May 1, 2001

Subject: Digital Millennium Copyright Act

Although the Digital Millennium Copyright Act (DMCA) has been in effect for a while, since it made such significant changes to copyright law, we thought our clients would benefit from a short explanation of the law.

Combining four new major acts and six new provisions, the DMCA changed the intellectual property landscape. The DMCA carries out the World Intellectual Property Organization treaties, creates a new form of intellectual property for boat hull designs, and most importantly, addresses copyright issues associated with the internet in today's society.

TITLE I: The WIPO Copyright and Performances and Phonograms Treaties Implementation Act

Title I carries out both the 1996 World Intellectual Property Organization Copyright Treaty and the World Intellectual Property Organization Performances and Phonograms Treaty (the "WIPO Treaties"). Through this, the DMCA changed copyright law to address the circumvention of technological measures which protecting and controlling access to a copyrighted work and the management of copyright information.

Circumvention of Technological Measures

Commonly called "hacking," the DMCA defines circumventing a technological measure as the act of descrambling a scrambled work, decrypting an encrypted work, or otherwise bypassing or impairing a technological measure. The DMCA prohibits bypassing technological protection measures. This prohibition became effective on October 28, 2000. The DMCA also prohibits a person from manufacturing, importing, offering to the public or providing tools or services that bypass technological protection measures.

The DMCA provides several exemptions to these prohibitions. Title I provides exemptions for nonprofit libraries, archives, educational institutions, law enforcement and intelligence agencies, encryption researchers, persons doing security testing and persons doing reverse engineering. Title I also provides an exemption for tools and services that prevent access by minors to material on the Internet. There is also an exemption for technological methods that collect or distribute personally identifying information about a person's on-line activities. These technological methods may be bypassed to prevent the collection and distribution of personally identifiable information. Each exemption has different conditions that must be met. Before carrying out any, check with counsel.

Copyright Management Information

Title I also addresses copyright management information ("CMI"). CMI is identifying information about the title, author, owner of a copyright, performers of certain kinds of works, terms and conditions for use of the work, identifying numbers or symbols relating to this information, or links to such information, and other information which may be prescribed by regulation. Title I prohibits intentional distribution of false CMI. Intentional alteration or removal of CMI is also prohibited together with distribution of altered copyright management information. Public performance of works, copies of works, or phonorecords with knowledge that CMI has been removed or altered is also prohibited.

TITLE II: The Online Copyright Infringement Liability Limitation Act

Title II of the DMCA is the Online Copyright Infringement Liability Limitation Act. Its purpose is to protect on-line service providers from copyright infringement liability inherent in Internet usage. On-line service providers were concerned over their potential liability for copyright infringement by their subscribers. Before this law, it was not settled whether on-line service providers would be liable for infringement by their subscribers.

To shield on-line service providers from liability, the DMCA creates four safe harbors. If the conditions are met, the internet service provider will be protected from paying money damages for activities that run afoul of traditional copyright law. The four safe harbors are: conduit, system caching, user storage, and information locator.

The conduit safe harbor protects an on-line service provider who provides, transmits, routes or connects through the internet service provider's system or network of materials. It protects service providers from liability for infringing material that merely passes through their systems. This safe harbor covers internet access, email transmissions, web site information downloads and postings by chat room and bulletin board users. To be eligible, the service provider may not alter content, initiate the transmission, or make or keep copies for more time than it takes to transmit, route, or select recipients for the transmission.

The system caching safe harbor protects a service provider who provides temporary or intermediate storage of materials on a network. It allows service providers to store material on their servers from outside web sites to provide quick and easy access to their users.

The user storage safe harbor protects a service provider who provides storage on its system for material at the request of a user.

The information locator safe harbor protects an internet service provider who links or refers a user to a site with infringing material or infringing activity.

Safe Harbor Conditions

Before an internet service provider gets the protection of one of these safe harbors, certain conditions must be met.

First the internet service provider must satisfy the DMCA's definition of a service provider. Which definition the provider must satisfy depends on which safe harbor the provider is using.

• For the conduit safe harbor, the service provider must be an entity that transmits, routes or provides connections for digital on-line communications, between or among points specified by a user of material of the user's choosing, without modifying the material's content.
• For the remaining safe harbors, the service provider must be an entity that transmits, routes or provides connections for digital on-line communications, between or among points specified by a user of material of the user's choosing, without modifying the material's content and mustw be a provider of on-line services or network access to an operator. It is uncertain how broad this definition is. Beyond including traditional on-line service providers, web page hosts and operators, this definition may be broad enough to include any business that has a web page or any business that gives its employees internet access.

Next, the internet service provider must adopt, reasonably carry out, and inform subscribers and account holders of a policy that provides for subscriber cancellation of repeat infringers. The provider must also adapt to and cannot interfere with standard technical measures - measures used by copyright owners to identify or protect copyrighted works which have been developed pursuant to a broad consensus of copyright owners and service providers in an open multi-industry standards practice, which are available to any person on reasonable and nondiscriminatory terms, and do not impose substantial burdens on their systems and networks.

Once these conditions have been met, the internet provider must meet the specific conditions for each safe harbor.

Additional Right for Copyright Owner

Beside creating safe harbors for internet service providers, the DMCA creates an additional right for the copyright owner. The DMCA grants a copyright owner the right to request from the clerk of any United States District Court the issuance of a subpoena to an internet service provider for identification of an alleged infringer. The DMCA also requires an internet service provider to remove infringing materials according to the DMCA's procedures once the internet service provider receives notice of infringement.

TITLE III: The Computer Maintenance Competition Assurance Act

This title expands copyright law relating to computer maintenance and repairs. This Title expands the Copyright Act to allow the owner or lessee of a computer to make or authorize the making of a copy of a computer program to maintain or repair that computer. This copy is permissible if made automatically when a computer is started and the computer already lawfully contains an authorized copy. After the copy has been made, it can only be used to maintain or repair and must be destroyed immediately upon completion of the maintenance or repair.

TITLE IV: Six Miscellaneous Provisions

Copyright Office

The first provision, Section 401(b), adds language to the Copyright Act confirming the Copyright Office's authority to continue to do the policy and international functions it has carried out for decades under its existing authority. It imposes on the Copyright office an advisory duty to Congress, a duty to provide information and assistance to federal agencies and the judiciary on matters relating to copyright, a participatory duty with intergovernmental organizations and meetings with foreign governments, a research and education duty, and a duty to do any other duties directed by Congress.

Ephemeral Recordings

The second provision expands the limitation of a copyright owner's exclusive rights for ephemeral recordings. Ephemeral recordings are recordings made to simplify a transmission. The classic example of such a recording is the practice of a radio station copying a set of songs from a CD and broadcasting from the copy instead of the original CD. This change expands the Digital Performance Right in Sound Recordings Act of 1995 (DPRA) which first created a limited public right in sound recordings. This right is only for public performances by means of digital transmission and is subject to an exemption for digital broadcasts and a statutory license for certain subscription transmissions that are not made on demand.

Before the DMCA, a transmitting organization was entitled to transmit a public performance or display of a work with either a license or a right granted by the Copyright Act and to make a copy of the performance or display of a work and retain the copy for up to six months or longer if the copy was for archival purposes. The DMCA expands the Copyright Act to allow a transmitting organization (a broadcast or television station that makes a broadcast of a performance of a sound recording in a digital format on a nonsubscription basis) to make a copy. If the transmitting organization cannot make a copy because of technological measures used by the copyright owner, the copyright owner is now required to provide a copy if feasible and economically reasonable. If the copyright owner fails to make a copy, the transmitting organization is not liable if it makes a copy by bypassing the copyright owner's technological measures that protected the work.

Distance Education

The third provision is addressed to Congress' interest that the Copyright Act be amended to promote distance education. It directed the Copyright Office to study the issue and make recommendations on how distance education should be promoted.

Library and Archives Right to Copy A Phonorecord

The fourth provision amends the Copyright Act provision which limited a copyright owner's exclusive rights by allowing a library or archive to make a copy of a phonorecord. This provision now requires a library or archive that makes a copy of a phonorecord to place the notice of copyright on the copy or phonorecord reproduced or to include a legend that says the work may be protected by copyright if no such notice can be found on the copy or phonorecord reproduced. The DMCA also increased the limit of copies for unpublished works to three but also adds a restriction that if the copy or phonorecord is reproduced in digital format the copy cannot be removed from the library's or archive's premises.

The DMCA also modifies a library's or archives right to make a copy or phonorecord of a published work to replace of a copy of a work damaged, deteriorated, lost or stolen. The DMCA now allows three copies to be made. It also allows a copy to be made if the format in which the work has been stored becomes obsolete. The DMCA also adds a restriction that if the copy or phonorecord is reproduced in digital format, the copy cannot leave the premises of the library or archive.

Digital Transmissions of Sound Recordings over the Internet

The fifth miscellaneous DMCA provision amends prior law to address the activity of making digital transmissions of sound recordings over the Internet which use streaming audio technologies. This change was necessary since streaming audio technologies did not fall into the prior categories. The DMCA amends the Copyright Act to expand the statutory license for subscription transmissions to include webcasting as a new category of eligible nosubscription transmissions. If the streaming falls into categories, it is subject to a statutory license. The DMCA also changes the conditions that must be met to obtain a statutory license. This section of the DMCA also instructs arbitration panels to set the royalty rates at fair market value.

This provision also creates a new statutory license for making ephemeral recordings. Transmitting organizations that wish to make more than the single ephemeral recording of a sound recording allowed under the exemption are now eligible for a statutory license to make such additional ephemeral recordings by transmitting organizations other than broadcasters who are exempt from the digital performance right, who are not covered by the expanded exemption in section 402 of the DMCA.

Residual Payments to Writers, Directors and Actors

The sixth miscellaneous provision adds a new chapter to address situations where residual payments are owed to writers, directors, actors through a collective bargaining agreement but the producer is unable to pay these residuals. The new chapter now makes the transferee liable to pay these residuals. Before this new law, many production companies ignored a provision in the collective bargaining agreement which required the production company to execute an assumption agreement with any of its distributors for these residuals. To use this provision, it must be established that the distributor knew or should have known that the motion picture was produced subject to a collective bargaining agreement or that the producer cannot satisfy the order of a court confirming an arbitration award as to these residuals. The new chapter excludes both transfers limited to public performance rights and grants of security interests.

TITLE V: The Vessel Hull Design Protection Act.

Unlike the other titles of the DMCA, this title creates a new area for copyright protection. It creates a system for protecting original designs for certain useful articles that make the article attractive or distinctive in appearance. For purposes of this law, "useful articles" are limited to the hulls (including the decks) of vessels no longer than 200 feet. A design is protected under the VHDPA when a useful article embodying the design is made public or a registration for the design is published. Protection is lost if an application for registration is not made within two years after a design is first made public, but a design is not registrable if it has been made public more than one year before the date of the application for registration. Once registered, protection continues for ten years from the date protection begins.