A service of Stephen W. Workman P.C

Copyright Fundamentals

An Introduction to Copyright Law by Steve Workman, Esq.

Copyright infringement -- actual or alleged -- seems to represent the single largest legal headache faced by members of the e-commerce community. Why is this? Well, if you're a webmaster, it's because either (a) you are concerned with making sure your images are properly licensed or acquired, to avoid copyright problems; or (b) as is often the case, you find yourself fielding "notices" from self-styled web police demanding that you remove content because it allegedly violates someone's copyright or (c) as is even more often the case, you understand that copyright is an important concept but, frankly, you're unsure how you should deal with it. If you're an online service provider, copyright is a major headache because you're often being threatened -- through cryptic e-mails -- with litigation unless you pull the plug on a site because it supposedly contains pirated images.

Recent developments in copyright law, specifically, the Digital Millennium Copyright Act "DMCA"), signed into law on October 28, 1998, have the effect of altering traditional notions of third-party liability for copyright infringement in the context of the Internet. I describe the impact of DMCA on your business in a separate article, also found on this web site. This article summarizes certain basic copyright principles.

The sources of copyright law

The laws of copyright in the United States are in a federal statute, the Copyright Act of 1976, as amended (Title 17 of the United States Code). The copyright laws of other developed nations can be generally ascertained by reference to the Berne Convention on Copyright, an international treaty. In 1988, the U.S. became a signatory to this treaty and, as a result, certain formalities that used to serve as prerequisites to obtaining copyright protection in the U.S. are no longer required, such as the old requirement that notice of copyright appear on or prominently in connection with a copyrighted work.

Copyright laws automatically provide authors, or other copyright owners, with monopoly power over how, when, and where their creative works are exploited. Copyrighted works include the millions of photographic images posted on sites all over the Internet (99.9% of all images out there on the Internet are copyrighted -- that is, they are owned by someone -- and these images, even if posted in newsgroups, are not in the "public domain"). These monopoly rights include the exclusive right to publish, copy, distribute, display, and adapt the copyrighted work. A copyright owner can grant others exclusive, or non-exclusive, rights to display the work in a particular medium, such as the Internet. If you display or copy the work without first obtaining a formal grant of rights (a "license"), you infringe the monopoly rights of the copyright owner, and are subject to severe legal penalties (by the way, webmasters who post images without permission can forget about the defenses of "fair use" or "public domain"-- I can tell you with virtual certainty that these defenses won't apply to your operations if you are a "for profit" enterprise). In addition, it is not just the person who is directly responsible for the unauthorized copying or display that is subject to legal penalties. In certain circumstances, third parties, who did not directly infringe on copyright but who are in the chain of unauthorized distribution, will also be considered infringers and subject to liability.

Several ways to become liable

Copyright infringement is viewed by the courts in the United States a species of "tort" (generally speaking, a tort is a civil wrong other than a breach of contract for which a court will provide relief). One important principle of tort law is that all persons who participate in a tort are responsible for the consequences of the tort, including persons other than the individual who actually committed the wrong. This concept of "third party liability" comes in two forms: vicarious liability and contributory liability.

Vicarious liability

Vicarious liability arises out of the principle of respondeat superior. Roughly translated, this doctrine holds that a person in a superior, that is, supervisory or hiring, position is answerable for the conduct of the person in the subordinate position, when the superior has an economic interest in the conduct in question.

The seminal case discussing vicarious liability in the context of copyright infringement is Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304, 137 U.S.P.Q. 275 (2d Cir. 1963). In that case, a department store owner was held liable for infringement of copyright committed by a phonograph record concessionaire operating in the store. The court in Shapiro reasoned:

"When the right and ability to supervise coalesce with an obvious and direct financial interest in the exploitation of copyrighted materials -- even in the absence of actual knowledge that the copyright monopoly is being impaired -- the purposes of copyright law may be best effectuated by the imposition of liability upon the beneficiaries of that exploitation." 316 F.2d at 307.


Under the doctrine of vicarious liability, the officers of a corporation have been held personally responsible, not only for the acts of subordinate employees, but also for the acts of the corporation itself, thereby piercing the shield of individual liability which normally attaches to the corporate structure. In these cases, courts have found that the test of "control" and "financial benefit" is met because a corporate officer directs the company's activities and also receives economic gain, in the form of salary or stock dividends.

Vicarious liability, however, even exceeds the traditional notions of the "master-servant" relationship. In a line of decisions known as the "dance hall" cases, owners of orchestra halls and ballrooms were routinely found liable for acts of copyright infringement by orchestras, even when the orchestras had full control over the musical compositions played. Essentially, these courts determined it would have been unfair to allow the owners to profit by turning a "deaf ear" to the unlawful activities of entertainers. It is not the lack of knowledge of the infringing activities that the courts here seem to have overlooked-- knowledge is not required for a finding of vicarious liability -- rather, these courts have softened and expanded the concept of "control" or "supervision" over the direct infringer's activities.

In the years since Shapiro was decided, a number of plaintiffs have sought to use its rationale to drag into court companies that could hardly be said to have control (real or imagined) over the infringer's activities, but which have "deeper pockets" than the actual infringer. For example, sponsors of infringing radio broadcasts have been sued, as have radio stations which have advertised allegedly infringing merchandise. Although fashioned as relief under "vicarious liability," these latter group of cases are perhaps more properly grouped into the second type of third-party liability recognized under copyright law: contributory liability. This confusion and intermingling of the theories vicarious and contributory liability is not limited to lawyers and judges. Even that authoritative treatise on copyright law, Nimmer on Copyright, fails to make a clear distinction between the two. But distinct they are.

Contributory liability

Contributory liability is not based on principles of agency law or respondeat superior. Instead, it is grounded in the theory of "enterprise liability" -- a concept, in my opinion, akin to the law of conspiracy. The elements of enterprise liability under general tort law are: knowledge of another's tortious activity and substantially aiding or encouraging that activity. (Restatement (Second) Torts, Section 876) These two elements, knowledge and aid/encouragement, define when a person can be held accountable under copyright law as a contributory infringer. Let's look at these elements separately:

In our legal system, knowledge of an activity can be "actual" or "constructive." A person has "actual knowledge" when he becomes or is made aware of the activity. "Constructive knowledge," on the other hand, doesn't require that the person really know what's going on. Courts will impute knowledge of an activity to a person if a reasonable should have known the activity was happening, even if the person was blissfully ignorant.

The second component of contributory liability, "substantial participation," presents a more complex issue. Participation can be characterized in a number of ways -- "inducement," "encouragement," "aid" or "contribution." But however characterized, it's clear that this participation must be "significant" or "material" (i.e., "important") to the infringing activity before contributory liability can arise. The difficulty comes in predicting what type of conduct constitutes "aid," "encouragement," or "inducement." In this regard, courts seem to employ an ad hoc or "equitable" approach, rejecting liability for those persons whose relationship with the infringing activity is tenuous, remote, or indirect, even though the product, service or support they provide to the infringer is clearly central to the infringer's illegal activity.

For example, one could make the strong argument that a party who manufactures and sells a machine that is capable of infringing copyright on a massive scale "significantly participates" in the resulting acts of infringement. This was the argument made by a motion picture studio against Sony, the manufacturer of the first VCR machine, the Betamax. The U.S. Supreme Court refused to find Sony guilty of contributory infringement of copyright on the grounds that the machine "is capable of substantial non-infringing uses." But as a dissenting Justice pointed out, what does that have to do with anything? The relevant issue under law was whether Sony significantly aided in copyright infringement, not whether the Betamax could be used for lawful purposes. The Sony decision is an example of courts using a sense of fairness and equity "in identifying the circumstances when it is just to hold one individual accountable for the [infringing] actions of another." Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984).

Conclusion

There are a lot of ways to become liable for copyright infringement. By reviewing a separate article I've prepared on the DMCA, you can learn how that new statute will help some Internet companies avoid liability.

Steven Workman is an intellectual property, entertainment law and new media attorney, specializing in e-commerce and the Internet industry. Mr. Workman is a member of the bars of the States of California and Illinois and is a pending member of the Florida bar. Mr. Workman received his J.D. with highest honors from the University of Illinois in 1986.