[Congressional Record Volume 144, Number 11 (Thursday, February 12, 1998)]
[Extensions of Remarks]
[Pages E160-E161]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    INTRODUCTION OF THE ``ON-LINE COPYRIGHT INFRINGEMENT LIABILITY 
                            LIMITATION ACT''

                                 ______
                                 

                           HON. HOWARD COBLE

                           of north carolina

                    in the house of representatives

                      Thursday, February 12, 1998

  Mr. COBLE. Mr. Speaker, The ``On-Line Copyright Infringement 
Liability Limitation Act'' is being introduced to address concerns 
raised by a number of on-line service and Internet access providers 
regarding their potential liability for copyright infringement when 
infringing material is transmitted on-line through their services. 
While several judicially created doctrines currently address the 
question of when liability is appropriate, providers have sought 
greater certainty through legislation as to how these doctrines will 
apply in the digital environment.
  In July of last Year, Chairman Henry Hyde and I introduced a bill, 
H.R. 2180, to begin the discussion in this Congress on this issue. 
Since that time, the Judiciary Subcommittee on Courts and Intellectual 
Property, which I chair, has held two legislative hearings on that 
bill. In addition, Representative Bob Goodlatte of Virginia, a senior 
Member of the Subcommittee, has invested months of his time leading 
negotiation sessions between on-line service and Internet access 
providers, telephone companies, libraries, universities and copyright 
owners.
  This bill is the result of those hearings and negotiation sessions 
and represents a common base from which to begin the markup process. It 
does so by codifying the core of current case law dealing with the 
liability of on-line service providers, while narrowing and clarifying 
the law in other respects that all parties agree should be addressed.
  This bill offers the advantage of incorporating and building on those 
judicial applications of existing copyright law to the digital 
environment that have been widely accepted as fair and reasonable. The 
bill takes a minimalist approach, and has been drafted in as simple a 
manner as possible, imposing limitations on liability without reference 
to specific technologies, without detailed procedures and codes of 
conduct, and without setting out a long list of factors that must be 
met in order to qualify.
  The bill distinguishes between direct infringement and secondary 
liability, treating each separately. This structure is consistent with 
evolving case law, and appropriate in light of the different legal 
bases for the policies behind the different forms of liability.
  As to direct infringement, liability is ruled out for passive, 
automatic acts engaged in through a technological process initiated by 
another. Thus, the bill essentially codifies the result in the leading 
and most thoughtful judicial decision to date; Religious Technology 
Center v. Netcom On-line Communications Services, Inc. In doing so, it 
overrules those aspects of the Playboy v. Frena case, inasmuch as that 
case might apply to service providers, suggesting that such acts could 
constitute direct infringement, and provides certainty that Netcom and 
its progeny, so far only a few district court cases, will be the law of 
the land.
  As to secondary liability, the bill changes existing law in two 
primary respects: no monetary relief can be assessed for the passive, 
automatic acts identified in Religious Technology Center v. Netcom On-
line Communications Services, Inc., and the current criteria for 
finding contributory infringement or vicarious liability are made 
clearer and somewhat more difficult to satisfy. In a change from the 
bill as introduced, additional criteria are no longer included. 
Injunctive relief will, however, remain available, ensuring that it is 
possible for copyright owners to secure the cooperation of those with 
the capacity to prevent ongoing infringement.
  Finally, the various safeguards that were included in the bill as 
introduced are incorporated in the substitute, as modified to reflect 
comments and suggestions submitted by interested parties. These 
safeguards include language intended to guard against interference with 
privacy; a provision ensuring that nonprofit institutions such as 
universities will not be prejudiced when they determine that an 
allegedly infringing use is fair use; a provision protecting service 
providers from lawsuits when they act to assist copyright owners in 
limiting or preventing infringement; and a provision requiring payment 
of costs incurred when someone knowlingly makes false accusations of 
on-line infringement.


                      Section-by-Section Analysis

  Paragraph 512(a)(1) exempts a provider from liability on the basis of 
direct infringement for transmitting material over its system or 
network at the request of a third party, and for the intermediate 
storage of such material, in certain circumstances. The exempted 
storage and transmissions are those carried out through an automatic 
technological process that is indiscriminate--i.e., the provider takes 
no part in the selection of the particular material transmitted--where 
the copies are retained no longer than necessary for the purpose of 
carrying out the transmission. This conduct would ordinarily include 
forwarding of customers' Usenet postings to other Internet sites in 
accordance with configuration settings that apply to all such postings. 
It would also include routing of packets from one point to another on 
the Internet.
  This exemption codifies the result of Religious Technology Center v. 
Netcom On-line Communications Services, Inc., 907 F. Supp. 1361 (N.D. 
Cal. 1995) (``Netcom''), with respect to liability of providers for 
direct infringement. See id. at 1368-70. In Netcom the court held that 
a provider is not liable for direct infringement where it takes no 
``affirmative action that directly results] in copying . . . works 
other than by installing and maintaining a system whereby software 
automatically forwards messages received from subscribers . . . and 
temporarily stores copies on its system.'' By referring to temporary 
storage of copies, Netcom recognizes implicitly that intermediate 
copies may be retained without liability for only a limited period of 
time. The requirement in paragraph 512(a)(1) that ``any copy made of 
the material is not retained longer than necessary for the purpose of 
carrying out that transmission'' is drawn from the facts of the Netcom 
case, and is intended to codify this implicit limitation in the Netcom 
holding.

  Paragraph 512(a)(2) exempts a provider from any type of monetary 
relief under theories of contributory infringement or vicarious 
liability for the same activities for which providers are exempt from 
any liability for direct infringement under paragraph 512(a)(1). This 
provision extends the Netcom holding with respect to direct 
infringement to remove monetary exposure for claims arising under 
doctrines of secondary liability. Taken together, paragraphs (1) and 
(2) mean that providers will never be liable for any monetary damages 
for this type of transmission of material at the request of third 
parties and for intermediate storage of such material. Copyright owners 
may still seek an injunction against such activities under theories of 
secondary liability, if they can establish the necessary elements of a 
claim.
  Paragraph 512(a)(3) similarly exempts a provider from monetary relief 
under theories of contributory infringement or vicarious liability for 
conduct going beyond the scope of paragraph (1), where a provider's 
level of participation in and knowledge of the infringement are low. 
Such conduct could include providing storage on a server and 
transmitting material from such storage in response to requests from 
users of the Internet. In addition, the provision modifies and 
clarifies the knowledge element of contributory infringement and the 
financial benefit element of vicarious liability. Even if a provider 
satisfies the common-law elements of contributory infringement or 
vicarious liability, it will be exempt from monetary liability if it 
satisfies the criteria in subparagraphs (A) and (B). As under paragraph 
(2), copyright owners may still seek an injunction even if the provider 
qualifies for the exemption from monetary relief.
  The knowledge standard in subparagraph (A) is nearly identical to 
that used in the bill as introduced, and is intended to be functionally 
equivalent. In addition to actual knowledge, it includes ``information 
indicating that the material is infringing.'' This would include a 
notice or any other ``red flag''--information of any kind that a 
reasonable person would rely upon. It may, in appropriate circumstances 
include the absence of customary indicia of ownership or authorization, 
such as a standard and accepted digital watermark or other copyright 
management information. As subsection (b) makes clear, the bill imposes 
no obligation on a provider to seek out such red flags. Once a provider 
becomes aware of a red flag, however, it ceases to quality for the 
exemption and, under existing law, it may have a duty to follow up.
  This standard differs from existing law, under which a defendant may 
be liable for contributory infringement if it knows or should have 
known that material was infringing.
  The financial benefit standard in subparagraph (B) is intended to 
codify and clarify the

[[Page E161]]

direct financial benefit element of vicarious liability as it has been 
interpreted in cases such as Marobie-FL, Inc. v. National Association 
of Fire Equipment Distributors,    F. Supp.    (N.D. Ill. 1997). As in 
Marobie, receiving a one-time set-up fee and flat periodic payments for 
service from a person engaging in infringing activities would not 
constitute receiving ``a financial benefit directly attributable to the 
infringing activity.'' Nor is subparagraph (B) intended to cover fees 
based on the length of the message (per number of bytes, for example) 
or by connect time. It would, however, include any such fees where the 
value of the service lies in providing access to infringing material.
  The number of factors required to establish eligibility for the 
exemption under the bill is two, as compared with six under the bill as 
originally introduced. Several of the original factors were rendered 
unnecessary because direct infringement and secondary liability are no 
longer combined in a single exemption. In addition, the reduced number 
of factors reflects an effort to further simplify the bill, and to 
avoid further contention over the specific formulation of several of 
the factors.

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