Intellectual Property

SERVICE PROVIDER LIABILITY

Intellectual Property: Discussion

● Copyright

§ Statutory Infringement

Section 102 of the Copyright Act allows protection of "original 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." E-Law 3.0.1. citing Copyright Act of 1947, 17 U.S.C. §102(a) (1947). To establish a copyright claim, the plaintiff must show (1) ownership of valid copyright; and (2) copying. Sega Enterprises Ltd. v. MAPHIA. Intent is not relevant in proving direct infringement of the Section 102 of the Copyright Act. E-Law 3.0.1. Direct Infringers are held strictly liable. E-Law 3.0.1. The Copyright Act does include an Innocent Infringers Provision which allows for reduction of damages. E-Law 3.0.1.

A number of the copyright infringement cases of interest to internet service providers deal with operators of bulletin boards (or BBSs). In one case, Central Point Software v. Nugent, computer software designers brought a motion for summary judgment on a copyright infringement action against an operator of computer bulletin board. Central. The District Court held that: (1) evidence that computer software was posted on bulletin board system and available for downloading was sufficient to establish copying element of copyright action; (2) the operator would be permanently enjoined; (3) statutory damages of $10,000 per work would be imposed; (4) all hardware and software must be turned over to plaintiffs; and (5) the defendant would pay attorney fees. Central. In another case, Playboy Enterprises v Frena, the Court found a BBS operator directly liable for the display and distribution of unauthorized copies to subscribers. Playboy. Also, in Sega, the court issued a preliminary injunction, finding that a prima facie case was established for direct copyright infringement based on a BBS operator’s permitting the uploading of copyrighted games onto the BBS. Sega.

However, in Religious Technology Center v. Netcom On-line Communications Services, Inc., the court found that neither Sega nor Playboy required a finding that Netcom be liable for direct infringement of Religious Technology’s exclusive right to produce their works.Religious. The court then states that Netcom cannot be liable for direct infringement. Religious.

One of the most important features of the Copyright act is the Fair use provision. E-Law 3.0.1, citing U.S.C. §107. Not all uses of copyrighted materials are infringing. The fair use provision lists acceptable uses of copyrighted works (criticism, comment, news reporting, teaching, scholarship, etc.). It also gives four factors to be considered when determining fair use: "(1) the purpose and character of the use, including whether such use is of commercial nature or is for nonprofit 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 the value of the copyrighted work". E-Law 3.0.1.

In Sega, the court stated that in order to use the fair use exception, the user must possess an authorized copy. The court then goes on to consider the four factors used when determining fair use and stated: (1) if the purpose is to make multiple copies of the original and save users the expense of purchasing authorized copies, this mitigates against finding of fair use; (2) when the nature is for entertainment purposes, this weighs against fair use; (3) that since the entire program appears to be copied, this also weighs against fair use; (4) here the effects of the copying on the market for copyrighted works is substantial and immeasurable and therefore weights heavily against fair use. Finally, the court felt it was unlikely that the defendants in this case would be able to establish fair use. Sega. Also, in Religious Technology Center v. Netcom On-line Communications Services, Inc., the District Court in California, after a detailed analysis of fair use, did not find that Netcom’s use was fair as a matter of law. Religious.

§ Contributory Infringement

An internet service provider could be held liable for copyright infringement under a theory of contributory infringement. Contributory copyright infringement is not statutory based nor is it based on strict liability. E-Law 3.0.1. "One who, with knowledge of infringing activity, induces, causes or materially contributes to infringing conduct of another may be held liable as contributory infringer." Sega, citing Casella v. Morris, 820 F.2d 362, 365 (11th Cir. 1987). In Sega, the court issued preliminary injunction, finding prima facie case was established for contributory copyright infringement based on the operator’s role in copying the video games "including provision of facilities, direction, knowledge and encouragement." Sega.

In another case, Religious Technology Center v. Netcom On-line Communications Services, Inc., the court states "it is fair, assuming Netcom is able to take simple measures to prevent further damage to plaintiffs’ 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 posting." Religious.

§ Vicarious Infringement

Another theory of liability for copyright infringement of importance to the internet service provider is vicarious copyright infringement. Vicarious copyright infringement is also not statutory based nor is it based on strict liability. E-Law 3.0.1. Vicarious liability for actions of the primary infringer can arise when defendant: (1) has right and ability to control the primary infringer; and (2) receives a direct financial benefit from the infringement. E-Law 3.0.1. citing Religious Technology Center v. Netcom On-line Communications Services, Inc. In Religious Technology Center, the court found a genuine issue of fact whether Netcom had the right and ability to control the activities of its subscribers. Religious. The court also found that Plaintiffs failed to raise a question of fact regarding whether Netcom’s policy of either enforcing or not enforcing violations of copyright laws financially benefited Netcom therefore the claim for vicarious liability must fail. Religious.

● Trademark and Unfair Competition

U.S. Trademark law provides:

(a) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which--

(1) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(2) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

E-Law 3.0.1. citing 15 U.S.C. §1125.

To establish prima facie case for trademark infringement under Lanham Act one must show: (a) mark is owned or associated with particular plaintiff; and (b) defendant's use of mark has caused public confusion or mistake. E-Law 3.0.1. citing Sega.

Unfair Competition claims under the Lanham Act must establish the public is likely to be confused by the similar marks. E-Law 3.0.1. citing Sega. In Sega, the court issued a preliminary injunction, finding Sega was likely to prevail on trademark infringement, federal unfair competition, and false designation of origin based on the BBS operator’s permitting the uploading and encouraging downloading of copyrighted games onto the BBS. Sega. In another case, Playboy Enterprises v. Frena, the court found that Frena infringed Playboy’s federally registered trademarks Playboy and Playmate. Playboy . Also, by deleting some of Playboy’s text and photographs and inserting his own, Frena competed unfairly with Playboy. Playboy.

Service Provider Liability Pages

Introduction • Table of Contents
Servcie Providers - Overview • Service Providers - Discussion • Liability Analogies - Overview • Liability Analogies - Discussion • Defamation - Overview • Defamation - Discussion • Intellectual Property - Overview • Intellectual Property - Discussion • Obscenity - Overview • Obscenity - Discussion • Criminal - Overview • Criminal Discussion • Privacy - Overview • Privacy - Discussion • Policy Discussion • Conclusion • Pocket Part • Notes & Links

Prepared for Professor Laura Gasaway's Cyberspace Law Seminar (Law - 357C)
UNC School of Law - Spring 1997

By: Ashe Lockhart (Webmaster) & Carol Kozar

Instructor: Laura N. Gasaway, Professor of Law and Director of the Katherine R. Everett Law Library