by Dan L. Bagatell, attorney at Brown & Bain in Phoenix, e-mail at bagatell@brownbain.com

Introduction

At the end of October, President Clinton signed into law H.R. 2281, the Digital Millennium Copyright Act. The statute primarily implements two international copyright treaties negotiated through the World Intellectual Property Organization (WIPO): the WIPO Copyright Treaty and WIPO Performances and Phonogram Treaty. The two treaties required the signatories to punish those who improperly circumvent technologies designed to prevent unauthorized copying of copyrighted works, such as using "black boxes" to descramble audiovideo signals, hacking into Web sites that charge for viewing, and bypassing technologies that prevent unauthorized copies of videotapes. The treaties also aimed to protect the integrity of "copyright management information," defined as information identifying the work, its author and owner, and the terms and conditions of permitted use.

Although the treaties were signed in December 1996, widespread objections delayed ratification and statutory implementation until October 1998. In particular, many expressed concern that the proposed implementation went further than the treaties required and unduly restricted "fair use" rights. The final version of the Act contains both exceptions and additional regulations demanded by various industry groups. Apart from implementing the treaties, the Act limits the liability of online service providers and amends the copyright laws in various other ways.

A summary of the Act follows.

Title I: WIPO Treaties Implementation

The Act adds a new Chapter 12 to the copyright statute, Title 17 of the U.S. Code, to cover "Copyright Protection and Management Systems." New Section 1201 generally prohibits circumventing technologies that control access to copyrighted works. New Section 1202 protects the integrity of "copyright management information." New Sections 1203 and 1204 provide civil remedies and criminal penalties for violations of Sections 1201 and 1202. Finally, new Section 1205 enacts a savings clause stating that the Act does not affect federal and state laws prohibiting the violation of an individual’s privacy when using the Internet.

The heart of the new law appears in Section 1201. Subsection 1201(a)(1)(A) provides that "[n]o person shall circumvent a technological measure that effectively controls access to a work protected [by the Copyright Act]." Likewise, Section 1201(a)(2) prohibits manufacturing, importing, offering and providing technology primarily designed or intended to circumvent such access control technology. Librarians, civil libertarians and various interest groups pointed out the astonishing potential breadth of the prohibitions, however, and as a result of intensive lobbying they are now subject to a host of qualifications and exceptions and do not take effect for two years in any event.

To assuage the concerns, the Act directs the Librarian of Congress, working with the Register of Copyrights and the Assistant Secretary of Commerce for Communications and Information, to develop regulations providing safe harbors for certain conduct using a quasi-"fair use" standard. The factors the agencies are to consider in rulemaking include the availability of the works generally and for nonprofit archival and educational uses, the impact of the general prohibition on criticism, reporting and education, and the effect circumvention has on the market value of the works. This provision effectively recognizes that technologies are evolving rapidly and that the statute may have unintended and undesirable effects. Rather than entertaining requests for exceptions directly, Congress preferred to delegate the responsibility to the agencies, although it remains unclear what role each agency will have and President Clinton has already raised separation of powers concerns about this issue.

Apart from administrative regulations, several "fair use"-like exceptions and exemptions were written directly into the statute. Subsection 1201(d) provides a narrow exemption allowing nonprofit libraries, archives and educational institutions to obtain access to a work to determine whether they want to obtain a copy. Subsection 1201(e) provides an exemption for law enforcement, intelligence and other local, state and federal governmental agencies. Subsection 1201(f) permits limited circumvention as part of reverse engineering. Subsection 1201(g) authorizes good faith encryption research and testing, and Subsection 1201(j) more broadly permits good faith testing of computer security systems. Subsection 1201(h) addresses technology designed to prevent minors from accessing Internet materials, while Subsection 1201(i) specifically allows users on online computer systems to avoid technologies that gather or distribute personal information about them. Subsection 1201(k), added at the end of the legislative process, specifically deals with the widespread use of analog videocassette recorders to copy TV shows, prerecorded movies and other works. It requires VCR manufacturers to begin including automatic gain control or colorstripe control technology, which can prevent unauthorized copies, but also limits the use of such technologies.

Section 1202 of the Act attempts to protect the integrity of "copyright management information" such as the title of a work, the name of its author and the copyright owner, and the terms and conditions for using the work. Subsection 1202(a) prohibits providing or distributing false copyright management information, while Subsection 1202(b) prohibits unauthorized removal or alteration of such information. Various limitations on liability for governmental activities and for broadcast and cable stations apply.

The sanctions for violating Sections 1201 or 1202 are severe. Civil remedies include injunctive relief, impounding and modification or destruction of infringing items, statutory or actual damages, disgorgement of profits and attorneys’ fees. Liability may be trebled for repeated violations or reduced for innocent violations. Criminal penalties apply for willful violations for the purpose of commercial advantage or private financial gain: up to $500,000 or five years in prison for the first offense, and double those figures for subsequent offenses.

Title II: The Online Copyright Infringement Liability Limitation Act

The Act also adds a new Section 512 to the Copyright Act that is designed to limit the liability of Internet service providers. Under Subsection 512(a), the service provider is not liable for automatically transmitting third-party materials in response to users’ requests—for example, when a user uses a browser to call up a third party Web page. Under Subsection 512(b), service providers are not liable for most forms of system caching—for example, where third party Web pages called up by users are temporarily stored on the service provider’s server. Under Subsection 512(c), service providers are not liable for innocently storing information on their systems at users’ direction. Under Subsection 512(d), service providers are not liable for innocently referring or linking users to infringing sites by providing directories, indexes and hypertext links to such sites. Subsection 512(e) limits colleges and university service providers’ liabilities for infringements by faculty and graduate students. And Subsection 512(g) limits service providers’ liability for taking down or disabling access to material reasonably claimed to be infringing.

Under Subsection 512(j), these limitations on liability not only remove the threat of damages, costs and attorneys’ fees, but also limit the scope of injunctive relief. Subsection 512(l) clarifies that none of these express limitations on liability affects what should be held infringing in the first place. Indeed, much of what Section 512 immunizes may not have been considered direct or contributory infringement under existing law, but service providers are likely to welcome the clear safe harbors.

Title III: Computer Maintenance Repair Exemption

The Act also makes a relatively minor modification to Section 117 of the Copyright Act, which deals with computer programs. It clarifies that lawful owners or lessees of computers may authorize third parties to activate the machine so that the hardware can be serviced. When computers are turned on, software is copied into RAM, and the Ninth Circuit held in MAI Systems v. Peak Computer, 991 F.2d 511 (1993), that such copying constitutes a "reproduction" that may infringe. The amendment does not overturn MAI; it simply ensures that temporarily copying computer programs into RAM for purposes of repair does not infringe.

Titles IV and V: Miscellaneous Provisions

The Act also includes a variety of narrow amendments dealing with "ephemeral recordings" in the broadcast industry, digital audio technology, and transfers of rights in motion pictures. The final title of the Act establishes sui generis statutory protection for vessel hull designs. The hull design protection is temporary and will be reevaluated after two years. Although earlier bills attempted to regulate protection of databases, those provisions were removed before final passage, and debate over databases presumably will resume in the new session of Congress.