Performance Standards

THE DAILY DEAL May 2, 2001

Updated 02:59 PM EST, May-1-2001

Performance standards

by Jonathan Bick
Posted 02:45 PM EST, May-1-2001

Internet content has become an increasingly valuable part of mergers and acquisitions transactions.

The mechanics of protecting the Internet-content assets of those deals has been radically changed by the Digital Millennium Copyright Act, enacted in 1998. No longer can Internet content be adequately protected by implementing copyright laws designed to protect books, despite the fact that Internet content is commonly referred to as "Web pages."

Internet content must be treated as a performance, and copyright laws designed to protect access to it must be employed to provide adequate legal protection.

This article highlights the anti-circumvention element of the DMCA and suggests ways that M&A practitioners might use it to protect the Internet content of their deals.

Copyright statutes give creative-content authors the right to keep that content from being copied. They also grant authors rights to publicly display the work and the right to make new works derived from it.

For purposes of M&A transactions, content assets can be divided into three general business models.

The first model is the purchase of unlimited-time access to the content, as in the case of the purchase of books. The second is the purchase of limited-time access to content, as in the case of theater performances. And the third is the distribution of free, unlimited access to content, as in the case of commercial television broadcasts.

Due to the popular misconception that Internet content is composed of individual e-pages that can be read by millions simultaneously, less effective copyright protection efforts have been implemented regarding the Internet content that has been part of many M&A deals.

However, even the most casual review of either the technical facts or the legal facts demonstrates that a copy of an Internet page is separately created for each Internet user every time the page is viewed. Each Internet-page viewer had access to the temporary storage of information located on a conduit computer. And such a transaction has been determined by courts to constitute another copy (see the 1993 decision in Mai Sys. Corp. v. Peak Computer Inc.)

Internet-content copies fundamentally differ from the content copies that can be purchased at a bookstore. Internet-content copies have more of the characteristics of access or performances than do tangible copies.

The lack of physical evidence of the Internet content reinforces the fact that partaking in Internet activity is more like experiencing a performance than buying a book to read. Even browsing Internet content is subjectively more similar to experiencing a performance, despite the fact that those familiar with the Internet speak of "back page" buttons and use other book-centric terminology.

For purposes of mergers and acquisitions transactions, Internet-content copies were previously treated as valuable objects. Now they must be treated as a different thing entirely.

Specifically, Internet-content in transactions should be viewed as performances for copyright treatment purposes. And due to the changes in the copyright laws made by the Digital Millennium Copyright Act, such treatment can easily be undertaken.

The DMCA's provisions constituted a radical change from the copyright protection protocol of the past. The law affords copyright holders the right to control the means by which those who obtain Internet-content copies can gain access to that Internet content.

The DMCA achieves this by making it a felony to circumvent technological measures that control access to copyrighted works. These anti-circumvention provisions, previously unavailable to the copyright holder, are an innovative way to protect Internet content.

In short, the DMCA bans the Internet-content copying tools rather than banning copying itself.

The contours of the new "access control" right that the DMCA created are not yet clearly defined. But this undeniably is a sea change in the way Internet content should be protected in M&A transactions.

This fundamentally new right—qualitatively different and additional to the rights that have traditionally been associated with copyright—is a call to review all prior Internet-content portions of M&A transactions.

To put it concisely, the Internet content portion of an M&A transaction should be written with a view to dealing with Internet content in terms best suited to protecting performances. Previously it was protected in terms best suited to protecting books.

Since the book model consists of the purchase of unlimited-time access to the content, and the performance protection model constitutes the purchase of limited-time access to content, the performance model gives an Internet-content recipient fewer rights.

The Internet-content portion of an M&A transaction should be reviewed to consider—and revised to address—three matters that directly concern Internet content when treated as performance.

First, does the Internet-content recipient have the hardware and software necessary to use the anti-circumvention encoded content delivered by the Internet-content provider? For the M&A agreement to take advantage of the new rights offered by the DMCA, it must address what each party must furnish with respect to the anti-circumvention effort.

Next, the transaction agreement should identify which party is responsible to ensure that the anti-circumvention process is sufficient to comply with the DMCA. Normally this is the responsibility of the party providing the Internet content.

Finally, it is advisable that an M&A agreement address the issue of books and records relating to the anti-circumvention effort. Evidence generated by such action may be necessary to enforce the DMCA access rights.

Jonathan Bick is an adjunct professor of Internet law at Pace Law School and Rutgers Law School. He is the author of "101 Things You Need To Know About Internet Law" (Random House 2000).

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