Anyone who, without the authorization of the copyright owner, exercises any of the exclusive rights of a copyright owner, as granted and limited by the Copyright Act, is an infringer of copyright.  Thus, any activity that falls within the scope of the exclusive rights of the copyright owner is an infringement and the infringer is liable, unless it is authorized by the copyright owner or is excused by a defense (such as fair use) or an exemption. For purposes of this discussion of infringement, the lack of such authorization, defense or exemption is generally presumed.
Copyright infringement is determined without regard to the intent or the state of mind of the infringer; "innocent" infringement is infringement nonetheless. Moreover, although the exclusive rights refer to such rights with respect to "copies" (plural) of the work, there is no question that under the Act the making of even a single unauthorized copy may constitute an infringement.
Courts generally use the term "copying" as shorthand for a violation of any of the exclusive rights of the copyright owner (not just the reproduction right). Courts usually require a copyright owner to prove ownership of the copyrighted work and "copying" by the defendant to prevail in an infringement action.
Since there is seldom direct evidence of copying (witnesses who actually saw the defendant copy the work, for instance), a copyright owner may prove copying through circumstantial evidence establishing that the defendant had access to the original work and that the two works are substantially similar. Other indications of copying, such as the existence of common errors, have also been accepted as evidence of infringement.
The copying of the copyrighted work must be copying of protected expression and not just ideas; likewise, the similarity between the two works must be similarity of protected elements (the expression), not unprotected elements (the facts, ideas, etc.). The portion taken must also be more thande minimis.
The similarity between the two works need not be literal (i.e., phrases, sentences or paragraphs need not be copied verbatim); substantial similarity may be found even if none of the words or brush strokes or musical notes are identical. Various tests have been developed to determine whether there has been sufficient non-literal copying to constitute substantial similarity between a copyrighted work and an allegedly infringing work. Judge Learned Hand articulated the well-known "abstractions test," where the expression and the idea are, in essence, treated as ends of a continuum, with infringement found if the allegedly infringing work crosses the line delineating the two. Such a line, as Judge Hand recognized, is not fixed in stone; indeed, as he put it, its location must "inevitably bead hoc ...." The "pattern" test has also been suggested, where infringement is found if the "pattern" of the work is taken (in a play, for instance, the "sequence of events, and the development of the interplay of characters").
The "subtractive" test -- which dissects the copyrighted work, disregards the noncopyrightable elements, and compares only the copyrightable elements of the copyrighted work to the allegedly infringing work -- has been the traditional method for determining substantial similarity. Following the 1970 Ninth Circuit decision in Roth Greeting Cards v. United Card Co., the "totality" test became popular for determining substantial similarity. The totality test compares works using a "total concept and feel" standard to determine whether they are substantially similar. Although chiefly used by the Ninth Circuit in the 1970s and 1980s, the test was used by other circuits as well.
The Ninth Circuit further defined an "extrinsic/intrinsic" test in proof of substantial similarity inSid & Marty Krofft Television Productions, Inc. v. McDonald's Corp. The intrinsic portion of the test measures whether an observer "would find the total concept and feel of the works" to be substantially similar. The extrinsic portion of the test, meanwhile, is an objective analysis of similarity based on "specific criteria that can be listed and analyzed." Thus, this test requires substantial similarity "not only of the general ideas but of the expressions of those ideas as well."
More recently, however, both the Ninth and Second Circuits have moved away from the totality test, particularly with respect to computer applications. In Data East USA, Inc. v. Epyx, Inc., the Ninth Circuit rediscovered "analytic dissection of similarities" in the substantial similarity determination of video games. Similarly, the Second Circuit, in Computer Associates International, Inc. v. Altai, Inc., fashioned an "abstraction-filtration-comparison test" for a computer program that combined Judge Learned Hand's "abstraction" test (to separate ideas from expression) and "filtration" reminiscent of traditional "subtraction" analysis in distinguishing protectible from non-protectible material.
In addition to the evolution of substantial similarity tests, there is disagreement as to the appropriate "audience" for determining substantial similarity. The "ordinary observer test" -- alluded to in ]Arnstein v. Porter and followed in a number of Second Circuit decisions -- considers the question of substantial similarity from the viewpoint of the "average lay observer." The Fourth Circuit, however, set forth a modified test in Dawson v. Hinshaw Music Inc., requiring the ordinary observer to be the "intended" audience for the particular work. Relying on decisions by both the Ninth and Seventh Circuits, the court in Dawson stated:
The challenge of this test, especially in more advanced technologies, is determining when, if ever, a work is not directed to an audience possessing specialized expertise, and at what point a work once intended for a specialized audience becomes accepted by the general public.
The ability to manipulate works in digital form raises an issue with respect to infringement of the reproduction and derivative works rights. A copyrighted photograph, for instance, can be manipulated in the user's computer in such a way that the resulting work is not substantially similar to the copyrighted work (in fact, it may bear little or no resemblance to the copyrighted work upon which it was based). The initial input of the copyrighted work into the user's computer may be an infringement of the copyright owner's reproduction right, but the infringing (or noninfringing) nature of the resulting work is less clear. Although courts traditionally rely on a "substantial similarity" test to determine infringement liability -- including with regard to the derivative works right -- neither the meaning of "derivative work" nor the statutory standard for infringement appears to require an infringing derivative work to be substantially similar.
The exclusive right to distribute copies or phonorecords includes the right to limit the importation of copies or phonorecords of a work acquired outside the United States into the U.S. without the authority of the copyright owner. Such unauthorized importation, whether it be of pirated items (i.e., "copies or phonorecords made without any authorization of the copyright owner") or "gray market" products (i.e., those copies or phonorecords legally produced overseas for foreign distribution, but not authorized for the U.S. market), is an infringement of the distribution right.
There are three exceptions to the importation right, which include a "suitcase" exception that exempts importation for the private use of the importer of one copy of a work at a time or of articles in the personal baggage of travelers entering the United States.
The applicability of the importation provisions to the transmission of works into the United States via the NII (or GII) may be debated. Nevertheless, the importation right is an outgrowth of the distribution right, both of which refer to "copies or phonorecords." A data stream can contain a copyrighted work in the form of electronic impulses, but those impulses do not fall within the definition of "copies" or "phonorecords." Therefore, it may be argued that the transmission of a reproduction of a copyrighted work via international communication links fails to constitute an "importation" under the current law, just as it is less than clear that a domestic transmission of a reproduction of a work constitutes a distribution of a copy under a literal reading of the Copyright Act.
Direct participation in infringing activity is not a prerequisite for infringement liability, as the Copyright Act grants to copyright owners not only the right to exercise the exclusive rights, but also the right "to authorize" the exercise of those rights. The inclusion of the right "to authorize" was "intended to avoid any questions as to the liability of contributory infringers" -- those who do not directly exercise the copyright owner's rights, but "authorize" others to do so. Other than the reference to a copyright owner's right "to authorize" exercise of the exclusive rights, however, the Copyright Act does not mention or define "contributory infringement" or "vicarious liability," the standards for which have developed through case law.
If someone has the "right and ability" to supervise the infringing action of another, and that right and ability "coalesce with an obvious and direct financial interest in the exploitation of copyrighted materials -- even in the absence of actual knowledge" that the infringement is taking place -- the "supervisor" may be held vicariously liable for the infringement. Vicarious liability is based on a connection to the direct infringer (not necessarily to the infringing activity).
The best known copyright cases involving vicarious liability are the "dance hall" cases, where vicarious liability was found when dance hall owners allowed the unauthorized public performance of musical works by the bands they hired, even when the owners had no knowledge of the infringements and had even expressly warned the bands not to perform copyrighted works without a license from the copyright owners.
"Contributory infringement" may be found when "one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another." Contributory infringement is based on a connection to the infringing activity (not necessarily to the direct infringer). A contributory infringer may be liable based on the provision of services or equipment related to the direct infringement.
Liability may be based on the provision of services related to the infringement. Courts have found contributory infringement liability, for instance, when a defendant chose the infringing material to be used in the direct infringer's work, and vicarious liability when a defendant was responsible for the day-to-day activities where the infringement took place.
Infringement liability may also be based on the provision of equipment or other instrumentalities or goods used in or related to the infringement. However, the Supreme Court in Sony Corp. v. Universal City Studios, Inc., a 5 to 4 decision, held that the manufacturer of videocassette recorders was not a contributory infringer for providing the equipment used in the unauthorized reproduction of copyrighted works. Borrowing a patent law principle, the Court reasoned that manufacturers of staple articles of commerce that are capable of substantial noninfringing uses should not be held liable as contributory infringers. The Court held:
The Court determined that the key question was whether the videocassette recorder was "capable of commercially significant noninfringing uses." The Court also held that in an action for contributory infringement against a manufacturer of copying devices, "the copyright holder may not prevail unless the relief that he seeks affects only his programs, or unless he speaks for virtually all copyright holders with an interest in the outcome."
Other cases against producers or providers of the instrumentalities of infringement since ]Sony generally have not been successful. However, the court in the recent Sega case issued a preliminary injunction against a BBS operator who sold special copiers, the "only substantial use" of which was to copy Sega's copyrighted video games. The court found that Sega established a ]prima facie case of contributory infringement by the BBS operator based on the operator's "advertising, sale and distribution" of the video game copiers.
There is a view that on-line service providers, such as bulletin board operators, should be exempt from liability or given a higher standard for liability, such as imposing liability only in those cases where infringement was willful and repeated or where it was proven that the service provider had both "actual knowledge" of the infringing activity and the "ability and authority" to terminate such activity. The latter proposed standard would combine the contributory infringement standard with the requirements for vicarious liability and apply it to all infringements (including direct infringements) of the service provider. Altering the standards of liability for infringement would be a significant departure from current copyright principles and law and would result in a substantial derogation of the rights of copyright owners. It is a difficult issue, with colorable arguments on each side.
Copyright law imposes different standards of liability for direct, contributory and vicarious liability. Direct infringers are held to a standard of strict liability. Liability for direct infringement is, therefore, generally determined without regard to the intent of the infringer. However, the Copyright Act gives courts the discretion to consider the innocent intent of the infringer in determining the amount of damages to be awarded. Related infringers -- those found to be contributory infringers or vicariously liable -- are not held to strict liability, but rather to a higher threshold for liability.
Arguments made by service providers wishing exemption or a higher standard for liability include: that the volume of material on a service provider's system is too large to monitor or screen; that even if a service provider is willing and able to monitor the material on its system, it cannot always identify infringing material; that failure to shield on-line service providers will impair communication and availability of information; that exposure to liability for infringement will drive service providers out of business, causing the NII to fail; and that the law should impose liability only on those who assume responsibility for the activities their subscribers (and, presumably, they) engage in on their system.
It is estimated by some that trillions of bits representing millions of messages and files travel through networks each day. Of course, only a percentage of those appear on any given service provider's system. Nevertheless, it is still virtually impossible for operators of large systems to contemporaneously review every message transmitted or file uploaded. On-line service providers are not alone in this position. Millions of photographs are taken to photo finishers each day by individual consumers. It is virtually impossible for these service providers to view any of those works before they are reproduced from the undeveloped film. Yet, they operate under strict liability standards. Likewise, book sellers, record stores, newsstands and computer software retailers cannot possibly read all the books, listen to all the records, review all the newspapers and magazines or analyze all the computer programs that pass through their establishments for possible infringements. Yet, they may be held strictly liable as distributors if the works or copies they deal in are infringing.
Further, while it may be argued that a bit is a bit and infringing bits are indistinguishable from authorized ones, and that discovery of infringing material may be made more difficult if the title or other identifying information is removed or altered, on-line service providers can certainly investigate and take appropriate action when notified of the existence of infringing material on their systems and thus limit their liability for damages to those for innocent infringement. Again, this problem has been a part of the cost of doing business for many other distributors of material that is provided to them by others.
Clearly, on-line service providers play an integral role in the development of the NII and facilitate and promote the free exchange of ideas. But that has not been grounds for removing or reducing liability for copyright infringement. One can perform these functions without infringing or facilitating the infringement of the copyrighted expression of others.
On-line service providers have a business relationship with their subscribers. They -- and, perhaps, only they -- are in the position to know the identity and activities of their subscribers and to stop unlawful activities. And, although indemnification from their subscribers may not reimburse them to the full extent of their liability and other measures may add to their cost of doing business, they are still in a better position to prevent or stop infringement than the copyright owner. Between these two relatively innocent parties, the best policy is to hold the service provider liable.
The on-line services provide subscribers with the capability of uploading works because it attracts subscribers and increases usage -- for which they are paid. Service providers reap rewards for infringing activity. It is difficult to argue that they should not bear the responsibilities. We are not aware that cost/benefit analyses have prompted service providers to discontinue such services. The risk of infringement liability is a legitimate cost of engaging in a business that causes harm to others, and that risk apparently has not outweighed the benefits for the more than 60,000 bulletin board operators currently in business.
There has been tremendous growth in the on-line service industry over the past several years, and it shows no signs of reversing the trend under current standards of liability. Other entities have some of the same costs of doing business, have instituted practices and taken appropriate precautions to minimize their risk of liability, such as indemnification agreements and insurance.
The Supreme Court has stated:
During the deliberations preceding enactment of the 1976 general revision of the Copyright Act, changes to the standards of liability were "considered and rejected." For instance, Congress was asked to alter the standard for vicarious liability for business owners whose independent contractors directly infringed the public performance right in copyrighted works (such as owners of dance halls).
A well-established principle of copyright law is that a person who violates any of the exclusive rights of the copyright owner is an infringer, including persons who can be considered related or vicarious infringers .... The committee has decided that no justification exists for changing existing law, and causing a significant erosion of the public performance right.
Congress also determined that the innocent infringer provision, which allows reduction of damages for innocent infringers "is sufficient to protect against unwarranted liability in cases of occasional or isolated innocent infringement, and it offers adequate insulation to users, such as broadcasters and newspaper publishers, who are particularly vulnerable to this type of infringement suit." Congress believed that "by establishing a realistic floor for liability, the provision preserves its intended deterrent effect; and it would not allow an infringer to escape simply because the plaintiff failed to disprove the defendant's claim of innocence."
Commentators have supported Congress' decision:
Innocent intent should no more constitute a defense in an infringement action than in the case of conversion of tangible personalty. In each case the injury to a property interest is worthy of redress regardless of the innocence of the defendant. Moreover, a plea of innocence in a copyright action may often be easy to claim and difficult to disprove. Copyright would lose much of its value if third parties such as publishers and producers were insulated from liability because of their innocence as to the culpability of the persons who supplied them with the infringing material.
Infringement may be alleged against service providers, such as BBS operators, in NII-related cases. As noted earlier, the court in Playboy  found the BBS operator directly liable for the display of the unauthorized copies on the service, as well as the distribution of unauthorized copies to subscribers. The court held:
In Sega Enterprises Ltd. v. MAPHIA, the court issued a preliminary injunction against the BBS operator, finding a prima facie case was established for both direct infringement, based on the BBS operator's permitting the uploading of the copyrighted games onto the BBS, and contributory infringement, based on the operator's "role in copying [Sega's copyrighted video games], including provision of facilities, direction, knowledge and encouragement." At least two other relevant cases are pending -- one against a commercial on-line service provider and another against an uploading subscriber, a BBS operator and an Internet access provider.
The Working Group believes it is -- at best -- premature to reduce the liability of any type of service provider in the NII environment. On-line service providers currently provide a number of services. With respect to the allowance of uploading of material by their subscribers, they are, in essence, acting as an electronic publisher. In other instances, they perform other functions. No one rule may be appropriate. If an entity provided only the wires and conduits -- such as the telephone company, it would have a good argument for an exemption if it was truly in the same position as a common carrier and could not control who or what was on its system. The same could be true for an on-line service provider who unknowingly transmitted encrypted infringing material.
It would be unfair -- and set a dangerous precedent -- to allow one class of distributors to self-determine their liability by refusing to take responsibility. This would encourage intentional and willful ignorance. Whether or not they choose to reserve the right to control activities on their systems, they have that right. Service providers expect compensation for the use of their facilities -- and the works thereon -- and have the ability to disconnect subscribers who take their services without payment. They have the same ability with respect to subscribers who break the law.
Exempting or reducing the liability of service providers prematurely would choke development of marketplace tools that could be used to lessen their risk of liability and the risk to copyright owners, including insuring against harm caused by their customers, shifting responsibility for infringement to the infringing subscriber through indemnification and warranty agreements, licensing (including collective license agreements), educating their subscribers about infringement and using technological protections, such as tracking mechanisms.
Circumstances also vary greatly among service providers. A bulletin board is simply a computer that the owner allows to be accessed by others using their computers and modems. One needs only a personal computer, a modem, a phone line, and some software to go into business -- at a cost of less than $2,000. There are small, non-profit and large, commercial operators. There are those that try to prevent and react when notified and those that encourage infringing activity. Different service providers play different roles -- and those roles are changing and being created virtually every day. At this time in the development and change in the players and roles, it is not feasible to identify a priori those circumstances or situations under which service providers should have reduced liability. However, it is reasonable to assume that such situations could and should be identified through discussion and negotiation among the service providers, the content owners and the government. We strongly encourage such actions in the interest of providing certainty and clarity in this emerging area of commerce.
Implementation of preventative measures, compliance with the law, and development of technological mechanisms to guard against infringement must be encouraged. Service providers should have incentive to make their subscribers more aware of copyright law and to react promptly and appropriately to notice by copyright owner that infringing material is available on their systems. Service providers should make clear that infringing activity is not tolerated on the system and reserve the right to remove infringing material or disconnect the subscriber who participated in the placement of it on the system.
Various remedies are available to copyright owners in infringement actions. A copyright owner may seek a preliminary or permanent injunction to prevent or restrain infringement. Courts generally grant permanent injunctions where liability is established and there is a threat of continuing infringement. Courts may also order the impounding of all copies or phonorecords at any time an action is pending. As part of a final judgment, the court may order the destruction (or any other "reasonable disposition") of the infringing copies or phonorecords.
At any time before final judgment is rendered, a copyright owner may elect to recover actual damages and profits of the infringer or be awarded statutory damages. Actual damages may be awarded in the amount of the copyright owner's losses plus any profits of the infringer attributable to the infringement (that are not taken into account in the calculation of the losses). Statutory damages may be awarded in an amount between $500 to $20,000 per work infringed.
If an infringer can show that he or she was not aware and had no reason to believe that the activity constituted an infringement, the court may find there was an innocent infringement. Such a finding is a factual determination, and does not absolve the defendant of liability for the infringement. It does, however, give the court discretion to reduce the amount of damages awarded to the copyright owner.
If a copyright owner can show that the infringement was willful, the court may increase statutory damages up to a maximum of $100,000. An infringement may be found to be willful if the infringer had knowledge that the activity constituted infringement or recklessly disregarded the possibility of infringement.
Courts have discretion to allow the recovery of full costs by or against any party other than the United States or its officer. Courts may also award reasonable attorney's fees to the prevailing party under certain circumstances.
Criminal sanctions are levied against infringers if the infringement was willful and for purposes of commercial advantage or private financial gain. Criminal proceedings must begin within three years after the criminal action arose. Where there is a conviction, the court must order the forfeiture and destruction or other disposition of all infringing copies and "all implements, devices, or equipment" used in the manufacture of the infringing copies.
A recent court decision demonstrates that the current law is insufficient to prevent flagrant copyright violations in the NII context. InUnited States v. LaMacchia, a university student provided clandestine BBS locations on the Internet for the receipt and distribution of unauthorized copies of commercially published, copyrighted software. Because he sought no profit from his actions -- actions that caused substantial economic harm to copyright owners -- he could not be charged under the current criminal provisions of the copyright law, and the court dismissed an indictment charging him with wire fraud, on the ground that his acts did not violate the wire fraud statute. (There would appear, nevertheless, to be every reason to believe that he had committed many civil infringements.)
The Copyright Act also makes certain non-infringements criminal acts, including:
the placement, with fraudulent intent, of a copyright notice that a person knows to be false on any article;
the public distribution or importation for public distribution, with fraudulent intent, of any article containing a copyright notice the distributor or importer knows to be false;
the removal or alteration, with fraudulent intent, of any notice of copyright on a copy of a copyrighted work; and
false representation, with knowledge, of a material fact in an application for copyright registration or in any written statement filed in connection with an application.
The Supreme Court has stated that "[a] successful defense of a copyright infringement action may further the policies of the Copyright Act every bit as much as a successful prosecution of an infringement claim by the holder of the copyright." There are a number of legal and equitable defenses available to defendants in copyright infringement actions. Fair use is the most common of the defenses. Others include misuse of copyright by the copyright owner, abandonment of copyright, estoppel, collateral estoppel, laches, ]res judicata, acquiescence, and unclean hands.
Generally, a claim of innocent infringement is not a defense against a finding of infringement. An innocent infringer is liable for the infringement, but a court may reduce -- or, in some instances, remit altogether -- the amount of damages. However, under certain, specified circumstances, a good faith reliance on a presumption that the term of protection had expired is a complete defense to an infringement action.
As noted earlier, certain uses do not rise to the level of infringement, such as reproduction of a ]de minimis portion of a work. In those cases, the plaintiff will not be able to sustain its burden of proof and no defense will be necessary. In other cases, a defendant may successfully assert that the activity is noninfringing due to the existence of a license -- statutory, negotiated or implied.
All of these defenses are available in the NII environment. For instance, one or more of these defenses, such as fair use or the existence of an implied license, may be successful where a copyright owner's posting to an automatic electronic mail distribution list ("listserv") is reproduced and distributed to the subscribers of that same listserv in connection with a response to or comment on the posting.
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