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New Jersey Law Journal

July 22, 2002

HEADLINE: Conventional Copyright Code Covers e-Content
Injunction granted stopping unauthorized use of movie trailers, but while case awaits trial, lobbying is underway to nullify its outcome

BYLINE:By Jonathan Bick The author is of counsel to Brach Eichler and is an adjunct professor of Internet law at Rutgers and Pace law schools. He is also the author of 101 Things You Need To Know About Internet Law (Random House 2000).

BODY:
Intellectual Property

The author is of counsel to Brach, Eichler, Rosenberg, Silver, Bernstein, Hammer & Gladstone of Roseland and is an adjunct professor of Internet law at Pace Law School and Rutgers Law School. He is also the author of 101 Things You Need To Know About Internet Law (Random House 2000).

The New Jersey District Court's recent application of copyright law to an Internet transaction extended the subject matter covered by the statute, but it did so by relying on conventional copyright doctrines.

In Video Pipeline v. Buena Vista Home Entertainment (2002 U.S. Dist. LEXIS 5400), the court found that posting Internet content derived from copyright protected material constituted copyright infringement and held that a retailer's Web site cannot lawfully promote movies with a Web site button that allows Internet customers to view a third-party site that shows unauthorized trailers for selected movies. 17 U.S.C. §106 of the Copyright Act conveys certain exclusive rights to a copyright owner. These rights include the right to reproduce the copyrighted works, to prepare derivative works and to distribute copies of the copyrighted works. In addition, in the case of motion pictures, these rights include the right to perform the copyrighted work publicly, and, in the case of pictorial works, including images of a motion picture or audiovisual work, the right to display the copyrighted work publicly.

Generally, the Video Pipeline court found that Internet publication was not a safe harbor for use of samples of audiovisual works. More specifically, the court found that exclusive copyright rights had been violated because the clip previews constituted preparation of derivative works; the transmission of the digital audiovisual images to individual computers constituted a public performance; and furnishing the digital audiovisual images via the Internet constituted a public display.

In its decision, not only did the court conclude that the copyright statutes were applicable and had been violated, it also found that two traditional copyright doctrines were applicable to Internet transactions. When the court found that the posting was not defensible under the first-sale doctrine (§109(a) of the Copyright Act) or the fair-use doctrine (§107 of the Copyright Act), it confirmed that traditional copyright doctrines are applicable to the Internet.

In short, the Video Pipeline court was able to apply established copyright statutes and legal doctrines to Internet content.

The court's actions were consistent with significant prior legislative intent, prior judicial action and conclusions from recent law review articles.

Seven years ago the White House Information Infrastructure Task Force issued a report ("Intellectual Property and the National Information Infrastructure: The Report of the Working Group on Intellectual Property Rights," Executive Summary 6 (1995)) evidencing the United States' intent to use existing copyright law to govern the Internet transactions.

From 1995 until today, the legal community's consensus has remained constant with respect to the application of existing copyright statutes to Internet transactions. A review of relevant law review articles from 1995 to 2002 suggests that existing copyright law can fully accommodate the issues and concerns presented by the Internet.

The existence of such consensus is also evidenced by the debate that has revolved around two copyright related Internet issues. The first is whether and to what extent an online service provider should be liable for the transmission of copyright infringing material over its networks. The other is how to craft an anti-circumvention provision that appropriately balances the interests of copyright owners in preventing the circumvention of technical means they use to protect their copyrighted works with the public's interest in promoting Internet communication.

The results of both debates suggest that the Internet does not warrant a major reconstruction of traditional copyright principles.

Generally when a copyrighted work, such as a film clip, has been reproduced and performed publicly (via an Internet posting) as in the Video Pipeline case without authorization, an actionable infringement occurs. This applies equally to duplicated images published on a Web site or incorporated into an e-mail.

Any time a user uploads or downloads information from or to the Internet, a possible violation of copyright can occur, although the doctrines of fair use and first sale are often applicable to ameliorate the negative legal implications of such transactions. These defenses were offered in Video Pipeline.

The doctrine of fair use limits the scope of the copyright monopoly in furtherance of community objectives other than protecting the copyright holder. When a court uses the fair-use doctrine it must look at four pertinent factors. They are, in sum, the purpose and character of the use, the nature of the copyrighted work, the quantity and importance of the material used, and the effect of the use on the potential market or value of the copyrighted work.

The Video Pipeline court found that fair-use defense was not applicable because even though the portion of the copyrighted movies used in the unauthorized trailers was small, they consisted entirely of scenes from the copyrighted movies and depicted no other readily identifiable content.

The first-sale rule stands for the proposition that once an intellectual property owner such as a copyright holder sells his product, the buyer of the product may ordinarily resell the product without incurring any liability for infringement, even if such sale was without the copyright holder's consent.

Copyright statutes (particularly §109(a)) carves out an exception to a copyright action, allowing the owner of a particular copy lawfully made, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy.

Since the first-sale doctrine prevents a copyright owner from controlling future transfers of a particular copy of a copyrighted work after the owner has transferred its material ownership to someone else, it was not applicable to Video Pipeline because it was not a retailer that had lawfully purchased copies of movies.

In addition to specific statutory guidance, the Video Pipeline court was able to rely on case law to actively apply traditional copyright law to the Internet. For example, in Playboy Enter. Inc. v. Frena, 839 F. Supp. 1552 (M.D. Fla. 1993), a Florida district court found that when a user of the Internet scans a picture from Playboy magazine and posts that picture on an electronic bulletin board, a violation of copyright has occurred against the registered copyright holder of that image.

In Playboy, the defendant Frena operated a subscription computer bulletin board service that distributed unauthorized copies of the plaintiff's copyrighted photographs. The bulletin board service was accessible via telephone modem to customers. Subscribers who logged onto the service could browse and download photographs taken from the plaintiff's copyrighted materials.

Frena did not upload any of the photographs onto the bulletin board and when he was made aware of the problem, he removed the photographs. The court ruled that Frena infringed the plaintiff's copyrights in the photographs.

Congress intervened when some courts tried to limit the traditional application of copyright law to the Internet. For example, in Religious Tech. Ctr. v. Netcom On-Line Communication Servs. Inc., 907 F. Supp. 1361 (N.D. Cal. 1995), the court refused to follow the decisions in Playboy, ruling that an operator of a computer bulletin board service and Internet access providers were not directly liable for copies made from the computer.

In part, as a result of such inconsistent rulings, Congress implemented the Digital Millennium Copyright Act, which re-established precisely how traditional copyright law should be applied to the Internet.

Additionally, the Video Pipeline court was able to draw on a significant number of related transactions to form its conclusions. Web sites that are dedicated to motion pictures often contain copyright prosecutable information, particularly text and images. Until the implementation of the DMCA, when Internet Service Providers provided the forum for uploading and downloading information, they might communicate that information to the public by telecommunication and violate copyright under some traditional interpretations of Copyright law.

One of the bundle of rights offered to copyright holders by 17 U.S.C. §106 is public display. Thus, for a presentation of a film clip or other work on the Internet to violate the rights of a copyright holder, the presentation must be done publicly. The test to determine whether or not a performance is public is the character of the audience.

Section 101 of the copyright law defines a public performance as follows:

To perform or display a work 'publicly' means to transmit or otherwise communicate a performance or display of the work to the public, by means of any device or process, whether the members of the public are capable of receiving the performance or receive it in the same place or in separate places and at the same time or at different times.

Consequently, most agree that the act of posting content on the Internet is a public performance due to the character of the Internet audience.

As noted above, the DMCA provided significant clarifications but not changes to the traditional application of copyright law to Internet transactions. It is widely understood that the DMCA is consistent with the court's holdings in Playboy and an examination of the DMCA shows its content is reminiscent of traditional copyright doctrines.

Video Pipeline does not involve the DMCA. However, it could be argued that the Video Pipeline court was encouraged to apply traditional copyright doctrine to Internet transactions due in part to the DMCA.

Consider for example, that Title II of the DMCA, 17 U.S.C. §512, specifically addresses the issue of ISP liability for subscriber infringement. The DMCA effectively insulates ISPs from liability for their passive transmission, re-transmission or temporary storage of material through or on their networks as long as they comply with certain statutory requirements designed to facilitate content providers' efforts to protect their copyrighted material. See 17 U.S.C. §§512(a)-(d), (f), (g), (i).

The DMCA's treatment of vicarious or contributory liability is less direct. ISP user's infringements that simply involve the temporary storage of material on an ISP's computers appear to be governed in the same manner as direct infringement. This result follows from the relevant provisions that guard against liability for both transmission and temporary storage of otherwise infringing material.

However, an ISP user's conduct that results in the ISP's long-term storage of material, such as the hosting of a Web page, is also governed by a provision that eliminates liability for monetary relief. For example, if a service provider does not have actual knowledge that the material or an activity is infringing, but acts expeditiously to remove the material on notification of claimed infringement, and does not receive a financial benefit directly attributable to the infringing activity, it will not be subject to an infringement claim. See 17 U.S.C. §§512(c)(1)(A)-(C).

In all cases, all three requirements (knowledge, interest and action) must be satisfied for the safe harbor to apply. Although the DMCA is new, it should be noted that the provisions generally correspond to the traditional doctrines of contributory and vicarious copyright liability.

A claim of nonliability is conditioned on an ISP's lack of actual knowledge of facts that make infringement apparent. If the ISP gains such knowledge or awareness, no liability attaches as long as the ISP removes or disables access to the alleged infringement. This is similar to the traditional copyright contributory liability's requirement that an ISP have actual knowledge or knowledge of facts that clearly establish infringement.

The next requirement necessary to claim nonliability is that the ISP in question receive no direct financial benefit in cases where the ISP has the "right and ability to control" the infringing activity. Under tradition legal theory, vicarious liability cannot exist unless an ISP has "a direct financial interest" in the infringing material and the "right and ability to supervise" that activity.

Finally, the DMCA adds a requirement of disabling access upon receipt of a statutorily prescribed formal notice by an ISP's designated agent. This mimics the traditional application of the contributory liability doctrine noted above, except that formal notice is the equivalent of knowledge for purposes of preserving an ISP's safe harbor.

Thus, even the most radical change of the copyright law as implemented by the DMCA is based on traditional copyright concepts. The DMCA clearly offers ISPs safe harbor from liability using traditional vicarious or contributory liability concepts. This application of traditional copyright doctrine arguably encouraged the Video Pipeline court to apply conventional copyright statutes to digital content.

The future of Video Pipeline v. Buena Vista Home Entertainment may be decided by Congress. Thus far in the case, in response to a Web site operator's action seeking a declaratory judgment that its practice of preparing its own trailers for defendant distributor's movie videos did not constitute copyright infringement, a film producer and distributor sought to enjoin the operator from creating the trailers and selling them to its retailer clients. Their injunction has been granted.

The court in this instance examined the copyright issues that arise when an entity uses the copyrighted content to make advertisements which are then made available for sale to video retailers for viewing by retail customers on the retailers' Web sites. The copyright owners were granted a preliminary injunction against the entity that creates and sells the unauthorized trailers for their copyrighted home videos.

Applying Lamb v. Starks, 949 F. Supp. 753 (N.D. Cal. 1996), which found that a defendant infringed a copyright by copying a trailer consisting of parts of scenes from plaintiff's movie, and also applying ALS Scan, Inc. v. Remarq Communities, Inc., 239 F.3d 619 (2001), which found that displaying copyrighted photographs on the Internet was a public display, the court concluded that Video Pipeline's actions constituted an infringement.

Alternatively, the Video Pipeline court could have reached a similar conclusion by applying NewYork Times Co. v. Tasini, 533 U.S. 483 (2002), which found that an electronic publisher infringed on copyrights by placing content in electronic databases that may be reproduced and distributed.

Although traditional copyright law was applied by the Video Pipeline court, while the case awaits trial, an effort to nullify its outcome is astir.

According to the Washington Internet Daily (April 19, 2002), Congress was asked to overturn Video Pipeline. The Video Software Dealers Association and the National Association of Recording Merchandisers petitioned members of the House Judiciary Committee to ask Congress to change the copyright law to allow them to use trailers that were derived from copyrighted material.