3A.4 Copyrights and the Theft of Digital Intellectual Property

3A.4 Copyrights and the "Theft" of Digital Intellectual Property

3A.4.1 Copyright Background

Copyright law - like patent law - involves a balancing act between providing an incentive for creators of work and generating "progress," that is, permitting others to build upon earlier work by others. Article I, Section 8 of the Constitution is the source of American copyright law, giving Congress the power "to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

A copyright in a work is created automatically if the work is original expression that is fixed in a tangible form. So, for example, original expression written or drawn on paper, recorded on tape, photographed on film, or saved to a computer disk is automatically copyrighted. Computer software code is generally copyrightable as a "literary work." The requirement that the work be "original expression" is one that is easily met. Even the slightest spark of creativity is enough. Facts are not copyrightable, but compilations of facts may be copyrightable in themselves if they organize the facts in some creative way. Ideas are also not copyrightable, only the expression of ideas. So, for example, Peter Benchley does not have a copyright on the idea of a large shark terrorizing a summer resort community, merely on his particular expression of that idea in the novel Jaws.

No notice of copyright is required on a work in order to secure a copyright, nor is registration of the copyright required - although both are good ideas if the work is potentially valuable. Copyrights held by individuals last for the life of the author plus 70 years (recently increased from 50 by the Copyright Term Extension Act). For corporately owned copyrights, the term is 95 years.

A copyright holder gets more than merely the exclusive right to control reproduction of the work - a bundle of rights come with the copyright. These rights include the rights to create derivative works (e.g. to make a movie based on a book), the right to public performance or display of the work, the right to claim the work as one's own, and the right to prevent others from use of the author's name as creator of a distorted version of the work.

Remedies for copyright infringement include injunction prohibiting continued infringement, impoundment of allegedly infringing copies, and damages, either "actual" or "statutory." Actual damages are the copyright owner's actual losses plus the infringer's profits (to the extent that they differ). At any point during the course of an infringement suit, a copyright owner who has registered the copyright prior to the alleged infringing act may opt to pursue statutory damages instead of actual damages. The Copyright Act defines statutory damages and no proof of actual loss is required.

The Copyright Act also allows for criminal penalties in some cases. If the copying by the infringer is "willful," that is, an intentional violation of a known legal duty, penalties can be up to 5 years in prison and a fine of up to $250,000. Previously, criminal liability required a profit motive. For instance, in 1994 an indictment against David LaMacchia, an MIT student who was accused of running a bulletin board for use in copying popular software valued at over $1,000,000, was dropped because he did not charge anyone to use the bulletin board, and therefore had no profit motive. Congress responded in 1997 by passing the No Electronic Theft Act, which removed the requirement of a profit motive for criminal liability.

3A.4.2 Fair Use

The Copyright Act contains language intended to address the need to allow some use of copyrighted material other than by the copyright owner. This is an attempt to create an appropriate balance between the need for both incentives for authors and progress in the arts and sciences.

The Act specifies that use of copyrighted material may be considered a "fair use" under certain circumstances. Fair use is a defense to copyright infringement and is analyzed on a case-by-case basis. Four factors are used in determining whether or not a particular use qualifies as a fair use:

1. The purpose and character of the use. Is it a commercial use, and presumptively unfair, or a non-profit use?

2. The nature of the copyrighted work. Where does the work fall on the spectrum of factual (lightly protected) to creative (highly protected) work?

3. The amount and substantiality of the portion of the copyrighted work used. "Substantiality" is an important consideration. A three-hundred-word quotation can be the "heart" of a long book.

4. Effect on the potential market for the work. Will the copyright owner incur losses as a result of the use?

No single factor is dispositive, although many courts view the fourth as the most important.

The 1993 case of Playboy Enterprises, Inc. v. Frena, provides an illustration of the application of the fair use doctrine to online activities. Frena operated a computer bulletin board system (BBS) that provided members with pictures from Playboy and Playmate magazines for download. One of the arguments he made in his defense was that his use of the photographs was a "fair use." A US District Court in Florida applied the four factors and found:

1. Frena's use of the copyrighted material was commercial since he charged users to become members of the BBS.

2. The copyrighted material was "fantasy and entertainment" and therefore towards the more protected end of the factual - creative spectrum.

3. Frena's argument that he had taken only a small portion of Playboy Enterprises' vast collection of photographs was incorrect because each photograph is individually protected by copyright. Thus, Frena had taken 100% of each copyrighted work.

4. If unchecked and engaged in by others, the activities in which Frena had engaged could ultimately have a serious effect on Playboy Enterprises' market.

Therefore, Frena's use of Playboy Enterprise's copyrighted work was not a fair use permitted by the Copyright Act.

In an earlier, 1984 landmark case in which technology and copyright law collided, Sony Corporation of America v. Universal City Studios, Inc., the US Supreme Court applied fair use analysis in assessing Sony's liability for the taping of copyrighted television shows by users of Sony's video cassette recorders (VCR). The Court ultimately found, in a close 5-4 decision, that recording a movie for viewing at later time ("time-shifting") was a fair use. The Court also had to decide the important issue of whether a manufacturer can be held responsible for the use of its devices by consumers for copyright infringement. Here, the Court said, a manufacturer could not be held contributorily liable for copyright infringement by users of a device if the device has substantial other legitimate, non-infringing uses, which the VCR has. This principle is an important one, and resurfaces in discussing the Digital Millenium Copyright Act.

The Napster music file swapping service, which appeared on the Web in 1999, created a situation in which many of the questions in the Sony case were revisited in an entirely new technological context. Were the people using Napster to share music files engaging in a fair use? If not, was Napster liable for its users' infringement? In February, 2001 in A&M Records v. Napster, a federal District Court had little trouble in finding that the swapping of copyrighted music was not fair use. Users were not engaging in "personal" use of the music files, they were trading them with thousands of strangers. Music is creative, strongly protected expression and the users were copying complete songs. Perhaps most importantly, the Court accepted the plaintiff's argument that online music swapping was dramatically affecting the market for music compact disks.

Regarding Napster's liability for copyright infringement by its users, Napster argued that, like Sony's VCR, Napster's music distribution service had significant non-infringing uses, such as promoting new bands and artists who were unable to obtain contracts with traditional record companies. The Court saw a difference between Napster and Sony. The latter's relationship with its customers - and therefore Sony's control over the uses of an individual's VCR - ended when the customer purchased the device. Napster, on the other hand, had a continuing relationship with its users that gave Napster the opportunity to control their ongoing activities. Napster was therefore liable for its users' copyright infringement.

3A.4.3 The Digital Millennium Copyright Act

In response to pressure from the motion picture industry, record labels, software publishers, and other entities with a major stake in profits to be made from copyrighted material, Congress passed the Digital Millennium Copyright Act (DMCA) in 1998, incorporating it as part of the Copyright Act. The DMCA criminalizes making, distributing, or using tools (e.g. software) to circumvent technological protection measures used by copyright owners to prevent access to copyrighted material. Criminal penalties can be severe - up to five years in prison and $500,000 in fines for a first offense.

The DMCA has created enormous controversy, as well as confusion among the courts, resulting in a flurry of seemingly conflicting decisions. Many of these decisions are still under review, and many more cases involving the DMCA are sure to follow. Opponents argue that the DMCA effectively negates the fair use provisions of the Copyright Act and that enforcement of the DMCA is often an unconstitutional suppression of free speech. Two recent high-profile cases illustrate the issues.

The motion picture industry developed a protection scheme for movies distributed on DVDs. This encryption code, called the Content Scrambling System (CSS), restricted play of the DVDs to approved devices - and also protected the movie from digital copying. A 15-year-old Norwegian teenager named Jon Johansen cracked the CSS encryption scheme, allegedly so that he could play his DVDs on a computer running the Linux operating system as opposed to Windows. Johansen made the "DeCSS" code available on the Web and it rapidly spread around the world. Motion picture studios filed suits against Web site owners who posted the DeCSS code or even posted links to other sites that made the code available.

Universal City Studios v. Corley was one such case. Corley operated a Web site called "2600.com," which was primarily frequented by hackers and those interested in such activities. He had posted the DeCSS code on his site, as well as links to other sites that made it available. Several movie studios sued Corley under the DMCA provision prohibiting the distribution of tools to circumvent technological protection measures to force him to remove the DeCSS code and the links to other sites. Corley argued both that computer code is speech and that DeCSS could be used to obtain access to copyrighted material that would be used in a manner consistent with the fair use provisions of the Copyright Act. He claimed that the DMCA was therefore unconstitutional on two grounds: that it suppressed free speech and that it violated the Constitution's Copyright Clause by unduly obstructing the fair use of copyrighted materials.

However, the Court of Appeals for the Second Circuit agreed in May 2001 with the District Court for the Southern District of New York's reasoning that although computer code is "speech" within the meaning of the First Amendment, the DMCA targeted only the "functional" aspects of the speech in question here, was therefore "content-neutral" regulation of speech, and survived constitutional scrutiny. The Court dismissed Corley's arguments regarding the Copyright Clause and fair use by saying that, "to whatever extent the argument might have merit at some future time in a case with a properly developed record, the argument is entirely premature and speculative at this time on this record. There is not even a claim, much less evidence, that any Plaintiff has sought to prevent copying of public domain works, or that the injunction prevents the Defendants from copying such works. As [District Court] Judge Kaplan noted, the possibility that encryption would preclude access to public domain works 'does not yet appear to be a problem, although it may emerge as one in the future.'" The injunction against Corley's posting of the code and links to sites providing it was affirmed. Nonetheless, the DeCSS code was soon being distributed around the Internet in forms more traditionally protected as "speech," such as poetry and songs.

At about the same time as the Corley decision, the California Court of Appeals reviewed a lower court decision in the case of DVDCCA v. Bunner. The DeCSS was available on Bunner's Web site and the DVD Copy Control Association, representing owners of copyrighted material distributed on DVDs, sued to prevent disclosure of the CSS code, which was disclosed every time the DeCSS code was published, and which the DVDCCA claimed was a protected trade secret. The lower court granted the requested injunction.

The Court of Appeals reversed, ruling that the code was constitutionally protected speech and that its suppression would violate the First Amendment. The court specifically rejected the DVDCCA's argument that because of the code's "functional" nature it fell outside the protection of the First Amendment. Revealing a trade secret, of course, can have civil legal consequences as a form of trade secret misappropriation. The Court emphasized that the First Amendment did not shield Bunner, or anyone else who revealed a trade secret while under a contractual obligation not to disclose it, or who disclosed it after acquiring it knowing that it had been obtained by improper means, from the possibility of a misappropriation suit by the trade secret's owner. Thus, there is a "right" to speak, but not always without consequences.

From the invention of the printing press, which first created the ability to make multiple, inexpensive copies of a written work, and thus an enhanced need to protect an author's right to profit from that work, to inexpensive audio and video tape recorders, to computers permitting easy and digitally perfect copying of software, music, and video, technological innovation has been a constant source of concern to the creators of intellectual property. The continued popularity of new music file-swapping services designed for pure "peer-to-peer" file exchange, and which thus avoid the contributory liability trap into which Napster fell, underlines what seems to be a fascinating fundamental reality of human behavior, namely that the more easily and anonymously people can engage in a prohibited activity, the more likely they are to do it, particularly if it is a "victimless" prohibited activity, such as copyright infringement.

The Internet and related computing and networking technologies have created a crisis in copyright law. However, as in the past, it is likely that over time, copyright law and its interpretation will be reshaped to adjust to each technological advance, and that copyright owners will develop new business models that will protect their interests and maximize their profits to the greatest extent possible.