Introduction to Intellectual Property Law & Policy

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DMCA’s Safe Harbor Is Dangerous For Business

The Online Copyright Infringement Liability Limitation Act [1], or Title II of the Digital Millennium Copyright Act (DMCA), is a compromise achieved in Congress between the interests of online service providers (OSPs) and copyright holders. The legislation protects OSPs from secondary liability for users’ copyright infringements in exchange for providing an effective mechanism for “expeditious” takedown, upon notice by the copyright holder, of allegedly infringing materials. The Congressional intent of the legislation was to achieve a balance between “securing copyright in the global, digital environment” and the necessity to protect OSPs from the legal uncertainties of copyright jurisprudence and potential crushing secondary liability, both of which undermined “substantial investments necessary to continue the expansion … of the Internet” [2]. In pursuit of this goal, Congress created an unprecedented extra-judicial mechanism for private enforcement of copyrights. Numerous commentators have expressed concern that DMCA’s “safe-harbor” provisions potentially infringe on the First Amendment rights of the Internet users [3]. This paper argues that in addition to these much discussed constitutional concerns, “safe harbor” provisions can also potentially have a negative effect on development and growth of commercial enterprise on the Internet, thereby negating one of the Act’s stated goals of expansion of the Internet.

Procedural protections provided by §512 were designed to protect the users of the Internet. In its “Notice-Takedown-Putback” framework Congress focused on the Act’s impact on an individual Internet user: “If material is wrongly taken down … end user will be given notice of the action taken, and … [has] a right to initiate a process that allows them to put their material back on-line” [4]. However, the safety valve of “safe harbor” provisions is not an adequate protection of individual user’s First Amendment rights. Supposedly infringing material is subject to removal, not only before a judge reviews the complaint, but also likely before the alleged infringer even receives the notice. While “safe harbor” provisions provide for a mechanism to protest against the complaint by submitting a counter-notice, the material, once removed, must stay down for at least 10-14 days [5]. Ten days to two weeks may greatly diminish the value of the time-sensitive information. In addition to being a clear threat to First Amendment rights, this process can have a tremendously chilling effect on commercial enterprise doing business on the Internet. Any E-commerce venture would sustain serious damage from being taken offline for two weeks.

Furthermore, while counter-notice provides for a mechanism to have the content restored, in practice the complaining party must merely file an action for injunctive relief in federal court to have the OSP maintain the allegedly infringing content offline until the judicial resolution [6]. Litigation in the federal courts is costly and time-consuming. The alleged infringer must defend the legitimacy of use of the expressive material in question, while that material remains offline. In the case of the E-Commerce enterprise this could mean that the company must litigate the merits of the copyright action while its business has been completely suspended. This result is equivalent to an award of a temporary restraining order and preliminary injunction without any hearing before a court or the posting of a bond [7]. Generally, “a preliminary injunction is an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion” [8]. “Safe harbor” provisions allow a moving party to overcome the high burden necessary for the preliminary injunctive relief through quick and cheap self-help measure. This creates an incentive for cease and desist DMCA actions of questionable merit by parties seeking to gain competitive advantage or otherwise hurt competing interests. In the case of the E-Commerce enterprise, DMCA provides a way for a business to maliciously inflict financial harm on a competitor.

DMCA includes a provision to discourage malicious behavior: “any person who knowingly materially misrepresents under this section … shall be liable for any damages, including costs and attorney’s fees” [9]. In practice, however, this provision sets a very high threshold for remedy. The copyright law is full of uncertainties about protectability and fair use of various materials. Specifically, in the case of E-Commerce, product information is generally not copyrightable but certain other creative elements such as original product photos might be. In most cases a malicious party can likely make a showing of a “good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law” [10]. In Rossi v. MPAA, [11] the Ninth Circuit established that for the purposes of DMCA the “good faith” standard should be subjective and does not require an objective showing of suspected infringement, such as results of a “reasonable investigation” [12] The burden of establishing that a complaining party “knowingly materially misrepresented” becomes nearly unreachable in the courts that adopt the subjective “good faith” standard. Since adoption of DMCA, the remedies for misrepresentation have been granted in only one case where the court found that the company “deliberately sought to suppress publication of content it knew was not subject to copyright protection” [13]. This case is an exception as it involved a particularly egregious misuse of DMCA cease and desist action by a clearly malicious actor. “While the Diebold decision shows the willingness of courts to sanction this kind of behavior, the ease with which the DMCA can be invoked to further improper ends is unsettling” [14]. In the context of E-Commerce enterprise, DMCA provides an incentive for a financially stronger company to destroy or significantly hurt a smaller competitor by forcing them into litigation while their business has been taken offline.

The negative effects of DMCA are exacerbated by the incentive that it offers OSPs to take advantage of “safe-harbor” provisions. Economics and assumption of risk instruct rationally behaving OSPs to shut down an allegedly infringing website with little or no investigation [15]. Search engines provide a good illustration of this effect. Application of contributory and vicarious liability to search engine providers is a largely undecided area of law. DMCA “safe harbor” provisions do not clarify the extent of any potential secondary liability but specifically limit all liability if the search engine provider follows the set of “notice and takedown” procedures [16]. “Given the uncertainty, it is not surprising that service providers have embraced the opportunity to take advantage of these provisions” [17]. The wide adoption of DMCA prevents development and clarification of copyright jurisprudence. The unsettled questions of secondary liability will remain unresolved because all economically rational service providers choose to protect themselves from liability by “safe-harbor” provisions [18]. Submission of DMCA cease and desist letter to a search engine can be particularly damaging to an E-Commerce enterprise because removal from the search engine index eliminates users’ ability to find the products offered by the business. Furthermore, search engines do not have a relationship with most of the sites in their index. Oftentimes, they are unable to provide a notice of a takedown because of lack of contact information. Finally, because of the nature of search engine indexing, reinstatement in the search results is not instantaneous. After the site is reinstated, it can potentially take months to achieve the same standing as before the take-down. Because of the dynamic nature of the Internet, the damage can often be irreparable.

The effects of DMCA legislation are difficult to evaluate because of the private nature of the DMCA action. The cease and desist letters and counter-notifications are not part of the public record. However, based on the empirical study by ChillingEffects.org DMCA legislation is routinely misused [19]. Corporations and business entities are the primary senders of DMCA notices. Nearly a half of all notices in the study were targeted against competitors. At least a third of notices surveyed contained serious flaws relating to substantive legal questions of the underlying claims or technical statutory noncompliance of the notices. Startling 31% of §512(c) and (d) notices raised significant questions relating to the underlying copyright claim such as fair use defenses, other substantive defenses, very thin copyright, or non-copyrightable subject matter. Finally, the study indicates very few counter-notices and cases of putback. While the methodology of this early study is not perfect, with small sample size of voluntarily submitted notices, the results indicate that DMCA is having a chilling effect on both expression and commercial enterprise on the Internet.

Most commentators have focused on the impact of DMCA on the First Amendment rights. While the chilling effect on expression is widely discussed, the effect on E-Commerce enterprise has been mostly overlooked. DMCA poses a threat to online business. Small E-Commerce ventures, that and play a key role in development of online marketplace, are particularly vulnerable. DMCA’s unprecedented extra-judicial self-help provisions put E-Commerce entrepreneurs at risk. The private nature of DMCA disputes keeps the extent of the problem from the spotlight. The effects of “safe harbor” provisions on E-Commerce must be evaluated to see if DMCA’s stated purpose of promoting the growth and development of the Internet is being achieved.

References:
[1] 17 U.S.C. 512.
[2] 144 Cong. Rec. S11, 887-02 (Oct. 8, 1998) (Statement of Sen. Hatch).
[3] See, e.g. Jonathan Bank & Matthew Schruers, Safe Harbors Against the Liability Hurricane: The Communication Decency Act and the Digital Millennium Copyright Act, 20 Cardozo Arts & Ent. L.J. 295 (2002); Matt Jackson, One Step Forward, Two Steps Back: A Historical Analysis of Copyright Liability, 20 Cardozo Arts & Ent. L.J. 367 (2002); Alfred C. Yen, Internet Service Provider Liability for Subscriber Copyright Infringement, Enterprise Liability and the First Amendment, 88 Geo. L.J. 1833 (2000).
[4] 144 Cong. Rec. S4884-01, 4889 (May 14, 1998) (Statement of Sen. Ashcroft).
[5] 17 U.S.C. 512(g)(2)(C).
[6] 17 U.S.C. 512(g)(2)(C).
[7] Alfred C. Yen, Internet Service Provider Liability for Subscriber Copyright Infringement, Enterprise Liability, and the First Amendment¸ 88 Geo. L.J. 1833 (2000).
[8] Mazurek v. Armstrong, 520 U.S. 968, 972 (1997).
[9] 17 U.S.C. 512(f) (emphasis added).
[10] 17 U.S.C. 512(c)(3)(A)(v).
[11] 391 F.3d 1000.
[12] Id. at 1003-1004.
[13] Online Policy Group v. Diebold, 337 F. Supp. 2d 1195 (N.D. Cal. 2004).
[14] Diane M. Baker, Defining The Contours Of The Digital Millennium Copyright Act: The Growing Body Of Case Law Surrounding The DMCA, 20 Berkeley Tech. L.J. 47 (2005).
[15] Lawrence F. Rozsnyai, Easy Come, Easy Go: Copyright Infringement And The DMCA’s Notice And Takedown Privision In Light Of Rossi v. MPAA, 2 Shindler J.L. Com. & Tech. 15 (2006).
[16] 17 U.S.C. 512(d).
[17] Craig W. Walker, Application Of The DMCA Safe Harbor Provisions To Search Engines, 9 Va. J.L. & Tech. 2 (2004).
[18] See e.g. Google’s DMCA policy at http://www.google.com/dmca.html.
[19] Jennifer Urban & Laura Quilter, Efficient Process Or “Chilling Effects”? Takedown Notices Under Section 512 Of The Digital Millennium Copyright Act, 22 Santa Clara Computer & High Tech. L.J. 621 (2006).

Posted by at February 24, 2007 11:45 PM in Commentary Posts