> NOTICE OF INFRINGEMENT
> =
> by Jonathan Rosenoer
> =
> * I. Access Providers & Infringement
> * II. Volition & Automatic Forwarding
> * III. Contributory Infringement
> * IV. Vicarious Liability
> * V. First Amendment
> * VI. Liability for Internet Browsing
> * VII. Fair Use
> * VIII. Scientology Not Likely to Prevail
> =
> I. Access Providers & Infringement
> =
> In the first ruling of its kind, a Federal court in California has
> held that a large Internet access provider may be liable for copyright
> infringement if it knows or should have known that an unauthorized
> copy of a copyrighted work is being posted to the Internet through its
> system and the provider is able to take simple measures to prevent
> further damage to the copyright owner. __Religious Technology Center
> v. Netcom-Online Communications Services, Inc.__, No. C-95-20091,
> Order Denying Netcom's Motion for Summary Judgment (N.D. Cal.
> 11/21/95). This ruling comes in a case brought by holders of the
> copyrights to published and unpublished works of L. Ron Hubbard,
> founder of the Church of Scientology, against a former Church
> minister, Dennis Erlich (now a vocal critic), and the operator of the
> computer bulletin board system (BBS) to which Erlich subscribes,
> Thomas Klemesrud, as well as the Internet access provider that
> connects Klemesrud's BBS to the Internet, Netcom. The suit alleges
> copyright infringement by Erlich, who posted portions of plaintiffs'
> ("Scientology's") works on the Internet -- the Usenet newsgroup
> alt.religion.scientology -- using access through Klemesrud's BBS.
> Failing to stop Erlich's continued postings, Scientology contacted
> Klemesrud and Netcom. Both refused to act. Although the Court's ruling
> states that Scientology has not shown that it will likely prevail on
> its claims against Netcom or Klemesrud, it reveals to online systems
> that a simple copyright notice may be sufficient to support a claim of
> infringement sufficient to compel the system to take steps to prevent
> further damage to a claimant's copyrighted work.
> =
> II. Volition & Automatic Forwarding
> =
> Copyright infringement involves unauthorized exercise of one or more
> of the exclusive rights of a copyright holder, as set out in Section
> 106 of the Copyright Act. Although intent and a particular state of
> mind may be relevant to an award of damages, they are not required
> elements of proof for a finding of direct copyright infringement. This
> is in contrast to defamation, where an online system may be able to
> escape liability for a defamatory posting where it can be shown the
> operator did not know or have reason to know of the defamatory
> posting.
> =
> Netcom urges that Erlich, not Netcom, is directly liable for the
> unauthorized copying of Scientology's works that found their way onto
> Netcom's computers. The Court observes,
> =
> "Netcom did not take any affirmative action that directly resulted in
> copying [Scientology's] works other than by installing and maintaining
> a system whereby software automatically forwards messages received
> from subscribers onto the Usenet, and temporarily stores copies on its
> system. Netcom's actions, to the extent that they created a copy of
> plaintiff's works, were necessary to having a working system for
> transmitting Usenet postings to and from the Internet."
> =
> According to the Court, Scientology's theory that Netcom is liable
> "because its computers in fact made copies" would result in "liability
> for every single Usenet server in the worldwide link of computers
> transmitting Erlich's message to every other computer." There is no
> need, says the Court, to make all these parties infringers. "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."
> =
> Although Scientology complains that infringing copies of its works
> were found on Netcom's computer for eleven days, the Court recognizes
> that under Scientology's theory "any storage of a copy that occurs in
> the process of sending a message to the Usenet is an infringement."
> Whether Netcom acted after it had warning from Scientology is not
> relevant to its direct liability for copying, but may be relevant to
> liability to contributory infringement -- where knowledge is an
> element.
> =
> Looking to a recent case where unauthorized copies of Playboy
> photographs were found on a BBS, the Court notes there the BBS
> operator was liable for violating the plaintiff's right to publicly
> distribute and display copies of the work. The BBS itself was not, as
> Scientology suggests, held liable for the unauthorized reproduction of
> plaintiff's work. And, says the Court, "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."
> =
> In response to Scientology's claim Netcom infringed Scientology's
> exclusive right to publicly distribute and display copies of its
> works, the Court notes that it "is not entirely convinced that the
> mere possession of a digital copy on a BBS that is accessible to some
> members of the public constitutes direct infringement by the BBS
> operator." According to the Court,
> =
> "Only the subscriber should be liable for causing the distribution of
> plaintiff's work, as the contributing actions of the BBS provider are
> automatic and indiscriminate. ... Where the BBS merely stores and
> passes along all messages sent by its subscribers and others, the BBS
> should not be seen as causing these works to be publicly distributed
> or displayed."
> =
> The Court points out that accepting Scientology's argument would
> create "unreasonable liability." "No purpose would be served,"
> observes the Court, "by holding liable those who have no ability to
> control the information to which their subscribers have access, even
> though they might be in some sense helping to achieve the Internet's
> automatic 'public distribution' and the users' 'public' display of
> files." This result is "unnecessary as there is already a party
> directly liable to causing the copies to be made." (The Court
> acknowledges that its conclusion is at odds with the Report of the
> Working Group on Intellectual Property Rights, which recommends a
> strict liability paradigm for BBS operators.)
> =
> III. Contributory Infringement
> =
> But even if not liable for direct copyright infringement, Netcom may
> still be held liable as a contributory infringer. The rule is that
> "[l]iability for participation in the infringement will be established
> where the defendant, 'with knowledge of the infringing activity,
> induces, causes or materially contributes to the infringing conduct of
> another.'"
> =
> Here, Netcom allegedly knew Erlich was infringing Scientology's
> copyright. Scientology's counsel told Netcom that copies of
> Scientology's works were being posted in a Usenet newsgroup by Erlich
> through Netcom's system. And, says Scientology, Netcom did nothing --
> allowing allegedly infringing postings to remain on its system so that
> Netcom subscribers and Usenet servers could access them. But, Netcom
> responds that,
> =
> "(1) [I]t did not know of Erlich's planned infringing activities when
> it agreed to lease its facilities to Klemesrud, (2) it did not know
> that Erlich would infringe prior to any of his posting, (3) it is
> unable to screen out infringing postings before they are made, and (4)
> its knowledge of the infringing nature of Erlich's postings was too
> equivocal given the difficulty in assessing whether [Scientology
> copyright] registrations were valid and whether Erlich's use was
> fair."
> =
> Reviewing Netcom's argument, the Court notes that the relevant time
> period is not when Netcom entered into its agreement with Klemesrud,
> but when it "provided its services to allow Erlich to infringe
> [Scientology's] copyrights."
> =
> Netcom points out that all alleged instances of infringement occurred
> prior to the date it first received notice of Scientology's
> infringement claim, on December 29, 1994. There is no question of fact
> therefore, says the Court, "as to whether Netcom knew or should have
> known of Erlich's infringing activities that occurred more than 11
> days before receipt of [Scientology's] letter." But there is a genuine
> question of fact about "whether Netcom knew of any infringement by
> Erlich before it was too late to do anything about it." Accordingly,
> =
> "If Scientology can prove the knowledge element, Netcom will be liable
> for contributory infringement since its failure to simply cancel
> Erlich's infringing message and thereby stop an infringing copy from
> being distributed worldwide constitute substantial participation in
> Erlich's public distribution of the message."
> =
> Netcom claims Scientology's notice of alleged infringement was too
> equivocal given the difficulty in assessing whether copyright
> registrations are valid and whether use is fair. But liability need
> not be unequivocal, says the Court. "Where works contain copyright
> notices within them, as here, it is difficult to argue that a
> defendant did not know that the works were copyrighted." Recognizing
> the problems in verifying claims of infringement because of possible
> fair use defenses, lack of copyright notices, or failure of the
> copyright holder to provide "necessary" documentation of a "likely"
> infringement, the Court states that where a BBS operator cannot
> "reasonably verify a claim of infringement" for such reasons, "the
> operator's lack of knowledge will be found reasonable and there will
> be no liability for contributory infringement for allowing the
> continued distribution of the works on its system."
> =
> Here, observes the Court, Netcom admits it did not look at the
> postings once given notice. Had Netcom viewed the copyright notice and
> statements regarding authorship, it would have triggered an
> investigation as to whether there was infringement. According to the
> Court, "these facts are sufficient to raise a question as to Netcom's
> knowledge once it received a letter from [Scientology] on December 29,
> 1994."
> =
> On the matter of inducing, causing or materially contributing to the
> infringing conduct of the primary infringer, the Court notes such
> participation must be substantial. Netcom did not act like a landlord
> and completely relinquish control of its system. Says the Court,
> =
> "[I]t is fair, assuming Netcom is able to take simple measures to
> prevent further damage to [Scientology's] copyrighted works, to hold
> Netcom liable for contributory infringement where Netcom has knowledge
> of Erlich's infringing postings yet continues to aid in the
> accomplishment of Erlich's purpose of publicly distributing the
> postings."
> =
> There is, therefore, a genuine issue of material fact on Scientology's
> claim of contributory infringement "as to the postings made after
> Netcom was on notice of [Scientology's] infringement claim."
> =
> IV. Vicarious Liability
> =
> According to the Court, if Scientology cannot prove contributory
> infringement by Netcom, Scientology may raise a claim Netcom is
> vicariously liable for infringement based on its relationship with
> Erlich. Vicarious liability for actions of a primary infringer will be
> found where "the defendant (1) has the right and ability to control
> the infringer's acts and (2) receives a direct financial benefit from
> the infringement." Proof of "knowledge" is not required to win a
> vicarious liability claim.
> =
> Although Netcom urges it has no right to control its users' postings
> before they occur, Scientology points out that Netcom's terms and
> conditions specify that it reserves the right to take remedial action
> against subscribers. Scientology also argues that under "netiquette,"
> violation of copyright is unacceptable and access providers have a
> duty to prevent this. Where the access provider fails to do so, the
> next service provider up the transmission stream must act. Other
> evidence of Netcom's right to control is alleged to be its prohibition
> of copyright infringement and requirement that subscribers indemnify
> it for damage to third parties.
> =
> Netcom claims, however, that it cannot screen messages before they are
> posted given the speed and volume of data that passes through its
> system, and that it has never exercised control over the content of
> user postings. But Scientology experts believe -- although without
> submitting supporting evidence-- that with an easy software
> modification Netcom could identify postings containing particular
> words or that come from particular individuals. Scientology also
> believes that Netcom could deny Erlich access to Usenet without
> denying access to the 500 users of Klemesrud's BBS, and notes that
> Netcom has suspended subscriber accounts on over a thousand occasions
> and has the ability to delete specific postings. Considering these
> claims, the Court finds Scientology has a raised a genuine issue of
> fact "as to whether Netcom has the right and ability to exercise
> control over the activities of its subscribers, and of Erlich in
> particular."
> =
> On the issue of whether Netcom obtains a direct financial benefit from
> Erlich's postings, the Court observes that Netcom obtains a flat fee
> and "[t]here is no evidence that infringement by Erlich, or any other
> user of Netcom's services, in any way enhances the value of Netcom's
> services to subscribers or attracts new subscribers." The Court
> rejects Scientology's claim that Netcom somehow gains a benefit from
> refusing to take enforcement actions against subscribers, advertising
> that compared to competitors like CompuServe and America Online, it
> provides easy, regulation-free Internet access. Having failed to raise
> a question of fact on this issue, Scientology's claim of vicarious
> liability fails.
> =
> V. First Amendment
> =
> Netcom claims that liability in this case would contravene the First
> Amendment, "forc[ing] Usenet servers to do the impossible -- screening
> all the information that comes through their systems." But, says the
> Court, it is "not convinced that Usenet servers are directly liable
> for causing a copy to be made, and absent evidence of knowledge and
> participation or control and direct profit, they will not be
> contributorily or vicariously liable." If such were not the case,
> "this could have a serious chilling effect on what some say may turn
> out to be the best public forum for free speech yet devised."
> =
> VI. Liability for Internet Browsing
> =
> Netcom also urges that under Scientology's theories, users might be
> liable for merely browsing infringing works, as browsing "technically
> causes an infringing copy of the digital information to be made in the
> screen memory." In response, the Court states that browsing is "the
> functional equivalent of reading, which does nor implicate the
> copyright laws and may be done by anyone in a library without the
> permission of the copyright owner." Significantly, the Court observes,
> =
> "Absent a commercial or profit-deriving use, digital browsing is
> probably a fair use; there could hardly be a market for licensing
> temporary copying of digital works onto computer screens to allow
> browsing. Unless such a use is commercial, such as where someone reads
> a copyrighted work online and therefore decides not to purchase a copy
> from the copyright owner, fair use is likely. ...
> =
> Additionally, unless a user has reason to know, such as from the title
> of a message, that the message contains copyrighted materials, the
> browser will be protected by the innocent infringer doctrine, which
> allows the court to award no damages in appropriate circumstances. In
> any event, users should hardly worry about a finding of direct
> infringement; it would seem highly unlikely from a practical matter
> that a copyright owner could prove such infringement or would want to
> sue such an individual."
> =
> VII. Fair Use
> =
> "Fair use" is a defense to copyright infringement. If Scientology can
> prove infringement by Netcom, the company may raise a defense focusing
> on its acts. In considering the fair use defense, courts evaluate four
> nonexclusive factors:
> =
> "(1) the nature and purpose of the use, including whether such use is
> of a commercial nature or is for nonprofit educational purposes;
> =
> (2) the nature of the copyrighted work;
> =
> (3) the amount and substantiality of the portion used in relation to
> the copyrighted work as a whole; and
> =
> (4) the effect of the use upon the potential market for or value of
> the copyrighted work."
> =
> The first factor weighs in Netcom's favor, says the Court. "Although
> Netcom gains financially from its distribution of messages to the
> Internet, its financial incentive is unrelated to the infringing
> activity and [it] receives no direct financial benefit from the acts
> of infringement."
> =
> The second looks to whether a work is published or unpublished,
> informational or creative. But here, Netcom's use of the works was
> "merely to facilitate their posting to the Usenet" and, the Court
> notes, their precise nature "is not important to the fair use
> determination."
> =
> On the matter of the amount and substantiality of the portion used,
> Netcom made available only what was posted by Erlich. (The Court
> previously ruled Erlich is "not likely entitled to his own fair use
> defense, as his postings contained large portions of [Scientology's]
> published and unpublished works quoted verbatim with little added
> commentary.") Doing so, the Court finds, "Netcom copied no more of
> [Scientology's] works than necessary to function as a Usenet server.
> ... Netcom had no practical alternative way to carry out its socially
> useful purpose [-- in allowing for the functioning of the Internet and
> the dissemination of other creative works, a goal of the Copyright
> Act] ...."
> =
> The last factor, the market effect, is the most important
> consideration. Among other things, Netcom argues there is no evidence
> that making Scientology religious scripture and policy letters
> available on the Internet will harm the market for those works by
> preventing someone from participating in the Scientology religion.
> Scientology counters that the wide distribution of the Internet, said
> to be 25 million, multiplies the effect of market substitution, and
> notes that, in the past, groups have stolen Scientology scripture in
> charging for Scientology-like training. And on this issue, the Court
> finds a genuine issue as to whether Erlich's Internet postings could
> hurt the market for Scientology works. There is, therefore, a question
> of fact on the matter of a fair use defense.
> =
> VIII. Scientology Not Likely to Prevail
> =
> In summary, the Court finds Scientology has raised genuine issues of
> fact regarding whether Netcom should have known Erlich was infringing
> Scientology's copyrights after receiving Scientology's letter, whether
> Netcom substantially participated in the infringement, and whether
> Netcom has a valid fair use defense." But Scientology is not entitled
> to a preliminary injunction against Netcom and Klemesrud. According to
> the Court, Scientology is not likely to prevail on its copyright
> claims against either, particularly "as they did not receive notice of
> the alleged infringement until after all but one of the postings were
> completed. Further, their participation in the infringement was not
> substantial." In addition, Scientology has not shown the current
> injunction against Erlich is not sufficient to avoid any harm to
> Scientology's intellectual property rights. Importantly, the Court
> observes,
> =
> "Because [Scientology] seek[s] injunctive relief that is broader than
> necessary to prevent Erlich from committing copyright infringement,
> there is a valid First Amendment question raised here. Netcom and
> Klemesrud play a vital role in the speech of their users. Requiring
> them to prescreen postings for possible infringement would chill their
> users' speech."
> ----------------------------------------------------------------------
> =
> CyberLaw (tm) is published solely as an educational service. The
> author, a California attorney, is Executive Editor of LEXIS COUNSEL
> CONNECT CALIFORNIA. He may be contacted at cyberlaw.us@counsel.com or
> cyberlaw@cyberlaw.com. Questions and comments may be posted on America
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> 415/964-2378). CyberLaw is a trademark of Jonathan Rosenoer. Copyright
> =A9 1995 Jonathan Rosenoer; All Rights Reserved.
> =
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