Digital Millennium Copyright Act (DMCA)
The Digital Millennium Copyright Act: Highlights of New Copyright Provision
Establishing Limitation of Liability for Online Service Providers
by Arnold P. Lutzker
Lutzker & Lutzker LLP
One of the principal provisions of the Digital
Millennium Copyright Act ("DMCA") is a limitation on the potential
money damages that Online Service Providers ("OSPs"), including libraries
and educational institutions, could face when they function like a common
carrier, allowing online users access to copyrighted material placed there
by someone else. Rather than confront huge financial claims if the third
party material infringes someone's copyright, OSPs can escape liability
provided they comply with these new rules. Since the statute takes
effect immediately, it is urgent that all institutions act promptly to
ensure that their systems are in compliance with the terms. Note that
the limitation does not apply to copyrighted material the OSP may place
online itself, such as on its home page. Standard copyright rules, including
proper clearance and fair use, apply to that material.
The statute defines a "service provider" as an entity
that transmits, routes and connects users to online communications
or provides online or network services, such as storing digital
material, caching or providing location tools (directories, hyperlinks,
etc). When dealing with copyrighted material available through its
network, an OSP must be passive. It cannot place material
online, modify content, store it longer than necessary or know that
it infringes someone else's copyright. Its systems must operate
automatically and it cannot chose recipients of transmissions. Finally,
it must not directly profit from an infringement.
The statute requires that in order for an OSP to
qualify, it must implement several novel requirements immediately.
Institutions would be well advised to turn these matters over to
an established committee that manages copyright policies, or to
create a new group for that purpose. In light of the fact that the
statute calls for taking prompt action and making informed decisions,
such a body could find itself involved in important policy questions.
Among the things an institution needs to do right away to qualify
for the limitation are the following:
- Designate an agent to receive statutory notices from
copyright owners about infringements and to send statutory notices
to affected subscribers.
- Advise the Copyright Office of the agent's name and
address and post that information on the OSP's web site. The
Copyright Office notice regarding Interim Regulations is available
and the Interim Regulations are available at
- Develop and post a policy for termination of repeat
offenders and provide network users with information about copyright
- Comply with "take down" and "put back" notice requirements.
- Ensure that the system accommodates industry-standard technical
measures used by owners to protect their works from unlawful
access and copyright infringement.
A special exception has been created for public and nonprofit institutions
of higher education, which allows them to qualify for the limitation even
when the offending user is a member of the faculty or a research graduate
student. The law also gives immunity from third party user claims, provided
there is a good faith compliance with the statutory rules. It should also
be borne in mind that it is not necessary to actively monitor material
on the Internet. The limitation requires an OSP to take action when
it has "actual knowledge" of an infringement (by facts brought to its
attention or by notice from the copyright owner), but it does not impose
the burden on the OSP to monitor or discover infringing behavior.
In all, the limitation on liability gives library
and educational service providers a critical legal exemption at
a time when their exposure to online copyright infringement is growing,
not only because of the increased volume of material on the Internet,
but also because of several adverse court rulings. To make full
and effective use of the limitation, each institution should take
the time now to carefully review the details of the Act set forth
in this memo.
Detailed Review of OSP Limitation
Many Online Service Providers ("OSPs"), including
libraries and educational institutions, have been exposed to a
legal claim of copyright infringement without even knowing it.
Under copyright rules, if someone copies, distributes or displays
a copyrighted work publicly without authority of the copyright
owner or its agent, then a violation of law has occurred. Even
innocent infringements are subject to penalties. In addition to
injunctive relief, a copyright owner prevailing in an infringement
action may be entitled to receive actual damages and profits of
the infringer, or statutory damages ($500-$20,000 per work infringed;
up to $100,000 per work in cases of willful infringement), plus
One of the developments associated with the Internet
has been the fact that valuable copyrighted works, such as new musical
CDs and movies, are posted at renegade sites for anyone to download
without paying a fee. This practice has driven some copyright owners
to the courts for relief. However, since the source of the infringements
is often an untraceable site in cyberspace, an alternative defendant
has been the Internet service provider that links customers to these
Traditionally, common carriers have been exempt from
liability for copyright infringement because they merely provide
the facilities that link sender and receiver and have no control
over the actual content of the transmissions. Many libraries and
educational institutions feel this describes their functions for
patrons, students and faculty in connection with the Internet. However,
in their capacity as OSPs, libraries and educational institutions
do more. Technically, they provide software to link users to sites,
they store information on their server and they facilitate recordings
and displays by subscribers. Each of these activities is a function
recognized in copyright law as an exclusive right of copyright owners.
Copyright law also holds that helping someone else to violate copyright
rights is an infringement, so-called "vicarious" or "contributory"
infringement. Thus, when certain commercial OSPs were accused of
violating copyright law, some courts held them liable for copyright
infringement. The fact that an institution is "not for profit" does
not eliminate exposure to the copyright infringement claim.
To remedy this exposure, OSPs sought a limitation under
copyright law. After two years of negotiations, the Online Copyright
Infringement Liability Limitation was approved by Congress as part
of the omnibus Digital Millennium Copyright Act. The new limitation greatly
reduces an OSP's exposure to monetary damages. However, it does not exempt
an OSP from legal action or injunctive relief. Nevertheless, it will serve
as a first line of defense against a claim of copyright infringement and
is in addition to other copyright defenses and limitations, like fair
use. Be forewarned: the rules are complex and require strict adherence
to rigorous deadlines. Unless fully complied with, an OSP, even a non-profit
institution, faces loss of the exemption and exposure to potentially large
copyright damage claims.
This memo will summarize the salient features of
the new limitation. It is incumbent upon libraries and educational
institutions that choose to operate as service providers to understand
the rules, establish internal mechanisms for compliance and monitor
these activities. It may be anticipated that this hard-fought limitation
will be subject to test cases to ensure full compliance. Again,
since non-profit status does not immunize an institution from liability,
do not presume that a test case involving a library or educational
institution will not occur. In fact, because so many computer skilled
people work or study at libraries and schools, an educational test
case may be desired by copyright owners to narrow this limitation.
Online Copyright Infringement Liability Limitation
Service Provider Defined.
The statute provides a definition
of "service provider" for purposes of the limitation as follows:
- An entity offering the transmission, routing, or providing
of connections for digital online communications between or
among points specified by a user, or material of the user's
choosing, without modification as to the content of the material
as sent or received; and
- provider of online services or network access, or the operator
of facilities therefor.
All entities whose services fit these descriptions,
and the definition in (b) is intended to be broad, may qualify with
regard to those activities. However, to the extent the functions
of the OSP involve creation and posting of content, choosing recipients
of messages or controlling users, the limitation does not apply
and regular copyright rules respecting proper clearance, as well
as fair use and other defenses, are applicable.
The new provision covers most transitory digital
network communications. Specifically, these are:
- Intermediate and transient storage of materials (such as Web
pages or chat room discussions) in the course of transmitting,
routing or providing connections;
- System Caching;
- Placing information on a system or network at the direction
of users; and
- Use of information location tools, such as directories, indexes
and hypertext links.
Conditions for Qualifying for the Limitation.
To qualify fully for the limitation with regard to all covered OSP
activities, a set of conditions for each specific function must
be met. If an institution performs all the OSP functions, as most
do, then all requirements must be met. The following summary breaks
down the requirements into three pertinent categories.
- The material must be made available online by someone
other than the OSP.
- The OSP cannot modify the material.
- No copy of the material during intermediate storage shall
be maintained longer than "reasonably necessary."
- The OSP does not have "actual knowledge" that the material
or the activity is infringing; more specifically,
- it is not aware of facts or circumstances from which
infringing activity is apparent; or
- upon receiving such awareness, the OSP acts expeditiously
to remove or disable access to the site.
Parties to the Transmissions.
- The transmissions must be initiated by or at the direction
of another person and sent to another.
- No copy of the material during intermediate storage shall
be made accessible to another person.
- The OSP must not select recipients.
- The OSP does not receive a financial benefit directly
attributable to the infringing activity, in a case in which
the OSP has the right and ability to control the activity.
- The transmission, routing, provision of connections or
storage must be carried out through an automatic, technical
- The OSP must follow rules relating to refreshing, reloading
or other updating of the material.
- The OSP cannot interfere with technology associated with
the material, such as access requirements or preconditions
for use, such as passcodes or fees.
- The OSP must comply with
- "notice and takedown" procedures, i.e., upon
"proper notification," expeditiously remove or disable
access to the offending material, and
- "counter notice and put back" procedures, i.e., upon
"proper counter notice," promptly notify copyright
owner of dispute and replace material within two weeks,
unless the matter is referred to court.
Obligations of Copyright Owners.
The limitation has countervailing
obligations of copyright owners. Among the most relevant are the following:
- When refreshing, reloading or updating material, the owner
must adhere to generally accepted industry standard data communications
- As to the OSP's obligation not to interfere with technology
controlling access to the material (e.g. passcodes and fees),
the owner's technology must
- not significantly interfere with the OSP's system
or network performance with intermediate storage of material,
- be consistent with generally accepted industry communications
- not extract information from the OSP's system or network
about the person initiating the transmission that it could
not have acquired through direct access to that person.
- Comply with notification requirements in connection with
"notice and take down" procedures.
Notice and Take Down.
"Notice and take down"
is an essential part of the protections sought by the content community
and forms a new regulatory regime for both OSPs and copyright owners.
If a content owner reasonably believes that a site misuses copyrighted
matter and it notifies the OSP according to statutory procedures,
or if the OSP independently becomes aware of the facts and circumstances
of infringement, then the OSP must expeditiously remove the material
or disable public access to the site, or face loss of the limitation.
Among the elements of the notice and takedown process
are the following:
- The OSP must have a designated agent to receive notices and
it must use a public portion of its web site for receipt of
- The OSP must notify the U.S. Copyright Office of the agent's
identity and the Copyright Office will also maintain electronic
and hard copy registries of web site agents.
- Proper written notification from a copyright owner to an OSP
- the name, address and electronic signature of the complaining
- sufficient information to identify the copyrighted work
- the infringing matter and its Internet location,
- a statement by the owner that it has a good faith belief
that there is no legal basis for the use of the materials
complained of, and
- a statement of the accuracy of the notice and, under penalty
of perjury, that the complaining party is authorized to
act on behalf of the owner.
- Any misrepresentation of material facts will subject the offending
party to claims for damages and attorneys fees.
Good Samaritan Immunity and "Notice and Put Back."
If the OSP complies
in good faith with the statutory requirements, the new law immunizes it
from liability to subscribers and third parties; however, this immunity
is conditioned upon affording the affected subscriber notice of the action.
If a subscriber files a proper "counter notice," attesting to its lawful
use of the material, then the OSP must "promptly" notify the copyright
owner and within 14 business days restore the material, unless the matter
has been referred to a court. The counter notice must contain these elements:
- The subscriber's name, address, phone number and physical
or electronic signature.
- Identification of the material and its location before removal.
- A statement under penalty of perjury that the material was
removed by mistake or misidentification.
- Subscriber consent to local federal court jurisdiction, or
if overseas, to an appropriate judicial body.
Special Rule Regarding Teaching and Research Employees of Public and Nonprofit Higher Educational Institutions.
OSP regime also makes one special exception to the general rule
that an institution is responsible for the acts of its employees.
In recognition of the principles of academic freedom and scholarly
research and the practice of administrators of higher educational
institutions of not interfering with classroom work, the statute
provides that faculty and graduate students employed to teach or
research shall not be considered "the institution" for OSP purposes.
Thus, if, for example, a member of the faculty posts infringing
content, selects recipient of infringing matter or knows of an infringement,
the institution would not automatically lose its right to the limitation.
The exception has three important qualifications:
- The faculty or graduate student's activities do not involve
online access (including e-mail) to materials that were "required
or recommended" within the preceding three years for a course
taught by the employee at the institution.
- The institution has not received more than two notices
of actionable infringement by the faculty or graduate student.
- The institution provides all users of its system or network
informational materials on compliance with U.S. copyright laws.
If properly followed, the higher educational institution
is not tainted by the actions of its teaching and research employees.
As an institution, it would qualify for protection against money
damage claims and could not be required to block access or terminate
a subscriber. It could still be subject to other injunctive remedies,
such as those involving preserving evidence.
The statute also recognizes the importance of protecting
the privacy of a user's identity on the Internet. Procedures are established
by which a complaining copyright owner may obtain the identity of individual
subscribers from the OSP. The principal safeguard involves the content
owner's compliance with a formal court request that will be issued by
federal court clerks. If followed, this process will protect the OSP from
liability under federal or state prohibitions respecting release of information
regarding individual subscribers.
Other Key Requirements.
In addition to all
these rules, the OSP must
- Develop and post a policy for termination of repeat offenders;
- Accommodate and not interfere with "standard" technical measures
used by copyright owners to identify and protect their works,
such as digital watermarking and access codes.
The Act makes clear that the OSP is not required
to monitor its services for potential infringements. It does not
have to seek out information about copyright misuse; however, it
cannot ignore obvious facts.
The new rules take effect
immediately; therefore, a review of current practices is urgent
for all service providers and their staffs. Implementation of system
should occur as soon as practicable.