Return of the SYSOPS: Simple Safeguards Against Cyberspace Liability

By: Mitchell D. Kamarck

Periodical: The Litigation & Technology Management Report

Date: August 1996

As discussed in last month's Litigation & Technology Management Report in the article entitled "Online Service Provider Copyright Liability," the courts are beginning to apply traditional notions of copyright infringement liability to the mixed world of cyberspace.  These rules, as discussed herein, are simple in the abstract but complex when applied to vastly different types of content providers on the Internet such as individuals who maintain their own home pages, corporations that create advertising and consumer interactive home pages, and the operators who run bulletin boards (BBSs) or chat rooms.  Collectively, these individuals, corporations, and system operators or sysops are all accountable pursuant to traditional copyright principles for the content they or others place in their respective Internet sites.  As the few cases on this subject indicate, sysops run their bulletin boards, or BBSs, in a variety of ways with some management styles increasing the likelihood that the sysop will be sued and found liable for copyright infringement and other styles diminishing the likelihood.  A review of the case law dealing with sysop copyright liability will help clarify which sysop rules should be abandoned and which should be adopted.

THE LAW AND PRINCIPLES

The primary purpose of the Copyright Act is to secure "the general benefits derived by the public from the labors of authors."  Thus, the basic premise behind the Copyright Act is that artistic creativity enhances society and the best way to nurture such creativity is through the creation of a limited monopoly in one's work so the artist can reap an economic benefit.  To protect this limited monopoly, the courts have created three distinctively different types of liability for the unauthorized use of an artist's copyrighted work: (1) direct infringement liability, (2) vicarious infringement liability and (3) contributory infringement liability.

Direct Infringement.  Direct infringement is exactly what the name implies: the unauthorized exercise of any of the exclusive rights of a copyright owner.  Moreover, determination of direct infringement does not require a finding of intent or scienter; rather liability for direct copyright infringement is imposed regardless of intent.  A prima facie case requires only a finding of (1) ownership of a valid copyright, and (2) the copying of constituent elements of the works that are original.1

In 1993, in Playboy Enterprises, Inc. v. Frena, 839 F.Supp. 1552 (M.D. Fla. 1993), a federal court found a sysop liable for direct copyright infringement even though the sysop did not upload the material onto the bulletin board and was unaware of the material being on the bulletin board until after served with the summons in the case.  The court held that Frena's intent was irrelevant because "[i]ntent to infringe is not needed to find copyright infringement."  According to the court, Frena, the sysop, had directly infringed two of Playboy's ownership rights in the pictures: to distribute and to display the copyrighted photographs.  The court reasoned that by allowing the display of the works on the bulletin board and allowing the downloading of the images, Frena had directly infringed Playboy's copyrights.2

In 1995, in Central Point Software, Inc. v. Nugent, 903 F.Supp. 1057 (E.D.Tex. 1995), a federal court summarily applied the direct infringement standard in finding a sysop liable for copyright infringement because copyrighted software could be downloaded from his bulletin board.  According to the court, the plaintiffs only had to prove ownership in a valid copyright and the actual downloading of the programs from the bulletin board site.  The court awarded the plaintiffs statutory damages in the sum of $10,000 per violation as well as attorneys' fees and ordered the sysop to deliver "all computer hardware and software used to make and distribute unlicensed or unauthorized copies of plaintiffs' copyrighted software." Id. at 1061.

The decisions in Frena and Central Point must be compared to the more recent and analytically detailed opinion in Religious Technology Center and Bridge Publications, Inc.  v.  Netcom On- Line Communication Services, Inc., 907 F.  Supp.  1361 (N.D.Cal.  1995).  In Religious Technology, the Church Of Scientology attempted to hold a sysop and an internet provider liable because a critic of the Church of Scientology had posted some of the church's work on the bulletin board.3  In denying the Church of Scientology's motion for summary judgment against the Internet provider and the sysop, the court distinguished Frena on the grounds that the sysop in that case appeared to be acting purpose fully in displaying and providing copies of the infringing work.  In contrast, according to the court, the copying and displaying in Religious Technology was automatic and "missing the volitional or causal elements necessary to hold a BBS operator directly liable...."  Thus, the Religious Technology court created a requirement that the act of infringement be volitional on the part of the direct infringer.

Contributory Infringement.  The doctrine of contributory copyright infringement provides that a person who, "with knowledge of the infringing activity, induces, causes, or materially contributes to the infringing conduct of another may be held liable as a contributory infringer." Sega Enterprises, Ltd. v. MAPHIA, 857 F.  Supp.  679, 686(N.D.Cal. 1994).  Thus, the doctrine requires both a finding of knowledge and contribution.

In Sega Enterprises Ltd. v. MAPHIA, the defendants marketed devices that could be used to copy Sega games and operated the bulletin board where copies of the Sega games could be uploaded and downloaded.  Due to MAPHIA's "role in the copying, including the provision of facilities, direction, knowledge, and encouragement, the court enjoined MAPHIA s conduct as a contributory infringer.  The fact that MAPHIA did not know exactly when the infringing activity took place was irrelevant because MAPHIA knew generally that it was taking place.

Though not a bulletin board case, the Ninth Circuit's recent opinion in Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir.  1996) clearly applies to bulletin boards.  In Fonovisa, the owner of copyrights and trademarks, in musical recordings sued the operators of a swap meet for copyright and trademark infringement.  The question in front of the Ninth Circuit was whether the operators of the swap meet made an adequate contribution toward the infringement.  The Ninth Circuit held that allegations regarding the services provided by the operators (i.e., "space, utilities, parking, advertising, plumbing and customers") were adequate to allege "contribution."

The court also considered the application of contributory infringement in Religious Technology.  Following the Ninth Circuit's ruling in Fonovisa, the court concluded that the sysop could be held for contributory copyright infringement.  On the knowledge element, the fact that the sysop was notified by the Church of Scientology about the copyright infringement and failed to act exposed him to liability.  On the contribution element, the court cited Fonovisa and noted that the sysop could have taken measures to stop the disbursement of the infringing work.

Vicarious Liability.  In the vicarious liability context, the court focuses on the relationship between the direct infringer and the sysop, not on the sysop’s knowledge.  Thus, proof of vicarious copyright infringement requires a finding that the purported vicarious infringer: (1) had the right and ability to control the infringing activity and (2) a direct financial interest in the infringing activity.

The only case to consider the application of vicarious liability in the sysop context is Religious Technology.  There, the court held that the plaintiff failed to adequately plead a claim of vicarious copyright infringement.  On the "control" element, the court stated that the sysop may have had adequate control if he could control the infringer's activities on the bulletin board, "such as by deleting infringing postings."  On the other hand, on the “direct financial benefit" element, the court stated that the plaintiff would need to prove more than that the sysop received a subscription fee from the direct infringer, but rather that the financial benefit derived from the infringer's use of the bulletin board varied due to the content of the infringing postings.  Thus, the court required the church to plead (and ultimately prove) that the sysop received a direct financial benefit that was attributable directly to the posting of the infringing work.

The Future.  Because this is an emerging area of a copyright law, the ultimate test for determining a sysop's liability for copyright infringement occurring on its bulletin board is uncertain.  However, indications are that sysops will need to proceed with care.  Already, the Clinton Administration's Information Infrastructure Task Force, in The Report of the Working Group on Intellectual Property Rights (the "White Paper"), stated that it was "premature to reduce the liability of any service provider ....  " The White Paper at 122. Moreover, The White Paper adopted the economic analysis that gave birth to vicarious liability:

On-line service providers have a business relationship with their subscribers.  They - and, perhaps, only they - are m a position know the identity and activities of their subscribers and to stop unlawful activities. . . . They are 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 White Paper at 117.  Thus, The White Paper tacitly approves the application of traditional concepts of copyright infringement liability to sysops. However, The White Paper also recognizes that "[c]ircumstances . . . vary greatly among service providers" and that "different service providers play different roles-and those roles are changing and being created every day." Id.  Thus,

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 a service provider 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.

Id.  Therefore, the future remains clouded as the courts slowly start to apply the old copyright principles to the new information age.

HOW TO AVOID THE PITFALLS OF COPYRIGHT LIABILITY

Though the future remains clouded, as case law evolves, there are a few precautions a sysop can initiate to avoid potential copyright infringement problems.4

1.  Outlaw Anonymity.  To some, the beauty of the Web is the anonymity that is possible on it. However, as Ron Presser stated:

From my side of the street anonymity is a real danger.  It may be part of the reality, but it's the part that, really, then becomes a problem.  .  .  .And the question is: If you allow anonymity, who else is it but the carrier that's going to be responsible?  And I think the concept is that authors should have the responsibility.  But if you allow that to go anonymously, you cut the circle. And so I think that is one of the key issues.5

Anonymity breeds lawless behavior; if one is permitted to hide behind a call-name or worse still, no name, in posting material on a bulletin board, one is more likely to post the impermissible.  Sysops must recognize that the early web culture of total freedom and anonymity created the environment where the identifiable portions of the web, such as sysops, are held accountable.  Sysops must police their bulletin boards, removing all anonymous material, and require all posting to include the author's name and e-mail address, if possible via the use of posting software.

2.  Cooperate with Copyright Owners. Along the same lines, the courts in both Fonovisa and Religious Technology noted that the sysop was not cooperative in the investigation of the copyright infringement.  It is imperative that the sysop, in fact, cooperate as much as possible, including disclosing the name and address of the person or persons making the postings.  Sysops should not enter into any agreements with customers which require the sysop to maintain the customer's anonymity.  In the copyright infringement arena, most infringements are easily provable and require little legal analysis.  In cases of doubt, the sysop should seek immediate legal assistance or remove the purportedly infringing material.

In order to deal promptly with copyright infringement claims, the sysop must set up a system for dealing with such complaints.  Such a system should include the prompt review of any complaint, a request for any additional information regarding such claim (e.g., proof of copyright ownership), and a program for in-house or outside counsel to quickly evaluate such claims.  The quicker a claim is analyzed and dealt with, the chances increase the sysop will not be embroiled in unnecessary litigation.

3.  Charging Guidelines.  Following the decision in Religious Technology, the sysop must be prepared to prove that it does not receive a direct financial benefit attributable directly to the posting of the infringing work.  Thus, the sysop cannot receive a fee based on the number of times a certain work was downloaded from the BBS; the subscription fee must be content and use neutral.

Likewise, awarding free software or similar gifts to people whose BBS postings result in increased hits is a questionable practice.6  Such award systems that are designed to increase a BBS' popularity, increase the likelihood that a court will find a connection between the infringing work and the profitability of the BBS.

4.  Contractual Indemnification.  Every agreement between a sysop and anyone permitted to post anything on the BBS must include an indemnification provision for copyright and trademark infringement.

5.  Terms of Use.  Sysops should include a "Terms of Use" page on their BBS.  As the title indicates, Terms Of Use provide the rules by which every user is permitted to use the BBS.7  Such Terms of Use not only deal with copyright infringement issues but also disclose the ownership of material on the web site, submission policies, disclaimers regarding material provided on the site, and various other contractual rights belonging to the sysop.  Regarding copyright infringement, the Terms of Use should state that all anonymous material will be removed from the site and that it is illegal to upload anything to which the user does not own the copyright or a license to use (including a short definition of such terms).  There should also be an indemnification provision regarding such illegal uses of the Internet site.  Finally, the Terms of Use page should be linked as a jump site on every screen at the web site.

CONCLUSION

The explorers who opened up the frontier of cyberspace founded a world based on freedom, sharing, and respect for the work of others.  However, some of the settlers who followed have defaced the landscape either for personal gain or in a misguided crusade to provide free software for all.  In so doing, these settlers have, wittingly or unwittingly, trampled the basic precept behind the Copyright Act; namely, granting authors and artists a limited monopoly from which to derive sufficient financial gain to compensate them for their works.  Currently, the courts are reining in the excesses of the settler years on the web, paving the way for the economic exploitation to follow.  Sysops must not be caught between the ideals of the frontier age

Mitchell D. Kamarck, of counsel to Rosenfeld, Meyer & Susman, LLP, in Beverly Hills, California, specializing in intellectual property and entertainment-related litigation. Mitchell also teaches a course entitled Television Law & Practice and Policy at California State University - Los Angeles. He can be reached by email at mkamarck@rmslaw. com.

Our Litigation Department specializes in civil litigation at all levels of the judiciary, and has wide-ranging experience in litigating business, commercial and entertainment-industry related matters. We have extensive experience in accounting and partnership, antitrust, and securities and corporate litigation. Additional areas of emphasis include copyright and intellectual property, real estate and products liability litigation as well as in the appellate practice.

Rosenfeld, Meyer & Susman was founded in 1957.  The Firm’s areas of expertise include: Labor and Employment Law, Litigation, Corporate, Entertainment, Trusts and Estates, Taxation, Family Law, Insurance Coverage and Defense, Real Estate and Employee Benefits.

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