Online service providers are especially vulnerable to claims of copyright infringement where their customers have the ability to post or upload infringing, copyrighted materials without the service provider's knowledge. Web site operators rarely have the capacity or desire to monitor the legality of their user's content and therefore, they face the increasing problem of users posting unauthorized, copyrighted works. Individuals that copy, distribute, modify or display copyrighted materials, even innocently, without the copyright owner's permission are in violation of the law and subject to monetary and injunctive remedies. Under copyright law, those who aid infringers (for example, by hosting or storing unauthorized content), may also be liable for substantial monetary penalties, based on the benefits such entities receive from the infringing activities. This framework has resulted in a great burden for service providers that may be liable under copyright law for the infringing activities of their customers.

In October 1998 President Clinton signed the Digital Millennium Copyright Act (DMCA) to address various copyright issues raised by the onslaught of digital media on the Internet. One particular provision of the DMCA directly addresses the problem described above by creating a limitation on the monetary damages that may be assessed against an online service provider for third party copyright infringement. If a service provider qualifies under the DMCA, it will not be held liable for any monetary relief for claims of copyright infringement based on third party activity. This represents a significant exemption when you consider that a copyright owner prevailing in an infringement action may be entitled to receive actual monetary damages suffered, in addition to any profits gained by the infringer, or statutory damages of $500-$20,000 per work infringed, plus attorney's fees. This safe harbor can also be used to supplement any additional defenses that a service provider has against claims of infringement under traditional copyright law.

In order to determine if your company can benefit from the DMCA, you must first determine if it is a "service provider." The term is defined broadly under the DMCA as "a provider of online services or network access." In essence, this definition covers most web based entities, such as traditional Internet service providers, chat rooms, web page hosting, digital information storage, bulletin boards or other online communications for users. Thus, if your company operates an interactive web site that allows users to upload photographs, store third party content, email other users or post comments it is eligible to receive the benefits of the DMCA.

Service providers under the DMCA must also be passives channels for third party information. They cannot place copyrighted materials online for users, modify user content or store content longer than necessary. Their online systems must operate automatically, with no subjective filtering taking place by the service provider and must not interfere with any technical measures, such as watermarking, used by copyright owners to protect their works. Finally, the service provider must be unaware that content posted on its web site infringes a third party's copyright and it must not profit directly any infringing activities.

The safe harbor is only available to service providers that comply with the DMCA rules. Unfortunately, some of these rules are complex and there are required deadlines, which, if missed, will cause your company to lose any exemption from liability it may have had. Despite this, strict adherence to the rules will help your company avoid potentially large copyright damage claims. Once you have determined that your company is a service provider as defined by the DMCA, implement the following steps to gain the benefit of the exemptions it offers:

Designate a company agent to receive notices of copyright infringement.
The designated individual should be an employee who understands basic copyright laws and is available to respond promptly to claims of copyright infringement. The responsibility of responding to such claims should be set out as a function of this employee's job.

Advise the Copyright Office of the company agent's name and address.
The Copyright Office provides an Interim Designation of Agent form that can be used for this purpose, which is available at http://lcweb.loc.gov/copyright/onlinesp. The form should be sent to the Copyright Office at: GC/I&R, P.O. Box 70400, Southwest Station, Washington, D.C. 20024, along with a $20 filing fee. This information should also be clearly stated in your Terms of Service or other user policy so that it is easily available to users through your web site.

Prepare and post a user policy that notifies users that repeat offenders will have services terminated.
Service providers must adopt and implement an acceptable use policy that informs users that individuals who persist in posting infringing content will be ineligible to receive continuing services. In addition, it is useful to include basic copyright law information to help users understand what kinds of activities constitute infringement. For example, the following language is appropriate:

You agree that you will not place or allow anyone using your account to place any copyrighted material on the Service without the permission of the copyright owner or persons authorized by the copyright owner to grant permission. You are responsible for obtaining the necessary permission before permitting any copyrighted material that belongs to others to be placed on the Service. You may download the material available on the Service only for your personal, non-commercial use. Except as authorized to use material without express permission under the copyright laws, you are responsible for obtaining permission before reusing any copyrighted material that is available on the Service.

Comply with the "take down" and "put back" notice requirements.
This is where the DMCA earns it reputation as a convoluted and impractical law. Under these provisions the service provider is required to promptly remove or disable public access to infringing materials when it is notified of their existence or becomes aware of circumstances indicating infringement. The service provider must provide notice of this removal to all affected customers, namely the individual who posted the content. This individual then has the opportunity to send the service provider a counter-notice, which must include:

1. the individual's contact information;
2. identification of the infringing materials and its location on the web site before removal;
3. a statement that the materials were misidentified as infringing; and
4. consent to a local federal jurisdiction.

As a practical matter, the complexities of the DMCA's "take down" and "put back" rule may be avoided by creating similar contractual rights with users through your Terms of Service. For example, your Terms of Service should have a provision that requires users to agree that content may be removed at the company's discretion at any time for any reason. If your company complies with the rules above, there is no requirement that it actively monitor its service or seek out potential copyright infringing activities. At the same time, service providers will not lose their eligibility for the safe harbor if they choose to conduct such monitoring activities.

Although the DMCA has been widely publicized since its passage two years ago, few service providers are aware of its existence and even fewer have taken the necessary steps to gain the benefits of its safe harbor provision. Implementing the four requirements described above can save your company time and effort in the face of copyright infringement claims. This will create peace of mind as your company grows and its ability to monitor user content diminishes.

© 2000 Sheila M. Leunig, Esq.
Attorney, Silicon Valley Law Group
Practice areas include transactional e-commerce, Internet law, intellectual property, corporate and securities law.