itself does nothing more than reference

Article 9 of the Berne Convention, which of course was adopted long before digital copies were

an issue under copyright law, and makes no explicit reference to “temporary digital storage.” In

addition, the phrase “storage of a protected work in digital form in an electronic medium” could

potentially include temporary digital storage in a node computer during transmission. It is

therefore difficult to agree with Commissioner Lehman that the Agreed Statement makes

anything “clear.”

been considered acceptable under the Berne Convention. Similarly, these provisions should be understood to

permit Contracting Parties to devise new exceptions and limitations that are appropriate in the digital network

environment.”

54 “WIPO Delegates Agree on Two Treaties,” 2 BNA’s Electronic Info. Pol’y & L. Rep. 22, 22 (1997).

55Id.

56 Article 9(2) of the Berne Convention provides, “It shall be a matter for legislation in the countries of the Union

to permit the reproduction of such works in certain special cases, provided that such reproduction does not

conflict with a normal exploitation of the work and does not unreasonably prejudice the legitimate interests of

the author.”

57 “WIPO Delegates Agree on Two Treaties,” 2 BNA’s Electronic Info. Pol’y & L. Rep. 22, 22-23 (1997).

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Rather, the Agreed Statement seems to leave virtually open ended the question of

whether temporary images in RAM will be treated as falling within the copyright owner’s right

of reproduction. The uncertainty surrounding the scope of the reproduction right in a digital

environment that, at least early on, seemed to divide U.S. courts therefore appears destined to

replicate itself in the international arena. The uncertainty is heightened by the fact that Article 9

of the Berne Convention allows signatories to adopt certain exceptions to the reproduction right,

raising the prospect of inconsistent exceptions being adopted from country to country. As a

result, whether interim copies made during the course of transmission constitute infringement

may turn on the countries through which the transmission path passes, which is arbitrary under

the current transmission technology of the Internet. The issue ignited debate in the United States

in connection with the federal legislation to implement the treaty.

(c) The WIPO Performances and Phonograms Treaty

Curiously, despite the focus on and ultimate removal of the proposed Article 7 of the

WIPO Copyright Treaty, Article 7 as adopted in the WIPO Performances and Phonograms

Treaty appears to come closer to adopting the approach of MAI. Article 7 gives performers the

exclusive right of “authorizing the direct or indirect reproduction of their performances fixed in

phonograms” (emphasis added). As originally proposed, Article 7 contained language even

closer to the MAI logic, for it expressed the reproduction right of performers as one of

“authorizing the direct or indirect reproduction, whether permanent or temporary, of their

performances fixed in phonograms” (emphasis added). The use of the phrase “permanent or

temporary” would more strongly have suggested that temporary interim reproductions of

performances would be within the performer’s right of reproduction.

In addition, Article 7(2) in an earlier draft was also deleted, which made reference to

transient copies as follows:

Subject to the conditions under, and without prejudice to the scope of

applicability of, Article 19(2), it shall be a matter for legislation in Contracting

Parties to limit the right of reproduction in cases where a temporary reproduction

has the sole purpose of making the fixed performance perceptible or where a

temporary reproduction is of a transient or incidental nature, provided that such

reproduction takes place in the course of use of the fixed performance that is

authorized by the performer or permitted by law in accordance with this Treaty.

The Agreed Statement that was issued with respect to the right of reproduction in the

WIPO Performances and Phonograms Treaty is very similar to the Agreed Statement on the

same subject that was issued with the WIPO Copyright Treaty. The Agreed Statement issued

with the WIPO Performances and Phonograms Treaty provides:

The reproduction right, as set out in Articles 7 and 11, and the exceptions

permitted thereunder through Article 16, fully apply in the digital environment, in

particular to the use of performances and phonograms in digital form. It is

understood that the storage of a protected performance or phonogram in digital

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form in an electronic medium constitutes a reproduction within the meaning of

these Articles.

Thus, the Agreed Statement for the WIPO Performances and Phonograms Treaty contains the

same ambiguities noted above with respect to the Agreed Statement for the WIPO Copyright

Treaty.

Similar to Article 7, Article 11 gives producers of phonograms the “exclusive right of

authorizing the direct or indirect reproduction of their phonograms, in any manner or form.” As

in the case of Article 7, an earlier proposed version of Article 11 contained the phrase “whether

permanent or temporary,” but this phrase was deleted in the final adopted version.58

Both Articles 7 and 11 define the rights recited therein in terms of “phonograms.”

“Phonogram” is defined in Article 2(b) as any “fixation” of the sounds of a performance or of

other sounds other than incorporated in a cinematographic or other audiovisual work.

“Fixation” is defined broadly in Article 2(c) as “the embodiment of sounds or the

representations thereof, from which they can be perceived, reproduced or communicated through

a device.” Storage in RAM would seem to satisfy this definition of fixation. Thus, any

unauthorized transmission of a performance, or of the sounds embodied in a phonogram fixing

such performance, to RAM memory would potentially violate the rights of both the owner of the

performance and of the phonogram.59

58 Article 11(2) in an earlier draft, similar to the proposed and later deleted Article 7(2), was also deleted. Article

11(2) would have provided: “Subject to the conditions under, and without prejudice to the scope of

applicability of, Article 19(2), it shall be a matter for legislation in Contracting Parties to limit the right of

reproduction in cases where a temporary reproduction has the sole purpose of making the phonogram audible or

where a temporary reproduction is of a transient or incidental nature, provided that such reproduction takes

place in the course of use of the phonogram that is authorized by the producer of the phonogram or permitted by

law in accordance with this Treaty.”

59 The WIPO Performances and Phonograms Treaty contains a number of important provisions relevant to the

Internet that are not discussed elsewhere in this paper. Article 4 requires Contracting Parties to afford national

treatment to nationals of other Contracting Parties. Article 5(1) affords moral rights to performers:

“Independently of a performer’s economic rights, and even after the transfer of those rights, the performer shall,

as regards his live aural performances or performances fixed in phonograms, have the right to claim to be

identified as the performer of his performances, except where omission is dictated by the manner of the use of

the performance, and to object to any distortion, mutilation or other modification of his performances that

would be prejudicial to his reputation.” A proposed Article 5(4), which was deleted in the final version, would

have allowed any Contracting Party to declare in a notification deposited with the Director General of WIPO

that it will not apply the provisions of Article 5.

Article 6 grants performers the exclusive right of authorizing the broadcasting and communication to the public

of their unfixed performances (except where the performance is already a broadcast performance) and the

fixation of their unfixed performances. Articles 9 and 13 grant performers and producers of phonograms,

respectively, the exclusive right of authorizing the commercial rental to the public of the original and copies of

their performances fixed in phonograms and of their phonograms.

Article 15 provides that “[p]erformers and producers of phonograms shall enjoy the right to a single equitable

remuneration for the direct or indirect use of phonograms published for commercial purposes for broadcasting

or for any communication to the public.” The Agreed Statement for Article 15 provides: “It is understood that

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Thus, the WIPO Performances and Phonograms Treaty replicates the same uncertainty as

the WIPO Copyright Treaty with respect to the issue of whether transient “copies” of

performances and phonograms will fall within the copyright owner’s right of reproduction.60

Indeed, the definition of the right of reproduction in Article 7 and Article 11 to include “direct or

indirect” reproductions, together with the broad definition of “fixation” in Article 2(c), arguably

adopt an approach that is closer to the MAI decision than the WIPO Copyright Treaty.

4. The Requirement of Volition for Direct Liability

Even assuming the rationale of the MAI case and the provisions of the WIPO Treaties are

applied to deem all reproductions during transmission of a work through the Internet to be

“copies” within the copyright owner’s rights, a difficult issue arises as to who should be

responsible for the making of such copies. Multiple actors may be potentially connected with a

particular copy or copies of a work on the Internet, such as a work posted to a bulletin board

service (BBS) – the original poster of the work, the BBS operator, the Online Service Provider

(OSP) through which the BBS is offered, a user downloading a copy of the work from the BBS,

and perhaps the operators of node computers through which a copy of the work may pass during

the course of such downloading. Which one or more of these actors should be deemed to have

made the copy or copies?

The most difficult aspect of the issue of which actors should be liable for copies made in

the course of the downloading, viewing or other transmission of a work through the Internet

stems from the fact that many such copies will typically be made automatically. For example,

“copies” of the work (in whole or in part) will automatically be made in the RAM (and possibly

in temporary hard disk storage) of each interim node computer within the transmission path of

the work through the Internet. And the modems on the initiating and receiving ends of the

transmission will buffer the data to be transmitted. Internet search engine services may use

Article 15 does not represent a complete resolution of the level of rights of broadcasting and communication to

the public that should be enjoyed by performers and phonogram producers in the digital age. Delegations were

unable to achieve consensus on differing proposals for aspects of exclusivity to be provided in certain

circumstances or for rights to be provided without the possibility of reservations, and have therefore left the

issue to future resolution.”

Under Article 17(1), the term of protection to be granted to performers under the Treaty is at least 50 years from

the end of the year in which the performance was fixed in a phonogram. Under Article 17(2), the term of

protection to be granted to producers of phonograms under the Treaty is at least 50 years from the end of the

year in which the phonogram was published, or failing such publication within 50 years from fixation of the

phonogram, 50 years from the end of the year in which the fixation was made.

60 Article 16 affords a generic vehicle for the adoption of exemptions or exceptions to rights conferred in the

Treaty. Article 16(1) provides that “Contracting Parties may, in their national legislation, provide for the same

kinds of limitations or exceptions with regard to the protection of performers and producers of phonograms as

they provide for in their national legislation, in connection with the protection of copyright in literary and

artistic works.” Article 16(2) provides, however, similar to the WIPO Copyright Treaty, that “Contracting

Parties shall confine any limitations of or exceptions to rights provided for in this Treaty to certain special cases

which do not conflict with a normal exploitation of the phonogram and do not unreasonably prejudice the

legitimate interests of the performer or of the producer of phonograms.”

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“spiders” to “crawl” through the Internet and make copies in RAM of materials on websites in

the course of creating an index of that material.

Should a volitional act be required on the part of a third party to be liable for a copy made

during transmission? If so, is a direct volitional act to cause the copy to be made required (as in

the case of the original poster or the ultimate recipient of the copy), or is it sufficient if there was

a volitional act in setting up the automatic process that ultimately causes the copy to be made (as

in the case of the BBS operator, the OSP or the search engine service)? In view of the fact that

copyright law has traditionally imposed a standard of strict liability for infringement,61 one could

argue that a direct volitional act may not be required.62

In addition to copies made automatically on the Internet, many infringing copies may be

made innocently. For example, one may innocently receive an e-mail message that infringes the

copyright rights of another and print that message out. Or one may innocently encounter (and

copy into the RAM of one’s computer or print out) infringing material in the course of browsing.

Several cases have addressed the issue of direct liability on the part of OSPs, BBS

operators, and others for infringement of the reproduction right by users of the service, and in

particular how much of a volitional act is required for direct infringement liability:63

(a) The Netcom Case

The well known case of Religious Technology Center v. Netcom On-Line

Communication Services64 refused to impose direct infringement liability on an OSP for copies

made through its service, at least where the OSP had no knowledge of such infringements. In

that case the plaintiffs sought to hold liable the OSP (Netcom) and the operator of a BBS which

gained its Internet access through the OSP for postings of the plaintiffs’ copyrighted works on

the bulletin board. The works in question were posted by an individual named Erlich65 to the

BBS’s computer for use through Usenet.66 The BBS’s computer automatically briefly stored

them. The OSP then automatically copied the posted works onto its computer and onto other

61 Religious Technology Center v. Netcom On-Line Communications Servs., 907 F. Supp. 1361, 1367 & n.10

(N.D. Cal. 1995); R. Nimmer, Information Law ¶ 4.06, at 4-25 (2001). Intent can, however, affect statutory

damages to be awarded to the plaintiff. Netcom, 907 F. Supp. at 1367.

62 But cf. R. Nimmer, Information Law ¶ 4.06, at S4-50 (2001 Cum. Supp. No. 2) (“Although copyright is a strict

liability statute, there should be some [sort] of volition or causation which is lacking where a defendant’s

system is merely used to create a copy by a third party.”).

63 See also cases discussed in Section III.C.1 below pertaining to direct liability of online service providers.

64 907 F. Supp. 1361 (N.D. Cal. 1995).

65 In an earlier order, the court had entered a preliminary injunction against Erlich himself.

66 The Usenet is “a worldwide community of electronic BBSs that is closely associated with the Internet and with

the Internet community. The messages in Usenet are organized into thousands of topical groups, or

‘Newsgroups’ .... As a Usenet user, you read and contribute (‘post’) to your local Usenet site. Each Usenet site

distributes its users’ postings to other Usenet sites based on various implicit and explicit configuration settings,

and in turn receives postings from other sites.” Daniel P. Dern, The Internet Guide for New Users 196-97

(1994).

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computers on the Usenet. In accordance with usual Usenet procedures, Usenet servers

maintained the posted works for a short period of time – eleven days on Netcom’s computer and

three days on the BBS’s computer.67 The OSP neither created nor controlled the content of the

information available to its subscribers, nor did it take any action after being told by the plaintiffs

that Erlich had posted infringing messages through its system.68

The court cast the issue of direct liability as “whether possessors of computers are liable

for incidental copies automatically made on their computers using their software as part of a

process initiated by a third party.”69 The court distinguished MAI, noting that “unlike MAI, the

mere fact that Netcom’s system incidentally makes temporary copies of plaintiffs’ works does

not mean that Netcom has caused the copying. The court believes that Netcom’s act of

designing or implementing a system that automatically and uniformly creates temporary copies

of all data sent through it is not unlike that of the owner of a copying machine who lets the public

make copies with it.”70 The court held that, absent any volitional act on the part of the OSP or

the BBS operator other than the initial setting up of the system, the plaintiffs’ theory of liability,

carried to its natural extreme, would lead to unreasonable liability:

Although copyright is a strict liability statute, there should still be some element

of volition or causation which is lacking where a defendant’s system is merely

used to create a copy by a third party.71

Accordingly, the court refused to hold the OSP liable for direct infringement. The court

also refused to hold the BBS operator liable for direct infringement. “[T]his court holds that the

storage on a defendant’s system of infringing copies and retransmission to other servers is not a

direct infringement by the BBS operator of the exclusive right to reproduce the work where such

copies are uploaded by an infringing user.”72 The court further held that the warning of the

presence of infringing material the plaintiffs had given did not alter the outcome with respect to

direct infringement liability:

Whether a defendant makes a direct copy that constitutes infringement cannot

depend on whether it received a warning to delete the message. This distinction

may be relevant to contributory infringement, however, where knowledge is an

element.73

The result of the Netcom case with respect to liability for direct infringement for the

transmission and intermediate storage of copyrighted materials by an OSP was codified in the

67 Netcom, 907 F. Supp. at 1367.

68 Id. at 1368.

69Id.

70 Id. at 1369.

71 Id. at 1370.

72 Id. at 1370-71 (emphasis in original).

73 Id. at 1370.

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first safe harbor for OSPs set forth in Section 512(a)(1) of the Digital Millennium Copyright

Act,74 discussed in detail in Section III.C below.

(b) The MAPHIA Case

Another well known case, Sega Enterprises Ltd. v. MAPHIA,75 adopted the logic of the

Netcom case and refused to hold a BBS and its system operator directly liable for the uploading

and downloading of unauthorized copies of Sega’s video games, even though the defendants

participated in encouraging the unauthorized copying, which was not true in Netcom. (As

discussed below, the court did, however, find contributory liability.) The evidence established

that the system operator had knowledge that the infringing activity was going on through the

bulletin board, and indeed that he had specifically solicited the uploading of the games for

downloading by users of the bulletin board.76 The system operator also sold video game

“copiers,” known as “Super Magic Drives,” through the MAPHIA BBS, which enabled

subscribers to the BBS to play games which had been downloaded from the BBS.77

In granting a motion by Sega seeking summary judgment and a permanent injunction, the

court refused to impose direct liability for copyright infringement on the BBS and its system

operator, Chad Sherman. The court cited the Netcom case for the proposition that, although

copyright is a strict liability statute, there should be some element of volition or causation which

is lacking where a defendant’s system is merely used to create a copy by a third party.78 The

court further stated:

While Sherman’s actions in this case are more participatory than those of the

defendants in Netcom, the Court finds Netcom persuasive. Sega has not shown

that Sherman himself uploaded or downloaded the files, or directly caused such

uploading or downloading to occur. The most Sega has shown is that Sherman

operated his BBS, that he knew infringing activity was occurring, and that he

solicited others to upload games. However, whether Sherman knew his BBS

users were infringing on Sega’s copyright, or encouraged them to do so, has no

bearing on whether Sherman directly caused the copying to occur. Furthermore,

Sherman’s actions as a BBS operator and copier seller are more appropriately

analyzed under contributory or vicarious liability theories. Therefore, because

74 H.R. Rep. No. 105-551 Part 1, at 11, 24 (1998).

75 948 F. Supp. 923 (N.D. Cal. 1996).

76 Id. at 928.

77 Id. at 929. The Super Magic Drive consisted of a connector which plugged into the video game console, a

receptacle which accepted video game cartridges, a main unit having a RAM to store games, and a floppy disk

drive. “A MAPHIA BBS user can download video programs through his or her computer onto a floppy disk

and make copies with his or her computer or play those game programs through the adaptor drive. To play a

downloaded game, the user places the floppy disk into the video game copier. The user can choose the ‘run

program’ option and run the video game program from the floppy disk without a video game cartridge. The

adaptor drive also allows the user to copy the contents of a game cartridge onto a floppy disk.”Id.

78 Id. at 932.

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Sega has not shown that Sherman directly caused the copying, Sherman cannot be

liable for direct infringement.79

(c) The Sabella Case

Similarly, in Sega Enterprises Ltd. v. Sabella,80 the court refused to hold a BBS operator

liable for direct infringement of the reproduction right where there was no evidence that the

operator did any unauthorized copying herself. The defendant, Sabella, was the system operator

of a BBS called “The Sewer Line,” which contained a directory called “Genesis,” into which

were uploaded and downloaded infringing copies of Sega’s video games by subscribers to the

BBS. The defendant also sold copiers that enabled users to play Sega games directly from

floppy disks without the need for a Sega game cartridge, and allowed purchasers of her copiers

to download files from her BBS without charge for a certain time period.

Although the court agreed that the defendant’s activities were more participatory than

those of the defendant in Netcom, the court nevertheless found the Netcom court’s logic

persuasive. “Sega has not shown that Sabella herself uploaded or downloaded the files, or

directly caused such uploading or downloading to occur. The most Sega has shown is that

Sabella should have known such activity was occurring, that she sold copiers that played games

such as those on her BBS, and that she gave her copier customers downloading privileges on her

BBS.”81 Citing Netcom, the court concluded that “whether Sabella knew her BBS users were

79 Id. (citations to Netcom omitted). An earlier opinion in the case, issued in conjunction with the granting of a

preliminary injunction to Sega, although somewhat unclear in its holding, seemed to suggest that the defendants

could be held liable for direct infringement, at least for the unauthorized copies being uploaded through the

bulletin board, although not for the subsequent downloading of copies by user of the bulletin board. See Sega

Enterprises Ltd. v. MAPHIA, 857 F. Supp. 679, 683 (N.D. Cal. 1994). The court in the later opinion, however,

disavowed this interpretation of its earlier opinion. With respect to its earlier order granting a preliminary

injunction, the court stated, “To the extent that order can be read to suggest that Sherman may be liable for

direct copyright infringement, it is clarified and superseded by this order.” Sega Enterprises Ltd. v. MAPHIA,

948 F. Supp. 923, 932 n.5 (N.D. Cal. 1996).

The court also rejected a fair use defense raised by Sherman. With respect to the first fair use factor, the

purpose and character of the use, the court found that Sherman’s activities in encouraging the uploading and

downloading of Sega’s games was clearly commercial. “Sherman intended to profit directly from the content of

the information made available on his BBS because his copier customers could use the game files to play the

games rather than purchase Sega game cartridges. This distinguishes Sherman from the Internet provider in

Netcom who did not gain anything from the content of the information available to subscribers.” Id. at 934.

With respect to the second fair use factor, the nature of the copyrighted work, the court noted that the Sega

video games were for entertainment uses and involved fiction and fantasy, so that the second factor weighed

against fair use. Id. The court found that the third factor, the extent of the work copied, weighed against fair

use because BBS users copied virtually entire copyrighted works, and Sherman had not shown any public

benefit or explanation for the complete copying. Id. at 935. Finally, the court found that the fourth factor, the

effect of the use upon the market, also weighed against fair use. “Even if the users are only playing the games

in their own homes and even if there are currently only a limited number of users that have copiers, unrestricted

and widespread conduct of this sort would result in a substantial adverse impact on the market for the Sega

games.”Id.

80 1997 Copyr. Law. Dec. ¶ 27,648 (N.D. Cal. Dec. 18, 1996).

81 Id. at 29,847-48.

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infringing on Sega’s copyright or encouraged them to do so, has no bearing on whether Sabella

directly caused the copying to occur.”82

The court did rule, however, that Sabella was liable for contributory infringement. The

court cited the Ninth Circuit’s holding in Fonovisa, Inc. v. Cherry Auction, Inc. that “providing

the site and facilities for known infringing activity is sufficient to establish contributory

liability.” 83 The court noted that Sabella provided the BBS as a central depository site for the

unauthorized copies of games, and allowed subsequent distribution of the games by user

downloads. “She provided the facilities for copying the games by providing, monitoring, and

operating the BBS software, hardware, and phone lines necessary for the users to upload and

download games.”84 Accordingly, she was liable for contributory infringement under the

Fonovisa standard.85

The court went further, however, holding that even an alternative and higher standard of

“substantial participation,” Sabella was liable. “Sabella did more than provide the site and

facilities for the known infringing conduct. She provided a road map on the BBS for easy

identification of Sega games available for downloading.”86 The court also rejected Sabella’s fair

use defense, issued a permanent injunction against Sabella, and awarded Sega statutory damages

of $5,000 per infringed work.

In contrast to the preceding cases, several cases have held that where a defendant BBS

operator has a more direct participation in the acts of infringement of its subscribers or users,

there can be direct infringement liability for those acts:

(d) The Frena Case

Playboy Enterprises, Inc. v. Frena,87 decided before Netcom, MAPHIA and Sabella, goes

further than those cases and established liability for the acts of subscribers without a direct

volitional act on the part of the operator. In that case, the court held the operator of a BBS,

Frena, responsible for infringement of the rights of distribution and display (although curiously

not the right of reproduction) with respect to the plaintiff’s copyrighted photographs, which were

distributed and displayed through the bulletin board by subscribers, despite evidence that the

operator never himself uploaded any of the photographs onto the bulletin board and removed the

82 Id. at 29,848.

83 76 F.3d 259, 264 (9th Cir. 1996).

84 Sabella, 1997 Copyr. Law. Dec. ¶ 27,648 at 29,849.

85 Another recent case applied the Fonovisa standard to hold the defendant Cyrix Corporation liable for

contributory infringement for posting on its website some copyrighted applet software of the plaintiff from

which it could be downloaded for use with the defendant’s sound boards. “Cyrix is probably also contributorily

liable because it encouraged and provided the resources for known infringing activity, i.e. the copying by others

of the applet software that Cyrix made available on its website.” Creative Labs, Inc. v. Cyrix Corp., 42

U.S.P.Q.2d 1872, 1875-76 (N.D. Cal. 1997).

86 Sabella, 1997 Copyr. Law. Dec. ¶ 27,648 at 29,849.

87 839 F. Supp. 1552 (M.D. Fla. 1993).

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photographs as soon as he was made aware of them. 88 “There is no dispute that Defendant

Frena supplied a product containing unauthorized copies of a copyrighted work. It does not

matter that Defendant Frena claims he did not make the copies [himself].” 89 Although the case

did not generate a finding of liability with respect to the right of reproduction, the court’s logic

with respect to finding infringement of the rights of distribution and display would seem to apply

to the reproduction right as well.

The reach of Frena may be limited, however, because the BBS was apparently one

devoted to photographs, much of it of adult subject matter, and subscribers routinely uploaded

and downloaded images therefrom. Thus, the court may have viewed Frena as a more direct

participant in the infringement, having set up a bulletin board that was devoted to the kind of

activity that would foreseeably lead to infringement. The undisputed evidence of the presence

on the bulletin board of the plaintiff’s photographs, some of which had been edited to remove the

plaintiff’s trademarks and to add Frena’s advertisements, was apparently evidence of sufficient

involvement for the court to find direct infringement of the public distribution right. Similarly,

Frena’s selection of the infringing content for inclusion in the bulletin board was apparently

sufficient involvement to find direct infringement of the public display right.90

In addition, as discussed in detail below, the legislative history of the Digital Millennium

Copyright Act, which contains a number of safe harbors that address the issue of OSP liability,

states that it was intended to overrule the Frena case, at least to the extent Frena suggested that

passive, automatic acts engaged in through a technological process initiated by another through

the facilities of an OSP could constitute direct infringement on the part of the OSP.91 In a case

decided in 2001, the Fourth Circuit held that the Digital Millennium Copyright Act had indeed

overruled Frena “insofar as that case suggests that [passive, automatic acts engaged in through a

technological process initiated by another] could constitute direct infringement.”92

(e) The Webbworld Case

In a case factually similar to Frena, a company operating a website was held directly

liable for the posting of copyrighted material on its site which could be downloaded by

subscribers. In Playboy Enterprises, Inc. v. Webbworld, Inc.,93 the defendant Webbworld, Inc.

operated a website called Neptics, which made adult images available to subscribers who paid

$11.95 per month. Over a period of several months, images became available through the

Neptics website which were originally created by or for the plaintiff Playboy Enterprises, Inc.

88 Id. at 1554.

89 Id. at 1556.

90 K. Stuckey, Internet and Online Law § 6.10[1][b], at 6-88 – 6-89 (2008).

91 H.R. Rep. No. 105-551 Part 1, at 11 (1998).

92 ALS Scan, Inc. v. RemarQ Communities, Inc., 239 F.3d 619, 622 (4th Cir. 2001). A subsequent district court

cited with approval the Fourth Circuit’s decision on this point. See Costar Group Inc. v. Loopnet, Inc., 164 F.

Supp. 2d 688, 695-96 (D. Md. 2001), aff’d, 373 F.3d 544 (4th Cir. 2004).

93 968 F. Supp. 1171 (N.D. Tex. 1997).

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The court rejected the defendant’s argument that it could not be held directly liable for

infringement under the logic of the Netcom case. The court distinguished the Netcom case on

the ground that Netcom did not create or control the content of the information available to its

subscribers, but rather merely provided access to the Internet. In contrast, the court noted that

Neptics was receiving payment selling the images it stored on its computers, and therefore was

acting as more than merely an information conduit.94

The defendant also argued that it could not be held liable for direct infringement because

it had no control over the persons who posted the infringing images to the adult newsgroups from

which Neptics obtained its material. The court rejected this argument: “While this may be true,

Neptics surely has control over the images it chooses to sell on the Neptics’ website. Even the

absence of the ability to exercise such control, however, is no defense to liability. If a business

cannot be operated within the bounds of the Copyright Act, then perhaps the question of its

legitimate existence needs to be addressed.”95

(f) The Sanfilippo Case

In Playboy Enterprises, Inc. v. Sanfilippo,96 the court found the defendant operator of a

website through which 7475 of the plaintiff’s copyrighted images were available directly liable

for infringement. The defendant admitted copying 16 files containing a great many of the

images from a third party source onto his hard drive and CD-ROM. He also admitted that 11

other files containing such images were uploaded to his hard drive by a third party. The court

found that, because the defendant had authorized the third party to upload such files to his site,

the defendant was directly liable for such upload as a violation of the exclusive right under

Section 106 of the copyright statute to “authorize” others to reproduce a copyrighted work. The

court also found that the defendant had willfully infringed 1699 of the copyrighted images.

One of the most interesting aspects of the Sanfilippo case is the amount of damages the

court awarded. The plaintiff sought statutory damages, and argued that a statutory damages

award should be made for each individual image that was infringed. The defendant argued that,

in awarding damages, the court should consider the fact that the copied images were taken from

compilations and, therefore, an award should be made only with respect to each particular

94 Id. at 1175.

95 Id. The court also held that the principals of Webbworld could be held vicariously liable for the infringements.

Although the principals had no control over those responsible for originally uploading the infringing images

onto the Internet sites from which Webbworld drew its images, the principals had the right and ability to control

what occurred on the Neptics website. The court ruled that the $11.95 subscription fee gave the principals a

sufficient direct financial benefit from the infringing activity to hold them vicariously liable. Id. at 1177.

The court made its rulings in the context of a motion for summary judgment by the plaintiff. The court granted

summary judgment of infringement with respect to sixty-two copyrighted images, but denied summary

judgment with respect to sixteen additional images because of the presence of material issues of fact. In a

subsequent ruling, the court found the defendants directly and vicariously liable with respect to these sixteen

additional images based on a similar legal analysis of liability. See Playboy Enterprises, Inc. v. Webbworld,

Inc., 45 U.S.P.Q.2d 1641 (N.D. Tex. 1997).

96 1998 U.S. Dist. LEXIS 5125 (S.D. Cal. 1998).

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magazine’s copyright from which the images were taken. The court rejected this argument and

allowed a statutory damage award for each image on the grounds that each image had an

independent economic value on its own, each image represented “a singular and copyrightable

effort concerning a particular model, photographer, and location,”97 and the defendant marketed

each one of the images separately. The court awarded statutory damages of $500 per image, for

a total damage award of $3,737,500.98

(g) The Free Republic Case

Even where there is a direct volitional act on the part of a website operator in copying

copyrighted material onto its site, difficult questions relating to First Amendment and fair use

rights may arise, particularly where the Web is used to facilitate free ranging discussion among

participants. For example, in 1998, the Los Angeles Times and The Washington Post filed a

copyright infringement lawsuit against the operator of a website called the Free Republic. The

site contained news stories from dozens of sources (including the plaintiffs), posted both by the

operator of the site and its users, and users were allowed to attach comments to the stories.99 The

plaintiffs argued that, because verbatim complete copies of their news stories were often posted

on the website, it was reducing traffic to their own websites on which the articles were posted,

and was harming their ability to license their articles and to sell online copies of archived

articles.100 The defendants raised defenses under the fair use doctrine and under the First

Amendment.101 The defendants moved for summary judgment on all claims and the plaintiffs

cross moved for summary judgment on the defendants’ defense of fair use.

The court rejected the defendants’ fair use argument and ruled that the defendants might

be liable for infringement.102 The court ruled that the first fair use factor (purpose and character

of the use) favored the plaintiffs, noting there was little transformative about copying the entirety

or portions of the articles, since the articles on the defendants’ site served the same purpose as

that for which one would normally seek to obtain the original – for ready reference if and when

websites visitors needed to look at it.103 The court also rejected the addition of commentary to

the articles as favoring the defendants under the first factor, noting that the first posting of an

article to the site often contained little or no transforming commentary, and in most cases it was

not necessary to copy verbatim the entire article in order for users to be able to comment on the

97 Id. at *18-19.

98 The plaintiff requested an astronomical $285,420,000 in statutory damages ($20,000/image for 5776 images

that were not willfully infringed, and $100,000/image for 1699 images that were willfully infringed).

99 Los Angeles Times v. Free Republic, 54 U.S.P.Q.2d 1453, 1455-56 (C.D. Cal. 2000).

100 Id. at 1457.

101 Id. at 1454-55.

102 The court limited its opinion to the availability of the defenses on which the defendants had moved for summary

judgment. The court stated it was expressing no opinion as to whether, “given that the ‘copying’ of news

articles at issue in this case is to a large extent copying by third-party users,” the plaintiffs could prove a claim

against the defendants for copyright infringement. Id. at 1458.

103 Id. at 1460-61.

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article.104 Finally, the court noted that the Free Republic site was a for-profit site, for which the

copying enhanced the defendants’ ability to solicit donations and generate goodwill for their

website operation and other businesses of the website operator.105

The second fair use factor (nature of the copyrighted work) favored the defendants,

because the copied news articles were predominantly factual in nature.106 The third fair use

factor (amount and substantiality of the portion used in relation to the copyrighted work as a

whole) favored the plaintiffs, because in many cases exact copies of the entire article were made

and the court had previously found that copying of the entire article was not necessary to

comment on it.107 Finally, the fourth fair use factor (effect of the use on the potential market for

or value of the copyrighted work) favored the plaintiffs, because the court found that the

availability of complete copies of the articles on the Free Republic site fulfilled at least to some

extent demand for the original works and diminished the plaintiffs’ ability to sell and license

their articles.108 On balance, then, the court concluded that the defendants could not establish a

fair use defense.109

The court also rejected the defendants’ First Amendment defense on the ground that the

defendants had failed to show that copying entire news articles was essential to convey the

opinions and criticisms of visitors to the site. The court noted that visitors’ critiques could be

attached to a summary of the article, or Free Republic could have provided a link to the

plaintiffs’ websites where the articles could be found.110

The parties subsequently settled the case, pursuant to which the court entered a stipulated

final judgment enjoining the defendants from copying, posting, uploading, downloading,

distributing or archiving any of the plaintiffs’ works, or encouraging others to do so, or operating

any website or other online service that accomplished or permitted any of the foregoing, except

as otherwise permitted by the plaintiffs in writing or by the fair use doctrine. The defendants

agreed to pay $1,000,000 in statutory damages for past infringing acts.111

104 Id. at 1461 & 1463-64. The most telling fact on the latter point was that the Free Republic provided a hypertext

link to Jewish World Review’s website at its request, and asked that Free Republic visitors no longer copy the

publication’s articles verbatim. Id. at 1463.

105 Id. at 1464-66.

106 Id. at 1467.

107 Id. at 1468.

108 Id. at 1470-71. The court rejected the defendants’ argument that its site was increasing hits to the plaintiffs’

sites through referrals off its own site, noting that the defendants had not addressed how many hits to the

plaintiffs’ sites were diverted away as a consequence of the posting of articles to the Free Republic. The court

also cited several cases rejecting the argument that a use is fair because it increases demand for the plaintiff’s

copyrighted work. Id. at 1471.

109 Id. at 1472.

110 Id. at 1472-73.

111 Los Angeles Times v. Free Republic, 56 U.S.P.Q. 2d 1862 (C.D. Cal. 2000).

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(h) The MP3.com Cases

In 2000, the Recording Industry Association of America, Inc. (RIAA), on behalf of 10 of

its members, filed a complaint in federal court in the Southern District of New York for willful

copyright infringement against MP3.com, based on MP3.com’s new “My.MP3” service.112

According to the complaint, this service allowed users to gain access through the Internet, and

download digital copies of, commercial CDs, using one of two component services:

“Instant Listening Service” – Under this service, a user could place an order for a commercial

CD through one of several online CD retailers cooperating with MP3.com, and then immediately

have access to the song tracks on that CD stored on an MP3.com server, before arrival of the

shipment of the physical CD ordered by the user.113

“Beam-it” – Under this service, a user could insert a commercial CD or a copy thereof

(authorized or unauthorized) into his or her computer CD-ROM drive. If the MP3.com server

was able to recognize the CD, the user was then given access to the song tracks contained on the

CD stored on an MP3.com server.114

In order to offer the My.MP3 service, MP3.com purchased and copied the tracks from

several tens of thousands of commercial CDs onto its servers.115 When users accessed sound

recordings through My.MP3, it was these reproductions made by MP3.com that were accessed,

and not any copies made from the users’ own CD.116 The plaintiffs sought a ruling that the

copying of the commercial CDs onto the MP3.com servers constituted willful infringement of

the copyright rights of the plaintiffs.

The case raised the very interesting issue of whether, assuming that users who are the

owners of a lawful copy of a CD could lawfully upload a copy thereof to an MP3.com server for

their own private use under Section 1008117 of the Audio Home Recording Act of 1992118 or

under the fair use doctrine, it should be lawful for MP3.com to assist users in accomplishing that,

and, if so, whether it should be permissible to do so by advance copying of tracks in anticipation

of a user ordering or already owning a CD containing those tracks.

112 Complaint for Copyright Infringement, UMG Recordings, Inc. v. MP3.com, Inc., No. 00 Civ. 0472 (S.D.N.Y.

Jan. 21, 2000).

113 Id. ¶ 4 & App. A.

114 Id.

115 UMG Recordings Inc. v. MP3.com Inc., 92 F. Supp. 2d 349, 350 (S.D.N.Y. 2000).

116 Id.

117 Section 1008 provides: “No action may be brought under this title alleging infringement of copyright based on

the manufacture, importation, or distribution of a digital audio recording device, a digital audio recording

medium, an analog recording device, or an analog recording medium, or based on the noncommercial use by a

consumer of such a device or medium for making digital musical recordings or analog musical recordings.” 17

U.S.C. § 1008.

118 Pub. L. No. 102-563, 106 Stat. 4244 (1992).

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The court ruled that the copying by MP3.com of the commercial CDs made out a prima

facie case of direct copyright infringement,119 and rejected the defendant’s assertion that such

copying was a fair use. The court ruled that the first fair use factor (purpose and character of the

use) weighed against the defendant because the defendant’s purpose for the use was commercial

– although defendant was not charging users a fee for the service, “defendant seeks to attract a

sufficiently large subscription base to draw advertising and otherwise make a profit.”120 The

court rejected the defendant’s argument that the copying was transformative because it allowed

users to “space shift” their CDs into another format in which they could enjoy their sound

recordings without lugging around physical CDs, ruling that the argument was “simply another

way of saying that the unauthorized copies are being retransmitted in another medium – an

insufficient basis for any legitimate claim of transformation.”121

With respect to the second factor (nature of the copyrighted work), the court held that,

because the copyrighted works at issue were creative musical works, this factor weighed against

defendant.122 The third factor (amount and substantiality of the copyrighted work used) also

weighed against the defendant because the defendant had copied, and the My.MP3 service

replayed, the copyrighted works in their entirety.123

Finally, with respect to the fourth factor (effect of the use upon the potential market for or

value of the copyrighted work), the court noted that the defendant’s activities “on their face

invade plaintiffs’ statutory right to license their copyrighted sound recordings to others for

reproduction.”124 The defendant argued that its activities enhanced the plaintiffs’ sales, since

subscribers could not gain access to recordings through MP3.com unless had already purchased,

or agreed to purchase, their own CD copies of those recordings. The court rejected this argument

on the following rationale:

Any allegedly positive impact of defendant’s activities on plaintiffs’ prior market

in no way frees defendant to usurp a further market that directly derives from

reproduction of the plaintiffs’ copyrighted works. This would be so even if the

copyrightholder had not yet entered the new market in issue, for a

copyrightholder’s “exclusive” rights, derived from the Constitution and the

119 “Thus, although defendant seeks to portray its service as the ‘functional equivalent’ of storing its subscribers’

CDs, in actuality defendant is re-playing for the subscribers converted versions of the recordings it copied,

without authorization, from plaintiffs’ copyrighted CDs. On its face, this makes out a presumptive case of

infringement under the Copyright Act of 1976 ….” 92 F. Supp. 2d at 350.

120 Id. at 351.

121 Id. Contrast this holding with the Ninth Circuit’s statement in RIAA v. Diamond Multimedia Sys., 180 F.3d

1072, 1079 (9th Cir. 1999), in which the Ninth Circuit found space shifting of a recording from a CD onto the

“Rio” portable MP3 player device (through a process known as “ripping,” or re-encoding of music data encoded

in CD format into the MP3 file format) to be “paradigmatic noncommercial personal use entirely consistent

with the purposes of the [Audio Home Recording Act].”

122 UMG, 92 F. Supp. 2d at 351-52.

123 Id. at 352.

124Id.

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Copyright Act, include the right, within broad limits, to curb the development of

such a derivative market by refusing to license a copyrighted work or by doing so

only on terms the copyright owner finds acceptable.125

The court therefore ruled that the defendant was not entitled to a fair use defense as a

matter of law, and entered partial summary judgment holding the defendant to have infringed the

plaintiffs’ copyrights.126 Subsequent to the court’s ruling of infringement, the defendant settled

with all but one of the plaintiff record companies (Universal Music Group) by taking a license to

reproduce the plaintiffs’ recordings on its servers and to stream them over the Internet to its

subscribers, for which MP3.com reportedly paid $20 million to each of the record companies and

agreed to pay a few pennies each time a user placed a CD in his or her locker, plus a smaller

amount each time a track was played.127

Universal Music Group pursued a claim of statutory damages against MP3.com. The

court concluded that MP3.com’s infringement was willful, and awarded statutory damages of

$25,000 per CD illegally copied by MP3.com.128 Even based on the defendant’s assertion that

there were no more than 4,700 CDs for which the plaintiffs qualified for statutory damages (an

issue that was to have been the subject of a separate trial), the statutory damages award would

have come to $118,000,000.129 On the eve of trial, the defendant settled with Universal Music

Group by agreeing to pay the plaintiff $53.4 million and to take a license to Universal’s entire

music catalog in exchange for unspecified royalty payments.130

MP3.com’s legal troubles did not end with the settlements with the RIAA plaintiffs. On

Aug. 8, 2001, a group of over 50 music publishers and songwriters filed suit against MP3.com on

claims of copyright infringement very similar to those asserted by the RIAA plaintiffs. The

plaintiffs sought to hold MP3.com liable for the copies of their works made in connection with

the My.MP3.com service, as well as for the subsequent “viral distribution” of copies of their

works allegedly done through services such as Napster, Gnutella, Aimster, and Music City by

MP3.com users after they download digital copies through MP3.com.131 Numerous other suits

125 Id. (citations omitted).

126 Id. at 353.

127 See Jon Healey, “MP3.com Settles with BMG, Warner,” San Jose Mercury News (June 10, 2000), at 1A; Chris

O’Brien, “MP3 Sets Final Pact: Universal Music Group Will Get $53.4 Million,” San Jose Mercury News (Nov.

15, 2000) at 1C, 14C.

128 UMG Recordings Inc. v. MP3.com, Inc., 56 U.S.P.Q.2d 1376, 1379, 1381 (S.D.N.Y. 2000). The court rejected

the plaintiffs’ argument that a statutory damages award should be made for each song copied, rather than each

CD. The court cited 17 U.S.C. § 504(c)(1), which provides that a statutory damages award may be recovered in

a specified range “with respect to any one work,” and further provides that “all parts of a compilation or

derivative work constitute one work.” UMG Recordings Inc. v. MP3.com Inc., 109 F. Supp. 2d 223, 224-25

(S.D.N.Y. 2000).

129 56 U.S.P.Q.2d at 1381.

130 O’Brien, supra note 127, at 1C.

131 “Music Publishers, Songwriters Sue MP3.com for ‘Viral Distribution’ of Copyrighted Works,” BNA’s

Electronic Commerce & Law Report (Aug. 29, 2001) at 933. In late August of 2001, MP3.com was acquired by

media company Vivendi Universal.

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were brought against MP3.com as well. For example, in Sept. of 2001, Isaac, Taylor & Zachary

Hanson also sued MP3.com for copying of their copyrighted songs on My.MP3.com.132

Numerous opinions have been issued as a result of these lawsuits, holding MP3.com

liable for willful copyright infringement and ruling it collaterally estopped from denying that it

willfully infringed the plaintiffs’ various copyrighted works when it created the “server copies”

of thousands of CDs in late 1999 and early 2000.133

(i) The CoStar Case

In CoStar Group Inc. v. LoopNet, Inc.,134 the plaintiff CoStar maintained a copyrighted

commercial real estate database that included photographs. The defendant LoopNet offered a

service through which a user, usually a real estate broker, could post a listing of commercial real

estate available for lease. The user would access, fill out, and submit a form for the property

available. To include a photograph of the property, the user was required to fill out another

form. The photograph would initially be uploaded into a separate folder on LoopNet’s system,

where it would first be reviewed by a LoopNet employee to determine that it was in fact a

photograph of commercial property and that there was no obvious indication the photograph was

submitted in violation of LoopNet’s terms and conditions. If the photograph met LoopNet’s

criteria, the employee would accept it and post it along with the property listing. CoStar claimed

that over 300 of its copyrighted photographs had been posted on LoopNet’s site, and sued

LoopNet for both direct and contributory copyright liability.135

CoStar argued that LoopNet should be directly liable for copyright infringement because,

acting through its employees’ review and subsequent posting of the photographs, LoopNet was

directly copying and distributing the photographs, citing the Frena case discussed above in

Section II.A.4(d). The district court rejected this argument, noting that the Fourth Circuit in the

ALS Scan case had concluded that the legislative history of the DMCA indicated Congress’

intent to overrule the Frena case and to follow the Netcom case, under which an OSP’s liability

for postings by its users must be judged under the contributory infringement doctrine.136

The Fourth Circuit affirmed this ruling on appeal.137 Citing its own decision in the ALS

Scan case, the Fourth Circuit noted that it had already held that the copyright statute implies a

requirement of volition or causation, as evidenced by specific conduct by the purported infringer,

132 Steven Bonisteel, “Hanson Sues Music Locker Service Over Copyright” (Sept. 26, 2001), available as of Jan. 6,

2002 at www.newsbytes.com/news/01/170530.html.

133 See, e.g., Country Road Music, Inc. v. MP3.com, Inc., 279 F.Supp.2d 325 (S.D.N.Y. 2003); Zomba Enters., Inc.

MP3.com, Inc., No. 00 Civ. 6833 (S.D.N.Y. Jun. 8, 2001); Teevee Toons, Inc. v. MP3.com, Inc., 134 F. Supp.

2d 546 (S.D.N.Y. 2001); UMG Recordings, Inc. v. MP3.com, Inc., No. 00 Civ. 472, 200 WL 1262568

(S.D.N.Y. 2000).

134 164 F. Supp. 2d 688 (D. Md. 2001).

135 Id. at 691-92.

136 Id. at 695-96.

137 CoStar v. LoopNet, 373 F.3d 544 (4th Cir. 2004).

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for direct liability.138 Mere ownership of an electronic facility by an OSP that responds

automatically to users’ input is not sufficient volition for direct liability. “There are thousands of

owners, contractors, servers, and users involved in the Internet whose role involves the storage

and transmission of data in the establishment and maintenance of an Internet facility. Yet their

conduct is not truly ‘copying’ as understood by the Act; rather, they are conduits from or to

would-be copiers and have no interest in the copy itself.”139

The court also inferred a requirement of volition from the statute’s concept of “copying,”

which requires the making of “fixed” copies. For the reasons discussed in Section II.A.2 above,

the court concluded that transient copies made by an OSP acting merely as a conduit to transmit

information at the instigation of others does not create sufficiently fixed copies to make it a

direct infringer of copyright.140 Accordingly, the court concluded, “[a]greeing with the analysis

in Netcom, we hold that the automatic copying, storage and transmission of copyrighted

materials, when instigated by others, does not render an ISP strictly liable for copyright

infringement under §§ 501 and 106 of the Copyright Act.”141 The court also affirmed the district

court’s ruling that the quick review of photographs performed by LoopNet’s employees before

allowing them to be posted on the site did not amount to “copying,” nor did it add volition to

LoopNet’s involvement in storing the copy.142

(j) The Ellison Case

The case of Ellison v. Robertson,143 discussed in detail in Section III.C.6(b)(1)(i) below,

refused to hold an OSP liable for direct infringement based on infringing materials posted on its

service by users without its knowledge on Usenet servers hosted by AOL (infringing copies of

fictional works).

(k) Perfect 10 v. Cybernet Ventures

In Perfect 10, Inc. v. Cybernet Ventures, Inc.,144 the court refused to hold the defendant

Cybernet, an “age verification service” that enrolled subscribers, after verifying their age as an

adult, to a service that would enable them to gain access for a monthly fee to a large number of

member sites displaying pornographic pictures, liable as a direct copyright infringer based on the

unauthorized presence of the plaintiffs’ copyrighted photographs on several of the member sites.

The court discussed the Netcom, MAPHIA, and Hardenburgh cases (the Hardenburgh case is

discussed in Section II.C below), then concluded as follows:

138 Id. at 549.

139 Id. at 551.

140 Id..

141 Id. at 555.

142 Id. at 556.

143 189 F. Supp. 2d 1051 (C.D. Cal. 2002), aff’d in part and rev’d in part, 357 F.3d 1072 (9th Cir. 2004) (district

court’s ruling of no direct infringement not challenged on appeal).

144 213 F. Supp. 2d 1146 (C.D. Cal. 2002).

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The principle distilled from these cases is a requirement that defendants must

actively engage in one of the activities recognized in the Copyright Act. Based on

the evidence before the Court it appears that Cybernet does not use its hardware to

either store the infringing images or move them from one location to another for

display. This technical separation between its facilities and those of its

webmasters prevents Cybernet from engaging in reproduction or distribution, and

makes it doubtful that Cybernet publicly displays the works. Further, there is

currently no evidence that Cybernet has prepared works based upon Perfect 10’s

copyrighted material. The Court therefore concludes that there is little likelihood

that Perfect 10 will succeed on its direct infringement theory.145

(l) Field v. Google

In Field v. Google,146 discussed in greater detail in Section III.B.4(a) below, the court

ruled that Google should not be liable as a direct infringer for serving up through its search

engine, in response to user search queries, copies of the plaintiff’s copyrighted materials that had

been cached by Google’s automated crawler, the Googlebot. Citing the Netcom and CoStar

cases, the court noted that a plaintiff must “show volitional conduct on the part of the defendant

in order to support a finding of direct copyright infringement.”147 For some unknown reason, the

plaintiff did not allege that Google committed infringement when its Googlebot made the initial

copies of the plaintiff’s Web pages on which his copyrighted materials had been placed and

stored those copies in the Google cache, nor did the plaintiff assert claims for contributory or

vicarious liability. Instead, the plaintiff alleged that Google directly infringed his copyrights

when a Google user clicked on a link on a Google search results page to the Web pages

containing his copyrighted materials and downloaded a cached copy of those pages from

Google’s computers.148

The court rejected this argument:

According to Field, Google itself is creating and distributing copies of his works.

But when a user requests a Web page contained in the Google cache by clicking

on a “Cached” link, it is the user, not Google, who creates and downloads a copy

of the cached Web page. Google is passive in this process. Google’s computers

respond automatically to the user’s request. Without the user’s request, the copy

would not be created and sent to the user, and the alleged infringement at issue in

this case would not occur. The automated, non-volitional conduct by Google in

response to a user’s request does not constitute direct infringement under the

Copyright Act.149

145 Id. at 1168-69.

146 412 F. Supp. 2d 1106 (D. Nev. 2006).

147 Id. at 1115.

148 Id.

149 Id.

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(m) Parker v. Google

In Parker v. Google,150 pro se plaintiff Gordon Parker was the owner of copyright in an ebook

titled “29 Reasons Not To Be A Nice Guy.” He posted Reason # 6 on USENET. Parker

asserted that Google’s automatic archiving of this USENET posting constituted a direct

infringement of his copyright. He also claimed that when Google produced a list of hyperlinks

in response to a user’s query and excerpted his web site in that list, Google again directly

infringed his copyrighted work.151

The district court rejected these claims. Citing the Costar and Netcom cases, the district

court held that “when an ISP automatically and temporarily stores data without human

intervention so that the system can operate and transmit data to its users, the necessary element

of volition is missing. The automatic activity of Google’s search engine is analogous. It is clear

that Google’s automatic archiving of USENET postings and excerpting of websites in its results

to users’ search queries do not include the necessary volitional element to constitute direct

copyright infringement.”152

On appeal, the Third Circuit affirmed in an unpublished decision.153 The court noted that,

“to state a direct copyright infringement claim, a plaintiff must allege volitional conduct on the

part of the defendant,” and Parker’s allegations failed to allege any volitional conduct on the part

of Google.154

(n) The Cablevision Case

In Twentieth Century Fox Film Corp. v. Cablevision Sys.,155 the district court ruled that

Cablevision was liable for direct copyright infringement based on the offering of a network

digital video recording system known as the “Remote-Storage DVR System” (RS-DVR), which

permitted customers to record cable programs on central servers at Cablevision’s facilities and

play the programs back for viewing at home. The technology underlying the RS-DVR worked as

follows. Cablevision took the linear programming signal feed received at its head end and

reconfigured it by splitting the feed into a second stream, which was then reformatted through a

process known as “clamping” to convert the bitrate of the stream into one that was more

efficient. In the process of clamping, portions of programming were placed into buffer memory.

The stream was then converted into a number of single program transport streams, one channel

per stream. The converted streams were then fed into a special set of “Arroyo” servers, which at

any given moment in time, stored in a buffer three frames of video from each of the linear

150 422 F. Supp. 2d 492 (E.D. Pa. 2006), aff’d, 2007 U.S. App. LEXIS 16370 (3d Cir. July 10, 2007).

151 Id. at 496.

152 Id. at 497.

153 Parker v. Google, 2007 U.S. App. LEXIS 16370 (3d Cir. July 10, 2007).

154 Id. at *6, 8.

155 478 F. Supp. 2d 607 (S.D.N.Y. 2007), rev’d, 536 F.3d 121 (2d Cir. 2008), cert. denied sub nom. CNN, Inc. v.

CSC Holdings, Inc., 557 U.S. 946 (2009).

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channels carried by Cablevision, so that if a customer requested that a particular program be

recorded, the appropriate packets could be retrieved from the buffer memory and copied to the

customer’s designated hard drive storage space on the Arroyo server.156

The RS-DVR service allowed customers to request that a program be recorded in one of

two ways. The customer could navigate an on-screen program guide and select a future program

to record, or while watching a program, the customer could press a “record” button on a remote

control. In response, the Arroyo server would receive a list of recording requests, find the

packets for the particular programs requested for recording, then make a copy of the relevant

program for each customer that requested it be recorded. A separate copy would be stored in

each customer’s designated hard drive storage space on the Arroyo server. If no customer

requested that a particular program be recorded, no copy of that program was made on the hard

drives of the Arroyo server. When the customer selected a recorded program for playback, the

Arroyo server would locate the copy of the desired program stored on the customer’s designated

hard drive storage space, then cause the program to be streamed out. The stream containing the

program would be transmitted to every home in the node where the requesting customer was

located, but only the requesting set-top box would be provided the key for decrypting the stream

for viewing.157

The plaintiffs alleged direct copyright infringement based on Cablevision’s creation of

the copies on the hard drives of the Arroyo servers and of the buffer copies. Although

Cablevision did not deny that these copies were being made, it argued that it was entirely passive

in the process and the copies were being made by its customers. It also argued, based on the

Sony case, that it could not be liable for copyright infringement for merely providing customers

with the machinery to make the copies.158

The court rejected these arguments, ruling that the RS-DVR was not merely a device, but

rather a service, and that, by providing the service, it was Cablevision doing the copying. In

particular, the court found the relationship between Cablevision and RS-DVR customers to be

significantly different from the relationship between Sony and VCR users. Unlike a VCR, the

RS-DVR did not have a stand-alone quality. Cablevision retained ownership of the RS-DVR

set-top box, and the RS-DVR required a continuing relationship between Cablevision and its

customers. Cablevision not only supplied the set-top box for the customer’s home, but also

decided which programming channels to make available for recording, and housed, operated, and

maintained the rest of the equipment that made the RS-DVR’s recording process possible.

Cablevision also determined how much memory to allot to each customer and reserved storage

capacity for each customer on a hard drive at its facility. Customers were offered the option of

acquiring additional capacity for a fee.159

156 Id. at 613-14.

157 Id. at 614-16.

158 Id. at 617-18.

159 Id. at 618-19.

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In sum, the court concluded that the RS-DVR was more akin to a video-on-demand

(VOD) service than to a VCR or other time-shifting device. The court noted that the RS-DVR

service was in fact based on a modified VOD platform. With both systems, Cablevision decided

what content to make available to customers for on-demand viewing. As in VOD, the number of

available pathways for programming delivery was limited; if there were none available, the

customer would get an error message or busy signal. Thus, in its architecture and delivery

method, the court concluded that the RS-DVR bore a striking resemblance to a VOD service – a

service that Cablevision provided pursuant to licenses negotiated with programming owners.160

Accordingly, the court ruled that a reasonable fact finder could conclude only that the copying at

issues was being done not by the customers, but by Cablevision itself.161

With respect to the buffer copies, Cablevision argued that the buffer copies were not

sufficiently fixed to be cognizable as “copies” under copyright law. The court rejected this

argument, noting that the buffer copies were sufficiently permanent to make the Arroyo hard

disk copies from, and were therefore capable of being reproduced, as required by the definition

of “fixation.” The court also cited the numerous court decisions, and the Copyright Office’s

August 2001 report on the DMCA, concluding that RAM copies are “copies” for purposes of the

copyright act. Accordingly, the court concluded that summary judgment of direct infringement

was warranted with respect to both the Arroyo server copies and the buffer copies.162

Finally, the court ruled, based on similar logic, that Cablevision was engaged in

infringing transmissions and public performances to its customers.163 The court noted that,

“where the relationship between the party sending a transmission and party receiving it is

commercial, as would be the relationship between Cablevision and potential RS-DVR customers,

courts have determined that the transmission is one made ‘to the public.’”164

On appeal, the Second Circuit reversed in The Cartoon Network LP v. CSC Holdings,

Inc.165 The Second Circuit’s rulings with respect to the issue of buffer copies are discussed in

Section II.A.2 above. With respect to the copies created on the hard drives of the Arroyo

servers, the court noted that Netcom and its progeny direct attention to the volitional conduct that

causes the copy to be made. In the case of an ordinary VCR, the court noted that it seemed clear

that the operator of the VCR – the person actually pressing the button to make the recording,

supplies the necessary element of volition, not the manufacturer of the device. The court

concluded that the RS-DVR customer was not sufficiently distinguishable from a VCR user to

impose liability as a direct infringer on a different party for copies that were made automatically

upon that customer’s command. The court distinguished cases holding liable a copy shop

making course packs for college professors, finding a significant difference between making a

160 Id. at 619.

161 Id. at 621.

162 Id. at 621-22.

163 Id. at 622-23.

164 Id. at 623.

165 536 F.3d 121 (2d Cir. 2008), cert. denied sub nom. CNN, Inc. v. CSC Holdings, Inc., 557 U.S. 946 (2009).

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request to a human employee, who then voluntarily operates the copying system to make the

copy, and issuing a command directly to a system, which automatically obeys commands and

engages in no volitional conduct.166 “Here, by selling access to a system that automatically

produces copies on command, Cablevision more closely resembles a store proprietor who

charges customers to use a photocopier on his premises, and it seems incorrect to say, without

more, that such a proprietary ‘makes’ any copies when his machines are actually operated by his

customers.”167

Nor was Cablevision’s discretion in selecting the programming that it would make

available for recording sufficiently proximate to the copying to displace the customer as the

person who “made” the copies. Cablevision’s control was limited to the channels of

programming available to a customer and not to the programs themselves. Cablevision had no

control over what programs were made available on individual channels or when those programs

would air, if at all. In that respect, Cablevision possessed far less control over recordable content

that it did in the VOD context, where it actively selected and made available beforehand the

individual programs available for viewing. Thus, Cablevision could not have direct liability for

the acts of its customers, and any liability on its part would have to be based on contributory

liability. The district court’s noted “continuing relationship” with its RS-DVR customers, its

control over recordable content, and the instrumentality of copying would be relevant to

contributory liability, but not direct liability.168

With respect to the issue of direct liability, the Second Circuit concluded: “We need not

decide today whether one’s contribution to the creation of an infringing copy may be so great

that it warrants holding that party directly liable for the infringement, even though another party

has actually made the copy. We conclude only that on the facts of this case, copies produced by

the RS-DVR system are ‘made’ by the RS-DVR customer, and Cablevision’s contribution to this

reproduction by providing the system does not warrant the imposition of direct liability.”169

The Second Circuit’s rulings with respect whether Cablevision was engaged in

unauthorized public performances through the playback of the RS-DVR copies are discussed in

Section II.B.5 below.

(o) Arista Records v. Usenet.com

In Arista Records LLC. V. Usenet.com, Inc.,170 the defendants operated a Napster-like

Usenet service that advertised to and targeted users who wanted to download music files. Unlike

peer-to-peer filing sharing networks, the files were stored on “spool” news servers operated by

166 Id. at 131.

167 Id. at 132.

168 Id. at 132-33.

169 Id. at 133.

170 633 F. Supp. 2d 124 (S.D.N.Y. 2009).

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the defendants. The defendants created designated servers for newsgroups containing music

binary files to increase their retention time over other types of Usenet files.171

The plaintiffs contended that the defendants directly infringed their copyrights by

engaging in unauthorized distribution of copies of their musical works to subscribers who

requested them for download. The court, relying on the Netcom and Cablevision cases, ruled

that a finding of direct infringement of the distribution right required a showing that the

defendants engaged in some volitional conduct sufficient to show that they actively participated

in distribution of copies of the plaintiffs’ copyrighted sound recordings. The court found

sufficient volitional conduct from the following facts. The defendants were well aware that

digital music files were among the most popular files on their service, and took active measures

to create spool servers dedicated to MP3 files and to increase the retention times of newsgroups

containing digital music files. They took additional active steps, including both automated

filtering and human review, to remove access to certain categories of content (such as

pornography), while at the same time actively targeting young people familiar with other filesharing

programs to try their services as a supposedly safe alternative to peer-to-peer music file

sharing programs that were getting shut down for infringement. From these facts, the court ruled

that the defendants’ service was not merely a passive conduit that facilitated the exchange of

content between users who uploaded infringing content and users who downloaded such content,

but rather the defendants had so actively engaged in the distribution process so as to satisfy the

volitional conduct requirement. Accordingly, the court granted the plaintiffs’ motion for

summary judgment on their claim for direct infringement of the distribution right.172

(p) Quantum Systems v. Sprint Nextel

In Quantum Sys. Integrators, Inc. v. Sprint Nextel Corp.,173 Quantum sued Sprint for

copyright infringement based on the automated loading of Quantum’s software into the RAM of

13 Sprint computers from unauthorized copies on the hard disk when those computers were

turned on or rebooted. The jury found liability and Sprint argued on appeal that the district court

erred in denying its JMOL motion and sustaining the jury’s finding of infringement because

there was no evidence that Sprint engaged in volitional copying, since the RAM copies were

automatically generated when the computers containing unauthorized, but unutilized, copies of

the software on the hard disk were turned on. The court rejected this argument, distinguishing its

Costar decision, which involved an ISP that merely provided electronic infrastructure for

copying, storage, and transmission of material at the behest of its users. By contrast, in the

instant case the copying was instigated by the volitional acts of Sprint’s own employees who

171 Id. at 130-31.

172 Id. at 132, 146-49. As a sanction for litigation misconduct, including spoliation of evidence and sending key

employees out of the country on paid vacations so they could not be deposed, the court precluded the

defendants from asserting an affirmative defense of protection under the DMCA’s safe harbor provisions. Id. at

137-42.

173 2009 U.S. App. LEXIS 14766 (4th Cir. July 7, 2009).

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loaded the original copies of the software onto Sprint computers and then rebooted the

computers, thereby causing the RAM copies.174

(q) Arista Records v. Myxer

In Arista Records LLC v. Myxer Inc.,175 the defendant Myxer operated a website that

enabled registered users to upload recorded music to the site and then, through the use of

Myxer’s software, to transcode the music into a format to create and download ringtones. Users

could make ringtones they had created available for download to other users. In addition to

uploading and downloading ringtones, Myxer users could play portions of any of the sound

recordings on Myxer’s site. Users could also select a sound recording on Myxer’s site and share

it on certain third party websites such as Facebook. Finally, users could select a sound recording

on Myxer’s site, often a full-length recording, and “Customize It” (using editing tools provided

by Myxer) by selecting a desired start and stop point for a ringtone. UMG Records, a competitor

in the ringtone market, contended that, by storing copies of UMG’s sound recordings on its

servers, allowing users to download copies of its sound recordings to users’ cell phones, and

allowing users to preview its sound recordings on either the Myxer site or on users’ cell phones,

Myxer was a direct infringer of UMG’s reproduction, distribution and digital public performance

rights, as well as a secondary infringer under theories of contributory and vicarious liability.176

UMG moved for summary judgment on its direct infringement claim. Myxer opposed

such motion based on the volitional requirement for direct liability under Netcom and other

cases, arguing that the user, not Myxer, engaged in the acts of direct copying, distribution, and

public performance (if any). The court found that the undisputed facts in the case established a

prima facie case that Myxer had directly infringed at least one of UMG’s exclusive rights.177

The court noted that it was “well-established that copyright infringement is a strict liability tort:

there is no need to prove the defendant’s mental state to establish copyright infringement.” 178

Given that fact, and the fact that the Ninth Circuit had never expressly adopted a volitional

conduct requirement as an element of direct liability, the court concluded that it was not inclined

to adopt such a requirement absent clear instruction from the Ninth Circuit.179 Nevertheless, the

court denied UMG’s motion for summary judgment because of genuine issues of material fact

pertaining to Myxer’s assertion of the safe harbor of Section 512(c), as discussed in Section

III.C.6(b)(1)(iii).r below.180

The court also denied UMG’s motion for summary judgment with respect to its claims of

contributory and vicarious liability. With respect to contributory liability, the court noted that

174 Id. at *1-3 & 15-18.

175 2011 U.S. Dist. LEXIS 109668 (C.D. Cal. Apr. 1, 2011).

176 Id. at *2, 15-18.

177 Id. at *37-39.

178 Id. at *45.

179 Id. at *46-49.

180 Id. at *3.

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there were substantial noninfringing uses of the Myxer site, because many of the ringtones and

recordings available were directly authorized by their copyright holder or users had certified that

they controlled the rights. Nevertheless, the court found summary judgment to be inappropriate

because contributory infringement requires a showing of direct copyright infringement, which

had not yet been definitively established. With respect to vicarious liability, the court noted that,

to the extent Myxer used the Audible Magic filtering technology to keep infringing material from

being uploaded onto its site, as well as other means to stop or limit the alleged copyright

infringement, there were genuine issues of material fact as to whether Myxer sufficiently

exercised a right to stop or limit the alleged copyright infringement. And, as in the case of

contributory infringement, it remained unclear whether there was an underlying claim of direct

infringement.181

(r) Disney Enterprises v. Hotfile

In Disney Enterprises, Inc. v. Hotfile Corp.,182 the defendant operated the web site

www.hotfile.com, at which users could upload electronic files to Hotfile’s servers. Upon upload,

the user received a unique link to the file. The Hotfile servers would then automatically make

five additional copies of the uploaded files and assign each copy a unique link. Each link acted

as a locator, allowing anyone with the link to click it or plug it into a web browser in order to

download the file. Third party sites, not Hotfile, catalogued, allowed searching of, and/or spread

the links that allowed persons to download the files.183

Hotfile made a profit in two ways. First, although anyone could use a link to download a

file, Hotfile charged members a fee that enabled them to download files much faster than nonmembers.

Second, Hotfile sold “hotlinks” that allowed third party sites to post a link that, when

clicked, automatically began to download the file, without ever directing the person clicking the

link to hotfile.com. To increase its number of members, Hotfile paid users to upload the most

popular content to its servers and asked that the users promote their links. Hotfile’s affiliate

program, for example, paid those uploading files cash when the file was downloaded 1000 times.

The complaint alleged that, as a result of their popularity, copyright-infringing files constituted

the bulk of files downloaded through Hotfile, Hotfile’s business encouraged persons to upload

material with copyright protection, and Hotfile understood the consequences of its business

model.184

The defendants filed a motion to dismiss the plaintiff’s claims for direct and secondary

liability for copyright infringement. The court granted the motion as to direct infringement,

invoking the requirement of Netcom that there must be some volitional act on the part of the

defendant in making the copies in order to establish direct liability. Here the hotfile.com web

site merely allowed users to upload and download copyrighted material without volitional

181 Id. at *137-141. The court also concluded that as a matter of law, Myxer’s use of UMG’s works did not qualify

as fair use. See id. at *109-135.

182 798 F. Supp. 2d 1303 (S.D. Fla. 2011).

183 Id. at 1306.

184 Id. at 1306-07.

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conduct on the part of the defendants.185 The court found unpersuasive two cases relied on by

the plaintiffs, the Mp3Tunes186 and Usenet.com187 cases, to support their argument that the

defendants, by creating a plan that induced infringement, were liable for direct infringement.

Although the court noted that the two cases supported the plaintiffs’ argument, the court stated

that it believed the cases were not correctly decided. The court also rejected the plaintiffs’

attempt to distinguish Netcom on the ground that it applied only where a defendant violated a

copyright holder’s right to reproduce – but not to distribute. The court noted that the Netcom

court stated it considered the copyright holder’s right to distribute in its analysis. The court also

rejected the plaintiffs’ argument that they had alleged a volitional act in the form of Hotfile’s

making of additional copies once the copyrighted material was uploaded to its server, because

courts had repeatedly held that the automatic conduct of software, unaided by human

intervention, is not volitional.188

The court found, however, that the plaintiffs had adequately pled claims for inducement,

contributory, and vicarious liability. Inducement and contributory infringement were adequately

pled by allegations that hotfile.com was a web site that Hotfile used to promote copyright

infringement and that Hotfile took affirmative steps to foster the infringement by creating a

structured business model that encouraged users to commit copyright infringement. Vicarious

liability was adequately pled by allegations that Hotfile had complete control over the servers

that users employed to infringe, had the technology necessary to stop the infringement, refused to

stop the massive infringement, and actually encouraged the infringement because the

infringement increased its profits.189

The court’s subsequent rulings upon various motions for summary judgment with respect

to the DMCA safe harbors and secondary liability are discussed in Sections III.C.3(s), III.C.4(f)

and III.C.6(b)(1)(iii).x below.

(s) Perfect 10 v. Megaupload

In Perfect 10, Inc. v. Megaupload Limited,190 the defendant operated a file storage service

through the “Megaupload” web site (among others), which allowed users to upload files. After

upload, the web site created a unique URL to the file, and anyone with the URL could then

download the file from Megaupload’s servers. Both Megaupload and its users disseminated

URLs for various files throughout the Internet. In order to view, copy, or download files from

185 Id. at 1307-08.

186 Capitol Records, Inc. v. Mp3Tunes, LLC, 2009 U.S. Dist. LEXIS 96521 (S.D.N.Y. Oct. 16, 2009), which held,

without much analysis, that a company’s knowledge of massive infringement plausibly alleged volitional

conduct.

187 Arista Records LLC v. Usenet.com, Inc. 633 F. Supp. 2d 124 (S.D.N.Y. 2009), which held that a company,

having a policy encouraging infringement plus the ability to stop that infringement, was liable for direct

copyright infringement.

188 Hotfile, 798 F. Supp. 2d at 1307-09.

189 Id. at 1301.

190 2011 U.S. Dist. LEXIS 81931 (S.D. Cal. July 27, 2011).

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the web sites without a waiting period, users were required to pay a membership fee. The

plaintiff sued the defendants for direct and secondary copyright infringement because thousands

of its copyrighted photographs were uploaded to Megaupload and available for downloading.

Those photos contained copyright notices and were labeled “Perfect 10” or “Perfect-10.” The

complaint alleged that Megaupload depended on, and provided substantial payouts to, affiliate

web sites who catalogued the URLs providing access to a mass of pirated content on

Megaupload’s servers, and that Megaupload encouraged its users to upload materials through a

rewards program. The defendant moved to dismiss the direct and secondary liability claims.191

With respect to the direct infringement claim, the court noted that under Netcom, an

important element of direct infringement is volitional conduct, and the element of volitional

conduct applies to all exclusive rights under the copyright act.192 Drawing all reasonable

inferences in the plaintiff’s favor, the court found that the plaintiff had adequately pled a claim

for direct infringement:

Megaupload serves as more than a passive conduit, and more than a mere “file

storage” company: it has created distinct websites, presumably in an effort to

streamline users’ access to different types of media (e.g., megaporn.com,

megavideo.com); it encourages and, in some cases pays, its users to upload vast

amounts of popular media through its Rewards Programs; it disseminates URLs

for various files throughout the internet; it provides payouts to affiliate websites

who maintain a catalogue of all available files; and, last, at a minimum, it is

plausibly aware of the ongoing, rampant infringement taking place on its

websites. Taken together, Perfect 10 has adequately alleged Megaupload has

engaged in volitional conduct sufficient to hold it liable for direct infringement.193

The court also concluded that claims of contributory infringement were adequately pled.

Knowledge of infringement had been adequately pled because, in addition to takedown notices

(which the court noted doubt as to whether takedown notices automatically imply knowledge),

many of the allegations giving rise to direct infringement also gave rise to knowledge. The

plaintiff had also adequately pled a material contribution to infringement in that Megaupload

encouraged, and in some cases, paid its users to upload vast amounts of popular media through

its rewards programs, disseminated URLs that provided access to such media, and provided

payouts to affiliates who catalogued the URLs for all available media.194

The court concluded, however, that the plaintiff had not adequately pled claims of

vicarious liability, because it did not allege facts suggesting that Megaupload had the right and

191 Id. at *3-5.

192 Id. at *10.

193 Id. at *11-12 (citations to the complaint omitted).

194 Id. at *16-17.

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ability to supervise infringing conduct of its third party users. Accordingly, the court dismissed

the claim for vicarious liability without prejudice.195

(t) Wolk v. Kodak Imaging Network

This case, which refused to find direct liability on the part of Kodak Imaging Network for

lack of volitional conduct, is discussed in Section III.C.6(b)(1)(iii).q below.

(u) Fox Broadcasting v. Dish Network

Fox sought a preliminary injunction against Dish Network, which had a contract with Fox

granting it the right to retransmit Fox broadcast material to its subscribers, for offering a high

definition digital video recorder called the “Hopper” and two associated services called

“PrimeTime Anywhere” (PTAT) and “AutoHop.” Because the Hopper was designed to service

multiple televisions, it had three tuners and a two-terabyte hard drive, which allowed Hopper

users to watch or record on three different television stations at once. The Hopper had the

additional unique capability of streaming all four of the major television networks on a single

satellite transponder, which allowed a user to watch or record all four network broadcasts while

leaving the other two tuners available for recording non-network programs or watching them on

other television sets equipped with additional set top boxes. The PTAT feature allowed

subscribers to set a single timer on the Hopper to record all primetime programming on any of

the four major broadcast networks each night of the week. Dish determined the start and end

time of the primetime block each night. In order to use PTAT, the user had to specifically enable

it from the main menu. Once enabled, a screen appeared allowing the user to choose to disable

recordings of certain networks on certain days of the week. If the user did not select otherwise,

the default settings caused the Hopper to record the entire primetime window on all four of the

major networks every day of the week. A user could begin watching the recorded programs

immediately after PTAT started recording, and could cancel a particular PTAT recording on a

given day up until 20 minutes before primetime programming began. All PTAT recordings were

stored locally on the Hopper in users’ homes. Unless the user selected otherwise, PTAT

recordings were automatically deleted after eight days. The Hopper also worked with the “Sling

Adapter,” which allowed subscribers to view Hopper content on their computers and mobile

devices via the Internet.196

AutoHop was a feature that allowed users to skip commercials in PTAT recordings with

the click of their remote control. If AutoHop was available for a particular PTAT program, the

user was given the option to enable it for that show. If the user enabled AutoHop, the Hopper

would automatically skip commercial breaks during that program. Markers inserted into the

PTAT recordings to mark the beginning and end of the commercials were checked manually by

technicians who viewed a separate quality assurance (“QA”) copy of the recording made by Dish

and stored on its servers. The technician would view the QA recording, fast-forwarding through

195 Id. at *19.

196 Fox Broadcasting Co. v. Dish Network, L.C.C., 905 F. Supp. 2d 1088, 1093-95 (C.D. Cal. 2012), aff’d, 723

F.3d 1067 (9th Cir. 2013).

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the program itself to the commercial breaks, to ensure that the markings were accurate and no

portion of the program was cut off. If the QA copies revealed an error in the marking process,

technicians could correct the error on a later broadcast to ensure that AutoHop functioned

properly for users who enabled it. If there was not enough time to correct a marking error before

the last broadcast ended, then AutoHop would not be available for that particular show.197

Fox sought a preliminary injunction against the PTAT and AutoHop functions on

grounds of copyright infringement. The court turned first to whether Fox could have secondary

liability for any infringing acts of its subscribers. Applying the Supreme Court’s Sony case, the

court noted that nothing suggested Hopper users were using the PTAT copies for anything other

than time-shifting in their homes or on mobile devices, an activity determined to be a fair use in

Sony. Because there was therefore no direct infringement on the part of PTAT users, Dish could

not have secondary copyright liability.198

The court then turned to whether Dish could have liability for direct copyright

infringement for the making of the PTAT copies or the QA copies of Fox’s programming.

Citing the Netcom and Cablevision cases, the court concluded that it was Dish’s subscribers, and

not Dish itself, who were making the copies. The court considered the various ways in which

Fox attempted to distinguish the facts at hand from the Cablevision case:

– Dish decided which networks were available on PTAT and defaulted the PTAT

settings to record all four networks. Those decisions, while undoubtedly discretionary authority

that Dish maintained, were similar to Cablevision’s unfettered discretion in selecting the

programming available for recording. But Dish had no control over what programs Fox and the

other networks chose to make available during primetime, and Dish recorded the programs only

if the user made the initial decision to enable PTAT. The court concluded that the default

settings did not support Fox’s contention that Dish, rather than its users, made the copies.

– Dish decided the length of time each copy was available for viewing before automatic

deletion after a certain number of days and a user could neither delete nor preserve the original

PTAT copy before that time. The court was not convinced, however, that this control, being

exercised after the creation of the copies, was relevant to whether Dish caused the copies to be

made in the first place, which were created only upon the users choosing to enable PTAT.

– Dish decided when primetime recordings started and ended each night and the user

could not stop a copy from being made during the copying process, but had to wait until the

recording ended before disabling the link to it on the hard drive. The court acknowledged that

these limitations on user choice evinced Dish’s greater participation in the copying process, but

nevertheless found that such involvement was not materially different from an Internet service

provider that copied a file in automatic response to a user’s request, as in the Loopnet case.

Although Dish defined some of the parameters of copyright for time-shifting purposes, it was

ultimately the user who caused the copy to be made by enabling PTAT.

197 Id. at 1096.

198 Id. at 1097-98.

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Accordingly, the court ruled that it was the user, not Dish, who was the most significant

and important cause of the copy, and Fox had therefore not established a likelihood of success on

the merits of its claim that by Dish directly infringed on its exclusive right to reproduction

through PTAT.199

The court next ruled that Dish’s making of the QA copies did not constitute a fair use

under the application of the four statutory fair use factors. Under the first factor, while the QA

copies themselves were not sold or otherwise monetized, they were made for the commercial

purpose of providing a high quality commercial skipping product that more users would want to

activate. The copies were not transformative because they did not alter their originals with new

expression, meaning or message. The first factor therefore weighed against fair use. The

creative nature of the copyrighted works copied entitled them to heightened protection and cut

against fair use under the second factor. The third factor also weighed against Dish because the

entire works were copied, although the court noted that the third factor was of considerably less

weight than the other factors due to the limited nature of the ultimate use.200

Turning to the fourth factor, the court noted that the QA copies were used to perfect the

functioning of AutoHop, a service that, standing alone, did not infringe. However, the record

showed that a market existed for the right to copy and use Fox programs, given that Fox licensed

copies of its programs to companies including Hulu, Netflix, iTunes, and Amazon to offer

viewers the Fox programs in various formats. In fact, the record suggested that Dish chose to

offer AutoHop to its subscribers in order to compete with other providers who paid for the rights

to use copies of the Fox programs through licensing agreements. By making an unauthorized

copy for which it had not paid and using it for AutoHop, Dish harmed Fox’s opportunity to

negotiate a value for those copies and also inhibited Fox’s ability to enter into similar licensing

agreements with others in the future by making the copies less valuable. Therefore, the fourth

factor also cut against Dish, and the court ruled that the QA copies did not constitute a fair use.

The fact that consumers ultimately used AutoHop in conjunction with PTAT for private home

use, a fair use under Sony, did not render the intermediate copies themselves a fair use as well.201

The court then considered whether Dish was liable for violation of Fox’s distribution

right and found that it was not. Citing the Perfect 10 v. Amazon case,202 the court noted that

infringement of the distribution right requires actual dissemination of a copy by sale or other

transfer of ownership, or by rental, lease, or lending. Here, a PTAT-enabled Hopper recorded

primetime programming locally and, at most that local copy was disseminated within a single

household. PTAT and AutoHop therefore did not involve any actual distribution of unauthorized

copies, so the court concluded that Fox had not established a likelihood of success on the merits

of its distribution claim.203

199 Id. at *1099-1102.

200 Id. at 1104.

201 Id. at 1105-06.

202 Perfect 10 v. Amazon.com, Inc., 508 F.3d 1146, 1162 (9th Cir. 2007).

203 Fox Broadcasting, 905 F. Supp. 2d at 1106.

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Lastly, the court turned to a consideration of whether a preliminary injunction should

issue based on the court’s finding that the QA copies were infringing.204 The court concluded

that no preliminary injunction should issue because Fox had not established a likelihood of

irreparable harm if Dish were not enjoined from making and using the QA copies. The record

suggested that the extent of harmed caused by the QA copies was calculable in money damages.

The fact that Fox had licensing agreements with other companies showed that copies of the Fox

programs had a market value that other companies already paid in exchange for the right to use

the copies. Although Fox had submitted evidence that some irreparable harms, such as loss of

control over its copyrighted works and loss of advertising revenue, might stem from the adskipping

use to which the QA copies were put, the record did not show that those harms flowed

from the QA copies themselves. Rather, if those harms were to materialize, they would be a

result of the ad-skipping itself, which did not constitute copyright infringement. The court

therefore concluded that any injury was compensable with money damages and did not support a

finding of irreparable harm.205

On appeal, the Ninth Circuit affirmed.206 It found that the district court did not abuse its

discretion in determining that Fox was unlikely to succeed on its claim of direct copyright

infringement regarding PTAT.207 “[O]perating a system used to make copies at the user’s

command does not mean that the system operator, rather than the user, caused copies to be made.

Here, Dish’s program creates the copy only in response to the user’s command. Therefore, the

district court did not err in concluding that the user, not Dish, makes the copy.”208 Citing

Cablevision, the court noted the facts that Dish decided how long copies are available for

viewing, modified the start and end times of the prime-time block, and prevented a user from

stopping a recording might be relevant to a secondary or perhaps even a direct infringement

claim, but they did not establish that Dish made the copies.209

The Ninth Circuit also determined that the district court did not abuse its discretion in

concluding that Fox was unlikely to succeed on its claim of secondary copyright infringement for

the PTAT and AutoHop programs because the activities of Dish’s users in making copies of

Fox’s shows constituted fair use. The Ninth Circuit noted, as the district court held, that

commercial skipping did not implicate Fox’s copyright interest because Fox owned the

copyrights to the television programs, not to the ads aired in the commercial breaks.210 “If

recording an entire copyrighted program is a fair use, the fact that viewers do not watch the ads

not copyrighted by Fox cannot transform the recording into a copyright violation. … Thus, any

204 The court observed that “neither the marking announcements nor the ad-skipping effect of AutoHop implicates

any copyright interest ….” Id. at 1110.

205 Id. at 1109-11.

206 Fox Broadcasting Co., Inc. v. Dish Network L.L.C., 723 F.3d 1067 (9th Cir. 2013).

207 Id. at 1073.

208 Id. at 1074.

209 Id.

210 Id. at 1074-75.

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analysis of the market harm should exclude consideration of AutoHop because ad-skipping does

not implicate Fox’s copyright interests.”211

The Ninth Circuit found that Dish had demonstrated a likelihood of success on its

customers’ fair use defense. With respect to the first factor, the court noted that Dish customers’

home viewing was noncommercial under Sony. Sony also governed the analysis of the second

and third factors, by virtue of its holding that because time-shifting merely enables a viewer to

see a work the viewer had been invited to witness in its entirety free of charge, the fact that the

entire work is reproduced does not have its ordinary effect of militating against a finding of fair

use. With respect to the fourth factor, the court noted that because Fox licenses its programs to

distributors such as Hulu and Apple, the market harm analysis was somewhat different than in

Sony, where no such secondary market existed for the copyright holders’ programs. However,

the court noted that the record before the district court established that the alleged market harm

raised by Fox resulted from the automatic commercial skipping, not the recording of programs

through PTAT. Specifically, it was the ease of skipping commercials, rather than the on-demand

availability of Fox programs, that caused any market harm.212

Finally, turning to the issue of Dish’s direct infringement by making the QA copies, the

Ninth Circuit ruled that the district court did not err in concluding that the QA copies were not a

cause of Fox’s alleged harm. That Dish used the copies in the process of implementing AutoHop

did not suggest that those copies were integral to AutoHop’s functioning. Rather, the record

demonstrated that the AutoHop files containing the marking of commercials, which were the

files distributed to users, were created using an entirely separate manual process and the QA

copies were used only to test whether the marking process was working correctly. The Ninth

Circuit also determined that the district court did not err in holding that monetary damages could

compensate Fox for any losses from the QA copies. Accordingly, the Ninth Circuit concluded

that the district court did not abuse its discretion in declining to grant Fox a preliminary

injunction.213

In Mar. 2014 Dish reached a settlement with the plaintiff Walt Disney Co. under which it

agreed to disable the AutoHop function for ABC programming during the first three days after

shows aired. In return Dish received the rights to stream content from ABC, ESPN and other

Disney properties through a new, Internet-based TV service.214

(v) Perfect 10 v. Giganews

In Perfect 10, Inc. v. Giganews, Inc.215 the defendants were providers of access to

USENET for a monthly fee starting at $4.99 per month. The content posted by the defendants’

211 Id. at 1075.

212 Id. at 1075-76.

213 Id. at 1079.

214 Bill Donahue, “Dish, ABC Settle Ad-Skipping Fight with Broad TV Deal,” Law360 (Mar. 7, 2014), available as

of Mar. 7, 2014 at www.law360.com/articles/515052/print?section=IP.

215 2013 U.S. Dist. LEXIS 71349 (C.D. Cal. Mar. 8, 2013).

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subscribers and other USENET users, including infringing content, was stored on the defendants’

servers. Before filing its complaint, the plaintiff sent a letter to one of the defendants, Giganews,

notifying that it was infringing the plaintiff’s copyrights, and included a DVD containing

hundreds of Perfect 10 images, characterizing them as a sampling of its copyrighted materials

that Giganews’ site had offered for sale without authorization. Giganews responded by stating

that each article posted on USENET has a unique message identification numbers, and if the

plaintiff provided the identification numbers of the articles containing the infringing content,

Giganews would be able to find the specific infringing material and remove it. The plaintiff did

not do so. The plaintiff then filed a complaint for direct, contributory and vicarious copyright

infringement and the defendants moved to dismiss all claims.216

With respect to the claims of copyright infringement, the court noted that the plaintiff’s

complaint was unclear as to the facts supporting those claims, but it appeared to be basing them

on the following allegations: “(1) that Defendants are USENET providers who charge their

subscribers a fee; (2) that Defendants program their computers to copy USENET content from

other USENET servers and make this content available to their subscribers; (3) that USENET is

now primarily used by its subscribers or visitors to exchange pirated content; (4) that Defendants

are not only aware of the rampant piracy committed by USENET users but rely on the piracy as

part of their business model; and (5) that Plaintiff has found at least 165,000 unauthorized

Perfect 10 images on Defendants’ USENET service.”217

The court then considered the volitional conduct requirement for direct infringement,

noting that although the Ninth Circuit had not spoken on the issue, the Netcom principle that

volitional conduct is required for direct liability had been widely accepted. The court noted,

however, that the concept of “volitional” can be confusing, sometimes meaning “intentional,”

and yet no showing of intent is required for direct infringement liability.218 “In this Court’s

view, the key to understanding the so-called ‘volitional conduct’ requirement is to equate it with

the requirement of causation, not intent. ‘Just who caused the copyright material to be

infringed?’ The Second Circuit’s opinion in Cartoon Network is particularly helpful in this

regard. In the words of that court, ‘the question is who made this copy.”219 The court cited the

Cybernet Ventures and MAPHIA cases approvingly for their descriptions of the volitional

conduct requirement as requiring that the defendant must “actively engage” or “directly cause”

the infringing activity in order to be held liable for direct infringement.220

Applying these standards to the facts of the case, the court found that the plaintiff had not

alleged that the defendants were the direct cause of, or actively engaged in, direct infringement.

The plaintiff had alleged that the defendants copied all of the material on their servers from

content uploaded onto USENET, stored these materials, most of which were infringing, on their

216 Id. at *1-7.

217 Id. at *12-13.

218 Id. at *16-17.

219 Id. at *17 (citations omitted).

220 Id. at *18.

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servers, programmed their servers to distribute and download the infringing content, and

controlled which materials were distributed to and copied from other third party servers. The

court ruled that these facts did not indicate that it was the defendants themselves that committed

the acts of copying, displaying or distributing the plaintiff’s copyrighted content and, as in

Netcom, the defendants had merely engaged in the act of designing or implementing a system

that automatically and uniformly created temporary copies of all data sent through it. Such

conduct did not constitute a volitional act.221

Nor did the plaintiff’s allegations regarding the defendants’ knowledge of the pirated

content on its servers salvage the plaintiff’s direct infringement claim. As the Netcom court

pointed out, knowledge is not a required element of direct infringement, and the court ruled that

a participant in the chain of events that ultimately allows viewers to obtain infringed material

does not become the direct cause of the copying merely because he learned of it. The court

noted that the Arista Records v. Usenet, MegaUpload, MP3tunes, and Playboy Enterprises cases

had taken into account a defendant’s knowledge in determining whether that defendant engaged

in volitional conduct, but disagreed with those decisions.222 “By focusing on the defendant’s

awareness or state of mind – rather than on who actually caused the infringement – these cases

effectively hold defendants liable for copyright infringement committed by third parties without

requiring a full assessment of the additional elements of secondary copyright infringement

claims.”223

Moreover, the court held the plaintiff’s allegation that the defendants controlled the

content on their servers, without a good faith allegation specifying how the defendants exercised

that control to directly create copies, could not alone create an inference that the defendants

engaged in a volitional act directly causing infringement. Accordingly, the court dismissed the

plaintiff’s claims for direct copyright infringement.224

(w) Capitol Records v. ReDigi

In Capital Records, LLC v. ReDigi, Inc.,225 ReDigi operated a web site that enabled users

to “resell” their legally acquired iTunes music files and purchase “used” iTunes files from others

at a fraction of the price on iTunes. To sell music on ReDigi’s web site, a user was required to

download ReDigi’s “Media Manager” to his or her computer. Once installed, Media Manager

analyzed the user’s computer to build a list of digital music files eligible for sale. A file was

eligible only if it was purchased on iTunes or from another ReDigi user; music downloaded from

a CD or other file-sharing webs site was ineligible for sale. After the validation process, Media

Manager continually ran on the user’s computer and attached devices to ensure that the user had

not retained music that had been sold or uploaded for sale. However, Media Manager could not

221 Id. at *21-22.

222 Id. at *22-25.

223 Id. at *25.

224 Id. at *22-23, 26.

225 934 F. Supp. 2d 640 (S.D.N.Y. 2013).

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detect copies stored in other locations. If a copy was detected, Media Manager prompted the

user to delete the file. The file was not deleted automatically or involuntarily, although ReDigi’s

policy was to suspend the accounts of users who refused to comply.226

Once uploaded, a digital music file underwent a second analysis to verify eligibility. If

ReDigi determined that the file had not been tampered with or offered for sale by another user,

the file was stored in ReDigi’s “Cloud Locker,” and the user was given the option of simply

storing and streaming the file for personal use or offering it for sale in ReDigi’s marketplace. If

a user chose to sell a digital music file, the user’s access to the file was terminated and

transferred to the new owner at the time of purchase. When users purchased a file (at 59 cents to

79 cents), the seller received 20%, 20% went to an escrow fund for the artist, and 60% was

retained by ReDigi. Capitol Records sued ReDigi for direct, contributory and vicarious

copyright infringement.227

The court found ReDigi liable under all three theories. With respect to direct

infringement, the court noted that courts had not previously addressed whether the unauthorized

transfer of a digital music file over the Internet – where only one file exists before and after the

transfer – constitutes reproduction within the meaning of the Copyright Act. The court held that

it does. The court characterized the reproduction right as the exclusive right to embody, and to

prevent others from embodying, a copyrighted work in a new material object. The court

concluded that, because the reproduction right is necessarily implicated when a copyrighted

work is embodied in a new material object, and because digital music files must be embodied in

a new material object following their transfer over the Internet, the embodiment of a digital

music file on a new hard disk is a reproduction within the meaning the meaning of the Copyright

Act. The court determined this to be true regardless whether one or multiple copies of the file

exist.228 “Simply put, it is the creation of a new material object and not an additional material

object that defines the reproduction right.”229 The court found it to be beside the point that the

original phonorecord no longer existed – it mattered only that a new phonorecord had been

created.230

The court found sufficient volitional conduct on the part of ReDigi to hold it liable for

direct infringement. The court noted that ReDigi’s founders had built a service where only

copyrighted works could be sold. Media Manager scanned a user’s computer to build a list of

eligible files that consisted solely of protected music purchased on iTunes. While the process

was automated, absolving ReDigi of direct liability on that ground alone would be a distinction

without a difference. The fact that ReDigi’s founders programmed their software to choose

copyrighted content satisfied the volitional conduct requirement and rendered ReDigi’s case

indistinguishable from those where human review of content gave rise to direct liability.

226 Id. at 645.

227 Id. at 646.

228 Id. at 648-50.

229 Id. at 650 (emphasis in original).

230 Id.

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Moreover, ReDigi provided the infrastructure for its users’ infringing sales and affirmatively

brokered sales by connecting users who were seeking unavailable songs with potential sellers.

The court concluded that such conduct transformed ReDigi from a passive provider of a space in

which infringing activities happened to an active participant in the process of copyright

infringement.231

Capitol Records also argued that ReDigi violated it distribution rights by simply “making

available” Capitol Records’ recordings for sale to the public, regardless whether a sale occurred.

The court cited a number of courts that had cast significant doubt on a “making available” theory

of distribution,232 but concluded that because actual sales on ReDigi’s web site infringed Capitol

Records’ distribution right, the court need not reach this additional theory of liability.233

The court found ReDigi contributorily liable because it knew or should have known that

its service would encourage infringement, was aware that copyrighted content was being sold on

its web site, and provided the site and facilities for the direct infringement. The court found that

the site was, by virtue of its design to deal solely in music files from iTunes, not capable of

substantial noninfringing uses. The court also ruled ReDigi to be vicariously liable because it

exercised complete control over its web site content, user access, and sales, and benefitted

financially from every infringing sale when it collected 60% of each transaction fee.234 The

court rejected ReDigi’s fair use defense because its web site made commercial use of the music

files and did nothing to transform them, and ReDigi’s sales were likely to undercut the market

for or value of the copyrighted works.235

For the reasons set forth in Section III.F.1 below, the court rejected ReDigi’s assertion

that the first sale doctrine permitted users to resell their digital music files on ReDigi’s web site.

(x) Summary of Case Law

To sum up, under a majority of the cases decided to date, a direct volitional act of some

kind is required for liability for direct copyright infringement. The MAPHIA and Sabella,

Cablevision, and Hotfile cases suggest that it is insufficient for direct liability for an actor such

as a BBS or web site operator to have provided only encouragement of the acts (such as initial

uploading of unauthorized copies) that lead to infringement. Similarly, the CoStar, Ellison and

Perfect 10 v. Cybernet Ventures cases suggest that an OSP will not have direct liability for

infringing material posted on its service by users or available through its service on third party

sites where the OSP has not encouraged such posting or had advance knowledge of it. And the

Field v. Google and Parker v. Google cases hold that a search engine operator will not have

direct liability for serving up cached copies of copyrighted materials in an automated response to

231 Id. at 657.

232 Elektra Entertainment Group, Inc. v. Barker, 551 F. Supp. 2d 234, 243 (S.D.N.Y. 2008); London-Sire Records,

Inc. v. John Doe 1, 542 F. Supp. 2d 153, 169 (D. Mass. 2008).

233 ReDigi, 934 F. Supp. 2d at 651 n.6.

234 Id. at 658-60.

235 Id. at 653-54.

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user requests based on search results. Rather, for direct liability the defendant must have

engaged in the very acts of infringement themselves in a volitional way. The Perfect 10 v.

Giganews case, while agreeing with Netcom that a volitional act is required for direct

infringement, equated the “volitional conduct” requirement with a requirement of causation, not

intent. That court cited the Cybernet Ventures and MAPHIA cases approvingly for their

descriptions of the volitional conduct requirement as requiring that the defendant must “actively

engage” or “directly cause” the infringing activity in order to be held liable for direct

infringement.

However, the Frena, Webbworld, Sanfilippo, Quantum Systems, Megaupload and ReDigi

cases (as well as the Hardenburgh and Webbworld cases discussed in Section II.C below with

respect to the public display and distribution rights) suggest that where an actor such as a BBS

operator or web site operator has some form of substantial direct involvement in the anticipated

acts that lead to infringement or in the infringing acts themselves (such as resale of the infringing

material), there may be a finding of sufficient volitional activity to impose direct liability. And

the Arista Records v. Usenet.com case suggests that direct liability for violation of the

distribution right can be premised on active promotion of sharing of illicit files coupled with

close control over what types of material are featured for distribution in the first instance. Thus,

to establish direct liability for infringement one must look at whether the defendant participated

in the very acts of infringement themselves.

However, one case – the Myxer case – simply refused to adopt the volitional requirement

for direct infringement, noting that the Ninth Circuit had never expressly adopted the volitional

requirement and finding such a requirement to be inconsistent with copyright infringement being

a strict liability tort.

As discussed in Section III.C below, the Digital Millennium Copyright Act236(referred to

herein as the “DMCA”) defines certain safe harbors against liability for OSPs who act as merely

passive conduits for infringing information and without knowledge of the infringement. An OSP

must meet quite specific detailed requirements to qualify for the safe harbors relating to acting as

a passive conduit and innocent storage of infringing information. Where an OSP does not

qualify for these safe harbors, the standards under the case law discussed above will apply to

determine liability.

5. The Reproduction Right Under WIPO Implementing Legislation

(a) United States Legislation

Four bills were introduced in Congress to implement the WIPO treaties. Two of them,

neither of which were ultimately enacted, would have attempted to clarify the issue of whether

interim copies made during the course of transmission infringe the reproduction right. The bill

that was adopted – The Digital Millennium Copyright Act – contains nothing explicitly

addressing the scope of the reproduction right in a digital environment.

236 Pub. L. No. 105-304, 112 Stat. 2860 (1998).

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(1) The Digital Millennium Copyright Act

The DMCA was signed into law by President Clinton on Oct. 28, 1998. It is essentially

an enactment of H.R. 2281, introduced in the House in July of 1997 by Rep. Howard Coble, and

its nearly identical counterpart in the Senate, S. 1121, introduced by Sen. Orrin Hatch also in

July of 1997, which was later combined with another bill and, as combined, denominated S.

2037. Both H.R. 2281 and S. 1121 were introduced with the support of the Clinton

administration.

Title I of the DMCA, entitled the “WIPO Copyright and Performances and Phonograms

Treaties Implementation Act of 1998” and comprised of Sections 101 through 105, implements

the WIPO treaties. Title I takes a minimalist approach to implementing the requirements of the

WIPO treaties. The Clinton administration took the view that most of the enhanced copyright

protections set forth in the treaties were already available under United States law, so that no

major changes to U.S. law were believed necessary to implement the treaties.

Specifically, the DMCA addresses only the requirements of Arts. 11 and 12 of the WIPO

Copyright Treaty, and of Arts. 18 and 19 of the WIPO Performances and Phonograms Treaty, to

provide adequate legal protection and effective legal remedies against (i) the circumvention of

effective technological measures that are used by rights holders to restrict unauthorized acts with

respect to their protected works, and (ii) the removal or alteration of any electronic rights

management information (information which identifies the work, the author of the work, the

owner of any right in the work, or information about the terms and conditions of use of the

work), or the distribution or communication to the public of copies of works knowing that the

electronic rights management information has been removed or altered. The specific provisions

of these bills are discussed in further detail below. These bills contain nothing addressing the

reproduction right or how that right relates to the digital environment.

(2) Legislation Not Adopted

An alternative bill to implement the WIPO treaties, S. 1146, entitled the “Digital

Copyright Clarification and Technology Education Act of 1997,” was introduced on Sept. 3,

1997 by Sen. John Ashcroft. Like the DMCA, S. 1146 contained language to implement

prohibitions against the circumvention of technologies to prevent unauthorized access to

copyrighted works and to provide electronic rights management information about a work,

although it adopted a different approach to doing so than the DMCA, as discussed further below.

S. 1146 also contained, however, a much broader package of copyright-related measures.

With respect to the reproduction right, S. 1146 would have clarified that ephemeral copies of a

work in digital form that are incidental to the operation of a device in the ordinary course of

lawful use of the work do not infringe the reproduction right. Specifically, S. 1146 would have

added a new subsection (b) to Section 117 of the copyright statute to read as follows:

(b) Notwithstanding the provisions of section 106, it is not an infringement to

make a copy of a work in a digital format if such copying –

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(1) is incidental to the operation of a device in the course of the use of a

work otherwise lawful under this title; and

(2) does not conflict with the normal exploitation of the work and does

not unreasonably prejudice the legitimate interests of the author.

The proposed new clause (b)(1) was similar to the right granted in the existing Section

117 of the copyright statute with respect to computer programs, which permits the making of

copies of the program “as an essential step in the utilization of the computer program in

conjunction with a machine.”237 Clause (b)(1) would have extended this right to the otherwise

lawful use of other types of works in a digital format, to the extent that copying is necessary for

such use. It would seem to have covered activities such as the loading of a musical work into

memory in conjunction with playing the work, the incidental copies of a movie or other work

ordered on demand that are made in memory in the course of the downloading and viewing of

the movie, and the various interim copies of a work that are made in node computers in the

routine course of an authorized transmission of the work through the Internet.

The limiting language contained in new clause (b)(2) was drawn directly from the WIPO

treaties themselves. Specifically, Article 10 of the WIPO Copyright Treaty permits treaty

signatories to provide for limitations of or exceptions to the rights granted under the treaty “in

certain special cases that do not conflict with a normal exploitation of the work and do not

unreasonably prejudice the legitimate interests of the author.” The scope of reach of this

language is obviously not self evident, and the boundaries of this exception to the reproduction

right are therefore not entirely clear. However, the exception should apply to at least the most

common instances in which incidental copies must be made in the course of an authorized use of

a digital work, including in the course of an authorized transmission of that work through a

network.

Another bill introduced into Congress to implement the WIPO copyright treaties was

H.R. 3048, entitled the “Digital Era Copyright Enhancement Act,” which was introduced on

Nov. 14, 1997 by Rep. Rick Boucher. With respect to the reproduction right, H.R. 3048

contained an identical amendment to Section 117 as S. 1146 that would have permitted the

making of incidental copies of a work in digital form in conjunction with the operation of a

device in the ordinary course of lawful use of the work.

The clarifying amendment to Section 117 concerning the reproduction right that these

alternative bills would have set up was not ultimately adopted by Congress in the DMCA.

(b) The European Copyright Directive

The European Copyright Directive contains strong statements of copyright owners’ rights

to control the reproduction, distribution and presentation of their works online. The European

Copyright Directive requires legislative action by EC member states with respect to four rights:

237 17 U.S.C. § 117.

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the reproduction right,238 the communication to the public right,239 the distribution right,240 and

protection against the circumvention or abuse of electronic management and protection

systems.241

With respect to the reproduction right, the European Copyright Directive adopts

essentially the same broad language of proposed Article 7(1) of the WIPO Copyright Treaty that

provoked so much controversy and was ultimately deleted from the WIPO Copyright Treaty.

Specifically, Article 2 of the European Copyright Directive provides that member states must

“provide the exclusive right to authorize or prohibit direct or indirect, temporary or permanent

reproduction by any means and in any form” of copyrighted works. The extension of the

reproduction right to “direct or indirect” and “temporary or permanent” reproductions would

seem to cover even ephemeral copies of a work made during the course of transmission or use of

a copyrighted work in an online context. Indeed, the official commentary to Article 2 notes that

the definition of the reproduction right covers “all relevant acts of reproduction, whether on-line

or off-line, in material or immaterial form.”242 The commentary also appears to adopt the

approach of the MAI case in recognizing copies of a work in RAM as falling within the

reproduction right: “The result of a reproduction may be a tangible permanent copy, like a book,

but it may just as well be a non-visible temporary copy of the work in the working memory of a

computer.”243

To provide counterbalance, however, Article 5(1) of the European Copyright Directive

provides an automatic exemption from the reproduction right for “[t]emporary acts of

reproduction … which are transient or incidental, which are an integral and essential part of a

technological process whose sole purpose is to enable: (a) a transmission in a network between

third parties by an intermediary or (b) a lawful use of a work or other subject-matter to be made,

and which have no independent economic significance.” This provision is very similar to the

new clause (b) that would have been added to Section 117 of the U.S. copyright statute under S.

1146 and H.R. 3048 (discussed in Section II.A.5(a)(2) above). The Article 5(1) exception would

appear to cover the store and forward procedure adopted by routers and the RAM copy produced

as a result of browsing at least by a private user (whether browsing for a commercial purpose

238 European Copyright Directive, art. 2.

239 Id. art. 3.

240 Id. art. 4.

241 Id. arts. 6-7.

242 Commentary to Art. 2, ¶ 2.

243 Id. ¶ 3.

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would have “independent economic significance” is unclear).244 The exception does not apply to

computer programs or databases because they are separately regulated in other Directives.245

Thus, the European Copyright Directive adopts an approach that affords the reproduction

right a very broad inherent scope, but provides an explicit and automatic exemption for copies

that are made incidental to the use246 of a work through a technological process, such as

transmission through a network or loading into memory for viewing or playing of the work.

Indeed, Recital (33) of the European Copyright Directive notes that the exception of Article 5(1)

“should include acts which enable browsing as well as acts of caching to take place, including

those which enable transmission systems to function efficiently, provided that the intermediary

does not modify the information and does not interfere with the lawful use of technology, widely

recognized and used by industry, to obtain data on the use of the information.”

According to Recital (32) of the European Copyright Directive, the final Directive, unlike

its predecessor drafts, opted for an approach of listing “an exhaustive enumeration of exceptions

and limitations to the reproduction right and the right of communication to the public.” These

exceptions and limitations are enumerated in Articles 5(2) and 5(3). The exceptions and

limitations in Article 5(2) apply only to the reproduction right, whereas the exceptions and

limitations in Article 5(3) apply to both the reproduction right and the right of communication to

the public.

Under Article 5(2), member states may provide for exceptions or limitations to the

reproduction right in the following cases:

(a) in respect of reproductions on paper or any similar medium, effected by the

use of any kind of photographic techniques or by some other process having

similar effects, with the exception of sheet music, provided that the rightholders

receive fair compensation;

(b) in respect of reproductions on any medium made by a natural person for

private use and for ends that are neither directly or indirectly commercial, on

condition that the rightholders receive fair compensation which takes account of

the application or non-application of technological measures referred to in Article

6 to the work or subject-matter concerned;

244 Justin Harrington & Tina Berking, “Some Controversial Aspects of the EU Copyright Directive (Directive

2001/29/EC),” Cyberspace Lawyer, Jan. 2003, at 2, 3-4. The Electronic Commerce Directive contains

exemptions in respect of hosting, caching and acting as a mere conduit. Id. at 4.

245 David Schollenberger, “Entertainment Without Borders” (Mar. 2003), at 9 (seminar paper on file with the

author).

246 An earlier version of Art. 5(1) provided that the use of the work must be “authorized or otherwise permitted by

law.” A copy of an earlier version of the European Copyright Directive and comments may be found at

www.bna.com/e-law/docs/ecdraft.html (last modified Dec. 2, 1997).

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(c) in respect of specific acts of reproduction made by publicly accessible

libraries, educational establishments or museums, or by archives, which are not

for direct or indirect economic or commercial advantage;

(d) in respect of ephemeral recordings of works made by broadcasting

organizations by means of their own facilities and for their own broadcasts; the

preservation of these recordings in official archives may, on the ground of their

exceptional documentary character, be permitted;

(e) in respect of reproductions of broadcasts made by social institutions pursuing

non-commercial purposes, such as hospitals or prisons, on condition that the

rightholders receive fair compensation.

It is interesting to note that the majority of these exceptions are conditioned upon the

rightholders receiving fair compensation, and they cover only copying that is for noncommercial

purposes. Exception (b) is of particular interest, for it provides a right for natural

persons to make copies for private use and for purposes that are neither directly or indirectly

commercial, provided the rightholders receive fair compensation. Presumably the exception

would apply where a natural person has purchased a copy of a copyrighted work, thereby

providing fair compensation to the rightholders, and thereafter makes additional copies for

personal, noncommercial uses – e.g., by making a copy of one’s purchased music CD onto a

cassette for use in one’s car. The drafters of the European Copyright Directive deemed this right

of private use to be of such significance that under Article 6(4), member states are permitted to

take measures to ensure that beneficiaries of this right are able to take advantage of it, “unless

reproduction for private use has already been made possible by rightholders to the extent

necessary to benefit from the exception or limitation concerned and in accordance with the

provisions of Article 5(2)(b) and (5), without preventing rightholders from adopting adequate

measures regarding the number of reproductions in accordance with these provisions.”247

The right of private use contained in Article 5(2)(b) is similar to a right afforded in the

United States under the Audio Home Recording Act (AHRA), 17 U.S.C. § 1008, which provides,

“No action may be brought under this title alleging infringement of copyright based on the

manufacture, importation, or distribution of a digital audio recording device, a digital audio

recording medium, an analog recording device, or an analog recording medium, or based on the

noncommercial use by a consumer of such a device or medium for making digital musical

recordings or analog musical recordings.” This statute is discussed in detail in Section II.A.7

below, and in Section III.C.2.(c)(1) below in connection with the Napster litigations. Napster,

Inc., the operator of a service that enabled subscribers to share music files in MP3 audio format

with one another, asserted the AHRA as a defense to an allegation by copyright owners that it

was contributorily and vicariously liable for the unauthorized sharing of copyrighted sound

recordings through its service. Napster argued that the AHRA permitted its subscribers to share

247 Under the last paragraph of Article 6(4), this right of member states to take measures to ensure that beneficiaries

of the right of private use are able to take advantage of it does not apply “to works or other subject-matter made

available to the public on agreed contractual terms in such a way that members of the public may access them

from a place and at a time individually chosen by them.”

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such sound recordings because they were shared for personal use by its subscribers. As

discussed in detail below, the courts rejected this argument.

Perhaps in response to online systems like Napster, the drafters of the European

Copyright Directive seem to have been concerned that the exception for personal use in Article

5(2)(b) not be construed to permit the unauthorized sharing of copyrighted works in digital form

through online systems, at least without compensation to the rightholders affected. Specifically,

Recital (38) of the European Copyright Directive states:

Member States should be allowed to provide for an exception or limitation to the

reproduction right for certain types of reproduction of audio, visual and audiovisual

material for private use, accompanied by fair compensation. This may

include the introduction or continuation of remuneration schemes to compensate

for the prejudice to rightholders. … Digital private copying is likely to be more

widespread and have a greater economic impact. Due account should therefore be

taken of the differences between digital and analogue private copying and a

distinction should be make in certain respects between them.

In addition, the drafters of the European Copyright Directive seemed to contemplate that

“intermediaries” providing services through which infringing activities take place online should

be subject to injunctive relief to stop unauthorized transmissions of copyrighted works through

its service. Recital (58) of the European Copyright Directive provides:

In the digital environment, in particular, the services of intermediaries may

increasingly be used by third parties for infringing activities. In many cases such

intermediaries are best placed to bring such infringing activities to an end.

Therefore, without prejudice to any other sanctions and remedies available,

rightholders should have the possibility of applying for an injunction against an

intermediary who carries a third party’s infringement of a protected work or other

subject-matter in a network. This possibility should be available even where the

acts carried out by the intermediary are exempted under Article 5. The conditions

and modalities relating to such injunctions should be left to the national law of the

Member States.

Under Article 5(3), member states may provide for further exceptions or limitations to the

reproduction right and the right of communication to the public in the following cases:

(a) use for the sole purpose of illustration for teaching or scientific research, as

long as the source, including the author’s name, is indicated, unless this proves

impossible, and to the extent justified by the non-commercial purpose to be

achieved;

(b) uses, for the benefit of people with a disability, which are directly related to

the disability and of a non-commercial nature, to the extent required by the

specific disability;

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(c) reproduction by the press, communication to the public or making available of

published articles on current economic, political or religious topics or of broadcast

works or other subject-matter of the same character, in cases where such use is

not expressly reserved, and as long the source, including the author’s name, is

indicated, or use of works or other subject-matter in connection with the reporting

of current events, to the extent justified by the informatory purpose and as long as

the source, including the author’s name, is indicated, unless this proves

impossible;

(d) quotations for purposes such as criticism or review, provided that they relate

to a work or other subject-matter which has already been lawfully made available

to the public, and that, unless this proves impossible, the source, including the

author's name, is indicated, and that their use is in accordance with fair practice,

and to the extent required by the specific purpose;

(e) use for the purposes of public security or to ensure the proper performance or

reporting of administrative, parliamentary or judicial proceedings;

(f) use of political speeches as well as extracts of public lectures or similar works

or subject-matter to the extent justified by the informatory purpose and provided

that the source, including the author's name, is indicated, except where this proves

impossible;

(g) use during religious celebrations or official celebrations organized by a public

authority;

(h) use of works, such as works of architecture or sculpture, made to be located

permanently in public places;

(i) incidental inclusion of a work or other subject-matter in other material;

(j) use for the purpose of advertising public exhibition or sale of artistic works, to

the extent necessary to promote the event, excluding any other commercial use;

(k) use for the purpose of caricature, parody or pastiche;

(l) use in connection with the demonstration or repair of equipment;

(m) use of an artistic work in the form of a building or a drawing or plan of a

building for the purposes of reconstructing the building;

(n) use by communication or making available, for the purpose of research or

private study, to individual members of the public by dedicated terminals on the

premises of establishments referred to in paragraph 2(c) of [Article 5(2)] of works

and other subject-matter not subject to purchase or licensing terms which are

contained in their collections;

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(o) use in certain other cases of minor importance where exceptions or limitations

already exist under national law, provided that they only concern analogue uses

and do not affect the free circulation of goods and services within the Community,

without prejudice to the other exceptions and limitations contained in this Article.

Note that, unlike many of the exceptions of Article 5(2), the exceptions of Article 5(3)

are not conditioned upon fair compensation to the rightholders.

6. Peer-to-Peer File Sharing

(a) BMG Music v. Gonzalez

In BMG Music v. Gonzalez,248 defendant Cecilia Gonzalez sought to defend her

downloading of more than 1370 copyrighted songs through the Kazaa file-sharing network by

arguing that her actions should fall under the fair use doctrine on the theory that she was just

sampling the music to determine what she liked sufficiently to buy at retail.249 The Seventh

Circuit rejected this argument out of hand. Focusing principally on the fourth fair use factor –

the effect of the use upon the potential market for or value of the copyrighted work – Judge

Easterbrook noted that as file sharing had increased over the last four years, sales of recorded

music had dropped by approximately 30%. Although other economic factors may have

contributed, he noted that the events were likely related.250

He further noted that rights holders had economic interests beyond selling compact discs

containing collections of works – specifically, there was also a market in ways to introduce

potential consumers to music. Noting that many radio stations stream their content over the

Internet, paying a fee for the right to do so, he noted that Gonzalez could have listened to

streaming music to sample songs for purchase, and had she done so, the rights holders would

have received royalties from the broadcasters.251 Rejecting the proffered fair use defense, Judge

Easterbrook stated, “Copyright law lets authors make their own decisions about how best to

promote their works; copiers such as Gonzalez cannot ask courts (and juries) to second-guess the

market and call wholesale copying ‘fair use’ if they think that authors err in understanding their

own economic interests or that Congress erred in granting authors the rights in the copyright

statute.”252

The plaintiffs sought statutory damages for Gonzalez’ unauthorized copying, seeking the

minimum amount of $750 per work infringed. Gonzalez sought to reduce the award below the

$750 minimum by arguing under Section 504(c)(2) that she was not aware and had no reason to

believe that her acts constituted infringement of copyright. The district court rejected the request

under the provisions of Section 402(d), which provides that if a valid notice of copyright appears

248 430 F.3d 999 (7th Cir. 2005).

249 Id. at 889-90.

250 Id. at 890.

251 Id. at 891.

252Id.

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on the phonorecords to which a defendant had access, then no weight shall be given to the

defendant’s interposition of a defense based on innocent infringement in mitigation of actual or

statutory damages.253 Gonzalez sought to avoid Section 402(d) by arguing that there were no

copyright notices on the data she downloaded. The court rejected this argument: “She

downloaded data rather than discs, and the data lacked copyright notices, but the statutory

question is whether ‘access’ to legitimate works was available rather than whether infringers

earlier in the chain attached copyright notices to the pirated works. Gonzalez readily could have

learned, had she inquired, that the music was under copyright.”254

(b) Columbia Pictures v. Bunnell

In Columbia Pictures Industries, Inc. v. Bunnell,255 the court entered judgment against

defendant Valence Media LLC, operator of the web site at www.torrentspy.com, for willful

inducement of copyright infringement, contributory copyright infringement, and vicarious

copyright infringement. The court awarded the plaintiffs statutory damages of $30,000 per

infringement for each of 3,699 infringements shown, for a total judgment of $110,970,000. The

court also issued a permanent injunction enjoining the defendants from encouraging, inducing, or

knowingly contributing to the reproduction, download, distribution, upload, or public

performance or display of any copyrighted work at issue, and from making available for

reproduction, download, distribution, upload, or public performance or display any such work.256

(c) Sony BMG Music Entertainment v. Tenenbaum

In Sony BMG Music Entertainment v. Tenenbaum,257 the court rejected a broadside fair

use defense for the file-sharing by a college sophomore, Joel Tenenbaum, of 30 copyrighted

songs belonging to the plaintiffs. Describing the defense raised by the defendant’s counsel as

“truly chaotic,”258 the court noted that it represented a version of fair use so broad that it would

excuse all file sharing for private enjoyment. As the court described counsel’s defense, “a

defendant just needs to show that he did not make money from the files he downloaded or

distributed – i.e., that his use was ‘non-commercial’ – in order to put his fair use defense before a

253 Id. at 891-92.

254 Id. at 892. Gonzalez also challenged the district court’s award of the $750 amount on summary judgment,

arguing that the choice of amount is a question for the jury. The Seventh Circuit noted that, although a suit for

statutory damages under Section 504(c) is a suit at law to which the seventh amendment applies, this does not

mean that a jury must resolve every dispute. When there are no disputes of material fact, a court may enter

summary judgment without transgressing the Constitution. The court noted that Gonzalez had argued for the

minimum amount of $750 per song and the plaintiffs had been content with that amount, which the district court

then awarded on summary judgment. Id.

255 2008 U.S. Dist. LEXIS 63227 (C.D. Cal. July 10, 2008).

256 Id. at *1-3.

257 672 F. Supp. 2d 217 (D. Mass. 2009), rev’d, 660 F.3d 487 (1st Cir. 2011), cert. denied, 132 S. Ct. 2431 (2012).

258 Id. at 220.

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jury. Beyond that threshold, the matter belongs entirely to the jury, which is entitled to consider

any and all factors touching on its innate sense of fairness – nothing more and nothing less.”259

The court first turned to the threshold issue of whether fair use is an equitable defense.

Noting that a number of courts had suggested that it is, the court nevertheless opined that even if

fair use is an entirely equitable defense, it is not clear that its determination requires a jury trial,

because judges, not juries, traditionally resolve equitable defenses. However, given that two

leading copyright historians had suggested that the equitable label may be a misnomer, and

because neither party pressed the point, the court assumed that fair use is a jury question, without

resolving the question of the equitable origins of the defense. But because fair use is ultimately a

legal question, the court noted that, in the face of the plaintiff’s motion for summary judgment on

the fair use issue, the defendant could put the defense to a jury only if he showed through

specific, credible evidence that the facts relevant to that legal analysis were in dispute. The

defendant had failed to do so.260

Turning to an application of the four fair use factors, the court found that the first factor –

purpose and character of the use – favored the plaintiffs. The court rejected the defendant’s

binary distinction between “commercial” and “non-commercial” uses under the first factor,

noting that the purpose and character of a use must be classified along a spectrum that ranges

from pure, large-scale profit-seeking to uses that advance important public goals, like those

recognized in the statute. The defendant’s file sharing fell somewhere in between. Although the

court was not willing to label it “commercial,” as the plaintiffs urged, the court ruled that

because the use was not accompanied by any public benefit or transformative purpose, the first

factor cut against fair use.261 The second factor – nature of the copyrighted work – also cut

against fair use because musical works command robust copyright protection.262

The defendant argued that the third factor – portion of the work used – cut against the

plaintiffs because he was alleged to have downloaded only individual songs, but not full albums,

and it was the albums in which the plaintiffs registered their copyrights, while the individual

songs were works made for hire. The court rejected this argument, noting that under existing file

sharing case law, individual songs were regularly treated as the relevant unit for evaluating

infringement and fair use of musical works.263

With respect to the fourth factor – effect on the potential market for the work – the

defendant argued that his file sharing made little economic difference to the plaintiffs because

the songs at issue were immensely popular and therefore widely available on file sharing

networks. The court rejected this as an improper framework for the analysis. Rather, one must

consider the effect on the market of the sum of activity if thousands of others were engaged in

259 Id. at 221.

260 Id. at 223-24.

261 Id. at 227-29.

262 Id. at 229.

263 Id. at 229-30.

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the same conduct. The plaintiffs had provided evidence that the widespread availability of free

copies of copyrighted works on the Internet had decreased their sales revenue, and the defendant

had offered no affidavits or expert report to disprove or dispute that evidence.264

The court’s opinion contains a few other interesting observations with respect to the

doctrine of fair use as applied to file sharing. First, citing the case of American Geophysical

Union v. Texaco Inc.,265 the court noted that a fair use determination may be affected by the

availability or absence of authorized ways to obtain the work in question. The defendant

asserted that the emergence of easy-to-use, paid outlets for digital music, such as the iTunes

music store, had lagged well behind the advent of file sharing, and this fact should affect the fair

use analysis. The court responded that, whatever the availability of authorized digital

alternatives was when peer-to-peer networks first because widespread in 1999, it was clear that

by August 2004 – when the defendant’s file sharing was detected – a commercial market for

digital music had fully materialized. In light of that chronology, the unavailability of paid digital

music was simply not relevant to the court’s application of the fair use doctrine.266

Although granting the plaintiffs’ motion for summary judgment on the defendant’s fair

use defense, the court concluded with the following two interesting dicta:

– “[T]he Court does not believe the law is so monolithic, or the principles of fair use so

narrow that they could not encompass some instances of file sharing copyrighted works. This

Court, unlike others that have spoken on the subject, can envision a scenario in which a

defendant sued for file sharing could assert a plausible fair use defense – for example, the

defendant who ‘deleted the mp3 files after sampling them, or created mp3 files exclusively for

space-shifting purposes from audio CDs they had previously purchased.’ (Berkman Center Br. at

36-37, document # 177-3.) The Court can also envision a fair use defense for a defendant who

shared files during a period before the law concerning file sharing was clear and paid outlets

were readily available. … A defendant who shared files online during this interregnum, sampling

the new technology and its possibilities, but later shifted to paid outlets once the law because

clear and authorized sources available, would present a strong case for fair use.”267

– “As this Court has previously noted, it is very, very concerned that there is a deep

potential for injustice in the Copyright Act as it is currently written. It urges – no implores –

Congress to amend the statute to reflect the realities of file sharing. There is something wrong

with a law that routinely threatens teenagers and students with astronomical penalties for an

activity whose implications they may not have fully understood. The injury to the copyright

holder may be real, and even substantial, but, under the statute, the record companies do not even

have to prove actual damage.”268

264 Id. at 230-31.

265 60 F.3d 913, 931 (2d Cir. 1994).

266 Tenenbaum, 672 F. Supp. 2d at 235-36.

267 Id. at 237-38.

268 Id. at 237.

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Following a trial, the jury found that Tenenbaum had willfully infringed the plaintiffs’

copyrights and imposed statutory damages of $22,500 per song, yielding a total award of

$675,000.269 In response to the defendant’s motion for a new trial or remitter, the trial court held

that an award of that size, given that Tenenbaum reaped no pecuniary reward from the

infringement and the infringing acts caused the plaintiffs minimal harm, violated the due process

clause of the Constitution as excessive. The court found the award to be far greater than

necessary to serve the government’s legitimate interests in compensating copyright owners and

deterring infringement and that, in fact, it bore no meaningful relationship to those objectives.

Accordingly, the court reduced the jury’s award to one-tenth the amount, or $2,250 per infringed

work (three times the statutory minimum), for a total award of $67,500. The court noted that

such amount was still more than the court itself might have awarded in its independent judgment,

but the amount was the greatest amount that the Constitution would permit given the facts of the

case.270 The court also reaffirmed its previous ruling rejecting Tenenbaum’s fair use defense.271

On appeal, the First Circuit reversed, finding that the district court erred when it bypassed

Tenenbaum’s remittitur arguments based on the excessiveness of statutory damages and reached

the constitutional due process issue. The court noted that, under established precedent, a trial

court’s reduction of compensatory damages must, to avoid Seventh Amendment error, allow the

plaintiff a new trial. Punitive damage awards, by contrast, may be reduced on due process

grounds without offering the plaintiff a new trial without running afoul of the Seventh

Amendment. In bypassing remittitur and the offer of a new trial, the district court had assumed

that statutory damage awards should be treated largely as punitive, not compensatory, awards for

Seventh Amendment purposes.272 But the First Circuit found that statutory damages have both a

compensatory and punitive element, and further noted that the Supreme Court had ruled in the

Feltner case273 that the Seventh Amendment provides a right to a jury trial on all issues pertinent

to an award of copyright statutory damages. Given these important Seventh Amendment issues,

the First Circuit held that the district court had erred in not ordering remittitur, which would have

afforded a number of possible outcomes that could have eliminated the constitutional due

process issue altogether, or at the very least materially reshaped it – e.g., by altering the amount

of the award at issue or even the evidence on which to evaluate whether a particular award was

excessive.274

The court also rejected the defendant’s argument that no statutory damages can be

awarded where harm caused by the defendant has not been proved, and that statutory damages

269 Sony BMG Music Entertainment v. Tenenbaum, 721 F. Supp. 2d 85, 87 (D. Mass. 2010), rev’d, 660 F.3d 487,

514 (1st Cir. Sept. 16, 2011), cert. denied, 132 S. Ct. 2431 (2012).

270 Id. at 89-90.

271 Id. at 98-99.

272 Sony BMG Music Entertainment v. Tenenbaum, 660 F.3d 487, 514 (1st Cir. 2011), cert. denied, 132 S. Ct. 2431

(2012).

273 Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340 (1998).

274 Tenenbaum, 660 F.3d at 511, 514-15.

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cannot be awarded unless reasonably related to actual damages.275 The court further rejected a

number of challenges to the district court’s jury instructions, including a challenge to the

instruction that willful infringement means that a defendant had knowledge that his actions

constituted copyright infringement or acted with reckless disregard for the copyright holder’s

rights. The First Circuit joined precedent from sister circuits that had unanimously and routinely

found that an infringement is willful under Section 504 if it is knowing or in reckless disregard

of the copyright holder’s rights.276

Accordingly, the court affirmed the finding of liability against Tenenbaum and the

injunctive relief, but vacated the district court’s due process damages ruling and reversed the

reduction of the jury’s statutory damages award. The court reinstated the jury’s award of

damages and remanded for consideration of the defendant’s motion for common law remittitur

based on excessiveness. If on remand, the district court allowed any reduction through

remittitur, the First Circuit ruled that the plaintiffs must be given the choice of a new trial or

acceptance of remittitur.277

On remand, the district court ruled there was no basis for common law remittitur of the

award because it was not grossly excessive, inordinate, shocking to the conscience of the court,

or so high that it would be a denial of justice to permit it to stand. Tenenbaum had personally

received multiple warnings from various sources across several years about downloading and

distributing copyrighted materials, including the fact that his activities could subject him to

liability of up to $150,000 per infringement. There was thus ample evidence of willfulness on

his part and the need for deterrence based on his blatant contempt of warnings and apparent

disregard for the consequences of his actions.278 Turning next to the legal principles set forth by

the First Circuit for evaluating a due process challenge to the award, the court ruled that under

the applicable standard – a statutory damages award comports with due process as long as it

cannot be said to be so severe and oppressive as to be wholly disproportioned to the offense of

obviously unreasonable – the award must withstand a due process challenge. The court

concluded that, given the deference afforded Congress’ statutory award determination and the

public harms it was designed to address, the particular behavior of Tenenbaum in the case, and

the fact that the award was not only within the range for willful infringement but also below the

limit for non-willful infringement, it could not be said that its amount was either wholly

disproportioned to the offense or obviously unreasonable.279

On appeal, the First Circuit affirmed that the $675,000 statutory damages award did not

violate due process, finding that the district court had applied the correct standard to judge the

275 Id. at 502, 506.

276 Id. at 507.

277 Id. at 515.

278 Sony BMG Music Entertainment v. Tenenbaum, 2012 U.S. Dist. LEXIS 119243 at *6-10 (D. Mass. Aug. 23,

2012), aff’d, 719 F.3d 67 (1st Cir. 2013).

279 Id. at *14-18.

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constitutionality of the award and reached the correct result for the reasons the district court had

given.280

(d) Capitol Records v. Thomas-Rasset

The case of Capitol Records, Inc. v. Thomas-Rasset281 presented a factual situation very

similar to that of the Tenenbaum case. Jammie Thomas-Rasset, an individual, was accused by

several record companies of copyright infringement for downloading and distributing their

copyrighted sound recordings through the Kazaa peer-to-peer filing sharing application. Three

jury trials were conducted, each of which resulted in a finding of willful infringement. The first

jury returned a statutory damages award of $9,250 per song for a total award of $222,000 based

on the defendant’s distribution of 24 songs. The court vacated the verdict, however, and granted

a new trial based on its conclusion that it had erred in giving a jury instruction which addressed

the existence of a “making available” right. The second jury returned a statutory damages award

of $80,000 per song for a total award of $1,920,000. Upon motion to set aside the award, the

court ruled the award was shocking and unjust and remitted the award to $2,250 per song, or

three times the statutory minimum – the same amount as the district judge used in the

Tenenbaum case. The plaintiffs then exercised their right to reject remittitur and requested a new

trial. The third jury returned a verdict awarding statutory damages in the amount of $62,500 for

each song, for a total award of $1,500,000.282

The defendant filed a motion to reduce the damages award on the ground that it violated

the due process clause of the Constitution because it bore no reasonable relationship to the actual

damages caused by the defendant. The court noted that, although in the past it had endeavored to

avoid unnecessary adjudication of a constitution issue by relying upon remittitur, based on the

plaintiffs’ demonstrated refusal to accept a remittitur and the fact that the defendant had not

requested remittitur, the court felt it was required to address the constitutionality of the award.

Reviewing the relevant legal authority governing the constitutionality of damage awards, the

court concluded that, although the due process clause does not require that a statutory damages

award be confined or proportioned to the plaintiff’s actual loss or damages, the award should

bear some relation to the actual damages suffered. That was not the case here.283 “In the case of

an individual, like Thomas-Rasset, who infringes by using peer-to-peer networks, the potential

gain from infringement is access to free music to build a personal library, which could be

purchased, at most, for thousands of dollars, not the possibility of hundreds of thousands – or

even millions – of dollars in profits.”284

Finding a broad legal practice of establishing a treble award as the upper limit permitted

in both statutory and common law contexts to address willful or particularly damaging behavior,

280 Sony BMG Music Entertainment v. Tenenbaum, 719 F.3d 67, 70-72 (1st Cir. 2013).

281 799 F. Supp. 2d 999 (D. Minn. 2011), rev’d, 692 F.3d 899 (8th Cir. 2012), cert. denied, 133 S. Ct. 1584 (2013).

282 Id. at 1002-03.

283 Id. at 1003, *1007-08.

284 Id. at 1010.

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the court concluded, with citation to the Tenenbaum case, that “in this particular case, involving

a first-time willful, consumer infringer who committed illegal song file-sharing for her own

personal use, $2,250 per song [three times the minimum statutory amount], for a total award of

$54,000, is the maximum award consistent with due process.”285

After the court issued this ruling in the Thomas-Rasset case, the First Circuit reversed the

Tenenbaum case, finding that the district court should not have reached the constitutional issues,

but instead should have relied upon the mechanism of remittitur/new trial to address the size of

the award. However, it should be noted that the procedural posture in which the district court

issued its constitutional ruling in the Thomas-Rasset case, in which a previous rejection of

remittitur and election of a new trial had taken place and the defendant had not requested

remittitur again, was very different from the procedural posture in which the Tenenbaum court

issued its ruling, where the court simply went directly to the constitutional issues in response to

the defendant’s motion for remittitur or a new trial.

The court in the Thomas-Rasset case issued a permanent injunction prohibiting the

defendant from infringing the plaintiffs’ copyrights, present or future, in any sound recording.

The court rejected, however, the plaintiffs request that the court include language in the

injunction barring the defendant from “making available” any of the plaintiffs’ sound recordings

for distribution:286

Plaintiffs argue that, if Thomas-Rasset makes Plaintiffs’ copyrighted works

available on a peer-to-peer network, she will have completed all of the steps

necessary for her to engage in the same illegal distribution of Plaintiffs’ works for

which she has already been found liable. Because the Court has held that the

Copyright Act does not provide a making-available right, it will not enjoin

Thomas-Rasset from making the copyrighted sound recordings available to the

public.287

On appeal, the plaintiffs argued that the Eighth Circuit should reverse the district court’s

order granting a new trial and reinstate the first jury’s award of $222,000. The plaintiffs also

sought a broadened injunction that would forbid Thomas-Rasset from making their copyrighted

sound recordings available for distribution. In summary, the Eighth Circuit held that the

plaintiffs were entitled to the remedies they sought: damages of $222,000 and a broadened

injunction that prohibited Thomas-Rasset to make available the plaintiffs’ sound recordings for

distribution. However, because the verdicts returned by the second and third juries were

sufficient to justify those remedies, the court found it unnecessary to consider the merits of the

district court’s order granting a new trial after the first verdict. And although the court

acknowledged the importance of the “making available” legal issue to the plaintiff recording

companies, the court ruled that they were not entitled to an opinion on an issue of law that was

285 Id. at 1013.

286 Id. at 1016.

287 Id.

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unnecessary for the remedies sought or to a freestanding decision on whether Thomas-Rasset

violated the law by making recordings available.288

On appeal, Thomas-Rasset lodged no objection to reinstatement of the first verdict,

subject to arguments about the constitutionality of the size of the damages. She also offered to

acquiesce in the entry of an injunction that would forbid her from making available copyrighted

works for distribution, which would render moot the issue whether making works available is

part of the distribution right of the copyright holder. In response, the Eighth Circuit observed

that it reviews judgments, not decisions on issues. The entitlement of the plaintiffs to the

remedies sought – damages of $222,000 and an injunction against making copyrighted works

available to the public – were the matters in controversy. That the plaintiffs sought these

remedies with the objective of securing a ruling on a particular legal issue did not make that legal

issue itself the matter in controversy.289 “Once the requested remedies are ordered, the desire of

the companies for an opinion on the meaning of the Copyright Act, or for a statement that

Thomas-Rasset violated the law by making works available, is not sufficient to maintain an

Article III case or controversy.”290

With respect to the scope of the injunction that should have been issued, the Eighth

Circuit noted that the district court’s refusal to enjoin the making available of the recordings was

an error of law, even assuming that the district court was correct in concluding that the

distribution right does not include a right of making available, because a district court has

authority to issue a broad injunction in cases where a proclivity for unlawful conduct has been

shown. Here, Thomas-Rasset’s willful infringement and subsequent efforts to conceal her

actions showed such a proclivity. Accordingly, the district court erred after the third trial by

concluding that the broader injunction requested by the plaintiffs was impermissible as a matter

of law. An injunction against making recordings available was lawful and appropriate under the

circumstances, even accepting the district court’s interpretation of the Copyright Act. Because

Thomas-Rasset was not resisting expanding the injunction to include that relief, the Eighth

Circuit directed the district court to modify the judgment to include the requested injunction.291

With respect to the question of damages, the Eighth Circuit ruled that the district court

erred in reducing the third jury’s verdict to $2,250 per work, for a total of $54,000, on the ground

that this amount was the maximum permitted by the Constitution. Under relevant Supreme

Court authority, damages awarded pursuant to a statute violate due process only if they are so

severe and oppressive as to be wholly disproportioned to the offense and obviously

unreasonable, and that was not the case here. The court noted that Congress set a statutory

damages range for willful copyright infringement of $750 to $150,000 per infringed work, and

the $222,000 sought was toward the lower end of that broad range. And it noted that the

Supreme Court has rejected the notion that the constitutional inquiry calls for a comparison of an

288 Capitol Records, Inc. v. Thomas-Rasset, 692 F.3d 899, 901-02 (8th Cir. 2012), cert. denied, 133 S. Ct. 1584

(2013).

289 Id. at 905.

290 Id. at 906.

291 Id. at 906-07.

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award of statutory damages to actual damages caused by the violation – because statutory

damages are imposed as a punishment for the violation of a public law, Congress may adjust

their amount to the public wrong rather than the private injury, just as if the award were going to

the state. Accordingly, the Eighth Circuit concluded that the plaintiffs were entitled to the

$222,000 award they sought, and the question whether the district court correctly granted a new

trial after the first verdict was moot.292

7. The Immunity of the Audio Home Recording Act (AHRA)

The Audio Home Recording Act of 1992 (AHRA)293 made two major substantive

changes to copyright law. First, Subchapter D of the AHRA (Section 1008) immunizes certain

noncommercial recording and use of musical recordings in digital or analog form.294 Section

1008 provides:

No action may be brought under this title alleging infringement of copyright295

based on the manufacture, importation, or distribution of a digital audio recording

device, a digital audio recording medium, an analog recording device, or an

analog recording medium, or based on the noncommercial use by a consumer of

such a device or medium for making digital musical recordings or analog musical

recordings.

Second, Subchapters B and C (Sections 1002-1007) of the AHRA require (i) that any

“digital audio recording device” (DARD) conform to the “Serial Copyright Management

System” (SCMS), which allows unlimited first generation copies of an original source, but

prohibits second generation copies (i.e., copies of a copy), and (ii) that manufacturers and

distributors of digital audio recording devices and digital audio recording media (such as DAT

tape and recordable CDs) pay royalties and file various notices and statements to indicate

payment of those royalties.296

(a) The Napster Cases

For a discussion of the rulings with respect to the AHRA in the Napster cases, see

Section III.C.2(c)(1) below.

292 Id. at 906, 907-10.

293 Pub. L. No. 102-563, 106 Stat. 4244 (1992), codified at 17 U.S.C. §§ 1001-1010.

294 Nimmer § 8B.01 (2000).

295 The immunity applies with respect to copyrights in both the sound recordings and any musical compositions

embodied therein. Id. § 8B.07[C][2], at 8B-90.

296 Id. §§ 8B.02 & 8B.03 (2000).

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(b) The Aimster Case

In In re Aimster Copyright Litigation,297 the plaintiffs brought copyright infringement

claims against the Aimster peer-to-peer file sharing site and its operators for secondary liability

for the infringing distribution of the plaintiffs’ copyrighted sound recordings. On a motion for a

preliminary injunction, the defendants asserted that the plaintiffs had failed to establish that

Aimster’s users were engaged in direct copyright infringement because the AHRA provided an

affirmative defense. The defendants argued that the AHRA shielded them from liability because

it was intended to immunize from liability personal use of copyrighted material by protecting all

noncommercial copying by consumers of digital and analog musical recordings, relying on the

Ninth Circuit’s Diamond Multimedia case, discussed in Section III.C.2(c)(1) above.298

The court rejected the defendants’ reliance on the AHRA, distinguishing the Diamond

Multimedia case as follows:

The facts of the instant case and Diamond Multimedia are markedly different.

The activity at issue in the present case is the copying of MP3 files from one

user’s hard drive onto the hard drive of another user. The Rio in Diamond

Multimedia, by contrast, “merely [made] copies in order to render portable, or

‘space shift,’ those files that already reside on a user’s hard drive.” 180 F.3d at

1079. The difference is akin to a[n] owner of a compact disc making a copy of

the music onto a tape for that owner’s sole use while away from home versus the

owner making thousands of copies of the compact disk onto a tape for distribution

to all of his friends. Furthermore, Diamond Multimedia had nothing whatsoever

to do with whether the MP3 files on the owner’s computers themselves infringed

copyrights. Rather, the decision was limited solely to the infringement issue

regarding the act of shifting files from a computer to a personal device and

whether that copying was subject to the particular requirements of the AHRA. In

short, Defendant’s reliance on Diamond Multimedia is entirely misplaced.299

(c) Atlantic Recording Corp. v. XM Satellite Radio

In Atlantic Recording Corp. v. XM Satellite Radio, Inc.,300 numerous record companies

sued XM Satellite Radio for contributory, vicarious and inducement copyright liability based on

XM’s offering of digital radio broadcast services together with special receivers marketed as

“XM + MP3” players that allowed subscribers to record, retain and library individually

297 252 F. Supp. 2d 634 (N.D. Ill. 2002), aff’d on other grounds, 334 F.3d 643 (7th Cir. 2003), cert. denied, 124 S.

Ct. 1069 (2004).

298 Id. at 648-49.

299 Id. at 649.

300 2007 U.S. Dist. LEXIS 4290 (S.D.N.Y. Jan. 19, 2007).

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disaggregated and indexed audio files from XM broadcast performances. The record companies

challenged these capabilities as an infringing “digital download delivery service.”301

XM offered several services specifically to XM + MP3 player users that were the subject

of the plaintiff’s challenge. First, while listening to XM programming, an XM + MP3 user could

instantly record any song at the touch of a button. To facilitate such recording, the XM + MP3

player maintained a short-term buffered copy of every broadcast song a user listened to. As a

result, a user could record and store in its entirety any broadcast song he or she heard, even if the

user started listening to the song after it began to play.302

Second, XM provided XM + MP3 users with playlists from blocks of broadcast

programming which had been disaggregated into individual tracks. XM sent users such digital

playlists with title and artist information included. The playlists identified all songs broadcast

over a particular channel and during a particular period of time. Users could then scroll through

a playlist and select which songs to store for future replay, and which to delete. Using this

utility, users could hear and store individual songs without actually listening to XM broadcast

programming.303

Third, XM provided to users a search function together with “ArtistSelect” and

“TuneSelect” utilities that made it easy for a user to find out when a requested song was being

broadcast. XM would send the listener immediate notice when his or her chosen artists or songs

were played on any XM channel. The user could then immediately switch channels and store the

requested track onto his or her XM + MP3 player.304

Fourth, the XM + MP3 players enabled users to store the approximate equivalent of

1,000 songs recorded from XM broadcasts for as long as the user maintained an XM

subscription. Accordingly, the court found that these songs were effectively leased to the XM

subscriber for as long as he or she maintained status as a subscriber.305

XM brought a motion to dismiss the copyright claims on the ground that it was shielded

from infringement actions by Section 1008 of the AHRA because it was acting as a distributor of

a digital audio recording device (DARD) immunized by the AHRA. The court first turned to

whether the XM + MP3 players constituted a DARD. The plaintiffs argued that they did not,

citing the Ninth Circuit’s decision in Recording Industry Ass’n of Am. v. Diamond Multimedia

Sys.,306 which held that the Diamond Rio device at issue was not a DARD because it could not

make copies from a transmission but instead could make copies only from a computer hard drive,

which is exempted under Section 1001(5)(B) of the AHRA. The court distinguished the facts of

301 Id. at *6.

302 Id. at *9.

303Id.

304 Id. at *9-10.

305 Id. at *10-11.

306 180 F.3d 1072 (9th Cir. 1999).

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the Diamond case, noting that the XM + MP3 players could receive from transmissions and were

capable of copying without an external computer or computer hard drive.307 “Accordingly, at

this stage of the proceeding, relying on plain meaning statutory interpretation and the definition

of a DARD contained in Diamond, until proven otherwise by means of discovery, the Court

treats the [XM + MP3 players] as DARDs.”308

The court next turned to whether the AHRA offered XM complete immunity from the

plaintiffs’ copyright claims. XM argued that, because it was a distributor of DARDs, it did have

such immunity. The court rejected this argument, noting that, while Section 1008 would protect

XM from suit for actions based on the distribution of DARDs, such protection would not act as a

wholesale, blanket protection for other conduct that XM might be engaged in beyond such

distribution. In particular, XM’s acts as a satellite radio broadcaster could form a separate basis

for copyright liability. Indeed, the plaintiffs’ complaint made clear that their claims of copyright

infringement were based on XM’s acting without authorization as a commercial content delivery

provider that delivered permanent digital copies of sound recordings to those devices without

permission from the copyright owner.309

More specifically, the plaintiffs alleged that, in providing services specific to users of

XM + MP3 players, XM was acting outside the scope of its statutory license for broadcast

service under Section 114 of the copyright statute – XM’s only source of permission to use the

plaintiffs’ recordings. Such unauthorized acts, according to the plaintiffs, were encroaching

directly on their digital download business.310 The court agreed, finding that by broadcasting and

storing copyrighted music on DARDs for later recording by the consumer, XM was acting as a

both a broadcaster and a distributor, but was paying license fees only to be a broadcaster.311

XM argued that its XM + MP3 player was much like a traditional radio/cassette player

and should therefore not be viewed as an improper adjunct to broadcasts. The court rejected this

analogy, noting that, in the case of traditional radio/cassette players, the only contact between

manufacturers of the devices and users occurred at the point of sale. The court found it quite

apparent that the use of a radio/cassette player to record songs played over free radio did not

threaten the market for copyrighted works as would the use of a recorder which stores songs

from private radio broadcasts on a subscription fee basis. The court further noted that, although

XM subscribers might put XM + MP3 players to private use, several court decisions had rejected

attempts by for profit users to stand in the shoes of their customers making non-profit or

noncommercial uses.312

307 XM Satellite, 200 U.S. Dist. LEXIS 4290 at *14 n.4.

308Id.

309 Id. at *16-18.

310 Id. at *19.

311 Id. at *20.

312 Id. at *21-22.

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The court therefore denied XM’s motion to dismiss: “The Court finds that because of the

unique circumstances of XM being both a broadcaster and a DARD distributor and its access to

the copyrighted music results from its license to broadcast only, that the alleged conduct of XM

in making that music available for consumers to record well beyond the time when broadcast, in

violation of its broadcast license, is the basis of the Complaint, and being a distributor of a

DARD is not. Thus the AHRA, on these facts, provides no protection to XM merely because

they are distributors of a DARD.”313

B. The Right of Public Performance

Section 106 (4) of the copyright statute grants the owner of copyright in a work the

exclusive right to perform the work publicly. The right applies to literary, musical, dramatic, and

choreographic works, pantomimes, motion pictures and other audiovisual works. It does not

apply to pictorial, graphic, sculptural, and architectural works. It also does not apply to sound

recordings, other than with respect to public performances by digital transmission,314 although a

public performance of a sound recording may infringe the right of public performance of the

underlying musical work that is recorded in the sound recording.

Section 101 provides that to perform a work “publicly” means:

(1) to perform ... it at a place open to the public or at any place where a substantial

number of persons outside of a normal circle of a family and its social

acquaintances is gathered; or

(2) to transmit or otherwise communicate a performance ... of the work to a place

specified by clause (1) or to the public, by means of any device or process,

whether the members of the public capable of receiving the performance or

display receive it in the same place or in separate places and at the same time or at

different times.

Because this definition encompasses transmissions of works, it clearly implicates online

activity. However, to fall within the public performance right, there must be a transmission of a

performance of the work, not merely of the work itself. Thus, for example, transmission of the

digitally encoded sounds of a musical work to the hard disk of a recipient computer may infringe

313 Id. at *23-24.

314 The Digital Performance Right in Sound Recordings Act of 1995 created a limited public digital performance

right in sound recordings as of February 1, 1996. Pub. L. No. 104-39, 109 Stat. 336 (codified at 17 U.S.C. §§

106, 114, 115). Certain transmissions of performances are exempt. The exemptions do not apply, however, to

an “interactive” service, which the copyright statute defines as a service “one that enables a member of the

public to receive a transmission of a program specially created for the recipient, or on request, a transmission of

a particular sound recording, whether or not as part of a program, which is selected by or on behalf of the

recipient.” 17 U.S.C. §§ 114(d)(1), 114(j)(7).

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the right of distribution of the work (as well as the reproduction right), but not the public

performance right, because the work is not being performed315 at the recipient’s end.

1. Isochronous Versus Asynchronous Transmissions

One of the most hotly debated issues concerning the scope of the public performance

right in online contexts is whether, to fall within the copyright owner’s right of public

performance, the “performance” must be accomplished by a transmitted signal that is capable of

immediate conversion to a performance moment-by-moment in time (referred to as an

“isochronous transmission”), or whether it is sufficient that the transmitted signal is sent either

faster or slower (overall or moment-by-moment) than the embodied performance (referred to as

an “asynchronous transmission”).316

The definition of performing a work publicly in Section 101 of the copyright statute was

drafted at a time when “transmissions” were generally isochronous transmissions, as in

broadcasting. If this definition is read to require an isochronous transmission – and to date all of

the types of transmissions that courts have held to be public performances have been isochronous

transmissions317 – then many acts of downloading of works on the Internet (being asynchronous

transmissions), even if followed by in-home playback, may not fall within the public

performance right. The issue is far from settled, however, and performing rights societies have

argued to the contrary.318 The issue is particularly significant for musical works because

different organizations are often responsible for licensing and collecting royalties for public

distribution and public performance of musical works.

Even if an isochronous transmission is required for a public performance, the distinction

between isochronous and asynchronous transmissions becomes highly blurred on the Internet.

Because the Internet is based on packet switching technology, all transmissions through the

Internet are in some sense “asynchronous.” Moreover, through use of buffering in memory or

storage of information on magnetic or optical storage, either at the transmitting or the receiving

end or both, of all or parts of transmitted data, even an asynchronous transmission can effect a

smooth, moment-by-moment performance at the receiving end.

One can argue that the determinative factor of whether a public performance has been

accomplished should be judged from the perspective of what the recipient perceives, not the

transmission technology used (whether isochronous or asynchronous), especially if the

transmitting party controls when and what the recipient sees. For example, the Senate Report

accompanying the Digital Performance Right in Sound Recordings Act of 1995 suggests that

burst transmissions for prompt playback may constitute public performances:

315 The copyright statute provides that “[t]o ‘perform’ a work means to recite, render, play, dance, or act it, either

directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to

show its images in any sequence or to make the sounds accompanying it audible.” 17 U.S.C. § 101.

316 K. Stuckey, Internet and Online Law § 6.08[4][b], at 6-63 – 6-64 (2008).

317 Id. at 6-64.

318Id.

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[I]f a transmission system was designed to allow transmission recipients to hear

sound recordings substantially at the time of transmission, but the sound recording

was transmitted in a high-speed burst of data and stored in a computer memory

for prompt playback (such storage being technically the making of a

phonorecord), and the transmission recipient could not retain the phonorecord for

playback on subsequent occasions (or for any other purpose), delivering the

phonorecord to the transmission recipient would be incidental to the

transmission.319

2. The Meaning of “Publicly”

Section 106 (4) grants the exclusive right to perform a work “publicly.” Section 101

defines performing a work “publicly” to include performance by transmission to an audience that

may receive the transmission at different times, at different places, or both. Thus, the mere fact

that recipients may download performances of a work at dispersed times on demand through the

Internet does not diminish the “public” nature of such performances. For example, in On

Command Video Corp. v. Columbia Pictures Industries, Inc.,320 the court held that the public

performance right was implicated by a system of video cassette players wired to hotel rooms

which was capable of transmitting guest-selected movies to the occupants of one room at a time.

In sum, the breadth of definition of “public” performances makes a variety of online

transmissions of “on demand” information potentially within the public performance right. How

contemporaneously the playback of that information must be with the transmission in order for

there to be deemed a “performance” under current United States law remains to be seen. The

WIPO treaties could render many of these issues largely academic in view of the fact that the

current public performance right could become subsumed in the potentially broader right of

“communication to the public” or “making available to the public” contained in the WIPO

treaties discussed below. However, as discussed further below, the implementation of the WIPO

treaties in the DMCA takes a minimalist approach and does not adopt separate rights of

“communication to the public” or “making available to the public.” Accordingly, the noted

uncertainties with respect to the right of public performance are likely to await further

clarification through judicial development.

3. Live Nation Motor Sports v. Davis

In Live Nation Motor Sports, Inc. v. Davis,321 the plaintiff promoted and produced

motorcycle racing events and streamed webcasts of the events on its web site. Although the facts

are unclear from the court’s opinion, the defendant provided links to the plaintiff’s web site that

enabled users of the defendant’s web site to view the webcasts from the defendant’s web site.

The plaintiff sought a preliminary injunction against the defendant, arguing that the defendant’s

319 S. Rep. No. 104-128, at 39 (1995), reprinted in 1995 U.S.C.C.A.N. 356, 386.

320 777 F. Supp. 787 (N.D. Cal. 1991).

321 2006 U.S. Dist. LEXIS 89552 (N.D. Tex. Dec. 11, 2006).

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links to the plaintiff’s web site constituted an unauthorized display and performance of the

plaintiff’s copyrighted broadcasts.322

The court granted a preliminary injunction enjoining the defendant from providing

Internet links to the plaintiff’s webcasts of its racing events or otherwise displaying or

performing the plaintiff’s webcasts.323 With almost no analysis, the court ruled that the plaintiff

had a likelihood of success on its copyright claim because “the unauthorized ‘link’ to the live

webcasts that [the defendant] provides on his website would likely qualify as a copied display or

performance of [the plaintiff’s] copyrightable material.”324 The court found a threat of

irreparable harm to the plaintiff because the defendant’s links would cause the plaintiff to lose its

ability to sell sponsorships or advertisements on the basis that its website was the exclusive

source of the webcasts.325

Although the unclear facts of this case make its reach uncertain, it could potentially imply

that any unauthorized link that causes material available on another site to be streamed through

an unauthorized site could constitute an infringing public display or performance.

4. United States v. ASCAP

In United States v. ASCAP,326 the district court ruled that the downloading of a digital

music file embodying a particular song does not constitute a public performance of that song.

The case arose out of an application that Yahoo, RealNetworks and AOL made to ASCAP for a

license to publicly perform the musical works of the ASCAP repertoire by means of their

respective Internet services. After the parties were unable to agree on a licensing fee, ASCAP

applied to the court for a determination of a reasonable fee. The parties cross-moved for partial

summary judgment on the issue of whether downloading a digital music file embodying a song

constitutes a public performance of the song.327

The court noted that the copyright statute provides that, to “perform” a work means to

“recite,” “render,” or “play” it, and the plain meanings of each of those terms require

contemporaneous perceptibility. Accordingly, the court concluded that for a song to be

“performed,” it must be transmitted in a manner designed for contemporaneous perception. The

downloading of a music file is more accurately characterized as a method of reproducing that

file, rather than performing it.328 The court also noted that its interpretation was consistent with

322 Id. at *3-4.

323 Id. at *18.

324 Id. at *12.

325 Id. at *15.

326 485 F. Supp. 2d 438 (S.D.N.Y. 2007), aff’d, 627 F.3d 64 (2d Cir. 2010), cert. denied, 181 L.Ed.2d 232 (Oct. 3,

2011).

327 Id. at 440-41. The applicants conceded that the streaming of a musical work does constitute a public

performance. Id. at 442.

328 Id. at 443-44. The court also found this interpretation consistent with the holdings of those courts that have

addressed downloading of music over the Internet using peer-to-peer file transfer programs. For example, the

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the Copyright Office’s position in its 2001 DMCA Section 104 Report to Congress, in which the

Copyright Office stated that “we do not endorse the proposition that a digital download

constitutes a public performance even when no contemporaneous performance takes place.”329

On appeal, the Second Circuit affirmed this ruling.330 The Second Circuit agreed with the

district court that the ordinary sense of the words “recite,” “render,” and “play” refer to actions

that can be perceived contemporaneously. Downloaded songs are not performed in any

perceptible manner during the transfers – the user must take some further action to play the songs

after download. Because the electronic download itself involves no recitation, rendering, or

playing of the musical work encoded in the digital transmission, the court held that such a

download is not a performance of that work.331

The Second Circuit rejected ASCAP’s argument that all downloads fall under clause (2)

of the definition of “perform or display a work ‘publicly’” in Section 101332 because downloads

“transmit or otherwise communicate a performance,” namely the initial or underlying

performance of the copyrighted work, to the public. The Second Circuit cited its 2008 ruling in

Cartoon Network (discussed in the next subsection) that, when the statute speaks of transmitting

a performance to the public, it refers to the performance created by the act of transmission, not

simply to transmitting a recording of a performance. ASCAP’s alternative interpretation was

flawed because, in disaggregating the “transmission” from the simultaneous “performance” and

treating the transmission itself as a performance, ASCAP rendered superfluous the subsequent “a

performance … of the work” as the object of the transmittal. Cartoon Network recognized that a

“transmittal of a work” is distinct from a transmittal of “a performance” – the former being a

transmittal of the underlying work and the latter being a transmittal that is itself a performance of

the underlying work. Accordingly, the court ruled that transmittal without a performance does

not constitute a “public performance.”333

court cited the holding in Maverick Recording Co. v. Goldshteyn, 2006 U.S. Dist. LEXIS 52422 at *8

(E.D.N.Y. July 31, 2006) (“Downloading and uploading copyrighted files from a peer-to-peer network

constitutes, respectively, reproducing and distributing copyrighted material in violation of 17 U.S.C. § 106.”)

(emphasis added). ASCAP, 2007 U.S. Dist. LEXIS 31910 at *14.

329 Id. at 444 (quoting U.S. Copyright Office, Digital Millennium Copyright Act Section 104 Report to the United

States Congress at xxvii-xxviii (Aug. 29, 2001)).

330 United States v. ASCAP, 627 F.3d 64 (2d Cir. 2010), cert. denied, 181 L.Ed.2d 232 (Oct. 3, 2011).

331 Id. at 73.

332 That clause provides that to “perform or display a work “publicly” means “(2) to transmit or otherwise

communicate a performance or display of the work to a place specified by clause (1) or to the public, by means

of any device or process, whether the members of the public capable of receiving the performance or display

receive it in the same place or in separate places and at the same time or at different times.” 17 U.S.C. § 101.

333 ASCAP, 627 F.3d at 73-74.

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5. The Cablevision Case

In The Cartoon Network LP v. CSC Holdings, Inc.334 the Second Circuit ruled on

whether the playback through Cablevision’s network of copies of cable programs stored on its

servers at the instance of its customers as part of its “Remote Storage” Digital Video Recorder

(RS-DVR) system constituted unauthorized public performances of the stored works. The

detailed facts of how the RS-DVR system worked are set forth in Section II.A.4(n) above.

Cablevision argued that the transmissions generated in response to customer requests for

playback of programs stored on its network servers by customers did not constitute public

performances because the RS-DVR customer, not Cablevision, invoked the transmitting and thus

the performing, and the transmissions were not “to the public.”335

The court ruled that it need not address Cablevision’s first argument because, even if the

court were to assume that Cablevision made the transmissions when RS-DVR playbacks

occurred, the RS-DVR playbacks did not involve the transmission of a performance “to the

public.” The court began its analysis by noting that the second, or “transmit,” clause of the

definition of public performance applies “whether the members of the public capable of

receiving the performance or display receive it in the same place or in separate places and at the

same time or at different times.”336 The court observed, “The fact that the statute says ‘capable

of receiving the performance,’ instead of ‘capable of receiving the transmission,’ underscores the

fact that a transmission of a performance is itself a performance.”337

The Second Circuit therefore focused on who was “capable of receiving” performances

through playbacks via the RS-DVR system. Cablevision argued that, because each RS-DVR

transmission was made using a single unique copy of a work, made by an individual subscriber,

one that could be decoded exclusively by that subscriber’s cable box, only one subscriber was

capable of receiving any given RS-DVR transmission. By contrast, the district court had

suggested that, in considering whether a transmission was “to the public,” one should consider

not the potential audience of a particular transmission, but the potential audience of the

underlying work whose content was being transmitted. The Second Circuit ruled that the district

court’s approach was inconsistent with the language of the transmit clause, which speaks of

persons capable of receiving a particular “transmission” or “performance,” and not of the

potential audience of a particular “work.”338

On appeal, the plaintiffs presented a slightly different argument, insisting that the same

original performance of a work was being transmitted to Cablevision’s various subscribers at

different times upon request. The court noted that the implication of the plaintiffs’ argument was

that, to determine whether a given transmission of a performance was to the public, one should

334 536 F.3d 121(2d Cir. 2008), cert. denied sub nom. CNN, Inc. v. CSC Holdings, Inc., 557 U.S. 946 (2009).

335 Id. at 134.

336 Id.

337 Id.

338 Id. at 135.

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consider not only the potential audience of that transmission, but also the potential audience of

any transmission of the same underlying “original” performance. The court rejected this

argument, noting that it would obviate any possibility of a purely private transmission.339

We do not believe Congress intended such odd results. Although the transmit

clause is not a model of clarity, we believe that when Congress speaks of

transmitting a performance to the public, it refers to the performance created by

the act of transmission. Thus, HBO transmits its own performance of a work

when it transmits to Cablevision, and Cablevision transmits its own performance

of the same work when it retransmits the feed from HBO.340

Accordingly, the Second Circuit concluded that a court must look downstream, rather

than upstream or laterally, to determine whether any link in a chain of transmissions made by a

party constitutes a public performance, and should not examine the potential recipients of the

content provider’s initial transmission to determine who was capable of receiving the RS-DVR

playback transmission. Because the RS-DVR system, as designed, made transmissions only to

one subscriber using a copy made by that particular subscriber, the court concluded that the

universe of people capable of receiving an RS-DVR transmission was the single subscriber

whose self-made copy was used to the create the transmission, and the transmissions through the

RS-DVR system were therefore not public performances.341 The court cautioned, however, that

its holding “does not generally permit content delivery networks to avoid all copyright liability

by making copies of each item of content and associating one unique copy with each subscriber

to the network, or by giving their subscribers the capacity to make their own individual copies.

We do not address whether such a network operator would be able to escape any other form of

copyright liability, such as liability for unauthorized reproductions or liability for contributory

infringement.”342

6. Ringtones – In re Application of Cellco Partnership

In In re Application of Cellco Partnership d/b/a Verizon Wireless,343 the court

ruled that the sale of ringtones by Verizon to its cell phone customers did not require payment to

ASCAP for a public performance license for the musical works embodied in the ringtones.

ASCAP argued that Verizon engaged in public performances of the musical works when it

downloaded ringtones to its customers. It also argued that Verizon was both directly and

339 Id. at 135-36.

340 Id. at 136.

341 Id. at 137, 139. “If the owner of a copyright believes he is injured by a particular transmission of a performance

of his work, he may be able to seek redress not only for the infringing transmission, but also for the underlying

copying that facilitated the transmission. Given this interplay between the various rights in this context, it

seems quite consistent with the Act to treat a transmission made using Copy A as distinct from one made using

Copy B, just as we would treat a transmission made by Cablevision as distinct from an otherwise identical

transmission made by Comcast.” Id. at 138.

342 Id. at 139.

343 663 F. Supp. 2d 363 (S.D.N.Y. 2009).

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secondarily liable for public performances of musical works when its customers played ringtones

on their telephones upon incoming calls.344

The court rejected both these arguments. As to the first, citing the Cablevision case

discussed in the previous subsection, the court ruled that, because only one subscriber was

capable of receiving a particular transmission of a ringtone during download, such transmission

was not itself made to the “public,” regardless of whether a download could be considered a

transmission of a “performance” of the musical works in the ringtone.345 The court did note that,

“[w]here a transmission is of a digital file rather than a performance that can be

contemporaneously observed or heard, and where that transmission is but a link in a chain to a

downstream public performance, it may be that the transmission is not an act of infringement for

which the transmitter is directly liable under § 106(4), but rather an act that may subject the

transmitter to contributory liability under § 106(4) for the infringement created by any ultimate

public performance.”346 That could not be the case here, however, because the court concluded

that there was no qualifying public performance under § 106(4) when the customer used the

ringtone upon an incoming call.

Specifically, the court ruled that, when a ringtone plays on a cellular telephone, even

when that occurs in public, the user is exempt from copyright liability under Section 110(4) of

the copyright statute, which exempts any “performance of a nondramatic literary or musical

work otherwise than in a transmission to the public, without any purpose of direct or indirect

commercial advantage and without payment of any fee or other compensation for the

performance to any of its performers, promoters, or organizers, if [] there is no direct or indirect

admission charge.”347 The court held that on occasions when Verizon customers had activated

their ringtones and the telephones rang in the presence of members of the public at a level where

it could be heard by others, such playing of the musical works embodied in the ringtones

satisfied all of the requirements of the §110(4) exemption: Verizon customers were not playing

the ringtones for any commercial advantage, they did not get paid any fee or compensation for

those performances, and they did not charge admission. Accordingly, there was no non-exempt

public performance by the users of the ringtones to which Verizon could be secondarily liable.348

The court also rejected ASCAP’s argument that Verizon was directly liable for itself

engaging in a public performance of copyrighted musical works when ringtones played in public

on customers’ cell phones because it controlled the entire series of steps that allowed and

triggered the cellular telephone to perform the musical works in public. The court noted that

344 Id. at 368.

345 Id. at 371.

346 Id. at 374 n.14.

347 Id. at 374 (quoting 17 U.S.C. § 110(4)).

348 Id. at 375. Nor, in order to avoid secondary liability, was Verizon obligated to show that each and every

customer would be able to meet its burden of proof that its performance of ringtones in public satisfied the §

110(4) exemption. “The law does not impose an insurmountable burden on Verizon to show precisely how

each of its customers has actually used her telephone, but only requires it to demonstrate that customers as a

group do not exhibit any expectation of profit when they permit the telephones to ring in public.” Id. at 376.

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Verizon’s only role in the playing of a ringtone was the sending of a signal to alert a customer’s

telephone to an incoming call, and that signal was the same whether the customer had

downloaded a ringtone or not, whether she had set the phone to play a ringtone upon receiving a

call or not, whether she was in a public setting or not, and whether she had the ringtone volume

turned high or low. And it was the caller, not Verizon, who initiated the entire process that led to

the playing of the ringtone. Accordingly, Verizon did not engage in activity constituting direct

liability, even if the ringing of its customers’ phones in public constituted public

performances.349

7. Arista Records v. Myxer

In Arista Records LLC v. Myxer Inc.,350 the defendant Myxer operated a website that

enabled registered users to upload recorded music to the site and then, through the use of

Myxer’s software, to transcode the music into a format to create and download ringtones. Users

could make ringtones they had created available for download to other users. In addition to

uploading and downloading ringtones, Myxer users could play portions of any of the sound

recordings on Myxer’s site. Users could also select a sound recording on Myxer’s site and share

it on certain third party websites such as Facebook. Finally, users could select a sound recording

on Myxer’s site, often a full-length recording, and “Customize It” (using editing tools provided

by Myxer) by selecting a desired start and stop point for a ringtone. UMG Records, a competitor

in the ringtone market, contended that, by storing copies of UMG’s sound recordings on its

servers, allowing users to download copies of its sound recordings to users’ cell phones, and

allowing users to preview its sound recordings on either the Myxer site or on users’ cell phones,

Myxer was a direct infringer of UMG’s reproduction, distribution and digital public performance

rights.351

In a footnote, the court noted that Myxer correctly argued that downloading ringtones to

one’s personal cell phone is not a public performance. Agreeing with the reasoning of the In re

Application of Cellco case, the court ruled that the act of downloading and then playing

ringtones so as to alert the individual of an incoming call does not violate the exclusive right of

public performance because it is not a “public” performance.352

8. Warner Bros. v. WTV Systems

In Warner Bros. Entertainment Inc. v. WTV Systems,353 the defendants offered a DVD

“rental” service called “Zediva” that allowed customers to view streams from DVDs in DVD

players hosted on the defendants’ premises. To operate the service, the defendants purchased

hundreds of DVD players and installed them in cabinets at a data center they leased in Santa

349 Id. at 376-79.

350 2011 U.S. Dist. LEXIS 109668 (C.D. Cal. Apr. 1, 2011).

351 Id. at *2, 15-18.

352 Id. at *37 n.16.

353 824 F. Supp. 2d 1003 (C.D. Cal. 2011).

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Clara, California. The defendants also purchased copies of the plaintiffs’ copyrighted works on

DVD and placed those DVDs in their DVD players for selection by their customers. Each DVD

remained in its respective DVD player while it was transmitted to the defendants’ customers on

multiple occasions.354

When a customer requested a particular work, the defendants, through their Zediva

service, started the play process on a particular DVD player holding the requested work,

converted the analog video signal from the DVD player into a digital signal using a video

adapter, fed the digital signal into a DVD control server that converted the digital signal to a

form suitable for streaming across the Internet, converted the digital signal to a format that could

be viewed in the player created by the defendants and used on their web site, transmitted the

performance via the Internet to the customer, and provided the customer with a custom viewer

necessary to view the video stream. To begin the process, the customer clicked on a virtual

button on the defendants’ web site. Customers were unable to access all the other features

available on a particular DVD, such as deleted and extra scenes, or other special DVD features.

The defendants maintained exclusive control of their servers, and the customers had no control

whatsoever over the various servers that the defendants used to direct traffic among their stacks

of DVD players.355

The defendants described the Zediva service as allowing customers to “rent” a particular

DVD and DVD player for 14 days. However, customers did not have access to or control over a

specific DVD or DVD player. Instead, the defendants streamed the content of the DVD to a

customer for a maximum period of four hours, provided that the customer did not pause it for

more than one hour during that time. After four hours of total “rental” time or an hour-long

pause, whichever occurred first, the defendants used the DVD player containing the same DVD

to transmit the work to a different customer. When the first customer made a request to resume

viewing, the transmission might be sent from a different DVD or a different DVD player than the

one originally used to transmit in the earlier “rental” period. According to the defendants’ web

site, if all of the copies of a particular work were “rented out” when a customer wanted to view

the work, the customer could request to be notified, via email, when it became available.356

The plaintiffs claimed that the Zediva service infringed their rights of public performance

and sought a preliminary injunction, which the court determined the plaintiffs were entitled to.

Turning to whether the streams constituted public performances, the court noted that the

definition of “public performance” in Section 106(4) is comprised of two clauses: (1) the

“public place” clause, which states that a performance is public if it occurs at a place open to the

public or at any place where a substantial number of persons outside of a normal circle of a

family and its social acquaintances is gathered; and (2) the “transmit” clause, which states that a

performance is public if someone transmits or otherwise communicates the performance to a

place specified by the public place clause, or to “the public,” whether the members of the public

354 Id. at 1006-07.

355 Id. at 1007 & n.2.

356 Id. at 1007.

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capable of receiving the performance receive it in the same place or in separate places and at the

same time or at different times.357

The defendants argued that their service offered “DVD rentals” rather than transmissions

of performances. The court rejected this argument, analogizing to On Command Video Corp. v.

Columbia Pictures Industries,358 which held that transmissions of movies from a central console

of VCRs (each VCR containing a copy of a particular movie) in a hotel to private guest rooms

did not constitute “electronic rentals” similar to guests’ physical borrowing of videotapes, but

rather constituted transmissions of performances under the transmit clause of Section 106(4). In

On Command, the fact that hotel guests initiated the transmission by turning on the television

and choosing a video was immaterial. The court ruled that, as in On Command, the Zediva

service fell under the transmit clause because it transmitted performances by communicating the

images and sounds of the movies through the use of a device or process (the defendants’

equipment, servers and the Internet) from its central bank of DVD players to individual

customer’s computers, where the images and sounds were received beyond the place from which

they were sent. And as in On Command, the fact that Zediva’s customers initiated the

transmission by turning on their computers and choosing which of the works they wished to view

was immaterial to the legal analysis.359

The court further ruled that the transmissions of the Zediva service were “to the public”

for purposes of the transmit clause “because the relationship between Defendants, as the

transmitter of the performance, and the audience, which in this case consists of their customers,

is a commercial, ‘public’ relationship regardless of where the viewing takes place. The nonpublic

nature of the place of the performance has no bearing on whether or not those who enjoy

the performance constitute ‘the public’ under the transmit clause.”360

The court rejected the defendants’ argument that their performances were not “to the

public” in view of the Cartoon Network (Cablevision) case discussed in Section II.B.5 above.

Under Cartoon Network, the Second Circuit found that the transmissions were not “to the

public” because each RS-DVR playback transmission was made to a single subscriber using a

single unique copy produced by that subscriber. By contrast, in this case, the defendants’

customers did not produce their own unique copy of the plaintiffs’ copyrighted works. Instead,

like On Command, the same DVD was used over and over again to transmit performance of the

works, which destroyed the one-to-one relationship on which the Cartoon Network decision

depended for its finding that the transmissions were not to the public.361

The court also rejected the defendants’ argument that it should adopt the Second Circuit’s

volitional requirement for direct copyright infringement liability. The court found that no Ninth

357 Id. at 1008-09.

358 777 F. Supp. 787, 789-90 (N.D. Cal. 1991).

359 WTV Systems, 824 F. Supp. 2d at 1009-10.

360 Id. at 1010.

361 Id. at 1011 n.7.

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Circuit case had adopted the volitional conduct requirement and that, in view of the fact that

copyright infringement is a strict liability offense, the court was not inclined to adopt the

volitional conduct requirement without clear instruction from the Ninth Circuit.362 Finally, the

court rejected the defendants’ reliance on Professional Real Estate Investors, Inc.,363 which

involved a service provided by a hotel that rented videodiscs to its guests, who carried the discs

to their rooms to watch them on in-room videodisc players. The Ninth Circuit found that

because the performances at issue took place in a guest’s private hotel room, the performances

were not “in public,” and the performances were not transmissions under the transmit clause

because the guests carried the discs to their rooms, rather than the hotel transmitting a

performance to the room from a central bank of players. The Ninth Circuit stated, however, that

a closed circuit system similar to the one described in On Command would fall squarely within

the transmit clause. Accordingly, the district court found that the Professional Real Estate case

supported the court’s finding of infringement.364

In concluding that the plaintiffs were entitled to a preliminary injunction, the court noted

the following forms of irreparable harm: because the defendants were exploiting the plaintiffs

copyrighted works without paying the normal licensing fees, they were depriving the plaintiffs of

revenue and jeopardizing the continued existence of the plaintiffs’ licensees’ businesses; the

Zediva service threatened the development of a successful and lawful video-on-demand market

and, in particular, the growing Internet-based video-on-demand market; the presence of the

Zediva service in the market threatened to confuse consumers about video-on-demand products,

and to create incorrect but lasting impressions with consumers about what constitutes lawful

video-on-demand exploitation of copyrighted works; and the Zediva service threatened the

development of a successful and lawful video-on-demand market by offering a sub-optimal

customer experience (the defendants admitted they had received complaints about the quality of

their service and that a lot of times customers would receive a notice that a particular copyrighted

work was temporarily “out of stock” because all DVD players containing that particular work

were in use).365

The case settled in October 2011, with Zediva agreeing to pay $1.8 million to six major

movie studios and to cease showing their movies without permission.366

9. Capitol Records v. MP3tunes

For analysis of this case’s rulings with respect to infringement of public performance

rights against the operator of a music “locker” service, see Section III.C.6(b)(1)(iii).s below.

362 Id.

363 866 F.2d 278 (9th Cir. 1989).

364 WTV Systems, 824 F. Supp. 2d at 1011.

365 Id. at 1013-14. The court required the defendants to post a bond of $50,000 as a condition to issuance of the

preliminary injunction. Id. at 1015.

366 Melissa Lipman, “DVD Streaming Co. Settles Movie Studios’ IP Suit For $2M,” Law360 (Oct. 28, 2011),

available as of Aug. 3, 2012 at http://www.law360.com/articles/281603.

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10. The Aereo Case

The District Court Decision

The widely followed case of American Broadcasting Cos. v. Aereo, Inc.367 applied the

logic of the Cablevision case, discussed in detail in Section II.B.5 above, to adjudicate important

issues of the scope of the public performance right. The plaintiffs sought a preliminary

injunction to stop Aereo from offering a private streaming service that allowed its users to access

live copyrighted content over the Internet through various mobile devices such as PCs, laptops,

smartphones, and tablet computers. The plaintiffs’ motion for a preliminary injunction was

limited in scope, challenging only the aspects of Aereo’s service that allowed subscribers to view

the plaintiffs’ copyrighted television programs contemporaneously with the over-the-air

broadcast of those programs.368

Aereo’s service worked as follows. A user of Aereo’s system, after logging into his

account on Aereo’s web site, could navigate through a programming guide to select television

programs currently being aired or that would be aired at a later time. If the user selected a

program that was currently being aired, the user was given two options, “Watch” and “Record.”

Selecting “Watch” caused Aereo’s system to transmit a web page to the user in which the

program started after a short delay, allowing the user to view the program “live,” i.e., roughly

contemporaneous with its over-the-air broadcast. If the user pressed the “Record” button after

having begun watching a program using the “Watch” feature, the Aereo system retained the copy

that the user had been watching. If “Record” was not selected, the copy was not retained and

could not be viewed again later.369

Instead of selecting the “Watch” function at the outset, the user could press the “Record”

button to schedule a recording of a program that would be broadcast at a later time or that was

currently being aired. However, the “Record” feature could also be used, like the “Watch”

feature, to view programs live – users could direct Aereo’s system to begin a recording and then

immediately begin playback of the recording as it was being made.370

The technology that implemented the service, which was designed specifically to take

advantage of the reasoning of the Cablevision case, consisted of a large bank of individual

antennas that could be “assigned” individually to specific users who wanted to watch or record a

program. Specifically, when a user clicked on the “Watch” button, the user’s web browser sent a

request to Aereo’s Application Server, which in turn sent a request and certain information about

the user and the requested television program to Aereo’s Antenna Server. The Antenna Server

allocated resources to the user, including an antenna and transcoder, depending on whether the

user was a “static” or “dynamic” user, a distinction based on the user’s subscription plan with

Aereo. Static users had a set of previously selected antennas that had been assigned to them,

367 874 F. Supp. 2d 373 (S.D.N.Y. 2012).

368 Id. at 375.

369 Id. at 377.

370 Id.

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whereas dynamic users, who were the vast majority of Aereo’s subscribers, were randomly

assigned an antenna each time they used Aereo’s system. No two users were assigned a single

antenna at the same time. The data obtained by a particular antenna while allocated to a

particular user was not shared with or accessible by any other Aereo use. 371

Once these resources were allocated, the Antenna Server sent a “tune” request that

directed the user’s antenna to tune into a particular broadcast frequency band to obtain the

desired program. The Antenna Server also sent a request to the Streaming Server that created a

unique directory, assigned to the user, for storing the output data received by the antennas and

processed by the transcoder. Once that directory was created, an electrical signal was sent from

the antenna, processed and converted into data packets, and then sent to the transcoder, which

encoded it in a form to be transmitted over the Internet. The encoded data was sent to the

Streaming Server, where it was saved on a hard disk to a file in the previously created directory

and, once saved, was read from that file into a RAM memory buffer that sent the data to the user

over the Internet once a sufficient amount of data (at least six or seven seconds of programming)

had accumulated. Essentially the same process occurred when the user engaged the “Record”

function, the only substantial difference between the “Watch” and “Record” functions being that

when a user engaged the “Record” function, the file saved to the hard disk was tagged as

permanent and automatically retained, whereas the file saved using the “Watch” function was not

automatically retained unless the user clicked “Record” while the show was still open on the

user’s web browser.372

The plaintiffs moved for a preliminary injunction. The district court noted that the only

significant factual dispute for purposes of that motion concerned the operation of Aereo’s

antennas. Aereo contended that each of its antennas functioned separately to receive the

incoming broadcast signals. The plaintiffs asserted that Aereo’s antennas functioned collectively

as a single antenna, because the individual antennas were packed so closely together on a board

that they in effect had a shared metallic substructure which appeared to the incoming signals as

one continuous piece of metal. After extensive review of the conflicting testimony of the parties’

experts, the court determined that, based on the evidence at that stage of the proceedings,

Aereo’s antennas did indeed function independently – a crucial fact for applicability of the

Cablevision case to the facts at hand.373

The district court then turned to the first element of establishing entitlement to a

preliminary injunction – likelihood of success on the merits. Aereo argued that Cablevision

applied to its system because, like the RS-DVR system in Cablevision, its system created unique,

user-requested copies that were transmitted only to the particular user that created them, and the

performances were thus not public. The plaintiffs distinguished Cablevision on its facts, arguing

that because Aereo’s subscribers were watching the programs as they were still being broadcast,

they were not using the copies Aereo created for time shifting purposes, and those copies

therefore did not “break the chain” of the over-the air transmission received by Aereo. Thus, the

371 Id. at 377-78.

372 Id. at 378-79.

373 Id. at 379-81.

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plaintiffs contended, Aereo was engaged in a public performance that emanated from the original

broadcast signal itself, much like a community antenna which simply passes along a broadcast

signal the public. Stated differently, the plaintiffs argued that the stored copies of the signals

made by Aereo should be viewed as merely facilitating the transmission of a single master copy

– in this case, the broadcast signal – rather than as copies from which a distinct transmission was

made.374

The court agreed with Aereo’s characterization of its system and rejected the plaintiffs’

attempts to distinguish Cablevision. With respect to the copies created by Aereo’s system, the

court found that they were not mere facilitating copies, but rather were no less materially

significant to how the system functioned than the copies created in Cablevision’s system. First,

Aereo’s system created a unique copy of each television program for each subscriber who

requested to watch that program, saved to a unique directory on Aereo’s hard disks assigned to

that user. Second, each transmission that Aereo’s system ultimately made to a subscriber was

from that unique copy. Third, the transmission of the unique copy was made solely to the

subscriber who requested it and no other subscriber was capable of accessing that copy. The

court held that these factual similarities of Aereo’s service to the Cablevision system suggested

that Aereo’s service fell within the core of what Cablevision held lawful. The court also ruled

the fact that Aereo’s users could “share” resource like antennas by using them at different times

did not affect the analysis, as it remained clear that the copies Aereo’s system made were unique

for each user and not shared.375

The court found other similarities to Cablevision as well. An undercurrent in the Second

Circuit’s reasoning in Cablevision was that the Cablevision system merely allowed subscribers to

enjoy a service that could also be accomplished using any standard DVR or VCR. Similarly,

Aereo’s functionality substantially mirrored that available using devices such as a DVR or a

Slingbox,376 which allow users to access free, over-the-air broadcast television on mobile

Internet devices of their choosing.377 Moreover, the court found that the analysis the Second

Circuit undertook in finding that the performance to the user was made from the copies stored in

the Cablevision system rather than from, for example, the incoming stream of data, was equally

applicable here. Specifically, Cablevision held that a public performance does not occur merely

because a number of people are transmitted the same television program. Nor was the Second

Circuit willing to accept the argument that, notwithstanding its creation of unique copies,

Cablevision was actually transmitting to its users the performance of that work that occurred

when the programming service supplying Cablevision’s content transmitted that content to

Cablevision. In fact, the Second Circuit expressly refused to look back to the received signal to

374 Id. at 385.

375 Id. at 385-86 & n.7.

376 A Slingbox, when connected to a user’s television in the home, digitized the received signals, including live

broadcast television, and allowed them to be streamed over the Internet to the user’s personal mobile devices.

Id. at 377. The district court noted, “Plaintiffs do not appear to contend in this litigation that services such as

Slingbox are unlawful, instead claiming that they are ‘irrelevant’ and that Aereo’s service is distinguishable

because Slingbox consumers themselves set up the Slingbox in their homes.” Id.

377 Id. at 386.

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judge whether Cablevision was engaged in a public performance. The district court therefore

observed that, given that each antenna in Aereo’s system functioned independently, in at least

one respect the Aereo system presented a stronger case than Cablevision for attaching

significance to the copies made because, unlike Cablevision in which multiple copies were all

created from a single stream of data, each copy made by Aereo’s system was created from a

separate stream of data.378

The district court also rejected the plaintiffs’ attempt to distinguish Cablevision on the

ground that Cablevision addressed only copies used for time shifting. The court noted that

nowhere in Cablevision did the Second Circuit articulate a requirement that the copies be used

for time shifting in order to “break the chain” of transmission from the original broadcaster to the

end user. Rather, the Second Circuit’s analysis of the public performance claim was entirely

directed toward explaining why the copies created by the system in Cablevision were significant

and resulted in performances to a limited, non-public audience. Nor did anything in Cablevision

turn on the times at which individuals received their transmissions.379

Finally, the court rejected the plaintiffs’ suggestion that Cablevision addressed only

transmissions using the same medium as the initial broadcast that were made to the same device

and to the same place as the initial transmission. Although points of distinction from

Cablevision, the court found no reason to believe that they had any material bearing on who was

“capable of receiving” a particular transmission or whether Aereo “breaks the chain” of

transmission.380

Accordingly, the court concluded that the plaintiffs were unlikely to succeed on the

merits of their public performance claim.381 The court, however, issued some words of caution

about the scope of its decision. First, the court made clear that it did not accept Aereo’s position

that the creation of any fixed copy from which a transmission is made always defeats a claim for

a violation of the public performance right, because such position would eviscerate the transmit

clause given the ease of making reproductions before transmitting digital data. Nor did the court

378 Id. at 386-87.

379 Id. at 387-90. The court found the plaintiffs’ argument that “complete” time shifting should be required to fit

within the contours of Cablevision even less persuasive, as the argument was no longer tied to the rationale that

time shifting is required to “break the chain” of the original transmission. For example, an Aereo user who

began watching a recording of the Academy Awards, initially broadcast at 6:00 p.m., one minute before the

program ended at 11:00 p.m. would not have engaged in complete time shifting, although the chain of

transmission would certainly have been “broken” across the nearly five hours of recording before viewing

commenced. The court found that the plaintiffs had not provided an argument as to why a user who began

watching a recording of a program one minute (or five minutes, or ten minutes) before the broadcast ended was

part of a public performance but a user who began watching a minute after the program ended was not. Id. at

393-94.

380 Id. at 394.

381 In view of its conclusion that the plaintiffs had failed to demonstrate they were likely to succeed in establishing

that Aereo’s system resulted in a public performance, the court found it need not reach the issue of whether

Aereo also could escape liability because it was the consumer, not Aereo, who made the transmissions that the

plaintiffs complained of. Id. at 396.

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need to resolve Aereo’s argument that its antennas, standing alone, defeated the plaintiffs’ claims

that it was engaged in a public performance. Instead, the court merely pointed out that it had

found Aereo’s use of single antennas to reinforce its conclusion that the copies created by

Aereo’s system were unique and accessible only to a particular user, as they indicated that the

copies were created using wholly distinct signal paths. Because the copies were created from a

signal received independently by each antenna, in order to find a “master” copy that was

arguably being transmitted, the court would have been required, contrary to Cablevision, to look

back to the incoming over-the-air signal rather than simply an earlier step in Aereo’s process.

Aereo’s antennas thus reinforced the significance of the copies its system created and aided the

court in finding that Aereo did not create mere facilitating copies.382

As such, the Court’s holding that Plaintiffs have not demonstrated a likelihood of

success is limited. There may be cases in which copies are purely facilitory, such

as true buffer copies or copies that serve no function whatsoever other than to

pass along a clearly identifiable “master” copy from which the transmission is

made. These facts, however, are not before the Court today.383

Turning to the other elements for a preliminary injunction, the district court found that

the plaintiffs had demonstrated they would suffer irreparable harm because Aereo would damage

their ability to negotiate with advertisers by siphoning viewers from traditional distribution

channels, in which viewership is measured by Nielsen ratings, into Aereo’s service which is not

measured by Nielsen, artificially lowering those ratings. Similarly, by poaching viewers from

cable or other companies that license the plaintiffs’ content, Aereo’s activities would damage the

plaintiffs’ ability to negotiate retransmission agreements, as those companies would demand

concessions from the plaintiffs to make up for the decrease in viewership. Aereo’s service would

also harm the plaintiffs’ streaming of their content on their own web sites.384

With respect to the balance of hardships, the court found that the balance did not tip

decidedly in favor of the plaintiffs. The harm to Aereo of a preliminary injunction would be

substantial, as it had sufficient capital to continue operations for just six to seven months, after

which it would likely shut down absent investment of further capital. An injunction was also

likely to cause Aereo to lose employees and damage its ability to attract investors to obtain new

capital, and to diminish its competitive advantage in launching a unique and innovative product.

Having concluded that Aereo’s service was likely lawful, the court ruled that it could not

disregard the harms to Aereo that an injunction would cause by assuming its business was

founded on infringement.385

In sum, the district court concluded that because it could not accept the plaintiffs’

attempts to distinguish Cablevision, the plaintiffs had not shown a likelihood of success on the

merits. And although they had demonstrated they faced irreparable harm, they had not

382 Id. at 396.

383 Id.

384 Id. at 397-99.

385 Id. at 402-03.

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demonstrated that the balance of hardships decidedly tipped in their favor. Accordingly, the

court denied the motion for a preliminary injunction.386

The Second Circuit Opinion

On appeal, the Second Circuit affirmed.387 The majority opinion began by reviewing the

Second Circuit’s interpretation of the transmit clause in Cablevision and noted several key

aspects of that interpretation. First, the phrase “capable of receiving the performance” in the

transmit clause refers not to the performance of the underlying work being transmitted but rather

to the transmission itself, since the transmission of a performance is itself a performance.

Second, the transmit clause directs courts to consider the potential audience of only the

performance created by the act of transmission. Third, following an interpretation of the transmit

clause first advanced by Professor Nimmer, whether a transmission originates from a distinct or

shared copy is relevant to the transmit clause because the use of a unique copy may limit the

potential audience of a transmission and thus whether that transmission is made to the public.388

The court noted that the preceding summary of Cablevision’s interpretation of the

transmit clause established “four guideposts that determine the outcome of this appeal”:

First and most important, the Transmit Clause directs courts to consider the

potential audience of the individual transmission. … Second and following from

the first, private transmissions – that is those not capable of being received by the

public – should not be aggregated. … Third, there is an exception to this noaggregation

rule when private transmissions are generated from the same copy of

the work. In such cases, these private transmissions should be aggregated, and if

these aggregated transmissions from a single copy enable the public to view that

copy, the transmissions are public performances. … Fourth and finally, “any

factor that limits the potential audience of a transmission is relevant” to the

Transmit Clause analysis.389

Applying these guideposts to the present case, the court found the key facts pertaining to

application of the transmit clause to be the same as in Cablevision. Specifically, when an Aereo

user elected to invoke the Watch or Record features, Aereo’s system created a unique copy of

that program on a portion of a hard drive assigned only to that Aereo user. And when an Aereo

user chose to watch the recorded program, the transmission sent by Aereo and received by that

386 Id. at 404.

387 WNET v. Aereo, Inc., 712 F.3d 676 (2d Cir. 2013). Judge Chin filed a lengthy dissent. The plaintiffs did not

appeal the district court’s factual finding that Aereo’s antennas operated independently, which was the only

relevant fact on which the parties disagreed. Id. at 680.

388 Id. at 687-88.

389 Id. at 689 (citations omitted).

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user was generated from that unique copy. Thus, just as in Cablevision, the potential audience of

each Aereo transmission was the single user who requested that a program be recorded.390

The court rejected a number of arguments put forth by the plaintiffs to distinguish

Cablevision. First, the plaintiffs noted that in Cablevision the defendant had a license to transmit

programming in the first instance when it first aired the programs, and no such license existed

here. The court rejected this, noting that Cablevision did not hold that Cablevision’s RS-DVR

transmissions were licensed public performances, but rather they were not public performances

at all, so no license was needed to make them, whether or not a license was required to first air

the programs to the public.391

Second, the plaintiffs argued that discrete transmissions should be aggregated to

determine whether they are public performances. Because Aereo’s discrete transmissions

enabled members of the public to receive the same performance (i.e., Aereo’s retransmission of a

program), they were transmissions made to the public. The court noted that this was nothing

more than the Cablevision plaintiffs’ interpretation of the transmit clause, as it equated Aereo’s

transmissions with the original broadcast made by the over-the-air network rather than treating

Aereo’s transmissions as independent performances. That approach had been explicitly rejected

by the Cablevision court. The plaintiffs also argued that the Copyright Act requires all of

Aereo’s discrete transmissions be aggregated and viewed collectively as constituting a public

performance. The plaintiffs argued this was not contrary to Cablevision, because Cablevision

held only that transmissions of the same performance or work made by different entities should

not be aggregated, but discrete transmissions of the same performance or work made by the same

entity should be aggregated to determine whether a public performance has occurred. The court

rejected this argument because it required a reading of the transmit clause contrary to that

adopted by Cablevision by focusing on the potential audience of the performance or work being

transmitted, not the potential audience of the particular transmission.392

Third, the plaintiffs argued that Cablevision was based on an analogy to a typical VCR,

with the RS-DVR simply an upstream version, but Aereo’s system was more analogous to a

cable television provider. The court responded that, while it was true that the Cablevision court

did compare the RS-DVR system to the stand-alone VCR, those comparisons occurred in the

section of the opinion discussing Cablevision’s potential liability for infringing the plaintiffs’

reproduction right. No part of Cablevision’s analysis of the public performance right, however,

seemed to have been influenced by any analogy to the stand-alone VCR.393

Fourth, the plaintiffs argued that Cablevision’s RS-DVR copies broke the continuous

chain of retransmission to the public in a way that Aereo’s copies did not. Specifically, Aereo’s

copies were merely a device by which Aereo enabled its users to watch nearly live TV, while

Cablevision’s copies, by contrast, could serve only as the source for a transmission of a program

390 Id. at 690.

391 Id.

392 Id. at 690-91.

393 Id. at 691.

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after the original transmission, i.e. the live broadcast of the program, had finished. The court

rejected this argument for two reasons. First, Aereo’s copies did have the legal significance

ascribed to the RS-DVR copies in Cablevision because the user exercised the same control over

their playback. Such volitional control over how the copy was played made Aereo’s hard disk

copies unlike the temporary buffer copies generated incident to Internet streaming only after the

user had selected the program to watch. Second, the plaintiffs’ argument failed to account for

Aereo’s user-specific antennas. Each user-associated copy of a program created by Aereo’s

system was generated from a unique antenna assigned only to the user who requested that the

copy be made. The feed from that antenna was not used to generate multiple copies of each

program for different Aereo users but rather only one copy – the copy that could be watched by

the user to whom that antenna was assigned, and only that user.394

Finally, the plaintiffs argued that holding that Aereo’s transmissions are not public

performances would exalt form over substance, because the Aereo system was functionally

equivalent to a cable television provider. The court noted that the same was likely true of

Cablevision, which created separate user-associated copies of each recorded program for its RSDVR

system instead of using more efficient shared copies because transmissions generated from

the latter would likely be found to infringe copyright holders’ public performance right. The

court acknowledged that perhaps the application of the transmit clause should focus less on the

technical details of a particular system and more on its functionality, but the Second Circuit’s

decision in Cablevision held that technical architecture matters.395

The majority opinion made one final point with respect to stare decisis, observing that,

though presented as efforts to distinguish Cablevision, the plaintiffs’ arguments were really ones

to overrule Cablevision. After noting that one panel could not overrule a prior decision of

another panel, the court went on to observe that stare decisis was particularly warranted here in

view of the substantial reliance on Cablevision, pointing to many media and technology

companies that had relied on Cablevision as an authoritative interpretation of the transmit clause.

One interesting example the court pointed to was cloud media services that allow their users to

store music on remote hard drives and stream it to Internet-connected devices, which apparently

had been designed to comply with Cablevision.396

Accordingly, the court ruled that Aereo’s transmission of unique copies of broadcast

television programs created at its users’ requests and transmitted while the programs were still

airing on broadcast television were not public performances under Cablevision, and affirmed the

district court’s denial of a preliminary injunction.397

394 Id. at 692-93.

395 Id. at 693-94.

396 Id. at 695 & n.19.

397 Id. at 696.

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11. The BarryDriller Case

The district court in this case reached the opposite result from the Aereo case on very

similar facts involving the defendants’ “Aereokiller” streaming service that allowed users to use

an individual mini digital antenna and DVR to watch or record a free television broadcast.

Indeed, the defendants opposed the plaintiff’s motion for a preliminary injunction in this case

largely on the argument that their streaming service was legal because it was “technologically

analogous” to the service found legal in the Aereo case.398 The BarryDriller court, however,

rejected the reasoning of the Second Circuit’s decision in Cablevision, upon which the Aereo

court had relied in reaching its decision. In particular, the court disagreed with the Second

Circuit’s analysis in Cablevision that the statutory definition of “public performance” requires

that a transmission of a performance itself be public in order for the transmitter to infringe the

public performance right:

That is not the only possible reading of the statute. The definition section sets

forth what constitutes a public performance of a copyrighted work, and says that

transmitting a performance to the public is a public performance. It does not

require a “performance” of a performance. The Second Circuit buttressed its

definition with a “cf.” to Buck v. Jewell-La Salle Realty Co., 283 U.S. 191, 196, S.

Ct. 410, 75 L.Ed. 971 (1931), which interpreted the 1909 Copyright Act’s

provision of an exclusive right to publicly perform a musical composition and

held that “the reception of a radio broadcast and its translation into audible sound”

is a performance. But Buck, like Cablevision and this case, was concerned with a

copyright in the work that was broadcast. Id. at 195. The Supreme Court was not

concerned about the “performance of the performance” – instead, it held that

using a radio to perform the copyrighted song infringed the exclusive right to

perform the song (not to perform the performance of the song). Id. at 196.399

The district court noted that the Second Circuit had supported its decision via citation to

the House Report on the 1976 Copyright Act, which stated that a performance made available by

transmission to the public at large is “public” even though the recipients are not gathered in a

single place, and that the same principles apply whenever the potential recipients of the

transmission represent a limited segment of the public, such as the occupants of hotel rooms or

the subscribers of a cable television service. From this, the Second Circuit reasons that the

transmission had to itself be public, and one must therefore look at the persons who are capable

of receiving a particular transmission of a performance to determine whether such transmission

398 Fox Television Stations, Inc. v. BarryDriller Content Systems, PLC, 2012 U.S. Dist. LEXIS 184209 at * 3-4

(C.D. Cal. Dec. 27, 2012). Before turning to its main analysis, the court rejected in a footnote the plaintiffs’

apparent argument that creation of a buffer copy in the course of streaming is itself a public performance:

“Plaintiffs seems to be relying on the fact that courts have found ‘streaming’ to be infringement of the

transmission right, and are arguing that streaming’s use of buffer copies means that the buffer copy is itself a

public performance. But Plaintiffs have cited to no authority that holds that the act of creating the transient

buffer copy – expressly considered in Cablevision and held not to be an act of infringement – is an infringement

of the public performance right. Cablevision, 536 F.3d at 127.” Id. at *12 n.9.

399 Id. at *14-15.

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constitutes a public performance.400 The district court rejected the Second Circuit’s

interpretation of the import of the House Report:

But the House Report did not discuss which copy of a work a transmission was

made from. The statute provides an exclusive right to transmit a performance

publicly, but does not by its express terms require that two members of the public

receive the performance from the same transmission. The statute provides that

the right to transmit is exclusive “whether the members of the public capable of

receiving the performance or display receive it in the same place or in separate

places and at the same time or at different times. 17 U.S.C. § 101. Again, the

concern is with the performance of the copyrighted work, irrespective of which

copy of the work the transmission is made from. … Thus, Cablevision’s focus on

the uniqueness of the individual copy from which a transmission is made is not

commanded by the statute.401

The district court noted that the Second Circuit’s focus on which copy of the work the

transmission is made from put it in tension with the 1991 decision in the On Command Video

Corp. case,402 in which a court in the Northern District of California held that a hotel system that

transmitted to individual hotel rooms movies being played from individual videotapes by remote

control from a central bank in a hotel equipment room violated the copyright holder’s public

performance right. The district court believed that the On Command Video Corp. case properly

focused on the public performance of the copyrighted work. Accordingly, the court concluded

that the defendants’ unique-copy transmission argument based on Cablevision and Aereo was not

binding in the Ninth Circuit.403

Having found that the plaintiffs had established a likelihood of success on the merits, and

finding the other three factors for a preliminary injunction weighed in the plaintiffs’ favor, the

court issued a preliminary injunction against the operation of the Aereokiller service. However,

given the court’s finding that the application of Ninth Circuit law differed from Second Circuit

law, the court believed that principles of comity prevented the entry of an injunction that would

apply to the Second Circuit, and that it should not assume that the other Circuits would agree

with its decision rather than Cablevision. Accordingly, the court issued an injunction prohibiting

the defendants from offering their service only within the states covered by the Ninth Circuit.404

400 Id. at *15.

401 Id. at *16. The court elaborated further in a footnote: “The Second Circuit appears to implicitly bracket the text

of the House Report like this: [a performance made available by] [transmission to the public]. It seems like the

House Report could just as easily be read like this: [a performance made available by transmission] [to the

public]. Defendants make Plaintiffs’ copyrighted works available to the public by transmission. The Second

Circuit’s reading effectively converts ‘available by transmission’ to ‘available by a single transmission.’ In any

event, the statute uses the verb ‘transmit,’ rather than the noun used in the House Report.” Id. at *16-17.

402 777 F. Supp. 787 (N.D. Cal. 1991).

403 BarryDriller, 2012 U.S. Dist. LEXIS at *17-18, 20.

404 Id. at 23-29.

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12. The FilmOn Case

This was the third major case to adjudicate claims of infringement of the public

performance right based on a streaming system that operated in a very similar way to those at

issue in the Aereo and BarryDriller cases by allowing users to use an individual mini digital

antenna and DVR to watch or record a free television broadcast.405 Indeed, FilmOn, the operator

of the system, readily admitted that its technology was “similar … in every relevant way” to the

technology at issue in Aereo and BarryDriller.406 The court issued a preliminary injunction

enjoining FilmOn from offering its service through the U.S. except within the Second Circuit

(where Aereo was the binding precedent), and required the plaintiffs to post a bond of

$250,000.407

To judge the plaintiffs’ likelihood of success on the merits of their claim that FilmOn’s

system infringed their right of public performance, the court pointed to the legislative history of

the transmit clause in the House Report for the 1976 Act, which stated, “Under the definitions of

‘perform,’ ‘display,’ ‘publicly,’ and ‘transmit’ in section 101, the concepts of public performance

and public display cover not only the initial rendition or showing, but also any further act by

which that rendition or showing is transmitted or communicated to the public.”408 The court

noted that the House Report further elaborated on the transmit clause, stating, “Each and every

method by which the images or sounds comprising a performance or display are picked up and

conveyed is a ‘transmission,’ and if the transmission reaches the public in [an]y form, the case

comes within the scope of clauses (4) or (5) of section 106.”409

In view of the legislative history, the court found that FilmOn’s service violated the

plaintiffs’ right of public performance:

By making available Plaintiffs’ copyrighted performances to any member of the

public who accesses the FilmOn X service, FilmOn X performs the copyrighted

work publicly as defined by the Transmit Clause: FilmOn X “transmit[s] … a

performance … of the work … to the public, by means of any device or process.”

See 17 U.S.C. § 101. “A ‘device,’ ‘machine,’ or ‘process’ is one now known [i.e.

in 1976] or later developed;” “[t]o ‘transmit’ a performance or display is to

communicate it by any device or process.” Id. (emphasis added). These two

definitions are facially broad and encompass FilmOn X’s convoluted process for

relaying television signals. The Transmit Clause, which applies whether

“members of the public capable of receiving the performance or display receive it

in the same place or in separate places and at the same time or at different times,”

also plainly captures FilmOn X’s DVR-like capabilities. Id. FilmOn X transmits

405 Fox Television Stations, Inc. v. FilmOn X LLC, 2013 U.S. Dist. LEXIS 126543 (D.D.C. Sept. 5, 203).

406 Id. at *8.

407 Id. at *57-61.

408 Id. at *38-39 (quoting H.R. Rep. No. 94-1476 (1976), reprinted in 1976 U.S.C.C.S.A.N. 5659, 5676-77).

409 Id. at *40 (quoting 1976 U.S.C.C.S.A.N. at 5678).

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(i.e., communicates from mini-antenna through servers over the Internet to a user)

the performance (i.e., an original over-the-air broadcast of a work copyrighted by

one of the Plaintiffs) to members of the public (i.e., any person who accesses the

FilmOn X service through its website or application) who receive the

performance in separate places and at different times (i.e. at home at their

computers or on their mobile devices).410

The court rejected FilmOn’s argument that it did not perform publicly because its system

facilitated a one-to-one relationship between a single mini antenna and a viewer of the plaintiffs’

programs. The court observed that, while each user might have an assigned antenna and harddrive

directory temporarily, the mini antennas were networked together so that a single tuner

server and router, video encoder, and distribution endpoint could communicate with them all. In

the court’s view, FilmOn’s system, through which any member of the public could click on the

link for the video feed, was hardly akin to an individual user stringing up a television antenna on

the roof. The court also expressed the belief that every broadcast of a television program

(whether cable, satellite, over-the-air, over the Internet, or otherwise) could be described as

generated from the same copy – the original source. The court therefore found FilmOn, a

commercial service retransmitting the plaintiffs’ television performances, to be in no meaningful

way different from cable television companies, whose relationship with broadcasters was the

primary motivation for the 1976 Act’s enactment of the transmit clause.411

Accordingly, the court concluded that the plaintiffs had established a likelihood of

success on the merits of their copyright infringement claim. Finding that the plaintiffs would

suffer irreparable harm if FilmOn were allowed to continue operation of its system, that the

balance of harm tipped in the plaintiffs’ favor, and that the public interest would be served by

upholding copyright protection, the court issued a preliminary injunction against FilmOn.412

C. The Right of Public Display

Section 106 (5) of the copyright statute grants the owner of copyright in a literary,

musical, dramatic, and choreographic work, a pantomime, and a pictorial, graphic or sculptural

work, including the individual images of a motion picture or other audiovisual work,413 the

exclusive right to display the work publicly.414 Section 101 defines the meaning of “to display a

work publicly” in virtually identical terms as the definition of “to perform a work publicly.”

Thus, a public display can be accomplished by a transmission of a display of the work to

410 Id. at *42-44. The court noted that it respectfully disagreed with the Second Circuit’s interpretation of the

transmit clause in Aereo for the reasons set forth in BarryDriller and in Judge Chin’s dissent in Aereo. Id. at

*44 n.11.

411 Id. at *46-48.

412 Id. at *50-59.

413 To display a motion picture, one must display individual images “nonsequentially.” K. Stuckey, Internet and

Online Law § 6.03[5], at 6-17 (2008).

414 The right of public display does not apply to sound recordings, architectural works, and audiovisual works

(except for display of individual images of an audiovisual work).

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members of the public capable of receiving the display in the same place or separate places and

at the same time or at different times.

The WIPO Copyright Treaty does not contain a right of public display per se. However,

the right of public display is arguably subsumed under the right of communication to the public

in the WIPO Copyright Treaty.

1. The Frena, Marobie-FL, Hardenburgh and Webbworld Cases

In Playboy Enterprises, Inc. v. Frena,415 the court held that the making of photographs

available on a BBS was a “public” display, even though the display was limited to subscribers,

and subscribers viewed the photographs only upon downloading the photographs from the BBS

on demand. Thus, making material available through the Internet even to only a small and select

audience may still constitute a “public” display. The point at which a selected audience becomes

so small that a display to such audience can no longer be considered a “public” display is

unclear. The Playboy court seemed to define an audience as “public” if it contains “a substantial

number of persons outside of a normal circle of family and its social acquaintances.”416

Similarly, in Marobie-FL, Inc. v. National Association of Fire Equipment Distributors,417

the administrator of the Web page of the defendant, National Association of Fire Equipment

Distributors (NAFED), placed certain files on NAFED’s Web page containing three volumes of

copyrighted clip art of the plaintiff. The court ruled that the placement of the files containing the

clip art on the Web page constituted a direct violation of both the plaintiff’s distribution right and

public display right. The court concluded that the mere making available of the files for

downloading was sufficient for liability, because “once the files were uploaded [onto the Web

server], they were available for downloading by Internet users and … the [OSP] server

transmitted the files to some Internet users when requested.”418 The court, citing the Netcom

case, refused to hold the OSP supplying Internet service to NAFED directly or vicariously liable,

although the court noted that the OSP might be liable for contributory infringement, depending

upon whether the OSP knew that any material on NAFED’s Web page was copyrighted, when it

learned of that fact, and the degree to which the OSP monitored, controlled, or had the ability to

monitor or control the contents of NAFED’s Web page.419

And in Playboy Enterprises, Inc. v. Hardenburgh,420 the defendants operated a BBS

which made available graphic image files to subscribers for a fee, many of which contained adult

material. To increase its stockpile of available information, and thereby its attractiveness to new

customers, defendants provided an incentive to encourage subscribers to upload information onto

415 839 F. Supp. 1552 (M.D. Fla. 1993).

416 Id. at 1557.

417 45 U.S.P.Q.2d 1236 (N.D. Ill. 1997).

418 Id. at 1241.

419 Id. at 1245.

420 982 F. Supp. 503 (N.D. Ohio 1997).

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the BBS. Subscribers were given “credit” for each megabyte of electronic data that they

uploaded onto the system, which entitled them to download defined amounts of data from the

system in return. Information uploaded onto the BBS went directly to an “upload file” where an

employee of the BBS briefly checked the new files to ascertain whether they were “acceptable,”

meaning not pornographic and not blatantly protected by copyright.421 Many of the plaintiff’s

copyrighted photographs appeared on the BBS and the plaintiff brought suit for infringement.

With respect to the issue of direct liability for the infringing postings of its subscribers,

the court agreed with the Netcom decision’s requirement of some direct volitional act or

participation in the infringement. However, the court found that the facts of the case, unlike

those of Frena, MAPHIA, and Netcom, were sufficient to establish direct liability for

infringement of both the public display and distribution rights. The court based its conclusion on

“two crucial facts: (1) Defendants’ policy of encouraging subscribers to upload files, including

adult photographs, onto the system, and (2) Defendants’ policy of using a screening procedure in

which [its] employees viewed all files in the upload file and moved them into the generally

available files for subscribers. These two facts transform Defendants from passive providers of a

space in which infringing activities happened to occur to active participants in the process of

copyright infringement.”422

Finally, in Playboy Enterprises, Inc. v. Webbworld, Inc.,423 the court held the defendants

directly liable for infringing public displays of copyrighted images for making such images

available through a website for downloading by subscribers.

2. Kelly v. Arriba Soft

An important case construing the scope of the public display right on the Internet is that

of Kelly v. Arriba Soft Corp.424 In that case, the defendant Arriba was the operator of a “visual

search engine” on the Internet that allowed users to search for and retrieve images. In response

to a search query, the search engine produced a list of reduced, “thumbnail” images. To provide

this functionality, Arriba developed a program called a “crawler” that would search the Web

looking for images to index, download full-sized copies of the images onto Arriba’s server, then

use those images to generate lower resolution thumbnails. Once the thumbnails were created, the

program deleted the full-sized originals from the server.425

When the user double-clicked on the thumbnail, a full-sized version of the image was

displayed. During one period of time, the full-sized images were produced by “inline linking” –

i.e., by retrieving the image from the original web site and displaying it on the Arriba web page

with text describing the size of the image and a link to the originating site – such that the user

421 Id. at 506.

422 Id. at 513.

423 45 U.S.P.Q.2d 1641 (N.D. Tex. 1997).

424 336 F.3d 811 (9th Cir. 2003).

425 Id. at 815.

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would typically not realize the image actually resided on another web site. During a subsequent

period of time, the thumbnails were accompanied by two links, a “source” and a “details” link.

The “details” link produced a separate screen containing the thumbnail image with text

describing the size of the image and a link to the originating site. Alternatively, by clicking on

the “source” link or the thumbnail itself, the Arriba site produced two framed windows on top of

the Arriba page: the window in the forefront contained the full-sized image, imported directly

from the originating site; underneath that was a second window displaying the home page

containing the image from the original site.426

Arriba’s crawler copied 35 photographs on which the plaintiff, Kelly, held the copyrights

into the Arriba database. When he complained, Arriba deleted the thumbnails of images that

came from Kelly’s own web sites and placed those sites on a list of sites that it would not crawl

in the future. Several months later, Kelly sued Arriba, identifying in the complaint other images

of his that came from third party web sites.427 The district court ruled that Arriba’s use of both

the thumbnails and the full sized images was a fair use, and Kelly appealed.428

The Ninth Circuit, in an opinion issued in July of 2003,429 affirmed the ruling that the use

of the thumbnails was a fair use. Applying the first of the four statutory fair use factors, the

court held that the thumbnails were a transformative use of Kelly’s works because they were

much smaller, lower resolution images that served an entirely different function than Kelly’s

original images. Users would be unlikely to enlarge the thumbnails and use them for artistic

purposes because the thumbnails were of much lower resolution than the originals. Thus, the

first fair use factor weighted in favor of Arriba.430

The court held that the second factor, the nature of the copyrighted work, weighed

slightly in favor of Kelly because the photographs were creative in nature. The third factor, the

amount and substantiality of the portion used, was deemed not to weigh in either party’s favor.

Although the entire images had been copied, it was necessary for Arriba to copy the entire

images to allow users to recognize the image and decide whether to pursue more information

about it or the originating web site.431

Finally, the court held that the fourth factor, the effect of the use upon the potential

market for or value of the copyrighted work, weighed in favor of Arriba. The court found that

Arriba’s use of the thumbnail images would not harm the market for Kelly’s use of his images or

the value of his images. By displaying the thumbnails, the search engine would guide users to

Kelly’s web site rather than away from it. Nor would Arriba’s use of the images harm Kelly’s

426 Id. at 815-16.

427 Id. at 816.

428 Id. at 816-17.

429 The 2003 opinion withdrew an earlier and highly controversial opinion issued by the court in 2002, discussed

further below.

430 Id. at 818-19.

431 Id. at 820-21.

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ability to sell or license the full-sized images. Anyone downloading the thumbnails would not be

successful selling full sized-images from them because of the low resolution of the thumbnails,

and there would be no way to view, create, or sell clear, full-sized images without going to

Kelly’s web sites. Accordingly, on balance, the court found fair use.432

The court reversed, however, the district court’s ruling that Arriba’s use of the full-sized

images through inline linking or framing was a fair use and remanded for further proceedings.

The Ninth Circuit’s ruling on this issue was contrary to a result the Ninth Circuit had reached in

an earlier opinion in the case issued in 2002,433 which it withdrew when issuing its 2003 opinion.

In the 2002 ruling, the Ninth Circuit had held, in a highly controversial ruling, that Arriba’s

inline linking to and framing of the full-sized images violated the plaintiff’s public display

rights.434 Interestingly, the court ruled that Kelly’s reproduction rights had not been infringed:

“This use of Kelly’s images does not entail copying them but, rather, importing them directly

from Kelly’s web site. Therefore, it cannot be copyright infringement based on the reproduction

of copyrighted works …. Instead, this use of Kelly’s images infringes upon Kelly’s exclusive

right to ‘display the copyrighted work publicly.’”435 Apparently the court’s observation that the

offering of the full-sized images through linking “does not entail copying” was meant to refer to

direct copying by Arriba, because a copy of the images is certainly made in the user’s computer

RAM, as well as on the screen, when the user clicks on the thumbnail to display the full sized

image.

With respect to infringement of the display right, the court ruled in its 2002 opinion that

the mere act of linking to the images constituted infringement. First, the court ruled that there

was an unauthorized “display”: “By inline linking and framing Kelly’s images, Arriba is

showing Kelly’s original works without his permission.”436 Second, the court held that such

“showing” was a “public” one: “A display is public even if there is no proof that any of the

potential recipients was operating his receiving apparatus at the time of the transmission. By

making Kelly’s images available on its web site, Arriba is allowing public access to those

images. The ability to view those images is unrestricted to anyone with a computer and internet

access.”437 The court thus concluded that Arriba had directly infringed Kelly’s public display

rights: “By allowing the public to view Kelly’s copyrighted works while visiting Arriba’s web

site, Arriba created a public display of Kelly’s works. … Allowing this capability is enough to

establish an infringement; the fact that no one saw the images goes to the issue of damages, not

liability.”438

432 Id. at 821-22.

433 Kelly v. Arriba Soft Corp., 280 F.3d 934 (9th Cir. 2002).

434 Kelly had never argued, either in the proceedings below or on appeal, that his public display rights had been

infringed. The Ninth Circuit raised this issue on its own.

435 Id. at 944.

436 Id. at 945.

437Id.

438 Id. at 946.

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The court went on in its 2002 opinion to hold that Arriba’s display of Kelly’s full-sized

images was not a fair use. Unlike the case of the thumbnails, the court held that the use of the

full-sized images was not transformative. “Because the full-sized images on Arriba’s site act

primarily as illustrations or artistic expression and the search engine would function the same

without them, they do not have a purpose different from Kelly’s use of them.”439 Accordingly,

the first factor weighed against fair use. For the same reasons as before, the second factor

weighed slightly in favor of Kelly.440 The third factor weighed in favor of Kelly because,

although it was necessary to provide whole images “to suit Arriba’s purpose of giving users

access to the full-sized images without having to go to another site, such a purpose is not

legitimate.”441 Finally, the fourth factor weighed in Kelly’s favor, because “[b]y giving users

access to Kelly’s full-sized images on its own web site, Arriba harms all of Kelly’s markets.”442

The Ninth Circuit’s ruling in its 2002 decision on the public display issue generated a lot

of controversy, since the reach of that ruling was potentially so broad. In particular, the logic the

Ninth Circuit adopted in its 2002 decision – that the mere act of inline linking to or framing of a

work, whether or not users actually view the linked work – constitutes a public display of the

linked work, could call into question the legality of many types of linking or framing that has not

been expressly authorized by the owner of the linked material. Apparently in response to the

controversy, on Oct. 10, 2002, the Ninth Circuit ordered additional briefing on issues of public

display and derivative use rights raised by the case.443

In its 2003 decision, the Ninth Circuit omitted entirely the discussion of the public

display right that had appeared in its 2002 decision. Instead, the court held that the district court

should not have decided whether the display of the full-sized images violated Kelly’s public

display rights because the parties never moved for summary judgment on that issue.444 In the

proceedings below, Kelly had moved only for summary judgment that Arriba’s use of the

thumbnail images violated his display, reproduction and distribution rights. Arriba cross-moved

for summary judgment and, for purposes of the motion, conceded that Kelly had established a

prima facie case of infringement as to the thumbnail images, but argued that its use of the

thumbnail images was a fair use. The Ninth Circuit concluded that, by ruling that use of both the

thumbnail images and the full-sized images was fair, the district court had improperly broadened

the scope of both Kelly’s original motion to include a claim for infringement of the full-sized

images and the scope of Arriba’s concession to cover the prima facie case for both the thumbnail

images and the full-sized images.445 Accordingly, the court remanded for further proceedings

439 Id. at 947.

440 Id. at 947-48.

441 Id. at 948.

442Id.

443 “Ninth Circuit Orders Added Briefs on Hyperlinking Issues in Arriba Soft Appeal,” BNA’s Electronic

Commerce & Law Report (Oct. 30, 2002) at 1082.

444 Kelly v. Arriba Soft Corp., 336 F.3d 811, 822 (9th Cir. 2003).

445 Id. at 817.

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with respect to the full-sized images to give the parties an opportunity to fully litigate those

issues.446

3. Ticketmaster v. Tickets.com

See Section III.D.7 below for a discussion of this case, which distinguished the Kelly v.

Arriba Soft case and held that Tickets.com’s deep linking to pages on Ticketmaster’s web site

where tickets could be purchased for events listed on Tickets.com’s site did not constitute an

infringing public display.

4. Perfect 10 v. Google (aka Perfect 10 v. Amazon)

Perfect 10 v. Google set forth a detailed adjudication of the boundaries of the display

right on the Internet, and in particular, which entity should be deemed to perform the display for

purposes of copyright liability when the display results through links from a web site to another

web site storing copies of the copyrighted material at issue. Because both the district court and

the Ninth Circuit issued very thorough, thoughtful opinions, the holdings of both courts will be

explained in detail.

The plaintiff Perfect 10 sought to preliminarily enjoin Google from displaying

thumbnails and full size versions of its copyrighted photographs through the “Google Image

Search” function in response to user search queries. Google Image Search allowed a user to

input a text search string and returned thumbnail images organized into a grid potentially

responsive to the search query.447

To operate Google Image Search, Google created and stored in its cache thumbnail

versions of images appearing on web sites crawled by Google’s web crawler. The thumbnails

chosen for display in response to search queries depended solely upon the text surrounding the

image at the original site from which the image was drawn. When a user clicked on a thumbnail

image, Google displayed a page comprised of two distinct frames divided by a gray horizontal

line, one frame hosted by Google and the second one hosted by the underlying web site that

originally hosted the full size image.448 In the upper frame, Google displayed the thumbnail,

retrieved from its cache, and information about the full size image, including the original

resolution of the image and the specific URL associated with that image. The upper frame made

clear that the image might be subject to copyright and that the upper frame was not the original

context in which the full size image was found. The lower frame contained the original web

page on which the original image was found. Google neither stored nor served any of the

content displayed in the lower frame, which was stored and served by the underlying third party

446 Id. at 822.

447 Perfect 10 v. Google, 416 F. Supp. 2d 828, 832-33 (C.D. Cal. 2006), aff’d sub nom. Perfect 10 v. Amazon.com,

Inc., 508 F.3d 1146, 1169 (9th Cir. 2007).

448 Id. at 833.

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web site containing the original image.449 Perfect 10 brought claims against Google for direct,

vicarious and contributory copyright infringement.

Direct Infringement Claims. Perfect 10 alleged that Google directly infringed its

copyrights by displaying and distributing the full size images hosted by third party web sites, and

by creating, displaying and distributing thumbnails of its copyrighted full size images. Google

conceded that it created and displayed thumbnails, but denied that it displayed, created, or

distributed what was depicted in the lower frame of search results displays, which were

generated via in-line links to third party sites storing the original images of interest.450

The district court began with a consideration of how “display” should be defined in the

context of in-line linking, noting that two approaches were possible: (1) a “sever” test, in which

display is defined as the act of serving content over the web, i.e., physically sending bits over the

Internet to the user’s browser, and (2) an “incorporation” test, in which display is defined as the

mere act of incorporating content into a web page that is then pulled up by the browser through

an in-line link. Under the server test, advocated in the case by Google, the entity that should be

deemed liable for the display of infringing content is the entity whose server served up the

infringing material. Under the incorporation test, advocated by Perfect 10, the entity that should

be deemed liable for the display of infringing content is the entity that uses an in-line link in its

web page to direct the user’s browser to retrieve the infringing content.451

The district court reviewed the existing decisions dealing with the question of whether

linking constitutes infringing “displaying” of copyrighted material. The court noted that in the

Webbworld and Hardenburg cases,452 the material was stored on the defendant’s servers, and in

the Perfect 10 v. Cybernet Ventures case,453 it was unclear whether the defendant stored or

served any of the infringing content. The court further noted that the Ninth Circuit had

withdrawn its opinion in Kelly v. Arriba Soft454 adopting the incorporation test in the face of

widespread criticism of that decision. The court therefore found that none of these cases, or any

other existing precedent, resolved the question before it.455

The district court concluded that the server test was the most appropriate one for

determining whether Google’s lower frames were a “display” of infringing material. The court

articulated several reasons for adopting the server test. First, it is based on what happens at the

technological level as users browse the web, and thus reflects the reality of how content actually

travels over the Internet before it is shown on users’ computers. Second, it precludes search

engines from being held directly liable for in-line linking and/or framing infringing content

449 Id. at 833-34.

450 Id. at 838.

451 Id. at 838-40.

452 These cases are discussed in Section II.C.1 above.

453 This case is discussed in Section II.A.4(k) above.

454 This case is discussed in Section II.C.2 above.

455 416 F. Supp. 2d at 840-43.

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stored on third party web sites, but allows copyright owners still to seek to impose contributory

or vicarious liability on web sites for including such content. Third, web site operators can

readily understand the server test and courts can apply it relatively easily. Fourth, in the instant

case, it imposes direct liability on the web sites that took Perfect 10’s full size images and posted

them on the Internet for all to see. Finally, the server test promotes the balance of copyright law

to encourage the creation of works by protecting them while at the same time encouraging the

dissemination of information. The server test would avoid imposing direct liability for merely

indexing the web so that users can more readily find the information they seek, while imposing

direct liability for the hosting and serving of infringing content.456

Applying the server test, the district court ruled that for purposes of direct infringement,

Google’s use of frames and in-line links did not constitute a “display” of the full size images

stored on and served by infringing third party web sites, but Google did “display” the thumbnails

of Perfect 10’s copyrighted images because it created, stored, and served those thumbnails on its

own servers.457

On appeal, the Ninth Circuit agreed with the district court that the “server” test should be

used to determine which entity displays an image on the web, concluding that the test was

consistent with the statutory language of the copyright statute. Under that test, Perfect 10 had

made a prima facie case that Google’s communication of its stored thumbnail images directly

infringed Perfect 10’s display rights. However, Google had not publicly displayed a copy of the

full size infringing images when it framed in-line linked images that appeared on a user’s

computer screen.458 The Ninth Circuit found that Google’s activities with respect to the full size

images did not meet the statutory definition of public display “because Google transmits or

communicates only an address which directs a user’s browser to the location where a copy of the

full-size image is displayed. Google does not communicate a display of the work itself.”459 The

court also ruled that, because Google’s cache merely stored the text of web pages, and not the

images themselves, Google was not infringing the display right by virtue of its cache.460

Fair Use. The district court evaluated Google’s assertion of the fair use defense to the

display of the thumbnails. With respect to the first fair use factor, the purpose and character of

the use, the court found that Google’s display of the thumbnails was a commercial use, since

Google derived significant commercial benefit from Google Image Search in the form of

increased user traffic and, in turn, increased advertising revenue. The court distinguished the

Ninth Circuit’s decision in the Kelly v. Arriba Soft case by noting that, unlike Arriba Soft,

Google derived direct commercial benefit from the display of thumbnails through its “AdSense”

program, under which third party web sites could place code on their sites to request Google’s

server to algorithmically select relevant advertisements for display based on the content of the

456 Id. at 843-44.

457 Id. at 844.

458 Perfect 10 v. Amazon.com, Inc., 508 F.3d 1146, 1159-60 (9th Cir. 2007).

459 Id. at 1161 n.7.

460 Id. at 1162.

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site, and then share revenue flowing from the advertising displays and click-throughs. If third

party web sites participating in the AdSense program contained infringing copies of Perfect 10

photographs, Google would serve ads on those sites and split the revenue generated from users

who clicked on the Google-served ads.461 Accordingly, the court concluded that “AdSense

unquestionably makes Google’s use of thumbnails on its image search far more commercial than

Arriba’s use in Kelly II. Google’ thumbnails lead users to sites that directly benefit Google’s

bottom line.”462

Relying on the Kelly v. Arriba Soft decision, the court concluded that the use of the

thumbnails was transformative because their creation and display enabled the display of visual

search results quickly and efficiently, and did not supersede Perfect 10’s us of the full size

images. But the court noted that the transformative nature of the thumbnail use did not end the

analysis, because the use was also “consumptive.” In particular, the court noted that after it filed

suit against Google, Perfect 10 entered into a licensing agreement with a third party for the sale

and distribution of Perfect 10 reduced-size images for download to and use on cell phones.463

“Google’s use of thumbnails does supersede this use of P10’s images, because mobile users can

download and save the thumbnails displayed by Google Image Search onto their phones.”464 On

balance, then, the court concluded that, because Google’s use of thumbnails was more

commercial than Arriba Soft’s and because it was consumptive with respect to Perfect 10’s

reduced-size images, the first factor weighed “slightly in favor” of Perfect 10.465

The district court ruled that the second fair use factor, the nature of the copyrighted work,

weighed “only slightly in favor” of Perfect 10 because, although its photographs were creative,

as in the case of the Kelly v. Arriba Soft case, they had appeared on the Internet before use in

Google’s search engine.466 The court found that the third factor, the amount and substantiality of

the portion used, favored neither party because Google’s use of the copies of Perfect 10’s images

was no greater than necessary to achieve the objective of providing effective image search

capabilities.467 Finally, the court found that the fourth factor, the effect of the use upon the

potential market for and value of the copyrighted work, weighed slightly in Perfect 10’s favor

because of the court’s finding that Google’s use of thumbnails likely would harm the potential

461 Perfect 10 v. Google, 416 F. Supp. 2d 828, 834, 846-47 (C.D. Cal. 2006), aff’d sub nom. Perfect 10 v.

Amazon.com, Inc., 508 F.3d 1146, 1169 (9th Cir. 2007).

462 Id. at 846. Google counterargued that its AdSense program policies prohibited a web site from registering as an

AdSense partner if the site’s web pages contained images that appeared in Google Image Search results. The

court noted, however, that Google had not presented any information regarding the extent to which the

purported policy was enforced nor had it provided examples of AdSense partners who were terminated because

of violations of the policy. In contrast, Perfect 10 submitted numerous screenshots of third party web sites that

served infringing content and also appeared to be receiving and displaying AdSense ads from Google. Id. at

846-47.

463 Id. at 847-49.

464 Id. at 849.

465Id.

466 Id. at 849-50.

467 Id. at 850.

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market for the downloading of Perfect 10’s reduced-size images onto cell phones. On balance,

then, the court found that the fair use doctrine likely would not cover Google’s use of the

thumbnails.468

On appeal, the Ninth Circuit reached the opposite conclusion under the fair use doctrine.

Before beginning its specific analysis of the four fair use factors, the Ninth Circuit made some

important preliminary rulings concerning the burden of proof with respect to the fair use

doctrine. The district court had ruled that, because Perfect 10 had the burden of showing a

likelihood of success on the merits, it also had the burden of demonstrating a likelihood of

overcoming Google’s fair use defense. The Ninth Circuit held the district court’s ruling on this

point to be erroneous. Citing cases from the Supreme Court and the Federal Circuit holding that

the burdens at the preliminary injunction stage track the burdens at trial, the Ninth Circuit ruled

that, once Perfect 10 had shown a likelihood of success on the merits, the burden shifted to

Google to show a likelihood that its affirmative defenses – including that of fair use – would

succeed.469

The Ninth Circuit’s analysis of the fair use factors is significant in its recognition of the

need, when judging the transformative nature of the use, to balance the public benefit from the

use against the potential harm to the rights holder from superseding commercial uses, as well as

in its requirement of a showing that alleged potential superseding commercial uses are both real

and significant in their impact. Specifically, with respect to the first factor, the Ninth Circuit,

citing the Kelly v. Arriba Soft case, noted that Google’s use of the thumbnails was highly

transformative because its search engine transformed each image into a pointer directing a user

to a source of information.470 In addition, “a search engine provides social benefit by

incorporating an original work into a new work, namely, an electronic reference tool.”471

468 Id. at 850-51.

469 Perfect 10 v. Amazon.com, Inc., 508 F.3d 1146, 1158 (9th Cir. 2007). This holding was the opposite of one the

Ninth Circuit had reached in an earlier issued opinion in the appeal, which the instant opinion replaced. In the

earlier opinion, the Ninth Circuit had concluded that, because a plaintiff has the burden of showing a likelihood

of success on the merits in order to obtain a preliminary injunction, the plaintiff should also have the burden of

demonstrating a likelihood of overcoming the defendant’s fair use defense. However, because the defendant in

an infringement action has the burden of proving fair use, the Ninth Circuit had ruled in its earlier opinion that

the defendant is responsible for introducing evidence of fair use in the first instance in responding to a motion

for preliminary relief, whereupon the burden would then shift to the plaintiff to demonstrate that it will

overcome the fair use defense. Perfect 10 v. Amazon.com, Inc., 487 F.3d 701, 714 (9th Cir. 2007) (superseded

by 508 F.3d 1146 (9th Cir. 2007)). The court further elaborated its rationale in the earlier opinion as follows:

“In order to demonstrate its likely success on the merits, the moving party must necessarily demonstrate it will

overcome defenses raised by the non-moving party. This burden is correctly placed on the party seeking to

demonstrate entitlement to the extraordinary remedy of a preliminary injunction at an early stage of the

litigation, before the defendant has had the opportunity to undertake extensive discovery or develop its

defenses.” 487 F.3d at 714. The Ninth Circuit apparently concluded that this earlier holding was inconsistent

with established precedent that the burdens at the preliminary injunction stage track the burdens at trial, leading

the court to issue a revised opinion.

470 508 F.3d at 1165.

471 Id. The Ninth Circuit rejected Perfect 10’s argument that providing access to infringing web sites cannot be

deemed transformative and is inherently not fair use. The court noted that Google was operating a

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In a significant ruling, the Ninth Circuit disagreed, on two grounds, with the district

court’s conclusion that Google’s use of thumbnail images was less transformative than the video

search engine at issue in Kelly v. Arriba Soft because Google’s use of thumbnails superseded

Perfect 10’s right to sell its reduced-size images for use on cell phones. First, the Ninth Circuit

noted that the alleged superseding use was not significant at the present time, because the district

court had not found that any downloads of Perfect 10’s photos for mobile phone use had actually

taken place.472 Second, the court concluded “that the significantly transformative nature of

Google’s search engine, particularly in light of its public benefit, outweighs Google’s

superseding and commercial uses of the thumbnails in this case.”473 Accordingly, the first fair

use factor weighed in favor of Google.

The Ninth Circuit found that the district court had correctly analyzed the second and third

factors.474 With respect to the fourth factor, Perfect 10 challenged the district court’s finding of

no harm to the market for the full sized images on the ground that likelihood of market harm may

be presumed if the intended use of an image is for commercial gain. The court noted, however,

that this presumption does not arise when a work is transformative because market substitution is

less certain. Because Google’s use of thumbnails for search engine purposes was highly

transformative and market harm could therefore not be presumed, and because Perfect 10 had not

introduced evidence that Google’s thumbnails would harm its existing or potential market for

full size images, the Ninth Circuit rejected Perfect 10’s argument.475

With respect to harm to Perfect 10’s alleged market for reduced size images, the Ninth

Circuit noted that the district court did not make a finding that Google users had actually

downloaded thumbnail images for cell phone use, so any potential harm to that alleged market

remained hypothetical. Accordingly, the court concluded that the fourth factor favored neither

party.476 Balancing the four factors, and particularly weighing Google’s highly transformative

use and its public benefit against the unproven use of thumbnails for cell phone downloads, the

court concluded that Google’s use of Perfect 10’s thumbnails was a fair use. Accordingly, the

court vacated the preliminary injunction regarding Google’s use of thumbnail images.477

comprehensive search engine that only incidentally indexed infringing web sites. “This incidental impact does

not amount to an abuse of the good faith and fair dealing underpinnings of the fair use doctrine. Accordingly,

we conclude that Google’s inclusion of thumbnail images derived from infringing websites in its Internet-wide

search engine activities does not preclude Google from raising a fair use defense.” Id. at 1164 n.8.

472 Id. at 1166.

473Id.

474 Id. at 1167-68

475 Id. at 1168.

476Id.

477 Id. In a side, but significant, issue, Google argued that the Ninth Circuit lacked jurisdiction over the preliminary

injunction to the extent it enforced unregistered copyrights. The court rejected this argument: “Once a court

has jurisdiction over an action for copyright infringement under section 411 [of the copyright statute], the court

may grant injunctive relief to restrain infringement of any copyright, whether registered or unregistered.” Id. at

1154 n.1.

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Contributory Infringement. Perfect 10 argued to the district court that Google was

contributing to the infringement of two direct infringers – third party web sites hosting and

serving infringing copies of Perfect 10 photographs, and Google Image Search users

downloading such images. The district court ruled as a preliminary matter that Perfect 10 could

not base its contributory infringement claim on users’ actions, because Perfect 10 had

demonstrated only that users of Google search were capable of directly infringing by

downloading the images, but had not submitted sufficient evidence showing the extent to which

users were in fact downloading Perfect 10’s images through Google Image Search. Thus, the

contributory infringement claim had to be based on knowledge and material contribution by

Google to the infringing activities of third party web sites hosting Perfect 10’s images.478

With respect to the knowledge prong, the district court, citing the Supreme Court’s

Grokster case, noted that either actual or constructive knowledge is sufficient for contributory

liability. The court rejected Perfect 10’s argument that Google had actual knowledge from the

presence of copyright notices on Perfect 10’s images or from the fact that Google’s AdSense

policy stated that it monitored the content of allegedly infringing sites. The court noted that

Google would not necessarily know that any given image on the Internet was infringing

someone’s copyright merely because the image contained a copyright notice. With respect to the

alleged monitoring by Google, Google had changed its AdSense policy to remove the language

reserving to Google the right to monitor its AdSense partners. The court further noted that, in

any event, merely because Google may have reserved the right to monitor its AdSense partners

did not mean that it could thereby discern whether the images served by those web sites were

subject to copyright.479

The district court then turned to an analysis of whether numerous notices of infringement

sent by Perfect 10 to Google were sufficient to give Google actual knowledge of infringing

activity. Google challenged the adequacy of those notices on the grounds that they frequently

did not describe in sufficient detail the specific URL of an infringing image and frequently did

not identify the underlying copyrighted work. Some notices listed entire web sites as infringing,

or entire directories within a web site. Google claimed that despite these shortcomings, it

promptly processed all of the notices it received, suppressing links to specific web pages that it

could confirm displayed infringing Perfect 10 copies. The court concluded, however, that it need

not resolve the question of whether Google had adequate actual knowledge of infringement, in

view of the court’s conclusion that Google had not materially contributed to the infringing

activity of third party web sites.480

The district court articulated the following grounds for its finding that Perfect 10 had not

adequately met its burden to show that Google sufficiently contributed to the infringing activity

for contributory liability. First, the court set forth numerous differences between Google’s

activity and the activity that had been found to materially contribute to infringement in the

478 Perfect 10 v. Google, 416 F. Supp. 2d 828, 851-52 (C.D. Cal. 2006), aff’d sub nom. Perfect 10 v. Amazon.com,

Inc., 508 F.3d 1146, 1169 (9th Cir. 2007).

479 Id. at 853-54.

480 Id. at 854.

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Napster cases. For example, unlike in the case of the Napster system, in the instant case the

infringing third party web sites existed, were publicly accessible, and engaged in the infringing

activity irrespective of their inclusion or exclusion from Google’s index. Unlike Napster,

Google did not provide the means of establishing connections between users’ computers to

facilitate the downloading of the infringing material. Even absent Google, third party web sites

would continue to exist and would continue to display infringing content (an observation which

would seem true of all search engines). And unlike Napster, Google did not boast about how

users could easily download infringing content, nor did it facilitate the transfer of files stored on

users’ otherwise private computers.481

In sum, the district court found that Perfect 10 had overstated Google’s actual conduct

and confused the mere provision of search technology with active encouragement and promotion

of infringing activity. The court also rejected Perfect 10’s argument based on the Supreme

Court’s Grokster case that Google had materially contributed to the infringing activity by

providing through AdSense a revenue stream to the infringing web sites. The court held that,

although the AdSense program might provide some level of additional revenue to the infringing

web sites, Perfect 10 had not presented any evidence establishing what that revenue was, much

less that it was material, either in its own right or relative to those web sites’ total income.

Accordingly, the court ruled that Perfect 10 was not likely to prevail on its claim for contributory

liability.482

In an important ruling on appeal,483 the Ninth Circuit reversed and remanded for factual

findings under a specialized test for contributory infringement for computer system operators.

The Ninth Circuit began its analysis by examining the issue of whether Perfect 10 had

adequately proved direct infringements to which Google could potentially contribute. Perfect 10

alleged that three parties directly infringed its images – third party web sites that copied,

displayed and distributed unauthorized Perfect 10 images, individual users of Google’s search

engine who stored full size Perfect 10 images on their computers, and users who linked to

infringing web sites, thereby automatically making cache copies of full size images in their

computers. Google did not dispute that third party web sites directly infringed Perfect 10’s

copyrights by copying, displaying and distributing unauthorized copies of Perfect 10 images.484

The Ninth Circuit agreed, however, with the district court that Perfect 10 failed to provide

any evidence directly establishing that users of Google’s search engine had stored infringing

images on their computers. Finally, the Ninth Circuit agreed with the district court that any

cache copies of full size images made by users who linked to infringing web sites were a fair use.

The copying performed automatically by a user’s computer to assist in accessing the Internet was

a transformative use and did not supersede the copyright holder’s exploitation of the work.485

481Id.

482 Id. at 855-56.

483 Perfect 10 v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007).

484 Id. at 1169.

485Id.

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“Such automatic background copying has no more than a minimal effect on Perfect 10’s rights,

but a considerable public benefit.”486 Accordingly, the Ninth Circuit assessed Google’s

secondary liability based solely with respect to activities of third party web sites that reproduced,

displayed, and distributed unauthorized copies of Perfect 10’s images on the Internet.487

Turning to whether Google could be secondarily liable for the infringing acts of those

third party web sites, the Ninth Circuit first noted that under the Sony doctrine, Google could not

be held liable for contributory infringement based solely on the fact that the design of its search

engine facilitated such infringement. Nor, under footnote 12 of the Supreme Court’s Grokster

decision, could Google be held liable solely because it did not develop technology that would

enable its search engine to automatically avoid infringing images.488

The Ninth Circuit next held that Google could not be liable under the Supreme Court’s

inducement test in Grokster, because Google had not promoted the use of its search engine

specifically to infringe copyrights.489 In reaching this result, however, the Ninth Circuit appears

to have put a gloss on the Supreme Court’s test for inducement liability, for in addition to noting

that inducement liability could result from intentionally encouraging infringement through

specific acts, the Ninth Circuit stated that intent could be imputed “if the actor knowingly takes

steps that are substantially certain to result in … direct infringement.”490

Finally, turning to whether Google could have secondary liability under the traditional

common law doctrine of contributory liability, the Ninth Circuit, citing its Napster decisions,

noted that it had “further refined this test in the context of cyberspace to determine when

contributory liability can be imposed on a provider of Internet access or services.”491 The Ninth

Circuit noted that under both Napster and Netcom, a service provider’s knowing failure to

prevent infringing actions could be the basis for imposing contributory liability, because under

such circumstances, the intent required under the Supreme Court’s Grokster decision may be

imputed. Accordingly, the Ninth Circuit articulated the following test for contributory liability

in the context of cyberspace:

[W]e hold that a computer system operator can be held contributorily liable if it

“has actual knowledge that specific infringing material is available using its

system,” Napster, 239 F.3d at 1002, and can “take simple measures to prevent

further damage” to copyrighted works, Netcom, 907 F. Supp. At 1375, yet

continues to provide access to infringing works.492

486Id.

487 Id. at 1170.

488 Id.

489 Id. at 1171 n.11.

490 Id. at 1171.

491 Id.

492 Id. at 1172 (emphasis in original).

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This articulated test leaves open at least the following questions, with respect to which

the Ninth Circuit’s decision gives little guidance:

-- Is this the exclusive test for contributory infringement in “the context of cyberspace”?

-- What are the boundaries of “the context of cyberspace” within which this test will

apply?

-- Does the reference to “actual” knowledge preclude secondary liability on the

alternative traditional common law formulation of “reason to know” in the context of

cyberspace?

-- Do “simple measures” extend only to taking down specific infringing material, or to

preventing its recurrence also?

Applying this specialized test, the Ninth Circuit ruled that the district court had erred in

concluding that, even if Google had actual knowledge of infringing material available on its

system, it did not materially contribute to infringing conduct because it did not undertake any

substantial promotional or advertising efforts to encourage visits to infringing web sites, nor

provide a significant revenue stream to the infringing web sites.493 The Ninth Circuit stated:

There is no dispute that Google substantially assists websites to distribute their

infringing copies to a worldwide market and assists a worldwide audience of users

to access infringing materials. We cannot discount the effect of such a service on

copyright owners, even though Google’s assistance is available to all websites,

not just infringing ones. Applying our test, Google could be held contributorily

liable if it had knowledge that infringing Perfect 10 images were available using

its search engine, could take simple measures to prevent further damage to Perfect

10’s copyrighted works, and failed to take such steps.494

Noting that there were factual disputes over whether there are “reasonable and feasible

means” for Google to refrain from providing access to infringing images, the Ninth Circuit

remanded the contributory infringement claim for further consideration of whether Perfect 10

would likely succeed in establishing that Google was contributorily liable for in-line linking to

full size infringing images under the test the court had enunciated.495

Similarly, the Ninth Circuit remanded for further proceedings on whether Amazon.com,

which Perfect 10 had also sued based on its offering of the A9.com search engine, should be held

contributorily liable. “It is disputed whether the notices gave Amazon.com actual knowledge of

specific infringing activities available using its system, and whether Amazon.com could have

493 Id.

494 Id.

495 Id. at 1172-73

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taken reasonable and feasible steps to refrain from providing access to such images, but failed to

do so.”496

Vicarious Liability. Perfect 10 also asserted claims against Google for vicarious liability.

With respect to the financial benefit prong, the district court found that Google obtained a direct

financial benefit from the infringing activity through its AdSense revenues under the standard

articulated in the Ninth Circuit’s Fonovisa decision,497 in which it held that the financial benefit

prong can be satisfied where the availability of infringing material acts as a “draw” for customers

to the site. Under that standard, the district court found it likely that at least some users were

drawn to Google Image Search because they knew that copies of Perfect 10’s photos could be

viewed for free, and Google derived a direct financial benefit when users visited AdSense

partners’ web sites that contained such infringing photos.498

Notwithstanding the financial benefit to Google, however, the district court found that

Google had insufficient control over the infringing activity to impose vicarious liability because

the Web is an open system. “Google does not exercise control over the environment in which it

operates – i.e., the web. Google’s ability to remove a link from its search index does not render

the linked-to site inaccessible. The site remains accessible both directly and indirectly (i.e., via

other search engines, as well as via the mesh of websites that link to it). If the phrase ‘right and

ability to control’ means having substantial input into or authority over the decision to serve or

continue serving infringing content, Google lacks such right or ability.”499 Moreover, Google’s

software lacked the ability to analyze every image on the Internet, compare each image to all

other copyrighted images that existed in the world, or even to that much smaller subset of images

that had been submitted to Google by copyright owners such as Perfect 10, and determine

whether a certain image on the web infringed someone’s copyright.500 Finally, the court ruled

that the “right and ability to control” prong required more than Google’s reservation in its

AdSense policy of the right to monitor and terminate partnerships with entities that violated

others’ copyrights. Accordingly, the district court held that Perfect 10 had not established a

likelihood of proving the second prong necessary for vicarious liability.501

Based on its various rulings, the district court concluded that it would issue a preliminary

injunction against Google prohibiting the display of thumbnails of Perfect 10’s images, and

ordered the parties to propose jointly the language of such an injunction.502

On appeal, the Ninth Circuit affirmed the district court’s ruling that Perfect 10 had not

shown a likelihood of establishing Google’s right and ability to stop or limit the directly

496 Id. at 1176.

497 Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996).

498 Perfect 10 v. Google, 416 F. Supp. 2d at 856-57.

499 Id. at 857-58.

500 Id. at 858.

501 Id.

502 Id. at 859.

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infringing conduct of third party web sites. The Ninth Circuit began its analysis by noting that,

under Grokster, “a defendant exercises control over a direct infringer when he has both a legal

right to stop or limit the directly infringing conduct, as well as the practical ability to do so.”503

With respect to the first part of this test, the court noted that, unlike in Fonovisa where the swap

meet operator had contracts with its vendors giving it the right to stop the vendors from selling

counterfeit recordings on its premises, Perfect 10 had not shown that Google had contracts with

third party web sites that empowered Google to stop or limit them from reproducing, displaying

and distributing infringing copies of Perfect 10’s images. Although Google had AdSense

agreements with various web sites, an infringing third party web site could continue to

reproduce, display, and distribute its infringing copies after its participation in the AdSense

program was ended.504 And unlike the Napster system, in which Napster’s control over its

closed system that required user registration and enabled Napster to terminate its users’ accounts

and block their access to the Napster system, Google could not terminate third party web sites

distributing infringing photographs or block their ability to host and serve infringing full size

images on the Internet.505

The Ninth Circuit also affirmed the district court’s findings that Google lacked the

practical ability to police the third party web sites’ infringing conduct. “Without imagerecognition

technology, Google lacks the practical ability to police the infringing activities of

third-party websites.”506 Google’s inability to police distinguished it from the defendants held

liable in the Napster and Fonovisa cases. Accordingly, Perfect 10 had failed to establish the right

and ability to control prong of vicarious liability.507 Having so concluded, the Ninth Circuit

determined that it need not reach Perfect 10’s argument that Google received a direct financial

benefit.508

Based on its rulings, the Ninth Circuit reversed the district court’s determination that

Google’s thumbnail versions of Perfect 10’s images likely constituted a direct infringement. It

also reversed the district court’s conclusion that Perfect 10 was unlikely to succeed on the merits

of its secondary liability claims because the district court failed to consider whether Google and

Amazon.com knew of infringing activities yet failed to take reasonable and feasible steps to

refrain from providing access to infringing images. Accordingly, the Ninth Circuit remanded the

case to the district court for further proceedings on this point, as well as to consider whether

Google and Amazon.com would qualify for any of the safe harbors of the DMCA, an issue

which the district court did not consider because of its rulings. Because the district court would

503 Perfect 10 v. Amazon.com, Inc., 508 F.3d 1146, 1173 (9th Cir. 2007).

504 Id.

505 Id. at 1174.

506 Id.

507 Id. The Ninth Circuit also stated, without analysis, that it agreed with the district court’s conclusion that

Amazon.com did not have the right and ability to supervise the infringing activity of Google or third parties,

and that the district court did not clearly err in concluding that Amazon.com lacked a direct financial interest in

such activities. Id. at 1176.

508 Id. at 1175 n.15.

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need to reconsider the appropriate scope of injunctive relief after addressing the secondary

liability issues, the Ninth Circuit decided that it need not address the parties’ dispute over

whether the district court abused its discretion in determining that Perfect 10 satisfied the

irreparable harm element of a preliminary injunction.509

On remand, Google asserted various safe harbors under the DMCA. Analysis of the

rulings with respect to whether Google was entitled to any of the safe harbors may be found in

Section III.C.6(b)(1)(ii).c.

5. Healthcare Advocates, Inc. v. Harding, Earley, Follmer & Frailey

In Healthcare Advocates, Inc. v. Harding, Earley, Follmer & Frailey,510 the court ruled

that display of copyrighted images on computer monitors within a law office constituted a public

display, but was permitted under the fair use doctrine. Healthcare Advocates had filed a lawsuit

alleging that a competitor infringed trademarks and copyrights and misappropriated trade secrets

belonging to Healthcare Advocates. The defendants in that case were represented by the

boutique IP law firm of Harding, Earley, Follmer & Frailey. To aid in preparing a defense, on

two occasions employees of the Harding firm accessed screenshots of old versions of Healthcare

Advocates’ web sites that had been archived by the Internet Archive’s web site

(www.archive.org). The old versions of the web site were accessed through the “Wayback

Machine,” an information retrieval system offered to the public by the Internet Archive that

allowed users to request archived screenshots contained in its archival database. Viewing the

content that Healthcare Advocates had included on its public web site in the past was very useful

to the Harding firm in assessing the merits of the trademark and trade secret allegations brought

against the firm’s clients. The Harding firm printed copies of the archived screenshots of interest

and used the images in the litigation against their clients. Healthcare Advocates then sued the

Harding firm, alleging that viewing the screenshots of the old versions of their web site on

computers within the firm constituted an infringing public display, and that printing of copies of

those screenshots and storing them on hard drives at the firm also infringed the company’s

copyrights.511

The court ruled that, “[u]nder the expansive definition of a public display, the display of

copyrighted images on computers in an office constitutes a public display.”512 The court

concluded, however, that the Harding firm’s display and copying of those images for purposes of

defending its clients in the litigation brought by Healthcare Associates constituted a fair use.

With respect to the purpose of the use, the court noted that the images were used to better

understand what Healthcare Associates’ complaint, which did not specify what had been

infringed nor have any documents attached to it depicting the infringement, was based on.513

509 Id. at 1176-77.

510 2007 U.S. Dist. LEXIS 52544 (E.D. Pa. July 20, 2007).

511 Id. at *2-10.

512 Id. at *19.

513 Id. at *22-23.

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Only a small group of employees were able to see the images within the law firm’s office, which

the court found was “similar to a family circle and its acquaintances.”514 The purpose of the

printing was only to make a record of what had been viewed and for use as supporting

documentation for the defense the firm planned to make for its clients.515 “It would be an absurd

result if an attorney defending a client against charges of trademark and copyright infringement

was not allowed to view and copy publicly available material, especially material that his client

was alleged to have infringed.”516

The second fair use factor weighed in favor of the firm because the nature of Healthcare

Associates’ web sites was predominantly informational. The third factor weighed in favor of the

firm because, although entire images were copied, employees at the firm needed to copy

everything they viewed because they were using the screenshots to defend their clients against

copyright and trademark infringement claims. The firm also had a duty to preserve relevant

evidence. Finally, the court found that the fourth fair use factor also favored the firm, because

the value of Healthcare Associates’ web sites was not affected by the Harding’s firm’s use, and

the images viewed and copied were archived versions of the web site that Healthcare Associates

no longer utilized, suggesting their worth was negligible. Accordingly, the court held that the

Harding firm’s use of the images obtained through the Wayback Machine constituted a fair

use.517

6. ICG-Internet Commerce Group, Inc. v. Wolf

In ICG-Internet Commerce Group, Inc. v. Wolf,518 the court held that the defendant had

infringed the plaintiff’s copy and public display rights in an adult video by posting the video to

the defendant’s web site. The court also ruled that the insertion into the plaintiff’s video of a

URL link to the defendant’s web site constituted the creation of an infringing derivative work.519

7. Perfect 10 v. Yandex

In Perfect 10, Inc. v. Yandex, N.V.,520 Yandex operated image search engines at

Yandex.ru, whose servers were located in Russia, and Yandex.com, whose servers were located

in the U.S. Yandex.ru was Russia’s most popular search engine and the fourth largest search

engine worldwide. The search engines did not store any full-sized images that its crawlers

514 Id. at *24. The copyright statute defines a “public” display as one made in a place “where a substantial number

of persons outside of a normal circle of a family and its social acquaintances is gathered.” 17 U.S.C. § 101.

515 Id. at *24.

516 Id. at *24-25.

517 Id. at *26-29. The court also ruled that the firm’s failure to preserve temporary cache files of the screenshots

that were automatically created by the computers used by the firm’s employees to view the images through the

Internet, and were also automatically deleted by the computers’ operating system, did not constitute spoliation

of evidence. Id. at *30-38.

518 519 F. Supp. 2d 1014 (E.D. Pa. 2007).

519 Id. at 1018.

520 2013 U.S. Dist. LEXIS 98608 (N.D. Cal. July 12, 2013).

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located, but rather stored only lower-resolution thumbnails of the images. Yandex reproduced its

thumbnail copies on search results pages so that a user making a search query could determine

which, if any, thumbnails were of interest and then click through to the third party web site that

hosted the full-sized image. When the user clicked on a link, the full-size source image was

displayed via in-line linking in the same browser window without including other parts of the

surrounding third-party web page on which the full-sized image appeared. Thumbnails of

several thousand unauthorized Perfect 10 images were stored on Yandex’s search engine servers

and Perfect 10 sued for direct, contributory and vicarious copyright infringement. Yandex

moved for summary judgment on several issues.521

Turning first to the issue of direct liability, the court noted that of the 63,756 alleged

infringements to which Yandex.ru and Yandex.com linked in search results, 51,959 of them were

hosted on servers located outside the U.S. The court noted that under the Ninth Circuit’s “server

test” adopted in the Perfect 10 v. Amazon case, the hosting web site’s computer, rather than the

search engine’s computer, is the situs of direct infringement, and Yandex could therefore have no

liability for direct infringement under U.S. copyright law with respect to those images hosted

outside the U.S. The court rejected Perfect 10’s argument that Yandex committed direct

infringement by display in the U.S. of images hosted outside the U.S. because users in the U.S.

could download them. Nowhere in the Amazon decision did the Ninth Circuit endorse the idea

that display of a copyrighted image anywhere in the world creates direct copyright liability in the

U.S. merely because images could be downloaded from a server abroad by someone in the U.S.

The court observed that such a principle would destroy the concept of territoriality inhering in

the Copyright Act for works on the Internet. The court found more plausible Perfect 10’s

argument that, when Yandex’s servers were located in the U.S. for a nine-month period, a

Yandex.com image search performed by a server in the U.S. could have linked to a Perfect 10

imaged hosted on a Yandex server in Russia. The court, however, found it unnecessary to

address the validity of the argument because Perfect 10 had not demonstrated that Yandex in fact

stored or displayed full-sized copies of the Perfect 10 images on Yandex’s U.S. servers.

Accordingly, the court granted Yandex summary judgment on direct infringement with respect to

hosting or display of Perfect 10 images through servers outside the U.S.522

The court then turned to storage of thumbnail versions of Perfect 10 images on

Yandex.com servers in the U.S. during the nine-month period from June 2012 to March 2013.

Yandex did not dispute that its use of the thumbnails in the U.S. constituted a prima facie

violation of Perfect 10’s display and distribution rights, but argued that its thumbnail copies were

a fair use. The court agreed. With respect to the first fair use factor, citing the Amazon and

Kelly v. Arriba cases, the court found that use of a thumbnail image as a pointer to a source of

information is highly transformative, and noted that Yandex’s in-linking to a full-size image,

which caused it to be transmitted from the third party web site hosting it, did not constitute direct

infringement on the part of Yandex.523

521 Id. at *2-6, 17.

522 Id. at *11-14.

523 Id. at 16-20..

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The court noted that the second fair use factor slightly favored the plaintiff Perfect 10, as

in Amazon. With respect to the third factor, the amount and substantiality of the use, the court

rejected Perfect 10’s argument that the third factor should favor it because Yandex allegedly

used 40,000 Perfect 10 thumbnails. The court noted that the substantiality analysis must be

made on a copyright-by-copyright basis, and the number of allegedly infringed images is

therefore not relevant. As in Amazon and Kelly, the court concluded that the third factor favored

neither party because Yandex’s transformative use required use of the entire image, although in

reduced size. With respect to the fourth factor, the court rejected Perfect 10’s argument that

Yandex’s search engines caused it market harm because they led to billions of unauthorized

views and downloads of its images from web sites to which Yandex linked Perfect 10

thumbnails. The court found that Perfect 10 had not substantiated the argument by competent

evidence. Perfect 10’s evidence consisted of screen shots from third party web sites showing

that links on those sites leading to Perfect 10 images had been viewed approximately 3.8 million

times, but Perfect 10 failed to provide evidence that any of those views were the result of

Yandex.com users clicking on thumbnails stored on Yandex.com servers in the U.S. during the

nine-month period. The court also rejected Perfect 10’s argument that its market for reducedsize

images for cell phone use had dried up since 2007 and Yandex had begun providing a

thumbnail search service since 2007; ergo, Perfect 10 had been harmed by Yandex. The court

noted that this simple correlation, without more, did not constitute sufficient evidence that

Yandex’s use of 40,000 thumbnail images during the nine-month period affected Perfect 10’s

market for reduced-size images. The court therefore concluded that the fourth factor favored

neither party. Balancing the four factors, the court ruled that Yandex.com’s thumbnails stored

on its servers in the U.S. for the nine-month period were fair use.524

Finally, the court ruled that Yandex could have potential contributory and vicarious

liability only with respect to direct infringements taking place in the U.S., which eliminated

contributory or vicarious liability for links connecting to full-size images hosted outside the U.S.

The court therefore granted summary judgment to Yandex to that extent. The court then ruled

that the case would proceed to trial with respect to liability pertaining to evidence submitted by

Perfect 10 of 23 links that connected to U.S. web sites.525

D. The Right of Public Distribution

Section 106 (3) of the copyright statute grants the copyright owner the exclusive right to

distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer

of ownership, or by rental, lease, or lending. Thus, to implicate the right of public distribution,

three conditions must obtain: (a) a “copy” must be distributed; (b) the distribution must be to the

“public”; and (c) the distribution must be by sale, rental, lease, lending or “other transfer of

ownership.”

524 Id. at *20-24.

525 Id. at *24-28 & n.3.

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1. The Requirement of a “Copy”

Whether transmissions of a work on the Internet implicate the public distribution right

turns in the first instance on whether there has been a distribution of a “copy” of the work. The

broadcasting and cable industries have traditionally treated broadcasts and cable transmissions as

not constituting distributions of copies of a work. With respect to Internet transmissions,

however, if a complete copy of a work ends up on the recipient’s computer, it may be easy to

conclude that a “copy” has been distributed. Indeed, to remove any doubt from this issue, the

NII White Paper proposed to include “transmission” within the copyright owner’s right of

distribution,526 where transmission is defined essentially as the creation of an electronic copy in a

recipient system.527

It is less clear whether other types of transmissions constitute distributions of “copies.”

For example, what about an artistic work that is transmitted and simultaneously performed live at

the recipient’s end? Although the public performance right may be implicated, has there been a

distribution of a “copy” that would implicate the right of distribution? Should it matter whether

significant portions of the work are buffered in memory at the recipient’s computer? Many of

these distinctions could be rendered moot by the potentially broader right of “communication to

the public” contained in the WIPO treaties discussed below, were that right ever to be expressly

adopted in implementing legislation in the United States (the DMCA does not contain such a

right).

Even if a “copy” is deemed to have been distributed in the course of an Internet

transmission of an infringing work, difficult questions will arise as to who should be treated as

having made the distribution – the original poster of the unauthorized work, the OSP or BBS

through which the work passes, the recipient, or some combination of the foregoing? Thus, the

same issue of volition arises with respect to the distribution right as was discussed above in

connection with the reproduction right.

(a) Cases Addressing Whether Mere Posting Is a Distribution

Several decisions have addressed the question of whether the mere posting – i.e., the

“making available” – of a work on a BBS or other Internet site, or in a “shared file” folder within

peer-to-peer client software, from which it can be downloaded by members of the public

constitutes a public distribution of the work, and have reached quite contrary results, as detailed

in the next two subsections. In addition to those decisions, several other decisions have declined

to reach the issue and/or left the question open, often acknowledging the existence of conflicting

authority:

526 The copyright statute currently defines “transmission” or “transmit” solely in reference to performances or

displays of a work. The NII White Paper does not, however, argue for removal of the requirement that an

offending distribution be one to the “public.” NII White Paper at 213-15.

527 NII White Paper at 213. Appendix 1 of the NII White Paper proposes the following definition: “To ‘transmit’ a

reproduction is to distribute it by any device or process whereby a copy or phonorecord of the work is fixed

beyond the place from which it was sent.” Id. App. 1, at 2.

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– In Arista Records LLC v. Greubel, 453 F. Supp. 2d 961 (N.D. Tex. 2006), the court,

although not deciding on a motion to dismiss whether the electronic transmission over a

computer network (here, transmission of copyrighted recordings through a file sharing network)

or the mere listing of such copyrighted recordings in a directory as available for download, is

sufficient to violate a copyright owner’s distribution right, the court cited numerous decisions so

holding or suggesting that either of such acts is sufficient for infringement of the distribution

right, and concluded that such decisions were sufficient to deny the defendant’s motion to

dismiss the complaint on the pleadings.528 The court stated, “[M]aking copyrighted works

available to other may constitute infringement by distribution in certain circumstances.”529

– Maverick Recording Co. v. Goldshteyn, 2006 U.S. Dist. LEXIS 52422 at *3 (E.D.N.Y.

July 31, 2006) (“[T]he ‘making available’ argument need not be decided here.”).

– Fonovisa, Inc. v. Alvarez, 2006 U.S. Dist. LEXIS 95559 at *8 (N.D. Tex. July 24,

2006) (“This Court is not making a determination as to whether ‘making works available’

violates the right of distribution.”).

– Warner Bros. Records, Inc. v. Payne, 2006 U.S. Dist. LEXIS 65765 at *4 (W.D. Tex.

July 17, 2006) (declining to “rule out the Plaintiffs’ ‘making available’ theory as a possible

ground for imposing liability”).

– Atlantic Recording Corp. v. Brennan, 2008 U.S. Dist. LEXIS 23801 at *3 (D. Conn.

Feb. 13, 2008) (denying plaintiffs’ entry of default against defendant, in part, by finding that

defendant may have a meritorious defense against plaintiffs’ “problematic” make available

argument).

– Electra Entertainment Group, Inc. v. Doe, 2008 U.S. Dist. LEXIS 98145 at *8-9

(E.D.N.C. Dec. 4, 2008) (court need not decide whether “making available” a sound recording

over the Internet constitutes a distribution because the plaintiffs’ complaint sufficiently alleged

an actual dissemination of copies of the recordings had occurred).

– Warner Bros. Records, Inc. v. Doe, 2008 U.S. Dist. LEXIS 98143 at *8-9 (E.D.N.C.

Dec. 4, 2008) (same).

(1) Cases Holding That Mere Posting Is a Distribution

In Playboy Enterprises, Inc. v. Frena,530 the court, with very little analysis of the issue,

held a BBS operator liable for infringement of the public distribution right for the making of

photographs available through the BBS that were downloaded by subscribers, even though the

defendant claimed he did not make copies of the photographs himself. But because the BBS was

apparently one devoted to photographs, much of it of adult subject matter, and subscribers

528 Id. at 967-71.

529 Id. at 969 (emphasis added).

530 839 F. Supp. 1552 (M.D. Fla. 1993).

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routinely uploaded and downloaded images therefrom, the court seems to have viewed the

defendant as a direct participant in the distributions to the public that took place through the

BBS.

Similarly, in Playboy Enterprises, Inc. v. Chuckleberry Publishing Inc.,531 the court ruled

that uploading copyrighted pictorial images onto a computer in Italy which could be accessed by

users in the United States constituted a public distribution in the United States. In contrast to the

Netcom case, the court noted that the defendant did more than simply provide access to the

Internet. Instead, the defendant provided services and supplied the content for those services,

which gave users the option to either view or download the images. By actively soliciting

United States customers to the services, the court concluded that the defendant had distributed its

product within the United States.

In Playboy Enterprises, Inc. v. Webbworld, Inc.,532 the court held the defendants directly

liable for infringing the distribution right by making copyrighted images available through a

website for downloading by subscribers. The court found that, in contrast to the Netcom case,

the defendants took “affirmative steps to cause the copies to be made.”533

The court in Marobie-FL, Inc. v. National Association of Fire Equipment Distributors534

ruled that the placement of three files containing copyrighted clip art on the Web page of the

defendant constituted a direct violation of the plaintiff’s distribution right because the files were

available for downloading by Internet users and were transmitted to Internet users upon request.

In all of the preceding four cases, it was apparent that actual downloads of complete

copies of the copyrighted material had taken place, and this fact, coupled with affirmative steps

taken by the defendants to promote the acts of downloading, seem to have led those courts to

find a violation of the distribution right. The more difficult cases of line drawing have arisen in

the peer-to-peer file sharing cases, many of which are discussed in the remainder of this

subsection and the next subsection, in which the defendant often merely makes available

copyrighted files for sharing (through a “shared file” folder used by the peer-to-peer client

software), but does not take additional affirmative steps to promote the downloading of copies of

those files. In addition, there often is not clear proof in those cases whether actual downloads

have taken place from the defendant’s particular shared file folder, and if so, to what extent –

including whether complete copies have been downloaded from the defendant’s shared file

folder or only bits and pieces of files, as is the inherent nature of the peer-to-peer protocol

mechanisms.

In its decision in Napster I, the Ninth Circuit held, without any discussion, that “Napster

users who upload files names to the search index for others to copy violate plaintiff’s distribution

531 939 F. Supp. 1032, 1039 (S.D.N.Y. 1996).

532 45 U.S.P.Q.2d 1641 (N.D. Tex. 1997).

533 Id. at 1647.

534 45 U.S.P.Q.2d 1236 (N.D. Ill. 1997).

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rights.”535 Although the Ninth Circuit’s opinion addressed whether Napster could be secondarily

liable for the infringing acts of its users through the system, it did not address the question of

whether Napster itself directly violated the plaintiff’s distribution rights by maintaining its search

index. That question was subsequently adjudicated by the district court in the Napster litigation,

which answered the question in the negative, as discussed in the next subsection.

In Interscope Records v. Duty,536 the court held that the mere placement of copyrighted

works in a share folder connected to the Kazaa peer-to-peer service constituted a public

distribution of those works. The court noted that, although “distribute” is not defined in the

copyright statute, the right of distribution is synonymous with the right of publication, which is

defined to include the “offering to distribute copies or phonorecords to a group of persons for

purposes of further distribution, public performance, or public display.”537 The court also cited

the Ninth Circuit’s decision in Napster I, which held that “Napster users who upload files names

to the search index for others to copy violate plaintiff’s distribution rights.”538

In Warner Bros. Records, Inc. v. Payne,539 the court ruled, on a motion to dismiss the

plaintiff’s complaint against a defendant who was making the plaintiff’s recordings available

through the Kazaa network, that “[l]isting unauthorized copies of sound recordings using an

online file-sharing system constitutes an offer to distribute those works, thereby violating a

copyright owner’s exclusive right of distribution.”540 The court relied on the Supreme Court’s

equating of the term “distribute” with “publication” in Harper & Row Publishers, Inc. v. Nation

Enterprises,541 noting that publication is defined to include the “offering to distribute copies.”

The court also relied on the logic of Hotaling v. Church of Jesus Christ of Latter-Day Saints,542

which held a library engages in the distribution of a copyrighted work when it adds the work to

its collections, lists the work in its index or catalog and makes the work available for borrowing

or browsing.543 Accordingly, the court denied the defendant’s motion to dismiss: “Making an

unauthorized copy of a sound recording available to countless users of a peer-to-peer system for

free certainly contemplates and encourages further distribution, both on the Internet and

elsewhere. Therefore, the Court is not prepared at this stage of the proceedings to rule out the

Plaintiffs’ ‘making available’ theory as a possible ground for imposing liability. A more detailed

understanding of the Kazaa technology is necessary and Plaintiffs may yet bring forth evidence

535 A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1014 (9th Cir. 2001) (emphasis added).

536 2006 U.S. Dist. LEXIS 20214 (D. Ariz. Apr. 14, 2006).

537 Id. at *7 (citing 17 U.S.C. § 101) (emphasis by the court).

538 Id. at *8 (quoting A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1014 (9th Cir. 2001)).

539 2006 U.S. Dist. LEXIS 65765 (W.D. Tex. July 17, 2006).

540 Id. at *8.

541 471 U.S. 539 (1985).

542 118 F.3d 199 (4th Cir. 1997).

543 2006 U.S. Dist. LEXIS at *9-10.

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of actual uploading and downloading of files, rendering use of the ‘making available’ theory

unnecessary.”544

In Universal City Studios Productions v. Bigwood,545 the court granted summary

judgment of infringement against the defendant, a user of Kazaa who had made two of the

plaintiffs’ copyrighted motion pictures available in his shared folder. Citing Hotaling and

Napster I and no contrary authority, and without any further analysis of its own, the court ruled

that “by using KaZaA to make copies of the Motion Pictures available to thousands of people

over the internet, Defendant violated Plaintiffs’ exclusive right to distribute the Motion

Pictures.”546

In Motown Record Co. v. DePietro,547 the court, citing the Ninth Circuit’s Napster I case,

held that a “plaintiff claiming infringement of the exclusive-distribution right can establish

infringement by proof of actual distribution or by proof of offers to distribute, that is, proof that

the defendant ‘made available’ the copyrighted work [in this case, via a peer-to-peer system].”548

In United States v. Carani,549 the court ruled that storing child pornography in a shared

folder on the Kazaa peer-to-peer network where it could be downloaded by others qualified as an

illegal “distribution” of child pornography, thus justifying an enhanced punishment.550

In ICG-Internet Commerce Group, Inc. v. Wolf,551 the court denied a motion for

summary judgment that the defendant had infringed the plaintiff’s distribution right in an adult

video by posting the video to the defendant’s web site, because it was unclear from a screenshot

of the defendant’s web site showing a hyperlink to “[s]ex tape download souces [sic]” whether

the hyperlink linked to a streaming or downloadable source file containing the plaintiff’s video.

The court did, however, find that the plaintiff’s copy and public display rights had been violated

by the posting of the video on the defendant’s site from which it could be viewed publicly.552

In Maverick Recording Co. v. Harper,553 in considering a copyright infringement claim

against the defendant for having copies of the plaintiffs’ copyrighted sound recordings in a

shared folder on a peer-to-peer network, the court held that a complete download of a given work

over the network is not required for copyright infringement to occur. Citing the Warner Bros. v.

544 Id. at *11.

545 441 F. Supp. 2d 185 (D. Me. 2006).

546 Id. at 190.

547 2007 U.S. Dist. LEXIS 11626 (E.D. Pa. Feb. 16, 2007).

548 Id. at *12.

549 492 F.3d 867 (7th Cir. 2007).

550 Id. at *21-23; accord United States v. Shaffer, 472 F.3d 1219, 1123-24 (10th Cir. 2007).

551 519 F. Supp. 2d 1014 (E.D. Pa. 2007).

552 Id. at 1018-19.

553 Order, Maverick Recording Co. v. Harper, No. 5:07-CV-026-XR (W.D. Tex. Aug. 7, 2008).

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Payne and Interscope decisions, the court stated, “The fact that the Recordings were available for

download is sufficient to violate Plaintiffs’ exclusive rights of reproduction and distribution. It is

not necessary to prove that all of the Recordings were actually downloaded; Plaintiffs need only

prove that the Recordings were available for download due to Defendant’s actions.”554

On appeal, the Fifth Circuit ruled that it need not address whether merely making

available files for download violates the distribution right because the defendant did not appeal

the district court’s finding that she had infringed the plaintiffs’ copyrights by downloading and

therefore reproducing the audio files. Thus, the distribution issue was moot since the defendant’s

liability would remain even if the Fifth Circuit were to agree with the district court on the

distribution issue.555 The Fifth Circuit also ruled that the defendant was not entitled to an

innocent infringer defense as a matter of law because Section 402(d) makes that defense

unavailable when a proper copyright notice appears on the published phonorecords to which a

defendant had access. There was no dispute that each of the published phonorecords from which

the shared audio files were taken had proper copyright notices on them, and lack of legal

sophistication as to what the notices meant was irrelevant.556 (The court does not mention

whether the audio files themselves that the defendant shared had copyright notices on them.)

Accordingly, the court concluded that the plaintiffs must be awarded statutory damages of $750

per infringed work.557

In Columbia Pictures Industries, Inc. v. Fung,558 the district court ruled, in the context of

a BitTorrent site, that “uploading a copyrighted content file to other users (regardless of where

those users are located) violates the copyright holder’s § 106(3) distribution right.”559 Because

of the nature of the BitTorrent protocol, users were not uploading the infringing content itself to

the defendants’ site, but rather were uploading dot-torrent files that contained only information

about hosts from which the infringing content could be downloaded using the BitTorrent

protocol. The dot-torrent files were indexed on the defendants’ site for searching. Thus, the

quoted language seems to implicitly hold that an actual distribution of infringing content is not

required to infringe the distribution right, since the mere upload of the dot-torrent file through

which the infringing content could be located was sufficient to infringe. In its opinion affirming

on appeal, the Ninth Circuit stated, “Both uploading and downloading copyrighted material are

infringing acts. The former violates the copyright holder’s right to distribution, the latter the

right to reproduction.”560 The court immediately thereafter indicated awareness that the dottorrent

files that were uploaded to Fung’s web sites did not contain the infringing content itself,

for the Ninth Circuit noted the plaintiff’s expert had averred that 90 to 96% of the content

554 Id., slip op. at 10.

555 Maverick Recording Co. v. Harper, 598 F.3d 193, 197 (5th Cir. 2010).

556 Id. at 198-99.

557 Id. at 199.

558 2009 U.S. Dist. LEXIS 122661 (C.D. Cal. Dec. 21, 2009), aff’d, 710 F.3d 1020 (9th Cir. 2013).

559 Id. at *29.

560 Columbia Pictures Industries, Inc. v. Fung, 710 F.3d 1020, 1034 (9th Cir. 2013).

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“associated with” the torrent files available on Fung’s web sites was for confirmed or highly

likely copyright infringing material.561

(2) Cases Holding That Mere Posting Is Not a Distribution

In Religious Technology Center v. Netcom On-Line Communication Services,562 the

court refused to hold either an OSP or a BBS operator liable for violation of the public

distribution right based on the posting by an individual of infringing materials on the BBS. With

respect to the BBS, the court stated: “Only the subscriber should be liable for causing the

distribution of plaintiffs’ work, as the contributing actions of the BBS provider are automatic and

indiscriminate.”563 With respect to the OSP, the court noted: “It would be especially

inappropriate to hold liable a service that acts more like a conduit, in other words, one that does

not itself keep an archive of files for more than a short duration.”564

In In re Napster, Inc. Copyright Litigation,565 the district court rejected the plaintiffs’

argument that Napster’s indexing of MP3 files that its users posted on the Napster network made

Napster a direct infringer of the plaintiffs’ exclusive distribution rights. The plaintiffs relied on

Hotaling v. Church of Jesus Christ of Latter-Day Saints,566 which held a library engages in the

distribution of a copyrighted work when it adds the work to its collections, lists the work in its

index or catalog and makes the work available for borrowing or browsing. The Napster court

distinguished the Hotaling case, arguing that the library had itself made actual, unauthorized

copies of copyrighted materials made available to its borrowers. By contrast, Napster did not

itself have a “collection” of recordings on its servers, but rather merely an index of recordings.567

“This might constitute evidence that the listed works were available to Napster users, but it is

certainly not conclusive proof that the songs identified in the index were actually uploaded onto

the network in a manner that would be equivalent to the way in which the genealogical materials

at issue in Hotaling were copied and distributed to the church’s branch libraries.”568

The court further noted that the definition of “publication” in the copyright statute, which

the Supreme Court observed in a 1985 case that the legislative history equated with the right of

distribution,569 requires the distribution of copies or phonorecords of a work to the public or the

offering to distribute copies of that work for purposes of further distribution, public performance,

or public display. The court held that merely by indexing works available through its system,

561 Id.

562 907 F. Supp. 1361, 1372 (N.D. Cal. 1995).

563 Id. at 1372.

564Id.

565 377 F. Supp. 2d 796 (N.D. Cal. 2005).

566 118 F.3d 199 (4th Cir. 1997).

567 In re Napster, Inc. Copyright Litigation, 377 F. Supp. 2d at 802-03.

568 Id. at 803.

569 Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539 (1985).

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Napster was not offering to itself distribute copies of the works for further distribution by its

users.570

The plaintiffs argued that the requirement of a transmission of a material object in order

to find a violation of the distribution right was no longer viable in view of the recently enacted

Artists’ Rights and Theft Prevention Act of 2005 (the ART Act).571 The plaintiffs cited Section

103(a)(1)(C) of the ART Act, codified at 17 U.S.C. § 506(a), which provides criminal sanctions

for any person who willfully infringes a copyright by the distribution of a work being prepared

for commercial distribution, by making it available on a computer network accessible to

members of the public. The plaintiffs interpreted this provision as imposing criminal liability on

any person who willfully makes an unauthorized copy of a copyrighted work available on a

publicly accessible computer network while that work is being prepared for commercial

distribution, and argued that Congress must have understood civil liability for copyright

infringement to be equally broad.572

The court rejected this argument, noting that the ART Act did not amend Section 106(3)

of the copyright statute, and in any event Section 103(a)(1)(C) of the ART Act makes clear that

willful copyright infringement and making the work available on a computer network are

separate elements of the criminal offense. Hence, the mere making available of an unauthorized

work on a computer network should not be viewed as sufficient to establish a copyright

infringement.573 Accordingly, the court ruled that the defendants were entitled to summary

judgment on the issue of direct liability on Napster’s part by virtue of its index.574 However,

note that the Ninth Circuit’s earlier decision in Napster I held that “Napster users [as opposed to

Napster itself] who upload files names to the search index for others to copy violate plaintiff’s

distribution rights.”575

In Perfect 10 v. Google,576 discussed in detail in Section II.C.4 above, the district court

ruled that Google did not publicly distribute infringing copies of Perfect 10’s copyrighted images

that could be located through the Google Image Search function. “A distribution of a

570 In re Napster, Inc. Copyright Litigation, 377 F. Supp. 2d at 803-05.

571 Pub. L. No. 109-9, 119 Stat. 218 (2005).

572 In re Napster, Inc. Copyright Litigation, 377 F. Supp. 2d at 804.

573 Id. at 804-05.

574 Id. at 805. The court held, however, that the plaintiffs had submitted sufficient evidence of direct infringement

by Napster’s users in the form of a showing of massive uploading and downloading of unauthorized copies of

works, together with statistical evidence strongly suggesting that at least some of the plaintiffs’ copyrighted

works were among them. Id. at 806. “It may be true that the link between such statistical evidence of copyright

infringement and the uploading or downloading of specific copyrighted works is at the moment a weak one.

However, to avoid summary judgment, plaintiffs need only establish that triable issue of material fact preclude

entry of judgment as a matter of law. … Here in particular, the court is mindful of the fact that the parties have

not even completed discovery relating to issues of copyright ownership and infringement.” Id. at 806-07.

575 A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1014 (9th Cir. 2001).

576 416 F. Supp. 2d 828 (C.D. Cal. 2006), aff’d sub nom. Perfect 10 v. Amazon.com, Inc., 508 F.3d 1146, 1169 (9th

Cir. 2007).

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copyrighted work requires an ‘actual dissemination’ of copies. … In the internet context, an

actual dissemination means the transfer of a file from one computer to another. Although

Google frames and in-line links to third-party infringing websites, it is those websites, not

Google, that transfer the full-size images to users’ computers [upon clicking on a thumbnail

version of the image displayed in the Google search results]. Because Google is not involved in

the transfer, Google has not actually disseminated – and hence, [] has not distributed – the

infringing content.”577

On appeal, the Ninth Circuit affirmed this ruling. Because Google’s search engine

communicated only HTML instructions telling a user’s browser where to find full size images on

web site, and Google did not itself distribute copies of the infringing photographs, Google did

not have liability for infringement of the right of distribution with respect to full size images that

could be located and displayed through the Image Search function.578 Perfect 10 argued that,

under the Napster I and Hotaling cases discussed above, the mere making available of images

violates the copyright owner’s distribution right. The Ninth Circuit held that this “deemed

distribution” rule did not apply to Google, because, unlike the users of the Napster system or the

library in Hotaling, Google did not own a collection of stored full size images that it made

available to the public.579

In Latin American Music Co. v. Archdiocese of San Juan,580 although not a case

involving online activity, the First Circuit held that the defendant’s mere listing in its licensing

catalog of songs that it did not own the copyright for did not constitute infringement. The court

ruled that mere authorization of an infringing act is insufficient basis for copyright infringement,

as infringement depends upon whether an actual infringing act, such as copying or performing,

has taken place.581

In London-Sire Records, Inc. v. Doe 1,582 the court ruled that merely listing recordings as

available for downloading on a peer-to-peer service did not infringe the distribution right. The

court held that authorizing a distribution is sufficient to give rise to liability, but only if an

infringing act occurs after the authorization.583 The court rejected the plaintiff’s argument to the

contrary based on the Supreme Court’s equating of the term “distribute” with “publication” in

Harper & Row Publishers, Inc. v. Nation Enterprises.584 The court noted that the Supreme Court

stated only that Section 106(3) recognized for the first time a distinct statutory right of first

publication, and quoted the legislative history as establishing that Section 106(3) gives a

577 Id. at 844 (citing In re Napster, Inc. Copyright Litigation, 377 F. Supp. 2d 796, 802-04 (N.D. Cal. 2005)).

578 Perfect 10 v. Amazon.com, Inc., 508 F.3d 1146, 1162 (9th Cir. 2007).

579 Id. at 1162-63. Cf. National Car Rental Sys. v. Computer Assocs. Int’l, Inc., 991 F.2d 426, 434 (8th Cir. 1993)

(stating that infringement of the distribution right requires the actual dissemination of copies or phonorecords).

580 499 F.3d 32 (1st Cir. 2007).

581 Id. at 46-47.

582 542 F. Supp. 2d 153 (2008).

583 Id. at 166.

584 471 U.S. 539 (1985).

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copyright holder the right to control the first public distribution of an authorized copy of his

work.585 The court went on to state, however, “That is a far cry from squarely holding that

publication and distribution are congruent.”586

The court noted that the statutory language itself suggests the terms are not synonymous.

Noting that “publication” incorporates “distribution” as part of its definition (“publication” is

“the distribution of copies or phonorecords of a work to the public”), the court reasoned:

By the plain meaning of the statute, all “distributions … to the public” are

publications. But not all publications are distributions to the public – the statute

explicitly creates an additional category of publications that are not themselves

distributions. For example, suppose an author has a copy of her (as yet

unpublished) novel. If she sells that copy to a member of the public, it constitutes

both distribution and publication. If she merely offers to sell it to the same

member of the public, that is neither a distribution nor a publication. And if the

author offers to sell the manuscript to a publishing house “for purposes of further

distribution,” but does not actually do so, that is a publication but not a

distribution.587

Accordingly, the court concluded that the defendants could not be liable for violating the

plaintiffs’ distribution right unless a “distribution” actually occurred.588 But that conclusion, did

not, however, mean that the plaintiffs’ pleadings and evidence were insufficient: “The Court can

draw from the Complaint and the current record a reasonable inference in the plaintiffs’ favor –

that where the defendant has completed all the necessary steps for a public distribution, a

reasonable fact-finder may infer that the distribution actually took place.”589

The court also made the following additional rulings:

-- That the Section 106(3) distribution right is not limited to physical, tangible objects,

but also confers on copyright owners the right to control purely electronic distributions of their

work. The court reasoned that electronic files are “material objects” in which a sound recording

can be fixed, and electronic distributions entail the movement of such electronic files, thereby

implicating the distribution right.590

-- That actual downloads of the plaintiffs’ works made by the plaintiffs’ investigator

were “sufficient to allow a statistically reasonable inference that at least one copyrighted work

585 London-Sire, 542 F. Supp. 2d at 168.

586Id.

587 Id. at 169.

588Id.

589Id.

590 Id. at 169-71 & 172-74.

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was downloaded at least once [by persons other than the investigator]. That is sufficient to make

out a prima facie case for present purposes.”591

In Elektra Entertainment Group, Inc. v. Barker,592 contrary to the London-Sire Records

decision (which incidentally was decided on the same day), the court ruled that, based on the

legislative history of the copyright statute and the Supreme Court’s Harper & Row decision, the

words “distribution” and “publication” should be construed as synonymous, and therefore the

right of distribution should be equated to the right of publication.593 Accordingly, the court ruled

that the same acts that would constitute a publication as defined in Section 101 of the copyright

statute – namely, the “offer[] to distribute copies or phonorecords to a group of persons for

purposes of further distribution, public performance, or public display” – would also violate the

distribution right, and that proof of an actual transfer need not be shown.594

However, the court rejected the plaintiff’s argument that a violation of the distribution

right could be established by a mere showing of the “making available” of copyrighted works by

the defendant, as the plaintiffs had pled in their complaint. The court rejected the plaintiffs’

argument that Congress’ adoption of the WIPO Copyright Treaty, which contains an express

right of “making available” a copyrighted work to the public, should control the interpretation of

Section 106(3)’s distribution right. The court noted that, because the WIPO treaties were not

self-executing, they created no private right of action on their own. The court was also unwilling

to infer the intent of an earlier Congress when enacting amendments to the definition of the

distribution right from the acts of a later Congress in ratifying the WIPO Copyright Treaty.595

Accordingly, the court was unwilling to equate Congress’ words, that the distribution right may

be infringed by “[t]he offer[] to distribute copies or phonorecords to a group of person for

purposes of further distribution, public performance, or public display,” to what the court

described as “the contourless ‘make available’ right proposed by Plaintiff.”596

The court also rejected the argument in an amicus brief submitted by the MPAA that the

plaintiffs’ “make available” claim was supported by the introductory clause of Section 106,

which gives the owner of a copyright the exclusive right “to authorize” the enumerated rights.

The court cited and followed authority noting that Congress had added the “authorize” language

to Section 106 in order to avoid any confusion that the statute was meant to reach contributory

infringers, not to create a separate basis for direct infringement.597

591 Id. at 176. “As noted above, merely exposing music files to the internet is not copyright infringement. The

defendants may still argue that they did not know that logging onto the peer-to-peer network would allow others

to access these particular files, or contest the nature of the files, or present affirmative evidence rebutting the

statistical inference that downloads occurred.”Id.

592 551 F. Supp. 2d 234 (S.D.N.Y. 2008).

593 Id. at 239-41.

594 Id. at 242 (quoting 17 U.S.C. § 101’s definition of “publication”).

595 Id. at 242 n.7.

596 Id. at 243.

597 Id. at 245-46.

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The court did, however, give the plaintiffs the opportunity to amend their complaint to be

faithful to the language of the copyright statute by alleging that the defendant had made an offer

to distribute, and that the offer to distribute was for the purpose of further distribution, public

performance, or public display.598 In addition, the court denied the defendant’s motion to

dismiss the complaint entirely because the plaintiffs had adequately alleged that, in addition to

making their works available, the defendant had actually distributed the plaintiffs’ copyrighted

works in direct violation of the distribution right.599 In August of 2008 the case settled.600

In Atlantic Recording Corp. v. Howell,601 seven major recording companies brought suit

against the defendants, who had allegedly made over 4,000 files available for download in a

shared folder on Kazaa. The private investigation company MediaSentry took screen shots

showing the files that were available for download. The plaintiffs owned registered copyrights

in 54 of the sound recordings in the folder. MediaSentry downloaded 12 of the copyrighted

recordings from the defendants’ computer, and the plaintiffs traced the computer to the

defendants and filed an action for copyright infringement. The plaintiffs filed a motion for

summary judgment of infringement.602

The court denied the motion. Citing numerous decisions and two copyright treatises, the

court noted the general rule that infringement of the distribution right requires an actual

dissemination of either copies or phonorecords. The court rejected the plaintiffs’ reliance on the

Hotaling case and the Ninth Circuit’s Napster I decision. With respect to Hotaling, the court

noted that in that case the plaintiff had already proved that the library made unlawful copies and

placed them in its branch libraries, so there had been actual distributions of copies in addition to

listing of the unlawful copies in the library’s catalog. With respect to the Napster I decision, the

court noted that the Ninth Circuit in the later Perfect 10 v. Amazon case had grouped the

holdings of Hotaling and Napster I together based upon the factual similarity that in both cases

the owner of a collection of works made them available to the public. Only in such a situation

could the holding of Hotaling potentially apply to relieve the plaintiff of the burden to prove

actual dissemination of an unlawful copy of a work. The defendant in the Perfect 10 case did not

own a collection of copyrighted works or communicate them to the public, so the Ninth Circuit

found Hotaling inapplicable.603 The Howell court went on to note the following:

However, the court did hold that “the district court’s conclusion [that distribution

requires an ‘actual dissemination’] is consistent with the language of the

598 Id. at 244-45.

599 Id. at 245.

600 “RIAA Settles Pending ‘Making Available’ Claim,” BNA’s Electronic Commerce & Law Report (Aug. 27,

2008) at 1160.

601 554 F. Supp. 2d 976 (D. Ariz. 2008).

602 Id. at 978.

603 Id. at 981-82.

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Copyright Act.” That holding contradicts Hotaling and casts doubt on the single

unsupported line from Napster upon which the recording companies rely.604

After surveying the many decisions addressing the issue, the court concluded that it

agreed “with the great weight of authority that § 106(3) is not violated unless the defendant has

actually distributed an unauthorized copy of the work to a member of the public. … Merely

making an unauthorized copy of a copyrighted work available to the public does not violate a

copyright holder’s exclusive right of distribution.”605 In reaching its conclusion, the court

rejected the plaintiffs’ argument that “distribution” and “publication” are synonymous terms in

the statute for all purposes. Rather, the court noted it was not clear that “publication” and

“distribution” are synonymous outside the context of first publication, which was the subject of

discussion in the Supreme Court’s Harper & Row decision. Citing London-Sire, the court noted

that while all distributions to the public are publications, not all publications are distributions.606

The court concluded: “A plain reading of the statute indicates that a publication can be either a

distribution or an offer to distribute for the purposes of further distribution, but that a distribution

must involve a ‘sale or other transfer of ownership’ or a ‘rental, lease, or lending’ of a copy of

the work.”607

Finally, the court noted that the plaintiffs’ motion for summary judgment must also fail

because they had not proved that a Kazaa user who places a copyrighted work into the shared

folder distributes a copy of that work when a third party downloads it. The court noted that in

the Kazaa system the owner of the shared folder does not necessarily ever make or distribute an

unauthorized copy of the work. And if the owner of the shared folder simply provides a member

of the public with access to the work and the means to make an unauthorized copy, the owner

would not be liable as a primary infringer of the distribution right, but rather would be

potentially liable only as a secondary infringer of the reproduction right.608 The court therefore

concluded that the plaintiffs’ motion for summary judgment must fail because “they have not

explained the architecture of the KaZaA file-sharing system in enough detail to determine

conclusively whether the owner of the shared folder distributes an unauthorized copy (direct

violation of the distribution right), or simply provides a third-party with access and resources to

make a copy on their own (contributory violation of the reproduction right).”609

In Capitol Records Inc. v. Thomas,610 the court sua sponte raised the issue of whether it

had erred in instructing the jury that making sound recordings available for distribution on a

peer-to-peer network, regardless of whether actual distribution was shown, qualified as

604 Id. at 982 (quoting Perfect 10 v. Amazon.com, Inc., 487 F.3d 701, 718 (9th Cir. 2007) (superseded by 508 F.3d

1146 (9th Cir. 2007)).

605 554 F. Supp. 2d at 983.

606 Id. at 984.

607 Id. at 985.

608 Id. at 986.

609Id.

610 579 F. Supp. 2d 1210 (D. Minn. 2008).

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distribution under the copyright act. The court concluded that it had erred and ordered a new

trial for the defendant.611 The parties agreed that the only evidence of actual dissemination of

copyrighted works was that plaintiffs’ infringement policing agent, MediaSentry, had

downloaded songs. The defendant argued that dissemination to an investigator acting as an

agent for the copyright owner cannot constitute infringement. The court rejected this argument,

noting that Eighth Circuit precedent clearly approved of the use of investigators by copyright

owners, and distribution to an investigator can constitute infringement.612

The court then turned to the issue of whether merely making available recordings for

download constitutes unauthorized distribution. The court first noted that the plain language of

Section 106(3) does not state that making a work available for sale, transfer, rental, lease or

lending constitutes distribution, and two leading copyright treatises (Nimmer and Patry) agree

that making a work available is insufficient to establish distribution. Congress’ choice not to

include offers to do the acts enumerated in Section 106(3) further indicated its intent that an

actual distribution or dissemination is required by Section 106(3).613

The court rejected the holding of other courts that the definition of “distribution” should

be taken to be the same as that of “publication,” noting that the legislative history does not

expressly state that distribution should be given the same broad meaning as publication, and in

any case, even if the legislative history indicated that some members of Congress equated

publication with distribution under Section 106(3), that fact could not override the plain meaning

of the statute. The court concluded that the statutory definition of publication is broader than the

term “distribution” as used in Section 106(3). Specifically, under the definition in Section 101, a

publication can occur by means of the distribution of copies of a work to the public, but it can

also occur by offering to distribute copies to a group of persons for purposes of further

distribution, public performance, or public display. Thus, while a publication effected by

distributing copies of the work is a distribution, a publication effected by merely offering to

distribute copies to the public is merely an offer of distribution, an actual distribution.614

The court rejected the plaintiffs’ argument that Section 106 affords an exclusive right to

authorize distribution (based on Section 106’s language that “the owner of copyright under this

title has the exclusive rights to do and to authorize any of the following …”) and that making

sound recordings available on a peer-to-peer network would violate such an authorization right.

The court concluded that the authorization clause merely provides a statutory foundation for

secondary liability, not a means of expanding the scope of direct infringement liability. The

court reasoned that if simply making a copyrighted work available to the public constituted a

distribution, even if no member of the public ever accessed that work, copyright owners would

611 Id. at 1212 & 1227. The instruction to the jury read: “The act of making copyrighted sound recordings

available for electronic distribution on a peer-to-peer network, without license from the copyright owners,

violates the copyright owners’ exclusive right of distribution, regardless of whether actual distribution has been

shown.” Id. at 1212.

612 Id. at 1214-15.

613 Id. at 1217-18.

614 Id. at 1219-20.

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be able to make an end run around the standards for assessing contributory copyright

infringement.615

Finally, the court rejected the arguments of the plaintiffs and various amici that the WIPO

treaties require the U.S. to provide a making-available right and that right should therefore be

read into Section 106(3). The court noted that the WIPO treaties are not self-executing and lack

any binding legal authority separate from their implementation through the copyright act. The

contents of the WIPO treaties would be relevant only insofar as Section 106(3) was ambiguous,

and there was no reasonable interpretation of Section 106(3) that would align with the United

States’ treaty obligations. Concern for compliance with the WIPO treaties could not override the

clear congressional intent in the language of Section 106(3).616

The defendant in this case, Jammie Thomas-Rasset, ultimately became the first peer-topeer

file sharer to defend infringement litigation all the way to a jury verdict. In July 2007, a

jury concluded that she should pay $220,000 in statutory damages, but she was granted a motion

for a new trial based on the erroneous jury instruction discussed above. In the second trial, the

jury returned a verdict for $1.92 million. The court later reduced the award to $54,000 but

granted the plaintiffs’ request for a new trial on damages. After a third trial, the jury again

returned a special verdict that included a statutory damages award of $1.5 million ($62,500 for

each shared song, multiplied by 24 songs).617

(3) Cases Refusing To Decide the Issue

In Arista Records LLC v. Does 1-16,618 several record labels brought a copyright

infringement claim against 16 unidentified defendants for illegally downloading and distributing

the plaintiffs’ copyrighted music through a peer-to-peer network and issued a subpoena seeking

information from the State University of New York at Albany sufficient to identify each

defendant. The defendants sought to quash the subpoena, in part on the basis that the plaintiffs’

complaint was defective in that, in essence, according to the defendants, it alleged that the

defendants were infringers because they were making available copyrighted song files, but

without any evidence of actual distribution of those files to the public. The court refused to

decide whether the mere “making available” of song files would be sufficient to violate the

distribution right because the complaint did not use that language, but rather alleged that each

defendant downloaded and/or distributed to the public copies of sound recordings.619 “We are

persuaded by the majority of cases and the school of thought that Plaintiffs have adequately pled

that Defendants distributed Plaintiffs’ copyrighted work, by merely stating, within the four

corners of the Complaint, the distribution allegation alone. The tasks of pleading and proving

615 Id. at 1220-21.

616 Id. at 1225-26.

617 “On Third Shot, Jury Returns $1.5 Million Statutory Damages Verdict Against P2P User,” BNA’s Electronic

Commerce & Law Report (Nov. 10, 2010) at 1692.

618 2009 U.S. Dist. LEXIS 12159 (N.D.N.Y. Feb. 18, 2009).

619 Id. at *15-16.

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that each Defendant actually distributed the copyright work do not necessarily collide at this

juncture of the case, and dismissal of the Complaint would not be appropriate at this stage.”620

2. The Requirement of a “Public” Distribution

Unlike the case of the public performance and public display rights, the copyright statute

does not define what constitutes a “public” distribution. However, one might expect courts to

afford a similarly broad interpretation of “public” with respect to the right of public distribution.

Some distributions will clearly be “public,” such as the posting of material on a Usenet

newsgroup, and some will clearly not, such as sending e-mail to a single individual. Many other

Internet distributions will fall in between. However, one might expect courts to treat distribution

to members of the public by Internet access at different times and places as nevertheless

“public,” by analogy to the public performance and public display rights.

As previously discussed with respect to the public display right, the court in Playboy

Enterprises, Inc. v. Hardenburgh,621 held the defendant operators of a BBS directly liable for

infringement of the public distribution right by virtue of making available photographs to

subscribers of the BBS for a fee, many of which were copyrighted photographs of the plaintiff

Playboy Enterprises. The court’s basis for finding liability was derived principally from the fact

that the defendants had a policy of encouraging subscribers to contribute files, including adult

photographs, to an “upload file” on the BBS and the defendants’ practice of using a screening

procedure in which its employees screened all files in the upload file to remove pornographic

material and moved them into the generally available files for subscribers. These facts led the

court to conclude that the defendants were active participants in the process of copyright

infringement.

With respect to the requirement that the distributions be “to the public” in order to

infringe the distribution right, the court ruled that “Defendants disseminated unlawful copies of

[the plaintiff’s] photographs to the public by adopting a policy in which [the defendants’]

employees moved those copies to the generally available files instead of discarding them.”622

The court also concluded that the defendants were liable for contributory infringement by virtue

of their encouraging of subscribers to upload information to the BBS with at least constructive

knowledge that infringing activity was likely to be occurring on their BBS.623

3. The Requirement of a Rental or Transfer of Ownership

The public distribution right requires that there have been either a rental or a transfer of

ownership of a copy. If material is distributed free, as much of it is on the Internet, there is no

sale, rental, or lease, and it is therefore unclear whether a sale or a “transfer of ownership” has

taken place. With respect to distributions in which the recipient receives a complete copy of the

620 Id. at *16-17.

621 982 F. Supp. 503 (N.D. Ohio 1997).

622 Id. at 513.

623 Id. at 514.

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work on the recipient’s computer, perhaps a “transfer of ownership” should be deemed to have

taken place, since the recipient has control over the received copy.

It is unclear precisely what a “rental” means on the Internet. For example, is a download

of an on-demand movie a “rental”? In a sense, the user pays a “rental” fee to watch the movie

only once. However, the downloaded bits of information comprising the movie are never

“returned” to the owner, as in the case of the usual rental of a copy of a work. These unanswered

questions lend uncertainty to the scope of the distribution right on the Internet.

4. The Right of Distribution Under the WIPO Treaties

Article 6 of the WIPO Copyright Treaty provides that authors of literary and artistic

works shall enjoy “the exclusive right of authorizing the making available to the public of the

original and copies of their works through sale or other transfer of ownership.” This right seems

potentially broader than the public distribution right under current U.S. law, because it includes

the mere “making available” of copies of works to the public, whereas U.S. law currently reaches

only the actual distribution of copies.

It is unclear whether this “making available” right reaches the mere posting of copies on

the Internet. The Agreed Statement for Article 6 provides: “As used in these Articles, the

expressions ‘copies’ and ‘original and copies,’ being subject to the right of distribution and the

right of rental under the said Articles, refer exclusively to fixed copies that can be put into

circulation as tangible objects.” One interpretation of the Agreed Statement is that a copy posted

on the Internet, being electronic in format, is not capable of being “put into circulation as

tangible objects.”

On the other hand, one might argue that at least complete copies downloaded to

permanent storage at recipient computers should be treated as the equivalent of circulation of

copies “as tangible objects.” If, for example, copies of a book were sold on floppy disks rather

than on paper, such floppy disks might well be treated as the placement of copies into circulation

as tangible objects. Yet a network download can result in a copy on a floppy disk (or a hard

disk) at the recipient’s computer. One could therefore argue that the transmission of electronic

copies to “physical” storage media at the receiving end should be treated as within the

distribution right of the WIPO treaty.

In any event, this “making available” right might more easily reach BBS operators and

OSPs through which works are “made available” on the Internet. It is unclear whether a

requirement of volition will be read into Article 6 for liability, as some U.S. courts have required

for liability under the current rights of public distribution, display and performance. Moreover,

because the WIPO Copyright Treaty does not define the “public,” the same ambiguities will arise

as under current U.S. law concerning what type of availability will be sufficient to be “public,”

particularly with respect to the “making available” of works to limited audiences.

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Articles 8 and 12 of the WIPO Performances and Phonograms Treaty contain rights of

distribution very similar to that of Article 6 of the WIPO Copyright Treaty,624 so the same

ambiguities noted above will arise.

5. The Right of Distribution Under WIPO Implementing Legislation

(a) United States Legislation

The DMCA does not contain any provisions that would modify the right of distribution as

it exists under current United States law. Thus, the DMCA implicitly deems the current right of

public distribution to be equivalent to the Article 6 right.

(b) The European Copyright Directive

Article 4(1) of the European Copyright Directive requires member states to “provide for

authors, in respect of the original of their works or of copies thereof, the exclusive right to

authorize or prohibit any form of distribution to the public by sale or otherwise.” Use of the

phrase “any form” of distribution suggests that a broad right is intended, although, as in the

United States, the right applies only with respect to the distribution of “copies.”625 Consistent

with the Agreed Statement of the WIPO Copyright Treaty, the comments to Article 4(1) of the

European Copyright Directive recite that “the expressions ‘copies’ and ‘originals and copies,’

being subject to the distribution right, refer exclusively to fixed copies that can be put into

circulation as tangible objects.”626

Thus, although use of the phrase “any form” of distribution might suggest that all online

transmissions of copyrighted works would fall within the distribution right of the European

Copyright Directive, the comments limit the distribution right “to fixed copies that can be put

into circulation as tangible objects.” It seems that the drafters of the European Copyright

Directive intended the right of communication to the public, rather than the right of distribution,

to cover online transmissions of copyrighted works, for Recital (23) states that the right of

communication to the public “should be understood in a broad sense covering all communication

to the public not present at the place where the communication originates. This right should

624 Article 8(1) provides, “Performers shall enjoy the exclusive right of authorizing the making available to the

public of the original and copies of their performances fixed in phonograms through sale or other transfer of

ownership.” Article 12(1) provides, “Producers of phonograms shall enjoy the exclusive right of authorizing

the making available to the public of the original and copies of their phonograms through sale or other transfer

of ownership.”

Like the Agreed Statement for the WIPO Copyright Treaty quoted in the text, the Agreed Statement for Articles

8 and 12 of the WIPO Performances and Phonograms Treaty provides: “As used in these Articles, the

expressions ‘copies’ and ‘original and copies,’ being subject to the right of distribution and the right of rental

under the said Articles, refer exclusively to fixed copies that can be put into circulation as tangible objects.”

625 Art. 4(2) deals with exhaustion of the distribution right under the first sale doctrine, and will be discussed in

Section III.F below.

626 Commentary to Art. 4, ¶ 1.

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cover any such transmission or retransmission of a work to the public by wire or wireless means,

including broadcasting. This right should not cover any other acts.”

E. The Right of Importation

Section 602(a) of the copyright statute provides that “importation into the United States

... of copies or phonorecords of a work that have been acquired outside the United States is an

infringement of the exclusive right to distribute copies ....” One purpose of Section 602(a) was

to allow a copyright owner to prevent distribution into the United States of copies of works that,

if made in the United States, would have been infringing, but were made abroad outside the

reach of United States copyright law.

Section 602(a) was obviously drafted with a model of physical copies in mind.

“Importation” is not defined in the copyright statute, but the requirement that copies of a work be

“acquired outside the United States” might suggest that “importation” means the movement of

physical copies into the United States.627 It is unclear how this right will be applied to Internet

transmissions into the United States, with respect to which no physical copies in a traditional

sense are moved across national borders. Because the NII White Paper takes the position that the

stream of data sent during a transmission does not constitute a “copy” of a copyrighted work, the

NII White Paper concludes that the Section 602(a) importation right does not apply to network

transmissions into the United States,628 and recommends that Section 602 be amended to include

importation by transmission of copies, as well as by carriage or shipping of them.629

However, because physical copies often end up on a computer in the United States as a

result of network transmissions into the United States, it is possible that the importation right will

be construed analogously to the distribution right with respect to transmissions, especially since

the importation right is defined in Section 602(a) in terms of the distribution right. Thus, if a

transmission is deemed to be within the distribution right, then it is possible that the importation

right will be construed to apply when transmissions of copies are made into the United States

from abroad.

In any event, the new right of communication to the public afforded under the WIPO

treaties, discussed in the next section, could help plug any hole that may exist in the traditional

importation right, at least with respect to transmissions into the United States that qualify as

“communications to the public,” if the such right is adopted in implementing legislation (as

noted in the next section, however, the DMCA does not contain an explicit right of

communication to the public).

627 Lemley, supra note 6, at 564.

628 NII White Paper at 68.

629 Id. at 135.

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F. The New Right of Transmission and Access Under the WIPO Treaties

The WIPO treaties each afford a broad new right of transmission and access to a

copyrighted work. The right is denominated a “right of communication to the public” in the

WIPO Copyright Treaty, and is denominated a “right of making available to the public” in the

WIPO Performances and Phonograms Treaty. Despite the difference in denomination, the rights

appear to be very similar.

1. The Right of Communication to the Public in the WIPO Copyright

Treaty

Article 8 of the WIPO Copyright Treaty provides a new right of “communication to the

public” as follows:

Without prejudice to the provisions of Articles 11(1)(ii), 11bis(1)(i) and (ii),

11ter(1)(ii), 14(1)(ii) and 14bis(1) of the Berne Convention, authors of literary

and artistic works shall enjoy the exclusive right of authorizing any

communication to the public of their works, by wire or wireless means, including

the making available to the public of their works in such a way that members of

the public may access these works from a place and at a time individually chosen

by them.

This new extended right of communication to the public is clearly meant to cover online

dissemination of works, and in that sense is broader than the existing rights of communication to

the public in the Berne Convention, which are confined to performances, broadcasts, and

recitations of works. Specifically, Article 11(1)(ii) of the Berne Convention provides that

authors of dramatic, dramatico-musical and musical works shall enjoy the exclusive right of

authorizing “any communication to the public of the performance of their works.” Article

11bis(1)(ii) provides that authors of literary and artistic works shall enjoy the exclusive right of

authorizing “any communication to the public by wire or by rebroadcasting of the broadcast of

the work, when this communication is made by an organization other than the original one.”

Finally, Article 11ter(1)(ii) provides that authors of literary works shall enjoy the exclusive right

of authorizing “any communication to the public of the recitation of their works.”

The new right of communication to the public in the WIPO Copyright Treaty appears to

be broader than the existing rights of reproduction, display, performance, distribution, and

importation under current United States law in the following ways:

• No Requirement of a Copy. The right does not require the making or distribution of

“copies” of a work. It therefore removes the potential limitations on the rights of

reproduction and distribution under United States law stemming from the requirement

of a “copy.”

• Right of Transmission. It affords the exclusive right to control any “communication

to the public” of a work “by wire or wireless means.” Although “communication” is

not defined in the WIPO Copyright Treaty, the reference to a communication “by

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wire or wireless means” seems clearly applicable to electronic transmissions of works

(a right of transmission). This conclusion is bolstered by the fact that Article 2(g) of

the WIPO Performances and Phonograms Treaty does contain a definition of

“communication to the public,” which is defined in terms of “transmission to the

public by any medium, other than broadcasting.”630 This transmission right will

potentially site the infringement at the place of transmission, in addition to the point

of receipt of a transmitted work (under the reproduction right).

• Right of Authorization. It also affords the exclusive right of “authorizing” any

communication to the public. No actual communications to the public are apparently

necessary to infringe the right.

• Right of Access. The right of authorizing communications to the public explicitly

includes “making available to the public” a work “in such a way that members of the

public may access” the work “from a place and a time individually chosen by them”

(a right of access).631 This access right would seem to allow the copyright holder to

remove an infringing posting of a work prior to any downloading of that work. This

right may also expand potential liability beyond just posters or recipients of infringing

material on the Internet to include OSPs and BBS operators, who could be said to

make a work available to the public in such a way that members of the public may

access it.

The Agreed Statement for Article 8, however, appears aimed at limiting the breadth of

the net of potential liability that Article 8 might establish. The Agreed Statement provides: “It is

understood that the mere provision of physical facilities for enabling or making a communication

does not in itself amount to communication within the meaning of this Treaty or the Berne

Convention. It is further understood that nothing in Article 8 precludes a Contracting Party from

applying Article 11bis(2).” It is unclear who the “mere” provider of “physical facilities” was

meant to reference – only the provider of telecommunications lines (such as phone companies)

through which a work is transmitted, or other service providers such as OSPs or BBS operators,

who may provide “services” in addition to “facilities.”

Another unclear point with respect to the scope of the right of communication to the

public is who the “public” is. Neither the WIPO Copyright Treaty nor the European Copyright

Directive provide any explanation of “to the public,” although the Commission in its 1997

commentary to one of the earlier drafts of the Directive stated that “public” included “individual

630 Article 2(f) of the WIPO Performances and Phonograms Treaty defines “broadcasting” to mean “the

transmission by wireless means for public reception of sounds or of images and sounds or of the representations

thereof ....” This definition seems to contemplate isochronous transmission.

631 Although “public” is not defined in the WIPO Copyright Treaty, the reference in Article 10 to access by

members of the public “from a place and at a time individually chosen by them” is very similar to the definition

of display or performance of a work “publicly” in Section 101 of the U.S. copyright statute, which applies

“whether the members of the public capable of receiving the performance or display receive it in the same place

or in separate places and at the same time or at different times.”

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members of the public,” but went on to state that “the provision does not cover mere private

communications.”632

The right of transmission and access under Article 8 of the WIPO Copyright Treaty is

similar to (and potentially broader than) the amendment to U.S. copyright law proposed in the

NII White Paper “to expressly recognize that copies or phonorecords of works can be distributed

to the public by transmission, and that such transmissions fall within the exclusive distribution

right of the copyright owner.”633 The NII White Paper’s proposal would expand the distribution

right, as opposed to creating a wholly new right, as the WIPO Copyright Treaty does. The

amendment proposed by the NII White Paper proved to be very controversial, and implementing

legislation introduced in Congress in 1996 ultimately did not win passage.

2. The Right of Making Available to the Public in the WIPO Performances

and Phonograms Treaty

Articles 10 and 14 of the WIPO Performances and Phonograms Treaty grant analogous

rights for performers and producers of phonograms to the right of “communication to the public”

contained in Article 8 of the WIPO Copyright Treaty. The WIPO Performances and

Phonograms Treaty, however, casts these rights as ones of “making available to the public.”

Specifically, Article 10 of the WIPO Performances and Phonograms Treaty provides:

Performers shall enjoy the exclusive right of authorizing the making available to

the public of their performances fixed in phonograms, by wire or wireless means,

in such a way that members of the public may access them from a place and at a

time individually chosen by them.

Thus, Article 10 provides an exclusive right with respect to analog and digital on-demand

transmission of fixed performances.634

Similarly, Article 14 provides:

Producers of phonograms shall enjoy the exclusive right of authorizing the

making available to the public of their phonograms, by wire or wireless means, in

such a way that members of the public may access them from a place and at a

time individually chosen by them.

632 Harrington & Berking, supra note 244, at 4.

633 NII White Paper at 130.

634 Rebecca F. Martin, “The WIPO Performances and Phonograms Treaty: Will the U.S. Whistle a New Tune?”, J.

Copyright Soc’y U.S.A., Spring 1997, at 157, 178. Art. 8 provides a correlative distribution right with respect

to more traditional forms of distribution: “Performers shall enjoy the exclusive right of authorizing the making

available to the public of the original and copies of their performances fixed in phonograms through sale or

other transfer of ownership.” The WIPO Performances and Phonograms Treaty also grants to authors in Art. 6

the exclusive right of authorizing “the broadcasting and communication to the public of their unfixed

performances except where the performance is already a broadcast performance” as well as “the fixation of their

unfixed performances.”

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No Agreed Statements pertaining to Articles 10 and 14 were issued.

Article 2(b) of the WIPO Performances and Phonograms Treaty defines a “phonogram”

to mean “the fixation of the sounds of a performance or of other sounds, or of a representation of

sounds other than in the form of a fixation incorporated in a cinematographic or other

audiovisual work.” Article 2(c) defines “fixation” broadly as “the embodiment of sounds, or of

the representations thereof, from which they can be perceived, reproduced or communicated

through a device.” Under this definition, storage of sounds on a computer would constitute a

“fixation,” and the fixed copy of such sounds would therefore constitute a “phonogram.”

Accordingly, the making available to the public of sounds stored on a computer would seem to

fall within the access rights of Articles 10 and 14.

Because there were no Agreed Statements generated in conjunction with Sections 10 and

14 of the WIPO Performances and Phonograms Treaty, there is no Agreed Statement similar to

that accompanying Article 8 in the WIPO Copyright Treaty for limiting liability for the mere

provision of physical facilities for enabling or making transmissions. Accordingly, one will have

to await the implementing legislation in the various countries to know how broadly the rights set

up in Articles 10 and 14 will be codified into copyright laws throughout the world.

3. The Right of Transmission and Access Under WIPO Implementing

Legislation

(a) United States Legislation

The DMCA does not contain any express implementation of a right of “communication

to the public” or of “making available to the public.” In view of this, the uncertainties discussed

previously concerning whether the mere transmission or access of a copyrighted work through an

online medium falls within existing United States rights of reproduction, distribution, public

display, or public performance remain under the DMCA.

With respect to the Article 10 right of making available to the public of fixed

performances, the recently enacted Digital Performance Rights in Sound Recordings Act grants

these rights for digital transmissions, although not for analog transmissions.635 However,

because the WIPO Performances and Phonograms Treaty grants these rights with respect to both

digital and analog transmissions, as well as with respect to spoken or other sounds in addition to

musical works, it would seem that the United States might have to amend its copyright laws to

comply with the requirements of Article 10.636

Although the DMCA does not contain any express rights of transmission or access, recent

case law suggests that courts may interpret existing copyright rights to afford the equivalent of a

right of transmission and access. For example, in the recent case of Marobie-FL, Inc. v. National

Association of Fire Equipment Distributors,637 discussed previously, the court concluded that the

635 17 U.S.C. § 106 (6).

636 Martin, supra note 634, at 178-79.

637 45 U.S.P.Q.2d 1236 (N.D. Ill. 1997).

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mere making available of the files for downloading was sufficient for liability, because “once the

files were uploaded [onto the Web server], they were available for downloading by Internet users

and … the [OSP] server transmitted the files to some Internet users when requested.”638 From

this statement, it appears that the court construed the distribution and public display rights to

cover both the making available of the clip art to the public on the Web page (a right of access),

as well as subsequent downloads by users (a right of transmission).

(b) The European Copyright Directive

The European Copyright Directive explicitly adopts both the right of communication to

the public of copyrighted works and the right of making available to the public of fixed

performances, by wire or wireless means, in language that parallels that of the WIPO Copyright

Treaty and the WIPO Performances and Phonograms Treaty. Specifically, Article 3(1) of the

European Copyright Directive provides the following with respect to copyrighted works:

Member States shall provide authors with the exclusive right to authorize or

prohibit any communication to the public of their works, by wire or wireless

means, including the making available to the public of their works in such a way

that members of the public may access them from a place and at a time

individually chosen by them.

The comments to Article 3 define “communication to the public” to cover “any means or

process other than the distribution of physical copies. This includes communication by wire or

by wireless means,”639 which clearly encompasses a right of transmission. Indeed, the comments

explicitly note: “One of the main objectives of the provision is to make it clear that interactive

‘on-demand’ acts of transmissions are covered by this right.”640 This theme is picked up in

Recital (25) of the European Copyright Directive, which states, “It should be made clear that all

rightholders recognized by this Directive should have an exclusive right to make available to the

public copyright works or any other subject-matter by way of interactive on-demand

transmissions. Such interactive on-demand transmissions are characterized by the fact that

members of the public may access them from a place and at a time individually chosen by them.”

Recital (27), however, echoes similar statements in the WIPO Copyright Treaty when it states

that the “mere provision of physical facilities for enabling or making a communication does not

in itself amount to communication within the meaning of this Directive.” The Recitals do not

clear up the ambiguity previously noted in the WIPO Treaty as to who the “mere” provider of

“physical facilities” was meant to reference – only the provider of telecommunications lines

(such as phone companies) through which a work is transmitted, or other service providers such

as OSPs or BBS operators.

The comments to the European Copyright Directive also make clear that Article 3(1)

affords a right to control online access to a work, apart from actual transmissions of the work:

638 Id. at *12.

639 Commentary to Art. 3, ¶ 1.

640 Id. ¶ 2.

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As was stressed during the WIPO Diplomatic Conference, the critical act is the

“making available of the work to the public,” thus the offering a work on a

publicly accessible site, which precedes the stage of its actual “on-demand

transmission.” It is not relevant whether it actually has been retrieved by any

person or not. The “public” consists of individual “members of the public.”641

Similarly, Article 3(2) of the European Copyright Directive affords a right of making

available to the public of fixed performances by wire or wireless means:

Member States shall provide for the exclusive right to authorize or prohibit the

making available to the public, by wire or wireless means, in such a way that

members of the public may access them from a place and at a time individually

chosen by them:

(a) for performers, of fixations of their performances;

(b) for phonogram producers, of their phonograms;

(c) for the producers of the first fixation of films, of the original and

copies of their films;

(d) for broadcasting organizations, of fixations of their broadcasts,

whether these broadcasts are transmitted by wire or over the air, including by

cable or satellite.

The right of Article 3(2) of the European Copyright Directive is actually broader than the

right required under Article 10 of the WIPO Performances and Phonograms Treaty. The Article

10 right of making available to the public applies only to performances fixed in “phonograms,”

which Article 2 defines to mean the fixation of the “sounds of a performance or of other sounds

other than in the form of a fixation incorporated in a cinematographic or other audiovisual

work.” The Article 3(2) right of the European Copyright Directive goes further, covering fixed

performances of audiovisual material as well. The comments to Article 3(2) of the European

Copyright Directive justify this extension of the right on the ground that audiovisual productions

or multimedia products are as likely to be available online as are sound recordings.642

In sum, the European Copyright Directive explicitly grants a right of transmission and

access to copyrighted works and fixed performances, whereas the DMCA does not. It remains to

be seen how broadly these rights mandated under the European Copyright Directive will be

adopted in implementing legislation in EC member countries. However, this disparity between

the express rights afforded under United States law and the European Copyright Directive raises

considerable potential uncertainty. First, at a minimum, use of different language to denominate

the various rights among countries may breed confusion. Second, differences of scope of the

rights of transmission and access are likely to arise between the United States and the EC by

641Id.

642 Id. ¶ 3.

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virtue of the fact that these rights are spelled out as separate rights in the EC, whereas, if they

exist at all, they are subsumed under a collection of various other rights in the United States.

Adding further to the potential confusion is the possibility that some EC member countries may

adopt these rights expressly, as mandated by the European Copyright Directive, whereas other

countries may, like the United States, deem them to be subsumed in other rights already afforded

under that country’s laws.

Because online transmissions through the Internet are inherently global, these disparities

raise the possibility that rights of varying scope will apply to an online transmission as it travels

through computers in various countries on the way to its ultimate destination. Similarly, legal

rights of varying scope may apply depending upon in which country a work is actually first

accessed. Given the ubiquitous nature of caching on the Internet, the site of the access may be

arbitrary from a technical point of view, but significant from a legal point of view. Such a

situation would not afford the international uniformity that the WIPO treaties seek to establish.

G. New Rights and Provisions Under The Digital Millennium Copyright Act, the

European Copyright Directive & Legislation That Did Not Pass

This Section discusses a number of new rights and provisions related to various areas of

copyright law that are contained in the DMCA and the European Copyright Directive. In

addition, this Section discusses a number of interesting rights and provisions concerning

copyright in the online context that were contained in proposed legislation that did not pass

Congress. These provisions are indicators of areas where future legislation and/or debate may

arise.

1. Circumvention of Technological Measures and Rights Management

Information Under the DMCA

Both the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty

require signatories to establish certain obligations with respect to circumvention of technological

measures to protect copyrighted works and the preservation and use of certain “rights

management information.”

With respect to the circumvention of technological measures, Article 11 of the WIPO

Copyright Treaty and Article 18 of the WIPO Performances and Phonograms Treaty require

treaty signatories to “provide adequate legal protection and effective legal remedies against the

circumvention of effective technological measures” that are used by authors, performers and

producers of phonograms to restrict acts with respect to their copyrighted works that are not

authorized by the rights holders or permitted by law.643

643 Shortly after the WIPO treaties were adopted, Assistant Secretary of Commerce and Commissioner of Patents

and Trademarks Bruce Lehman, who headed the U.S. delegation at the WIPO Conference, noted that this

provision is somewhat broader than the statutory language proposed on the subject in Congress before adoption

of the treaties. He noted that implementation of this treaty provision would therefore require new legislation.

“WIPO Delegates Agree on Two Treaties,” BNA’s Electronic Information Policy & Law Report (Jan. 3, 1997)

at 23.

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With respect to the preservation and use of rights management information, Article 12 of

the WIPO Copyright Treaty and Article 19 of the WIPO Performances and Phonograms Treaty

require treaty signatories to provide adequate and effective legal remedies against any person

performing any of the following acts knowing (or, with respect to civil remedies, having

reasonable grounds to know) “that it will induce, enable, facilitate or conceal an infringement of

any right covered by this Treaty or the Berne Convention”: (i) removing or altering any

electronic rights management information without authority or (ii) distributing, importing for

distribution, broadcasting or communicating to the public, without authority, copies of works

knowing that electronic rights management information has been removed or altered without

authority. The treaties define “rights management information” as “information which identifies

the work, the author of the work, the owner of any right in the work, or information about the

terms and conditions of use of the work, and any numbers or codes that represent such

information, when any of these items of information is attached to a copy of a work or appears in

connection with the communication of a work to the public.”

This subsection 1 discusses the implementation of these rights in the DMCA. The

following subsection 2 discusses the implementation of these rights under the European

Copyright Directive.

The four bills that were introduced in Congress to implement the WIPO treaties adopted

one of two approaches to the circumvention of technological measures and rights management

information. The first approach, contained in H.R. 2281 and S. 2037 and ultimately adopted in

the DMCA, outlawed both conduct and devices directed toward or used for circumventing

technological copyright protection mechanisms. The second approach, contained in S. 1146 and

H.R. 3048 but not passed by Congress, outlawed only conduct involving the removal or

deactivation of technological protection measures. Although Bruce Lehman conceded that the

WIPO treaties do not mandate adoption of a device-based approach, he and other supporters of

this approach argued that a conduct-only approach would be difficult to enforce and that

meaningful legislation should control the devices used for circumvention.644

The DMCA adds several new provisions to the Copyright Act, which are contained in a

new Chapter 12.

(a) Circumvention of Technological Protection Measures

(1) Prohibition on Conduct

Section 1201(a)(1) of the DMCA outlaws conduct to circumvent protection mechanisms

that control access to a copyrighted work: “No person shall circumvent a technological measure

that effectively controls access to a work protected under this title.” Note that this provision

does not expressly require either knowledge or intent, and is therefore potentially very broad in

its reach – the language states that the mere act of circumvention is a violation, and does not

expressly require that an infringement follow the circumvention act (although some courts have

644 Cunard & Coplan, “WIPO Treaty Implementation: Debate Over OSP Liability,” Computer Law Strategist (Oct.

1997) 1, 3.

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grafted such a requirement as discussed below). Section 1201(a)(3) defines “circumvent a

technological measure” as “to descramble a scrambled work, to decrypt an encrypted work, or

otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the

authority of the copyright owner.” That section further provides that a technological protection

measure “effectively controls access to a work” if “the measure, in the ordinary course of its

operation, requires the application of information, or a process or a treatment, with the authority

of the copyright owner, to gain access to the work.”

Section 1201(a)(1) provides that the prohibition on circumventing a technological

measure to gain unauthorized access to a work does not take effect until the end of a two-year

period beginning on the date of enactment of the bill – the two year waiting period expired on

October 28, 2000, and the prohibition is now in effect.

(i) Exemptions Adopted by the Librarian of Congress

Section 1201(a)(1) requires the Librarian of Congress, upon recommendation of the

Register of Copyrights and in consultation with the Assistant Secretary of Commerce for

Communications and Information, to conduct a rulemaking645 during the initial two-year period,

and during each succeeding three-year period, to determine whether certain types of users of

copyrighted works are, or are likely to be, adversely affected by the prohibition in Section

1201(a)(1).646 The Librarian must publish a list of particular classes of copyrighted works for

which the rulemaking determines that noninfringing uses have been, or are likely to be, adversely

affected, and the prohibitions of Section 1201(a) shall not apply to such users with respect to

such class of works for the ensuing three-year period.

The Exemptions of 2000. On Oct. 27, 2000, the Copyright Office published the first set

of classes of copyrighted works that the Librarian of Congress determined would be exempt from

the anti-circumvention provisions of Section 1201(a)(1), with the exemption to be in effect until

Oct. 28, 2003.647 Those classes, which were only two in number and very narrowly defined,

were as follows:

1. Compilations consisting of lists of websites blocked by filtering software and

applications. The Librarian determined that an exemption was necessary to avoid an adverse

effect on persons who wish to criticize and comment on such lists, because they would not be

645 As originally passed by Congress, section 1201(a)(1) required that the rulemaking be on the record. However,

the Intellectual Property and Communications Omnibus Reform Act of 1999, P.L. 106-113, passed by Congress

on Nov. 19, 1999 and signed by the President in late 1999, removed the requirement that the rulemaking be “on

the record.”

646 Section 1201(a)(C) provides that in conducting the rulemaking, the Librarian shall examine the availability for

use of copyrighted works; the availability for use of works for nonprofit archival, preservation, and educational

purposes; the impact that the prohibition on the circumvention of technological measures applied to copyrighted

works has on criticism, comment, news reporting, teaching, scholarship, or research; and the effect of

circumvention of technological measures on the market for or value of copyrighted works.

647 65 Fed. Reg. 64556 (Oct. 27, 2000).

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able to ascertain which sites are on the lists unless they circumvented encryption protecting the

contents of the lists.648

2. Literary works, including computer programs and databases, protected by access

control mechanisms that fail to permit access because of malfunction, damage or obsoleteness.

The Librarian determined that an exemption was necessary to gain access to literary works

protected by access control mechanisms, such as dongles or other mechanisms, that malfunction

or become obsolete.649

The Exemptions of 2003. On Oct. 27, 2003, the Copyright Office issued the second

determination of the classes of copyrighted works that the Librarian decided should have an

exemption, with the exemption to be in effect until Oct. 27, 2006.650 The classes, which were

only four in number and even more specifically defined than the first set of classes,651 were as

follows:

1. Compilations consisting of lists of Internet locations blocked by commercially

marketed filtering software applications that are intended to prevent access to domains, websites

or portions of websites, but not including lists of Internet locations blocked by software

applications that operate exclusively to protect against damage to a computer or computer

network or lists of Internet locations blocked by software applications that operate exclusively to

prevent receipt of email.652 The Librarian defined “Internet locations” to “include domains,

uniform resource locators (URLs), numeric IP addresses or any combination thereof.653 This

class is similar to the first class of exemptions in the Librarian’s first determination, but was

narrowed so as to exclude the ability to circumvent blocked lists associated with firewalls, antivirus

software and anti-spam software.654

648 Id. at 64564.

649 Id. at 64564-66. For the Copyright Office’s rationale for rejecting an exemption for a host of other proposed

classes of works, see id. at 64566-74.

650 68 Fed. Reg. 62011 (Oct. 31, 2003).

651 A statement accompanying the Librarian’s decision with respect to the exempted classes partially explained the

narrowness of the classes: “It is important to understand the purposes of this rulemaking, as stated in the law,

and the role I have in it. The rulemaking is not a broad evaluation of the successes or failures of the DMCA.

The purpose of the proceeding is to determine whether current technologies that control access to copyrighted

works are diminishing the ability of individuals to use works in lawful, noninfringing ways. The DMCA does

not forbid the act of circumventing copy controls, and therefore this rulemaking proceeding is not about

technologies that control copying. Some of the people who participated in the rulemaking did not understand

that and made proposals based on their dissatisfaction with copy controls. Other participants sought exemptions

that would permit them to circumvent access controls on all works when they are engaging in particular

noninfringing uses of those works. The law does not give me that power.” Statement of the Librarian of

Congress Relating to Section 1201 Rulemaking, available as of Oct. 30, 2003 at

www.copyright.gov/1201/docs/librarian_statement_01.html.

652 68 Fed. Reg. at 62013.

653Id.

654Id.

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2. Computer programs protected by dongles that prevent access due to malfunction or

damage and which are obsolete. This class is similar to the second class of exemptions in the

Librarian’s first determination, but was narrowed to cover only the case of obsolete dongles

because the Librarian found that this was the only class for which adequate factual support of

potential harm had been submitted in the second rulemaking proceeding.655 The Librarian

defined “obsolete” as “no longer manufactured or reasonably available in the commercial

marketplace.”656

3. Computer programs and video games distributed in formats that have become obsolete

and which require the original media or hardware as a condition of access. A format shall be

considered obsolete if the machine or system necessary to render perceptible a work stored in

that format is no longer manufactured or is no longer reasonably available in the commercial

marketplace. The Librarian determined that this exemption is necessary to allow archiving or

continued use of computer programs and video games that are subject to “original media only”

restrictions, are stored on media no longer in use, such as 5.25” floppy disks, or require use of an

obsolete operating system.657

4. Literary works distributed in ebook format when all existing ebook editions of the

work (including digital text editions made available by authorized entities) contain access

controls that prevent the enabling of the ebook’s read-aloud function and that prevent the

enabling of screen readers to render the text into a specialized format. The Librarian defined

“specialized format,” “digital text” and “authorized entities” to have the same meaning as in 17

U.S.C. § 121.658 The Librarian determined that this exemption is necessary in response to

problems experienced by the blind and visually impaired in gaining meaningful access to literary

works distributed as ebooks.659

For the Copyright Office’s rationale for rejecting an exemption for a host of other

proposed classes of works, see 68 Fed. Reg. at 62014-18. One of the more interesting proposed

exemptions that the Copyright Office rejected was one submitted by Static Control Components,

Inc. in response to the district court’s ruling in the case of Lexmark International, Inc. v. Static

Control Components, Inc.,660 discussed in Section II.G.1(o)(1) below. In that case, the district

court ruled on a motion for a preliminary injunction that Static Control violated Section

1201(a)(2) by distributing microchips that were used to replace the microchip found in plaintiff

Lexmark’s toner cartridges so as to circumvent Lexmark’s authentication sequence that

prevented the printer engine software on the Lexmark printer from allowing the printer to operate

with a refilled toner cartridge. In view of this ruling, Static Control submitted a proposed

655 Id. at 62013-14.

656 Id. at 62018.

657 Id. at 62014.

658Id.

659 Id.

660 253 F. Supp. 2d 943, 948-49 (E.D. Ky. 2003), rev’d, 387 F.3d 522 (6th Cir. 2004), reh’g denied, 2004 U.S. App.

LEXIS 27422 (Dec. 29, 2004), reh’g en banc denied, 2005 U.S. App. LEXIS 3330 (6rh Cir. Feb. 15, 2005).

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exemption to the Copyright Office to permit circumvention of access controls on computer

programs embedded in computer printers and toner cartridges and that control the interoperation

and functions of the printer and toner cartridge. The Copyright Office concluded that the

statutory exemption set forth in Section 1201(f), discussed in Section II.G.1(g) below, already

adequately addressed the concerns of toner cartridge re-manufacturers.661 The rationale for the

Copyright Office’s conclusion is discussed further in Section II.G.1(g) below.

The Exemptions of 2006. On Nov. 27, 2006, the Copyright Office issued the third

determination of the classes of copyrighted works that the Librarian decided should have an

exemption, with the exemption to be in effect until Oct. 27, 2009.662 In previous rulemakings,

the Copyright Office had determined that an exempted class must be based primarily on

attributes of the work itself and not the nature of the use or the user. In its 2006 ruling, the

Copyright Office determined for the first time that in certain circumstances it would be

permissible to refine the description of a class of works by reference to the type of user who may

take advantage of the exemption or by reference to the type of use of the work that may be made

pursuant to the exemption, and the Copyright Office applied this refinement to some of the

classes of works exempted.663

The exempted classes of works in the 2006 ruling were the following:

1. “Audiovisual works included in the educational library of a college or university’s

film or media studies department, when circumvention is accomplished for the purpose of

making compilations of portions of those works for educational use in the classroom by media

studies or film professors.”664 This exemption was the first one to define the class by reference

to particular types of uses and users.

2. “Computer programs and video games distributed in formats that have become

obsolete and that require the original media or hardware as a condition of access, when

circumvention is accomplished for the purpose of preservation or archival reproduction of

published digital works by a library or archive. A format shall be considered obsolete if the

machine or system necessary to render perceptible a work stored in that format is no longer

manufactured or is no longer reasonably available in the commercial marketplace.”665 This

exemption is the same as the third class in the 2003 ruling, except that a definition of what

renders constitutes an obsolete format was added.

661 68 Fed. Reg. at 62017.

662 71 Fed. Reg. 68472 (Nov. 27, 2006). On Oct. 27, 2009, the Librarian of Congress extended the 2006

exemptions on an interim basis until the Copyright Office and Librarian of Congress could complete their

decision with respect to the next classes of exemptions to be granted. See 74 Fed. Reg. 55139 (Oct. 27, 2009).

The extension period turned out to be 9 months, ending on July 26, 2010.

663 Id. at 68473-74.

664Id.

665 Id. at 68474.

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3. “Computer programs protected by dongles that prevent access due to malfunction or

damage and which are obsolete. A dongle shall be considered obsolete if it is no longer

manufactured or if a replacement or repair is no longer reasonably available in the commercial

marketplace.”666 This exemption is the same as the second class in the 2003 ruling.

4. “Literary works distributed in ebook format when all existing ebook editions of the

work (including digital text editions made available by authorized entities) contain access

controls that prevent the enabling either of the book’s read-aloud function or of screen readers

that render the text into a specialized format.”667 This exemption is similar to the fourth class in

the 2003 ruling, except that the two requirements in the description of the access controls is

phrased in the disjunctive, whereas in the 2003 ruling it was phrased in the conjunctive.

5. “Computer programs in the form of firmware that enable wireless telephone handsets

to connect to a wireless telephone communication network, when circumvention is accomplished

for the sole purpose of lawfully connecting to a wireless telephone communication network.”668

This is a new exemption, and is another one defined by reference to a particular type of use. The

purpose of this exemption is to address the use of software locks that prevent customers from

using their handsets on a competitor’s network, even after all contractual obligations to the

original wireless carrier have been satisfied, by controlling access to the firmware that operates

the mobile phone. The Copyright Office justified the exemption by noting that “in this case, the

access controls do not appear to actually be deployed in order to protect the interests of the

copyright owner or the value or integrity of the copyrighted work; rather, they are used by

wireless carriers to limit the ability of subscribers to switch to other carriers, a business decision

that has nothing whatsoever to do with the interests protected by copyright. … When application

of the prohibition on circumvention of access controls would offer no apparent benefit to the

author or copyright owner in relation to the work to which access is controlled, but simply offers

a benefit to a third party who may use § 1201 to control the use of hardware which, as is

increasingly the case, may be operated in part through the use of computer software or firmware,

an exemption may well be warranted.”669 The rationale underlying this class is an important one,

and may be applied to justify more exempted classes in future rulemakings by the Copyright

Office.

6. “Sound recordings, and audiovisual works associated with those sound recordings,

distributed in compact disc format and protected by technological protection measures that

control access to lawfully purchased works and create or exploit security flaws or vulnerabilities

that compromise the security of personal computers, when circumvention is accomplished solely

for the purpose of good faith testing, investigating, or correcting such security flaws or

vulnerabilities.”670 This exemption was prompted by the notorious case of the DRM technology

666 Id. at 68475.

667Id.

668 Id. at 68476.

669 Id.

670 71 Fed. Reg. 68477.

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that Sony BMG Music added to some music CDs distributed in 2005 and that went awry,

causing damage to users’ computers.

Among the proposed classes that the Copyright Office rejected was the interesting one of

an exemption for “space-shifting” to permit circumvention of access controls applied to

audiovisual and musical works in order to copy these works to other media or devices and to

access these works on those alternative media or devices. The Copyright Office rejected the

proposal on the ground that those proposing the exemption “uniformly failed to cite legal

precedent that establishes that such space-shifting is, in fact, a noninfringing use. The Register

concludes that the reproduction of those works onto new devices is an infringement of the

exclusive reproduction right unless some exemption or defense is applicable. In the absence of

any persuasive legal authority for the proposition that making copies of a work onto any device

of the user’s choosing is a noninfringing use, there is no basis for recommending an exemption

to the prohibition on circumvention.”671 The Copyright Office also rejected a proposed

exemption for all works protected by access controls that prevent the creation of backup copies,

reasoning that “the proponents offered no legal arguments in support of the proposition that the

making of backup copies is noninfringing.”672

The Exemptions of 2010. On July 27, 2010, the Librarian of Congress issued the fourth

determination of the classes of copyrighted works that should have an exemption, with the

exemption to be in effect until Oct. 27, 2012.673 The 2010 ruling continued the approach of the

2006 ruling in refining the description of a class of works by reference to the type of user who

may take advantage of the exemption or by reference to the type of use of the work that may be

made pursuant to the exemption. Indeed, in announcing the exemption, the Copyright Office

stated that the prohibitions against circumvention “shall not apply to persons who are users of a

copyrighted work which is in a particular class of works” granted an exemption.674

The six exempted classes of works in the 2010 ruling are the following:

1. “Motion pictures on DVDs that are lawfully made and acquired and that are protected

by the Content Scrambling System when circumvention is accomplished solely in order to

accomplish the incorporation of short portions of motion pictures into new works for the purpose

of criticism or comment, and where the person engaging in circumvention believes and has

reasonable grounds for believing that circumvention is necessary to fulfill the purpose of the use

in the following instances:

(i) Educational uses by college and university professors and by college and

university film and media studies students;

(ii) Documentary filmmaking;

671 Id. at 68478.

672 Id. at 68479.

673 75 Fed. Reg. 43825 (July 27, 2010).

674 Id. at 43826.

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(iii) Noncommercial videos.”

2. “Computer programs that enable wireless telephone handsets to execute software

applications, where circumvention is accomplished for the sole purpose of enabling

interoperability of such applications, when they have been lawfully obtained, with computer

programs on the telephone handset.”

3. “Computer programs, in the form of firmware or software, that enable used675 wireless

telephone handsets to connect to a wireless telecommunications network, when circumvention is

initiated by the owner of the copy of the computer program solely in order to connect to a

wireless telecommunications network and access to the network is authorized by the operator of

the network.”

4. “Video games accessible on personal computers and protected by technological

protection measures that control access to lawfully obtained works, when circumvention is

accomplished solely for the purpose of good faith testing for, investigating, or correcting security

flaws or vulnerabilities, if:

(i) The information derived from the security testing is used primarily to promote

the security of the owner or operator of a computer, computer system, or computer network; and

(ii) The information derived from the security testing is used or maintained in a

manner that does not facilitate copyright infringement or a violation of applicable law.”

5. “Computer programs protected by dongles that prevent access due to malfunction or

damage and which are obsolete. A dongle shall be considered obsolete if it is no longer

manufactured or if a replacement or repair is no longer reasonably available in the commercial

marketplace.”

6. “Literary works distributed in ebook format when all existing ebook editions of the

work (including digital text editions made available by authorized entities) contain access

controls that prevent the enabling either of the book’s read-aloud function or of screen readers

that render the text into a specialized format.”676

The Exemptions of 2012. On Oct 26, 2012, the Librarian of Congress issued the fifth

determination of the classes of copyrighted works that should have an exemption, effective as of

Oct. 28, 2012.677 The 2012 ruling broadened somewhat the approach of the 2010 ruling’s focus

on refining the description of a class of works by reference to the type of user who may take

advantage of the exemption or by reference to the type of use of the work that may be made

pursuant to the exemption. For example, the Copyright Office noted in its recommendation to

the Librarian of Congress the following: “While beginning with a category of works identified

675 The limitation of this exemption to “used” wireless telephone handsets was a narrowing of the network

connection exemption granted in the 2006 rulemaking.

676 75 Fed. Reg. at 43849.

677 77 Fed. Reg. 65260 (Oct. 26, 2012).

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in Section 102, or a subcategory thereof, the description of the ‘particular class’ ordinarily will

be refined with reference to other factors so that the scope of the class is proportionate to the

scope of harm to noninfringing uses. For example, a class might be refined in part by reference

to the medium on which the works are distributed, or to the access control measures applied to

the works. The description of a class of works may also be refined, in appropriate cases, by

reference to the type of user who may take advantage of the exemption or the type of use that

may be made pursuant to the designation.”678

Notably, the Librarian omitted from the exempted classes one of the broad classes that

had been granted an exemption in 2010 pertaining to computer programs for “unlocking”

wireless handsets to function with alternative wireless networks. Instead, the Librarian granted a

much more limited exemption that applied only to handsets acquired within 90 days after the

effective date of the exemption. The principle rationale for the much more limited exemption

was the following:

The Register further concluded that the record before her supported a finding that,

with respect to new wireless handsets, there are ample alternatives to

circumvention. That is, the marketplace has evolved such that there is now a wide

array of unlocked phone options available to consumers. While it is true that not

every wireless device is available unlocked, and wireless carriers’ unlocking

policies are not free from all restrictions, the record clearly demonstrates that

there is a wide range of alternatives from which consumers may choose in order

to obtain an unlocked wireless phone. Thus, the Register determined that with

respect to newly purchased phones, proponents had not satisfied their burden of

showing adverse effects related to a technological protection measure.679

This decision on the part of the Register proved to be the source of significant subsequent

controversy.

The six exempted classes of works in the 2012 ruling are the following:

1. “Literary works, distributed electronically, that are protected by technological

measures which either prevent the enabling of read-aloud functionality or interfere with screen

readers or other applications or assistive technologies in the following instances:

(i) When a copy of such a work is lawfully obtained by a blind or other person with a

disability, as such a person is defined in 17 U.S.C. 121; provided, however, the rights owner is

remunerated, as appropriate, for the price of the mainstream copy of the work as made available

to the general public through customary channels; or

(ii) When such work is a nondramatic literary work, lawfully obtained and used by an

authorized entity pursuant to 17 U.S.C. 121.”

678 Id. at 65261.

679 Id. at 65265.

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2. “Computer programs that enable wireless telephone handsets to execute lawfully

obtained software applications, where circumvention is accomplished for the sole purpose of

enabling interoperability of such applications with computer programs on the telephone

handset.”

3. “Computer programs, in the form of firmware or software, that enable a wireless

telephone handset originally acquired from the operator of a wireless telecommunications

network or retailer no later than ninety days after the effective date of this exemption to connect

to a different wireless telecommunications network, if the operator of the wireless

communications networks to which the handset is locked has failed to unlock it within a

reasonable period of time following a request by the owner of the wireless telephone handset,

and when circumvention is initiated by the owner, an individual consumer, who is also the owner

of the copy of the computer program in such wireless telephone handset, solely in order to

connect to a different wireless telecommunications network, and such access to the network is

authorized by the operator of the network.”

4. “Motion pictures, as defined in 17 U.S.C. 101, on DVDs that are lawfully made and

acquired and that are protected by the Content Scrambling System, where the person engaging in

the circumvention believes and has reasonable grounds for believing that circumvention is

necessary because reasonably available alternatives, such as noncircumventing methods or using

screen capture software as provided for in alternative exemptions, are not able to produce the

level of high-quality content required to achieve the desired criticism or comment on such

motion pictures, and where circumvention is undertaken solely in order to make use of short

portions of the motion pictures for the purpose of criticism or comment in the following

instances:

(i) In noncommercial videos;

(ii) In documentary films;

(iii) In nonfiction multimedia ebooks offering film analysis; and

(iv) For educational purposes in film studies or other courses requiring close analysis of

film and media excerpts, by college and university faculty, college and university students, and

kindergarten through twelfth grade educators. For purposes of this exemption, ‘noncommercial

videos’ includes videos created pursuant to a paid commission, provided that the commissioning

entity’s use is noncommercial.”

5. “Motion pictures, as defined in 17 U.S.C. 101, that are lawfully made and acquired via

online distribution services and that are protected by various technological protection measures,

where the person engaging in circumvention believes and has reason able grounds for believing

that circumvention is necessary because reasonably available alternatives, such as

noncircumventing methods or using screen capture software as provided for in alternative

exemptions, are not able to produce the level of high-quality content required to achieve the

desired criticism or comment on such motion pictures, and where circumvention is undertaken

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solely in order to make use of short portions of the motion pictures for the purpose of criticism or

comment in the following instances:

(i) In noncommercial videos;

(ii) In documentary films;

(iii) In nonfiction multimedia ebooks offering film analysis; and

(iv) For educational purposes in film studies or other courses requiring close analysis of

film and media excerpts, by college and university faculty, college and university students, and

kindergarten through twelfth grade educators. For purposes of this exemption, “noncommercial

videos” includes videos created pursuant to a paid commission, provided that the commissioning

entity’s use is noncommercial.”

6. “(i) Motion pictures, as defined in 17 U.S.C. 101, on DVDs that are lawfully made

and acquired and that are protected by the Content Scrambling System, where the circumvention,

if any, is undertaken using screen capture technology that is reasonably represented and offered

to the public as enabling the reproduction of motion picture content after such content has been

lawfully decrypted, when such representations have been reasonably relied upon by the user of

such technology, when the person engaging in the circumvention believes and has reasonable

grounds for believing that the circumvention is necessary to achieve the desired criticism or

comment, and where the circumvention is undertaken solely in order to make use of short

portions of the motion pictures for the purpose of criticism or comment in the following

instances:

(A) In noncommercial videos;

(B) In documentary films;

(C) In nonfiction multimedia ebooks offering film analysis; and

(D) For educational purposes by college and university faculty, college and university

students, and kindergarten through twelfth grade educators.

(ii) For purposes of this exemption, ‘noncommercial videos’ includes videos created

pursuant to a paid commission, provided that the commissioning entity’s use is noncommercial.”

7. “(i) Motion pictures, as defined in 17 U.S.C. 101, that are lawfully made and acquired

via online distribution services and that are protected by various technological protection

measures, where the circumvention, if any, is undertaken using screen capture technology that is

reasonably represented and offered to the public as enabling the reproduction of motion picture

content after such content has been lawfully decrypted, when such representations have been

reasonably relied upon by the user of such technology, when the person engaging in the

circumvention believes and has reasonable grounds for believing that the circumvention is

necessary to achieve the desired criticism or comment, and where the circumvention is

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undertaken solely in order to make use of short portions of the motion pictures for the purpose of

criticism or comment in the following instances:

(A) In noncommercial videos;

(B) In documentary films;

(C) In nonfiction multimedia ebooks offering film analysis; and

(D) For educational purposes by college and university faculty, college and university

students, and kindergarten through twelfth grade educators.

(ii) For purposes of this exemption, ‘noncommercial videos’ includes videos created

pursuant to a paid commission, provided that the commissioning entity’s use is noncommercial.”

8. “Motion pictures and other audiovisual works on DVDs that are protected by the

Content Scrambling System, or that are distributed by an online service and protected by

technological measures that control access to such works, when circumvention is accomplished

solely to access the playhead and/or related time code information embedded in copies of such

works and solely for the purpose of conducting research and development for the purpose of

creating players capable of rendering visual representations of the audible portions of such works

and/or audible representations or descriptions of the visual portions of such works to enable an

individual who is blind, visually impaired, deaf, or hard of hearing, and who has lawfully

obtained a copy of such a work, to perceive the work; provided, however, that the resulting

player does not require circumvention of technological measures to operation.”680

a. Scope of the Network Connection Exemption – The

TracFone Cases

In TracFone Wireless, Inc. v. Dixon,681 the court ruled that this exemption did not apply

to the defendants’ resale of unlocked TracFone phones that would work on wireless services

other than TracFone’s, because the defendants’ unlocking activity “was for the purpose of

reselling those handsets for a profit, and not ‘for the sole purpose of lawfully connecting to a

wireless telephone communication network.’”682 Thus, under this court’s view, the exemption

appears to be targeted to acts by individual owners of handsets who circumvent the phone’s lock

to enable their personal use of their own handset on another wireless network. It is unclear from

the court’s brief analysis whether the exemption would cover those who sell the “computer

firmware” referenced in the exemption (and not the unlocked phone itself) that enables an

individual to accomplish unlocking of his or her phone. It also unclear whether the reference in

the exemption only to “computer firmware” means that it would not apply to services rendered

by a third party in assisting an individual to unlock a phone for a fee.

680 Id. at 65278-79.

681 475 F. Supp. 2d 1236 (M.D. Fla. 2007).

682 Id. at 1238.

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In TracFone Wireless, Inc. v. Riedeman,683 TracFone brought claims under Section 1201

of the DMCA based on the defendant’s resale of TracFone phones for which the prepaid

software had been disabled. The defendant failed to file a response to the complaint and the

clerk entered a default against the defendant. The court entered a judgment finding that the

defendant had violated Section 1201 by circumventing technological measures that controlled

access to proprietary software in the phones and by trafficking in services that circumvented

technological measures protecting the software. The court also ruled that the Copyright Office

exemption did not apply to the defendant’s activities because the defendant’s “purchase and

resale of the TracFone handsets was for the purpose of reselling those handsets for a profit, and

not ‘for the sole purpose of lawfully connecting to a wireless telephone communication

network.’”684 The court entered a judgment against the defendant for statutory damages in the

amount of $1,020,800.685 Interestingly, the court entered an injunction against the defendant that

prohibited the defendant from even “purchasing … any wireless mobile phone that they know or

should know bears any TracFone Trademark ….”686

In TracFone Wireless, Inc. v. GSM Group, Inc.,687 the defendant was engaged in bulk

purchase, reflashing, and redistributing TracFone phones. The plaintiff brought claims under

Section 1201 for circumvention and trafficking in circumvention technology, and the defendant

moved to dismiss for failure to state a claim, relying on the Copyright Office exemption. The

court denied the motion, ruling that the exemption did not apply because, citing the Dixon case,

the purpose of the defendant’s circumvention was to resell wireless telephone handsets for profit

and not for the sole purpose of lawfully connecting to a wireless telephone communications

network.688 The court subsequently entered final judgment and a permanent injunction against

the defendants based on the DMCA claims on the same rationale. The permanent injunction

prohibited the defendants from purchasing or selling any wireless mobile phone that the

defendants knew or should have known bore any TracFone trademark and from reflashing or

unlocking any such phone. The court retained jurisdiction over the matter to punish any

violation of the permanent injunction in an amount of not less than $5,000 for each TracFone

handset that a defendant was found to have purchased, sold, or unlocked in violation of the

injunction, or $250,000, whichever was greater.689

Similarly, in TracFone Wireless, Inc. v. Bitcell Corp.,690 the court found the defendant’s

unlocking and resale of TracFone phones to constitute a violation of Section 1201. The court

683 2007 Copyr. L. Dec. ¶ 29,500 (M.D. Fla. 2007).

684 Id. at p. 40,531.

685Id.

686Id.

687 555 F. Supp. 2d 1331 (S.D. Fla. 2008).

688 Id. at 1336-37.

689 TracFone Wireless, Inc. v. GSM Groups, Inc., No. 07-23166-C1V Martinez-Brown, slip op. at 4-6 (S.D. Fla.

Aug. 15, 2008).

690 2008 U.S. Dist. LEXIS 41955 (S.D. Fla. May 28, 2008).

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noted that TracFone phones were sold subject to terms and conditions restricting use and sale of

the phones that were set forth in printed inserts included in the packaging with the phones, were

available to the public on TracFone’s web site, and were referenced in printed warnings placed

on the outside of the retail packaging of the phones.691 With no legal analysis, the court simply

stated that the “Terms and Conditions and language on the packaging constitute a valid binding

contract.”692 The court ruled that the Copyright Office exemption did not apply because the

defendant’s conduct “was for the purpose of reselling those Phones for a profit, and not ‘for the

sole purpose of lawfully connecting to a wireless telephone communication network.’”693 As in

the Riedeman case, the court entered an injunction against the defendant that prohibited the

defendant from even “purchasing … any wireless mobile phone that they know or should know

bears any Registered TracFone Trademark ….”694 The court ruled that any violation of the

injunction would be subject to a finding of contempt and a payment of liquated damages to

TracFone of the greater of $250,000 or $5,000 for each TracFone handset purchased, sold,

unlocked, altered in any way, or shipped.695

In a virtually identical opinion under similar facts, in TracFone Wireless, Inc. v. Anadisk

LLC,696 the same court found a violation of Section 1201, imposed the maximum statutory

damages award of $2,500 per phone on 4,990 phones for a total award of $12,375,000, and

entered a similar injunction. The court ruled that any violation of the injunction would be

subject to a finding of contempt and a payment of liquated damages to TracFone of the greater of

$1,000,000 or $5,000 for each TracFone handset purchased, sold, unlocked, altered in any way,

or shipped.697

And again in TracFone Wireless, Inc. v. SND Cellular, Inc., the same court imposed the

maximum statutory damages award of $11,370,000 based on trafficking in a minimum of 4,548

phones and entered a similar injunction. Again the court ruled that any violation of the

injunction would be subject to a finding of contempt and a payment of liquated damages to

TracFone of the greater of $1,000,000 or $5,000 for each TracFone handset purchased, sold,

unlocked, re-flashed, altered in any way, or shipped.698

In TracFone Wireless, Inc. v. Zip Wireless Products, Inc.,699 the court denied a motion to

dismiss TracFone’s claims of copyright infringement on the ground that the Copyright Office

exemption applied. TracFone had adequately alleged in its complaint that lawful connection to a

691 Id. at *3.

692 Id.

693 Id. at *8.

694 Id. at *9.

695 Id. at *12.

696 685 F. Supp. 2d 1304 (S.D. Fla. 2010).

697 Id. at 1317-18 & 1319-20.

698 TracFone Wireless, Inc. v. SND Cellular, Inc., 715 F. Supp. 2d 1246, 1263-64 (S.D. Fla. 2010).

699 716 F. Supp. 2d 1275 (N.D. Ga. 2010).

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wireless telephone network was not the sole purpose of the defendants’ circumvention efforts,

and that factual allegation was sufficient to overcome the defendants’ argument that TracFone’s

DMCA claims fell within the scope of the exemption.700

In TracFone Wireless, Inc. v. Bequator Corp., the court rejected the applicability of the

Copyright Office’s July 2010 exemption to the defendant’s bulk resale of unlocked or reflashed

TracFone phones. The court noted that the July 2010 exemption applied only to used wireless

telephone handsets and therefore did not cover the defendant’s activities. The court granted a

maximum statutory damages award of $46,540,000 ($2500 per phone sold) and entered a

permanent injunction against the defendants. Any violation of the injunction would incur

liquidated damages in the amount of the greater of $1,000,000 or $5,000 for each TracFone

handset purchased, sold, unlocked, reflashed, altered, rekitted, advertised, solicited and/or

shipped in violation of the injunction.701

(ii) Epic Games v. Altmeyer

In this case, the court issued a TRO enjoining the defendant from offering services to

modify Microsoft’s Xbox 360 to play pirated copies of the plaintiff’s video game Gears of War

2. The Xbox contained the capability to allow users to play the game live online, and to do so,

players were required to connect through an official web site. The software involved in playing

live was programmed to detect modifications to the Xbox and to recognize pirated games. If

modification or piracy was detected, the user would be banned from playing live. The defendant

offered a service to modify the Xbox to that neither the system itself nor the live software could

recognize pirated games or any modification. The court found a likelihood of establishing that

the offered services violated Section 1201(a)(2), and issued a TRO enjoining the defendant from

performing, advertising, marketing, distributing, or selling game console modification

services.702

(iii) Facebook v. Power Ventures

In this case, the defendants operated an Internet service called Power.com that collected

user information from Facebook’s web site outside of the “Facebook Connect” application

programmer’s interface (API). After a user provided his or her user names and passwords, the

Power.com service used the access information to scrape user data from those accounts.

Facebook’s Terms of Use broadly prohibited the downloading, scraping, or distributing of any

content on the web site, except that a user was permitted to download his or her own user

content. Facebook alleged that it had implemented specific technical measures to block access

by Power.com after the defendants informed Facebook that they intended to continue their

service without using Facebook Connect, and that the defendants then attempted to circumvent

those technological measures in violation of the anti-circumvention provisions of the DMCA.

700 Id. at 1285.

701 TracFone Wireless, Inc. v. Bequator Corp., 2011 U.S. Dist. LEXIS 42314 at *32-35, *41-44 (S.D. Fla. Apr. 13,

2011).

702 Epic Games, Inc. v. Altmeyer, 2008 U.S. Dist. LEXIS 89758 at * 3-4, 9-10 & 19 (S.D. Ill. Nov. 5, 2008).

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The defendants brought a motion to dismiss the DMCA claims, arguing that the unauthorized use

requirement of a Section 1201(a)(1) claim was not met because it was the users who were

controlling access (via Power.com) to their own content on the Facebook web site. The court

denied the motion, in view of the fact that the defendants’ argument relied on an assumption that

Facebook users were authorized to use Power.com or similar services to access their user

accounts, and the Terms of Use barred users from using automated programs to access the

Facebook web site.703

(iv) Bose v. Zavala

In this case, the defendant sold Bose Lifestyle Media Centers in auctions on eBay. In his

auctions, he offered to unlock the region coding within the Media Center’s DVD player by

altering Bose’s firmware in the device or to give the purchaser directions on how to do so.

Unlocking the region code would permit the Media Centers to play DVDs distributed anywhere

in the world. Bose brought claims against the defendant under Section 1201 of the DMCA and

the defendant moved to dismiss them under Fed. R. Civ. Pro. 12(b)(6) on the ground that Bose

lacked standing to assert the claims because it was not the type of party protected by the DMCA,

since it did not sell digital media or region code-changing services. The court rejected this

argument, ruling that a party who controls the technological measures that protect copyrighted

works is a “person injured” by the circumvention of the measures within the meaning of Section

1203(c).704 The court concluded, “Bose controls region coding, a technological measure that

protects copyrighted DVDs. This is sufficient to allege that it is a ‘person injured’ within the

meaning of the DMCA.”

(v) MGE UPS Systems v. GE

In MGE UPS Systems Inc. v. GE Consumer & Industrial Inc.,705 the Fifth Circuit ruled

that mere use of a copyrighted work subsequent to an illegal circumvention does not violate

Section 1201(a). The plaintiff distributed uninterruptible power supplies (UPS’s), some of which

required the use of MGE’s copyrighted software programs during servicing. The software

required connection of a security dongle to a laptop serial port during servicing. Software

hackers had published information on the Internet disclosing general instructions on how to

defeat the external security features of the dongle, thereby rendering the hacked software

accessible for use without limitation. The defendant’s employees obtained a hacked copy of

MGE’s software and used it to service the plaintiff’s UPS’s. The Fifth dismissed the plaintiff’s

claim that such use violated Section 1201(a). The court ruled that because Section 1201(a)(1) is

targeted at circumvention, it does not apply to the use of copyrighted works after the

technological measure has been circumvented. There was no evidence showing that a

703 Facebook, Inc. v. Power Ventures, Inc., 2009 U.S. Dist. LEXIS 42367 at *1-2, 9-10 & 13-14 (N.D. Cal. May

11, 2009).

704 Bose BV v. Zavala, 2010 U.S. Dist. LEXIS 2719 at *1-5 (D. Mass. Jan. 14, 2010).

705 622 F.3d 361 (5th Cir. 2010).

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representative or employee of the defendant had altered the software such that a dongle was not

required to use it, and hence the defendant had not itself engaged in any circumvention.706

(vi) Granger v. One Call Lender Services

In this case, the plaintiff was the owner of a computer program that estimated the rate or

cost of real estate title insurance sold by title insurance agents. The defendants placed an

infringing version of the rate calculator program on their website, though later took it down upon

receipt of a demand letter from the plaintiff. The plaintiffs had embedded within the computer

program copyright tag lines and a watermark that, if not removed carefully, could leave a telltale

sign as to the origin of the work. The plaintiff argued that removal of the watermark

constituted circumvention in violation of Section 1201 and sought statutory damages. The court

rejected this argument, citing authority that in the Third Circuit, the legal theory of

circumvention had been applied solely to circumstances where the conduct complained of

entailed circumventing protective measures such as passwords, server software, or other

technological barriers, as opposed to the embedded copyright tag lines and watermark at issue in

the present case. Accordingly, the plaintiff could not recover damages for circumvention,

although it could recover damages for removal of CMI.707

(vii) Eyepartner v. Kor Media Group

In Eyepartner, Inc. v. Kor Media Group LLC,708 the plaintiff licensed the defendant its

software under a limited license to use the software but not to modify or access the encrypted

source code. The license agreement expressly prohibited any acts to modify, translate, reverse

engineer, decompile, disassemble or create derivative works of the software. The defendants

were unhappy with the quality of the software and, rather than pay for the additional application

programming interface service that might have addressed the defendants’ concerns, they chose to

make their own modifications to the plaintiff’s code by decrypting and disassembling the source

code. The defendants argued that it was a fair use to disassemble the source code so that it could

be modified to make the program function as they wished. The court ruled, however, that such a

defense could absolve liability only as to willful copyright infringement but not as to the

plaintiff’s claims for violation of the anti-circumvention provisions. The court further concluded

that, in any event, fair use was inappropriate because the defendants had contractually waived

their rights to modify the code. The plaintiffs had used an encrypting technology called IonCube

to prevent the defendants from accessing the source code of the software, which the defendants

had circumvented using a “deZender” program. The court found that such acts violated Section

1201(a)(3)(A) of the DMCA and issued a preliminary injunction against the defendants.709

706 Id. at 364-66.

707 Granger v. One Call Lender Services, LLC, 2012 U.S. Dist. LEXIS 104885 at *2-4, 14-15 (E.D. Pa. July 26,

2012).

708 2013 U.S. Dist. LEXIS 98370 (S.D. Fla. July 15, 2013).

709 Id. at *1-23.

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(2) Prohibition on Devices

The DMCA also outlaws devices and technology directed to circumvention of

technological copyright protection measures. Specifically, Sections 1201(a)(2) and 1201(b)

prohibit the manufacture, import, offer to the public, or trafficking in any technology, product,

service, device, component, or part thereof that is primarily designed or produced for the purpose

of circumventing a technological measure that effectively “controls access to” a copyrighted

work or “protects a right of a copyright owner,” or has only limited commercially significant

purpose or use other than to circumvent such technological measure, or is marketed for use in

circumventing such technological protection measure. Section 1201(b)(2) provides that a

technological measure “effectively protects a right of a copyright owner” if the measure “in the

ordinary course of its operation, prevents, restricts, or otherwise limits the exercise of a right of a

copyright owner.” Although trafficking in these types of prohibited devices might well

constitute contributory infringement, Sections 1201(a)(2) and 1201(b) make it a direct statutory

violation subject to criminal and civil penalties.

It should be noted that, although Sections 1201(a)(2) and 1201(b) in combination prohibit

devices designed to circumvent both technological measures that control access to a copyrighted

work and that protect a right of a copyright owner, Section 1201(a)(1) prohibits conduct that is

directed only to the former, but not the latter. The rationale for this distinction was apparently a

belief that anyone should be free to circumvent a measure protecting rights of a copyright owner

in order to make fair use of a work,710 whereas gaining access in the first instance to a

copyrighted work without the owner’s permission cannot be a fair use.711

Unlike the case of the prohibition of circumvention to gain unauthorized access to a work

under Section 1201(a)(1), the prohibitions of Sections 1201(a)(2) and 1201(b) were not

suspended for a two year period and went into effect immediately under the DMCA. Thus, the

DMCA set up the curious situation in which, for the initial two year period, it did not directly

prohibit circumvention of a technological measure to gain access to a work, but did prohibit the

manufacture, sale or importation of devices that would enable or assist one to gain such access.

710 See The Digital Millennium Copyright Act of 1998, U.S. Copyright Office Summary (Dec. 1998) at 4

(explaining that the distinction between Section 1201(a) and (b) as to the act of circumvention in itself was “to

assure that the public will have the continued ability to make fair use of copyrighted works. Since copying may

be a fair use under appropriate circumstances, section 1201 does not prohibit the act of circumventing a

technological measure that prevents copying.”). Similarly, the Copyright Office noted in its rationale for the

first set of exemptions it established from the prohibition against circumvention of technological measures

controlling access to a work: “The decision not to prohibit the conduct of circumventing copy controls was

made, in part, because it would penalize some noninfringing conduct such as fair use.” 65 Fed. Reg. 64556,

64557 (Oct. 27, 2000).

711 Realnetworks, Inc. v. DVD Copy Control Ass’n, 641 F. Supp. 2d 913, 942 (N.D. Cal. 2009) (“The prohibition

on individual circumvention conduct only applies with respect to access protection technologies (because fair

use can never be an affirmative defense to the act of gaining unauthorized access), not to technologies that

prevent copying.”); Inna Fayenson, “Anti-Circumvention Provisions of The Digital Millennium Copyright Act,”

Journal of Internet Law, Apr. 1999, at 9, 10.

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Another curious aspect of the DMCA is that it authorizes the Librarian to create

additional exceptions via rulemaking only to Section 1201(a)(1), but not to Sections 1201(a)(2)

and 1201(b). Thus, the DMCA appears to allow the Librarian to permit acts of circumvention in

additional situations, but not the devices necessary to enable or assist such acts.

(i) Sony Computer Entertainment America v.

Gamemasters

In this lawsuit, Sony Computer Entertainment America (SCEA) obtained a preliminary

injunction against the defendants, who were distributing a device called the “Game Enhancer”

that enabled players to play Sony PlayStation games sold in Japan or Europe, and intended by

SCEA for use exclusively on Japanese or European PlayStation consoles, on U.S. PlayStation

consoles.712 The Sony PlayStation console was designed to operate only when encrypted data

was read from a game CD-ROM verifying that the CD was an authorized, legitimate product

licensed for distribution in the same geographical territory of the console’s sale.713

The Game Enhancer enabled a player to trick a U.S. PlayStation console into playing a

Japanese or European authorized game CD by the following method. After inserting an

authorized CD game, the user was instructed to hold down the disk cover switch of the console

while keeping the lid or disk cover open. The Game Enhancer was then turned on and its

internal operating system selected for execution, thereby replacing the PlayStation console’s

internal operating system. The validity and territorial codes were read from the authorized CD,

thereby instructing the console that the inserted CD was valid and authorized. The user was then

instructed to hit the “select” button on the game controller to signal the console to stop the CD

motor, enabling the player to remove the U.S. authorized game CD and replace it with a CD that

was authorized for play only on a Japanese or European console. Once the game was loaded, the

Game Enhancer then returned control to the PlayStation’s operating system, and the

unauthorized game could be played.

The court ruled that, because the Game Enhancer was a device whose primary function

was to circumvent the mechanism on the PlayStation console that ensured the console operated

only when encrypted data was read from an authorized CD-ROM, the Game Enhancer had a

primary function to circumvent a technological measure that effectively controls access to a

copyrighted work and was therefore a violation of Section 1201(a)(2)(A). The court ruled that

SCEA was therefore entitled to a preliminary injunction against sale of the device under Section

1203.714

(ii) The DirecTV Cases

a. DirecTV, Inc. v. Borow

712 Sony Computer Entertainment America v. Gamemasters, 87 F. Supp. 2d 976, 981 (N.D. Cal. 1999).

713Id.

714 Id. at 987-88. A similar case finding a violation of the DMCA as a result of sales of a cable descrambler and

decoder is CSC Holdings, Inc. v. Greenleaf Electronics, Inc., 2000 U.S. Dist. LEXIS 7675 (N.D. Ill. 2000).

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This straightforward case found defendant Randy Borow in violation of Section

1201(a)(1) for using an emulator to circumvent DirecTV’s encryption on its signals and to

simulate certain functions of the DirecTV access card in order to watch DirecTV’s programming

without paying subscription fees.715

b. DirecTV, Inc. v. Carrillo

In this case, the court found the defendant liable under Section 1201 based on his

possession and transfer of equipment used to pirate satellite TV signals. The court found that the

devices were primarily designed to intercept encrypted signals.716

(iii) Sony Computer Entertainment America v. Divineo

In Sony Computer Entertainment America, Inc. v. Divineo,717 the court granted summary

judgment to the plaintiff that several devices sold by the defendant violated the anticircumvention

provisions of the DMCA. The devices all could be used to circumvent an

authentication process designed by Sony into the Playstation system to verify that an inserted

disc was authentic before the Playstation would play it. If a user burned a copy of a copyrighted

Playstation game, a unique code that was part of every authentic disc would not be copied, thus

preventing the user from playing the copy on the Playstation. The defendant sold the following

devices that could be used to circumvent this process: (i) HDLoader, software that permitted a

user to make an unauthorized copy of Playstation-compatible video games onto a separate hard

drive connected to the Playstation system; (ii) mod chips that, when wired to a Playstation

console, circumvented the authentication system and allowed the system to play the unauthorized

software; and (iii) devices that allowed a user to boot up a Playstation console and perform a disc

swap without triggering the software and hardware mechanisms within the Playstation that

initiated the authentication system.718

The defendant argued against liability on the ground that there were several ways in

which the devices could be used that did not result in infringement of the plaintiff’s copyrighted

video games. First, the devices could be used to allow more than 150 items of “homemade”

software to execute on the Playstation. Second, software developers could use the devices to test

their own games as a less expensive alternative to purchasing a specialized Sony console that

would run any game. Third, HDLoader made playing games more convenient by allowing users

to avoid having to swap out discs to change games and because the Playstation could read hard

drive data more quickly than data stored on CDs or DVDs. The defendant also gave a legal

notice on its web site warning users that they were responsible for the legality of their own use of

materials obtained through the web site.719 The defendant also invoked the reverse engineering

715 DirecTV, Inc. v. Borow, 2005 U.S. Dist. LEXIS 1328 at *3, 12-13 (N.D. Ill. Jan. 6, 2005).

716 DirecTV, Inc. v. Carrillo, 227 Fed. Appx. 588, 589-90 (9th Cir. 2007).

717 457 F. Supp. 2d 957 (N.D. Cal. 2006).

718 Id. at 958-59.

719 Id. at 961.

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defense of Section 1201(f) of the DMCA, arguing that users of mod chips could use them to

ensure the interoperability of an independently created computer program with the Playstation.720

The court rejected all of these arguments, holding that the challenged devices were

primarily designed for the purpose of circumventing the Playstation authentication system which

otherwise controlled access to software played on the system, and that “downstream customers’

lawful or fair use of circumvention devices does not relieve [defendant] from liability for

trafficking in such devices under the DMCA.”721 The court also ruled that the defendant’s legal

notice to users of its devices was not relevant to its own liability under the DMCA.722 The

application of the court’s ruling to the Section 1201(f) interoperability rights is interesting. It

means that, even though it may be permissible to circumvent a technological measure to obtain

information necessary for interoperability of an independently developed computer program, or

for the user of an independently developed computer program to circumvent an access control

measure in order to interoperate with a program controlled by the measure, it is nevertheless

illegal for a third party to sell such user a device that would enable the circumvention, if the

device is designed primarily for circumvention. Another implication of the ruling is that legal

uses that may result after use of a device to accomplish circumvention are not to be factored into

whether the device is primarily designed for circumvention. Under this decision, the DMCA

focuses only on the capability of the device to accomplish circumvention in the first instance,

and if that is its primary technical function, it is illegal.

(iv) Ticketmaster L.L.C. v. RMG Technologies, Inc.

In this case, the plaintiff Ticketmaster alleged the defendant had violated Sections

1201(a)(2) and 1201(b)(1) by distributing an automated tool that enabled users (such as ticket

brokers) to access and navigate rapidly through the Ticketmaster site and purchase large

quantities of tickets. The tool enabled users to bypass Ticketmaster’s “CAPTCHA” system, a

security system designed to distinguish between human users and automated programs by

requiring the user to read a distorted sequence of letters and numbers on the screen and enter

those letters and numbers correctly into the system in order to gain access to the ticket purchase

page.723

On a motion for a preliminary injunction, the court found the plaintiff likely to prevail on

these claims. The court rejected the defendant’s argument that CAPTCHA was not a system or a

program that qualified as a technological measure under the DMCA because it was simply an

image, and it was designed to regulate ticket sales, not to regulate access to a copyrighted work.

The court ruled that the DMCA does not equate its use of the term “technological measure” with

the defendant’s terms “system” or “program,” and that in any case the CAPTCHA system was a

technological measure within the DMCA because most automated devices could not decipher

and type the stylized random characters the system generated in order to proceed to the

720 Id. at 965.

721 Id.

722 Id.

723 Ticketmaster L.L.C. v. RMG Technologies, Inc., 507 F. Supp. 2d 1096, 1102, 1111-12 (C.D. Cal. 2007).

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copyrighted ticket purchase pages.724 Thus, CAPTCHA qualified as a technological measure

that restricted access to copyrighted works within the purview of Section 1201(a)(2). Similarly,

it also fell within the purview of Section 1201(b)(1) because it protected rights of the copyright

owner by preventing automated access to the Ticketmaster ticket purchase web pages, thereby

preventing users from copying those pages. Accordingly, the court issued a preliminary

injunction prohibiting the defendant from trafficking in any computer program or other

automatic devices to circumvent copy protection systems in Ticketmaster’s web site and from

using any information gained from access to Ticketmaster’s web site to create computer

programs to circumvent Ticketmaster’s copy protection and web site regulation systems.725

(v) The Tracfone Cases

In TracFone Wireless, Inc. v. Pak China Group Co., Ltd.,726 the defendants were engaged

in bulk purchase, reflashing, and redistributing TracFone phones. The plaintiff brought claims

under Section 1201 for circumvention and trafficking in circumvention technology. The

defendants failed to answer and were in default. The court found the defendants guilty of the

alleged violations of Section 1201 and imposed the maximum statutory damages of $37,707,500

based on the sale of at minimum 15,083 reflashed TracFone prepaid phones.727

In TracFone Wireless, Inc. v. Technopark Co., Ltd.,728 the court found the defendants

liable under Section 1201 for the unauthorized unlocking or reflashing of TracFone phones and

for trafficking in certain unlocking devices known as “Octopus Boxes” in furtherance of its

unlocking scheme. The court also found the defendants liable for facilitating co-conspirators

who were trafficking in the service of circumventing TracFone’s technological measures. The

court imposed a maximum statutory damages award of $10,000 for the four unlocking or

reflashing devices manufactured by the defendants and sold by distributors that TracFone was

aware of.729

In addition, see the numerous TracFone cases discussed in Section II.G.1(a)(1) above.

(vi) Movida Communications, Inc. v. Haifa

In this case, the court ruled that the defendant’s actions of tampering with or altering prepaid

control software resident on Movida pre-paid wireless handsets, entering unauthorized PIN

numbers into the phones for purposes of unlocking or re-flashing the phones, and reselling the

phones for use on networks other than Movida’s, violated Section 1201 of the DMCA. The court

issued a permanent injunction against the defendant, prohibiting him even from purchasing any

724 Id. at 1112.

725 Id. at 1112, 1116.

726 843 F. Supp. 2d 1284 (S.D. Fla. 2012).

727 Id. at 1301.

728 2012 U.S. Dist. LEXIS 58449 (S.D. Fla. Apr. 9, 2012).

729 Id. at *4, 13-14 & 15-16.

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model of Movida handsets, in addition to re-flashing or unlocking any Movida handset, and

accessing, altering, erasing, tampering with, deleting or otherwise disabling Movida’s proprietary

prepaid cellular software contained within any model of Movida handset. The order also

provided that any violation would be punished in an amount of not less than $5,000 per Movida

handset.730

(vii) Microsoft Corp. v. EEE Business Inc.

In this case, the defendant engaged in the unauthorized distribution of Microsoft software

that was available only under a Volume License Agreement. The agreement permitted only

authorized volume licensees to install software to unlock the media programming to enable the

user to enter a 25-character alphanumeric code, called the Volume License Key (VLK), which

was unique to the licensee and required to be kept confidential under the terms of the Volume

License Agreement. The court ruled that, by distributing a VLK without authorization, the

defendant had effectively circumvented Microsoft’s technological measure to control access to a

copyrighted work in violation of Section 1201(a)(2) of the DMCA.731

(viii) MDY Industries v. Blizzard Entertainment

In this case, the defendant distributed bot software called “Glider” that was able to play

Blizzard Entertainment’s multiplayer online role-playing game known as World of Warcraft

(WoW) for its owner while the owner was away from his or her computer, thereby enabling the

owner to advance more quickly within WoW than would otherwise be possible.732 Blizzard

Entertainment brought claims under the DMCA, alleging that Glider evaded Blizzard

technologies known as “Warden” to detect and prevent the use of bots by WoW players.

Warden included two different software components. The first component, known as “scan.dll,”

scanned the user’s computer for unauthorized programs such as Glider before the user logged

onto the WoW servers to play the game, and if it detected such programs, scan.dll would deny

the user access to the game servers. The second component, known as the “resident” component

of Warden, ran periodically while a user played WoW and if it detected the use of a bot program,

Blizzard would revoke access to the game.733

Blizzard argued that scan.dll and the resident software controlled access to copyrighted

software, as required by Section 1201(a)(2) of the DMCA, in two ways. First, when scan.dll

prevented a user from playing WoW, or when the resident software terminated a user’s playing

of WoW, they prevented additional code in the game client software from being written to RAM.

Second, scan.dll and the resident software barred access to WoW’s non-literal elements (the

730 Movida Communications, Inc. v. Haifa, 2008 Copyr. L. Dec. ¶ 29,528 (C.D. Cal. 2008).

731 Microsoft Corp. v. EEE Business Inc., 555 F. Supp. 2d 1051, 1059 (N.D. Cal. 2008).

732 MDY Industries, LLC v. Blizzard Entertainment, Inc., 2008 U.S. Dist. LEXIS 53988 at *2 (D. Ariz. 2008 July

14, 2008).

733 Id. at *34.

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multi-media presentation of the WoW universe and character interactions) generated by the

code’s interaction with the computer hardware and operating systems.734

The court rejected Blizzard’s claim under Section 1201(a)(2). With respect to access to

the code of WoW, the court, citing the Lexmark case, ruled that a holder of Blizzard’s game

client software had full and complete access to that code on both the CD that contained it and on

the user’s hard drive once the software had been loaded onto the user’s computer. The user

thereafter could view a copy of the game client software code, regardless of whether the user

actually played WoW or encountered Warden. The user did not need to pass through Blizzard’s

security devices to gain access to the code. Accordingly, the court granted summary judgment to

the defendant on this issue. The court ruled that it could not similarly grant summary judgment

with respect to the non-literal elements of WoW because the parties’ statement of facts filed in

conjunction with their motions for summary judgment said virtually nothing about this aspect of

the game. Finally, the court noted that neither scan.dll nor the resident software appeared to

require the application of information by the game user, or the application of a process or a

treatment by the game user, before granting access to copyrighted information, as required by

Section 1201(a)(2). Instead, they merely scanned for unauthorized programs. However, because

neither party had addressed this issue in their briefs, the court noted that it would be a factual

issue for trial.735

The court also rejected a claim by Blizzard under Section 1201(b)(1) of the DMCA.

Blizzard asserted that scan.dll and the resident software prevented users from copying software

code to RAM and accessing the non-literal elements of the game once they were caught using

Glider. MDY disputed this factual assertion, contending that code from the game client software

was not written to RAM after a user passed by scan.dll or the resident software. The court

concluded that, because there was a factual dispute with respect to the extent to which Blizzard’s

Warden software protected against the copying of software code to RAM, and because the

parties did not submit sufficient facts from which the court could decide whether the protective

measures protected Blizzard’s rights in the non-literal elements of the game, summary judgment

on the Section 1201(b)(1) claim was denied.736

In a subsequent opinion issued after a bench trial, the court held that Blizzard’s

circumvention claims against Glider under Sections 1201(a)(2) and 1201(b)(1) failed with

respect to the discrete nonliteral components of the games stored on the game player’s hard

drive, because they could be accessed and viewed without signing onto the server (and therefore

involving the Warden software) by independently purchased computer programs that could call

up the individual visual images or recorded sounds within the game client software. However,

the circumvention claims were valid with respect to the “dynamic” nonliteral elements of WoW

– i.e., the real-time experience of traveling through different worlds, hearing their sounds,

viewing their structures, encountering their inhabitants and monsters, and encountering other

players – because those dynamic elements could be accessed and copied only when the user was

734 Id. at *34-35.

735 Id. at 18*35-40.

736 Id. at *41-43.

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connected to a Blizzard server that controlled their dynamic display, which in turn required the

user successfully to pass scan.dll when logging on and to survive the periodic scrutiny of the

resident component.737

Six weeks later, the court entered two permanent injunctions against the marketing, sale

and distribution of Glider for use in connection with WoW – one on the basis of the copyright

infringement and DMCA claims, and another on the basis of a tortious interference with contract

claim for which the court had ruled in favor of Blizzard. The court stayed the injunction on the

copyright and DMCA claims pending their appeal, but refused to stay the injunction on the

tortious interference claims.738 In a subsequent opinion, the court awarded Blizzard statutory

damages of $6.5 million.739

On appeal, the Ninth Circuit reversed, except as to MDY’s liability for violation of

Section 1201(a)(2).740 The Ninth Circuit cast one of the key issues on appeal to be whether the

DMCA’s anti-circumvention provisions prohibit circumvention of access controls only when

unauthorized access leads to copyright liability, as the Federal Circuit had held in the

Chamberlain and Storage Tech cases.741 The Ninth Circuit reached a conclusion contrary to the

Federal Circuit on that issue.742

First, the Ninth Circuit noted textual differences between the prohibitions of Section

1201(a) and 1201(b). Section 1201(a) is directed to protecting a “work protected under this

title,” whereas Section 1201(b) is directed to protecting “a right of a copyright owner.”743

Noting that neither Section 1201(a)(1) nor 1201(a)(2) explicitly refer to traditional copyright

infringement under Section 106, the court read Section 1201(a) “as extending a new form of

protection, i.e., the right to prevent circumvention of access controls, broadly to works protected

737 MDY Industries, LLC v. Blizzard Entertainment, Inc., 616 F. Supp. 2d 958, 964-68 (D. Ariz. 2009). The court

noted that Warden did not prevent all WoW users from copying the dynamic nonliteral elements of the game

because players who did not use Glider could copy that content while connected to Blizzard servers. The court

noted, however, that Section 1201(b)(1)(A) requires only that the technological measure restrict or otherwise

limit unauthorized copying. Id. at 968 n.3.

738 MDY Industries, LLC v. Blizzard Entertainment, Inc., 2009 U.S. Dist. LEXIS 24151 (Mar. 10, 2009). The

court denied a motion for reconsideration of the denial of the stay of the tortious interference injunction. MDY

Industries, LLC v. Blizzard Entertainment, Inc., 2009 U.S. Dist. LEXIS 25650 (Mar. 25, 2009).

739 MDY Industries, LLD v. Blizzard Entertainment, Inc., 2009 U.S. Dist. LEXIS 38260 (D. Ariz. Apr. 1, 2009).

740 MDY Industries, LLC v. Blizzard Entertainment, Inc., 2011 U.S. App. LEXIS 3428 (9th Cir. Feb. 17, 2011).

741 Chamberlain Group, Inc. v. Skylink Technologies, Inc., 381 F.3d 1178, 1203 (Fed. Cir. 2004); Storage

Technology Corp. v. Custom Hardware Eng’g Consulting, Inc., 421 F.3d 1307 (Fed. Cir. 2005).

742 The court also rejected MDY’s contention that Warden’s scan.dll and resident components were separate, and

only scan.dll should be considered as a potential access control measure under Section 1201 (a)(2). The court

held that “an access control measure can both (1) attempt to block initial access and (2) revoke access if a

secondary check determines that access was unauthorized. Our analysis considers Warden’s scan.dll and

resident components together because the two components have the same purpose: to prevent players using

detectable bots from continuing to access WoW software” MDY Industries, 2011 U.S. App. LEXIS at *27.

743 Id. at *29-30.

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under Title 17, i.e., copyrighted works.”744 The court also noted that the two specific examples

of unlawful circumvention recited under Section 1201(a) – descrambling a scrambled work and

decrypting an encrypted work – are acts that do not necessarily infringe or facilitate infringement

of a copyright. Descrambling or decrypting do not necessarily result in someone’s reproducing,

distributing, publicly performing, or publicly displaying the copyrighted work, or creating

derivative works based on the copyrighted work.745

In addition, the court noted another significant difference between Section 1201(a) and

Section 1201(b) in that Section 1201(a)(1)(A) prohibits circumventing an effective access

control measure, whereas Section 1201(b) prohibits trafficking in circumvention devices, but

does not prohibit circumvention itself because, as the Senate Judiciary Committee report noted,

such conduct was already outlawed as copyright infringement, so no new prohibition was

necessary.746 Accordingly, the court concluded, “This difference reinforces our reading of §

1201(b) as strengthening copyright owners’ traditional rights against copyright infringement and

of § 1201(a) as granting copyright owners a new anti-circumvention right.”747 The court found

the legislative history of the anti-circumvention provisions of the DMCA to reinforce its reading

that Section 1201(a) creates a new anti-circumvention right distinct from copyright infringement,

while Section 1201(b) strengthens the traditional prohibition against copyright infringement.748

The Ninth Circuit noted that its reading of the anti-circumvention provisions put it in

conflict with the Federal Circuit’s decisions in the Chamberlain and Storage Tech cases, in

which the Federal Circuit required Section 1201(a) plaintiffs to demonstrate that the

circumventing technology infringes or facilitates infringement of the plaintiff’s copyright – what

the Ninth Circuit referred to as an “infringement nexus requirement.”749 Although the Ninth

Circuit stated that it appreciated the policy considerations expressed by the Federal Circuit in

Chamberlain, the Ninth Circuit found itself unable to follow the Federal Circuit’s infringement

nexus requirement because it is contrary to the plain language of the statute and would lead to

statutory inconsistencies in the DMCA. For example, under the Federal Circuit’s construction,

Congress’s creation of a mechanism in Section 1201(a)(1)(B)-(D) for the Librarian of Congress

to grant exemptions to certain non-infringing behavior from Section 1201(a)(1) liability would

be unnecessary if an infringement nexus requirement existed.750

744 Id. at *31.

745 Id.

746 Id. at *32.

747 Id. The court also noted that, if a copyright owner puts in place an effective measure that both (1) controls

access and (2) protects against copyright infringement, a defendant who traffics in a device that circumvents

that measure could be liable under both Sections 1201(a) and 1201(b). Id. at *35.

748 Id. at *35-40.

749 Id. at *40.

750 Id. at *45-46. The Ninth Circuit noted, that like the Chamberlain court, it need not reach the question of the

relationship between fair use and violations of Section 1201. MDY had not claimed that Glider use was a fair

use of WoW’s dynamic non-literal elements. Accordingly, the court left open the question whether fair use

might serve as an affirmative defense to a prima facie violation of Section 1201. Id. at *48 n.12.

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Turning to application of its construction of the anti-circumvention provisions to the facts

of the case, the Ninth Circuit agreed with the district court that Glider did not violate Section

1201(a)(2) with respect to WoW’s literal elements and individual non-literal elements, because

Warden did not effectively control access to those WoW elements. The literal elements (the

game client’s software code) were available on a player’s hard drive once the game client

software was installed, and the non-literal components could be accessed by a user without

signing on to the server by using independently purchased computer programs to call up the

visual images or the recorded sounds within the game client software stored in files on the hard

disk. Because a player needed not encounter Warden to access WoW’s individual non-literal

elements, Warden did not effectively control access to those elements.751 On this point, the

Ninth Circuit founds its conclusion in accord with the Sixth Circuit’s decision in the Lexmark

case,752 in which mere purchase of one of the plaintiff’s printers allowed “access” to the

copyrighted program, because it could be read directly from the printer memory without

encountering the printer’s authentication sequence.753

The court next found Blizzard to be liable for trafficking in violation of Section

1201(a)(2) with respect to WoW’s dynamic non-literal elements, which constituted a copyrighted

work available only through the WoW server. The Ninth Circuit noted a split between other

circuits with respect to the meaning of the phrase “circumvent a technological measure …

without the authority of the copyright owner.” The Federal Circuit concluded in Chamberlain

that the definition of “circumvent a technological measure” imposes an additional requirement

on a Section 1201(a)(2) plaintiff: to show that the defendant’s circumventing device enables

third parties to access the copyrighted work without the copyright owner’s authorization (citing

Chamberlain, 381 F.3d at 1193).754 The Second Circuit adopted a different view, “that §

1201(a)(3)(A) plainly exempts from § 1201(a) liability those whom a copyright owner authorizes

to circumvent an access control measure, not those whom a copyright owner authorizes to access

the work” (citing Corley, 273 F.3d at 333 & n.15).755 The Ninth Circuit found “the Second

Circuit’s view to be the sounder construction of the statute’s language, and [we] conclude that §

1201(a)(2) does not require a plaintiff to show that the accused device enables third parties to

access the work without the copyright owner’s authorization. Thus, Blizzard has satisfied the

‘circumvention’ element of a § 1201(a)2) claim, because Blizzard has demonstrated that it did

not authorize MDY to circumvent Warden.”756

The Ninth Circuit found, however, that MDY was not liable under Section 1201(b)(1)

because Warden did not protect MDY’s reproduction right against unauthorized copying.

Although WoW players copied the software code into RAM while playing the game, Blizzard’s

end user license agreement and Terms of Use authorized all licensed WoW players to do so.

751 Id. at *52-53.

752 See Section II.G.1(a)(15)(i) below.

753 Id. at *53-54.

754 Id. at *56 n.16.

755 Id.

756 Id.

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Because the court had found that the prohibition in the Terms of Use on use of bots was a

contractual covenant rather than a condition to the license,757 violation of the covenant by a

Glider user did not make the user a copyright infringer by continuing to copy code into RAM.

Second, although WoW players could theoretically record game play by taking screen shots,

there was no evidence that Warden detected or prevented such allegedly infringing copying.

Warden had been designed to reduce the presence of cheats and bots, not to protect WoW’s

dynamic non-literal elements against copying. Accordingly, the court ruled that Warden did not

effectively protect any of Blizzard’s rights under the copyright act, and MDY was therefore not

liable under Section 1201(b)(1) for Glider’s circumvention of Warden.758

(ix) Coupons, Inc. v. Stottlemire

The plaintiff offered coupon printing software that enabled online, printable coupons to

be delivered to consumers. The software placed a registry key file on the user’s personal

computer that acted as a counter, limiting the number of times each coupon could be printed on

that computer (typically, two prints per coupon). The defendant discovered how to remove the

counter, created a computer program that automated its removal, and distributed the program.

The plaintiff alleged that, because each coupon had its own unique bar code and date stamp, the

coupons were subject to copyright protection, and the defendant’s distribution of its computer

program violated the DMCA by allowing users to access more than the limit for each coupon.

The plaintiff also claimed that the act of printing constituted unauthorized copying. The

defendant brought a motion to dismiss.759 The court found fault with the plaintiff’s DMCA

claims:

These concepts seem to be logically inconsistent and, when asserted together, do

appear to blur the carefully constructed distinction between “access controls” and

“rights controls.” If the court accepts Coupons’ argument that each coupon is

“unique,” then can there be a claim of improper copying ….? On the other hand,

if the coupons are not unique, then the allegations against Stottlemire appear to

fall within the “rights controls” (i.e., permitting users to print more copies of

coupons than were authorized by Plaintiff).760

The court was also not convinced that the addition of a bar code or other functional

device on the coupon qualified it as a unique copyrighted work. But in any event, if Coupons

wanted to make the argument, then the court noted that it needed to actually allege it in the

complaint, and the plaintiff’s reference to “unique coupons” in the complaint was not sufficient

to put the defendant on notice of the claims against him. The court ruled that the plaintiff needed

to clarify which theory it was pursuing (a “unique” coupon theory or a “general” coupon theory).

Accordingly, the court dismissed the DMCA cause of action with leave to amend the complaint

to clarify whether the plaintiff was asserting a claim under a Section 1201(b) “rights controls”

757 See Section III.C.2(i) below.

758 2011 U.S. App. LEXIS 3428 at *60-61.

759 Coupons, Inc. v. Stottlemire, No. CV 07-03457 HRL (N.D. Cal. July 2, 2008), slip op. at 1, 4.

760 Id. at 4-5.

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theory (i.e., allowing users to print more than the authorized number of copies) or a claim under

a Section 1201(a) “access controls” theory (i.e., “unique” coupons).761

After the plaintiff amended its complaint, the defendant again brought a motion to

dismiss, which the court denied.762 In the amended complaint, the plaintiff claimed that each

printed coupon’s identification number marked it as an authorized copy of a copyrighted work,

and did not create a derivative work. The plaintiff asserted claims under both Sections 1201(a)

and 1201(b). The court ruled that the plaintiff had sufficiently alleged facts that its software

controlled access to the printing of the copyrighted coupon to state a claim under Section

1201(a). With respect to Section 1201(b), the court ruled that the plaintiff had adequately

alleged that its software controlled copying and distribution in two ways: the registry key

limited the number of coupons distributed to a single computer (simultaneously limiting the

number of authentic copies that the computer could print), and the software’s counter limited the

number of authentic coupons distributed as a whole. The court held that, although the plaintiff

would have to prove that its software actually worked as both an access and use control, it had

sufficiently alleged facts that supported its theory that the defendant had violated Section

1201(b), and the motion to dismiss was denied.763

(x) CoxCom, Inc. v. Chafee

CoxCom leased cable boxes to its subscribers that enabled them to descramble incoming

signals for viewing and that transmitted certain information from subscribers back to CoxCom,

including billing information association with purchase of pay-per-view programming. The

defendant sold a digital cable filter that filtered out low-frequency signals, including the return

transmissions from the cable box containing purchase information. The court noted that the

filters were not illegal, and had innocuous uses, such as allowing cable television subscribers to

enhance viewing quality by filtering out interference from FM radio broadcast towers, shortwave

radios, and home appliances. However, the defendants marketed the filters to their customers as

capable of filtering out pay-per-view charges.764 The plaintiffs brought claims under the DMCA

anti-circumvention provisions and the district court granted summary judgment to the plaintiffs

on those claims.765

On appeal, the First Circuit affirmed, rejecting the defendants’ argument that their filters

did not “circumvent” technological measures. The court found the technological measure at

issue to be CoxCom’s pay-per-view delivery and billing system that scrambled pay-per-view

programming to make it not viewable unless subscribers chose to purchase it.766 Without further

analysis, the First Circuit simply concluded: “A digital cable filter allows subscribers to ‘avoid’

761 Id. at 5.

762 Coupons, Inc. v. Stottlemire, 588 F. Supp. 2d 1069, 1072 (N.D. Cal. 2008).

763 Id. at 1073-75.

764 CoxCom, Inc. v. Chafee, 536 F.3d 101, 104-05 (1st Cir. 2008).

765 Id. at 106.

766 Id. at 110.

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or ‘bypass’ that technological measure. Given the factual record, we have little trouble

concluding that the district court properly granted summary judgment to CoxCom as to

appellants’ liability under the DMCA.”767

(xi) The DISH Network Cases

a. Dish Network v. Sonicview

DISH Network transmitted encrypted programming signals that were then received by an

EchoStar receiver, which processed and decrypted the signals using data and encryption

technology stored in a DISH Network access card loaded into the receiver. The access card

communicated with the receiver to assure that only signals the subscriber was authorized to

received would be decrypted. DISH Network brought anti-circumvention claims against the

defendants, whom DISH Network alleged were involved in the manufacture of receivers,

software and other devices used to intercept and steal DISH Network’s encrypted signals. Upon

a motion for a TRO, the court ruled that DISH Network’s security access cards functioned as

both access controls and copyright controls, and that the defendants’ distribution of software files

through a website that allowed individuals to decrypt and view DISH Network content likely

violated both Section 1201(a)(2) and 1201(b)(1).768

b. Dish Network v. SatFTA

In Dish Network v. SatFTA,769 the court found the defendant liable under Section

1201(a)(2) for trafficking in circumvention devices that aided in circumvention of Dish

Network’s signal and content security measures in its receivers, including software that

facilitated the unauthorized re-programming of Dish Network smartcards, circuit diagrams that

could be used to build a connector to interface with the EEPROM in a Dish Network receiver to

erase the data created by Dish Network’s electronic countermeasures and continue receiving

unauthorized programming, and diagrams depicting the storage locations of data that secured

communication between receivers and smartcards.770 The court also found the defendant liable

under Section 1201(b)(1) for trafficking in a program that allowed users to copy the

programming of a Dish Network satellite receiver to a computer hard drive. Dish Network

protected against unauthorized copying and distribution of recorded programming by saving the

copyrighted content in an unrecognizable format, and the court found that to be a sufficient

technological measure to invoke the protection of Section 1201(b)(1). The defendant contended

that his program served a legitimate function by allowing individuals to create backup copies of

767 Id.

768 Dish Network L.L.C. v. Sonicview USA, Inc., 2009 U.S. Dist. LEXIS 63429 at *2-3,*7-8 (S.D. Cal. July 23,

2009).

769 2011 U.S. Dist. LEXIS 25038 (N.D. Cal. Mar. 9, 2011).

770 Id. at *3-6, *12-13. The court also found the defendant liable for personal violations of Section 1201(a)(1) for

his admitted modification of Dish Network smartcards. The court rejected the defendant’s defense that he had

modified the smartcards only for the purpose of testing the operation of various receivers, not to receive an

unauthorized satellite signal. Id. at *10-11.

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their Dish Network recordings. The court rejected this defense, citing the case of Realnetworks,

Inc. v. DVD Copy Control Ass’n771 for the rule that, although the DMCA provides for a limited

fair use exception for certain end users of copyrighted works, the exception does not apply to

manufacturers or traffickers. Because the defendant’s program allowed a computer to overcome

Dish Network’s copy-control measures, it violated Section 1201(b)(1).772

c. Dish Network v. Dimarco

The case of Dish Network LLC v. Dimarco773 involved the impoundment of technology

that could be used to gain unauthorized access to Dish Network signals. When an authorized

EchoStar receiver received a Dish Network signal, it forwarded part of the signal called the

“entitlement control message” to a NagraStar smart card in the receiver. If the subscriber was

tuned to a channel he was authorized to receive, the smart card retrieved a decryption key from

its read-only memory and used the key to unlock the “control word” from the entitlement control

message. The smart card then transmitted the control word back to the receiver, and the receiver

used it to decode the incoming signal so the subscriber could watch the programming. Content

providers like Dish Network routinely changed their decryption keys to help thwart piracy. A

new form of piracy was developed called “Internet key sharing” or “IKS” whereby a pirate kept

his unauthorized receiver connected to the Internet for automatic re-flashing with the newest

keys, which were retrieved from an IKS server connected to multiple legitimate NagraStar smart

cards. Control words obtained from the authorized smart cards were sent from the IKS server

over the Internet to unauthorized receivers.774

The defendants sold unauthorized receivers with decryption software and hardware,

cables to connect the unauthorized receivers to the Internet for use with an IKS server, and

passwords to access the IKS server which were euphemistically referred to as “extended

warranty codes.” The defendants admitted that the receivers they sold were capable of being

used for piracy, but argued that because they did not themselves traffic in illegal encryption keys,

their products amounted to “modern day rabbit ears” for their customers to receive free satellite

programming. The receivers had no built-in means of connecting to the Internet, but the

defendants sold an adapter called a “WizHub” that enabled connection to the Internet.775

The defendants argued that the court should not impound its WizHubs or extended

warranty codes because the WizHub was simply an adapter and one could not engage in piracy

without the piracy software and IKS servers. The court rejected this argument, noting that a

device such as the WizHub permitting the connection of an otherwise legitimate receiver to the

Internet along with a password permitting access to a server with illegally trafficked decryption

keys could be said to constitute a product designed to circumvent a technological measure that

771 641 F. Supp. 2d 913 (N.D. Cal. 2009).

772 Dish Network, 2011 U.S. Dist. LEXIS 25038 at *13-14.

773 2012 U.S. Dist. LEXIS 33889 (D. Nev. Mar. 14, 2012).

774 Id. at *3-4.

775 Id. at *4, 11-12.

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effectively controlled access to a protected work. The court could not see any possible need for a

person using a free-to-air satellite receiver in a legitimate way to connect that receiver to the

Internet and enter a password to connect to a server whose sole purpose was the trafficking of

decryption keys. The court therefore ordered the impoundment of the WizHub connectors and

the extended warranty codes under Section 1203(b)(2), although not of the receivers themselves

(for which the plaintiffs had not sought impoundment). The court refused, however, to seize the

defendants’ web sites, which appeared to be used for the legitimate sale of free-to-air

receivers.776

d. Dish Network v. Sonicview

This case, a follow-on decision of the case described in subsection a. above, involved the

same kind of “Internet Key Sharing” (or “IKS”) piracy of Dish Network signals described in the

Dimarco case in the previous subsection. To enable IKS piracy, the defendants sold their

Sonicview receivers, each model of which contained firmware having more than one exact match

of the proprietary code and data that resided on the plaintiffs’ smart card, a particular algorithm

important for encrypting and decrypting Dish Network satellite signals, and a graphical user

interface. There were also strong similarities between the Sonicview receivers’ firmware and

that of existing piracy firmware. The defendants also sold a serial Ethernet adapter called the

iHub, which came with a 16-digit code that enabled the Sonicview receiver to access the IKS

server through a dongle and an add-on module that worked in conjunction with the receiver,

when loaded with piracy software, to receive Dish Network’s high-definition programming.

Sonicview also operated a web site that contained piracy software available for download which

was intended for use with Sonicview receivers to decrypt Dish Network’s satellite television

programming.777

The court found the defendants in violation of Section 1201(a)(2) by trafficking in the

receivers, iHubs, add-on modules, and piracy software. The combination of a Sonicview

receiver, iHub, and add-on module, when loaded with the piracy software, permitted

unauthorized access to Dish Network’s satellite programming. The court, citing two other

district court decisions to the same effect, noted that potential lawful or fair use is not a defense

to Section 1201(a) when its requirements are established. The court awarded statutory damages

of $200 per violation for 324,901 violations (at least 307,401 receivers and 17,500 iHubs sold),

for a total award of $64,980,200.778

e. Dish Network v. Alejandri

In Dish Network v. Alejandri,779 the court granted summary judgment to the plaintiffs

that the defendants’ sale of free-to-air receivers together with referral to service providers who

776 Id. at *12-15, 17.

777 Dish Network, LLC v. Sonicview USA, Inc., 2012 U.S. Dist. LEXIS 75663 at *10-11, 13 (S.D. Cal. May 31,

2012).

778 Id. at *22, 24-25 & 40-41.

779 2012 U.S. Dist. LEXIS 106839 (D. Puerto Rico July 30, 2012).

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could program them using the IKS piracy technology to receive Dish Network signals without

payment of subscriber fees violated Section 1201(a)(1)(A) of the DMCA. The court noted that

the defendants’ equipment used for unlawful circumvention, which had been impounded, would

be disposed of by the U.S. Marshals’ Service upon order of the court at the conclusion of the

proceedings.780 The court also found a violation of Section 605(a) of the Communication Act

(47 U.S.C. § 605(a)) and awarded statutory damages under that Act. The court did not award

statutory damages under the DMCA – although the court’s opinion does not make clear, it

appears that the plaintiffs did not seek statutory damages under the DMCA.781

(xii) Realnetworks v. DVD Copy Control Association.

In Realnetworks, Inc. v. DVD Copy Control Association, Inc.,782 the DVD Copy Control

Association (DVDCCA) brought claims alleging that distribution of Realnetworks’ RealDVD

product violated the anti-trafficking provisions of the DMCA. DVDCCA licenses the Content

Control System (CSS) technology, which combines multiple layers of encryption with an

authentication process to protect the content on DVDs. CSS requires that a DVD drive lock

upon insertion of a CSS-protected DVD and prevent access to its contents until a CSS-authorized

player engages in an authentication procedure, akin to a secret handshake, to establish mutual

trust. It also requires that players authenticate themselves to DVD drives to establish mutual

trust, both to unlock the DVD and gain access to its protected video contents and also separately

to gain access to keys stored in secure areas of the DVD, which then decrypt and descramble the

DVD content. The process of authentication with the DVD drive, and subsequent content

decryption, will fail if a DVD is not in the DVD drive. Finally, the CSS technology creates a

system whereby content on a DVD may be played back only in decrypted and unscrambled form

from the physical DVD and not any other source, such as a computer hard drive.783

The RealDVD product provided a variety of functions, including playing back DVDs

placed in a computer’s DVD drive, looking up information about the DVD from Internet

databases, providing links to various information web sites relevant to the chosen DVD, and –

the function at issue in the lawsuit – saving an image of the copy-protected content on the

device’s hard drive for later playback without the physical DVD being present.784

The court ruled that the CSS technology was both an access control and a copy control

(the authentication process functioned as an access control and the encryption functioned as a

copy control),785 and that distribution of RealDVD therefore violated the anti-trafficking

780 Id. at *10-14, 21-25 & 28-29.

781 Id. at *16-21, 25-28.

782 641 F. Supp. 2d 913 (N.D. Cal. 2009).

783 Id. at 919-20.

784 Id. at 924. The RealDVD und user license agreement provided, “You may use the saving functionality of the

Software only with DVDs that you own. You may not use the Software to save DVDs that you do not own,

such as rental or borrowed DVDs.” Id. at 926.

785 Id. at 935.

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provisions of both Sections 1201(a)(2) and 1201(b). RealDVD circumvented the access controls

of CSS in violation of Section 1201(a)(2) by allowing access of CSS content on the hard drive

without going through most of the CSS protection steps, such as DVD drive-locking, CSS

authentication, and CSS bus encryption. Once RealDVD had copied a DVD, it did not

authenticate the DVD drive or receive encrypted keys for playback from the hard drive.

Accordingly, the process of authentication with the DVD drive, and subsequent content

decryption, were thereby circumvented by RealDVD.786 RealDVD circumvented the copy

controls of CSS in violation of Section 1201(b) by using the CSS authentication codes and

algorithms to make an unauthorized copy of the DVD content.787

The court rejected a number of defenses asserted by Realnetworks. First, Realnetworks

argued that CSS was not an “effective” technological measure because it had been widely

cracked. The court found this fact of no moment, because the DMCA is predicated on the

authority of the copyright owner, not whether or not the technological measure is a strong means

of protection. The court held that it is sufficient under the statutory language if an access control

prevents the easy creation at the consumer level of widely available and usable copies of

copyrighted works.788

The court rejected Realnetworks’ argument that the copyright holder plaintiffs (the movie

studios) could not bring a DMCA claim against a co-licensee to CSS technology. Realnetworks

cited cases holding that copyright licenses are governed by contract law and copyright owners

who enter into such licenses waive their rights to sue the licensee for copyright infringement and

are limited to breach of contract claims. The court distinguished those cases, noting that the

studios were not bringing copyright infringement claims, nor were they the direct licensors of

CSS technology. Because Realnetworks had acted outside the scope of its license with the

DVDCCA, the studios were permitted to bring circumvention claims under the DMCA.789

The court also rejected Realnetworks defenses that distribution of RealDVD was

protected by the Sony doctrine because it was capable of substantial noninfringing uses and by

virtue of the fact that the copying it permitted fell within the fair use rights of users who made

copies for personal, noncommercial use. First, the court held that the DMCA supersedes Sony to

the extent that the DMCA broadened copyright owners’ rights beyond the Sony holding.

Second, the court ruled that whether consumer copying of a DVD for personal use is a fair use

was not at issue, because while the DMCA provides for a limited fair use exception for certain

end users of copyrighted works, the exception does not apply to manufacturers or traffickers of

the devices prohibited by Section 1201(a)(2).790 “So while it may well be fair use for an

individual consumer to store a backup copy of a personally-owned DVD on that individual’s

786 Id. at 933.

787 Id. at 935.

788 Id. at 932.

789 Id. at 933.

790 Id. at 941-43.

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computer, a federal law has nonetheless made it illegal to manufacture or traffic in a device or

tool that permits a consumer to make such copies.”791

Accordingly, the court granted a preliminary injunction against the distribution of

RealDVD.792

(xiii) Apple v. Psystar

In Apple, Inc. v. Psystar Corp.793 Apple contended that Psystar’s distribution of modified

copies of its Mac OS X operating system on non-Apple computers constituted copyright

infringement and illegal trafficking in circumvention devices. Apple distributed Mac OS X

subject to a license agreement that prohibited its use on any non-Apple-labeled computer. Apple

used lock-and-key technological measures to prevent Mac OS X from operating on non-Apple

computers. Specifically, it encrypted the files of Mac OS X and used a kernel extension that

communicated with other kernel extensions to locate a decryption key in the hardware and use

that key to decrypt the encrypted files of Mac OS X. Psystar distributed a line of computers

called Open Computers that contained copies of Mac OS X, modified to run on Psystar’s own

hardware, which was not authorized by Apple.794

Psystar’s had engaged in the following conduct at issue. It bought a copy of Mac OS X

and installed it on an Apple Mac Mini computer. It then copied Mac OS X from the Mac Mini

onto a non-Apple computer for use as an “imaging station.” Once on the imaging station, Mac

OS X was modified. Psystar then replaced the Mac OS X bootloader (a program that runs when

a computer first powers up and locates and loads portions of the operating system into random

access memory) and disabled and/or removed Mac OS X kernel extension files and replaced

them with its own kernel extension files. Psystar’s modifications enabled Mac OS X to run on

non-Apple computers. The modified copy of Mac OS X became a master copy that was used for

mass reproduction and installation onto Psystar’s Open Computers.795

The court first ruled that Psystar had violated Apple’s exclusive right to copy Mac OS X

by making copies of the modified version of OS X and installing them on non-Apple computers,

and by making copies of such software in random access memory when turning on its computers

running Mac OS X. The court refused to allow Psystar to assert a defense to such copying under

Section 117 of the copyright statute, ruling that Psystar had waived such a defense by failing to

plead it.796 The court also held that distribution of Psystar’s computers infringed Apple’s

exclusive distribution rights with respect to Mac OS X. The court rejected Psystar’s defense

791 Id. at 942.

792 Id. at 952.

793 673 F. Supp. 2d 931 (N.D. Cal. 2009), aff’d, 658 F.3d 1150 (9th Cir. 2011), cert. denied, 132 S. Ct. 2374 (2012).

794 Id. at 933-34.

795 Id. at 934.

796 Id. at 935. Without giving any reasons why, the court also observed that “the assertion of Section 117 is so

frivolous in the true context of how Psystar has used Mac OS X that a belated attempt to amend the pleadings

would not be excused.” Id. at 936.

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under the first sale doctrine, based on the fact that it allegedly included a legitimately purchased

Mac OS X DVD with every Psystar computer. The court held that the first sale defense under

Section 109 provides immunity only when copies are lawfully made, and the master copy of the

modified Mac OS X residing on Psystar’s imaging station was unauthorized, as were all the

many unauthorized copies that were made from such master copy.797 The court also concluded

that Psystar had violated Apple’s exclusive right to create derivative works by replacing the Mac

OS X bootloader with a different bootloader to enable an unauthorized copy of Mac OS X to run

on Psystar’s computers, by disabling and removing Apple kernel extension files, and by adding

non-Apple kernel extension files. The court rejected Psystar’s contention that these

modifications did not amount to creation of a derivative work because Apple’s source code,

object code and kernel extensions had not been modified. The court held that the replacement of

entire files within the software while copying other portions resulted in a substantial variation

from the underlying copyrighted work and therefore an infringing derivative work.798

Turning to Apple’s trafficking claim, the court noted that Apple’s encryption of the Mac

OS X operating system files, although aimed primarily at controlling access, also effectively

protected its right to copy, at least for copies made in RAM. Accordingly, the encryption

scheme constituted both an access control measure and a copy control measure. Psystar’s

distribution of “decryption software” (apparently referring to Psystar’s substituted kernel

extension files that obtained Apple’s decryption key from the hardware and then used that key to

decrypt the Mac OS X modules) violated both Section 1201(a)(1)(A) and Section 1201(b)(1)

because it enabled obtaining unauthorized access to Mac OS X and resulted in an unauthorized

copy of Mac OS X being loaded into RAM.799

The court rejected Psystar’s argument that Apple’s technological protection measure was

not effective because the decryption key for circumvention was publicly available on the

Internet. “The fact that circumvention devices may be widely available does not mean that a

technological measure is not, as the DMCA provides, effectively protecting the rights of

copyright owners in the ordinary course of its operations.”800 Accordingly, the court granted

Apple’s motion for summary judgment.801

The court also rejected Psystar’s argument that Apple’s alleged attempt to use copyright

to tie Mac OS X to Apple hardware constituted copyright misuse. Because Apple had not

prohibited others from independently developing and using their own operating system, it had

not violated the public policy underlying copyright law or engaged in copyright misuse. The

court noted that Apple had not prohibited purchasers of Mac OS X from using competitor’s

products. Rather, it had simply prohibited purchasers from using OS X on competitor’s

797 Id. at 937.

798 Id. at 938.

799 Id. at 941.

800 Id. at 942 (quoting Sony Computer Entm’t Am., Inc. v. Divineo, Inc., 457 F. Supp. 2d 957, 965 (N.D. Cal.

2006)).

801 Psystar, 673 F. Supp. 2d at 942.

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products. Thus, Apple’s license agreement was simply an attempt to control the use of its own

software.802

On appeal, the defendant did not challenge the district court’s rulings of infringement, but

rather challenged the district court’s rejection of Psystar’s misuse defense. The Ninth Circuit

affirmed the district court’s copyright misuse rulings.803 After a review of relevant misuse

decisions by courts in the Ninth Circuit, the court concluded, “A software licensing agreement

may reasonably restrict use of the software as long as it does not prevent the development of

competing products.”804 The court found that Apple’s license agreement did not impermissibly

do so: “Apple’s [license agreement] does not restrict competitor’s ability to develop their own

software, nor does it preclude customers from using non-Apple components with Apple

computers. Instead, Apple’s [license agreement] merely restricts the use of Apple’s own

software to its own hardware. … Psystar produces its own computer hardware and it is free to

develop its own computer software.”805 The court also rejected Psystar’s reliance on the first

sale doctrine, arguing that Apple was attempting to control the use of the Mac OS X software

after it had been sold, because Psystar purchased retail-packaged copies of the OS. The court

found that the argument falsely assumed that Apple transferred ownership of the Mac OS X

when it sold a retail-packaged DVD containing software designed to enable Apple’s existing

customers to upgrade to the latest version of the OS. The court found that, although buyers of

the DVD purchased the disc, they knew they were not buying the software, as Apple’s license

agreement clearly explained as much. Accordingly, the DVD purchasers were licensees, not

owners, of the copies of the software.806 The Ninth Circuit therefore affirmed the district court’s

grant of summary judgment in favor of Apple and its entry of a permanent injunction against

Psystar’s infringement of the Mac OS X.807

(xiv) Blizzard Entertainment v. Reeves

In this case, the defendant ran a website that enabled its users to bypass the checks and

restrictions for access to the plaintiff’s World of Warcraft online gaming environment. After

granting a default judgment, the court turned to what the appropriate award of statutory damages

should be. The court estimated the number of circumvention violations by looking to the total

number of community members on the defendant’s website (427,393), each of whom was

assumed to have downloaded, access or otherwise used anti-circumvention software, services, or

products offered by the defendant. The court then awarded the $200 minimum amount per

violation, for a total award of $200 x 427,393 = $85,478,600.808

802 Id. at 939-40.

803 Apple, Inc. v. Psystar Corp., 658 F.3d 1150, 1152 (9th Cir. 2011), cert. denied, 132 S. Ct. 2374 (2012).

804 Id. at 1159.

805 Id. at 1160.

806 Id. at 1159-60.

807 Id. at 1162.

808 Blizzard Entertainment, Inc. v. Reeves, 2010 U.S. Dist. LEXIS 85560 at *7-8 (C.D. Cal. Aug. 10, 2010).

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(xv) The Craigslist Cases

a. Craigslist v. Naturemarket

In Craigslist, Inc. v. Naturemarket,809 the defendants distributed software that bypassed

the CAPTCHA system of the Craigslist site and enabled users to post ads automatically in

whatever quantity, frequency, and location the user wished, in violation of the Craigslist site

Terms of Use.810 Upon a motion for a default judgment, a magistrate judge issued an opinion

recommending that the defendants’ distribution of the software be found in violation of Sections

1201(a)(2) and 1201(b)(1) because the software “enabled unauthorized access to and copies of

copyright-protected portions of Plaintiff’s website controlled by [the CAPTCHA system] –

particularly the ad posting and account creation portions of the website.”811 The magistrate

judge also recommended an award of statutory damages in the amount of $1,000 per copy of

software distributed, estimated at 470 copies (obtained by dividing the defendants’ estimated

revenue of $40,000 by the list price of $84.95 for the software), for a total statutory damages

award of $470,000.812 The district court adopted the magistrate judge’s recommendations and

opinion in every respect, and entered a permanent injunction against the defendants enjoining

them from distributing software that enabled postings on Craigslist without each posting being

entered manually or that used automated means to download or otherwise obtain data from

Craigslist, from circumventing the CAPTCHA system or other technological measures

controlling access to the site, from repeatedly posting the same or similar content on the site or in

more than one category, and from accessing or using the site for any commercial purpose

whatsoever.813

b. Craigslist v. Mesiab

In Craigslist, Inc. v. Mesiab,814 a magistrate judge recommended that the plaintiff’s

motion for default judgment and award of statutory damages be granted based on violations of

the DMCA anti-circumvention provisions in the following ways:

– Distribution of “EasyAd Suite” software that bypassed the CAPTCHA system of the

Craigslist site and enabled users to post ads automatically and in unlimited quantity. The

magistrate recommended that an award of $800 per copy sold be increased to $1,500 per copy

809 694 F. Supp. 2d 1039 (N.D. Cal. 2010) (report and recommendation of magistrate judge re plaintiff’s motion for

default judgment).

810 Id. at 1048-49.

811 Id. at 1056.

812 Id. at 1063-64. The magistrate judge also recommended that an award of actual damages be made against the

defendants based on the liquidated damages clause of the Terms of Use, which provided for $200 for every ad

the defendants posted as posting agents on behalf of users, for a total of $840,000. Id. at 1064.

813 Craigslist, Inc. v. Naturemarket, Inc., 694 F. Supp. 2d 1039 (N.D. Cal. 2010) at 1046-47.

814 2010 U.S. Dist. LEXIS 134411 (N.D. Cal. Nov. 15, 2010).

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because the defendants had shown disregard for the injunction entered by the court. Based on

2,983 copies of the software distributed, the magistrate recommended an award of $4,474,500.815

– Sale or offer for sale of “CAPTCHA credits,” which was a service to circumvent

CAPTCHAs through instantaneous outsourcing for occasions when the EasyAd Suite program

was unable to decode the CAPTCHA. The defendants also offered CAPTCHA circumventions

in bulk for prices ranging from $12.50 for 500 credits to $157.50 for 10,000 credits. The

magistrate ruled that damages under the DMCA could properly be calculated based on offers to

sell and not actual sales of CAPTCHA credits, as well as credits sold through a third party.

Because it was uncontested that defendants’ web site offered to sell CAPTCHA credits and those

offers were made to at least the number of people who purchased the EasyAd Poster Deluxe

software, the magistrate found the defendants liable for damages for 2,983 offers. The

magistrate recommended an award of $400 per violation for offers to sell CAPTCHA credits, for

an award of $1,193,200.816

– Offers of Craigslist telephone-verified accounts. The “Adult” and “Therapeutic

Services” categories on Craigslist required telephone verification in order to post ads and the

telephone-verified accounts offered by the defendants allowed purchasers to pay to have their

accounts fraudulently verified by contracted employees or devices. Again applying the rule that

offers for sale were sufficient for damages, the magistrate found that at least 1,000 offers for

telephone-verified accounts were made, and that an award of $400 per offer was reasonable

($400,000 in total).817

The district court adopted the magistrate’s recommendation in full and entered judgment

against the defendants for a total statutory damages award of $6,067,700.818

c. Craigslist v. Hubert

In Craigslist, Inc. v. Hubert,819 the court ruled, on an entry of default judgment after the

defendant failed to appear, that the sale of software allowing users to automatically post ads to

Craigslist and the provision of a service that automated and circumvented the entry of

CAPTCHA passwords violated the ant-circumvention provisions of the DMCA. The court

awarded statutory damages of $400 for each of the 3,000 users of the defendant’s web site, on

the theory that each user received an “offer” to circumvent in the form of an offer to purchase the

defendant’s software or CAPTCHA credits, for a total award of $1,200,000. The court rejected

the plaintiff’s request for the statutory maximum of $2,500 per offer, finding that such an award

815 Id. at *30-32.

816 Id. at *6, 33-35.

817 Id. at *35-37.

818 Craigslist, Inc. v. Mesiab, 2010 U.S. Dist. LEXIS 134381 (N.D. Cal. Dec. 20, 2010).

819 2010 U.S. Dist. LEXIS 143037 (N.D. Cal. Apr. 15, 2010).

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would be vastly disproportional to the actual costs the plaintiff alleged it had incurred as a result

of auto-posting, $5,000 per year.820

d. Craigslist v. Branley

In this case, the court denied Craigslist’s request for a default permanent injunction

against a defendant who failed to appear because Craigslist had not alleged facts sufficient to

support the allegation that the defendant would continue to act as an agent posting ads for third

parties by circumventing Craigslist’s CAPTCHA system using software known as “CLAD

Genius,” in violation of Section 1201 and Craigslist’s Terms of Use.821

e. Craigslist v. Kerbel

In this case, the court granted the plaintiff’s motion for a default judgment, finding that

the plaintiff had adequately pled claims for violation of the anti-circumvention provisions based

on the defendants’ alleged bypassing of Craiglist’s CAPTCHA software and its phone

verification measures in order to automatically create accounts and post ads to Craigslist. The

court awarded statutory damages of $200,000, calculated on the defendants’ offer to sell a bundle

of 10,000 “credits” used to purchase phone-verified accounts on Craigslist at 10 credits each,

representing 1,000 offers to sell the accounts, multiplied by the minimum statutory damages

award of $200 per violation.822

(xvi) Echostar v. Viewtech

In Echostar Satellite LLC v. Viewtech, Inc.,823 the court granted the plaintiff summary

judgment on its claim under Section 1201(a)(2) against the defendants for the distribution of

receivers structurally altered so as to be capable of unauthorized decryption of Echostar satellite

TV programming and of software that would enable the piracy of Echostar’s programming. The

court also found that the defendants’ provision of free receiver to moderators on popular piracy

web sites and encouragement of the moderators to provide favorable reviews of the receiver’s

ability to obtain the plaintiff’s protected programming violated the third prong of Section

1201(a)(2), which prohibits marketing a technology used in circumventing an access measure.

The court awarded statutory damages of $214,898,600, representing $200 for each of at least

1,074,493 receivers intended for piracy sold by the defendants.824

820 Id. at *4, 10-13.

821 Craigslist, Inc. v. Branley, 2012 U.S. Dist. LEXIS 36731 at *4-5, 12 (N.D. Cal. Mar. 19, 2012).

822 Craigslist, Inc. v. Kerbel, 2012 U.S. Dist. LEXIS 108573 at *26-27, 49-50 (N.D. Cal. Aug. 2, 2012).

823 2011 U.S. Dist. LEXIS 42709 (S.D. Cal. Apr. 20, 2011).

824 Id. at *4-5, *8-11.

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(xvii) Adobe Systems v. Feather

In this case, the defendant offered for sale and distributed pirated copies of the plaintiffs’

software via the Internet, including on eBay and through his own website. He also trafficked in

and sold product keys or serial numbers designed to circumvent the plaintiffs’ copyright

protection measures to enable the pirated copies to function. Upon a motion for default

judgment, the court found that the defendant’s actions, as alleged in the complaint, established

violations of Section 1201(a)(2) and of willful copyright infringement. The court awarded

statutory damages for willful infringement under Section 504(c)(2) in the amount of $90,000 for

each of 28 copyrighted works infringed, for a total award of $2,520,000 in damages. The

plaintiffs did not seek separate damages for their DMCA claim, and the court noted in a footnote

that they could not do so in any event, citing other authority for the proposition that a plaintiff

cannot seek duplicative statutory damages under the Copyright Act and the DMCA.825 Note that

the ruling with respect to “duplicative” statutory damages seems contrary to other cases, such as

the Pacific Stock v. MacArthur & Co. case discussed in Section G.1(c)(1)(xi) below, which

awarded statutory damages for CMI violations in addition to statutory damages for copyright

infringement arising out of the same acts.

(3) What Constitutes an Effective Technological Measure

(i) Auto Inspection Services v. Flint Auto Auction

In Auto Inspection Services v. Flint Auto Auction,826 the plaintiff was the owner of an

automotive inspection program that provided a uniform method of inspecting vehicles after the

term of a lease or use had expired. The plaintiff included a quality control feature as part of the

program that allowed it to monitor all information collected using the program. For example,

when a vehicle inspector collected data for a vehicle and entered it into the program, the data had

to be sent to the plaintiff for quality control inspection before the information could be forwarded

to the owner of the vehicle. In this way, the plaintiff could monitor who was using the program

to protect against unauthorized use.827

The defendant, a former licensee of the plaintiff’s program, wrote its own automotive

inspection program to replace the plaintiff’s program. The plaintiff claimed that the defendant’s

program was a copyright infringement. The plaintiff also claimed that its quality control feature

constituted a technical protection measure to restrict access and use of its software, and that the

defendant had violated the anti-circumvention provisions of the DMCA by circumventing the

quality control feature to gain access to the plaintiff’s source code to copy it.828

The court found it questionable that the quality control feature was a technical measure

that effectively controlled access to a protected work within the purview of the DMCA. The

825 Adobe Sys v. Feather, 895 F. Supp. 2d 297, 301-02 & 303 n.5 (D. Conn. 2012).

826 2006 U.S. Dist. LEXIS 87366 (E.D. Mich. Dec. 4, 2006).

827 Id. at *1-2.

828 Id. at *4-5, 22.

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court noted that the protected work at issue was the source code of the program, and the user

detection feature was a part of the program itself that in no way controlled access to the source

code. Rather, it merely alerted the plaintiff as to who was using the program. Consequently, the

user detection feature would not prevent anyone from gaining access to the source code and

copying it verbatim. Moreover, the feature came into play only after a user had conducted an

inspection, and did not prevent unauthorized users from accessing the program in the first

instance.829

(ii) Healthcare Advocates, Inc. v. Harding, Earley,

Follmer & Frailey

In Healthcare Advocates, Inc. v. Harding, Earley, Follmer & Frailey,830 the court

addressed the issue of whether a robots.txt file applied to a web site to indicate no archival

copying by robots should take place constitutes an effective technological measure. Healthcare

Advocates had filed a lawsuit alleging that a competitor infringed trademarks and copyrights and

misappropriated trade secrets belonging to Healthcare Advocates. The defendants in that case

were represented by the boutique IP law firm of Harding, Earley, Follmer & Frailey. To aid in

preparing a defense, on two occasions employees of the Harding firm accessed screenshots of

old versions of Healthcare Advocates’ web sites that had been archived by the Internet Archive’s

web site (www.archive.org). The old versions of the web site were accessed through the

“Wayback Machine,” an information retrieval system offered to the public by the Internet

Archive that allowed users to request archived screenshots contained in its archival database.

Viewing the content that Healthcare Advocates had included on its public web site in the past

was very useful to the Harding firm in assessing the merits of the trademark and trade secret

allegations brought against the firm’s clients.831

The Internet Archive had a policy to respect robots.txt files and not to archive sites

containing a robots.txt file that indicated the site should not be archived. In addition, for those

web sites that did not have a robots.txt file present at the web site’s inception, but included it

later, the Internet Archive would remove the public’s ability to access any previously archived

screenshots stored in its database. The archived images were not deleted, but were instead

rendered inaccessible to the general public, and the Internet Archive’s web crawler was

instructed not to gather screenshots of that web site in the future.832

Healthcare Advocates had not included a robots.txt file on its web site prior to July 7,

2003. Consequently, Internet Archive’s database included screenshots from Healthcare

Advocates’ web site when the Harding firm’s employees accessed that database through the

Wayback Machine on July 9, 2003 and July 14, 2003. On those two dates of access, however,

the Internet Archive’s servers, which checked for robots.txt files and blocked the images from

being displayed from the corresponding web site, were malfunctioning due to a cache exhaustion

829 Id. at *23.

830 2007 U.S. Dist. LEXIS 52544 (E.D. Pa. July 20, 2007).

831 Id. at *1-3.

832 Id. at *7-8.

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condition. Because of this malfunction, employees of the Harding firm were able to view and

print copies of the archived screenshots of Healthcare Advocates’ web site stored in Internet

Archive’s database, contrary to Internet Archives’ normal policy. Healthcare Advocates sued the

Harding firm, alleging that it has manipulated the Wayback Machine on the two dates in question

in a way that rendered useless the protective measure of the robots.txt file that Healthcare

Advocates had placed on its web site, in violation of the anti-circumvention provisions of the

DMCA.833

The court turned first to the question of whether the robots.txt file used by Healthcare

Advocates qualified as a technological measure effectively controlling access to its web site as

defined in the Section 1201(a)(3)(B) of the DMCA. The court concluded on the particular facts

of the case that it did, although the court refused to hold that a robots.txt file universally

constitutes a technological protection measure:

The measure at issue in this case is the robots.txt protocol. No court has found

that a robots.txt file universally constitutes a “technological measure effectively

controll[ing] access” under the DMCA. The protocol by itself is not analogous to

digital password protection or encryption. However, in this case, when all

systems involved in processing requests via the Wayback Machine are operating

properly, the placement of a correct robots.txt file on Healthcare Advocates’

current website does work to block users from accessing archived screenshots on

its website. The only way to gain access would be for Healthcare Advocates to

remove the robots.txt file from its website, and only the website owner can

remove the robots.txt file. Thus, in this situation, the robots.txt file qualifies as a

technological measure effectively controlling access to the archived copyrighted

images of Healthcare Advocates. This finding should not be interpreted as a

finding that a robots.txt file universally qualifies as a technological measure that

controls access to copyrighted works under the DMCA.834

However, the court found no violation of the DMCA by the actions of the Harding firm

employees because those employees had not acted to “avoid” or “bypass” the technological

measure. The court noted that those choice of words in the DMCA “imply that a person

circumvents a technological measure only when he affirmatively performs an action that disables

or voids the measure that was installed to prevent them from accessing the copyrighted

material.”835 The employees of the Harding firm had not taken such affirmative action. As far

as they knew, no protective measures were in place with respect to the archived screenshots they

were able to view, and they could in fact not avoid or bypass any protective measure because on

the dates in question nothing stood in the way of them viewing the screenshots.836

833 Id. at *4, 8-10, 43.

834 Id. at *41-42 (citation omitted).

835 Id. at *46.

836 Id. at *47.

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Healthcare Advocates argued that liability under the DMCA should be judged on what

the Harding firm knew, not what actions it took. Healthcare Advocates argued that the Harding

firm knew it was not permitted to view certain archived images, because some of the images

were blocked. Healthcare Advocates therefore claimed that the firm knew or should have known

that it was not supposed to be able to view any of the screenshots at issue, and that any request

made for archived images after the first request resulted in a denial constitute circumvention of

its robots.txt file. The court rejected this argument, ruling that simply making further requests is

not circumvention under the DMCA. The requests did not alter any computer code to render the

robots.txt file void. Internet Archive’s servers indicated that no lock existed when the requests

were made. Accordingly, the Harding firm could not avoid or bypass a digital wall that was not

there.837

The court also ruled that Healthcare Advocates’ inference that the Harding firm should

have known it was not allowed to view any archived images via the Wayback Machine was both

unreasonable and irrelevant. When a screenshot was blocked, the Wayback Machine returned a

message stating that the page was blocked by the web site owner, but the message also included

links, one of which said, “Try another request or click here to search for all pages on

healthcareadvocates.com.” When this page appeared, the firm’s employee clicked on the link

and received a list of all available screenshots.838 The court held that, even if the firm knew that

Healthcare Advocates did not give it permission to see its archived screenshots, “lack of

permission is not circumvention under the DMCA.”839 Accordingly, the court granted the

Harding firm summary judgment on Healthcare Advocates’ claim of a violation of the DMCA.840

(iii) Apple v. Psystar

The facts of this case are set forth in Section II.G.1(b)(14) above. The court rejected the

defendant’s argument that Apple’s encryption of its Mac OS X operating system files, which

were decrypted by a decryption key stored within Apple’s hardware, was not an effective

technological protection measure because the decryption key was publicly available on the

Internet. “The fact that circumvention devices may be widely available does not mean that a

technological measure is not, as the DMCA provides, effectively protecting the rights of

copyright owners in the ordinary course of its operations.”841

(4) No Requirements With Respect to Design of a Product

Section 1201(c)(3) provides that nothing in the bills “shall require that the design of, or

design and selection of parts and components for, a consumer electronics, telecommunications,

or computing product provide for a response to any particular technological measure ….”

837 Id. at *47-50.

838 Id. at *50-51.

839 Id. at *51.

840Id.

841 Apple, Inc. v. Psystar Corp., 673 F. Supp. 2d 931, 942 (quoting Sony Computer Entm’t Am., Inc. v. Divineo,

Inc., 457 F. Supp. 2d 957, 965 (N.D. Cal. 2006)).

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(5) Other Rights Not Affected

Sections 1201(c)(1), (2), and (4) provide that Section 1201 is not intended to affect rights,

remedies, limitations, or defenses (including fair use) to copyright infringement; or to enlarge or

diminish vicarious or contributory liability in connection with any technology or product; or to

enlarge or diminish any rights of free speech of the press for activities using consumer

electronics, telecommunications, or computing products.

Notwithstanding these provisions, groups such as the Digital Future Coalition (DFC)

have criticized the approach of the DMCA. In a position paper dated August 1997,842 the DFC

argued that Section 1201 would effectively negate fair use rights, because it imposes liability for

“circumvention” even when the purpose of the activity is permitted by the copyright act (such as

reverse engineering or other activities that otherwise constitute fair use). The DFC also argued

that Section 1201 would outlaw legitimate devices with substantial noninfringing uses,

effectively overruling the Supreme Court’s decision in Sony Corp. v Universal City Studios.843

The DFC argued that the savings clauses of Section 1201(c) are inadequate because

“while Section 1201 will not as a formal matter restrict existing limitations and exceptions to

copyright, it will as a practical matter preclude the exercise of these limitations and exceptions

by preventing the manufacture and use of the technologies necessary for their existence. Nor

would the savings clause protect individuals who gain ‘access’ to works in violation of

1201(a)(1), even if they do so for entirely lawful purposes.”844

Another position paper filed on behalf of the Information Technology Industry Council

raised concern that Section 1201 will impose liability too broadly in view of the broad definition

of “circumvention”:

Thus, if a device does not respond to a technological protection measure that is

intended to control copying, which in some cases may be a simple 1 or 0 in

header information included with the digital content, the device may be construed

as avoiding, bypassing, deactivating or impairing that measure.… Companies

that make devices that do not respond to copy flags – because they don’t know

about the flags or because of technological difficulties associated with complying

– could be liable under Section 1201 even though they had no intent to

circumvent.845

842 The position paper may be found at www.ari.net/dfc/docs/stwip.htm.

843 464 U.S. 417 (1984).

844 Position paper at 3.

845 Prepared Statement of Chris Byrne of Silicon Graphics, Inc. on Behalf of the Information Technology Industry

Council Before the House Judiciary Committee Courts and Intellectual Property Subcommittee (Wed., Sept. 17,

1997) (available from Federal News Service, 620 National Press Building, Washington, D.C. 20045, and on file

with the author). Section 1201(c)(3), discussed above, appears to be directed at least in part to addressing this

issue.

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The paper also raised concern about broadening the standard for liability for third party

use of devices that infringe copyright owner’s rights from that of the Sony case, which imposes

liability only for sale of devices having no substantial noninfringing uses, to the prohibition

under the bill of devices that are “primarily designed or produced” for circumvention, or have

“only limited commercially significant purpose” other than circumvention, or are marketed for

use in circumvention.

(6) Exemption for Nonprofit Organizations and Law

Enforcement

Section 1201(d) sets up an exemption from the circumvention prohibitions of Section

1201(a)(1) for nonprofit libraries, archives, or educational institutions that gain access to a

commercially exploited copyrighted work solely in order to make a good faith determination of

whether to acquire a copy of that work, provided that a copy of the work is not retained longer

than necessary to make the good faith determination, is used for no other purpose, and there is

not otherwise reasonably available an identical copy of the work in another form. Section

1201(e) provides that the prohibitions of Section 1201 do not apply to lawfully authorized

investigative, protective, information security,846 or intelligence activity of law enforcement

officers.

(7) Reverse Engineering for Interoperability

Section 1201(f) provides three exemptions to the anti-circumvention provisions relating

to reverse engineering and interoperability:

Reverse Engineering for Interoperability of an Independently Created Computer

Program. Section 1201(f)(1) provides that, notwithstanding the prohibitions in Section

1201(a)(1)(A), “a person who has lawfully obtained the right to use a copy of a computer

program may circumvent a technological measure that effectively controls access to a particular

portion of that program for the sole purpose of identifying and analyzing those elements of the

program that are necessary to achieve interoperability of an independently created computer

program with other programs, and that have not previously been readily available to the person

engaging in the circumvention, to the extent any such acts of identification and analysis do not

constitute infringement under this title.” The language in Section 1201(f) requiring that the

reverse engineering be for the sole purpose of “identifying and analyzing those elements of the

program that are necessary to achieve interoperability of an independently created computer

program with other programs” comes directly from Article 6 of the European Union Software

Directive, and appears to be the first time that language from an EU Directive has been

incorporated verbatim into the United States Code.847

846 Section 1201(e) defines “information security” to mean activities carried out to identify and address the

vulnerabilities of a government computer, computer system, or computer network.

847 Jonathan Band & Taro Issihiki, “The New Anti-Circumvention Provisions in the Copyright Act: A Flawed

First Step,” Cyberspace Lawyer, Feb. 1999, at 2, 4. Section 1201(f) may also represent the first Congressional

recognition of the legitimacy of software reverse engineering. Id.

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Development and Employment of a Technological Means for Enabling Interoperability.

Section 1201(f)(2) provides that, notwithstanding the prohibitions in Sections 1201(a)(2) and

1201(b), “a person may develop and employ technological means to circumvent a technological

measure, or to circumvent protection afforded by a technological measure, in order to enable the

identification and analysis under paragraph (1), or for the purpose of enabling interoperability of

an independently created computer program with other programs, if such means are necessary to

achieve such interoperability, to the extent that doing so does not constitute infringement under

this title.”

The scope of this exemption is uncertain from its language in several respects. First, it is

unclear what kinds of “technological means” Congress had in mind for falling within this

exemption. The reference to allowing a person to “develop and employ” such technological

means may suggest that the exemption is limited to only those means developed by the person

desiring to circumvent, as opposed to commercially available circumvention means. The

legislative history suggests otherwise, however, for it contemplates that the rights under Section

1201(f)(2) may be exercised through either generally available tools or specially developed tools:

[Section 1201(f)(2)] recognizes that to accomplish the acts permitted under

[Section 1201(f)(1)] a person may, in some instances, have to make and use

certain tools. In most instances these will be generally available tools that

programmers use in developing computer programs, such as compilers, trace

analyzers and disassemblers, which are not prohibited by this section. In certain

instances, it is possible that a person may have to develop special tools to achieve

the permitted purpose of interoperability. Thus this provision creates an

exception to the prohibition on making circumvention tools contained in

subsections 1201(a)(2) and (b). These tools can be either software or hardware.848

From this legislative history, it is apparent that the phrase “develop and employ” in Section

1201(f)(2) was probably intended to mean “develop and/or employ.”

A second ambiguity is whether the “technological means” of Section 1201(f)(2) were

intended to be limited to the kinds of reverse engineering “tools” cited in the legislative history

(compilers, trace analyzers, disassemblers and the like), or whether they could be read more

broadly to encompass computer programs, such as application programs, that in their ordinary

operation are designed to circumvent technological measures protecting another computer

program so as to interoperate with it. For example, consider the fact pattern at issue in the case

of Lexmark International, Inc. v. Static Control Components, Inc.,849 discussed in Section

II.G.1(o)(1) below. In that case, the district court ruled on a motion for a preliminary injunction

that Static Control violated Section 1201(a)(2) by distributing microchips that were used to

replace the microchip found in the plaintiff Lexmark’s toner cartridges. Static Control’s

microchip contained a computer program that circumvented Lexmark’s authentication sequence

848 S. Rep. No. 105-190, at 33 (1998).

849 253 F. Supp. 2d 943, 948-49 (E.D. Ky. 2003), rev’d, 387 F.3d 522 (6th Cir. 2004), reh’g denied, 2004 U.S. App.

LEXIS 27422 (Dec. 29, 2004), reh’g en banc denied, 2005 U.S. App. LEXIS 3330 (6th Cir. Feb. 15, 2005).

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that prevented the printer engine software on the Lexmark printer from allowing the printer to

operate with a refilled toner cartridge.

The district court in that case ruled that the exemptions of Section 1201(f) did not apply

because Static Control’s microchips could not be considered to contain independently created

computer programs, since the toner loading program on those microchips was an exact copy of

the toner loading program contained on Lexmark’s microchips.850 However, suppose Static

Control had independently developed the computer program contained on its microchips.851

Would the exemption of Section 1201(f)(2) apply? Static Control could argue yes, on the ground

that Section 1201(f)(2) permits it to “employ technological means [the computer program on its

microchip] to circumvent a technological measure [the authentication sequence implemented by

the Lexmark printer engine software] … for the purpose of enabling interoperability of an

independently created computer program [again, the computer program on Static Control’s

microchip] with other programs [the Lexmark printer engine program].”

On the other hand, Lexmark could argue no, on the ground that the legislative history

indicates that the “technological means” referenced in Section 1201(f)(2) were meant to be

limited to reverse engineering “tools,” and the program on the Static Control microchip is not a

reverse engineering tool, but rather an application program. In sum, the issue is whether the

“independently created computer program” referenced in Section 1201(f)(2) can also constitute

the “technological means” of circumvention, or whether the “technological means” is limited to

the reverse engineering tool used to develop the independently created computer program in the

first place. Stated differently, the issue is whether Section 1201(f)(2) was meant to be narrow to

cover only the development and employment of special tools used to aid the reverse engineering

permitted by Section 1201(f)(1), or whether it was intended to permit more generalized

circumvention of technological measures by one computer program in order to interoperate with

another computer program whose technological protection measures are being circumvented by

the first program. A similar ambiguity is embedded in Section 1201(f)(2)’s reference to “other”

programs – can a program whose technological measure is circumvented by an independently

created computer program, both in the ordinary operation of the independently created computer

program and in the reverse engineering that was done to create such program, qualify as an

“other” program? The legislative history contains no guidance on the interpretation of “other” in

the exemption.

850 As discussed further in Section II.G.1(a)(13)(i) below, the Sixth Circuit on appeal reversed the district court’s

grant of a preliminary injunction and remanded. Among other things, the Sixth Circuit questioned whether

Lexmark’s toner loading program was even copyrightable, ruling that on the preliminary injunction record

Lexmark had made inadequate showings with respect to originality of its toner loading program and whether

that program functioned as a “lock-out code” that had to be copied for functional purposes. Lexmark Int’l v.

Static Control Components, 387 F.3d 522, 536-41 (6th Cir. 2004), reh’g denied, 2004 U.S. App. LEXIS 27422

(Dec. 29, 2004), reh’g en banc denied, 2005 U.S. App. LEXIS 3330 (6th Cir. Feb. 15, 2005).

851 The Sixth Circuit also ruled that, whether or not the toner loading program on Static Control’s microchips was

independently created, the record established that there were other programs on Static Control’s microchips that

were independently created, and those computer programs also interoperated with Lexmark’s printer engine

program on Lexmark’s microchips. Id. at 550.

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It appears that the Copyright Office agrees with an expansive reading of the Section

1201(f) exemption. After the district court’s decision in the Lexmark case came down, Static

Control submitted a proposed exemption to the Copyright Office in its 2003 rulemaking

proceeding under Section 1201(a)(1) to determine classes of works exempt from the anticircumvention

prohibitions. In particular, Static Control asked for an exemption for the

following classes of works:

1. Computer programs embedded in computer printers and toner cartridges and that

control the interoperation and functions of the printer and toner cartridge.

2. Computer programs embedded in a machine or product and which cannot be copied

during the ordinary operation or use of the machine or product.

3. Computer programs embedded in a machine or product and that control the operation

of a machine or product connected thereto, but that do not otherwise control the performance,

display or reproduction of copyrighted works that have an independent economic significance.852

The Copyright Office set forth its analysis of Static Control’s requested exemptions,

among many other requested exemptions, in a lengthy memorandum issued on Oct. 27, 2003 by

the Register of Copyrights to the Librarian of Congress. Although it is not clear from the

memorandum whether the Copyright Office took a position with request to Static Control’s

second and third proposed exemptions, the Copyright Office determined that no exemption was

warranted for the first proposed exemption because “Static Control’s purpose of achieving

interoperability of remanufactured printer cartridges with Lexmark’s … printers could have been

lawfully achieved by taking advantage of the defense found in §1201(f), the reverse engineering

exemption.”853

The Copyright Office read the purpose behind Section 1201(f) broadly: “Not only did

Congress intend that ‘interoperability’ include the exchange of information between computer

programs; it also intended ‘for such programs mutually to use the information which has been

exchanged.’ Interoperability necessarily includes, therefore, concerns for functionality and use,

and not only of individual use, but for enabling competitive choices in the marketplace.”854 The

Copyright Office elaborated that the statutory exemptions of Section 1201(f) afford broader

exemptions than even the Copyright Office itself could grant by virtue of rulemaking. In

particular, the Copyright Office’s exemptions are limited to individual acts of exemption

prohibited by Section 1201(a)(1), whereas the statutory exemptions of Section 1201(f) include

the distribution of the means of circumvention into the marketplace:

852 Memorandum from Marybeth Peters, Register of Copyrights, to James H. Billington, Librarian of Congress,

“Recommendation of the Register of Copyrights in RM 2002-4; Rulemaking on Exemptions from Prohibition

on Circumvention of Copyright Protection Systems for Access Control Technologies,” Oct. 27, 2003, p. 172,

available as of Jan. 10, 2004 at www.copyright.gov/1201/docs/registers-recommendation.pdf.

853 Id. at 176.

854 Id. at 178 (quoting the House Manager’s Report at 14).

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[T]he statutory exemption found in §1201(f) not only permits circumvention of

technological measures to analyze and identify interoperable elements of a

protected computer program, but also provides exemptions to the trafficking

provisions in §1201(a)(2) and 1201(b). Even if the Register had found a factual

basis for an exemption, it would only exempt the act of circumvention. It would

not exempt the creation and distribution of the means to circumvent or the

distribution of interoperable computer programs embedded in devices. Since it is

clear that Static Control’s goal was not merely to privately circumvent, but rather

to facilitate the distribution of competitive toner cartridges to others, a

recommendation for an exemption in this rulemaking would have little effect on

the intended use.855

Accordingly, the Copyright Office concluded that “Congress has comprehensively

addressed the important concern of interoperability for competition and functionality within its

own statutory exemption” and that an exemption through rulemaking was not necessary.856

Providing Information or Means for Interoperability to Others. Section 1201(f)(3)

provides that the “information acquired through the acts permitted under paragraph (1), and the

means permitted under paragraph (2), may be made available to others if the person referred to in

paragraph (1) or (2), as the case may be, provides such information or means solely for the

purpose of enabling interoperability of an independently created computer program with other

programs, and to the extent that doing so does not constitute infringement under this title or

violate applicable law other than this section.”

Section 1201(f)(3) contains ambiguities with respect to its scope that are similar to those

noted with respect to Section 1201(f)(2). The legislative history for Section 1201(f)(3) states the

following:

[Section 1201(f)(3)] recognizes that developing complex computer programs

often involves the efforts of many persons. For example, some of these persons

may be hired to develop a specific portion of the final product. For that person to

perform these tasks, some of the information acquired through the permitted

analysis, and the tools to accomplish it, may have to be made available to that

person. This subsection allows developers of independently created software to

rely on third parties either to develop the necessary circumvention tools or to

identify the necessary information to achieve interoperability. The ability to rely

on third parties is particularly important for small software developers who do not

have the capability of performing these functions in-house. This provision

permits such sharing of information and tools.857

855 Id. at 180-81 (emphasis in original).

856 Id. at 183.

857 S. Rep. No. 105-190, at 33 (1998).

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Although Section 1201(f)(3) clearly contemplates an exemption for distribution to third

parties of the “technological means” referenced in Section 1201(f)(2), as well as the

“information” gleaned from reverse engineering under Section 1201(f)(1), the same issues of the

scope of “technological means” intended to be within the exemption arise as in Section

1201(f)(2). As noted, the Copyright Office seems to read Section 1201(f)(3) broadly to permit

the distribution of independently developed computer programs that circumvent the

technological protection measures of other programs in order to interoperate with such other

programs. The legislative history quoted above, however, seems to read Section 1201(f)(3) more

narrowly as directed to distribution of reverse engineering “tools” or information to third party

developers who may be hired to assist in the development of an independent computer program,

as opposed to a distribution of a competitive product into the marketplace.

These ambiguities in the scope of the Section 1201(f) exemptions will need to be

resolved over time through litigation. In addition, it is worth observing that, although Section

1201(f) provides useful exemptions, it leaves open the issue of whether circumvention of access

restrictions in order to perform reverse engineering for purposes other than interoperability, such

as error correction, is prohibited. The Copyright Office’s exemption rulemaking procedures may

afford a mechanism to further flesh out or clarify the Section 1201(f) exemptions.

Several cases have adjudicated the scope of the Section 1201(f) exemption:

(i) Universal City Studios Inc. v. Reimerdes

In Universal City Studios, Inc. v. Reimerdes,858 discussed in further detail in Section

II.G.1(m)(4) below, the court rejected the applicability of Section 1201(f) to the defendants’

posting on their Web site of, and posting links to, a descrambling computer program known as

“DeCSS,” which circumvented the encryption of movies stored in digital form on a digital

versatile disk (“DVD”) encoded with the industry standard Content Scramble System (“CSS”).

The defendants argued that DeCSS had been created to further the development of a DVD player

that would run under the Linux operating system, as there allegedly were no Linux-compatible

players on the market at the time.859 They further contended that DeCSS was necessary to

achieve interoperability between computers running the Linux operating system and DVDs, and

that the exception of Section 1201(f) therefore applied.860

The court rejected this argument for several reasons. First, Section 1201(f)(3) permits

information acquired through reverse engineering to be made available to others only by the

person who acquired the information, and the defendants did not themselves do any reverse

engineering (DeCSS had been created by a third party). Even if the defendants had authored

DeCSS, the court ruled that Section 1201(f)(3) would allow the dissemination only of

information gleaned from the reverse engineering and solely for the purpose of achieving

interoperability as defined in the statute (which was not the reason the defendants posted

858 111 F. Supp. 2d 294 (S.D.N.Y. 2000).

859 Id. at 319.

860 Id. at 320.

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DeCSS), and not dissemination of the means of circumvention itself.861 Second, the defendants

could not claim that the sole purpose of DeCSS was to create a Linux DVD player, because

DeCSS was developed on and ran under the Windows operating system, and could therefore

decrypt and play DVD movies on Windows as well as Linux machines.862 In addition, in an

earlier opinion, the court ruled that Section 1201(f) was inapplicable because the legislative

history of the DMCA makes clear that Section 1201(f) permits reverse engineering of

copyrighted computer programs only and does not authorize circumvention of technological

systems that control access to other copyrighted works, such as movies.863

(ii) Storage Technology Corporation v. Custom

Hardware Engineering & Consulting

This case rejected an assertion of a Section 1201(f) defense because the defendant’s

circumvention resulted in an infringing copy of the plaintiff’s copyrighted program being made

in RAM, and the Section 1201(f) defense exempts circumvention only if it does not result in

copyright infringement. For a discussion of the details of the case, see Section II.G.1(o)(4)

below.

(iii) Chamberlain Group, Inc. v. Skylink Technologies,

Inc.

The facts of this case are set forth in Section II.G.1(o)(2) below. Although this case did

not directly adjudicate the scope of the Section 1201(f) exemptions, the court made a few

statements in dicta suggesting that Section 1201(f) acts to immunize interoperability from anticircumvention

liability. In that case, the Federal Circuit ruled that the anti-circumvention

provisions of Section 1201 do not apply to all forms of circumvention to gain access to a work,

but rather only to circumventions that facilitate some form of copyright infringement.864 The

court reached this conclusion in part on the rationale that a broad interpretation of the anticircumvention

provisions to prohibit all forms of unauthorized access, whether or not protected

copyright rights were thereby implicated, would be tantamount to “ignoring the explicit

861Id.

862Id.

863 Universal City Studios Inc. v. Reimerdes, 82 F. Supp. 2d 211, 218 (S.D.N.Y. 2000) (citing S. Rep. No. 105-190

(1998) and H.R. Rep. 105-551 (II) (1998)). Section 1201(f) would seem applicable to the original reverse

engineering that the developers of DeCSS engaged in, but the trickier issue dealt with by the court is whether it

should apply to subsequent use of the DeCSS to gain access to copyrighted works stored on a DVD in order to

play such works under the Linux operating system. Such access is for use of the work stored on the DVD

(albeit in an interoperable way), whereas the exception speaks in terms of “identifying and analyzing” the

copyrighted work to achieve interoperability. In addition, Section 1201(f) appears to be a defense only to the

conduct of circumvention prohibited by Section 1201(a)(1), and not to the distribution of devices prohibited

under Sections 1201(a)(2) and 1201(b). Because the court found that DeCSS is a device within the prohibition

of Section 1201(a)(2), it was not subject to the exception of Section 1201(f).

864 Chamberlain Group, Inc. v. Skylink Technologies, Inc., 381 F.3d 1178, 1195, 1203 (Fed. Cir. 2004), cert.

denied, 161 L. Ed. 2d 481 (2005).

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immunization of interoperability from anticircumvention liability under § 1201(f).”865 This

language, although dicta, characterizes the Section 1201(f) exemption very broadly.866

Another dictum by the court in connection with articulating its rationale for rejecting

such a broad interpretation of anti-circumvention liability makes clear the court’s belief that the

anti-circumvention provisions should not be construed to prevent interoperability of computer

programs:

Chamberlain’s proposed construction would allow any manufacturer of any

product to add a single copyrighted sentence or software fragment to its product,

wrap the copyrighted material in a trivial “encryption” scheme, and thereby gain

the right to restrict consumers’ rights to use its products in conjunction with

competing products. In other words, Chamberlain’s construction of the DMCA

would allow virtually any company to attempt to leverage its sales into

aftermarket monopolies – a practice that both the antitrust laws and the doctrine

of copyright misuse normally prohibit.867

(iv) Lexmark International, Inc. v. Static Control

Components, Inc.

For a discussion of the applicability of the reverse engineering exception of Section

1201(f) in this case, see Section II.G.1(o)(1) below.

(v) Davidson Assocs. v. Internet Gateway

In this case, the plaintiff Davidson & Assocs., doing business as Blizzard Entertainment,

owned the copyrights in several computer games. The games could be played in either a singleplayer

mode or in an online multi-player mode called “Battle.net mode.”868 Blizzard operated a

24-hour online gaming service known as the Battle.net service that allowed owners of certain

Blizzard games to play those games against each other in Battle.net mode by linking together

over the Internet through Battle.net servers. In addition to multi-player game play, Battle.net

mode allowed users to chat with other potential players, to record wins and losses and save

advancements in a password protected individual game account, and to set up private games on

the Battle.net service to allow players to determine whom they wished to interact with on the

Battle.net service.869 The court noted that these Battle.net mode features were “accessed from

865 Id. at 1200.

866 The court noted that it had no occasion to reach the argument, raised by an amicus, that Section 1201(f) should

cover the defendant’s actions in distributing a product that circumvented technological measures restricting

access to the plaintiff’s computer program so as to interoperate with it. Because Section 1201(f) is an

affirmative defense, the court noted that it would become relevant only if the plaintiff could prove a prima facie

case of anti-circumvention liability to shift the burden to the defendant, which the court ruled the plaintiff had

ultimately failed to do. Id. at 1200 n.15.

867 Id. at 1201 (citations omitted).

868 Davidson & Assocs. v. Internet Gateway, 334 F. Supp. 2d 1164, 1168 (E.D. Mo. 2004).

869Id.

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within the games themselves,” which seems to mean that there was particular code within the

Blizzard games that allowed them to operate in Battle.net mode and communicate with the

Battle.net servers.870

The Battle.net service was designed to prohibit access and use of Battle.net mode by

unauthorized or pirated copies of Blizzard games. In particular, in order to log on to the

Battle.net service and access Battle.net mode, the Blizzard games were designed to initiate an

authentication sequence or “secret handshake” between the game and the Battle.net server based

on the “CD Key” of the game, a unique sequence of alphanumeric characters that was printed on

a sticker attached to the case in which each game was packaged. The game would pass the CD

Key to the Battle.net server, which would verify its validity and determine whether the same CD

Key was already being used by another game that was currently logged on to the server. If the

CD Key was determined to be valid by the server and not already in use, the server would send a

signal to the game allowing it to enter the Battle.net mode and to use the Battle.net gaming

services.871

In order to install a copy of a Blizzard game, the user was required to click acceptance of

a clickwrap license agreement that prohibited reverse engineering of the software and that

required the user to agree to the Terms of Use of the Battle.net service, which prohibited

emulation or redirection of the communication protocols used by Blizzard as part of Battle.net

service for any purpose.872

The defendants developed a server, known as the bnetd server, that was designed to

emulate the Battle.net service so as to allow players to play their Blizzard games in an online

multi-player mode through the bnetd server.873 In order to develop the bnetd server, the

defendants had to reverse engineer the Blizzard games to learn the Battle.net protocol. In

addition, because Blizzard games were designed to connect only to Battle.net servers, the

defendants had to modify a computer file in the Blizzard games containing the Internet address

of the Battle.net servers so as to cause the games to connect to a bnetd server instead. The

defendants distributed a utility known as “BNS” that modified such file and caused Blizzard

games to connect to the bnetd server rather than the Battle.net server. Once connected to the

bnetd server through the modified Internet address file, a Blizzard game would send its CD Key

to the bnetd server. When the bnetd server received the CD Key, unlike Battle.net, it did not

determine whether the CD Key was valid or currently in use by another player. Instead, the

bnetd server would always send the game an “okay” reply. Thus, both authorized as well as

unauthorized or pirated copies of Blizzard games could be played in online mode through the

bnetd server.874

870Id.

871 Id. at 1169.

872 Id. at 1169-71.

873 Id. at 1172.

874 Id. at *1172-73.

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The plaintiffs alleged two violations of the anti-circumvention provisions of the DMCA.

First, they alleged that the defendants had violated Section 1201(a)(1)(A) in the course of

development of the bnetd emulator by circumventing Blizzard’s technological measures (the

secret handshake) to gain access to Battle.net mode in the course of their reverse engineering.875

Although not clear from the court’s opinion, the copyrighted work that the defendant’s gained

access to via their circumvention was apparently the code in the Blizzard games that allowed

them to operate in Battle.net mode and to communicate with the Battle.net service.

The defendants argued that their circumvention in the course of reverse engineering was

permitted by Section 1201(f)(1) because it was done for the sole purpose of creating and

distributing interoperable computer programs such as the bnetd server. They also argued that

they had authority to access the Battle.net mode because they lawfully purchased the Blizzard

software they reverse engineered.

The district court rejected these defenses. First, it ruled that it was “undisputed that

defendants circumvented Blizzard’s technological measure, the ‘secret handshake,’ between

Blizzard games and Battle.net, that effectively control access to Battle.net mode.”876 By its

reference to “Battle.net mode,” the court was again presumably referring to the code in the

Blizzard games that allowed them to operate in Battle.net mode. The court rejected the

defendants’ reliance on Section 1201(f)(1), because the defendants had not developed an

independently created computer program. The court noted that the defendants’ actions in

developing the bnetd server “extended into the realm of copyright infringement” because once

game play started, “there are no differences between Battle.net and the bnetd emulator from the

standpoint of a user who is actually playing the game.”877 It is unclear from this language

precisely what the basis was on which the court found copyright infringement. Perhaps the court

believed that the defendants had copied code from the Battle.net server into the bnetd server, for

earlier in the opinion the court noted that the plaintiffs contended “that the defendants not only

copied code that would achieve interoperability, but also copied elements that would preserve

player account information, display of icons, and presentation of ad banners.”878 However, the

opinion on appeal suggests that there was no copying of battle.net server code into the bnetd

server.879

The court also rejected the Section 1201(f)(1) defense because it found that the

defendants’ actions constituted more than enabling interoperability, since the emulator did not

875 Id. at 1183.

876 Id. at 1184-85.

877 Id. at 1185.

878 Id. at 1184.

879 Davidson & Assocs. v. Jung, 422 F.3d 630, 636 (8th Cir. 2005) (“By necessity, Appellants used reverse

engineering to learn Blizzard’s protocol language and to ensure that bnetd.org worked with Blizzard games.

Combs used reverse engineering to develop the bnetd.org server, including a program called ‘tcpdump’ to log

communications between Blizzard games and the Battle.net server.”).

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check the validity of the CD Key code passed from the game to the emulator, thereby allowing

unauthorized copies of the Blizzard games to play on bnetd servers.880

The plaintiffs also asserted that by distributing the bnetd software, the defendants had

violated Section 1201(a)(2) by trafficking in devices whose only purpose was to circumvent their

secret handshake and allow access to Battle.net mode. The defendants did not dispute the

plaintiffs’ factual assertions, but instead asserted the defense of Sections 1201(f)(2)-(3) on the

ground that those sections entitled them to distribute software to others for the purpose of

enabling interoperability with the Blizzard games.881 The court rejected the defenses on two

grounds. First, the court ruled that the defendants’ purpose in distributing their software was not

solely to enable interoperability, but rather to “avoid the restricted access to Battle.net.”882 In

addition, the court reiterated its conclusion that the development and distribution of the bnetd

software was infringing, and “persons who commit copyright infringement cannot benefit from

the exemptions of § 1201(f).”883 Accordingly, the court granted the plaintiffs’ motion for

summary judgment on their anti-circumvention and trafficking in anti-circumvention technology

claims.884

On appeal, the Eight Circuit affirmed in an opinion that is even more terse and difficult to

understand than the district court’s opinion. The court found a violation of Section 1201(a)(1)

merely because unauthorized copies of Blizzard games were allowed to play through the bnetd

server, even though the circumvention of the secret handshake did not cause the illegal copy of

the Blizzard games to be made in the first place:

Blizzard games, through Battle.net, employed a technological measure, a software

“secret handshake” (CD key), to control access to its copyrighted games. The

bnetd.org emulator developed by Appellants allowed the Blizzard game to access

Battle.net mode features without a valid or unique CD key. As a result,

unauthorized copies of the Blizzard games were played on bnetd.org servers.885

880 334 F. Supp. 2d at 1185.

881 Id. at 1185-86.

882 Id. at 1186.

883 Id. at 1187.

884Id.

885 Davidson & Assocs. v. Jung, 422 F.3d 630, 640 (8th Cir. 2005). The Eighth Circuit distinguished the Lexmark

decision by noting that in Lexmark, the Sixth Circuit had found Lexmark’s authentication sequence did not

effectively control access to the Toner Loading Program and Printer Engine Program at issue, because it was

not Lexmark’s authentication sequence that controlled access to such programs, but rather the purchase of a

Lexmark printer that allowed access to the programs. “Here, Battle.net’s control measure was not freely

available. Appellants could not have obtained a copy of Battle.net or made use of the literal elements of

Battle.net mode without acts of reverse engineering, which allowed for a circumvention of Battle.net and

Battle.net mode. Unlike in Lexmark Int’l, Inc., Battle.net mode codes were not accessible by simply purchasing

a Blizzard game or logging onto Battle.net, nor could data from the program be translated into readable source

code after which copies were freely available without some type of circumvention.” Id. at 641. Although the

preceding passage is confusing, it seems to imply (by the reference to “literal elements of Battle.net mode”) that

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The court also ruled that the anti-trafficking provisions of Section 1201(a)(2) had been violated

because the bnetd.org emulator had as its sole purpose “to avoid the limitations of Battle.net.”886

With respect to the Section 1201(f) defense asserted by the defendants, the Eighth Circuit

generalized all subsections of Section 1201(f) into one set of requirements as follows:

To successfully provide the interoperability defense under § 1201(f), Appellants

must show: (1) they lawfully obtained the right to use a copy of a computer

program; (2) the information gathered as a result of the reverse engineering was

not previously readily available to the person engaging in the circumvention; (3)

the sole purpose of the reverse engineering was to identify and analyze those

elements of the program that were necessary to achieve interoperability of an

independently created computer program with other programs; and (4) the alleged

circumvention did not constitute infringement.887

In a very confusing portion of its opinion, the court then ruled that the exemption of

Section 1201(f) was not available to the defendants because their circumvention constituted

infringement. Precisely what that “infringement” was is unclear, although the court seems to

base its holding on the fact that infringement by third parties was encouraged because pirated

copies of Blizzard games could be played in multi-player mode through the bnetd server (even

though the circumvention at issue did not cause or allow the pirated copies of the Blizzard games

to be made in the first instance):

As detailed earlier, Blizzard’s secret handshake between Blizzard games and

Battle.net effectively controlled access to Battle.net mode within its games. The

purpose of the bnetd.org project was to provide matchmaking services for users of

Blizzard games who wanted to play in a multi-player environment without using

Battle.net. The bnetd.org emulator enabled users of Blizzard games to access

Battle.net mode features without a valid or unique CD key to enter Battle.net.

The bnetd.org emulator did not determine whether the CD key was valid or

currently in use by another player. As a result, unauthorized copies of the

Blizzard games were freely played on bnetd.org servers. Appellants failed to

establish a genuine issue of material fact as to the applicability of the

interoperability exception.888

Based on these terse and confusing rulings, the court affirmed summary judgment in

favor of the plaintiffs.889

the secret handshake controlled access to some Battle.net code within the Blizzard game itself. The Court’s

reference to “Battle.net” seems to be referring to the Battle.net server software.

886Id.

887 Id. at 641-42.

888 Id. at 642.

889 Id.

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(vi) Sony Computer Entertainment America v. Divineo

In Sony Computer Entertainment America, Inc. v. Divineo,890 the court ruled that

downstream lawful or fair uses of a circumvention device, including use to exercise Section

1201(f) rights, did not relieve the defendant from liability for trafficking in such devices under

the DMCA. For a discussion of the details of the facts and rulings of the court, see Section

II.G.1(b)(3) above.

(8) Encryption Research

Section 1201(g) provides that it is not a violation of the regulations prohibiting

circumventing a technological measure if such circumvention is done as an act of good faith

“encryption research.” “Encryption research” is defined as “activities necessary to identify and

analyze flaws and vulnerabilities of encryption technologies applied to copyrighted works, if

these activities are conducted to advance the state of knowledge in the field of encryption

technology or to assist in the development of encryption products.” “Encryption technology” is

defined as “the scrambling and descrambling of information using mathematical formulas or

algorithms.” Sections 1201(g)(2)(C) and (D) require, however, that the person have made a

good faith effort to obtain authorization before the circumvention, and that such acts not

otherwise constitute a copyright infringement or violate other applicable law. Section 1201(g)(5)

required that a report be generated to Congress on encryption technologies, with legislative

recommendations (if any), not later than one year after enactment of the bill.

(9) Protection of Minors

Section 1201(h) provides that a court, in applying the prohibitions of Section 1201(a)

against the manufacture or trafficking in a component or part designed to circumvent

technological measures, may consider the necessity of such component or part for its intended

and actual incorporation into a product whose sole purpose is to prevent the access of minors to

material on the Internet.891

(10) Protection of Personally Identifying Information

Section 1201(i) provides that it is not a violation of the Section 1201(a)(1)(A) prohibition

on circumventing a technological measure if such measure, or the work it protects, is capable of

collecting or disseminating personally identifying information reflecting the online activities of a

natural person who seeks to gain access to the work protected, or if the measure in the normal

course of its operation or the work it protects, collects or disseminates personally identifying

information about the person who seeks to gain access to the work, without providing

conspicuous notice of such collection or dissemination to such person and the capability to

890 547 F. Supp. 2d 957 (N.D. Cal. 2006).

891 An earlier version of H.R. 2281 would have expanded this exception to also allow a parent to circumvent a

technological measure controlling access to a test or evaluation of that parent’s minor child’s abilities by a

nonprofit educational institution if the parent attempted to obtain authorization before the circumvention and the

circumvention was necessary to obtain a copy of the test or evaluation.

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prevent or restrict the same, and the circumvention is carried out solely to prevent such collection

or dissemination. If a technological measure is disclosed to a user as not being capable of

collecting or disseminating personally identifying information, then the exception of Section

1201(i) does not apply.

(11) Security Testing

Section 1201(j) provides that it is not a violation of the prohibitions of Sections

1201(a)(1)(A) and 1201(a)(2) if a person is engaged in “security testing,” which is defined to

mean accessing a computer, computer system, or computer network solely for the purpose of

good faith testing, investigating or correcting a security flaw or vulnerability with the

authorization of the owner or operator, provided that such act does not otherwise constitute a

violation of applicable law (including the Computer Fraud and Abuse Act of 1986).

(12) Copy Restrictions To Be Built Into VCRs and Camcorders

Section 1201(k) dictates that certain technological capabilities be built into consumer

analog video cassette recorders (VCRs) and camcorders (professional analog video cassette

recorders are exempted) to protect certain analog television programming and prerecorded

movies. Specifically, effective 18 months after enactment of the DMCA, most formats of

consumer analog892 VCRs and camcorders must contain one of two forms of copy control

technology in wide use in the market today – either the “automatic gain control technology”

(which causes distortion in the images upon playback) or the “colorstripe copy control

technology” (which causes distracting visible color stripes to appear through portions of the

viewable picture in normal viewing mode). Effective immediately, Section 1201(k) also

prohibits tampering with these analog copy control technologies to render them ineffective. The

Conference Report accompanying H.R. 2281893 states that Congress intended this Section to

prohibit the manufacture and sale of “black box” devices and software “hacking” that defeat

these copy control technologies.

Section 1201(k) defines certain specific encoding rules that such devices must implement

in order to preserve the capability to perform long-standing consumer home taping practices.

Specifically, such devices cannot limit the copying of traditional broadcasts of programming

through basic or extended basic tiers of programming services, although they may limit the

copying of pay-per-view, near video-on-demand or video-on-demand transmission, or content

stored on prerecorded media, as well the making of second generation copies where the original

transmission was through a pay television service (such as HBO, Showtime or the like).

892 Page 68 of the Conference Report states, “The conferees also acknowledge that numerous other activities are

underway in the private sector to develop, test, and apply copy control technologies, particularly in the digital

environment. Subject to the other requirements of this section, circumvention of these technologies may be

prohibited under this Act.”

893 H.R. Rep. No. 105-796, at 78 (1998).

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(13) Other Cases Filed Under the Anti-Circumvention

Provisions

Several other anti-circumvention cases have been filed under the DMCA:

(i) Sony Computer Entertainment, Inc. v. Connectix,

Inc.

On Jan. 27, 1999, Sony Computer Entertainment, Inc. and its U.S. subsidiary Sony

Computer Entertainment America, manufacturers and distributors of the Sony PlayStation, filed

suit against Connectix, Inc., a company that had developed a software emulator called the

“Virtual Game Station” that would enable video games written for the PlayStation to run on

Apple computers. In order to create the emulator, Connectix disassembled and reverse

engineered the PlayStation’s operating system. The plaintiff’s complaint included claims for

copyright infringement, trademark dilution, and circumvention of technological protection

measures.894

The circumvention claim was based on the fact that the PlayStation and its video games

each contain embedded technological measures to prevent counterfeit games from running on the

PlayStation, and the alleged fact that Connectix’s emulator software did not contain such

technological measures, thus enabling counterfeit games to run on it. The plaintiffs contended

that omission of the PlayStation’s technological measures constituted an unlawful circumvention

of those measures. In its opposition to the plaintiffs’ motion for a temporary restraining order,

Connectix asserted that its emulator did in fact implement the PlayStation’s technological

measures and could not run counterfeit games. Thus, the alleged factual predicate on which the

plaintiffs based their circumvention claim was apparently missing. On Feb. 4, 1999, the district

court judge denied the plaintiffs’ motion for a temporary restraining order.895

Even if Connectix’s emulator software did not contain the technological measures of the

PlayStation, the plaintiffs’ circumvention claim appears to be flawed for several reasons. First,

the DMCA’s prohibition under Section 1201(a)(1) on circumvention of technological measures

controlling access was not yet in effect at the time the complaint was filed, and the DMCA

contains no prohibition on the act of circumventing copy controls. Second, Connectix’s

emulator did not actively “circumvent” anything in the games it could run. At most, it simply

allegedly operated regardless of whether the video games contained the authentication signals

required by the PlayStation (i.e., it allegedly ignored the authentication signal of the

PlayStation). But Section 1201(c)(3) provides that Section 1201 does not require a computing

product to “provide for a response to any particular technological measure,” so long as the

product is not primarily designed or produced for the purpose of circumventing a technological

measure or has only limited commercially significant purposes or uses other than the same.

Because the Connectix emulator was not primarily designed to circumvent technological

894 See Band & Issihiki, supra note 847, at 8.

895 Id. at 8-9. On appeal, the Ninth Circuit ultimately held that Connectix’s reverse engineering of the Sony

Playstation fell within the fair use doctrine. See Sony Computer Entertainment, Inc. v. Connectix Corp., 203

F.3d 596 (9th Cir. 2000). The Ninth Circuit’s opinion did not address the DMCA issues.

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measures, but rather to run legitimate PlayStation games, it should probably fall within the

savings clause of Section 1201(c)(3).896

(ii) RealNetworks, Inc. v. Streambox Inc.

On Dec. 20, 1999, RealNetworks, Inc., the developer and distributor of various versions

of the “RealPlayer,” which embodied “streaming” technology that allowed Internet users to

obtain real-time delivery and instant playback of audio and video content over the Internet,

brought suit against Streambox, Inc.897 RealNetworks’ products embodied anti-piracy

technology. Specifically, RealNetworks supplied copyright holders with a product known as

“RealProducer,” which converted ordinary audio and video files into digitized “RealAudio” and

“RealVideo” files. RealNetworks also offered a “RealServer” product to copyright holders that

allowed them to distribute their copyrighted material in a secure format designed to interact only

with RealPlayers to further prevent unauthorized access to copyrighted content.898

RealNetworks based its complaint on the following three products developed and

distributed by Streambox:

“Streambox Ripper,” which converted any RealAudio file to a file in the format of

Windows Media Audio (WMA), MPEG-Layer 3 (MP3), or Microsoft Windows

Wave Format (WAV). Once in any of these three formats, an audio file could be

copied, stored, or freely distributed, thereby circumventing RealNetworks’ security

measures.899

“Streambox VCR,” which mimicked a RealPlayer, tricking RealServers into interacting

with it and distributing both RealAudio and RealMedia files to it, thereby also

circumventing the RealNetworks’ security measures.900

“Streambox Ferret,” which was supposedly designed to work with and enhance the

functionality of RealPlayers. RealNetworks alleged, however, that Streambox Ferret

replaced the “snap.com” search engine on the RealPlayer’s search bar with a

“Streambox” logo that diverted those using the RealPlayer’s search function from

Snap’s search services (with whom RealNetworks had an exclusive arrangement) to a

competing service operated by Streambox. In addition, RealNetworks alleged that

896 Band & Issihiki, supra note 847, at 8-9.

897 Complaint for Violation of The Digital Millennium Copyright Act, Contributory, Vicarious and Direct

Copyright Infringement, Tortious Interference with Contract, and Lanham Act Violations, RealNetworks, Inc.

v. Streambox Inc., No. C99-2070Z (W.D. Wa. Dec. 20, 1999), available as of Dec. 30, 1999 at

www.realnetworks.com/company/pressroom/pr/99/rnwk_complaint.html.

898 Id. ¶ 6.

899 Id. ¶¶ 12-13.

900 Id. ¶¶ 17-19.

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Streambox Ferret corrupted completely the search functionality of the more recent

versions of the RealPlayer.901

RealNetworks alleged, among other things, that (i) by circumventing RealNetworks’

technological measures that protect the rights of copyright owners to control whether an end-user

can copy and distribute copyright owners’ works, both Streambox Ripper and Streambox VCR

violated Section 1201(b) of the DMCA,902 and (ii) because the installation of Streambox Ferret

modified the graphical user interface and computer code of RealPlayer, thereby creating an

unauthorized derivative work, Streambox’s distribution of Streambox Ferret made it

contributorily liable for copyright infringement, as well as vicariously liable, since Streambox

allegedly controlled and profited from the infringement.903

In a decision issued Jan. 18, 2000, the court entered a preliminary injunction against

Streambox, enjoining the manufacturing and distribution of Streambox VCR and Streambox

Ferret, but not of Streambox Ripper.904 This case raised three important procedural issues with

respect to the DMCA. First, the case raised the interesting issue of who has standing to invoke

the remedies of the DMCA – specifically, whether RealNetworks should be considered a proper

party to bring the lawsuit, since the material that Streambox Ripper and Streambox VCR placed

into a different file format (i.e., allegedly circumvented a protection measure for) was

copyrighted, not by RealNetworks, but by its customers. As discussed further below, Section

1203 of the DMCA provides: “Any person injured by a violation of section 1201 or 1202 may

bring a civil action in an appropriate United States district court for such violation.”

Significantly, the reference to “any person” suggests that Section 1203 does not limit its scope to

the copyright owner of the material with respect to which a technological protection measure has

been circumvented, and the court so held. Specifically, the court ruled that RealNetworks had

standing to pursue DMCA claims under Section 1203 based on the fact that it affords standing to

“any person” allegedly injured by a violation of Section 1201 and 1202 of the DMCA.905

Second, the case raised the issue of what type of “injury” a plaintiff must show under

Section 1203. Neither Section 1203 itself nor the legislative history illuminate this issue. In the

instant case, RealNetworks was apparently relying on the argument that, because its customers

were potentially injured by Streambox’s violation of Section 1201(b), RealNetworks itself was

also injured. Although the court did not explicitly address this issue, by issuing a preliminary

injunction, it implicitly accepted that RealNetworks was exposed to injury cognizable by the

DMCA.

901 Id. ¶¶ 22-24.

902 Id. ¶¶ 33-35 & 41-43.

903 Id. ¶¶ 48-49.

904 RealNetworks, Inc. v. Streambox Inc., 2000 U.S. Dist. LEXIS 1889 (W.D. Wa. 2000).

905 Id. at *15-16. This holding is consistent with CSC Holdings, Inc. v. Greenleaf Electronics, Inc., 2000 U.S. Dist.

LEXIS 7675 (N.D. Ill. 2000). In that case the plaintiff was a cable provider bringing suit against defendants

under the DMCA for selling and distributing pirate cable descrambling equipment. The court held that the

plaintiff was authorized to bring suit under Section 1203(a), as it was a person injured by a violation of the

DMCA.

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Third, the case raised the issue of whether a plaintiff who demonstrates a likelihood of

success on the merits of claims under Section 1201 of the DMCA is entitled to a presumption of

irreparable harm for purposes of a preliminary injunction, as would be the case in a showing of

likely success on a claim for copyright infringement. The court noted that this must be

considered an open issue: “Because the DMCA is a recently-enacted statute, there appears to be

no authority holding that a plaintiff seeking a preliminary injunction who shows a reasonable

likelihood of success on a claim arising under section 1201 of the DMCA is entitled to a

presumption of irreparable harm.”906 Accordingly, the court considered in each instance whether

Streambox’s violations of the DMCA were likely to cause irreparable harm.

Turning to the plaintiff’s claims under the anti-circumvention provisions of the DMCA,

the court noted that RealNetworks’ products embodied two technological measures to control

against unauthorized access or copying of content. First, a “Secret Handshake” – an

authentication sequence that only RealServers and RealPlayers knew – ensured that files hosted

on a RealServer could be sent only to a RealPlayer. Second, a “Copy Switch” was used, which

was a piece of data in all RealMedia files that contained the content owner’s preference

regarding whether or not the stream could be copied by end users.907 RealPlayers were designed

to read the Copy Switch and obey the content owner’s wishes.

The court ruled that the Secret Handshake constituted a technological measure that

effectively controlled access to copyrighted works within the meaning of Section 1201(a)(3)(B),

and that the Copy Switch constituted a technological measure that effectively protected the right

of a copyright owner to control the unauthorized copying of its work within the meaning of

Section 1201(b)(2)(B). The court concluded that, because Streambox VCR was primarily

designed to bypass the Secret Handshake and circumvent the Copy Switch (and had only limited

commercially significant purposes beyond the same), Streambox VCR violated Sections

1201(a)(2) and 1201(b) of the DMCA.908

The court rejected Streambox’s defense that Streambox VCR allowed consumers to make

“fair use” copies of RealMedia files under the Supreme Court’s decision in Sony Corp. v.

Universal City Studios, Inc.909 The court distinguished the Sony case on the ground that, in

Sony, the Supreme Court based its holding on the fact that video cassette recorders were mostly

used by consumers for “time shift” viewing of programs, rather than the redistribution of perfect

digital copies of audio and video files, and that substantial numbers of copyright holders who

broadcast their works either had authorized or would not object to having their works timeshifted

by private viewers. In the instant case, the court noted, copyright owners had specifically

chosen to prevent the copying enabled by the Streambox VCR by putting their content on

RealServers and leaving the Copy Switch off.910

906 RealNetworks, 2000 U.S. Dist. LEXIS 1889 at *17.

907 Id. at *6.

908 Id. at *19-21.

909 464 U.S. 417 (1984).

910 RealNetworks, 2000 U.S. Dist. LEXIS at *21-22.

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In addition, the court, citing Nimmer’s copyright treatise, ruled that, by passage of the

DMCA, Congress had decided that “those who manufacture equipment and products generally

can no longer gauge their conduct as permitted or forbidden by reference to the Sony doctrine.

For a given piece of machinery might qualify as a stable item of commerce, with a substantial

noninfringing use, and hence be immune from attack under Sony’s construction of the Copyright

Act – but nonetheless still be subject to suppression under Section 1201.”911 The court also

rejected Streambox’s asserted defense under Section 1201(c)(3) of the DMCA, which it cited for

the proposition that the Streambox VCR was not required to respond to the Copy Switch. The

court noted that this argument failed to address Streambox VCR’s circumvention of the Secret

Handshake, which was enough by itself to create liability under Section 1201(a)(2).912

Turning to the Streambox Ripper product, the court ruled that the plaintiff had not

established a reasonable likelihood of success on its DMCA claim. RealNetworks maintained

that the primary purpose and only commercially significant use for the Ripper was to enable

consumers to prepare unauthorized derivative works of copyrighted audio or video content. The

court rejected this argument, noting that the Ripper has legitimate and commercially significant

uses to enable content owners, including copyright holders and those acquiring content with the

content owner’s permission, to convert their content from the RealMedia format to other formats.

Moreover, there was little evidence that content owners use the RealMedia format as a

“technological measure” to prevent end users from making derivative works. In any case, the

court found that RealNetworks had not introduced evidence that a substantial number of content

owners would object to having end users convert RealMedia files that they legitimately obtained

into other formats, or that Ripper would cause injury to RealNetworks.913

Finally, the court ruled that the plaintiff was entitled to a preliminary injunction with

respect to Streambox Ferret. RealNetworks claimed that Streambox committed contributory or

vicarious copyright infringement by distributing the Ferret to the public, because consumers who

used the Ferret as a plug-in were making an unauthorized derivative work of the RealPlayer by

changing the RealPlayer user interface to add a clickable button that permitted the user to access

the Streambox search engine, rather than the Snap search engine. Although the court stated that

it was not persuaded that RealNetworks had demonstrated that it was likely to succeed on its

contributory/vicarious infringement claims on this basis, the court concluded that RealNetworks

had raised serious questions going to the merits of its claims, and the balance of hardships clearly

favored RealNetworks, because the addition of the alternative search engine afforded by the

Ferret jeopardized RealNetworks’ exclusive relationship with Snap.914

In September of 2000, the parties settled the lawsuit pursuant to an agreement in which

Streambox agreed to modify Streambox Ripper so that it no longer transformed RealMedia

streams into other formats, to modify Streambox VCR so that it respected RealNetworks’ copy

911 Id. at *23 (quoting 1 M. Nimmer & D. Nimmer, Nimmer on Copyright (1999 Supp.) § 12A.18[B]).

912 RealNetworks, 2000 U.S. Dist. LEXIS at *23.

913 Id. at *27-28.

914 Id. at *30-33.

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protection features, to license RealNetworks’ software development kit (which would allow

Streambox to create versions of its products that worked with RealNetworks’ copy protection

technology), to stop distributing Streambox Ferret, and to pay an undisclosed sum of money.915

(iii) Universal City Studios, Inc. v. Reimerdes

In this case, the plaintiffs were copyright holders who distributed motion pictures

encoded in a proprietary system for the encryption and decryption of data contained on digital

versatile disks (DVDs) known as the Content Scramble System (CSS). The CSS technology was

licensed to manufacturers of DVDs, who used it to encrypt the content of copyrighted motion

pictures distributed in the DVD format. The plaintiffs filed suit under the DMCA against various

defendants whom the plaintiffs alleged violated the anti-circumvention provisions of the DMCA

by posting on their websites the source code of a program named “DeCSS,” which was able to

defeat DVD encryption using the CSS technology and enable viewing of DVD movies on

unlicensed players and the making of digital copies of DVD movies.916 The plaintiffs sought a

preliminary and permanent injunction to prevent the defendants from posting DeCSS on their

Web site and from linking their site to others that posted DeCSS.917

On Jan. 20, 2000, the court entered a preliminary injunction against the defendants,

restraining them from posting on any website or otherwise making available DeCSS or any other

technology, product or service primary designed or produced for the purpose of, or having only

limited commercially significant purposes or use other than, circumventing CSS, or marketed by

defendants or others acting in concert with them for use in circumventing CSS.918 In an opinion

issued Feb. 2, 2000, the court set forth its findings of fact and conclusions of law supporting the

preliminary injunction.919

On Aug. 17, 2000, after a bench trial, the court issued a permanent injunction against the

defendants.920 The court ruled that DeCSS was clearly a means of circumventing CSS, a

technological access control measure, that it was undisputed that DeCSS was designed primarily

to circumvent CSS, and therefore that DeCSS constituted a prima facie violation of Section

1201(a)(2).921 The court rejected the defendants’ argument that CSS did not “effectively

control” access to the plaintiffs’ copyrighted works because it was based on a 40-bit encryption

915 “Early DMCA Lawsuit Settled, Streambox Will Modify Products to Prevent Digital Copying,” BNA’s

Electronic Commerce & Law Report (Oct. 11, 2000) at 1019.

916 Universal City Studios Inc. v. Reimerdes, 111 F. Supp. 2d 294 (S.D.N.Y. 2000).

917 Id. at 303.

918 Preliminary Injunction, Universal City Studios, Inc. v. Reimerdes, No. 00 Civ. 0277 (LAK) (S.D.N.Y. Jan. 20,

2000) ¶ 2.

919 Universal City Studios, Inc. v. Reimerdes, 82 F. Supp. 2d 211 (S.D.N.Y. 2000).

920 Universal City Studios Inc. v. Reimerdes, 111 F. Supp. 2d 294 (S.D.N.Y. 2000). An amended final judgment

was entered by the court on Aug. 23, 2001, enjoining the defendants from posting DeCSS on their web site and

from knowingly linking their web site to any other web site on which DeCSS was posted. Universal City

Studios Inc. v. Reimerdes, 111 F. Supp. 2d 346 (S.D.N.Y. 2000).

921 111 F. Supp. 2d at 317-19.

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key, which the defendants argued was a weak cipher. The court noted that Section 1201(a)(3)(B)

provides that a technological measure “effectively controls access to a work” if it requires the

application of information or a process with the authority of the copyright owner to gain access

to a work. Because one cannot gain access to a CSS-protected work on a DVD without the

application of three keys that are required by the player software and are made available only

under license, CSS satisfied this definition. The court refused to import into the statute any

requirement for a technologically “strong means” of protection.922

The court also rejected the defendants’ argument that DeCSS was written to further the

development of a DVD player that would run under the Linux operating system, as there

allegedly were no Linux-compatible players on the market at the time. The court ruled that, even

if there were so, it would be immaterial to whether the defendants had violated Section

1201(a)(2) by trafficking in DeCSS.923 “The offering or provision of the program is the

prohibited conduct – and it is prohibited irrespective of why the program was written, except to

whatever extent motive may be germane to determining whether [the defendants’] conduct falls

within one of the statutory exceptions.”924

The court rejected a number of other defenses under the DMCA asserted by the

defendants. First, for the reasons set forth in Section II.G.1(g) above in the discussion of Section

1201(f), the court rejected the defendants’ argument that the reverse engineering exception of

Section 1201(f) was applicable.

Second, the defendants asserted the encryption research defense under Section 1201(g),

which requires a showing that the person asserting the defense lawfully obtained the encrypted

copy of the work being studied, the circumvention act at issue is necessary to conduct encryption

research, the person made a good faith effort to obtain authorization before the circumvention,

and the act does not constitute copyright infringement. The court held that the defendants had

failed to prove that any of them were engaged in good faith encryption research, nor was there

any evidence that the defendants made any effort to provide the results of the DeCSS effort to

the copyright owners (which Section 1201(g)(3) instructs the court to take into account in

assessing whether one is engaged in good faith encryption research), nor any evidence that any

of them made a good faith effort to obtain authorization from the copyright owners.925

Third, the defendants asserted the security testing defense under Section 1201(j). The

court rejected this defense, which is limited to “assessing a computer, computer system, or

computer network, solely for the purpose of good faith testing, investigating, or correcting [of a]

security flaw or vulnerability, with the authorization of the owner or operator,” because the

record did not establish that DeCSS has anything to do with testing computers, computer

922 Id. at 318. The court cited legislative history to the effect that a technological measure “effectively controls

access” to a copyrighted work merely if its function is to control access. Id. at 317-18.

923 Id. at 319.

924Id.

925 Id. at 320-21.

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systems, or computer networks, and the defendants had not sought authorization for their

activities.926

Fourth, the defendants claimed that they were engaged in a fair use under Section 107 of

the copyright statute. The court categorically rejected this defense, noting that the defendants

were not being sued for copyright infringement, but rather for offering to the public technology

primarily designed to circumvent technological measures that control access to copyrighted

works.927 The court held that fair use is not a defense to Section 1201(a)(2) of the DMCA: “If

Congress had meant the fair use defense to apply to such actions, it would have said so. Indeed,

as the legislative history demonstrates, the decision not to make fair use a defense to a claim

under Section 1201(a) was quite deliberate.”928 The court noted that Congress had provided a

vehicle, in the form of rulemaking by the Register of Copyrights, by which particular classes of

copyrighted works could be exempted from the prohibitions if noninfringing uses of those

classes of works would be affected adversely by Section 1201(a)(1).929 The court also rejected

the defendants’ assertion that, because DeCSS could be used for noninfringing purposes, its

distribution should be permitted under Sony Corp. v. Universal City Studios, Inc.930 The court

elected to follow the holding in the RealNetworks case that a piece of technology might have a

substantial noninfringing use, and therefore be immune from attack under Sony, yet nonetheless

be subject to suppression under Section 1201.931

Finally, in one of the most novel aspects of the opinion, the court addressed the issue

whether the mere linking by the defendants to other Web sites on which DeCSS could be

obtained should be deemed to be offering to the public or providing or otherwise trafficking in

DeCSS within the prohibitions of Section 1201(a)(2). The court, noting that the dictionary

definitions of the words “offer,” “provide,” and “traffic” are broad, ruled that “the antitrafficking

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.”932 Accordingly, the court enjoined the defendants from providing three

types of links:

926 Id. at 321.

927 Id. at 322.

928Id.

929 Id. at 323 The court, in a very lengthy analysis, also rejected various First Amendment challenges to the

constitutionality of the anti-circumvention provisions of the DMCA. See id. at 325-341.

930 464 U.S. 417 (1984).

931 Reimerdes, 111 F. Supp. 2d at 323. In the preliminary injunction proceeding, one of the defendants asserted a

defense under Section 512(c) of the DMCA, discussed below, which limits liability of “service providers” for

certain acts of infringement committed through systems or networks operated by them. The court rejected this

defense on the ground that Section 512(c) provides protection only from liability for copyright infringement,

and not for violations of the anti-circumvention provisions of Section 1201(a)(2). The court also ruled that the

defendant had offered no proof that he was a “service provider” within the meaning of Section 512(c). 82 F.

Supp. 2d at 217.

932 Reimerdes, 111 F. Supp. 2d at 325.

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Links “to sites that automatically commence the process of downloading DeCSS upon a

user being transferred by defendants’ hyperlinks.” The court ruled that this was the

functional equivalent of the defendants transferring the DeCSS code themselves.933

Links “to web pages that display nothing more than the DeCSS code or present the user

only with the choice of commencing a download of DeCSS and no other content. The

only distinction is that the entity extending to the user the option of downloading the

program is the transferee site rather than defendants, a distinction without a

difference.”934

Links “to pages that offer a good deal of content other than DeCSS but that offer a

hyperlink for downloading, or transferring to a page for downloading, DeCSS,” based on

the given facts, in which the defendants had intentionally used and touted the links to

“mirror” sites to help others find copies of DeCSS, after encouraging sites to post DeCSS

and checking to ensure that the mirror sites in fact were posting DeCSS or something that

looked like it, and proclaimed on their own site that DeCSS could be had by clicking on

the links.935

On appeal, the defendants renewed their attack on the constitutionality of the DMCA. In

Universal City Studios Inc. v. Corley,936 the Second Circuit rejected such challenges and upheld

the constitutionality of the DMCA anti-circumvention provisions. The court first rejected the

defendants’ argument that Section 1201(c)(1) should be read narrowly to avoid ambiguity that

could give rise to constitutional infirmities. The defendants contended that Section 1201(c)(1)

could and should be read to allow the circumvention of encryption technology when the

protected material would be put to fair uses. The court disagreed that Section 1201(c)(1)

permitted such a reading. “Instead, it clearly and simply clarifies that the DMCA targets the

circumvention of digital walls guarding copyrighted material (and trafficking in circumvention

tools), but does not concern itself with the use of those materials after circumvention has

occurred.”937 The court held that, in any event, the defendants did not claim to be making fair

use of any copyrighted materials, and nothing in the injunction prohibited them from making

such fair use.938 “Fair use has never been held to be a guarantee of access to copyrighted

material in order to copy it by the fair user’s preferred technique of in the format of the

original.”939

The court ruled that computer programs are not exempted from the category of First

Amendment speech merely because their instructions require use of a computer. Rather, the

933Id.

934Id.

935Id.

936 273 F.3d 429 (2d Cir. 2001).

937 Id. at 443 (emphasis in original).

938 Id. at 459.

939Id.

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ability to convey information renders the instructions of a computer program in source code form

“speech” for purposes of the First Amendment.940 However, the court held that the “realities of

what code is and what its normal functions are require a First Amendment analysis that treats

code as combining nonspeech and speech elements, i.e., functional and expressive elements.”941

Accordingly, the scope of First Amendment protection for the DeCSS code at issue was

limited.942

With this background, the court turned to a First Amendment analysis of the specific

prohibitions of the injunction. With respect to the prohibition against posting of the DeCSS

code, the court held that the prohibition was content neutral and was directed only toward the

nonspeech component of DeCSS – “[t]he DMCA and the posting prohibition are applied to

DeCSS solely because of its capacity to instruct a computer to decrypt CSS. That functional

capability is not speech within the meaning of the First Amendment.”943 Therefore, the contentneutral

posting prohibition, which had only an incidental effect on a speech component, would

pass muster if it served a substantial governmental interest unrelated to the suppression of free

expression, which the court found that it did.944

With respect to the prohibition against linking to other web sites posting DeCSS, the

court again noted that a link has both a speech and a nonspeech component. “It conveys

information, the Internet address of the linked web page, and has the functional capacity to bring

the content of the linked web page to the user’s computer screen.”945 And again, the court ruled

that the prohibition on linking was content neutral. “The linking prohibition applies whether or

not the hyperlink contains any information, comprehensible to a human being, as to the Internet

address of the web page being accessed. The linking prohibition is justified solely by the

functional capability of the hyperlink.”946 The court rejected the defendants’ argument that the

prohibition burdened substantially more speech than necessary to further the government’s

legitimate interest because it did not require an intent to cause harm by the linking, and that

linking could be enjoined only under circumstances applicable to a print medium. The court

found that the defendants’ arguments ignored the reality of the functional capacity of decryption

computer code and hyperlinks to facilitate instantaneous unauthorized access to copyrighted

940 Id. at 447.

941 Id. at 451.

942 Id. at 453.

943 Id. at 454.

944 Id. at 454-55. The court noted that it had considered the opinion of the California Court of Appeal in the

Bunner case, discussed in subsection e. below and that to “the extent that DVD Copy Control disagrees with our

First Amendment analysis, we decline to follow it.” Id. at 455 n.29. As noted in subsection e. below, the

Supreme Court of California subsequently reversed the California Court of Appeal decision.

945 Id. at 456.

946Id.

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materials by anyone anywhere in the world. Accordingly, “the fundamental choice between

impairing some communication and tolerating decryption cannot be entirely avoided.”947

Having rejected all constitutional challenges to the district court’s injunction, the Second

Circuit affirmed the district court’s final judgment.948 The defendants decided not to appeal the

case further to the Supreme Court.949

(iv) A Related DVD Case Involving Trade Secret Claims

– DVD Copy Control Association, Inc. v. McLaughlin (the Bunner case)

This case,950 although initially filed in state court alleging only misappropriation of trade

secrets, presented another fact pattern amenable to a claim under the anti-circumvention

provisions of the DMCA. The plaintiff in that case, DVD Copy Control Association, Inc. (DVD

CCA), was the sole licensor of CSS.951 The plaintiff alleged that various defendants had

misappropriated trade secrets in CSS by posting on their websites proprietary information

relating to how the CSS technology functions, the source code of DeCSS, and/or providing links

to other websites containing CSS proprietary information and/or the DeCSS program.952

On Dec. 29, 1999, the court denied an application by the plaintiff for a temporary

restraining order that would have required the defendants to remove the DeCSS program and

proprietary information from their websites, as well as links to other sites containing the same.953

However, on Jan. 21, 2000 (the day after the court in Reimerdes issued its preliminary injunction

under the DMCA), the judge reversed course and issued a preliminary injunction prohibiting the

defendants from “[p]osting or otherwise disclosing or distributing, on their websites or

elsewhere, the DeCSS program, the master keys or algorithms of the Content Scrambling System

(‘CSS’), or any other information derived from this proprietary information.”954

In its order, the court stated that the evidence was fairly clear that the trade secret was

obtained through reverse engineering, and acknowledged that reverse engineering is not

considered “improper means” of obtaining a trade secret under the Uniform Trade Secrets Act.

“The only way in which the reverse engineering could be considered ‘improper means’ herein

would be if whoever did the reverse engineering was subject to the click license agreement

947 Id. at 458.

948Id.

949 Lisa Bowman, “Copyright Fight Comes to an End” (July 3, 2002), available as of July 8, 2002 at

http://news.com.com/2102-1023-941685.html.

950 No. CV786804 (Santa Clara Superior Court, Dec. 27, 1999).

951 Id. ¶ 4.

952 Id. ¶¶ 1, 27-29, 45-50, 60-61.

953 Deborah Kong, “DVD Movie Fight Loses,” San Jose Mercury News (Dec. 30, 1999) at 1C.

954 Order Granting Preliminary Injunction, DVD Copy Control Assoc. v. McLaughlin (Sup. Ct., County of Santa

Clara, Jan. 21, 2000), available as of Jan. 19, 2002 at

www.eff.org/pub/Intellectual_property/Video/DVDCCA_case/20000120-pi-order.html.

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which preconditioned installation of DVD software or hardware, and prohibited reverse

engineering. Plaintiff’s case is problematic at this pre-discovery state. Clearly they have no

direct evidence at this point that [defendant] Jon Johansen did the reverse engineering, and that

he did so after clicking on any licence [sic] agreement.”955 Nevertheless, without elaboration,

the court found that the “circumstantial evidence, mostly due to the various defendants’

inclination to boast about their disrespect for the law, is quite compelling on both the issue of

Mr. Johansen’s improper means [and] th[e] Defendants’ knowledge of impropriety.”956 The

court found that the harm to the defendants of the injunction would be minimal, while without

the injunction, “the Plaintiff’s right to protect this information as secret will surely be lost, given

the current power of the Internet to disseminate information and the Defendants’ stated

determination to do so.”957

The court rejected the defendants’ argument “that trade secret status should be deemed

destroyed at this stage merely by the posting of the trade secret to the Internet. To hold

otherwise would do nothing less than encourage misappropriators of trade secrets to post the

fruits of their wrongdoing on the Internet as quickly as possible and as widely as possible,

thereby destroying a trade secret forever. Such a holding would not be prudent in this age of the

Internet.”958 The court refused, however, to extend the injunction to links to other websites

where DeCSS was posted. The court warned that a ban on Internet links would be “overbroad

and burdensome,” calling links “the mainstay of the Internet and indispensable to its convenient

access to the vast world of information. A website owner cannot be held responsible for all of

the content of the sites to which it provides links.”959

In November 2001, a California Court of Appeal reversed the injunction on First

Amendment grounds. In DVD Copy Control Assoc. v. Bunner,960 the court acknowledged that,

if the trial court correctly concluded that the plaintiffs had established a reasonable probability of

success, a preliminary injunction would be justified in the absence of any free speech concerns.

Nevertheless, the court found that the preliminary injunction could not withstand First

Amendment scrutiny. The court ruled that DeCSS was “speech” within the scope of the First

Amendment because “[r]egardless of who authored the program, DeCSS is a written expression

of the author’s ideas and information about decryption of DVDs without CSS.”961 The court

then held that republication of DeCSS by defendant Bunner962 was “pure speech within the ambit

955 Id. at 2.

956 Id. at 2-3.

957 Id. at 3.

958Id.

959 Id. at 4.

960 60 U.S.P.Q.2d 1803 (Cal. Ct. App. 2001).

961 Id. at 1809.

962 According to Bunner, defendant Jon Johansen actually reverse engineered the CSS software and Bunner merely

republished it. He argued that he had no reason to know that DeCSS had been created by improper use of any

proprietary information since the reverse engineering of CSS performed by Johansen was not illegal under

Norwegian law. Id. at 1805-06.

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of the First Amendment” and that the preliminary injunction therefore constituted an unlawful

prior restraint.963 “[A] person who exposes the trade secret may be liable for damages if he or

she was bound by a contractual obligation to safeguard the secret. And anyone who infringes a

copyright held by [the plaintiff] of by an DVD content provider may be subject to an action

under the Copyright Act. We hold only that a preliminary injunction cannot be used to restrict

Bunner from disclosing DeCSS.”964

On appeal, the California Supreme Court reversed the California Court of Appeal’s

decision, ruling that the trial court’s preliminary injunction did not violate the First

Amendment.965 Although the Court held that restrictions on the dissemination of computer code

were subject to scrutiny under the First Amendment because the code was a means of expressing

ideas,966 it found that the preliminary injunction passed scrutiny, assuming the trial court

properly issued the injunction under California’s trade secret law, because it was content neutral

(and therefore not subject to strict scrutiny) and achieved the requisite balance of interests by

burdening no more speech than necessary to serve the government interests at stake.967 The

Court emphasized that its holding was “quite limited,” and that its ruling that the preliminary

injunction did not violate the free speech clauses of the United States and California

Constitutions was based on the assumption that the trial court properly issued the injunction

under California’s trade secret law. “On remand, the Court of Appeal should determine the

validity of this assumption.”968

On remand, the California Court of Appeal held that the preliminary injunction was not

warranted under California trade secret law because DeCSS had been so widely distributed on

the Internet that it was no longer a trade secret.969 At the time of the hearing in the trial court for

a preliminary injunction, the evidence showed that DeCSS had been displayed on or linked to at

least 118 Web pages in 11 states and 11 countries throughout the world and that approximately

93 Web pages continued to publish information about DeCSS. Subsequent to the filing of the

law suit, a campaign of civil disobedience began among the programming community to spread

the DeCSS code as widely as possible. Persons distributed the code at the courthouse, portions

of it appeared on tee shirts, and contests were held encouraging people to submit ideas about

how to disseminate the information as widely as possible.970

The court stated, “Publication on the Internet does not necessarily destroy the secret if the

publication is sufficiently obscure or transient or otherwise limited so that it does not become

963 Id. at 1811.

964 Id. at 1812.

965 DVD Copy Control Ass’n v. Bunner, 31 Cal.4th 864 (2003).

966 Id. at 876.

967 Id. at 877-85.

968 Id. at 889.

969 DVD Copy Control Ass’n Inc. v. Bunner, 116 Cal. App. 4th 241 (6th Dist. 2004).

970 Id. at 248-49.

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generally known to the relevant people, i.e., potential competitors or other persons to whom the

information would have some economic value.”971 However, in the instant case, the court held

that the evidence in the case demonstrated that DeCSS had been published to “a worldwide

audience of millions” and “the initial publication was quickly and widely republished to an eager

audience so that DeCSS and the trade secrets it contained rapidly became available to anyone

interested in obtaining them.”972 Accordingly, the plaintiff had not established a likelihood of

success on its trade secret claim because DeCSS had been so widely published that the CSS

technology “may have lost its trade secret status.”973

In a related DeCSS case involving jurisdictional issues, defendant Matthew Pavlovich, a

Texas resident who posted DeCSS on the web, was sued by the movie industry in California. A

state judge granted an injunction against his posting of DeCSS on trade secret grounds. The

California Supreme Court ruled that Pavlovich could not be sued in California because he did not

have substantial ties to the state. In January of 2004, the U.S. Supreme Court reversed an

emergency stay of the California Supreme Court’s decision and lifted the injunction. Justice

O’Connor noted in the order that there was no need to keep DeCSS a secret.974

(v) A Related DVD Case – Norwegian Prosecution of

Jon Johansen

In January 2002, Norwegian prosecutors brought criminal charges against Jon Johansen,

one of the original three authors of the DeCSS program, for violating Norwegian hacking

laws.975 On Jan. 11, 2002, the civil rights organization Electronic Frontier Norway (EFN) issued

a press release calling for Johansen’s acquittal and full redress.976 After a trial, a three-judge

court in Oslo acquitted Johansen, ruling that consumers have rights to view legally obtained

DVD films “even if the films are played in a different way than the makers had foreseen.” On

appeal, Johansen was again acquitted.977

(vi) Another Challenge to the DMCA – The Felten Case.

During 2000, the Secure Digital Music Initiative (SDMI) offered a cash prize to anyone

who could break its watermark encryption scheme for the protection of digital content. A team

of scientists, led by Prof. Edward Felten of Princeton University, was able to crack the scheme

971 Id. at 251.

972 Id. at 252-53.

973 Id. at 255.

974 Samantha Chang, “Supreme Court Unscrambles DVD Decision” (Jan. 17, 2004), available as of Jan. 19, 2004

at www.reuters.com/newsArticle.jhtml?type=musicNews&storyID=4152687.

975 Declan McCullagh, “Norway Cracks Down on DVD Hacker” (Jan. 10, 2002), available as of Jan. 19, 2002 at

www.wired.com/news/politics/0,1283,49638,00.html.

976 The press release was available as of Jan. 19, 2002 at www.efn.no/freejon01-2002.html.

977 “Court Surprised DVD-Jon’s Lawyer” (Dec. 22, 2003), available as of Dec. 22, 2003 at

www.aftenposten.no/english/local/article.jhtml?articleID=696470.

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and desired to publish a paper on how they were able to do it. The RIAA threatened Prof. Felten,

contending that publication of the paper would violate the anti-circumvention provisions of the

DMCA. As a result of the threats, Prof. Felten withdrew publication of his paper from an April

2001 conference. In June 2001, he and seven other researchers, together with the Usenix

Association (a professional organization that had accepted Felten’s paper for a security

symposium to be held during August 2001), filed a lawsuit against the RIAA, seeking a

declaration that publication of their work would not violate the DMCA, and against the Justice

Department to block it from prosecuting the symposium organizers for allowing the paper to be

presented.978 On Nov. 28, 2001, a district judge in New Jersey dismissed the lawsuit, apparently

concluding that neither the RIAA nor the Justice Department had imminent plans to seek to stop

Prof. Felten from publishing his findings.979 Citing assurances from the government, the RIAA,

and the findings of the district judge, in Feb. of 2002, Prof. Felten and his research team decided

not to appeal the dismissal of their case.980

(vii) Pearl Investments, LLC v. Standard I/O, Inc.

In this case, Pearl hired Standard to perform software programming services to develop

an automated stock-trading system (ATS). After completion of ATS, an employee of Standard

named Chunn who had helped develop ATS, working on his own time, created software for his

own experimental automated trading system, which he maintained on a server separate from the

server that Pearl’s ATS system was operating on, although Chunn’s server was hosted by the

same service provider as Pearl’s ATS system.981 Pearl’s ATS system operated on a virtual

private network (VPN) that contained access restrictions implemented through a special router to

the VPN.982 At one point, Pearl requested the service provider to install Linux on its ATS server.

The service provider mistakenly installed Linux on Chunn’s server, which was plugged into

Pearl’s router. Pearl alleged that a “tunnel” (a secure connection) was configured in the router

that provided a connection between Chunn’s server and Pearl’s server, thereby allowing Chunn

to circumvent Pearl’s password-protected VPN and gain unauthorized access to its ATS system

running on the VPN, which included Pearl’s copyrighted software.983

Pearl brought claims against Standard and Chunn for, among other things, violation of

Section 1201(a)(1)(A) of the DMCA based on the alleged creation of the tunnel. Both the

plaintiff and the defendants sought summary judgment on the claim. The court ruled that

978 Declan McCullagh, “Code-Breakers Go to Court” (June 6, 2001), available as of Jan. 19, 2002 at

www.wired.com/news/mp3/0,1285,44344,00.html.

979 Robert Lemos, “Court Dismisses Free-Speech Lawsuit” (Nov. 28, 2001), available as of Jan. 19, 2002 at

http://news.cnet.com/news/0-1005-200-8010671.html.

980 Electronic Frontier Foundation press release, “Security Researchers Drop Scientific Censorship Case” (Feb. 6,

2002), available as of Feb. 10, 2002 at www.eff.org/IP/DMCA/Felten_v_RIAA/20020206_eff_felten_pr.html.

The government stated in documents filed with the court in Nov. 2001 that “scientists attempting to study

access control technologies” are not subject to the DMCA. Id.

981 Pearl Investments, LLC v. Standard I/O, Inc., 257 F. Supp. 2d 326, 339-40 (D. Me. 2003).

982 Id. at 342, 349.

983 Id. at 341-42 & n.36, 349.

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Standard was entitled to summary judgment because the evidence was undisputed that Chunn, in

developing and operating his automated trading system, was acting solely on his own and not as

an employee of Standard. Standard could therefore not be held liable for his actions.984

The court, however, denied summary judgment to Chunn. First, the court ruled that

Pearl’s VPN was the “electronic equivalent” of a locked door that fit the definition of a

technological protection measure put in place by the copyright owner to control access to Pearl’s

copyrighted ATS software.985 The court rejected the argument that the VPN did not effectively

control Chunn’s access to the ATS system in view of the fact that he had written the ATS system

himself and maintained a backup file of it for Pearl. “The question of whether a technological

measure ‘effectively controls access’ is analyzed solely with reference to how that measure

works ‘in the ordinary course of its operation.’ 17 U.S.C. § 1201(a)(3)(B). The fact that Chunn

had alternative means of access to the works is irrelevant to whether the VPN effectively

controlled access to them.”986 Finally, the court ruled that because there was a factual dispute

about whether only employees of the service provider, rather than Chunn, had configured the

tunnel from Chunn’s server to the Pearl VPN, or whether Chunn had configured his server and

router to tunnel into Pearl’s network, Chunn was not entitled to summary judgment on the

DMCA claim.987

In a subsequent jury trial, the jury found for Chunn on Pearl’s DMCA claim.988

(viii) 321 Studios v. Metro Goldwyn Mayer Studios, Inc.

In this case, 321 Studios marketed and sold software called DVD Copy Plus, which was

capable of copying the video contents of a DVD, both encrypted and unencrypted with the

DeCSS encryption scheme, onto a recordable CD. 321 Studios sought a ruling that its software

did not violate the anti-circumvention provisions of the DMCA.989 The court ruled that the

software’s capability to decrypt DVDs encoded with CSS did violate the anti-circumvention

provisions. The court first rejected 321 Studios’ argument that CSS was not an effective

technological measure because the CSS access keys were widely available on the Internet. The

court held that “this is equivalent to a claim that, since it is easy to find skeleton keys on the

black market, a deadbolt is not an effective lock to a door.”990

984 Id. at 346-47, 349-50.

985 Id. at 350.

986Id.

987Id.

988 See Pearl Investments v. Standard I/O, Inc., 324 F. Supp. 2d 43 (2004) (rejecting Pearl’s claim that the jury’s

verdict in favor of Chunn on the DMCA claim was inconsistent with its conclusion that Chunn’s physical

hookup to the Pearl system caused damage to Pearl).

989 321 Studios v. Metro Goldwyn Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1089-90 (N.D. Cal. 2004).

990 Id. at 1095.

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With respect to the specific prohibition of Section 1201(a)(2), 321 Studios argued that it

had the authority of the copyright holder to decrypt DVDs protected by CSS because its product

worked only on original DVDs, and the purchaser of a DVD has the authority of the copyright

holder to bypass CSS to play the DVD. The court rejected this argument, citing Universal City

Studios, Inc. v. Corley991 for the proposition that purchase of a DVD does not authorize the

purchaser to decrypt CSS, but rather only to view the content on the DVD. Only a licensed DVD

player has the authority of the copyright holder to decrypt CSS and 321 Studios did not hold a

CSS license.992

With respect to the specific prohibition of Section 1201(b)(1), 321 Studios argued that

CSS was not a copy control measure because it controlled only access to content and did not

control or prevent copying of DVDs. The court rejected this argument, noting that while it was

technically correct that CSS controlled access to DVDs, “the purpose of this access control is to

control copying of those DVDs, since encrypted DVDs cannot be copied unless they are

accessed.”993 The court also rejected 321 Studios’ argument that the primary purpose of DVD

Copy Plus was not to violate rights of a copyright holder since the software could be used for

many purposes that did not involve accessing CSS or that involved making copies of material in

the public domain or under fair use principles. In a potentially very broad holding, the court held

that the downstream uses of DVD Copy Plus, whether legal or illegal, were irrelevant to

determining whether 321 Studios itself was violating the DMCA.994 “It is the technology itself at

issue, not the uses to which the copyrighted material may be put. This Court finds, as did both

the Corley and Elcom courts, that legal downstream use of the copyrighted material by

customers is not a defense to the software manufacturer’s violation of the provisions of §

1201(b)(1).”995

321 Studios also argued that its software did not violate Section 1201(b)(2) because it

used authorized keys to decrypt CSS. The court ruled that, “while 321’s software does use the

authorized key to access the DVD, it does not have authority to use this key, as licensed DVD

players do, and it therefore avoids and bypasses CSS.”996

Finally, 321 Studios argued that, under the common requirement of both Sections

1201(a)(2) and 1201(b)(1), its DVD Copy Plus software was not primarily designed and

produced to circumvent CSS, but rather was designed and produced to allow users to make

copies of all or part of a DVD, and that the ability to unlock CSS was just one of the features of

its software. The court rejected this argument, noting that Sections 1201(a)(2) and 1201(b)(1)

both prohibit any technology or product “or part thereof” that is primarily designed or produced

991 273 F.3d 429 (2d Cir. 2001).

992 321 Studios, 307 F. Supp. 2d at 1096.

993 Id. at 1097.

994Id.

995 Id. at 1097-98.

996 Id. at 1098. This holding is contrary to that reached by the court in I.M.S. Inquiry Management Systems, Ltd. v.

Berkshire Information Systems, Inc., 307 F. Supp. 2d 521 (S.D.N.Y. 2004), discussed in the next subsection.

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for circumvention. Because it was undisputed that a portion of 321 Studios’ software was solely

for the purpose of circumventing CSS, that portion of the software violated the DMCA.997

Accordingly, the court enjoined 321 Studios from manufacturing, distributing, or otherwise

trafficking in any type of DVD circumvention software.998

(ix) I.M.S. Inquiry Management Systems, Ltd. v.

Berkshire Information Systems, Inc.

This case reached the opposite result from the 321 Studios v. Metro Goldwyn Mayer

case, and held that the unauthorized use of an otherwise legitimate, owner-issued password does

not constitute a “circumvention” of a technological measure under the DMCA.999 The plaintiff

owned a web-based service that provided information on tracking magazine advertising

exclusively to its clients through proprietary passwords. The defendant obtained a user

identification and password issued to a third party and made unauthorized use of the same to gain

access to the plaintiff’s web site, from which the defendant downloaded approximately 85% of

the report formats and copied those formats into its competing service.1000 The court ruled there

was no DMCA violation because “what defendant avoided and bypassed was permission to

engage and move through the technological measure from the measure’s author. … Defendant

did not surmount or puncture or evade any technological measure to do so; instead, it used a

password intentionally issued by plaintiff to another entity.”1001

(x) Paramount Pictures Corp. v. 321 Studios.

The court in this case, in a very short opinion citing the Corley and Reimerdes cases and

for the reasons stated therein, held that 321 Studios violated the anti-circumvention provisions of

the DMCA by manufacturing and selling its software product that permitted the possessor of a

DVD encoded with CSS to decode CSS and thereby make identical copies of the DVD. The

court enjoined 321 Studios from manufacturing, distributing, linking to, or otherwise trafficking

in any of its software products that were capable of decrypting CSS.1002

997 321 Studios, 307 F. Supp. 2d at 1098. The court ruled that it could not determine on summary judgment

whether the software had only limited commercially significant purposes other than circumvention, and that

would be an issue a jury would have to decide. Id. The court also rejected 321 Studios’ challenge to the

constitutionality of the anti-circumvention provisions on the ground that is unconstitutionally restricted 321

Studios’ right to tell others how to make fair use of a copyrighted work, impermissibly burdened the fair use

rights of others, and exceeded the scope of Congressional powers. Id. at 1098-1105.

998 Id. at 1105.

999 I.M.S. Inquiry Management Systems, Ltd. v. Berkshire Information Systems, Inc., 307 F. Supp. 2d 521

(S.D.N.Y. 2004).

1000 Id. at 523.

1001 Id. at 532-33.

1002 Paramount Pictures Corp. v. 321 Studios, 69 U.S.P.Q.2d 2023, 2023-24 (S.D.N.Y. 2004).

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(xi) Macrovision Corp. v. 321 Studios

In this case, the same judge as in the Paramount Pictures case, in a one paragraph opinion

that simply cited his earlier decision in the Paramount Pictures case, issued a preliminary

injunction against 321 Studios barring it from selling the various versions of its DVD copying

software.1003 In August of 2004, 321 Studios reached a settlement with the motion picture

industry, which included a financial payment and an agreement to stop distributing its DVD

copying software worldwide, and ceased operations.1004

(xii) Comcast of Illinois X v. Hightech Electronics, Inc.

In this case, the defendant Hightech set up a website named 1-satellite-dish.com that

contained links to over thirty other websites selling illegal cable pirating devices. Comcast

brought claims under Sections 1201(a)(2) and (b)(1) against the website as well as against Net

Results, the named domain server for the 1-satellite-dish.com website.1005 The defendants

argued that only copyright holders can bring suit under the anti-circumvention provisions and

that Comcast, in regard to the cable signals at issue, was not the copyright owner. The court

rejected this argument, citing CSC Holdings, Inc. v. Greenleaf Electronics, Inc., 2000 U.S. Dist.

LEXIS 7675 (N.D. Ill. 2000), which held that the plaintiff cable provider had standing to bring

suit under Section 1203(a) against the defendants for selling and distributing pirate cable

descrambling equipment, as it was a person injured by a violation of the DMCA Accordingly,

the Comcast court concluded that Comcast could bring its claim under the DMCA.1006

With respect to the merits of the DMCA claims, the court ruled that Comcast controlled

through technological measures access to copyrighted programs it provided to its subscribers by

scrambling those programs, and that such measures also protected the rights of the copyright

owners in those programs, as required by Sections 1201(a)(2) and (b)(1). Citing the Reimerdes

case, the court noted that there can be a violation of the DMCA for maintaining links to other

websites that contain access to or information regarding circumvention technology. The court

noted that the Intellectual Reserve case had refused to find contributory liability for posting links

to infringing websites because there was no direct relationship between the defendant and the

people who operated the websites containing the infringing material, and the defendants did not

receive any kind of compensation from the linked websites.1007

By contrast, in the instant case, the court noted that Comcast had alleged that Hightech

received compensation from the website operators that linked to 1-satellite-dish.com. In

addition, the court found that Net Results, as the domain server of websites selling illegal cable

1003 Macrovision Corp. v. 321 Studios, 2004 U.S. Dist. LEXIS 8345 (S.D.N.Y. May 12, 2004).

1004 “Maker of DVD-Copying Products Reaches Settlement Over Suits” (Aug. 10, 2004), available as of Aug. 11,

2004 at www.siliconvalley.com/mld/siliconvalley/news/editorial/9364923.htm.

1005 Comcast of Illinois X v. Hightech Electronics, Inc., 2004 Copyr. L. Dec. ¶ 28,840 at pp. 37,299 & 37,232-33

(N.D. Ill. 2004).

1006 Id. at 37,233.

1007Id.

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equipment, could possibly be engaging in trafficking under the DMCA because it was allegedly

assisting sellers of illegal cable equipment in distributing such equipment. The court therefore

concluded that Comcast had sufficiently stated a claim against the defendants under the DMCA

in trafficking or acting in concert with a person who had manufactured or distributed illicit

circumvention equipment, and denied the defendants’ motion to dismiss the DMCA claims.1008

(xiii) Davidson & Assocs. v. Internet Gateway

For a discussion of this case, which found violations of both the anti-circumvention and

trafficking prohibitions of Section 1201, see Section II.G.1(g)(5) above.

(xiv) Agfa Monotype Corp. v. Adobe Sys.

This case addressed the issue of whether a passive bit or flag indicating the copyright

owner’s preference with respect to copying or distribution constitutes an effective technological

access control measure or measure protecting copyright rights, and held that it does not. The

plaintiffs were the copyright owners in about 3,300 copyrighted TrueType fonts. The plaintiffs

alleged that Version 5 of Adobe’s Acrobat product violated the anti-circumvention provisions of

the DMCA because it ignored the “embedding bits” in certain of the plaintiffs’ fonts that

indicated whether the fonts were licensed for editing.1009

Adobe Acrobat 5.0 was capable of embedding fonts into portable electronic documents

stored in Adobe’s Portable Document Format (PDF). The court described the technology of font

embedding as follows:

A font is copied when it is embedded. Fonts are embedded through embedding

bits. Embedding bits indicate to other programs capable of reading them, such as

Adobe Acrobat, the font embedding licensing rights that the font vendor granted

with respect to the particular font. The software application decides whether or

not to embed the font based upon the embedding bit. An embedding bit cannot be

read by a computer program until that program has already accessed the font data

file. TrueType Fonts are not encrypted, scrambled, or authenticated. A TrueType

Font data file can be accessed regardless of the font’s embedding permissions. A

program seeking to access a TrueType font need not submit a password or

complete an authorization sequence to access, use or copy TrueType Fonts.1010

The Microsoft TrueType Font specification defined four levels of embedding bit

restrictions: Restricted (font cannot be embedded); Print & Preview (font can be embedded but

the document must be opened as read-only and no edits may be applied to the document),

Editable (font can be embedded and the document may be opened for reading and editing), and

1008 Id. at 37,233-34.

1009 Agfa Monotype Corp. v. Adobe Sys., 404 F. Supp. 2d 1030, 1031-32 (N.D. Ill. 2005).

1010 Id. at 1031.

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Installable.1011 Acrobat 5.0 made it possible for the first time to embed in the “form field” or

“free text annotation” of a PDF document1012 any TrueType Font whose embedding bit was not

set to “Restricted,” including fonts whose embedding bit was set to “Print and Preview.” This

capability of Acrobat 5.0 was referred to as the “Any Font Feature.”1013

The plaintiffs contended that the Any Font Feature resulted in “editable embedding,”

because a recipient of a PDF file with embedded fonts could use the fonts to change the contents

of a form field or free text annotation. The plaintiffs further contended that such editable

embedding was possible only because Acrobat 5.0 allowed the embedding bits set by the

plaintiffs to be “circumvented” in violation of the DMCA.1014

The court rejected the plaintiffs’ claims under both Sections 1201(a)(2) and 1201(b)(1) of

the DMCA. With respect to Section 1201(a)(2), the court ruled that the plaintiffs’ embedding

bits did not effectively control access to the TrueType fonts. The court found that an embedding

bit was a passive entity that did nothing by itself. Embedding bits were not encrypted, scrambled

or authenticated, and software applications such as Acrobat 5.0 did not need to enter a password

or authorization sequence to obtain access to the embedding bits or the specification for the

TrueType font (which was publicly available for free download from the Internet). The

embedding bits therefore did not, in their ordinary course of operation, require the application of

information, or a process or a treatment, with the authority of the copyright owner, to gain access

to the plaintiffs’ TrueType fonts, as required by Section 1201(a)(3)(B) in order for a

technological measure to effectively protect access to a copyrighted work.1015

In addition, the court ruled that Acrobat 5.0 did not contain technology, components or

parts that were primarily designed to circumvent TrueType embedding bits. The court found

that Acrobat 5.0 had many commercially significant purposes other than to circumvent

embedding bits, even if it did circumvent them. The purpose of the embedded font capability in

Acrobat 5.0 was so that electronic documents could look exactly the same when printed and

viewed by a recipient as sent by the creator. The primary purpose of the forms feature was to

allow recipients to complete electronic forms they receive and electronically return the

information inputted on the form to the creator. Similarly, the commercial purpose of the free

text annotation feature was to allow recipients to insert comments into the PDF that could be

viewed by the creator when electronically returned. Nor was Acrobat 5.0 marketed for the

primary purpose of circumventing the embedding bits – Adobe had made no mention of

1011 Id. at 1031-32.

1012 A PDF form field was designed to allow a recipient to complete an electronic form and electronically return the

information inputted on the form to the creator. A PDF free text annotation was designed to allow recipient to

insert comments into the PDF document that could be viewed by the creator when electronically returned. Id. at

1033.

1013 Id. at 1032.

1014 Id. at 1034.

1015 Id. at 1036-37.

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embedding bits, circumvention of embedding bits, or the Any Font Feature in any of its

marketing materials for Acrobat 5.0.1016

With respect to the plaintiffs’ Section 1201(b)(1) claim, Adobe argued, and the court

agreed, that the embedding bits did not constitute a technological measure that prevented,

restricted, or otherwise limited the exercise of a right of copyright. The plaintiffs had already

authorized the copy and distribution of their TrueType fonts for embedding in PDF documents

for “Print and Preview” purposes. Acrobat 5.0 did not make an additional copy or distribution of

a font to embed the font in free text annotations or form fields, and the plaintiffs’ copyright did

not give them the right to control subsequent use of lawfully made copies of the fonts.1017

In addition, for the same reasons noted in connection with the plaintiffs’ Section

1201(a)(2) claim, the court ruled that Acrobat 5.0 as a whole and the parts thereof were not

primarily designed or promoted for font embedding purposes and had many other commercially

significant purposes other than circumventing the embedding bits associates with the plaintiffs’

TrueType fonts. Accordingly, the court granted Adobe’s motion for summary judgment with

respect to the plaintiffs’ anti-circumvention claims.1018

(xv) Egilman v. Keller & Heckman

This case agreed with the I.M.S. case and held that access to a computer through the

unauthorized use of a valid password does not constitute an unlawful circumvention.1019 The

plaintiff Egilman was a medical doctor and testifying expert witness in a case in which the court

had issued an order prohibiting anyone involved in the litigation from publishing any statements

on Internet websites over which they had control concerning the litigation. Egilman was

sanctioned for violating the order by publishing certain inflammatory statements on his website.

Egilman claimed that one of the defendant’s law firms had obtained the user name and password

to his website without authorization and disclosed that information to another defendant’s law

firm, which then used the user name and password to gain access to his website, from which the

firm obtained information showing that Egilman had violated the court order. Egilman asserted

a claim under the anti-circumvention provisions against the law firm.1020

The court rejected the claim. It reviewed the facts and holding of the I.M.S. case

discussed in subsection j. above, and found that the case was correctly decided.1021 The court

therefore ruled that “using a username/password combination as intended – by entering a valid

username and password, albeit without authorization – does not constitute circumvention under

1016 Id. at 1032-33.

1017 Id. at 1038-40.

1018 Id. at 1040.

1019 Egilman v. Keller & Heckman, LLP, 401 F. Supp. 2d 105 (D.D.C. 2005).

1020 Id. at 107-09.

1021 Id. at 112-14.

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the DMCA.” The “technological measure” employed by Egilman had not been “circumvented,”

but rather merely utilized.1022

(xvi) Macrovision v. Sima Products Corp.

In Macrovision v. Sima Products Corp.,1023 the court held that the defendant’s products,

which eliminated Macrovision’s Analog Copy Protection (ACP) signals imprinted on DVDs

containing copyrighted works to prevent the copying of the DVDs, violated the anticircumvention

provisions. The ACP system inserted additional information in the non-visible

portion of the analog signal, the practical effect of which was to render videotaped copies of the

analog signal so visually degraded as to be unwatchable. The defendant’s devices eliminated

Macrovision’s ACP from an analog signal. The removal function was effectuated by a single

chip, usually the SA7114 chip from Philips. Macrovision contended, and Sima did not dispute,

that Sima’s devices could be fitted with an alternate chip manufactured by Philips that, under

license from Macrovision, would recognize the ACP and not allow for its circumvention.1024

Sima contended that its devices were intended primarily to allow the consumer to make

“fair use” backup copies of a DVD collection. The court noted, however, that although the

DMCA provides for a limited “fair use” exception for certain users of copyrighted works under

Section 1201 (a)(2)(B), the exception does not apply to manufacturers or traffickers of the

devices prohibited by Section 1201(a)(2).1025

Sima argued that the “primary purpose” of its devices was not circumvention. The court

rejected this argument, noting that, although some of the devices had some auxiliary functions,

Sima did not argue that it was necessary for the device to be able to circumvent ACP in order to

perform those functions. Nor did Sima argue that using the Macrovision-licensed Philips chips

would prevent the devices from performing the auxiliary functions or facilitating the copying of

non-protected works, such as home videos. Accordingly, the devices had only limited

commercially significant purposes or uses other than circumvention.1026 The court also noted

that Sima had touted on its web site the devices’ capability of circumventing copy protection on

copyrighted works. And the DMCA does not provide an exception to the anti-circumvention

provisions for manufacturers of devices designed to enable the exercise of fair use rights.

Finally, the court noted that in any event Sima had cited no authority, and the court was aware of

none, for the proposition that fair use includes the making of a backup copy.1027 Accordingly,

1022 Id. at 114.

1023 2006 U.S. Dist. LEXIS 22106 (S.D.N.Y. Apr. 20, 2006).

1024 Id. at *2-3.

1025 Id. at *2-3, 6.

1026 Id. at *6-7.

1027 Id. at *7-8.

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the court preliminarily enjoined Sima from selling its devices and any other products that

circumvented Macrovision’s copyright protection technologies in violation of the DMCA.1028

(xvii) Nordstrom Consulting, Inc. v. M&S Technologies,

Inc.

In Nordstrom Consulting, Inc. v. M&S Technologies, Inc.,1029 Nordstrom, acting as a

consultant, developed software for a visual eye chart to be distributed as part of M&S’s visual

acuity systems. Nordstrom retained ownership of the copyrights in the software and, after a

falling out with M&S, assigned the copyrights to a separate corporation. After leaving M&S, the

plaintiffs alleged that M&S violated the DMCA by circumventing the password protection on a

computer used by Nordstrom in order to gain access to the software.1030 The court rejected this

claim. Citing the Chamberlin v. Skylink case, the court noted that there must be a showing that

the access resulting from the circumvention led to infringement, or the facilitation of

infringement, of a copyrighted work, and the plaintiffs had failed to make such a showing. The

court noted it was undisputed that the defendant had accessed the software in order to repair or

replace the software of a client of M&S and a valid licensee of the software, so the

circumvention of the password did not result in an infringement or the facilitation of

infringement.1031

M&S, in turn, alleged that Nordstrom had violated the DMCA by circumventing the

digital security of M&S’s computer network. M&S’s network was divided into two parts, one

dealing with visual acuity systems and one with hotel/hospitality businesses. M&S asserted that,

while Nordstrom had a password to access the acuity side of the system, he did not have a

password to access the hotel side, yet Nordstrom claimed to have accessed the hotel side. The

court denied summary judgment on M&S’s claim because of factual disputes. Nordstrom

asserted that he did not access the hotel side of the system and that any materials on the hotel

side were not registered copyrights. By contrast, M&S had offered evidence that Nordstrom

accessed the hotel side of the system, and alleged that the hotel side contained copyrighted

works.1032

(xviii) R.C. Olmstead v. CU Interface

This case agreed with the I.M.S. case and held that access to a computer through the

unauthorized use of a valid username and password does not constitute an unlawful

circumvention.1033 The plaintiff was the owner of data processing software for credit unions

called RCO-1 that it licensed to the defendant. The defendant CUI hired some developers to

1028 Id. at *11-12.

1029 2008 U.S. Dist. LEXIS 17259 (N.D. Ill. Mar. 4, 2008).

1030 Id. at *3-8.

1031 Id. at *23-24/

1032 Id. at *30-31.

1033 R.C. Olmstead, Inc. v. CU Interface, LLC, 2009 U.S. Dist. LEXIS 87705 (N.D. Ohio Mar. 27, 2009).

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develop a replacement program for RCO-1 and, to aid development, allowed the developers to

gain access to RCO-1 using valid usernames and passwords issued to CUI. The plaintiff claimed

that such unauthorized access violated the DMCA. The court rejected this claim, finding the

case indistinguishable from I.M.S. and the reasoning of I.M.S. persuasive. The court also noted

that the license agreement between the plaintiff and CUI did not set any restrictions regarding

issuance of usernames and passwords, so that the plaintiff could not even show that CUI’s use of

its usernames and passwords was unauthorized.1034 “Simply put, CUI did not circumvent or

bypass any technological measures of the RCO software – it merely used a username and

password – the approved methodology – to access the software.”1035

(xix) Avaya v. Telecom Labs

In this case, the court refused to decide on a motion for summary judgment the issue

addressed in the I.M.S. case of whether unauthorized use of a valid password to gain access to

software constitutes a violation of the DMCA.1036 The plaintiff Avaya sold PBX systems with

maintenance software embedded in them. When selling a new system, Avaya supplied the

customer with a set of default passwords that the customer used to first log in to the system.

Avaya alleged that the passwords were used without authorization by the defendants to log in

and gain access to Avaya’s maintenance software. Defendants moved for summary judgment

that use of valid logins to gain access to software does not violate the DMCA. The court ruled

that summary judgment was not appropriate because granting the motion would not result in

dismissal of any portion of Avaya’s DMCA claims from the case. All that would be resolved

would be the abstract issue of whether use of valid logins does not violate the DMCA. Because

Avaya had not identified a single, specific PBX to which the alleged illegal conduct was applied,

ruling on the motion would have no effect until such time as the defendants could prove which of

the PBXs at issue were accessed with the known, valid logins that they alleged were immune

from DMCA liability.1037 “Avaya’s DMCA claims may or may not have merit, but a summary

judgment rendered on a discrete set of facts that have yet to be proven is not the proper vehicle

for that determination.”1038

(xx) Actuate v. IBM

In Actuate Corp. v. International Business Machines Corp.,1039 Actuate alleged that

IBM’s unauthorized posting on an IBM web site of Actuate’s copyrighted software for

downloading, together with the license keys that allowed for unlimited use of such software by

downloaders, whether they were authorized to use the software or not, constituted circumvention

of technological measures on the software that restricted access to it and trafficking in

1034 Id. at *21-24.

1035 Id. at *24.

1036 Avaya, Inc. v. Telecom Labs, Inc., 2009 U.S. Dist. LEXIS 82609 (D.N.J. Sept. 9, 2009).

1037 Id. at *2 & *10-13.

1038 Id. at *13.

1039 2010 U.S. Dist. LEXIS 33095 (N.D. Cal. Apr. 5, 2010).

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circumvention devices. IBM filed a motion to dismiss the claim, relying on the I.M.S., Egilman,

and R.C. Olmstead cases for the proposition that improper use of a legitimate password issued by

the copyright holder does not constitute circumvention.1040

The court denied the motion. It found the I.M.S., Egilman, and R.C. Olmstead cases in

conflict with the 321 Studios and the Microsoft v. EEE Business cases from the Northern District

of California with respect to the issue of whether the unauthorized use of an otherwise legitimate

password can constitute circumvention. The court rejected IBM’s argument that the two lines of

cases were not inconsistent on the ground that, in the 321 Studios and Microsoft v. EEE Business

cases, there was no allegation that the parties whose passwords were being used had issued those

passwords to a third party. The court found no basis in 321 Studios for such a distinction, and

noted that Egilman expressly rejected the distinction. Accordingly, the court concluded that the

two lines of cases simply reached contradictory results, and declined to follow the reasoning of

the I.M.S. line of cases. It instead followed the 321 Studios and the Microsoft v. EEE Business

cases, and held that unauthorized distribution of passwords and user-names avoids and bypasses

a technological measure in violation of Sections 1201(a)(2) and 1201(b)(1).1041

The reasoning of the I.M.S. court – that a password somehow does not fall within

[the analogy to the combination of a locked door used in the DeCSS cases], is not

well-founded. Rather, a combination to a lock appears to be essentially the same

as a password. Nor does the Court find support in the statute itself for drawing a

distinction between passwords and other types of code that might be used for

decryption. Therefore, the Court rejects Defendants’ position. Unauthorized use

of a password may constitute circumvention under the DMCA.1042

(xxi) Navistar v. New Baltimore Garage

In this case, the plaintiff restricted access to its dealer communication network

and copyrighted material stored therein through use of passwords. The license agreement

for use of the network prohibited sharing with or otherwise distributing passwords to

third parties and using a third party’s password to gain access to the network. The

defendant, a licensee of the plaintiff’s network, violated these prohibitions and shared its

passwords with a third party who used them to log in and gain unauthorized access to

information on the plaintiff’s network. The plaintiff claimed that the defendant’s

provision to the third party with access to the plaintiff’s network through the

unauthorized use of its passwords constituted circumvention of a technological measure

or trafficking in technology designed to circumvent access or copy controls. The court,

noting a split in authority on the issue, ruled that unauthorized use of a valid password

does not violate the anti-circumvention provisions of the DMCA, and the unauthorized

sharing of a valid password does not constitute prohibited trafficking. Accordingly, the

1040 Id. at *9-10.

1041 Id. at *24-25.

1042 Id. at *26.

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court granted the defendant’s motion to dismiss the plaintiff’s DMCA claim with leave to

amend.1043

(xxii) Dice Corp. v. Bold Technologies

Both the plaintiff and the defendant provided software for companies in the alarm

industry. The defendant wrote an extraction program to extract customer data from the

plaintiff’s software (written in Thoroughbred basic) and convert it into a format that

could be read by the defendant’s software (written in C++ and Visual Basic). The

database files where the customer data was stored by the plaintiff’s software were not

subject to any access or security features and could be accessed by anyone who had a

copy of Thoroughbred basic. No administrative password was required to run queries on

the database.1044

The plaintiff’s complaint alleged that encryption of its software constituted a

technological measure that effectively controlled access to its products and that the

defendant’s use of former employees of the plaintiff with knowledge of methods to

circumvent such encryption permitted the defendant to access the plaintiff’s software

without permission, in violation of the anti-circumvention provisions of the DMCA. The

court granted the defendant summary judgment on this claim, finding that the plaintiff

had produced no evidence that the defendant accessed any source code (which one of the

plaintiff’s employees admitted during discovery was not in fact encrypted) or other

copyrighted material of the plaintiff. Rather, the defendant had accessed through its

extraction program only customer data that was owned by the user of the plaintiff’s

software, which data was neither encrypted nor protected against access by any password

or other technological measure.1045

(14) Criminal Prosecutions Under the DMCA

(i) The Sklyarov/Elcomsoft Case

Dmitry Sklyarov, a 27-year-old Russian programmer who worked for a Russian company

called Elcomsoft, helped create the Advanced eBook Processor (AEBPR) software, which

enabled eBook owners to translate from Adobe’s secure eBook format into the more common

Portable Document Format (PDF). The software worked only on legitimately purchased eBooks.

Sklyarov was arrested at the behest of Adobe Systems, Inc. on July 17, 2001 in Las Vegas after

he delivered a lecture at a technical convention, and charged by the Dept. of Justice with criminal

violations of the DMCA for distributing a product designed to circumvent copyright protection

measures. He was subsequen