Trademark and Copyright Law and the Internet

By:  Rob Hassett and Suellen Bergman

 

I. Trademark Law and the Internet

The increase in Internet activity has spawned interest in using trademarks on websites, as well as registering trademarks as domain names. With the push for branding on the Internet, legal issues – a step behind technology – arise out of disputed trademark uses on the Internet.

A. Infringement Issues

1. Consumer Confusion

a. Courts will usually prohibit trademark uses where consumers are likely to be confused because two marks are similar and used in the same channels of trade. See Playboy Enter. v. Calvin Designer Label, 985 F. Supp. 1218 (N.D. Cal. 1997).

b. Even when marks are not used in the same channel of trade, courts may restrict the use of similar marks in the Internet arena because “with respect to Internet service, even services that are not identical [but which do use similar trademarks] are capable of confusing the public.” GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199 (9th Cir. 2000) (finding that Disney’s “Go Nework” logo infringed the plaintiff’s “GoTo” Web site logo). Disney agreed to pay $21.5 million to settle this lawsuit.(1)

2. Criticism

In Bally Total Fitness Holding Corp. v. Faber, 29 F. Supp.2d 1161, 50 U.S.P.Q. 2d (BNA) 1840 (C.D. Cal. 1998), the defendant used Bally’s trademark in a website entitled “Bally sucks,” which criticized the service at Bally’s fitness centers. The District Court dismissed Bally’s suit because the defendant’s use of Bally’s mark did not create a likelihood of confusion or otherwise constitute trademark infringement or dilution. See Compupix.com/ballysucks/index.htm.

3. Linking (Linking, Deep Linking, and Multiple Linking)

One of the Internet’s most useful features is the ability to directly connect from one website to another. A user makes this connection by clicking on an icon or words, called a “hyperlink” or “link.” Linking is not only an essential aspect of the Internet, but it is beneficial to users because it enables them to quickly find information on topics of interest. Likewise, it benefits website owners by increasing visits or traffic to their website, and therefore, website operators sometimes encourage links to their site. For example, some websites encourage linking if the link is not confusing or misleading, and have policies which permit linking in certain circumstances: www.gateway.com and http://www.bellatlantic.com/.

There are some instances, however, where the link is constructed in a manner that confuses or misleads the user by implying that the linked websites have an affiliation, such as endorsement or sponsorship. Those instances give rise to legal disputes. a. Ticketmaster Corp. v. Tickets.com, Inc., 2000 U.S. Dist. LEXIS 4553, 54 U.S.P.Q.2d (BNA) 1344, (C.D. Ca. 2000).

Tickets.com operates a website which provides information about sporting and entertainment events. Tickets.com’s website linked a user directly to the Ticketmaster Web page where a user can order tickets to the posted events. This kind of connection, where the link directs the user to an interior page of another website and bypasses the linked-to website’s home page is known as “deep linking.” In Ticketmaster, the Court held that linking to another Web site does not in itself constitute a violation of the Copyright Act. The Court reasoned that the linking function does not actually involve copying material from the copyright owner’s website because the user is “automatically transferred to the particular genuine Web page of the original author.” Ticketmaster, 2000 U.S. Dist. LEXIS 4553 at *6. Therefore, the Court dismissed Ticketmaster’s copyright infringement claim. Id. at *4.

However, the Court denied defendant’s motion to dismiss Ticketmaster’s claims of unfair competition and trademark infringement because of plaintiff’s allegations that Tickets.com falsely implied an association with Ticketmaster through deep linking. Thus, this decision suggests that where linking causes a likelihood of confusion as to the source or sponsorship of a website or of goods or services offered on a website, the linking can constitute unfair competition. Deep linking can cause problems for the linked to website if its advertisers pay on the “basis of the number of ‘hits’ on the home page, [because the advertiser] will not pay for deep-linked reference to the interior home page. Further, the allegation is made that bypassing the home page enables the customer to avoid the terms and conditions, which are not available to him on the events page.”(2)

b. Ticketmaster v. Microsoft, CV 97-3055 RAP (C.D. Cal. Filed April 28, 1997). Ticketmaster filed a similar lawsuit against the Microsoft Corporation, claiming that Seattle Sidewalk, Microsoft’s online entertainment guide, illegally linked to its website.(3) The parties settled this case in March, 2000.

c. Los Angeles Times v. Free Republic, 2000 U.S. Dist. LEXIS 5669, 52 U.S.P.Q.2d (BNA) 1453, (C.D. Ca. 2000), discussed infra, implies that linking is an acceptable alternative to copying news stories.

d. See also MP3Board’s lawsuit seeking a court ruling to protect search engines from linking liability, discussed infra.

e. Multiple linking: Bernstein v. J.C. Penny, Inc., 1998 U.S. Dist. LEXIS 19048; 50 U.S.P.Q.2D (BNA) 1063 (C.D. Cal. 1998). In Bernstein, the defendant linked J. C. Penny’s site to the website of a third party, which in turn contained links to numerous other sites. One such website contained infringing copies of Elizabeth Taylor, the spokesperson for the plaintiff’s perfume. The Court granted the defendant’s motion to dismiss, stating, inter alia, that linking is not copyright infringement because there is no copying, linking is capable of substantial non-infringing uses, it was not clear that the defendant knew of the infringing photographs, and defendant’s “multiple linking does not constitute substantial participation in infringement where its website does not mention the fact that Internet users could, by following the links, find infringing material on another website.” 1998 U.S. Dist. LEXIS 19048 at *3.

f. On the other hand, linking can be illegal. In a case in Japan, a website owner developed software, which removed a “photomask,” a device commonly employed in Japan to censor the most explicit parts of pornographic pictures. His website sold this photomask-removing software and offered a link to websites containing pornographic pictures, thus enabling visitors to his website to link and view the pornographic images without censorship.(4) On March 30, 2000, Judge Masayuki Kawai, Osaka District Court, determined that the defendant increased the number of ways in which people access pornographic websites, setting precedent that creating a link to a site that violates the law constitutes aiding and abetting a crime.(5)

B. Dilution

Where a mark has become “famous” it is entitled to protection not only from “confusion” but also from tarnishment and blurring. For example, it is not likely that customers using the adult site “Adults ‘R’ US” thought that the site was being operated by “Toys ‘R’ US.” As discussed below, the use of that domain name was nevertheless illegal.

1. Toys “R” US, Inc. v. Adults “R” US, 1996 U.S. Dist. LEXIS 17090, 40 U.S.P.Q.2d (BNA) 1836 (N.D. Cal. 1996). The Court awarded a preliminary injunction to Toys “R” Us, finding that its marks are famous and distinctive and, thus, eligible for protection from dilution under 15 U.S.C. § 1125. The Court also enjoined the defendants from using “Adults ‘R’ Us” because it tarnishes the “‘R’ Us” family of marks by “associating them with a line of sexual products that are inconsistent with the image Toys ‘R’ Us has striven to maintain for itself.” 1996 U.S. Dist. LEXIS 17090 at *7.

2. Ringling Bros.-Barnum & Bailey Combined Shows v. Utah Div. of Travel Dev., 170 F.3d 449 50 U.S.P.Q.2d (BNA) 1065 (4th Cir. 1999), held that Ringling Brothers could not prevent the State of Utah from using “The Greatest Snow on Earth” as a slogan for Utah’s winter sports attractions. The Court determined that the Federal Anti-Dilution required a showing of “actual economic harm” to the famous marks’ economic value by lessening its selling power as an advertising agent for its goods or services. Proof of this harm should be demonstrated by surveys and by showing actual loss.

3. The First Circuit, in I.P. Lund Trading A.P.S. v. Kohler Co., 163 F.3d 27, 49 U.S.P.Q.2d (BNA) 1225 (1st Cir. 1998), specifically rejected the “lessening of demand for the product” test that had been applied by the Fourth Circuit in the Ringling Brothers case.

C. Cybersquatting

1. Panavision, Int., L.P. v. Toeppen, 945 F. Supp. 1296, 40 U.S.P.Q.2d (BNA) 1908 (C.D. Cal. 1996). The Court found that defendant’s registration of the plaintiff’s trademarks as the defendant’s domain name for purposes of resale constituted trademark dilution. Accord Intermatic, Inc. v. Toeppen, 947 F. Supp. 1227, 41 U.S.P.Q.2d (BNA) 1223 (N.D. Ill. 1996). The plan to resell the domain name was determined to be “commercial use” which is required to constitute dilution.

2. Hijacking

Until recently, registration of a competitor’s mark as a domain name (hijacking) was legal: see, Juno Online Servs., L.P. v. Juno Lighting, Inc., 979 F. Supp. 684 (N.D. Ill. 1997), 44 U.S.P.Q.2D (BNA) 1913. See also HQM Ltd. and Hatfield Inc. v. William B. Hatfield, 71 F. Supp. 2d 500 (D. Md. 1999) (holding that the registering and activating of a website with the “.com” designation does not, by itself, constitute commercial use). Hijacking with “bad faith intent to profit” is now illegal under the recently enacted Anticybersquatting Act, discussed below.(6)

3. Anticybersquatting Consumer Protection Act

a. Legislation

On November 29, 1999, President Clinton signed the Omnibus Appropriations Act (H.R. 3194). This Act includes the Intellectual Property and Communications Omnibus Reform Act of 1999 (S. 1948), which incorporates, inter alia, the Anticybersquatting Consumer Protection Act, 15 U.S. C. § 1125(d), attached hereto as Exhibit A. The Act amends Section 43 of the Lanham Act to add a subsection (d), and focuses on domain name registrants who acquire a domain name containing a trademark “with a bad-faith intent to profit” from the use of such mark. In particular, the amendment authorizes a private cause of action by the owner of a mark against anyone who, with a bad-faith intent to profit, registers, traffics in, or uses a domain name that: is identical or confusingly similar to a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to or dilutive of a famous mark that is famous at the time of registration of the domain name, or is a trademark, word, or name protected by reason of section 18 U.S.C. § 706,(7) , or 36 U.S.C. § 220506.(8)

The statute, at 15 U.S.C. §1125(d)(I)(B), provides a non-exhaustive list of nine factors the court may consider in determining “bad faith.”(9) These factors are suggestive of the factual circumstances the courts should consider in determining whether the alleged infringing domain name, and the acts of the holder of the allegedly infringing domain name, encroach upon the range of rights granted to a trademark holder. Thus, the court is to consider evidence of whether the domain name holder has property rights in the mark; whether the site is commercial or non-commercial in nature; whether there is evidence that the domain name harms the good will of the registered mark; whether the domain name holder (who has not used or intended to use the domain name) has offered to sell the domain name to the holder of the mark; and whether the domain name holder has a pattern of registering multiple domains which the holder knew were the marks of others.

In addition, the Anticybersquatting Consumer Protection Act:(10)

i. Allows parties to bring an in rem action(11) against any owner of a domain name that has been registered in violation of the Act and,

ii. Permits obtaining injunctive relief and damages from those who, “with bad faith intent to profit,”(12) register domain name identifiers which are identical or similar to a trademark; in lieu of actual damages, the trademark holder can recover damages of at least $1,000.00, but not more than $100,000 per domain name identifier. The court can order that the defendant transfer the domain name to a successful plaintiff. See, e.g., Lozano Enter. v. La Opinion Publ’g Co., 1997 U.S. Dist. LEXIS 20372, 44 U.S.P.Q.2d (BNA) 1764 (C.D. Cal. 1997).

b. Recent Cases

Victims of cybersquatting are already taking advantage of this new Act, which has been upheld on appeal. Sporty’s Farm LLC v. Sportsman’s Market Inc., 202 F.3d 489 (2d Cir. 2000) (the Court held that the defendant’s use of sports.com was indistinguishable from the “Sport’s” trademark, that Sporty’s Farm acted with a bad faith intent to profit because it had not made use of the “sporty’s” mark before registering it as a domain name, and it planned to use the website to directly compete with Sportsman).(13) Moreover, courts are enforcing the Anticybersquatting Act: see, e.g., Bargain Bid v. Ubid, 2000 U.S. Dist. LEXIS 3021 (E.D.N.Y. 2000) (the District Court, Eastern District of New York, enjoined defendants (1) from using the Bargain Bid and Barginbid marks and (2) from indicating that the defendants’ services were sponsored, affiliated, or approved by Bargain Bid, where the defendants registered the domain name “bargainbid.com” to allegedly divert consumers from the Bargain Bid’s Website by using the common misspelling of “bargain.”)(14) Nevertheless, the Bargain Bid case did not deter an alleged cybersquatter from registering www.phillipmorris.com, which is similar to Philip Morris, Inc.’s corporate name, but spelled with an additional “l.” Currently, the website www.phillipmorris.com is registered to the “Phillip Morris Club” and states that it is “dedicated to linking all of the guys named Phillip Morris together” and that it is not affiliated with the Philip Morris tobacco company.(15) However, the page contains a link to an anti-tobacco site, ButtOut.net,(16) and previously, www.phillipmorris.com automatically redirected visitors to ButtOut.net. Philip Morris, Inc. is not adopting a wait-and-see attitude; in mid-June, 2000, Philip Morris filed a trademark lawsuit in the U. S. District Court of the Eastern District of Virginia.(17)

4. Registering

Registering a domain name with “intent to profit” would now be illegal under the Anticybersquatting Act (which created a new §43(d) of the Lanham Act, 15 U.S.C. §1125(d)). Previously, registering a domain name without more would not constitute either “use in commerce” or “commercial use” as was previously required under the Lanham Act to establish a violation.

5. ICANN (Internet Corporation for Assigned Names and Numbers)

ICANN is the non-profit body responsible for domain name system management, IP address allocation, and related functions. ICANN was established last year to (a) phase out the government’s involvement in the domain name system and (b) to end the monopoly held by Network Solutions Inc. (Nasdaq: NSOL), by opening up the registration of such popular domains as “.com,” “.org,” and “.net” to additional companies. Although the database for the generic Top Level Domains (gTLD) is still managed (a “registry” function) by Network Solutions, Inc. (NSI), the domains may be “registered” by many different entities including www.register.com and www.aol.com. ICANN is now considering additional generic TLDs to .com, .net and .org for commercial uses. For example, ICANN is considering suggestions to add “.travel,” “.banc,” “.museum,” “.union, and “.xxx” or “.sex.”(18) At its July 16, 2000, meeting in Yokohama, Japan, the ICANN Board will consider the Names Council’s 18/19 April 2000 recommendation that the Board adopt “a policy for the introduction of new gTLDs in a measured and responsible manner . . . ,” as well as the Names Council’s 19 May 2000 recommendations concerning protection for intellectual property during the start up phase of new top-level domains.(19)

ICANN plans to solicit name proposals in August, 2000.(20) Applicants should submit proposals by October 1, 2000, and ICANN will make a decision in November, 2000.(21)

On October 24, 1999, ICANN adopted a uniform domain name dispute resolution policy, attached at Exhibit B, which is binding on all accredited registrars; this policy incorporates by reference the Rules for Uniform Domain Name Dispute Resolution Policy.(22) The policy and the rules provide a method to contest the propriety of existing domain name registrations. In order to be entitled to obtain transfer of a domain name from a prior registrant, a complainant must establish that: (1) the domain name(s) is/are identical or confusingly similar to a trademark or service mark in which the Complainant has rights; and (2) the domain name holder has no rights or legitimate interests with respect to the domain name(s) that is/are the subject of the complaint; and (3) the domain name(s) has/have been registered and is/are being used in bad faith.(23) The Dispute Resolution policy is popular due to its relatively low cost and the speed with which parties obtain results (within 45 days).(24) Seventy-four percent of cases favor existing trademark holders.(25) However, courts are not bound by the administrative proceedings of an ICANN panel. See Weber-Stephen Prods. v. Armitage Hardware and Bldg. Supply, 2000 U.S. Dist LEXIS 6335, 54 U.S.P.Q.2d (BNA) 1766, (N.D. Ill. 2000). This ruling is significant because of the volume of proceedings before the dispute resolution panel: as of May 9, 2000, there were 518 pending cases.(26)

D. Communicative Use

Playboy Enters., Inc. v. Welles, 7 F. Supp. 2d 1098, 47 U.S.P.Q. 2d (BNA) 1186, (S.D. Ca. 1998), aff’d, 1998 U.S. App. LEXIS 27739 (9th Cir. 1998). A former playmate was permitted to state her association with Playboy Enterprises, Inc. (PEI)(27) on her own website. The heading of the defendant’s website is “Terri Terri Welles – Playmate of the Year 1981,” and the title of the link page is “Terri Welles – Playboy Playmate of the Year 1981.” Each of the pages uses “PMOY ‘81” as a repeating watermark in the background. According to defendant, eleven of the fifteen free Web pages include a disclaimer at the bottom of the pages which indicates that Playboy does not endorse the website. Id. at 1100. Playboy moved for a preliminary injunction which would enjoin the defendant (1) from using the trademarked term “Playmate of the Year” in the title of the home page and the link page; (2) from using the watermark “PMOY ‘81” in the background; and (3) from using the trademarked terms “Playboy” and “Playmate” in the metatagging(28) of defendant’s site. The Court denied a preliminary injunction because the trademarks that defendant uses, and the manner in which she uses them, describe and identify her. Therefore, the Court held that the defendant has made a “fair use” of these marks(29) and her site was not confusingly similar to Playboy’s site.

Later, the Court granted the defendant’s motion for summary judgment, holding that the use of the words “playboy” and “playmate” in the text portion of her website were a fair use of Playboy’s trademarks because they fairly described and identified the defendant.(30) The Court noted that Playboy failed to introduce compelling evidence of actual consumer confusion.(31) Compare N.V.E. v. Hoffmann-La Roche, CA No. 99-5858 (D.N.J. 1999) (WHW) (the District Court enjoined metatagging where the metatag misdirected searchers to a competing website).(32)

II. Copyright Law and the Internet

A. Limits of Copyright Protection after Lotus v. Borland; Non-Literal Elements of Computer Software

The non-literal elements of computer software are elements of the software other than the source code and object code such as the overall layouts, menus, structure and look and feel. At one point, there appeared to be a significant amount of protection for the non-literal elements of computer software. The courts even went so far as to apply the notion that taking the “total concept and feel” of a computer program (which had been found to be illegal with respect to television characters)(33) constitutes a copyright infringement.(34)

In the 1990’s, the courts began restricting protection of non-literal elements in computer programs under copyright law. The two leading cases in this regard are Computer Assocs., Inc. v. Altai, Inc., 982 F.2d 693 (2d Cir. 1992) and Lotus Dev. Corp. v. Borland Int’l, Inc., 489 F.3rd 807 (1st Cir. 1995).(35) 1. Computer Assocs., Inc. v. Altai, Inc.

In the Computer Associates case, Computer Associates had developed a scheduling program and, separately, an “ADAPTER” to allow the scheduling program to be operate on a number of different operating systems. Altai, a competitor of Computer Associates, desired to develop an “adapter type” program to allow its scheduling program to be used on an additional operating system. Altai hired an employee of Computer Associates who, without Altai’s knowledge, brought over code from the ADAPTER program. After Computer Associates filed suit, Altai realized what had happened, admitted liability for the direct copying and reconstructed the program without any literal copying. The court had to determine whether the non-literal copying constituted an infringement. The Court of Appeals approved the District Court’s statements that “references to structure, sequence, and organization” are no longer necessarily relevant to how computer programming is done. With object oriented programming, such as JAVA, and with Windows based result oriented programming, such as Visual Basic, it is difficult to point to any particular sequence of a computer program. The Court went on to describe its three-step test for determining what, if any, of the non-literal elements of a computer program are protectable under copyright law.

a. The first step of the analysis is “abstraction.” The court determines what are the various levels of abstraction of the program. The lowest level consists of the actual instructions organized into a hierarchy of modules. At a higher level are the functions of each module. (Note that a selection and organization of modules could involve creativity that is protectable if at that level the program survives Step 2 “filtration” (discussed below), as compilations may be protectable under Section 103 of the Copyright Act.)

b. The second step of the analysis is “filtration” of each level of abstraction. Here the court filters out the following (at each level):

i. Elements that constitute ideas or are dictated by efficiency;

ii. Elements dictated by external factors such as standard techniques rather than creative originality on the part of the programmer; and

iii. Elements taken from the public domain.

c. The third step of the analysis is the comparison test. During the filtration step, the court has determines what portion of the plaintiff’s program is protectable expression. Next, the court ascertains whether or not the “defendant copied any aspect of this protected expression, as well as an assessment of the copied portion’s relative importance with respect to the plaintiff’s program.” Computer Associates, 982 F.2d 693, 710. The Court of Appeals held that the District Court’s appointment of its own expert witness was appropriate.

Following these tests, the Court held that there was no infringement. The Court did hold that there was a possibility of misappropriation of trade secrets. According to the Court, state trade secret law is not pre-empted under Section 301 of the Copyright Act.

2. Lotus v. Borland

In Lotus v. Borland, supra, Borland had developed a competitive spreadsheet program that included an option which provided “a virtually identical copy of the 1-2-3 menu tree” contained in the Lotus spreadsheet program. There was no contention that the underlying code or protected elements of computer screen displays had been copied. Lotus’ only contention was that Borland had unlawfully copied its menu command hierarchy. The trial court concluded that Lotus’ menu hierarchy was protectable expression for several reasons, one of which was that many different words could be used for the same commands. The Court of Appeals reversed. Referring to 17 U.S.C. §102(b), the Court of Appeals said:

We hold that the Lotus menu hierarchy is an uncopyrightable method of operation. We do not consider whether it could also be a system, process, or procedure. The Supreme Court granted certiorari to Lotus on an appeal from the First Circuit decision. However, the Justices were equally divided on the issue and the Supreme Court affirmed the decision by default.(36)

3. As courts became reluctant to protect non-literal elements of computer programs under copyright law, they became more comfortable granting patent protection to computer programs. Shifting much of the protection for non-literal elements of computer programs from copyright to patent law created a situation that makes it much more difficult for start up companies to protect their software because of the much higher expense of filing for patent protection. Patent protection for software could allow for monopoly protection of some matters that would not have been protected by copyright law and that are too easy to create in the software context to fairly be the subject of patent protection. A plethora of programming code is created daily, therefore patent applicants are being granted protection for software commonly used by others in the industry who just have not pursued the patent application process. Therefore, the legislature should develop a modified hybrid of trade secret, patent and copyright law to protect computer software.

B. Liability of website owners, Internet Service Providers and commercial online services after the enactment of the Digital Millennium Copyright Act

1. Legislation

The Digital Millennium Copyright Act of 1998 (105 P.L. 304; 112 Stat. 2860) (DMCA):

a. Exempts Internet Service Providers from liability for copyright infringement under certain circumstances;(37)

b. Makes it illegal to circumvent technology used to prevent copyright infringement(38) (this provision is to take effect two (2) years from October 28, 1998);

c. Makes it illegal to manufacture or traffic in any technology that is designed or produced for the purpose of circumventing a technological measure that controls access to a work protected under the DMCA (this provision is effective as of the date of the enactment of the DMCA);(39) and, inter alia,

d. Expands the rights of owners of sound recordings to restrict performance of (or in some cases receive set royalties for) their sound recordings from what was covered by the Digital Sound Recording Act of 1995(40) to any sound recordings provided over the Internet whether or not it is via subscription or interactive (this provision is effective as of the date of enactment).

2. Tasini v. The New York Times Co., 192 F.3d 356, 52 U.S.P.Q.2d (BNA) 1186 (2d Cir. 1999). A Federal District Court in New York held that making publication information accessible on Lexis-Nexis and other similar databases “constitutes reproduction and distribution of freelance contributions as part of that particular collective work.” Tasini v. The New York Times Co., 972 F.Supp. 804, 43 U.S.P.Q.2D (BNA) 1801 (S.D.N.Y. 1997). The District Court held that the publishers were protected by a privilege afforded to publishers of “collective works” under Section 201(c) of the Copyright Act, but the Second Circuit reversed this decision in Tasini v. The New York Times Co., 206 F.3d 161, 54 U.S.P.Q.2d (BNA) 1032 (2d Cir. 1999). The Second Circuit concluded that “the Publishers’ licensing of Authors’ works to UMI(41) for inclusion in these databases is not within the Section 201(c) revision privilege.” Tasini, 206 F.3d 161, 169. The Court continued: The relevant inquiry under Section 201(c), is . . . whether the republication or redistribution of the copyrighted piece is as part of a collective work that constitutes a ‘revision’ of the previous collective work, or even a “later collective work in the same series.” If the republication is a “new anthology” or a different collective work, it is not within the privilege. H.R. Rep. No. 94-1476, at 122-23 (1976), reprinted in 1976 U.S.C.A.A.N. 5659, 5738. Because NYTO(42) is for present purposes at best a new anthology of innumerable editions of the Times, and at worst a new anthology of innumerable articles from these editions, it cannot be said to be a “revision” of any (or all) particular editions or to be a “later collective work in the same series.” Id. Accord Ryan v. Carl Corp., 23 F. Supp. 2d 1146, 1150, 48 U.S.P.Q.2D (BNA) 1626 (N.D. Cal. 1998) (commenting that “calling the reproduction of a single article a ‘revision’ of a collected work, however, is more strained than even a flexible interpretation can withstand” and construing Section 201(c) of the Copyright Act in the authors’ favor).

The impact of Tasini on electronic media could take two paths. First, according to Patricia Felch, an attorney who represented four of the Tasini plaintiffs in the appeal of the trial court’s ruling, print and electronic publishers could claim that print publishers must refrain from reselling free-lancers’ works to electronic publishers and that electronic publishers must remove free-lancers’ works from the electronic databases.(43) Felch notes that this reaction would ruin the value of databases as a comprehensive and long term research tool she therefore proposes an alternate solution which lead plaintiff Jonathan Tasini encouraged: electronic database producers and print publishers can join the Publishing Rights Clearinghouse (PRC).(44) In a similar manner to what ASCAP and BMI do with royalties earned from public performances of music, the PRC accepts applications for additional uses of individual works and (a) sets a cost for such uses, (b) finds the authors, and (c) administers payments to the original authors.(45)

A lawsuit filed June 12, 2000, by freelance writers against the Boston Globe also questions who owns online content. This suit “challenges a licensing agreement which seeks their consent to allow the Globe to reproduce their past and future freelance work in other forms, including online, without additional compensation.” See Mark Jurkowitz, Freelancers’ Issue Tests Online Rights, digitalMass, June 15, 2000.

3. Hacking DVD Two courts have recently granted preliminary injunctions against website operators from “posting [hacking information] on any Internet Website, or in any other way [assisting users to circumvent the protections from copying afforded by DVD technology].” These courts held that such activities constituted circumvention of technological measures, which control access to a work protected under the Copyright Act as prohibited under the DMCA. The defense argued that the circumvention procedures were obtained as a by-product of developing a system to allow the playing of DVD on Unix computers (an arguably allowable activity). In both these cases the complainants charge that offenders violated copyright laws by publishing DVD descrambling program, DeCSS. See Universal Cities, Inc. v. Reimerdes, 82 F. Supp. 2d 211, 53 U.S.P.Q.2d (BNA) 1780 (S.D.N.Y. 2000); Control Assoc., Inc. v. McLaughlin, No. CV 786-804, Sup. Court Calif., (Jan. 21, 2000). In the California state court case, the Judge caused a stir by denying a temporary restraining order; apparently the Judge initially believed that the use and information was focused properly on just allowing the playing of DVDs on Unix systems.(46) The Judge postponed the case to allow the DVD Copy Control Association additional time to identify some of the numerous John Does in the case.(47) On the other hand, courts question restrictions on data-scrambling encryption software.(48)

4. Internet Service Provider (ISP) liability The Internet cannot, as a practical matter, function efficiently if service providers are responsible for copyright infringements that may occur as a result of their customers’ actions. For example, the Internet service providers and those hosting chat lines generally are not in a position to take responsibility for preventing copyright infringements by their customers. Courts have found that an online service provider can be liable if it knows one of its subscribers was using its facilities to infringe. See Religious Tech. Ctr. v. Netcom Online Communication Servs., Inc., 907 F. Supp. 1361, 37 U.S.P.Q.2d (BNA) 1545, (N.D.Ca 1995).

On the other hand, an ISP is not responsible for defamatory messages posted on its system. See Lunney v. Prodigy Servs. Co., 94 N.Y. 2d 242, 723 N.E.2d 539 (1999), cert. denied, ___ U.S. ___, 120 S.Ct. 1832, 146 L. Ed. 2d 776 (2000). In that case, an imposter, using accounts under plaintiff’s name, sent threatening and profane e-mail messages to a local scoutmaster using defendant’s Internet service. Plaintiff sued defendant claiming that it was negligent in allowing the imposter to open accounts in his name and was responsible for the imposter stigmatizing and defaming plaintiff. The Court found that the plaintiff was not defamed because the messages were not “of and concerning” him and that the defendant ISP was not a publisher, and even if it were, defendant had a qualified privilege which sheltered it from liability. Accord Jane Doe One et al. v. Oliver et al., 46 Conn. Supp. 406 (Sup. Ct. Conn. 2000). In addition, the Communications Decency Act of 1996 (CDA) provides federal immunity for an ISP which distributes defamatory statements originating from third-party users of the service. See Zeran v. America Online, 129 F. 3d 327 (4th Cir. 1997), cert. denied, 524 U.S. 937, 118 S.Ct. 2341, 141 L.Ed.2d 712 (1998) (holding that the CDA immunizes ISPs from lawsuits holding them liable for defamatory material they fail to screen). In contrast, British ISP Demon Internet recently agreed to pay $25,000 and court costs estimated at several hundred thousand dollars to an individual for remarks posted in a news group carried on Demon’s news servers which contained allegedly defamatory statements.(49) Courts are also reluctant to hold registrars liable for fraudulent transfers of domain names.(50)

C. New Technologies (e.g., webcasting, www.ditto.com, and MP3)

1. Webcasting

The DMCA outlines the rights any Webcaster must acquire:

a. Webcasting Webcasting refers to the streaming of audio (or sometimes video) on the Internet (i.e. “Internet radio”). Webcasters sometimes transmit many different channels of uninterrupted music divided into genres. Webcasters must obtain a license for each of the two copyrighted works embodied in a musical recording: (1) the underlying musical composition or “musical work,” which is comprised of written notes and lyrics, and (2) the sound recording, which is the sound of the music, including the recording artist’s interpretation of the musical composition. The DMCA enables Webcasters (and other subscription or nonsubscription digital audio services) to obtain a statutory license(51) to perform sound recordings on the Internet. Webcasters are usually eligible for a statutory license because their primary purpose is to provide audio or other entertainment programming, not to promote or sell particular products or services. Interactive services (i.e. services which permit a listener to choose a particular song or create a personalized program for the listener) and Webcasters who do not qualify for a statutory license must obtain licenses from the copyright owners of the sound recordings they wish to transmit.

i. Current license agreements (BMI, ASCAP, SESAC) Spinner.com, a Webcaster which provides original programming,(52) currently has licensing agreements with BMI, ASCAP, and SESAC (for performance of compositions on Web sites). BMI and ASCAP have licensing agreements which are approximately 3% of the Webcaster’s gross revenue. ASCAP uses a formula which takes from the greater of revenue or expenses. BMI’s license agreement deals strictly with revenue, and is a little lower than ASCAP. SESAC’s license caps out at $3,000-$4,000 per year, so Spinner.com pays the cap every year.

ii. Future license agreements While BMI, ASCAP, and SESAC have agreements with many Websites (Webcasters), RIAA (Record Industry Association of America) has agreements with only a few for performances of sound recordings by Webcasters.(53) Supposedly, RIAA’s license is similar to ASCAP’s license, but RIAA seeks a much higher royalty percentage. RIAA negotiates these performance royalties with Webcasters on behalf of record companies. Consequently, Spinner.com and other Webcasters are negotiating with RIAA for a performance royalty license for the sound recordings. “Royalty percentages being asked by the [recording] labels range as high as fifteen percent of a [Web] site’s gross revenues. Representatives for the Web sites say they are arguing for as low as one to two percent.”(54) These negotiations will probably be resolved through the copyright arbitration royalty proceeding (CARP),(55) as was done previously under the Digital Sound Recording Act of 1995 with respect to non-interactive digital subscription services (see “c” below). Although there is no license now, some Webcasters are holding money in reserve because the license will apply retroactively to October 28, 1998.(56)

iii. Failure to obtain a license RIAA has sued a Web site operator (Napster), which allegedly offers downloads of unlicensed music, for copyright infringement. See A&M Records, Inc. v. Napster, Inc., infra. However, downloading is very different from performance because downloading allows the user to replay the recording at will.

b. Ephemeral Recordings

Ephemeral recordings are copies of sound recordings which a Webcaster (or radio broadcaster) makes for programming purposes. A Webcaster does not need to pay separately for these recordings if it is licensed to transmit them (i.e., it has a statutory license to transmit the recordings), and it meets, inter alia, the following conditions: (1) Only the Webcaster may use the copy of the recording; (2) The copy must be destroyed within six months, unless preserved exclusively for archival purposes; and (3) Only one ephemeral copy of the recording may be made, and no further copies of the recording can be made from that ephemeral copy.

c. Previous Royalty Determination

Recording Indus. Ass’n of Am. v. Librarian of Congress, 176 F.3d 528, 50 U.S.P.Q.2D (BNA) 1768 (D.C. Cir. 1999). Under Section 114(f) of the Copyright Act, 17 U.S.C. §§ 101-1332, the Librarian of Congress is charged with establishing the rates and terms for compulsory licenses for certain subscription transmissions of digital audio music. In the first proceeding under § 114, the Librarian determined that three music services subject to the terms of the license must pay the Recording Industry Association of America (“RIAA”) 6.5 percent of their gross domestic residential revenues in exchange for the right to transmit digital audio music. The RIAA claimed that the 6.5 percent royalty for subscription digital musical services set by the Librarian was too low, but the Court upheld this rate as an acceptable interpretation of 17 U.S.C. §801(b)(1).

d. Currently, Congress is hearing debates about compulsory licenses for Internet companies. On June 15, 2000, the director of the federal copyright office and major content providers argued to Congress that Internet companies should not be eligible for the special licenses that satellite and cable companies have to carry broadcast programming, but web businesses countered that this puts them on an uneven playing field.(57)

2. RIAA v. Diamond Multimedia Sys., Inc., 29 F. Supp. 2d 624 (C.D. Cal. 1998) aff’d, 180 F.3d 1072 (9th Cir. 1999), 51 U.S.P.Q.2d (BNA) 1115. The Court of Appeals for the Ninth Circuit affirmed the denial of a preliminary injunction finding that Diamond Multimedia, the maker of Rio,(58) did not violate the Audio Home Recording Act of 1992(59) with the Rio because the Rio could not make copies except from a hard drive. The Court found that such copying was not covered by the Act. However, on August 4, 1999, Diamond Multimedia and the RIAA announced that they entered into a settlement agreement. RIAA’s general counsel and senior executive vice president, Cary Sherman, stated that this “announcement makes clear that the future of the digital music marketplace will be created in the marketplace itself, enabled by initiatives like SDMI [Secure Digital Music Initiative].”(60) While the authors have not been able to obtain details of the settlement reached between RIAA and Diamond Multimedia, one can infer from what has been published that the terms probably include a requirement that Diamond incorporate technology which prevents serial copying.

3. Transformative Fair Use of Copyrighted Works

a. In Kelly v. Arriba Soft Corp., 77 F. Supp. 2d 1116, 53 U.S.P.Q.2d (BNA) 1361 (1999), the Federal District Court for the Central District of California granted partial summary judgment to the creators of the “visual search engine,” www.ditto.com, which searches a database of digital images. These digital images were copied without authorization from third-party Web sites. The Court found that such actions constitute a “fair use.”(61) The Court determined that the defendant’s visual search engine was designed to catalog and improve access to images on the Internet, not for an artistic or illustrative purpose. Therefore, it was a “transformative” use and did not harm the market for the copied works.

b. Compare eBay, Inc. v. Bidders Edge, Inc., 2000 U.S. Dist LEXIS 7287 (N.D. Ca. 2000). Plaintiff operates a person-to-person Internet trading Web site and sued the defendant for using a “spider”(62) to extract auction information, which the defendant aggregated on its site along with data from other sites. Plaintiff posted “robot exclusion headers,” which are akin to an electronic “no trespassing” sign, to advise other computers that it did not permit unauthorized robotic activity. Defendant ignored these headers, and even circumvented plaintiff’s attempts to trace its violations. eBay argued that it was entitled to an injunction because the defendant’s actions were equivalent to sending an army of robots each day to check the prices in a competitor’s brick and mortar store; thus defendant’s activities constituted a trespass. The Court granted the injunction, noting that defendant’s activities consumed a portion of plaintiff’s server capacity and bandwidth.

c. Los Angeles Times v. Free Republic, 2000 U.S. Dist. LEXIS 5669, 52 U.S.P.Q.2d (BNA) 1453, (C.D. Ca. 2000). Plaintiffs The Washington Post and Los Angeles Times publish newspapers online and in print. The defendant, Free Republic, operates a Web site on which members post news articles (frequently, the site posts the entire text of an article) and add their commentary. Visitors to defendant’s site read the articles and can add comments. The Court denied the defendant’s motion for summary judgment on the grounds of fair use and the First Amendment. The Court found that the site members copied entire articles or large portions of the articles onto the site, and this verbatim copying was not a transformative use. The defendant contended that it was necessary for them to post an entire article to permit their users to criticize the manner in which media covered current events. However, the Court found that the commentary focused more on the content of the news than on the manner in which the media reported that news.

4. Liability for Piracy

The software and entertainment industries contend daily with the problem of pirating and copying by consumers. Recently the piracy problem has become much more serious for the entertainment industry. Digital recording technology exacerbates this problem because it allows people to create “perfect” copies. Software available from the Napster Web site (www.napster.com) and similar sites (such as those operated by Scour(63) and Gnutella) makes it easy to obtain MP3(64) formatted music both of songs that the owners intend to make freely available and from popular songs owned by record companies.

a. Suits by the recording industry against MP3.com and Napster Several companies operate websites where users share MP3 files. These MP3 files contain proprietary information (i.e. popular music), and therefore copyright laws apply to these transactions. The owners of copyrighted music have taken legal action against operators of MP3 sharing Web sites: MP3.com and Napster.(65) i. UMG Recording Inc. v. MP3.com Inc., 92 F. Supp. 2d 349, 2000 U.S. Dist. LEXIS 5761 (S.D.N.Y. May 4, 2000). MP3.com launched its service in January, 2000. Their service allows users to maintain an online MP3 catalog of the music in their CD collection. Thus any of the users can enjoy music in their personal collection through any computer connected to the Internet. Also, users can “listen to existing digital music from MP3.com bands, songs from existing CDs, and instantly listen to new CDs purchased from MP3.com online retail partners.”(66)

The RIAA sued MP3.com, claiming that its business enabled users to infringe sound recordings on some 45,000 audio CDs.(67) RIAA demanded injunctive relief and statutory damages for willful infringement. MP3.com claimed that their service, My.MP3.com, permitted only the person who buys a CD to listen to that music through its service.(68) This argument attempts to make an analogy to the time-shifting argument in the Sony case(69) where the Court found that VCRs were legal devices. The RIAA opposes this argument: Hillary Rosen (CEO and president of RIAA) stated that “it is not legal to compile a vast database of our members’ sound recordings with no permission and no license.”(70) RIAA also complained that MP3.com did nothing to prevent music piracy. MP3.com contended that it does have security measures in place: it protects all user accounts with passwords so that no two users can listen to the same account at the same time, it permits users to listen to the digital music only on a computer (i.e. users cannot download the music to a portable MP3 player), and it requires that users either purchase a new CD or have an actual physical copy of music (not merely a computer file) in order to add the music to the user’s account.(71) However, MP3.com cannot prevent individuals from passing one CD to all their friends and each of those people using that CD to access a digital copy on those My.MP3.com accounts. The Court found that defendant MP3.com “is replaying the subscribers’ converted versions of the recording it copied, without authorization, from plaintiff’s copyrighted CDs.” 2000 U.S. Dist. LEXIS 5761 at *3-4. Therefore, the Court determined that the defendant engaged in copying, and it then examined whether the defendant had a fair use defense.

Although the defendant did not charge a fee to subscribers, its use was commercial, because it sought to attract “a sufficiently large subscription base to draw advertising and otherwise make a profit.” 2000 U.S. Dist. LEXIS 5761 at *7. The defendant argued that its innovative service permitted record buyers to “space shift” by playing back their recordings in a location which was removed from the physical location of their CDs. The Court found that this service was not transformative because it merely repackaged recordings to facilitate their transmission through another medium. The second and third fair use factors favored the plaintiff because the plaintiff’s music was creative and the defendant copied all of it. In evaluating the fourth factor, the Court found that, regardless of whether the record companies planned to license their works for Internet transmission, the Copyright Act allowed an author to prohibit development of derivative works by refusing to license his works. Consequently, even though the defendant argued that its service had a positive effect on CD sales,(72) the defendant may not “usurp a further market that directly derives from reproduction of the plaintiff’s copyrighted works.” The Court likewise dismissed defendant’s argument that it was performing a public service: copyright law is “not designed to afford consumer protection or convenience but rather to protect the copyright holder’s property interest . . . ” and found MP3.com liable. MP3.com settled this copyright dispute with two of the plaintiffs: Warner and BMG on June 9, 2000.(73) While the parties did not disclose the settlement terms, reports indicate that the “licensing terms per label could total about $11 million a year based on fees that record companies would charge on a per-play basis” and “the industry would split a total $75 million to $100 million in payments.”(74) One report indicated that MP3 will pay Warner Music Group and BMG approximately $20 million each.(75) News of the April 30, 2000, Court decision finding MP3.com liable for copyright infringement caused MP3.com’s stock, which at one time had traded at $105, to drop 40% (to $7) in a single trading session.(76) However, news of the settlement caused MP3.com’s shares to rise over 11% (from $17.25 to $19.19) in trading that morning.(77) MP3.com is still negotiating with Sony, Universal, and EMI, other plaintiffs in the suit.(78) Commentators continue to debate whether the settlement favors the labels or MP3.com.(79) ii. A&M Records, Inc. v. Napster, Inc., 2000 U.S. Dist LEXIS 6243 (N.D. Ca. May 5, 2000). While MP3.com maintains an unauthorized database, Napster’s service facilitates communications between users seeking certain sound recordings and “host” computers which contain MP3 format copies (both authorized and unauthorized) of those sound recordings. First, a user logs onto Napster’s service, and Napster compiles a list of MP3 songs on that user’s computer (and likewise for all users logged on at that time). Then, the Napster user selects a sound recording from a song index. Next, Napster provides the address of a host computer, which stores the desired song. Finally, the user transmits the music from the host computer to the user’s computer. The Court found that the MP3 file is “actually transmitted over the Internet, but the steps necessary to make that connection could not take place without the Napster server.” 2000 U.S. Dist. LEXIS 6243 at *5-6.(80) The plaintiff, recording companies, claim that the defendant had knowledge of and participated in the infringing acts of its users and thus engaged in contributory infringement. The plaintiffs also claim that the defendant’s ability to control or supervise the transmissions and financial interest in the infringing activities of its users constituted vicarious infringement. Defendant Napster moved for summary judgment on the grounds that it was entitled to the “safe harbor” from monetary damages in DMCA §512(a),(81) even if its users committed infringing acts. The plaintiffs responded to the summary judgment motion by arguing that Napster’s essential function was as a “information location tool,” and, consequently, that if Napster were eligible for protection at all, it would be under the more rigorous (because it covers active assistance to users) Section 512(d).(82) Naspter contended that its searchable directory and index is an “information location tool,” but that, after initial input from users, its service is more automatic than other “information location tools,” like Yahoo!, which depend on “human judgment and editorial discretion” of the service provider staff. 2000 U.S. Dist. LEXIS 6243, at *16-17. The Court found that Napster’s essential functions, including the index and search engine, should be analyzed under subsection 512(d) because those functions are paramount to Napster’s marketability, i.e. the index and ability for users to locate “millions of songs” online without “wading through page after page of unknown artists.” 2000 U.S. Dist. LEXIS 6243 at *18. The Court also found that §512(a) and §512(d) were not mutually exclusive, and thus analyzed Napster’s service under §512(a). Id. at *16-17. The Court concluded that, under §512(a), the service provider must facilitate or engage in the routing or transmission of copyrighted material “through a system or network controlled or operated by or for the service provider,” and Napster users actually transmitted MP3 files via the Internet, not Napster. Id. at *21. Because Napster does not serve as a conduit for the connection itself, but rather provides the address information which makes the connection possible, id. at *23-24, Napster does not qualify for the §512(a) safe harbor. Recently, Hank Barry, CEO of Napster, made a new argument to support Napster’s position against the RIAA – it is legal for consumers to share music files, even copyrighted ones, over the Internet – but commentators find this dramatic argument legally unfounded because, as one law professor stated, “[c]opyright laws work in a digital world, too.”(83) What may actually help Napster’s position against the RIAA is Napster’s new beta 6 version, which “lets users download their favorite tunes in the Windows Media Audio (WMA) format, which has copyright protection built in.”(84) Napster also launched a New Artists Program on June 2, 2000, to “enable new artists to self-publish and self-distribute on a level that hasn’t happened before,” according to Napster marketing director Liz Brooks.(85) The tremendous response – more than 10,000 artists have submitted profiles for the program – will provide venues for MP3s of independent bands.(86) Perhaps this plan to help unknown bands find audiences will help Napster gain supporters in the music industry.(87)

iii. Tee Vee Toons, an independent label, has also sued the MP3 file sharing services.

(a) Tee Vee Toons v. MP3.com, filed May 25, 2000, (S.D.N.Y).  Tee Vee Toons (TVT) is the first independent label to file a lawsuit against MP3.com.(88) TVT is home to acts such “as rapper Snoop Dogg and the first label of alt-rock act Nine Inch Nails.”(89) TVT alleges that MP3.com distributes unauthorized copies of its recordings to customers of its online service and wants the Court to order MP3.com to remove TVT’s songs from MP3.com’s service.(90)

(b) Tee Vee Toons v. Napster, filed June 7, 2000 (S.D.N.Y.).  TVT sued Napster and unnamed universities which, TVT alleges, have contributed to Napster’s alleged unlawful actions.(91) b. Artists’ suits against operators of MP3 file sharing Web sites i. Rock group Metallica sued Napster in April, 2000, claiming that Napster’s MP3 sharing software contributes to copyright infringement.(92) In May, the band delivered the names of alleged individual infringers to the company and requested that they be blocked from Napster’s service; Napster complied with this request, blocking access to 317,377 people who Metallica claims are illegally offering its music for trade.(93) Over 30,000 Metallica fans are appealing this ban.(94) ii. Rap musician Dr. Dre also sued Napster. On May 17, 2000, he gave Napster 239,612 user names of individuals he contends have illegally made his songs available online, and requested that Napster block those users.(95) Again, Napster fulfilled this request, banning 230,142 Napster members.(96) However, some individuals have found technological means around the ban, and have even posted methods to circumvent the ban on message boards.(97) Of course, none of the litigation has slowed venture capital funding for Napster,(98) which recently received $15 million from Hummer Winblad(99) in its second round of funding.(100) Nor has the litigation slowed the proliferation of MP3-related Web sites, some of which offer free downloads as well as songs for approximately one dollar each.

See, e.g., www.mjuice.com, www.epitomic.com, www.riffage.com, and http://www.emusic.com/.

c. Lawsuit by music search engine against the recording industry: MP3Board Inc. v. Recording Industry Ass’n of Am., Inc., 00-20606 (filed June 2, 2000, San Jose, Ca.).(101) MP3Board.com Inc., a small company that operates a music search engine, filed a declaratory lawsuit against the Recording Industry Association of America.(102) MP3Board’s suit asks Judge Ronald M. Whyte to declare that it would not be liable for copyright infringement if it provided results of an automated search, which included pirated copyrighted works.(103) The result of this suit may depend on whether the Court finds that MP3Board plays an active role in directing consumers to pirated materials, i.e. do the links aid and abet something improper.(104)

d. Legislative Response

On May 24, 2000, the House Committee on Small Business held a hearing aimed at determining whether small businesses (not the RIAA) can survive in the quickly changing online music world.(105) In addition, two legislators, Representative Bob Goodlatte (R-Va) and Representative Dave Dreier (R-California) met with digital music executives in San Francisco to learn about the online music business and how the industry is trying to adapt to the proliferation of file-sharing programs.(106) On May 19, 2000, a “centrist Democratic think tank” said that it would suggest measures to Congress to reduce music piracy associated with Napster and similar controversial song-swapping services.(107)

e. The Future

The Internet as a media delivery system Music is not the only form of streaming media that is popular. Some Web sites focus on delivering films via the Internet; for example, see: www.mediatrip.com, www.atomfilms.com, www.ifilm.com, www.broadcast.com, www.reelshort.com, www.shortbuzz.com, www.sightsound.com, www.bijoucafe.com, www.alwaysif.com, www.thenewvenue.com, www.dfilm.com, and www.cinemanow.com.(108) As compression technology improves, information transfer speed increases, and computer storage becomes cheaper,(109) the Internet will become a common delivery system for all content and media. Due to advances in hacking and other methods of circumventing copyright protection,(110) computer piracy will continue to create legal challenges to protecting intellectual property rights on the Internet.

END NOTES

1 Disney’s Settlement Ends Suit Asserting Trademark Violation, Wall Street Journal Interactive Edition, May 26, 2000.

2 Copyright Not Infringed by Hyperlink to Interior Pages, The Internet Newsletter, Mar. 2000.

3 Brenda Sandburg, Copyright Not Violated by Hypertext Link, The Recorder, Mar. 31, 2000.

4 Web Links Can Be Considered Illegal, Osaka Court Judgment Says, Asia Biz Tech, April 7, 2000.

5 Id.

6 Note that the Hatfield case, which held that there was no liability, occurred prior to the enactment of the Anticybersquatting Act.

7 18 U.S.C. § 706 provides for criminal for fraudulent or unauthorized use or display of the Red Cross of the American National Red Cross.

8 36 U.S.C. § 220506 provides for civil penalties for unauthorized use of the names, marks or symbols of United States Olympic Committee, the International Olympic Committee, the International Paralympic Committee, the Pan-American Sports Organization.

9 These factors are as follows: (I) the trademark or other intellectual property rights of the person, if any, in the domain name; (II) the extent to which the domain name consists of the legal name of the person or a name that is otherwise commonly used to identify that person; (III) the person’s prior use, if any, of the domain name in connection with the bona fide offering of any goods or services; (IV) the person’s bona fide noncommercial or fair use of the mark in a site accessible under the domain name; (V) the person’s intent to divert consumers from the mark owner’s online location to a site accessible under the domain name that could harm the goodwill represented by the mark, either for commercial gain or with the intent to tarnish or disparage the mark, by creating a likelihood of confusion as to the source, sponsorship, affiliation, or endorsement of the site; (VI) the person’s offer to transfer, sell, or otherwise assign the domain name to the mark owner or any third party for financial gain without having used, or having an intent to use, the domain name in the bona fide offering of any goods or services, or the person’s prior conduct indicating a pattern of such conduct; (VII) the person’s provision of material and misleading false contact information when applying for the registration of the domain name, the person’s intentional failure to maintain accurate contact information, or the person’s prior conduct indicating a pattern of such conduct; (VIII) the person’s registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to marks of others that are distinctive at the time of registration of such domain names, or dilutive of famous marks of others that are famous at the time of registration of such domain names, without regard to the goods or services of the parties; and (IX) the extent to which the mark incorporated in the person’s domain name registration is or is not distinctive and famous within the meaning of subsection (c)(1) of section 43. See also Jeffrey K. Riffer, Anticybersquatting Consumer Protection Act Targets “Bad Faith” Domain Name Holders, Nat’l L.J., Jan 7, 2000.

10 See Jeff Riffer, New Federal Law on Cybersquatting Signed, The Internet Newsletter, Dec. 1999, pp. 1-2.

11 The Act also authorizes an in rem action against the domain name; the remedies in such an in rem action are limited to the forfeiture or cancellation of the domain name, or transfer of the domain name to the mark’s owner. The in rem action is available if the holder of the domain name is not subject to personal jurisdiction in a federal civil action, or cannot be found. The venue for the in rem action is the district in which the domain name registrar, domain name registry, or other authority that registered or assigned the domain name is located. See Porsche Cars North America, Inc. v. porsch.com, 51 F. Supp. 2d 707 (E. D. Va. 1999). See also Caesars World, Inc. v. Caesars-Palace.com, 2000 U.S. Dist. LEXIS 2671 (E.D. Va. 2000); Lucent Technologies, Inc., v. Lucentsucks.com, 2000 U.S. Dist. LEXIS 6159 (E.D. Va. 2000).

12 See list of non-exhaustive factors, supra.

13 See, e.g., Morrison & Foerster LLP v. Wick, 2000 U.S. Dist LEXIS 5161 (D. Co. 2000); Shields v. Zuccarini, 89 F. Supp. 2d 634 (E.D. Pa. 2000) (holding that Zuccarini, an admitted Internet domain name “wholesaler,” violated the Act by registering five variations of plaintiff’s mark); Spear, Leeds & Kellogg v. Rosado, 2000 U.S. Dist LEXIS 3732 (S.D. N.Y. 2000); Virtual Works, Inc. v. Network Solutions, Inc., 2000 U.S. Dist. LEXIS 2670 (E.D. Va. 2000). But see Cello Holding v. Lawrence-Dahl Companies, 89 F. Supp. 2d 464 (S.D.N.Y. 2000) (denying summary judgment to Cello Holdings Company, whose uses their trademark “Cello” to sell audio equipment because “cello” is a common noun and a jury would need to determine whether defendant acted in bad faith by registering cello.com and attempting to sell it to several companies which use the word “cello” in connection with their business).

14 See Leigh Jones, Federal Cybersquatter Law Survives Test, N.Y.L.J., Jan 18, 2000. See, also, President and Fellows of Harvard College v. Rhys, D. Mass., No. 99CV12489RCL, (filed 12/6/99, Judge Reginald Lindsey), (Harvard sued domain name owners, and seeks to prevent Web Productions, a company which has registered sixty-five domain names relating to Harvard and Radcliffe, from using Harvard’s trademarks). Brad Pitt has also filed suit against the owners of “bradpitt.com,” who initially tried to sell the domain name to Pitt for as much as $50,000.00, and the owners of “bradpitt.net,” a commercial cite and fan club outlet which sells merchandise featuring Brad Pitt. Ritchenya A. Shepherd, Cyberpirates Now May Have to Walk the Plank, Nat’l L.J., Dec. 16, 1999.

15 See www.phillipmorris.com

16 Id.

17 Steven Bonistell, Marlboro Man takes Aim at “Phillipmorris.com,” Newsbytes, June 16, 2000.

18 Ronna Abramson, ICANN’s Plan for Name-Calling, The Industry Standard, June 15, 2000.

19 See http://www.icann.org/yokohama/new-tld-topic.htm (as updated June 17, 2000).

20 Jim Hu, Group Posts Plan to Add Domains Beyond “.com,” “.org,” CNET News, June 15, 2000.

21 Id.

22 Information about this policy is available at http://www.icann.org/udrp/udrp.htm

23 The policy sets forth several factors to consider as evidence of registration and use in bad faith, including facts which indicate that the registrant (1) had registered the domain “primarily for the purpose of selling, renting, or otherwise transferring the domain name registration to the complainant who is the owner of the trademark or service mark or to a competitor of that complainant, for valuable consideration in excess of documented out-of-pocket costs directly related to the domain name;” (2) has “registered the domain name in order to prevent the owner of the trademark or service mark from reflecting the mark in a corresponding domain name,” provided that the registrant has “engaged in a pattern of such conduct;” (3) has registered the domain name “primarily for the purpose of disrupting the business of a competitor;” or (4) by using the domain name, intentionally attempted to attract, for commercial gain, Internet users to its site or other online location, “by creating a likelihood of confusion with the complainant’s mark as to the source, sponsorship, affiliation, or endorsement of the registrant’s site or location of a product or service on its site or location.

24 See, generally, John Caher, New Domain Arbitration Rules Get Results, N.Y.L.J., Mar. 14, 2000.

25 Jeri Clausing, In New Forum for Domain Name Disputes, Trademark Holders Dominate, New York Times, May 19, 2000.

26 Victoria Slind-Flor, Court Curbs Power of ICANN, Nat’l L. J., May 18, 2000.

27 As found by the Court, Playboy Enterprises (PEI):

owns federally registered trademarks for the terms Playboy, Playmate, Playmate of the Month, and Playmate of the Year. The term Playmate of the Year is sometimes abbreviated “PMOY.” PEI does not have a federally registered trademark in the abbreviation “PMOY,” although PEI argues that “PMOY” is worthy of trademark protection because it is a well-known abbreviation for the trademark Playmate of the Year. Playboy Enters., 7 F.Supp.2d at 1100.

28 A “metatag” is a hidden word or label in a Web page that often includes keywords to draw the attention of Internet search engines to that Web page. See Carl S. Kaplan, Former Playboy Model Wins Rights to Use Keywords, Cyber Law Journal, Dec. 17, 1999.

29 The Court also found that, with respect to the metatags, there is no trademark infringement where defendant has used Playboy’s trademarks in good faith to index the content of her Website.

30 See Former Playboy Model Wins Right to Use Keywords, Cyber Law Journal, Dec. 17, 1999, (wysiwyg://66//http://www.nytimes.com/library/tech/99/12/cyber/cyberlaw/17law.html); Playboy Enters., Inc. v. Welles, 78 F. Supp. 2d 1066 (S.D. Cal. 1999).

31 Id.

32 See Victoria Slind-Flor, False Signs on the I-Highway, Nat’l L.J., Jan 5, 2000.

33 See Sid and Marty Krofft Television Prods. v. McDonald’s Corp., 562 F.2d 1152 (9th Cir. 1977).

34 See, generally, Scott on Computer Law, Second Edition, § 3.47(C)(1).

35 See also, Softel, Inc. v. Dragon Medical & Scientific Communications, Inc., 118 F.3rd 955 (2nd Cir. 1997).

36 116 S.Ct. 804 (1996).

37 Jonathan Band of Morrison & Foerster outlines steps that should be taken to benefit from the DMCA’s safe harbor provision for online service providers: online service providers should (1) adopt a written policy providing for termination of subscribers and account holders who are repeat offenders and post the policy on the Web site; (2) designate an agent to receive notification of claimed infringement from the copyright owner and post the agent’s contact information in a publicly accessible place on the Web site; and (3) register the designated agent with the Copyright Office according to interim regulations at 60 Fed. Reg. 59233, along with a filing fee. See http://www.sla.org/govt/band2html.

38 See Digital Millennium Copyright Act, Sec. 1201. Circumvention of copyright protection systems.

39 See Digital Millennium Copyright Act, § 1201(a)(2)(A).

40 Digital Performance Right in Sound Recordings Act of 1995 (Public Law 104-39). See also, Regulations amended by the Copyright Office at 37 C.F.R. Part 201. The Digital Performance Right in Sound Recordings Act of 1995 gave record companies a limited performance right in sound recordings (i.e. the right to bar and/or receive statutory royalties for digital audio transmissions of recordings for which they hold a copyright, namely, interactive transmissions, and those for which a subscription fee was paid). The DMCA applied this right to audio streaming over the Internet, or Webcasting, discussed infra.

41 UMI is University Microfilms International.

42 NYTO is NY Times OnDisc.

43 Patricia A. Felch, Free-Lancers Victorious in Tasini, but Impact on Electronic Media Still Unclear, e-Commerce Law & Strategy, Nov. 1999, Vol. 16, No. 7, p. 4.

44 Id.

45 Id.

46 See, also, Mike Godwin, Courts Enjoin Sites That Publish DVD Decryption Software, E-Commerce L. Weekly, Jan. 28, 2000.

47 Evan Hansen, Free Speech Touted in DVD Cracking Case, CNET News, May 4, 2000.

48 See Junger v. Daley, 209 F.3d 481 (6th Cir. 2000) (suggesting the President Clinton’s restrictions on distributing encryption products might be unconstitutional); Declan McCullagh, Crypto Regs Challenged Again, Wired News, April 4, 2000.

49 Cameron Stracher, Dot-Libel: The Internet’s Threatened Revolution in Media Law Might be Better Addressed by Traditional Legal Principles, Law.com, May 10, 2000.

50 Craig Bicknell, NSI’s Webjacking Epidemic, Wired News, June 8, 2000; Craig Bicknell, Sex.com Saga Still Sizzling, Wired News, May 11, 2000; Cohen v. Carren, 94 F. Supp. 2d 1112 (D.C. Or. 2000). See also Steven Bonisteel, Registrar Examines Domain Hijacking Defenses, Newsbytes.com, June 6, 2000.

51 A Webcaster must meet the following conditions to qualify for the statutory license: A. Pay royalties (discussed infra). B. Sound recording performance complement: A Webcaster may not play in any three-hour period (1) more than three songs from a particular album, including no more than two consecutively, or (2) four songs by a particular artist or from a boxed set, including no more than three consecutively. This limit is called the “sound recording performance complement.” Retransmitters of over-the-air radio broadcasts are required, upon notice, to cease retransmissions of digital broadcasts that regularly exceed the sound recording performance complement. For analog broadcasts, retransmissions must cease, upon notice, if a substantial portion of the broadcast transmissions exceed the complement. C. Prior announcements not permitted. Advance song or artist playlists generally may not be published. However, a Webcaster may name one or two artists to illustrate the type of music on a particular channel. DJ “teaser” announcements using artists’ names are permitted, but only those that do not specify the time a song will be played. D. Archived programming. Archived programs – those that are posted on a Web site for listeners to hear repeatedly on-demand – may not be less than five hours in duration. Those that are five hours or more may reside on a Web site for no more than a total of two weeks. Merely changing one or two songs does not meet this condition. E. Looped programming. Looped or continuous programs – those that are performed continuously, automatically starting over when finished – may not be less than three hours in duration. Again, merely changing one or two songs does not meet this condition. F. Repeat of other programs limited. Programs under one hour in duration that are performed at scheduled times may be performed only three times in a two-week period, four times if one hour or more in duration. G. Obligation to identify song, artist and album. When performing a sound recording, a Webcaster must identify the sound recording, the album and the featured artist, if receivers of the service are capable of displaying this information. This requirement took effect October 28, 1999. H. Prohibition on falsely suggesting a link between recordings or artists and advertisements. A Webcaster may not perform a sound recording in a way that falsely suggests a connection between the copyright owner or recording artist and a particular product or service. I. Obligation to take steps to defeat copying by recipient. A Webcaster must disable copying by a transmission recipient if in possession of the technology to do so, and must also take care not to induce or encourage copying by transmission recipients. J. Requirement to accommodate technical protection measures. A Webcaster must accommodate the transmission of measures widely used by sound recording copyright owners to identify or protect copyrighted works, if it is technically feasible to transmit them without imposing substantial burdens on the transmitting entity. K. Obligation to cooperate to defeat scanning. A Webcaster must cooperate with copyright owners to prevent recipients from using devices that scan transmissions for particular recordings or artists. L. Transmission of bootlegs not covered. The statutory license is limited to transmissions made from lawful copies of sound recordings. It does not cover transmissions made from bootlegs or pre-released recordings (unless the performance of a pre-released recording is otherwise authorized by the copyright owner). M. Automatic switching of channels. The Webcaster must not automatically and intentionally cause a device receiving the transmission to switch from one program channel to another. N. Transmission of copyright management information. If technically feasible, transmissions by the Webcaster must be accompanied by the information encoded in the sound recording by the copyright owner that identifies the title of the song, the featured artist and other related information (if any). See http://www.riaa.com/weblic/wlwcast.htm.

52 Other Internet sites (a) serve as a secondary transmission sites for analog radio, (b) operate as facilitators for commercial radio stations (e.g. Broadcast.com), or (c) operate as a blended entertainment site and offer a mix of audio streaming and entertainment news. See Dov H. Scherzer, Statutory Fee Issues for Online Recordings, Ent. L. and Fin., Dec. 1999, Vol. 15, No. 9, pp. 1, 4-5.

53 The RIAA has reached an agreement with Musicmusicmusic Inc., which operates a service called RadioMoi. Richtel, Matt, Web Sites and Recording Labels at Impasse on Fees, N.Y. Times, Nov. 29, 1999.

54 Id.

55 The RIAA submitted a Petition to Convene the Copyright Arbitration Royalty Panel (CARP) to the Copyright Office in July, 1999. “When the arbitration panel convenes, it will have six months to issue a recommendation. The Library of Congress will have an additional four months to approve the recommendation.” Dov. H. Scherzer, Statutory Fee Issues for Online Recordings, Ent. L. & Fin, Dec. 1999, Vol. 15, No. 9, pp. 1, 4-5. “Separate from the its petition, the RIAA is continuing to negotiate voluntary license agreements with individual Webcasters in the hopes of setting a favorable precedent.” Id.

56 Dov H. Scherzer, Statutory Fee Issues for Online Recordings, Ent. L. & Fin., Dec. 1999, Vol. 15, No. 9, pp. 1, 4-5.

57 Kalpana Srinivasan, Intellectual Property in Cyberspace Debated, Nando Times, June 15, 2000.

58 The Rio portable music player is a digital audio recording device. The Rio is a small device (roughly the size of an audiocassette) with headphones that allows a user to download MP3 audio files from a computer and to listen to them elsewhere.

59 See 17 U.S.C. §1001 et seq. (P.L. 102-563, at 4, 106 Stat. 4248).

60 Discord Surrounding Diamond Multimedia’s Rio Player is Ended Through Settlement Agreement, The Intellectual Property Strategist, Sept. 1999, Volume 1, Number 12, at 4. See generally, Randolph B. Houston, Jr., Let’s Get Digital, Texas Lawyer, Dec. 17, 1999.

61 See Robert W. Clarida, Fair Use on the Web – a New Ballgame, Intellectual Property Strategist, Jan. 2000, Vol. 6, No. 4, p. 7; Victoria Slind-Flor, Thumbnail Not Even Tiny Infringement, Nat’l L.J., Nov. 30, 1999. See also Los Angeles Times v. Free Republic, 2000 U.S. Dist. LEXIS 5669, 52 U.S.P.Q.2d (BNA) 1453, (C.D. Ca. 2000), discussed infra, (holding that “adding commentary to a verbatim copy of a copyrighted work or portions thereof does not transform the work [to a fair use], especially where the first posting of this article . . . often contains little or no commentary.”); Ritchenya A. Shepherd, Web Site Can’t Post News Stories, Nat’l L.J., Nov. 17, 1999.

62 A “spider,” sometimes called a “crawler” or a “bot” (short for “software robot”), is a program that visits Websites to read either the entire site or only specific pages. The spider takes information from the Websites pages and creates entries for a search engine index. Usually, a Website owner will submit new or recently updated pages for a spider to visit. These software robots are called spiders because they frequently visit many sites at the same time, their “legs” cover a large area of the “web.” Programmers can instruct spiders to crawl through a site’s pages in many ways; one way is to follow all the hypertext links in each page until the spider has read all the pages. The rules of politeness for Web spiders (like netiquette) are set forth in the Standard for Robot Exclusion (SRE). These rules include asking each server which files it should exclude from indexing, not going through firewalls, and waiting between successive server requests so that other Web site visitors do not experience a decreased response time when visiting a Website at the same time a spider is collecting information.

63 Scour is “trying to steer clear of digital pirates and does offer a large array of legally licensed downloadable music, music videos, movie trailers and photos.” Benny Evangelista, Scour Expands Napster’s Concept Beyond Swapping Music, San Francisco Chronicle, May 18, 2000.

64  MP3 stands for MPEG-1 Audio Layer-3; a standard technology and format for compressing a sound sequence into a very small file (about one-twelfth the size of the original file) while preserving close to the original level of sound quality when the music is replayed.

65 Napster is arguably the most active digital music collector. This tremendous activity hogs bandwidth, which measures the capacity of data that can be moved between two points in a given period of time. Consequently, some universities have blocked students’ access to Napster, although savvy students have found ways to get around the blocks and regain access to Napster’s popular Web site and server. For example, “Oregon State shut off the pipeline to Napster in November [1999] after it was discovered that Napster use was sucking up 5 percent of the university’s precious bandwidth.” Courtney Macavinta, Blocked Students Find Backdoor to Napster, CNET News.com, February 2, 2000.

66 Chris Oakes, MP3.com Fights Fire with Fire, Wired News, Jan. 27, 2000. Also, users can purchase CDs from online music vendors and MP3.com will instantly place a virtual copy in that user’s account at MP3.com so that that user can listen to the song immediately, even though he will not receive the physical CD he purchased for several days. Patti Hartigan, MP3.com’s New Service Threatens Music Industry, Boston Daily Globe, Jan. 28, 2000.

67 Stefania R. Geraci, RIAA sues MP3.com for Copyright Infringement, e-Commerce Law & Strategy, Docket Sheet, February, 2000, p. 9.

68 See, generally, John T. Aquino, MP3.com’s Copying Recordings Infringed Companies’ Copyrights, E-Commerce L. Weekly, May 15, 2000.

69 Sony Corp. of America v. Universal City Studios, 464 U.S. 417, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984). For an in-depth discussion of fair use, see the article on fair use at the authors’ Web site at http://www.internetlegal.com.

70 Stefania R. Geraci, RIAA sues MP3.com for Copyright Infringement, e-Commerce Law & Strategy, Docket Sheet, February, 2000, pp. 9-10.

71 Patti Hartigan, MP3.com’s New Service Threatens Music Industry, Boston Daily Globe, Jan. 28, 2000.

72 Many articles debate whether MP3 sharing services increase or decrease retail music sales. See, e.g. John Borland and Rachel Konrad, Study Finds Napster Use May Cut Into Record Sales, CNET News, May 25, 2000; Michael Learmonth, Finally, Some Numbers on Napster, The Industry Standard, May 2, 2000.

73 Matt Richtel, Two Record Labels Settle Copyright Suit With MP3.com, New York Times, June 10, 2000, p. C1.

74 Jim Hu, MP3.com Settles Copyright Dispute with Warner, BMG, CNET News, June 9, 2000. Initial reports indicated that MP3.com would pay Warner Music between $15 million and $20 million. Martin Peers and Don Clark, Time Warner Unit, MP3.com Are Close to Settling Copyright Infringement Suit, Wall Street Journal, June 7, 2000.

75 Michael Learmonth, MP3.com Settles With Two Record Labels, The Industry Standard, June 12, 2000.

76 Id.

77 Jim Hu, MP3.com Settles Copyright Dispute with Warner, BMG, CNET News, June 9, 2000.

78 Who Wins in the MP3.com Settlement, The Industry Standard, June 12, 2000.

79 Id.

80 See also Napster Does Not Qualify for DMCA Infringement Exemption, E-Commerce L. Weekly, May 15, 2000.

81 17 USCS § 512, Limitations on liability relating to material online, provides: (a) Transitory digital network communications. A service provider shall not be liable for monetary relief, or, except as provided in subsection (j), for injunctive or other equitable relief, for infringement of copyright by reason of the provider’s transmitting, routing, or providing connections for, material through a system or network controlled or operated by or for the service provider, or by reason of the intermediate and transient storage of that material in the course of such transmitting, routing, or providing connections, if – (1) the transmission of the material was initiated by or at the direction of a person other than the service provider; (2) the transmission, routing, provision of connections, or storage is carried out through an automatic technical process without selection of the material by the service provider; (3) the service provider does not select the recipients of the material except as an automatic response to the request of another person; (4) no copy of the material made by the service provider in the course of such intermediate or transient storage is maintained on the system or network in a manner ordinarily accessible to anyone other than anticipated recipients, and no such copy is maintained on the system or network in a manner ordinarily accessible to such anticipated recipients for a longer period than is reasonably necessary for the transmission, routing, or provision of connections; and (5) the material is transmitted through the system or network without modification of its content.

82 17 USCS § 512 (d), Information location tools, provides: A service provider shall not be liable for monetary relief, or, except as provided in subsection (j), for injunctive or other equitable relief, for infringement of copyright by reason of the provider referring or linking users to an online location containing infringing material or infringing activity, by using information location tools, including a directory, index, reference, pointer, or hypertext link, if the service provider— (1) (A) does not have actual knowledge that the material or activity is infringing; (B) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or (C) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material; (2) does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity; and (3) upon notification of claimed infringement as described in subsection (c)(3), responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity, except that, for purposes of this paragraph, the information described in subsection (c)(3)(A)(iii) shall be identification of the reference or link, to material or activity claimed to be infringing, that is to be removed or access to which is to be disabled, and information reasonably sufficient to permit the service provider to locate that reference or link.

83 Lee Gomes, Napster Says it’s OK to Share MP3 Files, Wall Street Journal, June 14, 2000, p. B10.

84 Marilynn Wheelter, Newest Napster Keeps Users Honest, ZDNet News, June 1, 2000.

85 Michael Learmonth, Napster Tried to Make Nice, The Industry Standard, June 9, 2000.

86 Id.

87 Id.

88 Independent Label Sues MP3.com Over Copyright, Bloomberg News, May 25, 2000.

89 Reuters, TVT Joins Anti-Napster Brigade, Wired News, June 7, 2000.

90 Marilyn A. Gillen, TVT Sues MP3.com Over Storage Service, Billboard, May 25, 2000.

91 Marilyn A. Gillen, TVT Files Copyright Suit vs. Napster, Billboard, June 8, 2000.

92 Chris Nelson, Digital Nation, Musicians Offer Their Two Cents on Napster, SonicNet.com, June 8, 2000.

93 Brad King, Napster Backlash Has Begun, Wired News, May 15, 2000.

94 John Borland, Napster says 30,000 Metallica Fans Appeal Ban, CNET News, May 16, 2000.

95 John Borland, Dr. Dre Chimes in with Names to Ban from Napster, CNET News, May 17, 2000.

96 John Borland, Napster Boots Dr. Dre Fans From Service, CNET News, May 26, 2000.

97 Id. See also, John Borland, Napster-like Technology Takes Web Search to New Level, CNET News, May 31, 2000.

98 Napster Gets New CEO, $15 Million Infusion, Bloomberg News, May 21, 2000.

99 Lessley Anderson, Hummer Winblad Funds Napster, The Industry Standard, May 19, 2000.

10 Napster’s prior funding was two million dollars. Dealflow, Red Herring, May 24, 2000.

101 Brenda Sandburg, Missing Links, The Recorder, June 14, 2000.

102 Matt Richtel, Warned by the Music Industry, Web Site Files Suit, New York Times, June 6, 2000.

103 Howard Mintz, MP3Board Sues to Protect Links to Files, San Jose Mercury News, June 3, 2000.

104 Warren Cohen, Sue Us? Sue You! MP3Board Gets to the RIAA First, Inside.com, June 6, 2000.

105 John Borland, U.S. House to Hold Hearing on Napster, MP3s, CNET News, May 10, 2000. 106 Id.

107 Group to Take up Napster, Copyright with Congress, Reuters (special to CNET News.com), May 19, 2000.

108 Bob Longino, Surfing the Netplexes, Atlanta J. & Const., June 18, 2000, L8.

109 For example, a British company sells DVD players which “output pure digital signals.” Leander Kahney, When DVD is too Good to be Legal, Wired News, June 19, 2000.

110 On the other hand, Stephen King will sell installments of a new novel, “The Plant” for one dollar per episode through a scheme that does not rely on technological copyright management systems, but rather on the honor system. See King To Follow E-Book Success With Honor-System Experiment, E-Commerce L. Weekly, June 19, 2000.

The information above is provided for general educational purposes and not as legal advice. Laws in areas in which we practice change continually and also vary from jurisdiction to jurisdiction. Therefore no visitor to our site should rely on any of the articles provided for legal advice, but should always consult their own attorney regarding legal matters.

© 1998, Rob Hassett, Atlanta, Georgia. All Right Reserved.

Cybersquatting: The New Age of URLs and Their Impact on Trademarks

By Rob Hassett and Suellen Bergman

Hassett Cohen Goldstein & Port, LLP
990 Hammond Drive, Suite 990
Atlanta, GA 30328
(770) 393-0990
http://www.internetlegal.com

I. Introduction

The Internet is a source of frequent disputes regarding the use of trademarks and service marks as domain names. This paper addresses the cases and statutes relating to these issues.

II. Infringement and Dilution Decisions

The following is a sample of Internet-related cases concerning trademark infringement and trademark dilution.1 These cases first address trademark uses on the Internet which are clearly prohibited, then cases that are closer questions, and finally uses of another’s trademark that are clearly legal.

A.  Domain Names, Metatags or Marks in a Site Which Could Confuse the Public

1. Courts usually prohibit trademark uses where consumers are likely to be confused because two marks are similar and used in the same channels of trade. See Playboy Enter. v. Calvin Designer Label, 985 F. Supp. 1218 (N.D. Cal. 1997).

2. Even when marks are not used in the same channels of trade, courts may restrict the use of similar marks in the Internet arena. “[W]ith respect to Internet service, even services that are not identical [but which do use similar trademarks] are capable of confusing the public.”2 See GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1207 (9th Cir. 2000) (finding that Disney’s “Go Network” logo infringed the plaintiff’s “GoTo” Web site logo, and that even if Disney limited its search portal to the entertainment and leisure areas, Disney’s logo could still be confused with plaintiff’s “GoTo” site because both Web sites feature a search engine).3

B. Dilution of Famous Marks (Federal Anti-dilution Act enacted in 1996)

Where a mark has become “famous” it is entitled to protection not only from “confusion” but also from tarnishment and blurring. For example, it is not likely that customers using the adult site “Adults ‘R’ US” thought that the site was operated by or associated with “Toys ‘R’ US.” As discussed below, the use of that domain name was nevertheless illegal.

1. Toys “R” US, Inc. v. Adults “R” US, 1996 U.S. Dist. LEXIS 17090, 40 U.S.P.Q.2d (BNA) 1836 (N.D. Cal. 1996). The Court awarded a preliminary injunction to Toys “R” Us, finding that its marks are famous and distinctive and, thus, eligible for protection from dilution under 15 U.S.C. § 1125. The Court also enjoined the defendants from using “Adults ‘R’ Us” because it tarnishes the “‘R’ Us” family of marks by “associating them with a line of sexual products that are inconsistent with the image Toys ‘R’ Us has striven to maintain for itself.” 1996 U.S. Dist. LEXIS 17090 at *7.

2. Similarly, in Mattel Inc. v. Internet Dimensions Inc., et al., 2000 U.S. Dist. LEXIS 9747, 55 U.S.P.Q.2d (BNA) 1620 (S.D.N.Y. 2000), the Court granted an injunction against the defendant barring further use of Mattel’s trademark “Barbie” and ordered that the domain name barbiesplaypen.com, which the defendant had used for pornographic photos, be transferred to Mattel.4

3. Ringling Bros.-Barnum & Bailey Combined Shows v. Utah Div. of Travel Dev., 170 F.3d 449, 50 U.S.P.Q.2d (BNA) 1065 (4th Cir. 1999), held that Ringling Brothers could not prevent the state of Utah from using “The Greatest Snow on Earth” as a slogan for Utah’s winter sports attractions. The Court determined that the Federal Anti-dilution Act required a showing of “actual economic harm” to the famous marks’ value by lessening its selling power as an advertising agent for its goods or services.5 Proof of this harm should be demonstrated by conducting surveys and by showing actual loss, but was not shown in this case.

C. Cybersquatting: The First Cybersquatting Cases (Registering Domain Names With the Sole Intent to Resell Them)

1. Panavision, Int’l, L.P. v. Toeppen, 945 F. Supp. 1296, 40 U.S.P.Q.2d (BNA) 1908 (C.D. Cal. 1996). The Court found that defendant’s registration of a domain name, which was identical to the plaintiff’s trademarks, in order to sell the domain name to the trademark owner constituted trademark dilution.

2. Accord Intermatic, Inc. v. Toeppen, 947 F. Supp. 1227, 41 U.S.P.Q.2d (BNA) 1223 (N.D. Ill. 1996), aff’d, (9th Cir. 1998). The plan to resell the domain name was determined to be “commercial use” which is required to constitute dilution.

D. Hijacking (Registering of Competitor’s Domain Name)

1. Until recently, registration of a competitor’s mark as a domain name (hijacking) was legal: see Juno Online Servs., L.P. v. Juno Lighting, Inc., 979 F. Supp. 684 (N.D. Ill. 1997), 44 U.S.P.Q.2D (BNA) 1913. See also HQM Ltd. and Hatfield Inc. v. William B. Hatfield, 71 F. Supp. 2d 500 (D. Md. 1999) (holding that the registering a Web site with the “.com” designation and activating it for e-mail does not, by itself, constitute commercial use). Hijacking with “bad faith intent to profit” is now illegal under the recently enacted Anticybersquatting Act, discussed below.6

2. The Barcelona City Council in Spain filed a complaint with the World Intellectual Property Organization (WIPO)7 against a tourism company which had registered Barcelona.com. The tourism company claimed that this was a case of “reverse hijacking.” The WIPO panel rejected this claim and awarded the Barcelona.com domain name to the City Council. The panel decided that the City Council had “better rights” to the name than the tourism company because Internet users looking for information about Barcelona would expect to reach an official representative or agency of the city of Barcelona. Furthermore, the WIPO panel determined that the tourism company was taking advantage of the public’s confusion and was therefore guilty of bad faith.8 This decision not only puts into question the rights of those who own geographic domain names, but also has been the subject of much criticism.9 The tourism company plans to challenge this decision by filing a new action in a United States court.10 Contra Kur-und Verkehrsverein St. Moritz v. StMoritz.com, where the complainant, an official organization of the town of St. Moritz did not obtain the domain name stmoritz.com.11 The respondent used the domain name to present information about St. Moritz and Switzerland, and, therefore the WIPO arbitrator found that the respondent lacked bad faith and may have a right or legitimate interest with respect to the name.12

E.  Deep Linking Which Creates Confusion

One of the Internet’s most useful features is the ability to directly connect from one Web site to another. A user makes this connection by clicking on an icon or words, called a “hyperlink” or “link.” Linking is not only an essential aspect of the Internet, but it is beneficial to users because it enables them to quickly find information on topics of interest. Likewise, it benefits Web site owners by increasing visits or traffic to their Web site, and therefore Web site operators sometimes encourage links to their site. For example, some Web sites encourage linking if the link is not confusing or misleading, and have policies which permit linking in certain circumstances: www.gateway.com and www.bellatlantic.com.

There are some instances, however, where the link is constructed in a manner that confuses or misleads the user by implying that the linked Web sites have an affiliation, such as endorsement or sponsorship. Those instances give rise to legal disputes.

1. Ticketmaster Corp. v. Tickets.com, Inc., 2000 U.S. Dist. LEXIS 4553, 54 U.S.P.Q.2d (BNA) 1344, (C.D. Ca. 2000). Tickets.com operates a Web site which provides information about sporting and entertainment events. Tickets.com’s Web site linked a user directly to the Ticketmaster Web page where a user can order tickets to the posted events. This kind of connection, where the link directs the user to an interior page of another Web site and bypasses the linked-to Web site’s home page, is known as “deep linking.” In Ticketmaster, the Court held that linking to another Web site does not in itself constitute a violation of the Copyright Act. The Court reasoned that the linking function does not actually involve copying material from the copyright owner’s Web site because the user is “automatically transferred to the particular genuine Web page of the original author.” Ticketmaster, 2000 U.S. Dist. LEXIS 4553 at *6. Therefore, the Court dismissed Ticketmaster’s copyright infringement claim. Id. at *4.

However, the Court denied defendant’s motion to dismiss Ticketmaster’s claims of unfair competition and trademark infringement because of plaintiff’s allegations that Tickets.com falsely implied an association with Ticketmaster through deep linking. Thus, this decision suggests that where linking causes a likelihood of confusion as to the source or sponsorship of a Web site or of goods or services offered on a Web site, the linking can constitute unfair competition. Deep linking can cause problems for the linked-to Web site if its advertisers pay on the “basis of the number of ‘hits’ on the home page, [because the advertiser] will not pay for deep-linked reference to the interior home page. Further, the allegation is made that bypassing the home page enables the customer to avoid the terms and conditions, which are not available to him on the [deep linked] events page.”13

2. Ticketmaster Corp. v. Microsoft, Inc., CV 97-3055 RAP (C.D. Cal. filed April 28, 1997). Ticketmaster filed a similar lawsuit against the Microsoft Corporation, claiming that Seattle Sidewalk, Microsoft’s online entertainment guide, illegally linked to its Web site.14 The parties settled this case in March 2000.

F. Registering the Domain Name That is a Mark (Not Necessarily the Mark of a Competitor)

Registering a domain name with “intent to profit” would now be illegal under the Anticybersquatting Act (which created a new §43(d) of the Lanham Act, 15 U.S.C. §1125(d)). Before the Anticybersquatting Act was enacted, registering a domain name — without more — would not constitute either “use in commerce” or “commercial use,” which was required under the Lanham Act to establish a violation. See National Westminster Bank PLC v. Purge I.T., et al., WIPO Case No. D2000-0636 (transferring natwestsucks.com to the trademark owner where there was bad faith evidence of attempting to “ransom” the domain name, even though the domain name had never been used).

G. Registering a Domain Name That is a Common Word or Mark

Cello Holding v. Lawrence-Dahl Companies, 89 F.Supp. 2d 464, 54 U.S.P.Q.2d 1645 (S.D.N.Y. 2000) (summary judgment denied to Plaintiff because many companies use “cello” as a mark and it is a common word).

H. Using Mark to Criticize a Product or Service (Rather Than to Actually Sell Products or Services)

Disenchanted consumers vent frustrations about a given company on the Internet, frequently on a “sucks site” which targets particular companies. The most well-known such forums are Starbucked, Aolsucks, and noamazon.com.15 If such a site uses a company’s trademark for noncommercial criticism, it runs afoul of trademark law if it confuses or tricks consumers into believing that the site is sponsored or affiliated with the company.16 On the other hand, parody is legal if the parody is sufficiently distinguishable from the original to be recognizable as a parody (i.e. the parodist will likely lose a case if he is using the parody to promote a product related to the original) and where there is a meaningful connection between the subject of the parody and the ultimate message.17

1. In Bally Total Fitness Holding Corp. v. Faber, 29 F. Supp.2d 1161, 50 U.S.P.Q. 2d (BNA) 1840 (C.D. Cal. 1998), the defendant used Bally’s trademark in a Web site entitled “Bally sucks,”18 which criticized the service at Bally’s fitness centers. The District Court dismissed Bally’s suit because the defendant’s use of Bally’s mark did not create a likelihood of confusion or otherwise constitute trademark infringement or dilution.

2. While it should be obvious to an Internet user that a “sucks” domain name is not the company’s official Web site and that the company has not sponsored that Web site, some recent cases have nevertheless ordered that “sucks” domains be transferred to the trademark owner. However, in some of those cases, the requisite bad faith evidence was present. For example, Wal-MartCanadaSucks.com and WalMartPuertoRicoSucks.com were transferred to Wal-Mart Stores, Inc. in an ICANN arbitration (discussed infra) decision.19 While the registrar of those sites contends that he used those sites to solicit consumer complaints about Wal-Mart, the arbitrator noted that at one point he “demanded ‘consulting fees’ from Wal-Mart in return for having alerted the company to the availability of several other domain names based on its moniker.”20

3. In People for the Ethical Treatment of Animals, Inc. v. Doughney, CA No. 99-1336-A, E.D. Va., June 12, 2000, the animal rights organization was awarded the domain name peta.org, which was registered by the defendant for the fictional organization People Eating Tasty Animals. The Court rejected defendant’s parody and trademark misuse defense stating that no parody existed (since an Internet user would not know that he was not at PETA’s official Web site until after using PETA’s mark to access the Web site and “a parody exists when two antithetical ideas appear at the same time”).21

4. A complaint has been filed against several domain names which purport to protest Guinness Beer: Guinness-Sucks.com, Guinness-Beer-Sucks.com, Guinness-Beer-Really-Sucks.com, Guinness-Beer-Really-Really-Sucks.com, and variations of the above addresses without the hyphens.22

5. Verizon Communications attempted to preempt a “sucks” parody site and itself registered “verizonsucks.com”23 as well as fifty-six other self-critical names.24 Nevertheless, Web publisher 2600.com registered “verizonreallysucks.com” and promptly received a cease and desist letter.25 Consequently, 2600.com responded by registering the name “VerizonShouldSpendMoreTimeFixingItsNetworkAndLessMoneyOnLawyers.com.”26 Verizon stated that it’s goal was to act against approximately two hundred genuine cybersquatters who had registered Verizon related names with the hope of selling them, so Verizon’s legal department sent warning letters to everyone, including 2600.com.27 Verizon’s spokesperson Larry Plumb said that 2600.com was the one exception and “once we saw it met the standards of fair use, we decided not to pursue it. We’re out to defend our brand against confusion and dilution, not squelch free speech.”28

I. Use of Mark to Communicate or Describe Truth About a Site

Playboy Enters., Inc. v. Welles, 7 F.Supp.2d 1098, 47 U.S.P.Q.2D (BNA) 1186, (S.D. Ca. 1998), aff’d, 1998 U.S. App. LEXIS 27739 (9th Cir. 1998). A former playmate was permitted to state her association with Playboy Enterprises, Inc. (PEI) 29 on her own Web site. The heading of the defendant’s Web site is “Terri Welles–Playmate of the Year 1981,” and the title of the link page is “Terri Welles–Playboy Playmate of the Year 1981.” Each page uses “PMOY ’81” as a repeating watermark in the background. According to defendant, eleven of the fifteen free Web pages include a disclaimer at the bottom of the page which indicates that the Web site is not endorsed by Playboy. Id. at 1100. Playboy moved for a preliminary injunction which would enjoin the defendant (1) from using the trademarked term “Playmate of the Year” in the title of the home page and the link page; (2) from using the watermark “PMOY ’81” in the background; and (3) from using the trademarked terms “Playboy” and “Playmate” in the meta-tagging 30 of defendant’s site. The Court denied a preliminary injunction because the trademarks that defendant uses, and the manner in which she uses them, describe her and identify her. Therefore, the Court held that the defendant has made a “fair use” of these marks 31 and her site is not confusingly similar to Playboy’s site.

Later, the Court granted the defendant’s motion for summary judgment, holding that the use of the words “playboy” and “playmate” in the text portion of her Web site was a fair use of Playboy’s trademarks because they fairly described and identified the defendant.32 The Court noted that Playboy failed to introduce compelling evidence of actual consumer confusion.33 Compare N.V.E. v. Hoffmann-La Roche, CA No. 99-5858 (D.N.J. 1999) (WHW) (the District Court enjoined metatagging where the metatag misdirected searchers to a competing Web site).34

J. Other Uses of a Mark (Linking Searches on Search Engines to Banner Ads)

Playboy Enters., Inc. v. Netscape Communications Corp., 55 F. Supp. 2d 1070 (C.D. Ca. 1999) aff’d without opinion, 1999 U.S. App. LEXIS 30215 (9th Cir. 1999). This case involves the sale of online banner ads keyed to the specific search terms: “playboy” and “playmate.” The Court ruled that the terms “playboy” and “playmate” are generic and that Playboy has no monopoly on these words in all forms. Consequently, the Court denied Playboy’s request for a preliminary injunction against Excite, Inc. and Netscape. The Court held that the sale of banner ads which keyed “playboy” and “playmate” to third-party advertisers which operate adult entertainment sites does not constitute trademark infringement or dilution. On September 14, 2000, the District Court granted the defendants’ motion for summary judgment. Playboy Enters., 2000 U.S. Dist. LEXIS 13418 (C.D. Cal. 2000).

K. Registering of Common Surnames

1. Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 51 U.S.P.Q.2D (BNA) 1801 (9th Cir. 1999). This was an appeal by the defendant, an entity that maintained domain registrations for individual names. The defendant had registered many surnames, including “Avery.net” and “Dennison.net.” Avery Dennison Corporation claimed these registrations diluted the “Avery Dennison” mark. The Ninth Circuit reversed the District Court’s holding that there was dilution. The Ninth Circuit held that:

a. The Avery Dennison mark was not famous because it was not “truly prominent and renowned” so that even marks “with such powerful consumer associations and even non-competing users can impinge on their value.” Avery, 189 F.3d 868, 875. The Court noted that there were many registrations of marks and uses of the marks “Avery” and “Dennison” by others, and this factor weighs against those being famous marks.

b. The Court also said that although “an intent to arbitrage” constituted a commercial use, an intent to “capitalize on the surname status of ‘Avery’ and ‘Dennison’ did not constitute a commercial use of a mark.” Id. at 880.

2. Other domain name decisions have favored the “smaller” party. See, e.g., Hasbro, Inc. v. Clue Computing, Inc., 66 F. Supp. 2d 117, 52 U.S.P.Q.2D (BNA) 1402 (D. Mass. 1999) [holding that ownership of a well-known trademark (the mark “clue” for a board game) does not automatically entitle a party to a domain name (“clue.com” which Clue Computing registered)].35

L. Generic and Descriptive

The Federal Circuit held that the slogan “Best Beer in America” was incapable of registration as a trademark because of its highly laudatory and descriptive nature. In re Boston Beer Co. Ltd. Partnership, 198 F.3d 1370, 53 U.S.P.Q. 1056 (Fed. Cir. 1999).36 But see Etoys.com v. etoy.com, Los Angeles Superior Court, preliminary injunction issued Nov. 29, 1999.37

III. Cybersquatting

A. The Anticybersquatting Consumer Protection Act

On November 29, 1999, President Clinton signed the Omnibus Appropriations Act (H.R. 3194). This Act includes the Intellectual Property and Communications Omnibus Reform Act of 1999 (S. 1948), which incorporates, inter alia, the Anticybersquatting Consumer Protection Act, 15 U.S. C. § 1125(d), attached hereto as Exhibit A. The Act amends Section 43 of the Lanham Act to add a subsection (d), and focuses on domain name registrants who acquire a domain name containing a trademark “with a bad-faith intent to profit” from the use of such mark. In particular, the amendment authorizes a private cause of action by the owner of a mark against anyone who, with a bad-faith intent to profit, registers, traffics in, or uses a domain name that:

is identical or confusingly similar to a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to or dilutive of a famous mark that is famous at the time of registration of the domain name, or is a trademark, word, or name protected by reason of section 18 U.S.C. § 706,38 or 36 U.S.C. § 220506.39

The statute, at 15 U.S.C. §1125(d)(I)(B), provides a non-exhaustive list of nine factors a court may consider in determining “bad faith.”40 These factors are suggestive of the factual circumstances the courts should consider in determining whether the alleged infringing domain name, and the acts of the holder of the allegedly infringing domain name, encroach upon the range of rights granted to a trademark holder. Thus, a court is to consider evidence of whether the domain name holder has property rights in the mark; whether the site is commercial or non-commercial in nature; whether there is evidence that the domain name harms the good will of the registered mark; whether the domain name holder (who has not used or intended to use the domain name) has offered to sell the domain name to the holder of the mark; and whether the domain name holder has a pattern of registering multiple domains which the holder knew were the marks of others.

In addition, the Anticybersquatting Consumer Protection Act:41

1. Allows parties to bring an in rem action42 against any owner of a domain name that has been registered in violation of the Act and,

2. Permits obtaining injunctive relief and damages from those who, “with bad faith intent to profit,”43 register domain name identifiers which are identical or similar to a trademark; in lieu of actual damages, the trademark holder can recover damages of at least $1,000.00, but not more than $100,000 per domain name identifier. The court can order that the defendant transfer the domain name to a successful plaintiff. See, e.g., Lozano Enter. v. La Opinion Publ’g Co., 1997 U.S. Dist. LEXIS 20372, 44 U.S.P.Q.2d (BNA) 1764 (C.D. Cal. 1997).

3. Registering a domain name with “intent to profit” would now be illegal under the Anticybersquatting Act (which created a new §43(d) of the Lanham Act, 15 U.S.C. §1125(d)). Previously, registering a domain name without more would not constitute either “use in commerce” or “commercial use” as was previously required under the Lanham Act to establish a violation.

B. Multiple Defendants (In Rem Proceedings)

The Anticybersquatting Act, infra, allows a court to order the cancellation or forfeiture of a domain name or the transfer of a name to the owner of the trademark. It is now possible for plaintiffs to pursue domain names as a group rather than being forced to sue each of the registrants individually.

1. In Porsche Cars North America, Inc. v. porsche.com, 51 F. Supp. 2d 707, 51 U.S.P.Q.2d (BNA) 1461 (E.D. Va. 1999), the Court rejected Porsche’s in rem claim to grab control of domain names incorporating versions of the “Porsche” name. The in rem action was an effort to avoid having to individually sue hundreds of registrants who had registered those domain names. However, on June 9, 2000, the Fourth Circuit Court of Appeals vacated and remanded this decision since the District Court did not consider the effect of the Anticybersquatting Act. See Porsche Cars North America, Inc. v. allporsche.com, et al., 2000 U.S. App. LEXIS 12843, 55 U.S.P.Q.2d (BNA) 1158 (4th Cir. 2000).

2. Bad faith is required for a plaintiff to use the in rem provisions of the Anticybersquatting Act. See Harrods Ltd. v. Sixty Internet Domain Names, 2000 U.S. Dist LEXIS 11911 (E.D. Va. 2000).

C. Validity of the Anticybersquatting Act

Victims of cybersquatting are taking advantage of this new Act, which has been upheld on appeal. Sporty’s Farm LLC v. Sportsman’s Market Inc., 202 F.3d 489 (2d Cir. 2000) (the Court held that the defendant’s use of sports.com was indistinguishable from the “Sport’s” trademark, that Sporty’s Farm acted with a bad faith intent to profit because it had not made use of the “sporty’s” mark before registering it as a domain name, and it planned to use the Web site to directly compete with Sportsman).44 

IV. ICANN (Internet Corporation for Assigned Names and Numbers)

A. Proposed Addition Of New Top Level Domain Names

ICANN is the non-profit body responsible for domain name system management, IP address allocation, and related functions. ICANN was established last year to (a) phase out the government’s involvement in the domain name system and (b) to end the monopoly held by Network Solutions Inc. (Nasdaq: NSOL), by opening up the registration of such popular domains as “.com,” “.org,” and “.net” to additional companies. Although the database for the generic Top Level Domains (gTLD) is still managed (a “registry” function) by Network Solutions, Inc. (NSI), the domains may be “registered” by many different entities including www.register.com and www.aol.com. ICANN is now considering additional generic TLDs to .com, .net and .org for commercial uses. For example, ICANN is considering suggestions to add “.travel,” “.banc,” “.museum,” “.union, and “.xxx” or “.sex.”45 Various groups have suggested other gTLDs: The Free Software Foundation asked ICANN to approve “.gnu” domains dedicated to open-source projects and programming; NetNumber, an Internet telephone and communications company suggested “.tel,” and VRx Network Services may suggest the domains “.faq,” “.list,” “.prices,” and “.gallery.”46 At its July 16, 2000, meeting in Yokohama, Japan, the ICANN Board of Directors adopted a policy for the introduction of new Internet gTLDs.47 “ICANN president Ester Dyson said the group is considering adding between three and twenty new top-level domains, although she refused to refused to elaborate further.”48 After a period of public comment, these proposals will be evaluated and ICANN will select a limited number of proposals for negotiations toward agreements between ICANN and the TLD sponsors and operators. ICANN’s goal is to complete negotiations for appropriate agreements by December 31, 2000.49 In mid-August, ICANN posted the Detailed New TLD Registry Application Form, instructions for filling out the application, and a statement of criteria for the Board’s eventual decision. ICANN began accepting applications on September 5, 2000. The remainder of the schedule is as follows:

October 2, 2000 Deadline for ICANN’s receipt of completed applications (including all supporting materials and application fees) and amendments to applications.

October 5, 2000 Portions of these applications deemed appropriate for publication for purposes of public comment or otherwise will be posted on ICANN’s web site.

October 19, 2000 Close of period for public comments on proposals.

Mid-November50 2000 After approval by the Board, ICANN will announce selections for negotiations toward entry of agreements with registry sponsors and operators.

December 31, 2000 Target date for completion of negotiations.

In order to apply, applicants must not only submit an application in accordance with ICANN’s guidelines (which are available on ICANN’s Web site51) but also pay a non-refundable fee of $50,000.00. As of August 2, 2000, twenty-nine groups expressed interest in starting up new top level domains (i.e. suggesting a new gTLD and operating a registry for the suggested gTLD).52 Critics complain that the fee “is too high a barrier to entry for noncommercial groups or poor international companies to hurdle.”53 Also, there are questions about whether the selection process will be fair, i.e. those corporate and industrial applicants with connections to ICANN members will have their gTLD selected, but an individual who suggested the same gTLD and also paid a non-refundable $50,000.00 fee will not be selected; such questions about the fairness of the gTLD selection process could result in litigation against ICANN.

B. ICANN Uniform Domain Name Dispute Resolution Policy

1. Background

On October 24, 1999, ICANN adopted a uniform domain name dispute resolution policy which is binding on all accredited registrars; this policy incorporates by reference the Rules for Uniform Domain Name Dispute Resolution Policy (UDRP).54 The policy and the rules provide a method to contest the propriety of existing domain name registrations. In order to be entitled to obtain transfer of a domain name from a prior registrant, a complainant must establish that:

(1) the domain name(s) is/are identical or confusingly similar to a trademark or service mark in which the Complainant has rights; and

(2) the domain name holder has no rights or legitimate interests with respect to the domain name(s) that is/are the subject of the complaint; and

(3) the domain name(s) has/have been registered and is/are being used in bad faith.55

The Dispute Resolution policy is popular due to its relatively low cost and the speed with which parties obtain results (within 45 days).56 By the spring of this year, seventy-four percent of the decided cases favored existing trademark holders.57 However, courts are not bound by the administrative proceedings of an ICANN panel. See Weber-Stephen Prods. v. Armitage Hardware and Bldg. Supply, 2000 U.S. Dist LEXIS 6335, 54 U.S.P.Q.2d (BNA) 1766, (N.D. Ill. 2000). This ruling is significant because of the volume of proceedings before the dispute resolution panel: as of May 9, 2000, there were 518 pending cases.58

2. Recent Decisions Under ICANN’s Uniform Domain Name Dispute Resolution Policy59 and Court Cases

a. Trademarks

i. In one of the first cases of trademark cybersquatting, President and Fellows of Harvard College v. Rhys, D. Mass., No. 99CV12489RCL, (filed Dec. 6, 1999, Judge Reginald Lindsey), Harvard sued domain name owners, and seeks to prevent Web Productions, a company which has registered sixty-five domain names relating to Harvard and Radcliffe, from using Harvard’s trademarks.60

ii. Frequently, the trademark owner is able to obtain the rights to the domain name that contains the mark.

(a) Dell Computer Corp. won the rights to nine addresses, including dellwireless.net, dellpocketpc.net, dellpalm.com, and dellpalm.net.61

(b) Chase Manhattan Corp. announced that it was acquiring the British investment bank Robert Fleming Holdings, Ltd. The same day Chase made this announcement, Entertainment Charlotte registered seven addresses with variations on the combined names, such as chasefleming.org and chase-flemings.net. An arbitrator awarded these addresses to Chase Manhattan Corp.62

(c) Yahoo! Inc. has been successful in two cybersquatting cases. In one case, a WIPO panel ruled that an individual must give up four addresses to Yahoo: yahoofree.com, yahoofree.net, yahooemail.net, and yahoochat.net.63 In another case, several companies which together had registered thirty-six domain names had to return all those names to Yahoo. See Yahoo! Inc. and GeoCities v. Data Art Corp., et al., WIPO Case No. D2000-0587.

(d) AT&T won the domain names attmexico.com and att-latinamerica.com; the WIPO arbitrator “found that ‘the letters ATT are a fundamental feature of the complainant’s marks’ and concluded that the two domain names were registered in bad faith.”64 AT&T also won transfer of the domain name “ATT2000.com” in AT&T Corp. v. Tala Alamuddin, WIPO Case No. V2000-0249, where the arbitrator noted that the acronym “ATT” was internationally recognized.65

(e) A cybersquatter must give up the domain name www.e-ikea.com because it was confusingly similar to the trademark of IKEA, the world’s largest furniture retailer, and it was registered in bad faith.66

(f) Cybersquatters frequently register more than one variation of a domain name that contains a trademark. Nevertheless, successful trademark owners obtain the rights to all those domain name variations. In Telia AB v. Ewaldsson, WIPO Case No. D2000-0599, the panel awarded 243 domain names to complainant Telia.

(g) Offering to ransom the domain name to the trademark holder is evidence of bad faith which the arbitrators consider in awarding a domain name to the trademark holder. See Christies, Inc. v. Ola Ljungberg, WIPO Case No. DNU2000-0002, where the cybersquatter offered to sell christies.nu to Christies, Inc., the auction house, for $120,000.00.

(h) The largest crackdown on cybersquatting: Three Olympic governing bodies (the International Olympic Committee, the United States Olympic Committee, and the Salt Lake Organizing Committee for the Olympic Winter Games of 2002) filed a suit in the United States District Court of Virginia seeking a court ruling to shut down over 1,800 Web sites which are allegedly profiting from official Olympic trademarks [all the sites contain the trademark names “Olympics,” “Olympic,” “Olympiad,” their derivation in Spanish or French, or their misspelling (such as “2004Olimpics.com”)].67 The United States Olympic Committee has already won the right to two domain names in a recent arbitration proceeding. See United States Olympic Comm. (USOC) v. Tri B-U-N Eco. Project, WIPO Case No. D2000-0435 (awarding the domain names usaolympiconlinestore.com and olympiconlinestore.com to the USOC).

iii. Mixed Success

Some trademark owners are not successful. This is frequently because of an inability to show bad faith on the part of the registrant. For example, Reuters won the right to five addresses (wwwreuters.com, ruters.com, reters.com, reuers.com, and reutersnews.com) registered by Global Net 2000, Inc., which “used the Reuters mark to drive visitors to its Web site by forwarding” visitors to its own site.68 However, Reuters did not win the transfer of one address, ereuters.com. The arbitrator found that, although the domain name is confusingly similar to the complainant’s (Reuters) trademark and the respondent has no rights or legitimate interests in the domain name, the arbitrator noted that ereuters.com was used for non-profit discussions regarding improvements in Asian maid services and thus was not registered in bad faith.69

iv. Unsuccessful Trademark Owners

(a) Fuji Publishing, a Web developer, won the right to use the domain name Fuji.com in creating e-commerce Web sites for wineries and cigar companies. The photographic materials company Fuji Photo Film Company of Japan and its U.S. subsidiary claimed that it should own the Fuji.com domain name. They did not succeed because they did not meet the UDRP requirement that the current holder of a disputed domain name has no legitimate claim to the address since Fuji Publishing used the domain name to sell its own services, not confuse consumers or trade off Fuji Photo Film’s name.70

(b) Augusta National, Inc., the golf country club which hosts the Master’s tournament has a trademark on “Masters” and tried to obtain the name Masters.com from Bancrost & Masters, a computer services company. Not only was Augusta National unsuccessful in its attempt to obtain the domain name, but now faces a cancellation proceeding for its federally registered “Masters” trademark.71

(c) EasyJet Airline Company lost its cybersquatting claim over the name easy-jet.com because the arbitration panel found that the registrant, who sells printer cartridge refills, lacked bad faith.72

b. Celebrities and Famous Names

i. Brad Pitt has also filed suit against the owners of “bradpitt.com,” who initially tried to sell the domain name to Pitt for as much as $50,000.00,73 and the owners of “bradpitt.net,” a commercial cite and fan club outlet which sells merchandise featuring Brad Pitt.74

ii. Frequently, the celebrity (or the celebrity’s estate) wins the right to the domain name bearing his or her name. See www.rosaparks.com,75 www. Jimihendrix.com,76 and jthrotull.com and jethro-tull.com.77 The reason is that the arbitrators treat the name of a famous or widely known person as constituting an unregistered trademark or service mark sufficient for the UDRP paragraph 4(a)(i). See, e.g., Julia Fiona Roberts v. Russell Boyd, WIPO Case No. D2000-0219.

iii. Nevertheless, the celebrity is not guaranteed to win the rights to a domain name bearing his famous name.

(a) If the complainant is world famous under a name that utilizes common words, the celebrity may not win the rights to a domain name bearing his or her name. See Gordon Sumner, p/k/a Sting v. Michael Urvan, WIPO Case No. D2000-0596 (the famous musician “Sting” did not win sting.com)

(b) Singer and actress Madonna has filed a complaint to own the domain name madonna.com. The current owner of that domain name, Dan Parisi (who owns the adult Web site whitehouse.com), is arguing that “Madonna” is a common word in the English language; however a spokesperson for Madonna said that Madonna has trademarked the word “Madonna.”78

V. Miscellaneous

A. One court has addressed the question of whether a domain name constitutes property: In Network Solutions, Inc. v. Umbro Int’l, Inc., 259 Va. 759, 529 S.E.2d 80, 2000 VA Lexis 75 (2000), there was a judgment against the domain name registrant, but the creditor was unable to have the domain name seized and sold to satisfy the judgment. The Virginia Supreme Court found that the rights inherent in the domain name contract cannot be seized under Virginia’s statutory garnishment procedure because the domain name holder has no separate intellectual property right in the domain name. The only rights in a domain name are the rights under the domain name contract, which means a creditor could file a lien against a domain, but may be unable to sell it. Thus, this case limits the rights of one who holds a domain and could be construed to limit the value of a domain name.79

B. The freedom to create links has become an issue where courts have enjoined entities from linking due to contributory infringement. See Intellectual Reserve, Inc. v. Utah Lighthouse Ministry, Inc., 75 F. Supp. 2d 1290, 53 U.S.P.Q.2d (BNA) 1425 (C.D. Utah 1999).80

C. Cybersquatting

1. “Typosquatting” – cybersquatting by misspelling a famous name or trademark.81

a. Bargain Bid v. Ubid, et al., 2000 U.S. Dist. LEXIS 3021 (E.D.N.Y. 2000) (the United States District Court, Eastern District of New York, enjoined defendants (1) from using the Bargain Bid and Barginbid marks and (2) from indicating that the defendants’ services were sponsored, affiliated, or approved by Bargain Bid, where the defendants registered the domain name “barginbid.com” to allegedly divert consumers from the Bargain Bid’s Web site by using the common misspelling of “bargain.”)82

b. Nevertheless, the Bargain Bid case did not deter an alleged cybersquatter from registering www.phillipmorris.com, which is similar to Philip Morris, Inc.’s corporate name, but spelled with an additional “l.” Currently, the Web site www.phillipmorris.com is registered to the “Phillip Morris Club” and states that it is “dedicated to linking all of the guys named Phillip Morris together” and that it is not affiliated with the Philip Morris Tobacco Company.83 However, the page contains a link to an anti-tobacco site, ButtOut.net,84 and previously, www.phillipmorris.com automatically redirected visitors to ButtOut.net. Philip Morris, Inc. is not adopting a wait-and-see attitude; in mid-June, 2000, Philip Morris filed a trademark lawsuit in the U. S. District Court of the Eastern District of Virginia.85

c. Likewise, when a domain name “wholesaler” registered many domain names consisting of the “misspelling of famous marks or personalities in the hope of diverting Internet traffic to his sites,” WIPO arbitrators ruled that he must give up his registered misspellings of the Wall Street Journal – www.wallstreetjounal.com and www.wallstreetjournel.com – to the Wall Street Journal.86

d. See also Microsoft Corp. v. Microsof.com aka Tarek Ahment, WIPO Case No. D2000-0548 (awarding microsof.com to Microsoft Corporation).

e. The typosquatting problem has caused concern for the Treasury Department’s Office of the Comptroller of the Currency, the agency that oversees the operation of U.S. financial institutions.87 This agency issued an alert to banks, advising that the banks be careful in selecting domain names and suggesting that banks may want to consider purchasing similarly spelled domain names to prevent customer confusion and to preclude bank customers from mistakenly transmitting confidential information to those other similar Web sites.

D. State Legislation

Hollywood is a land of famous people, so it is no surprise that California has enacted its own Anticybersquatting law. This legislation prohibits the registration, in bad faith,88 of domain names that are identical or confusingly similar to the real names of other people, living or deceased. The rationale behind this law is that it will provide a “higher level of protection against Internet fraud and will make it easier for consumers to navigate the Internet by reducing the number of fraudulently registered names.” In addition, the California law closes a gap in recently enacted federal law by including protections for names that are not trademarked and for the names of promising newcomers who may not meet federal “sufficiently famous” standards but whose names might be pirated. It also offers protection for the heirs of celebrities. . . . The bill passed without a dissenting vote in the Legislature.89

Several prominent trade organizations supported this bill: SAG (Screen Actors Guild), the Motion Picture Producers Association of America, and the RIAA (Recording Industry Association of America).90 However, the California law may be challenged as an unlawful expansion of federal trademark law.91

E. Remedies

1. The most common remedy a successful complainant obtains through the arbitration process is transfer of the domain name. See. e.g., Heel Quik!, Inc. v. Goldman, NAF FA92527, available at http://www.arb-forum.org/sitemap/index.html

2. In unusual cases where there is “malicious, fraudulent, deliberate, or willful” trademark infringement under Section 35(a) of the Lanham Act, litigants have opted to take a cybersquatter to court and obtain attorney fees. In E-Stamp Corp. v. Lahoti, Case No. 00-9287 (C.D. Cal. 2000), the Court noted that the cybersquatter defendant, who had registered estamps.com and slight variations thereof, attacked Plaintiff’s mark when Plaintiff’s company was particularly vulnerable and awarded the Plaintiff $305,615.20 in attorney fees.92

VI. Conclusion

Generally, trademark owners obtain domain names containing or confusingly similar to their marks in the arbitration proceedings. Since WIPO began arbitrating Internet domain cases last year, it has received more than one thousand such cases and has completed over half of them.93

In conclusion, the Anticybersquatting Act and ICANN’s Uniform Dispute Resolution Proceeding have tremendously expanded the rights of common law trademarks and registered trademarks to preclude others from usurping those rights by registering domain names with the mark or confusingly similar to the mark.  

Criteria for Assessing TLD Proposals

ICANN expects to receive many applications to sponsor or operate new top-level domains (TLDs). In this year’s application program, it is likely that only a few of these will be selected by the ICANN Board for negotiations toward registry sponsor and operator agreements. To the extent possible, as this process continues ICANN will provide additional guidance on the likely number of TLDs to be included.

The ICANN staff is responsible for gathering information about submitted applications, evaluating the applications and associated information, and making recommendations to the Board based on the applications, associated information, and evaluations. In its evaluations, the ICANN staff currently intends to consider at least the factors described below. Applicants are invited to be creative and to explain the value of their proposals in the context of these and any other relevant factors.

1. The need to maintain the Internet’s stability.

ICANN’s first priority is to preserve the stability of the Internet, including the domain-name system (DNS). Proposals should demonstrate specific and well-thought-out plans, backed by ample, firmly committed resources, to operate in a manner that preserves the Internet’s continuing stability. The introduction of the proposed TLD should not disrupt current operations, nor should it create alternate root systems, which threaten the existence of a globally unique public name space. Security and reliability of the DNS are important aspects of stability, and proposals should set forth comprehensive strategies to assure both.

ICANN will undertake a wide-ranging assessment of a proposal’s treatment of stability issues. Among the significant aspects of stability ICANN will review are:

a. The prospects for the continued and unimpaired operation of the TLD in the manner proposed by the registry operator or sponsor throughout the period for which the delegation is agreed;

b. Provisions to minimize unscheduled outages of registry or registration systems due to technical failures or malicious activity of others;

c. Provisions to ensure consistent compliance with technical requirements in operation of the TLD;

d. Effects of the new TLD on the operation and performance of the DNS in general and the root-server system in particular;

e. Measures to promote rapid correction of any technical difficulties that occur (whether or not due to the TLD’s operation), such as availability of accurate, consistent, and helpful Whois information;

f. The protection of domain-name holders from the effects of registry or registration-system failure, such as procedures for rapid restoration of services from escrowed data in the event of a system outage or failure; and

g. Provisions for orderly and reliable assignment of domain names during the initial period of the TLD’s operation.

2. The extent to which selection of the proposal would lead to an effective “proof of concept” concerning the introduction of top-level domains in the future.

Recent experience in the introduction of new TLDs is limited in some respects. The current program of establishing new TLDs is intended to allow the Internet community to evaluate possible additions and enhancements to the DNS and possible methods of implementing them. Stated differently, the current program is intended to serve as a “proof of concept” for ways in which the DNS might evolve in the longer term.

Proposals should be chosen so as to promote effective evaluation of:

the feasibility and utility of different types of new TLDs,

the effectiveness of different procedures for launching new TLDs,

different policies under which the TLDs can be administered in the longer term,

different operational models for the registry and registrar functions,

different business and economic models under which TLDs can be operated;

the market demand for different types of TLDs and DNS services; and

different institutional structures for the formulation of registration and operation policies within the TLD.

This factor will be best served by applications that clearly articulate what concept or proposition the proposal would test, how the results of that test should be evaluated, and how the results of the evaluation would assist in the long-range management of the DNS.

3. The enhancement of competition for registration services.

As noted in the White Paper, market mechanisms that support competition and consumer choice should, where possible, drive the management of the DNS. One of ICANN’s core principles is the encouragement of competition at both the registry and registrar levels. Though the market will be the ultimate arbiter of competitive merit, the limited number of new TLDs to be introduced at this time makes it appropriate to make a preliminary evaluation of competitive merit for the “proof of concept.”

A proposal’s contributions to enhancement of competition can take various forms, depending on the specifics of the proposal. Depending on the characteristics of the TLD proposed, the nature and degree of competition involved may vary. Proposals will be evaluated to determine whether they are responsive to the general goal of enhancing competition for registration services.

Some examples of competitive issues that may be considered in evaluating proposals are:

a. What prospects do the proposed TLD and registry have for effectively competing with other TLDs and registries (either pre-existing or introduced at the same time)? Are the proposed pricing and service levels likely to be competitive with other TLDs and operators having significant market shares? If effective marketing is necessary to make the TLD competitive, does the proposal adequately provide for that marketing? If the proposal is for an unrestricted TLD, are any features proposed to maximize the prospect that the TLD will be attractive to consumers as an alternative to .com?

b. Is the proposal particularly attractive to a significant sub-market in which it can compete effectively? Are distinctive services being proposed that will meet the needs of those not being served adequately by existing services?

c. Is there any significant competitive concern that the proposed TLD is likely to lead to lock-in of domain-name holders, so that inter-TLD competition is constrained? To the extent there is a concern about constrained competition, what measures are proposed or available to ensure competitive operation of the TLD (periodic rebidding of registry, etc.)?

d. What effect would the proposal have on registrar-level competition? Does the proposal restrict the ability of accredited registrars to offer registration services within the TLD on competitive terms? What mechanism is proposed for selecting registrars?

e. If accredited registrars are not permitted to offer registration services within the TLD on a competitive basis, are there other, effective mechanisms for providing competitive choices to domain-name holders seeking to register within the TLD?

f. Would the proposal advance competitive frontiers by introducing an innovative use of the DNS?

g. Would restrictions proposed for a restricted TLD impair (either in principle or in implementation) competition among potential registrants?

4. The enhancement of the utility of the DNS.

One motivation often cited for introducing new TLDs is that doing so might increase the utility of the DNS. Under this view, the appropriateness of adding new TLDs should be evaluated based on whether addition of the new TLDs: would sensibly add to the existing DNS hierarchy and would not create or add to confusion of Internet users in locating the Internet resources they seek.

At least the following considerations will be considered in this regard:

a. If the TLD is intended for a particular use or purpose, does the TLD label suggest that use? Is this true for a large portion of Internet users globally (i.e. in different languages)?

 b. Is the proposed TLD semantically “far” from existing TLDs, so that confusion is avoided? (For example, TLD labels suggesting similar meanings might be more easily confused.) Is it phonetically distinct from existing TLDs? Meanings and pronunciations in different languages may be relevant to these inquiries.

c. Does the proposed TLD avoid names reserved by RFCs (or documents that are nearly RFCs), notably “.local” (from the HTTP State Management draft) and those names listed in RFC 2606.

d. In the case of a restricted TLD, is the restriction one that will assist users in remembering or locating domain names within the TLD? (E.g., users might conclude that “ford.car” is associated with the automobile company, not the modeling agency.)

5. The extent to which the proposal would meet previously unmet types of needs.

The DNS should meet a diversity of needs. Close examination will be given to whether submitted proposals exhibit a well-conceived plan, backed by sufficient resources, to meet presently unmet needs of the Internet community.

6. The extent to which the proposal would enhance the diversity of the DNS and of registration services generally.

One goal of introducing new TLDs should be to enhance the diversity of the DNS and the manner in which registration services are provided. In examining submitted proposals, consideration will be given to the diversity the proposal would add to the DNS. Among the diversity of proposals sought, ICANN hopes to receive proposals for fully open top level domains, restricted and chartered domains with limited scope, noncommercial domains, and personal domains. Diversity in business models and of geographic locations are also advantageous. (Note that this criterion must be judged based on the whole group of selected proposals, rather than any single proposal.)

7. The evaluation of delegation of policy-formulation functions for special-purpose TLDs to appropriate organizations.

As noted in the ICANN-staff-prepared document entitled “ICANN Yokohama Meeting Topic: Introduction of New Top-Level Domains,” the DNS is a hierarchical system that facilitates delegation of policy-formulation authority for particular TLDs. In the context of unsponsored TLDs, this can appropriately be accomplished for many operational matters by giving the registry operator flexibility in the registry contract. For restricted TLDs, some have suggested a “sponsorship” model, in which policy-formulation responsibility for the TLD would be delegated to a sponsoring organization that allows participation of the affected segments of the relevant communities. Proposals will be analyzed to determine whether they offer the opportunity for meaningful, real-world evaluation of various structures for appropriate delegation of policy-formulation responsibilities, as well as evaluation of various allocations of policy-formulation responsibilities between ICANN and sponsoring organizations.

8. Appropriate protections of rights of others in connection with the operation of the TLD.

In introducing new TLDs, care should be taken to ensure that the rights of third parties are appropriately protected. Examples of matters to be examined in this regard include:

a. Does the proposal have a well-thought-out plan for allocation of names during the start-up phase of the TLD in a way that protects the legitimate interests of significant stakeholders, including existing domain-name holders, businesses with legally protected names, and others with which conflict is likely?

b. Does the proposal provide for a reasonably accessible and efficient mechanism for resolving domain-name disputes?

c. Has the proponent considered intellectual property interests or otherwise designed protections for third-party interests?

d. Does the proposal make adequate provision for Whois service that strikes an appropriate balance between providing information to the public regarding domain-name registrations in a convenient manner and offering mechanisms to preserve personal privacy?

e. Does the proposal incorporate policies that are likely to discourage abusive registration practices?

9. The completeness of the proposals submitted and the extent to which they demonstrate realistic business, financial, technical, and operational plans and sound analysis of market needs.

The ICANN staff intends to place significant emphasis on the completeness of the proposals and the extent to which they demonstrate that the applicant has a thorough understanding of what is involved, has carefully thought through all relevant issues, has realistically assessed the business, financial, technical, operational, and marketing requirements for implementing the proposal, has procured firm commitments for all necessary resources, and has formulated sound business and technical plans for executing the proposal. Applicants are strongly encouraged to retain well-qualified professional assistance (e.g., technical, engineering, financial, legal, marketing, and management professionals, as appropriate) in formulating their proposals. Proposals that are presented in a clear, substantive, detailed, and specific manner will be preferred.

Comments concerning the layout, construction and functionality of this site should be sent to webmaster@icann.org.

(c) 2000 The Internet Corporation for Assigned Names and Numbers

All rights reserved.

 TLD Application Process FAQs

We add/revise material on this page frequently. If you have visited here before, please reload/refresh this page. (Please note that in some cases the questions in the following FAQs have been edited to generalize them or otherwise to provide information of greater general interest.)

FAQ #1: What is the process for obtaining information about how to apply to sponsor or operate a new TLD?

ICANN will make various information for applicants available on its web site. The information can be accessed through the web page at <http://www.icann.org/tlds/tld-application-process.htm>. This information will include various explanatory materials as well as application forms.

If you have a question before 3 October 2000 about the TLD application process that, after carefully reviewing the posted materials, you feel has not yet been answered, you may submit that question by e-mail to tld-applications@icann.org. To help provide all applicants with equitable access to information about the process as they prepare their applications, it is ICANN’s practice to respond to questions about applications during the application period only when they are submitted in writing. Please do not attempt to get additional information by calling or visiting our offices.

We will periodically review the questions submitted and, if a response is appropriate, we will post the question (or an edited version of it, if we feel that would be more informative) along with our responses on this web page. Please watch this web page to see any response to your question. We will not be replying separately to e-mail inquiries.

We may also create and publish other FAQs on this page as we become aware of points that should be clarified.

Please note that any question that you submit to tld-applications@icann.org is subject to being published verbatim on this web page. If you do not wish to publish an idea you have to the world, you should not include it in your question.

IMPORTANT NOTE: Those seeking information about the possibility of registering domain names within an existing or to-be-created TLD should direct their questions to icann@icann.org. Questions of this character should not be sent to the tld-applications mailbox.

FAQ #2: My TLD concept is complicated, and I feel I need to meet with ICANN to explain it. How do I do that?

After the close of the application period on 2 October 2000, ICANN staff will be evaluating all of the applications received. This process will involve not only reviewing what has been submitted, but also consulting with technical, financial, business, and legal experts and gathering additional information that may be pertinent to the application.

As needed, after the application period is concluded the ICANN staff may gather additional information by sending applicants e-mails asking for the information, by conducting telephone or in-person interviews with applicants, by attending (possibly with ICANN-retained experts) presentations by applicants or their experts, or by other means. These inquiries will be initiated by the ICANN staff; if you feel a presentation to ICANN is necessary to properly present your proposal you should suggest that in your written application.

FAQ #3:  (A) I represent a fairly large ISP & newly forming open source registrars’ group that is also interested in possibly creating a new TLD. How do I know what TLD is being spoken for? The US$ 50,000 application fee is not a problem, but I don’t want to waste it on a TLD that already has been dealt with or is being processed.

(B) Recently I’m drawing an Chinese DNS standard and require information about DNS, especially TLDs. As I know, ICANN issued new TLDs recently during the meeting in Yokohama, and I want to know what are these new TLDs.

In Yokohama, the ICANN Board adopted a policy that will allow the introduction of new TLDs, which will probably become operational next year. However, no particular TLDs were approved in Yokohama. The TLDs that are presently in effect are described in the “Present Structure of the Domain-Name System” section of the “Introduction of New Top-Level Domains” document published in advance of the Yokohama meeting.

FAQ #4: Will the date I submit my application matter if multiple candidates apply for the same name(s)? Do applicants who submit their applications earlier get priority with everything else equal?

You must submit your complete application to ICANN by the 2 October 2000 deadline. If you do so, the date on which you submit your application will not affect the selection process. In other words, the date you apply makes no difference (as long as you get your application in on time).

FAQ #5: Is it correct to assume that new TLDs to be considered by ICANN may utilize non-ASCII characters in both the name of the TLD and in name components (“labels”) hierarchically below it?

No. Domain names are used as identifiers in a variety of protocols and applications that conform to them. These protocols expect the identifiers they use to conform to a very narrow definition, which has been established in the Internet for over 25 years. Use of names that do not conform to the narrowest of the rules and conventions is known to cause operability and interoperability problems. The format is described in several places, most importantly section 3 of RFC 1034 and section 2.1 of RFC 1123 (both full Internet Standards).

Specifically, applications expect domain names that are composed only of the letters A to Z (interpreted in a case-independent fashion), digits, hyphens, and the period, all coded according to the rules of the “ASCII” character set (the “basic version” character coding specified in ISO 646). The period is used only to separate name components (called “labels” in the DNS). Labels may not start or end with a hyphen or be more than 63 characters in length; top-level domain names (i.e. the rightmost label in a name) may not start with a digit.

At this time, ICANN will only establish top-level domains having names that comply with the above format. Registries will be expected similarly to follow that format for the names they register.

The Internationalized Domain Name (IDN) Working Group of the Internet Engineering Task Force (IETF) is charged with specifying the requirements for internationalized access to domain names and a standards track protocol and encodings, based on those requirements, which will adequately respond to applications restrictions. When IDN’s work is complete, the above name-formation requirements might be modified.

See FAQ #9 and FAQ #36 for related information.

FAQ #6: Will applications submitted after 2 October 2000 (around December or early next year) be considered?

The current activity (in calling for proposals to sponsor or operate new TLDs) is part of a “proof of concept” program in which various ideas for new TLDs will be tested in actual practice. The plan is to introduce a limited number of new TLDs in a measured and responsible manner and then to evaluate how the introduction fared.

To be included in this proof-of-concept program, applications must be received by 2 October 2000. Based on evaluation of how things proceed, next steps will be decided, and later applications might then be accepted.

FAQ #7: How can I arrange for ICANN to send me a hard copy of the application form?

You can’t. Applications will consist primarily of comprehensive technical, business, and policy proposals prepared by or for the applicant. There will also be various forms to be submitted, which are scheduled to be available on the ICANN web site on 15 August 2000. Once these are available, you should print them, fill them out, and submit them as part of your overall application.

FAQ #8: In some jurisdictions, it is a long process to authorize a not-for-profit application for which the temporary applicant is an ordinary corporation with the intent to convert it to a not-for-profit corp? Such an authorization may be conditional upon the conversion prior to fully implementing the registry.

The appropriate course in this situation depends on whether the to-be-formed not-for-profit corporation is proposed to be a sponsoring organization (the usual case), the registry operator, or both.

A proposed sponsoring organization need not actually be formed at the time that the application is made. The application for a sponsored TLD can be made by those proposing to form the sponsoring organization. Of course, formation must be complete before the organization enters a TLD sponsorship agreement with ICANN. Ordinarily, ICANN’s decision to delegate to a sponsoring organization will be made based partly on the characteristics of the proposed organization, and that organization should be the one that will serve as the sponsoring organization throughout the period of the requested delegation.

In contrast, the registry operator’s proposal should be submitted by an existing organization. As with sponsoring organizations, ICANN’s decision to delegate to a registry operator will be made based partly on the characteristics of the operator. The proposed operator should be the one that is proposed for the entire period of the requested delegation.

See FAQ #12 for related information.

FAQ #9: If a restricted TLD were to be the subject of an application, would ICANN accept a TLD name in ASCII letters which are conversions from another symbolic system to Roman letters?

A TLD name must conform to format requirements summarized in FAQ #5. Provided it does, it can be a transliteration having meaning in another symbolic system. For example, .san (transliterated from Japanese) would acceptable as the name of a TLD for personal-use domain names.

FAQ #10: Will there at any time be the opportunity to secure an extended window to lodge an application or the possibility of securing some sort of option over the right to lodge an application? The very short time frame within which to lodge applications is short.

The current application process is part of a “proof of concept” program that is intended to involve introduction of only a limited number of new TLDs. In recognition of the limited recent experience in introducing new TLDs, the program is meant to allow the Internet community to evaluate possible additions and enhancements to the DNS and possible methods of implementing them. After these initial introductions, decisions can be made about evolution of the DNS (including new TLDs) based on the experience gained. While it would not be appropriate to prejudge those decisions, they may involve seeking additional applications in the future.

FAQ #11: One might think that all applicants must be not-for-profit organizations. Is this understanding correct?

No. Depending on the type of TLD being proposed (sponsored or unsponsored), the applicant will be either a sponsoring organization or a registry operator. For discussions of the role of each, see the Sponsored and Unsponsored TLDs section of the New TLD Application Process Overview document and criteria 7 in the Criteria for Assessing TLD Proposals document. Each organization should have characteristics (not-for-profit, for-profit, etc.) appropriate to its role within the overall context of the proposal.

FAQ #12: Can multiple organizations make an application to sponsor a TLD?

Yes, in the situation where the sponsoring organization is not yet formed. See, for example, item A1 on the Sponsored TLD Application Transmittal Form and Instruction I9.2. In all other situations, there should be only a single applicant. For related information, see FAQ #8.

FAQ #13: I have the question about paying the US$50,000 fee. If the application is not granted, is ICANN giving the US$50,000 back?

No. The fee is only an application fee, in exchange for which ICANN will review your application. ICANN will keep your fee even if it does not grant your application. There is only one situation in which your application fee might be returned. If you claim your application contains confidential information and ICANN disagrees, ICANN will delete the information before reviewing your application on the merits. In this situation, you will be offered the opportunity to withdraw the application and obtain a refund of the US$50,000 application fee. See section I of the Statement of Requested Confidential Treatment of Materials Submitted for details.

FAQ #14: If the application is granted by ICANN, is ICANN keeping the fee?

Yes. Applications will be granted only after review and evaluation by ICANN. The fee is designed to defray ICANN’s costs associated with processing and evaluating the applications, and follow-up.

Please note that ICANN recovers its costs of operation from domain-name and IP-address registries and registrars. Those preparing Registry Operator Proposals should factor their share (if the application is accepted) of ICANN’s cost-recovery needs into their business model.

FAQ #15: Why is the application fee so high? Aren’t you going to prevent non-profit TLD registry proposals by requiring such a steep application fee?

As a small non-profit organization, ICANN must conduct its activities so they are essentially self-funding, on the principle of cost-recovery. For example, the accreditation process for .com, .net, and .org registrars is funded through application and accreditation fees paid by those registrars. Likewise, the new-TLD-application process must be self-funding. This process will include very intensive review and analysis of applications on many levels (including technical, financial, legal, etc.). The application fee was set at a level intended to cover all of ICANN’s costs related to the process. It would not be justifiable to require existing registries and registrars to subsidize the process.

In establishing the fee, ICANN’s Board was concerned that the application fee might discourage some applications for special-purpose restricted TLDs. However, a multi-tiered fee structure would mean that some applicants would subsidize the application-review costs of others. This would be particularly unfair because of difficulties in distinguishing between for-profit and non-profit proposals in the global context. Accordingly, a single, cost-recovery-based application fee has been adopted for this year’s new-TLD-application process.

FAQ #16: ICANN states clearly its intention to create competition among gTLD registries as it did with registrars. Will ICANN grant an application for a new registry for an existing gTLD like .com, .net, or .org?

No. The current program involves the evaluation of applications to sponsor or operate “new TLDs,” not existing ones. As stated in the New TLD Application Process Overview document, “The adopted policy calls for submission of proposals to sponsor or operate new TLDs by interested persons and organizations.” There is no intent to upset arrangements for existing TLDs through this program.

FAQ #17: My group is dissatisfied with the operation of the two-letter ccTLD that has been assigned to our country. We would like to apply to operate a registry for that ccTLD. Should we submit an application under the New TLD program?

No. The New TLD Application Process involves establishing new TLDs, not changing the delegation of existing ones. Applications in the New TLD program should not seek TLD strings that match alpha-2 codes on the ISO 3166-1 list. See FAQ #21 and FAQ #24 for related information.

FAQ #18: If we go through all the effort to apply for a top level domain, who owns it? What could potentially happen to change ownership?

Top-level domains are established for the benefit of the Internet community. Their operation is delegated to particular organizations based on a showing that doing so is in the best interests of the Internet community. An operator does not “own” a top-level domain. As noted in RFC 1591 (written by Jon Postel in 1994 and entitled “Domain Name System Structure and Delegation”): “Concerns about ‘rights’ and ‘ownership’ of domains are inappropriate. It is appropriate to be concerned about ‘responsibilities’ and ‘service’ to the community.”

It is anticipated that TLD registry agreements will provide that, if a registry operator fails to meet its service obligations, the agreement may be terminated. In their proposals, sponsoring organizations and registry operators should state the term they are suggesting and explain why they believe that term would best serve the interest of the Internet community. See, for example, item D13.2.10 of the Registry Operator’s Proposal.

FAQ #19: Is the non-refundable US$ 50,000 application fee per TLD or per idea? In other words, if I apply for multiple TLD strings is that one or many applications?

It is US $50,000 per application. Section VIII of the New TLD Application Instructions discusses the circumstances in which a single application can propose multiple TLD strings.

FAQ #20: I am planning to submit an application to ICANN for a new TLD. I would like to submit my application in writing. What address should I send my application to?

This information is provided in item I22 of the New TLD Application Instructions. Persons considering submitting an application are urged to carefully review that document as well as the instructions stated in the applications. Failure to follow all of the instructions can lead to denial of your application.

FAQ #21: Will an application which accidentally proposes a TLD that is an alpha-3 code on the ISO-3166-1 list fail?

As stated in FAQ #17, applications in the New TLD program should not seek TLD strings that match alpha-2 codes on the ISO 3166-1 list. There is no similar, automatic disqualification on alpha-3 codes on the ISO 3166-1 list.

See FAQ #24 for a follow-up question.

FAQ #22: What is the procedure in the event of duplicate submission of a domain name by different parties? Which party would get preference? Would the fee be non-refundable for the party that is not selected?

Applications to sponsor or operate a TLD will be evaluated according to the Criteria for Assessing TLD Proposals, under which all aspects of the proposal (operational, financial, technical, etc.) will be considered. The particular TLD string requested is only one of many factors in the evaluation. Clearly, the same TLD cannot be established for both proposals; differences between the applications would be considered according to the criteria. The fee paid by a non-selected applicant would not be refundable.

FAQ #23: Will two (or more) parties that apply for a TLD in related fields or that propose identical plans be asked to negotiate to present a joint proposal?

Although it is possible that negotiations toward a joint proposal would be urged depending on the circumstances, applicants should not assume that ICANN will request or require such negotiations. Applicants should consider discussing their proposals with other interested members of the community before submitting them.

FAQ #24: FAQ #21 states that there is no “automatic disqualification” of applications proposing TLD labels that are alpha-3 codes on ISO 3166-1 list. Is this the correct even if a ccTLD has been established for the corresponding alpha-2 code on the ISO 3166-1 list?

Yes, it is correct that there is no automatic disqualification. Please take note, however, of consideration 4(b) in the Criteria for Assessing TLD Proposals, which states:

b. Is the proposed TLD semantically “far” from existing TLDs, so that confusion is avoided? (For example, TLD labels suggesting similar meanings might be more easily confused.) Is it phonetically distinct from existing TLDs?

Meanings and pronunciations in different languages may be relevant to these inquiries. In this context, “existing TLDs” includes ccTLDs that have been established.

FAQ #25: We are an established not-for-profit institute that wishes to sponsor a chartered TLD. However, we feel that the eventual formation of an international sponsoring organization would be best for this chartered TLD. We would therefore like to propose our institute as the sponsoring organization pro tem, with a well-defined schedule for the establishment of the international sponsoring organization (as negotiated with ICANN). Would such a proposal be acceptable to ICANN?

Assuming that a proposal qualifies in other respects, the fact that the proposed sponsoring organization has not yet been formed should not disqualify the proposal. As noted in section 1(c)(i) of the New TLD Application Process Overview, “Where the proposed sponsoring organization has not yet been formed, the submission may be made by the organizers of that organization.” Thus, it would be appropriate to have a proposal under which your not-for-profit institute would propose to establish the international sponsoring organization. If you wish your proposal to be evaluated based on the appropriateness of the to-be-formed international organization (rather than the institute) as sponsor, we recommend that your proposal include plans to form the organization before completion of any contract negotiations with ICANN. The proposed organization could be affiliated initially with your institute, with a spin-off scheduled for a later time.

In submitting your application, you should check the box in item A1 of the Sponsored TLD Application Transmittal Form next to “Organization(s) or person(s) proposing to form the sponsoring organization (check this item only if the sponsoring organization has not yet been formed).” Section I of the Sponsoring Organization’s Proposal should be completed to give the information for the sponsoring organization that is proposed (i.e. the one to be formed).

FAQ #26: Will existing ICANN-accredited registrars for .com, .net, and .org be able to act as registrars in the new TLDs?

The type of channels used for registrations in a TLD is only one of many factors that will be considered in determining whether to select a proposal for negotiations toward possible establishment of a TLD. For a discussion of some relevant factors that may pertain to the considerations raised by your question, see Criteria for Assessing TLD Proposals, and particularly “the enhancement of competition for registration services” (factor 3).

FAQ #27: Can the floppy diskette requirement be expanded to allow softcopy submission on CD?

Yes, it can. Thanks for the great suggestion! We have already changed the documents to make this change.

FAQ #28: Can you provide any estimate on the timing for the “proof of concept” phase for new TLDs, and when the next opportunity to propose TLDs after this initial phase will be?

There is not yet any date that has been scheduled for a “next round,” and at present we have no predictions as to the schedule. In the current round of applications, applicants are requested to describe the value of their proposals as proofs of concept. Item E30 of the Description of TLD Policies requests suggestions for how the results of the introduction being proposed should be evaluated. Once a decision is made on the evaluation procedure to be used for TLDs introduced in the current round, the timing of future steps should become clearer.

FAQ #29: We would like to provide an Executive Summary of our TLD proposal (perhaps 1 to 3 pages in length) that describes the motivation and overall goals of the TLD. Where should such a summary be placed in the application? Perhaps as a cover letter?

We suggest that you attach it to your Description of TLD Policies. Before item E1 on your description, you should type in a statement such as “An Executive Summary of this proposal is attached.”

Materials that you wish ICANN to consider in support of your application should be included in the body of your application materials (i.e. your transmittal form, the Sponsoring Organization’s Proposal, the Registry Operator’s Proposal, the Description of TLD Policies, the fitness disclosures, or the Statement of Requested Confidential Treatment) or as a referenced attachment, not in an unreferenced, separate cover letter.

FAQ #30: Item (c) under factor 8 of the Criteria for Assessing TLD Proposals states that when evaluating proposals ICANN will examine: “c. Has the proponent considered intellectual property interests or otherwise designed protections for third-party interests?” What types of intellectual-property protections should be included?

Applicants should propose measures they believe are appropriate to protect intellectual property and other third-party interests. The types of protections that are appropriate will depend, to some extent, on the nature of the TLD and other circumstances. Applicants should anticipate that one of the topics of public comments on their proposals will be the appropriateness of the protections they propose. In preparing their proposals, applicants may wish to consult the materials prepared by the ICANN DNSO Intellectual Property Constituency (IPC) and posted on the IPC website. These are the views of the IPC only.

FAQ #31: What TLDs are already established?

Presently, there are seven traditional “generic” TLDs (.com, .edu, .gov, .int, .mil, .net, and .org), nearly 250 two-character “country-code” TLDs, and one infrastructure TLD (.arpa). For a more detailed description of the present TLDs, see the detailed topic paper on TLDs prepared in advance of the ICANN Yokohama meeting.

FAQ #32: I’m investigating the possibility of two companies (parent companies) with complimentary capabilities forming a jointly held company (joint venture) to operate a new non-sponsored TLD registry. The joint venture would not have any operational experience and history. Am I correct in assuming that the Registry Operator’s Proposal should describe the data and history for the two parent companies? Also, will ICANN consider the application if the joint venture is not yet established when the application is sent?

A Registry Operator’s Proposal must be submitted by a proposed registry operator that is in existence (i.e. has already been formed) at the time the proposal is signed and submitted. Note that the proposed registry operator should be an organization, such as a corporation, having the ability to enter legally binding contracts.

The Registry Operator’s Proposal should describe the capabilities of the entity proposed actually to serve as registry operator. In the circumstances you describe, that could be done by describing the data and history of the parent companies and by providing documentation that the parent companies are firmly committed to transferring their relevant operational units to the newly formed entity.

FAQ #33: How do I pay the application fee?

When they were first posted, the instructions required that the non-refundable application fee be paid by check. That is still the payment method we prefer that you use. However, for the convenience of those that may have difficulty in obtaining a check drawn on a United States bank, we have decided to permit payment by wire transfer. In either case, because your application will only be considered once we are satisfied you have fully paid the application fee, it is vital that you follow the payment instructions exactly:

If you choose to pay by check, with your application you must send a check, drawn on a United States bank and payable to the Internet Corporation for Assigned Names and Numbers (ICANN), in the amount of 50,000 United States dollars. If you choose to pay by wire transfer, you must arrange for the wire transfer to be sent to ICANN at the following account:

Internet Corporation for Assigned Names and Numbers

Account number 09141-04900

Routing indicator 121000358

Bank of America Branch 0914

4754 Admiralty Way

Marina del Rey, CA 90292 USA

Telephone +1/310/247-2080

We must receive wire transfers at least five business days before we receive your application and you must include a wire transfer receipt or other document identifying the wire transfer with your application.

FAQ #34: Where can I obtain a list of the parties that previously submitted a letter of interest and brief proposal to operate/sponsor a new gTLD?

For a list of expressions of interest received in the period leading up to the ICANN meeting in Yokohama, click here.

FAQ #35: Can I propose to act as both the registry operator also a registrar?

Applicants should describe the marketing channels they are proposing. See item D13.2.4 of the Registry Operator’s Proposal. A proposal to act as both registry operator and registrar is not forbidden, though that feature may affect how your proposal is evaluated. In formulating recommendations for the ICANN Board, the ICANN staff currently intends to consider at least the factors stated in the Criteria for Assessing TLD Proposals, including factor 3: “The enhancement of competition for registration services.”

FAQ #36: In your response to FAQ #5, regarding the use of non-ASCII characters in a TLD string, you stated, “top-level domain names… may not start with a digit.” Having conducted research into this specific area, we have proven (just by the adoption of simple policies that can be applied at the registry level) that it is possible to operate a TLD with a digit as the first character while maintaining the stable operation of the DNS, and we believe that a proposal of this sort “might increase the utility of the DNS.” Can the no-beginning-digit statement of FAQ #5 be relaxed?

Not at this time. It is important to Internet stability that DNS names conform to the relatively narrow format rules and conventions stated in the RFCs because, among other things, application developers have relied on those format rules and conventions in designing, implementing, and testing software that handles DNS names. Although the statements in RFC 1034 and section 2.1 of RFC 1123 (cited in the response to FAQ #5) might, standing alone, be subject to differing interpretations, subsequent RFCs have interpreted those RFCs to prohibit TLD labels starting with digits. See RFC 2396, pages 13-14 (August 1998); RFC 1738, page 6 (December 1994). At least one of these RFCs has been available to software developers for over five years.

If the no-first-digit requirement for TLD labels is to be relaxed, it should be done through the IETF, which developed the documents articulating the requirement.

Comments concerning the layout, construction and functionality of this site should be sent to webmaster@icann.org.

(c) 2000 The Internet Corporation for Assigned Names and Numbers.

All rights reserved.

________________________

1 The term “trademarks” refers to trademarks and service marks.

2 Disney’s Settlement Ends Suit Asserting Trademark Violation, Wall Street Journal Interactive Edition, May 26, 2000. Disney agreed to pay $21.5 million to settle this lawsuit.

3 Disney’s Settlement Ends Suit Asserting Trademark Violation, Wall Street Journal Interactive Edition, May 26, 2000. Disney agreed to pay $21.5 million to settle this lawsuit. /

4 See Steven Bonisteel, Mattel Whips “Barbie” Porn-Site Operator In Court, Newsbytes, July 19, 2000.

5 Compare I.P. Lund Trading A.P.S. v. Kohler Co., 163 F.3d 27, 49 U.S.P.Q.2d (BNA) 1225 (1st Cir. 1998) (specifically rejecting the “lessening of demand for the product” test applied by the Fourth Circuit in the Ringling Brothers case).

6 Note that the Hatfield case, which held that there was no liability, occurred prior to the enactment of the Anticybersquatting Act.

7 WIPO is an approved domain name dispute arbitration organization. See also Reuters, WIPO Launches “Squat Fight,” Wired News, July 10, 2000; Adam Creed, Australian Gov’t Asks WIPO To Rid World of Cybersquatters, Newsbytes, June 22, 2000.

8 See Excelentisimo Ayuntamiento de Barcelona v. Barceloa.com Inc., WIPO Case No. D2000-0505.

9 Louise Ferguson, Geographic Domains on Shaky Ground, The Industry Standard, Aug. 11, 2000.

10 Id.

11 WIPO Case No. D2000-0617.

12 Id. Another interesting aspect of this case is that the respondent did not file a response to the complaint. Nevertheless, the WIPO arbitrator viewed the Web site at issue and found bad faith lacking, as well as the Web site owner’s potential for legitimate interest.

13 Copyright Not Infringed by Hyperlink to Interior Pages, The Internet Newsletter, Mar. 2000.

14 Brenda Sandburg, Copyright Not Violated by Hypertext Link, The Recorder, Mar. 31, 2000.

15 Oscar S. Cisneros, Legal Tips for Your “Sucks” Site, Wired News, Aug. 14, 2000.

16 Id.

17 Criag Bicknell, Idealab F*cks With F*ckedCompany, Wired News, Sept. 27, 2000.

18 See www.comupix.com/ballysucks/index.htm.

19 Steven Bonisteel, Wal-Mark Sucks Names Away From Domain Claim Jumper, Newsbytes, Aug 1, 2000.

20 John Partridge, “Cybergripers” Lose Rights, The Globe and Mail, Aug. 19, 2000. Now Wal-Mart has itself registered over two hundred anti-Wal-Mart names in the hopes of preventing critical and parody sites. See also, David Streitfeld, Making Bad Names For Themselves, Washington Post, Sept. 8, 2000.

21 Federal Court Orders Peta.org Name Delivered to Animal Rights Group, IP L. Weekly, July 25, 2000. See also Sonja Barisic, Owner of PETA Parody Web Site Ordered to Relinquish Address, Associated Press, July 21, 2000.

22 Steven Bonisteel, Guinness “Sucks” Domain Disputes Come to a Head, Newsbytes, Aug 28, 2000.

23 Gwendolyn Mariano and Evan Hansen, Parody Site Sucked Into Cybersquatting Squabbles, CNETNews.com, Aug. 24, 2000.

24 David Streitfeld, Making Bad Names For Themselves, Washington Post, Sept. 8, 2000.

25 Oscar S. Cisneros, Mattel: Don’t Play With Barbie, Wired News, July 27, 2000.

26 Gwendolyn Mariano and Evan Hansen, Parody Site Sucked Into Cybersquatting Squabbles, CNETNews.com, Aug. 24, 2000.

27 David Streitfeld, Making Bad Names For Themselves, Washington Post, Sept. 8, 2000.

28 Id.

29 As found by the Court, Playboy Enterprises (PEI):

owns federally registered trademarks for the terms Playboy, Playmate, Playmate of the Month, and Playmate of the Year. The term Playmate of the Year is sometimes abbreviated “PMOY.” PEI does not have a federally registered trademark in the abbreviation “PMOY,” although PEI argues that “PMOY” is worthy of trademark protection because it is a well-known abbreviation for the trademark Playmate of the Year.

 Playboy Enters., 7 F.Supp.2d at 1100.

30 A “metatag” is a hidden word or label in a Web page which often includes keywords to draw the attention of Internet search engines to that Web page. See Kaplan, Carl S., Former Playboy Model Wins Rights to Use Keywords, Cyber Law Journal, Dec. 17, 1999.

31 The Court also found that, with respect to the metatags, there is no trademark infringement where defendant uses Playboy’s trademarks in good faith to index the content of her Web site.

32 See Former Playboy Model Wins Right to Use Keywords, Cyber Law Journal, Dec. 17, 1999, (wysiwyg://66//http://www.nytimes.com/library/tech/99/12/cyber/cyberlaw/17law.html); Playboy Enters., Inc. v. Welles, Case No. 98-CV-0413-K, Judge Judith Keep (S.D. Cal. Dec. 1, 1999) (http://www.terriwelles.com/order_01.htm).

33 Id.

34 See Slind-Flor, Victoria, False Signs on the I-Highway, Nat’l L.J., Jan 5, 2000.

35 See Kaplan, Carl S., Judges Pick David Over Goliath in Domain Name Suits, Cyber Law Journal, Sept. 17, 1999.

36 See also Groner, Jonathan, Court Rejects Trademark for “Best Beer in America,” Legal Times, Dec. 13, 1999.

37 Kettmann, Steve, E-Riots Threaten Etoys.com, Wired News, Dec. 15, 1999; Mirapaul, Matthew, Etoys Lawsuit is No Fun for Artist Group, New York Times, Dec. 9, 1999. See also Priority of Parties’ Use of Marks on Web Pages Too Close to Call, E-Commerce Law Weekly, Dec. 14, 1999, pp. 219-220. The parties ultimately settled Etoys.com v. etoy.com.

38 18 U.S.C. § 706 provides for criminal for fraudulent or unauthorized use or display of the Red Cross of the American National Red Cross.

39 36 U.S.C. § 220506 provides for civil penalties for unauthorized use of the names, marks or symbols of United States Olympic Committee, the International Olympic Committee, the International Paralympic Committee, the Pan-American Sports Organization.

40 These factors are as follows:

(I) the trademark or other intellectual property rights of the person, if any, in the domain name;
(II) the extent to which the domain name consists of the legal name of the person or a name that is otherwise commonly used to identify that person;
(III) the person’s prior use, if any, of the domain name in connection with the bona fide offering of any goods or services;
(IV) the person’s bona fide noncommercial or fair use of the mark in a site accessible under the domain name;
(V) the person’s intent to divert consumers from the mark owner’s online location to a site accessible under the domain name that could harm the goodwill represented by the mark, either for commercial gain or with the intent to tarnish or disparage the mark, by creating a likelihood of confusion as to the source, sponsorship, affiliation, or endorsement of the site;
(VI) the person’s offer to transfer, sell, or otherwise assign the domain name to the mark owner or any third party for financial gain without having used, or having an intent to use, the domain name in the bona fide offering of any goods or services, or the person’s prior conduct indicating a pattern of such conduct;
(VII) the person’s provision of material and misleading false contact information when applying for the registration of the domain name, the person’s intentional failure to maintain accurate contact information, or the person’s prior conduct indicating a pattern of such conduct;
(VIII) the person’s registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to marks of others that are distinctive at the time of registration of such domain names, or dilutive of famous marks of others that are famous at the time of registration of such domain names, without regard to the goods or services of the parties; and
(IX) the extent to which the mark incorporated in the person’s domain name registration is or is not distinctive and famous within the meaning of subsection (c)(1) of section 43.

See also Jeffrey K. Riffer, Anticybersquatting Consumer Protection Act Targets “Bad Faith” Domain Name Holders, Nat’l L.J., Jan 7, 2000.

41 See Jeff Riffer, New Federal Law on Cybersquatting Signed, The Internet Newsletter, Dec. 1999, pp. 1-2.

42 The Act also authorizes an in rem action against the domain name; the remedies in such an in rem action are limited to the forfeiture or cancellation of the domain name, or transfer of the domain name to the mark’s owner. The in rem action is available if the holder of the domain name is not subject to personal jurisdiction in a federal civil action, or cannot be found. The venue for the in rem action is the district in which the domain name registrar, domain name registry, or other authority that registered or assigned the domain name is located. See Porsche Cars North America, Inc. v. porsch.com, 51 F. Supp. 2d 707 (E. D. Va. 1999). See also Caesars World, Inc. v. Caesars-Palace.com, 2000 U.S. Dist. LEXIS 2671, 54 U.S.P.Q.2d (BNA) 1121 (E.D. Va. 2000); Lucent Technologies, Inc., v. Lucentsucks.com, 95 F. Supp. 2d 528, 54 U.S.P.Q.2d (BNA) 1653 (E.D. Va. 2000).

43 See the list of non-exhaustive factors, supra.

44 See, e.g., Morrison & Foerster LLP v. Wick, 94 F. Supp. 2d 1125 (D. Co. 2000); Shields v. Zuccarini, 89 F. Supp. 2d 634 (E.D. Pa. 2000) (holding that Zuccarini, an admitted Internet domain name “wholesaler,” violated the Act by registering five variations of plaintiff’s mark); Spear, Leeds & Kellogg v. Rosado, 2000 U.S. Dist LEXIS 3732 (S.D. N.Y. 2000); Virtual Works, Inc. v. Network Solutions, Inc., 106 F. Supp. 2d 845, 54 U.S.P.Q.2d (BNA) 1126 (E.D. Va. 2000). But see Cello Holding v. Lawrence-Dahl Companies, 89 F. Supp. 2d 464 (S.D.N.Y. 2000) (denying summary judgment to Cello Holdings Company, whose uses their trademark “Cello” to sell audio equipment because “cello” is a common noun and a jury would need to determine whether defendant acted in bad faith by registering cello.com and attempting to sell it to several companies which use the word “cello” in connection with their business).

45 See Associated Press, Web Body to Review Domain Proposals, CNETNews.com, Aug. 3, 2000; Aaron Pressman, New Top-Level Domains in Sight, The Industry Standard, July 17, 2000 David McGuire, ICANN Moves Forwards On Domains, Governance, Newsbytes, July 16, 2000; Aaron Pressman, New Domains at Last, The Industry Standard, June 26, 2000 (“Despite some opposition from big business, it looks like Web sites will soon have more names from which to choose. How does ‘.sucks’ sound?”); Ronna Abramson, ICANN’s Plan for Name-Calling, The Industry Standard, June 15, 2000.

46 Declan McCullagh, Free Geeks Want Good Gnus, Wired News, July 12, 2000.

47 See http://www.icann.org/general/faq1.htm: FAQ on new generic top level domains (Posted September 13, 1999)

Q: When will ICANN create new generic top level domains, such as .arts, .shop, .store, .news, .sex, etc.?

A: ICANN and its constituent organizations have recently begun the process of considering whether, how, and when to add new generic top-level domains (gTLDs) to the domain name system. In recent years, a number of plans have been proposed to create new gTLDs, such as .firm, .store, .law, and .arts., and some companies have even taken orders for them. ICANN, which administers the domain name system, has not yet made a decision for or against the addition of new generic top-level domains. The ICANN process provides for the development of consensus-based policies (such as policies concerning new names) in an open, transparent and bottom-up manner in which interested individuals have an opportunity to participate and comment.

There are many arguments both for and against new gTLDs: for example, those in favor argue that new gTLDs are technically easy to create, will help relieve perceived scarcities in existing name spaces, and are consistent with a general push towards consumer choice and diversity of options; those opposed point to greater possibilities for consumer confusion, the risk of increased trademark infringement, cybersquatting and cyberpiracy.

ICANN’s Domain Name Supporting Organization (DNSO) has primary responsibility for making a recommendation on new gTLDs to the ICANN Board. On May 27, 1999, the ICANN Board of Directors referred to the DNSO a set of recommendations on new gTLDs submitted by the World Intellectual Property Organization; the DNSO’s provisional Names Council responded by creating a Working Group to review the issue. Any individual interested in participating in the DNSO’s Working Group on the creation of new gTLDs should visit http:// www. dnso.org/listdnso.html.

48 Ben Charny, ICANN Domain Name Race Is On, ZDNewsNet, Sept. 6, 2000.

49 See New TLD Application Process Overview at http://www.icann.org/tlds/application-process-03aug00.htm.

50 ICANN plans for this to be during or shortly after ICANN annual meeting.

51 ICANN’s Criteria for Assessing TLD Proposals and TLD Application Process FAQs are attached.

52 Oscar S. Cisnerso, Is .biz the .com of the Future?, Wired News, Aug 2, 2000.

53 Graham Lea, ICANN Adds Domains Names, Stores Up Troubles, theregister.co.uk, July 18, 2000.

54 Information about this policy is available at http://www.icann.org/udrp/udrp.htm

55 The policy sets forth several factors to consider as evidence of registration and use in bad faith, including facts which indicate that the registrant

(1) had registered the domain “primarily for the purpose of selling, renting, or otherwise transferring the domain name registration to the complainant who is the owner of the trademark or service mark or to a competitor of that complainant, for valuable consideration in excess of documented out-of-pocket costs directly related to the domain name;”

(2) has “registered the domain name in order to prevent the owner of the trademark or service mark from reflecting the mark in a corresponding domain name,” provided that the registrant has “engaged in a pattern of such conduct;”

(3) has registered the domain name “primarily for the purpose of disrupting the business of a competitor;” or

(4) by using the domain name, intentionally attempted to attract, for commercial gain, Internet users to its site or other online location, “by creating a likelihood of confusion with the complainant’s mark as to the source, sponsorship, affiliation, or endorsement of the registrant’s site or location of a product or service on its site or location.

56 See generally, John Caher, New Domain Arbitration Rules Get Results, N.Y.L.J., Mar. 14, 2000.

57 Jeri Clausing, In New Forum for Domain Name Disputes, Trademark Holders Dominate, New York Times, May 19, 2000. WIPO, one of the authorized arbitration organizations, has a slightly higher percentage of rulings that favor the trademark holder, with roughly eighty percent of the completed cases resulting in the transfer of the domain name. See Almar Latour, U.N. Court Rules in Favor of Telia on Domain Names, Wall Street J., Aug. 14, 2000.

58 Victoria Slind-Flor, Court Curbs Power of ICANN, Nat’l L. J., May 18, 2000.

59 One Web site, the Domain Name Law Reports (found at www.dnlr.com), offers fully summarized ICANN case law on-line.

60 Harvard University was also sued in a preemptive move by “notHarvard.com, which packages online classes with products that might appeal to students.” Patrick Healy, notHarvard Takes Harvard to Court, The Boston Globe, July 28, 2000. Harvard then counter sued notHarvard.com. Oscar S. Cisneros, Harvard Fights ‘Not’ Knockoff, Wired News, Aug. 1, 2000. However, notHarvard recently changed its name to Powered.com and is asking a Texas court to enter a consent decree wherein the parties would agree to dismiss both suits and Powered.com would transfer the domain name notHarvard.com to the school. Katie Dean, NotHarvard.com not NotHarvard.com, Wired News, Sept. 19, 2000.

61 Associated Press, Arbitrator Sides With Dell In Cybersquatting Dispute, The Wall Street J. Interactive Edition, Aug. 22, 2000. Some question whether the trademark owners “deserve” these URLs, suggesting that there are no reasons why Dell shouldn’t sell all its products through it’s main Web site: dell.com. See Kieren McCarthy, The Sick World of Knowledge Behind Cybersquatting, www.theregister.co.uk, August 15, 2000.

62 Id.

63 Elif Kaban, Cybersquatters Ordered to Give Up 40 Web Sites to Yahoo, Reuters, Aug. 14, 2000.

64 Associated Press, Yahoo!, AT&T, Microsoft Win Cybersquatting Cases, mercurycenter.com, Aug. 1, 2000.

65 Ritchenya A. Shepgherd, Counsels’ Domain-Name Pains, Nat’l L.J., Aug. 30, 2000.

66 Reuters, IKEA Wins Eviction of Cybersquatter From Web Site, N.Y. Times, Aug. 17, 2000.

67 Bernhard Warner, Cybersquatters Face Olympic-Sized Lawsuit, The Industry Standard, July 11, 2000.

68 See Domain Disputes, www.nytimes.com, July 28, 2000.

69 See Reuters Ltd. V. Ghee Khaan Tan, WIPO Case No. D2000-0670.

70 Steven Bonisteel, Tacoma Web Developer Bests Giant Fuji in Domain Dispute, Newsbytes, July 7, 2000.

71 Steven Bonisteel, Famed Golf Club in the Rough Over Domain Dispute, Newsbytes, Aug. 31, 2000.

72 EasyJet Airline Co. Ltd. V. Mr. Tim Holt, WIPO Case No. D2000-0465; Reuters, EasyJet Left Up in the Air in Cyberspace, The Industry Standard, Aug. 28, 2000.

73 Frequently, the person who registers a domain name with a celebrity’s name in it wants to sell the domain name to the celebrity, however, a few just want to use the opportunity to meet or have some contact with the celebrity. See Patrick Danner, High-profile Celebrities in South Florida Don’t Own Their Own Names For the Purposes of a Web Site, But It’s OK With Them, Miami Daily Business Rev., July 14, 2000.

74 Ritchenya A. Shepherd, Cyberpirates Now May Have to Walk the Plank, Nat’l L.J., Dec. 16, 1999.

75 In 1955 Rosa Parks fought for her bus seat, an action considered a turning point in the United States civil rights movement; this year she won the rights to www.rosaparks.com, a site created by a man who allegedly planned to auction it off. “The Rosa and Raymond Parks Institute for Self Development in Detroit will use rosaparks.com to educate visitors on civil rights and Mrs. Parks.” Michael Della Bitta, Rosa Parks Takes Her Seat on the Net, www.foxnews.com, Sept. 20, 2000.

76 See Joseph Gallivan, Cybersquatter Gets Evicted, nypost.com, Aug. 9, 2000. See the WIPO Arbitration decision at http://arbiter.wipo.int/domains/html/d2000-0364.html.

77 See the WIPO Arbitration decision at http://arbiter.wipo.int/domains/html/d2000-0475.html.

78 Ben Charny, Madonna Wants Her Name Back, zdnet.com, Aug. 19, 2000.

79 Warren E. Agin, What Is a Domain Name Anyway? Impact of Network Solutions and Umbro Rulings, E-commerce L. & Strategy, June 2000, Vol. 17, No. 2.

80 See Kaplan, Carl S., Copyright Decision Threatens Freedom to Link, Cyber Law Journal, Dec. 10, 1999.

81 Typosquatters not only want to misdirect traffic to their Web site, but also use this traffic to generate advertising revenue: when individuals mistype a popular Web address, the typosquatter places advertisements in hidden browser windows, which very few people see, but for which the advertisers still pay money (to the typosquatter). See Bob Sullivan, Making Money Off “Typosquatting,” www.msnbc.com, Sept. 18, 2000; Bob Sullivan, “Typosquatters” Turn Flubs into Cash, ZDNet, Sept. 23, 2000.

82 See Leigh Jones, Federal Cybersquatter Law Survives Test, N.Y.L.J., Jan 18, 2000.

83 See www.phillipmorris.com.

84 Id.

85 Steven Bonistell, Marlboro Man takes Aim at “Phillipmorris.com,” Newsbytes, June 16, 2000.

86 Cybersquatter Told to Quit Wall Street Journal Sites, Reuters, Sept. 13, 2000.

87 Brian Krebs, Feds Warn Banks About Misleading Web Site Names, Newsbytes, July 19, 2000.

88 A judge may consider “fair use” of a name for satirical or other purposes in determining bad faith. David McGuire, California Passes Sweeping Anti-Cybersquatting Law, Newsbytes, Aug. 23, 2000. “Both the UDRP and the congressional cybersquatting law purport to protect fair use.” Id.

89 Lynda Gledhill, New Law on Cyber Piracy, San Francisco Chronicle, Aug. 23, 2000.

90 Id.

91 David McGuire, California Passes Sweeping Anti-Cybersquatting Law, Newsbytes, Aug. 23, 2000.

92 Cybersquatter Assessed $300,000 in Attorney’s Fees, Mealey Publications, Sept. 15, 2000.

93 Almar Latour, U.N. Court Rules in Favor of Telia on Domain Names, Wall Street J., Aug. 14, 2000.

© 2000 Rob Hassett, Atlanta, Georgia. All Rights Reserved. 

The   information above is provided for general educational purposes and not as legal advice. Laws in areas in which we practice change continually and also  vary from jurisdiction to jurisdiction. Therefore no visitor to our site should rely on any of the articles provided for legal advice, but should   always consult their own attorney regarding legal matters.

Interactive Online Entertainment Law

                 By

 Rob Hassett and Suellen W. Bergman

Casey Gilson P.C.

Atlanta, GA 30328

(770) 512=0300

http://www.internetlegal.com

 

ACKNOWLEDGEMENTS

The writers wish to thank Robert C. Port and Lori Brill for their help in preparing these materials.

INTERACTIVE ONLINE ENTERTAINMENT LAW

I. Introduction

Over the past year, courts, Congress, and state legislatures have dealt with a number of different issues that concern Interactive Online Entertainment, including:

1. How far will the courts, Congress and ICANN go to restrict the use of marks as domain names, metatags and for other uses on Web sites?

2. Under what circumstances may “ephemeral” (in other words temporary) copies be made and used for digital broadcast purposes?

3. What performance rights do owners of copyrights in sound recordings have with regard to the use of their recordings by Webcasters?

4. Under what circumstances may operators of interactive online entertainment sites attract people to their sites using bulk email?

5. What are the privacy rights of users of Web sites?

6. Under what circumstances are agreements entered into over the Internet enforceable?

7. What is a Web site operator’s liability for a Web site which involves activity that is legitimate in some jurisdictions, but illegal in others?

These and other issues are discussed in this paper.

II. Domain Names and Marks

A. Case law

Uses of domain names and references made to marks on the Internet frequently clash with the rights of owners of trademarks and service marks. Ten (10) examples of these kinds of clashes are discussed below in order from those most likely to be prohibited to those most likely to be allowed.

1. Consumer Confusion

Where consumers are likely to be confused because two marks are similar and used in the same channels of trade, courts will almost always prohibit those uses. See Playboy Enter. v. Calvin Designer Label, 985 F. Supp. 1218 (N.D. Cal. 1997).

2. Dilution

Where a mark has become “famous” it is entitled to protection not only from “confusion” but also from tarnishment and blurring. For example, it is not likely that customers using the adult site “Adults “R” US” thought that the site was being operated by Toys “R” US. As discussed below, the use of that domain name was nevertheless illegal.

a. Toys “R” US, Inc. v. Adults “R” US, 1996 U.S. Dist. LEXIS 17090, 40 U.S.P.Q.2d (BNA) 1836 (N.D. Cal. 1996). The Court awarded a preliminary injunction to Toys “R” Us, finding that its marks are famous and distinctive and, thus, eligible for protection from dilution under 15 U.S.C. § 1125, and enjoined the defendants from using “Adults R Us” because it tarnishes the “‘R’ Us” family of marks by “associating them with a line of sexual products that are inconsistent with the image Toys ‘R’ Us has striven to maintain for itself.” 1996 U.S. Dist. LEXIS 17090 at *7.

b. Ringling Bros.-Barnum & Bailey Combined Shows v. Utah Div. of Travel Dev., 170 F.3d 449 50 U.S.P.Q.2d (BNA) 1065 (4th Cir. 1999), held that Ringling Brothers could not prevent Utah from using “The Greatest Snow on Earth” as a slogan for Utah’s winter sports attractions because the Federal Anti-Dilution law was held to require a showing of “actual economic harm” to the famous marks’ economic value by lessening its selling power as an advertising agent for its goods or services. Proof of this harm should be demonstrated by surveys and by showing actual loss.

c. The First Circuit, in I.P. Lund Trading A.P.S. v. Kohler Co., 163 F.3d 27, 49 U.S.P.Q.2d (BNA) 1225 (1st Cir. 1998), specifically rejected the “lessening of demand for the product” test that had been applied by the Fourth Circuit in the Ringling Brothers case.

3. Contributory Infringement

The Ninth Circuit upheld summary judgment in favor of Network Solutions, Inc. (NSI) in a case where a trademark owner sought to hold NSI liable for trademark infringements by cybersquatters and others who used its services. Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 52 U.S.P.Q.2D (BNA) 1481 (9th Cir. 1999). Lockheed sued NSI in 1996 over use of the domain name “Skunkworks,” which is a trademark of Lockheed’s Southern California aircraft construction and design laboratory. Lockheed wanted NSI to “preclude anyone from registering anything with [the words] >Skunk Works,’ in the domain name or that sounded like >Skunk Works.'”(1) The Court held that NSI was only vulnerable to suit if it intentionally induced a third party to infringe a mark or supplied a product to that third party with actual or constructive knowledge that the product was being used to infringe the service mark. See Lockheed, 194 F.3d 980, 984.

4. Cybersquatting

Panavision, Int., L.P. v. Toeppen, 945 F. Supp. 1296, 40 U.S.P.Q.2d (BNA) 1908 (C.D. Cal. 1996). The Court found that defendant’s registration of the plaintiff’s trademarks as the defendant’s domain name for purposes of resale constituted trademark dilution. Accord Intermatic, Inc. v. Toeppen, 947 F. Supp. 1227, 41 U.S.P.Q.2d (BNA) 1223 (N.D. Ill. 1996). The plan to resell the domain name was determined to be “commercial use” which is required to constitute dilution.

5. Hijacking

Until recently, registration of a competitor’s mark as a domain name (hijacking) would not be illegal, see, Juno Online Servs., L.P. v. Juno Lighting, Inc., 979 F.Supp. 684 (N.D. Ill. 1997), 44 U.S.P.Q.2D (BNA) 1913. See also HQM Ltd. and Hatfield Inc. v. William B. Hatfield, 71 F. Supp. 2d 500 (D. Md. 1999) (holding that the registering and activating of a Web site with the”.com” designation does not, by itself, constitute commercial use). Hijacking with “bad faith intent to profit” is now illegal under the recently enacted Anticybersquatting Act, discussed below.(2)

6. Registering

Registering a domain name with “intent to profit” would now be illegal under the Anticybersquatting Act (which created a new §43(d) of the Lanham Act, 15 U.S.C. §1125(d)). Previously, registering a domain name without more would not constitute either “use in commerce” or “commercial use” as was previously required under the Lanham Act to establish a violation.

7. Criticism

In Bally Total Fitness Holding Corp. v. Faber, 29 F. Supp.2d 1161, 50 U.S.P.Q.2D (BNA) 1840 (C.D. Cal. 1998), the defendant used Bally’s trademark in a Web site entitled “Bally sucks,” which was critical of Bally. The District Court dismissed Bally’s suit because the defendant’s use of Bally’s mark did not create a likelihood of confusion or otherwise constitute trademark infringement or dilution. See the Web site at Compupix.com/ballysucks/index.htm

8. Communicative Use

Playboy Enters., Inc. v. Welles, 7 F.Supp.2d 1098, 47 U.S.P.Q.2D (BNA) 1186, (S.D. Ca. 1998), aff’d, 1998 U.S. App. LEXIS 27739 (9th Cir. 1998). A former playmate was permitted to state her association with Playboy enterprises, Inc. (PEI)(3) on her own Web site. The heading of the defendant’s Web site is “Terri Welles–Playmate of the Year 1981,” and the title of the link page is “Terri Welles–Playboy Playmate of the Year 1981.” Each of the pages uses “PMOY ’81” as a repeating watermark in the background. According to defendant, eleven of the fifteen free Web pages include a disclaimer at the bottom of the pages which indicates that the Web site is not endorsed by Playboy. Id. at 1100. Playboy moved for a preliminary injunction which would enjoin the defendant (1) from using the trademarked term “Playmate of the Year” in the title of the home page and the link page; (2) from using the watermark “PMOY ’81” in the background; and (3) from using the trademarked terms “Playboy’ and ‘Playmate” in the meta-tagging(4) of defendant’s site. The Court denied a preliminary injunction because the trademarks that defendant uses, and the manner in which she uses them, describe her and identify her. Therefore the Court held that the defendant has made a “fair use” of these marks(5) and her site was not confusingly similar to Playboy’s site.

Later, the Court granted the defendant’s motion for summary judgment, holding that the use of the words “playboy” and “playmate” in the text portion of her Web site were a fair use of Playboy’s trademarks because they fairly described and identified the defendant.(6) The Court noted that Playboy failed to introduce compelling evidence of actual consumer confusion.(7) Compare N.V.E. v. Hoffmann-La Roche, CA No. 99-5858 (D.N.J. 1999) (WHW) (the District Court enjoined metatagging where the metatag misdirected searchers to a competing Web site).(8)

9. Associating Advertisements With Internet Searches

Playboy Enters., Inc. v. Netscape Communications Corp., 55 F. Supp. 2d 1070 (C.D. Ca. 1999) aff’d without opinion, 1999 U.S. App. LEXIS 30215 (9th Cir. 1999). This case involves the sale of online banner ads keyed to the specific search terms: “playboy” and “playmate.” The Court ruled that the terms “playboy” and “playmate” are generic and that Playboy has no monopoly on these words in all forms. Consequently, the Court denied Playboy’s request for a preliminary injunction against Excite, Inc. and Netscape Communications Corporation finding that the sale of those search keywords to third-party advertisers which operate adult entertainment sites does not constitute trademark infringement or dilution.

The freedom to create links has also become an issue where courts enjoined entities from linking due to contributory infringement. See Intellectual Reserve, Inc. v. Utah Lighthouse Ministry, Inc., Civ. No. 2:99-CV-808C (C.D. Utah Dec. 6, 1999).(9)

10. Common Surnames

Avery Dennison Corp. v. Sumpton, 189 F.3d 868 51 U.S.P.Q.2D (BNA) 1801 (9th Cir. 1999). This was an appeal of a case in which an entity which maintained domain registrations for individual names that included among other surnames, “Avery.net” and “Dennison.net” was held not to have diluted the “Avery Dennison” mark. The Ninth Circuit reversed the District Court’s holding that there was dilution. The Ninth Circuit held that:

a. The Avery Dennison mark was not famous because it was not “truly prominent and renowned” so that even marks “with such powerful consumer associations and even non-competing users can impinge on their value.” Avery, 189 F.3d 868, 875. The Court noted that there were many registrations of marks and uses of the marks “Avery” and “Dennison” by others, and this factor weighs against those being famous marks.

b. The Court also said that although “an intent to arbitrage” constituted a commercial use, an intent to “capitalize on the surname status of ‘Avery’ and ‘Dennison’ did not constitute a commercial use of a mark.” Id. at 880.

Other domain-name decisions have favored the “smaller” party. See, e.g., Hasbro, Inc. v. Clue Computing, Inc., 66 F. Supp. 2d 117, 52 U.S.P.Q.2D (BNA) 1402 (D. Mass. 1999) [holding that ownership of a well-known trademark (the mark “clue” for a board game) does not automatically entitle a party to a domain name (“clue.com” which Clue Computing registered)].(10)

11. Generic and Descriptive

The Federal Circuit held that the slogan “Best Beer in America” was incapable of registration as a trademark because of its highly laudatory and descriptive nature. In re Boston Beer Co. Ltd. Partnership, No. 99-1123 (Fed. Cir, 1999).(11) But see Etoys.com v. etoy.com, Los Angeles Superior Court, preliminary injunction issued Nov. 29, 1999.(12)

12. Multiple Defendants

The Anticybersquatting Act, infra, allows a court to order the cancellation or forfeiture of a domain name or the transfer of a name to the owner of the trademark. It is now possible for plaintiffs to pursue domain names as a group rather than being forced to sue each of the registrants individually. Cf. Porsche Cars North America, Inc. v. Porsche.com, 51 F. Supp. 2d 707, 51 U.S.P.Q.2d (BNA) 1461 (E.D. Va. 1999), in which the Court rejected Porsche’s “in rem” claim to grab control of domain names incorporating versions of the “Porsche” name. The ‘in rem” action was an effort to avoid having to individually sue hundreds of registrants who had registered those domain names.

B. Legislation: Anticybersquatting Consumer Protection Act

On November 29, 1999, President Clinton signed the Omnibus Appropriations Act (H.R. 3194). This Act includes the Intellectual Property and Communications Omnibus Reform Act of 1999 (S. 1948), which incorporates, inter alia, the Anticybersquatting Consumer Protection Act.

1. The Anticybersquatting Consumer Protection Act (S. 1255):(13)

a. Allows parties to bring an in rem action(14) against any domain name that has been registered in violation of the Act and,

b. Permits obtaining injunctive relief and damages from those who, “with bad faith intent to profit,”(15) register domain name identifiers which are identical or similar to a trademark; in lieu of actual damages, the trademark holder can recover damages of at least $1,000.00, but not more than $100,000 per domain name identifier. The court can order that the defendant transfer the domain name to a successful plaintiff. See, e.g., Lozano Enter. v. La Opinion Publ’g Co., 1997 U.S. Dist. LEXIS 20372, 44 U.S.P.Q.2d (BNA) 1764 (C.D. Cal. 1997).

2. Recent Cases

Victims of cybersquatting are already taking advantage of this new Act. See, e.g., John Tesh v. Celebsites, Inc., C.D. Calif., 00-00603ABC (RZX) (filed Jan. 19, 2000), (John Tesh claims, inter alia, that defendants, owners of “JohnTesh.com,” falsely advertised that site as the official site for Tesh, creating consumer confusion because Tesh owns and operates his own official Web site, “Tesh.com.”);(16) President and Fellows of Harvard College v. Rhys, D. Mass., No. 99CV12489RCL, (filed 12/6/99, Judge Reginald Lindsey), (Harvard sued domain name owners, and seeks to prevent Web Productions, a company which has registered sixty-five domain names relating to Harvard and Radcliffe, from using Harvard’s trademarks). Brad Pitt has also filed suit against the owners of “bradpitt.com,” who initially tried to sell the domain name to Pitt for as much as $50,000.00, and the owners of “bradpitt.net,” a commercial cite and fan club outlet which sells merchandise featuring Brad Pitt.(17)

Moreover, courts are enforcing the Anticybersquatting Act: see, e.g., Bargain Bid v. Ubid, 99-CV-7598 (E.D.N.Y. 2000) (the District Court, Eastern District of New York, enjoined defendants (1) from using the Bargain Bid and Barginbid marks and (2) from indicating that the defendants’ services were sponsored, affiliated, or approved by Bargain Bid, where the defendants registered the domain name “bargainbid.com” to allegedly divert consumers from the Bargain Bid’s Web site by using the common misspelling of “bargain.”)(18)

C. ICANN (Internet Corporation for Assigned Names and Numbers)

ICANN is the non-profit body responsible for domain name system management, IP address allocation, and related functions. ICANN was established last year to (a) phase out the government’s involvement in the domain name system and (b) to end the monopoly held by Network Solutions Inc. (Nasdaq: NSOL), by opening up the registration of such popular domains as “.com” and “.net” to additional companies. Although the database for the Top Level Domain is still managed by NSI (a “registry” function), the domains may be “registered” by many different entities including www.register.com and www.aol.com. ICANN is now considering additional generic TLDs to .com, .net and .org for commercial uses.(19)

On October 24, 1999, ICANN adopted a uniform domain name dispute resolution policy which is binding on all accredited registrars; this policy incorporates by reference the Rules for Uniform Domain Name Dispute Resolution Policy.(20) The policy and the rules provide a method to contest the propriety of existing domain name registrations. In order to be entitled to obtain transfer of a domain name from a prior registrant, a complainant must establish that:

(1) the domain name(s) is/are identical or confusingly similar to a trademark or service mark in which the Complainant has rights; and

(2) the domain name holder has no rights or legitimate interests with respect to the domain name(s) that is/are the subject of the complaint; and

(3) the domain name(s) has been registered and is being used in bad faith.(21)

III. Copyright

Several recent Internet related cases and statutes involve copyright issues, including the expansion of rights in sound recordings and the lengthening of the copyright term.(22)

A. Legislation

The Digital Millennium Copyright Act of 1998 (105 P.L. 304; 112 Stat. 2860)

1. Exempts Internet service providers from liability for copyright infringement under certain circumstances;(23)

2. Makes it illegal to circumvent technology used to prevent copyright infringement(24) (this provision is to take effect two (2) years from October 28, 1998); and, inter alia,

3. Expands the rights of owners of sound recordings to restrict performance of (or in some cases receive set royalties for) their sound recordings from what was covered by the Digital Sound Recording Act of 1995(25) to any sound recordings provided over the Internet whether or not it is via subscription or interactive (this provision is effective as of the date of enactment).

The effect of the Digital Millennium Copyright Act on Webcasting and the interplay of the rights any Webcaster must acquire are as follows:

a. Webcasting. Webcasting refers to the streaming of audio on the Internet (i.e. “Internet radio”). Webcasters sometimes transmit many different channels of uninterrupted music divided into genres. Webcasters must obtain a license for each of the two copyrighted works embodied in a musical recording:

(1) the underlying musical composition or “musical work,” which is comprised of written notes and lyrics, and (2) the sound recording, which is the sound of the music, including the recording artist’s interpretation of the musical composition. The DMCA enables Webcasters (and other subscription or nonsubscription digital audio services) to obtain a statutory license(26) to perform sound recordings on the Internet. Webcasters are usually eligible for a statutory license because their primary purpose is to provide audio or other entertainment programming, not to promote or sell particular products or services. Interactive services (i.e. services which permit a listener to choose a particular song or create a personalized program for the listener) and Webcasters who do not qualify for a statutory license must obtain licenses from the copyright owners of the sound recordings they want to transmit.

i. Current license agreements (BMI, ASCAP, SESAC).(27)

Spinner.com, a Webcaster which provides original programming,(28) currently has licensing agreements with BMI, ASCAP, and SESAC (for performance of compositions on Web sites). BMI and ASCAP have licensing agreements which are about 3% of gross revenue. ASCAP uses a formula which takes from the greater of revenue or expenses. BMI’s license agreement deals strictly with revenue, and is a little lower than ASCAP. SESAC’s license caps out at $3,000-$4,000 per year, so Spinner.com pays the cap every year.

ii. Future license agreements.

While BMI, ASCAP, and SESAC have agreements with many Websites (Webcasters), RIAA (Record Industry Association of America) has agreements with only a few for performances of sound recordings by Webcasters.(29) Supposedly, RIAA’s license is similar to ASCAP’s license, but RIAA seeks a much higher royalty percentage. RIAA negotiates these performance royalties with Webcasters on behalf of record companies. Consequently, Spinner.com and other Webcasters are negotiating with RIAA for a performance royalty license for the sound recordings, but do not have one currently. “Royalty percentages being asked by the [recording] labels range as high as fifteen percent of a [Web] site’s gross revenues. Representatives for the Web sites say they are arguing for as low as one to two percent.”(30) These negotiations will probably be resolved through the copyright arbitration royalty proceeding (CARP),(31) as was done previously under the Digital Sound Recording Act of 1995 with respect to non-interactive digital subscription services (see “c.” below). Although there is no license now, some Webcasters are holding money in reserve because the license will apply retroactively to October 28, 1998.(32)

iii. Failure to obtain a license.

RIAA has sued a Web site operator (Napster), which allegedly offers downloads of unlicensed music, for copyright infringement. See Ricker, Di Mari, Music Bar Upbeat On AOL-Time Warner Merger, Cal L., Jan. 14, 2000. Downloading is very different from performance. Downloading allows the user to replay the recording at will.

b. Ephemeral Recordings. Ephemeral recordings are copies of sound recordings which a Webcaster (or radio broadcaster) makes for programming purposes. A Webcaster does not need to pay separately for these recordings if it is licensed to transmit them (i.e. it has a statutory license to transmit the recordings), and it meets, inter alia, the following conditions:

(1) The copy of the recording must be used only by the Webcaster;

(2) The copy must be destroyed within six months, unless preserved exclusively for archival purposes; and

(3) Only one ephemeral copy of the recording may be made, and no further copies of the recording can be made from that ephemeral copy.

c. Previous Royalty Determination. Recording Indus. Ass’n of Am. v. Librarian of Congress, 176 F.3d 528, 50 U.S.P.Q.2D (BNA) 1768 (D.C. Cir. 1999). Under Section 114(f) of the Copyright Act, 17 U.S.C. §§ 101-1332, the Librarian of Congress is charged with establishing the rates and terms for compulsory licenses of certain subscription transmissions of digital audio music. In the first proceeding under § 114, the Librarian determined that three music services subject to the terms of the license must pay the Recording Industry Association of America (“RIAA”) 6.5 percent of their gross domestic residential revenues in exchange for the right to transmit digital audio music. The RIAA claimed that the 6.5 percent royalty for subscription digital musical services set by the Librarian was too low, but the Court upheld this rate as an acceptable interpretation of 17 U.S.C. §801(b)(1).

B. RIAA v. Diamond Multimedia Sys., Inc., 29 F. Supp. 2d 624 (C.D. Cal. 1998) aff’d, 180 F.3d 1072 (9th Cir. 1999), 51 U.S.P.Q.2d (BNA) 1115. The Court of Appeals for the Ninth Circuit affirmed the denial of a preliminary injunction finding that Diamond Multimedia, the maker of Rio,(33) had not violated the Audio Home Recording Act of 1992(34) with the Rio because the Rio could not make copies except from a hard drive. The Court found that such copying was not covered by the Act. However, on August 4, 1999, Diamond Multimedia and the RIAA announced that they entered into a settlement agreement. RIAA’s general counsel and senior executive vice president, Cary Sherman, stated that this “announcement makes clear that the future of the digital music marketplace will be created in the marketplace itself, enabled by initiatives like SDMI [Secure Digital Music Initiative].”(35) While the authors have not been able to obtain details of the settlement reached between RIAA and Diamond Multimedia, one can infer from what has been published that the terms probably include a requirement that Diamond incorporate technology which prevents serial copying.

C. Tasini v. The New York Times Co., 192 F.3d 356, 52 U.S.P.Q.2d (BNA) 1186 (2d Cir. 1999). A Federal District Court in New York held that making publication information accessible on Lexis-Nexis and other similar data bases “constitutes reproduction and distribution of freelance contributions as part of that particular collective work.” Tasini v. The New York Times Co., 972 F.Supp. 804, 43 U.S.P.Q.2D (BNA) 1801 (S.D.N.Y. 1997). The District Court held that the publishers were protected by a privilege afforded to publishers of “collective works” under Section 201(c) of the Copyright Act, but the Second Circuit reversed this decision in Tasini v. The New York Times Co., 192 F.3d 356, 52 U.S.P.Q.2d (BNA) 1186 (2d Cir. 1999). The Second Circuit concluded that “the Publishers’ licensing of Authors’ works to UMI for inclusion in these databases is not within the Section 201(c) revision privilege.” Tasini, 192 F.3d 356, 364. The Court continued:

The relevant inquiry under Section 201(c), is . . . whether the republication or redistribution of the copyrighted piece is as part of a collective work that constitutes a ‘revision’ of the previous collective work, or even a “later collective work in the same series.” If the republication is a “new anthology” or a different collective work, it is not within the privilege. H.R. Rep. No. 94-1476, at 122-23 (1976), reprinted in 1976 U.S.C.A.A.N. 5659, 5738. Because NYTO is for present purposes at best a new anthology of innumerable editions of the Times, and at worst a new anthology of innumerable articles from these editions, it cannot be said to be a “revision” of any (or all) particular editions or to be a “later collective work in the same series.”

Id. Accord Ryan v. Carl Corp., 23 F. Supp. 2d 1146, 1150, 48 U.S.P.Q.2D (BNA) 1626 (N.D. Cal. 1998) (commenting that “calling the reproduction of a single article a “revision” of a collected work, however, is more strained than even a flexible interpretation can withstand” and construing Section 201(c) of the Copyright Act in the authors’ favor).

The impact of Tasini on electronic media could take two paths. First, according to Patricia Felch, an attorney who represented four of the Tasini plaintiffs in the appeal of the trial court’s ruling, print and electronic publishers could claim that print publishers must refrain from reselling free-lancers’ works to electronic publishers and that electronic publishers must remove free-lancers’ works from the electronic databases.(36) Felch notes that this reaction would ruin the value of databases as a comprehensive and long term research tool she therefore proposes an alternate solution which lead plaintiff Jonathan Tasini encouraged: electronic database producers and print publishers can join the Publishing Rights Clearinghouse (PRC).(37) In a similar manner to what ASCAP and BMI do with royalties earned from public performances of music, the PRC accepts applications for reuses of individual works and (a) sets a cost for such reuses, (b) finds the authors, and (c) administers payments to the original authors.(38)

D. Transformative Fair Use of Copyrighted Works.

In Kelly v. Arriba Soft Corp., C.D. Calif, SAC No. 99-560 GLT (JW) Dec. 15, 1999, the Federal District Court for the Central District of California granted summary judgment to the creators of a “visual search engine,” www.ditto.com, which searches a database of digital images, even though the images were copied without authorization from third-party Web sites. The Court found that such actions constitute a “fair use.”(39) The Court determined that the defendant’s visual search engine was designed to catalog and improve access to images on the Internet, not for an artistic or illustrative purpose, and was, therefore, a “transformative” use and additionally did not harm the market for the copied works.

E. Challenging the constitutionality of Sonny Bono Copyright Term Extension Act of 1998 (CTEA).(40)

The Sonny Bono Copyright Term Extension Act of 1998 has been criticized as copyright overprotection, rather than copyright extension. This Act is important to the Internet because it reduces the benefits of those Internet sites that provide digital copies of public domain works.

Some have criticized the CTEA because it offers an extension of the term of copyrights for an author or creator without any reciprocal requirement of the author or creator. Also, the CTEA delays works from entering the public domain, without any corresponding benefit to society. One such critic of the CTEA, Lawrence Lessig, the Berkman Professor of Law at Harvard Law School, has filed a lawsuit on behalf of Eldritch Press,(41) a non-profit organization that posts literary works on the Internet when they have entered the public domain.(42)

Article I, Section 8 of the United States Constitution states that Congress may “promote the Progress of Science and useful arts, by securing for limited times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries” (emphasis added). In 1790, this limited time period of copyright was twenty-eight years. Subsequently, Congress enacted a series of extensions, which provide for copyright terms of up to seventy-five years. These extensions retroactively extended the copyright for works which were written many years ago that would otherwise soon enter the public domain.(43) CTEA has again retroactively extended the copyright terms; this extension is challenged in the Eldritch lawsuit. The plaintiffs argue that (1) the retroactive extension in CTEA violates the constitutional “limited times” requirement for constitutional exclusive rights to “writings and discoveries” and (2) the retroactive and prospective extensions violate the First Amendment because they suppress speech without promoting any respective governmental interests. The CTEA has also been criticized by some as merely a vehicle which will benefit Disney (which lobbied for the Act) because Mickey Mouse would have entered the public domain in 2004. Under the CTEA, however, Mickey Mouse will remain Disney’s copyright until 2023.(44)

F. Hacking DVD.

Two courts have recently granted preliminary injunctions against Web site operators from “posting [hacking information] on any Internet Web site, or in any other way [assisting users to circumvent the protections from copying afforded by DVD technology].” The court held that such activities constituted circumvention of technological measures which control access to a work protected under the Copyright Act as prohibited under the Digital Millennium Copyright Act of 1998. The defense argued that the circumvention procedures had been obtained as a by-product of developing a system to allow the playing of DVD on Unix computers (which arguably would be allowed).(45)

G. MP3.com and Fair Use.

There have been recent news reports that the Record Industry Assocation of America has filed a lawsuit against MP3.com because MP3.com has just started providing a service where any of its users that has purchased a particular record may listen to that record from the MP3.com archives over the Internet at any time such user wishes. MP3.com is apparently taking the position that this service is merely a form of time shifting which was held to be a “fair use” with respect to videotaping in Sony Corp. of America v. Universal City Studios, 464 U.S. 417, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984).(46)

IV. Spam (47)

A. Spam cases

1. The Tenth Circuit, in U.S. West v. FCC, 182 F.3d 1224 (10th Cir. 1999), held that U.S. West could not be blocked by an FCC rule from using information obtained from customers regarding who the customers called, and other similar data, for marketing to those individuals because such prohibition was “a violation of the First Amendment.” The Court reasoned that such use constituted commercial speech, applied the First Amendment commercial speech analysis, and held that the proposed FCC rule was unconstitutional. The test(48) was as follows:

First, determine whether the commercial speech concerns lawful activity and is not misleading. If so, the speech can only be restricted if:

(1) the government has a substantial state interest in regulating the speech;

(2) the regulation directly and materially advances that interest; and (3) the regulation is no more extensive than necessary to serve the governmental interests.

Surprisingly, the Court found that the rule was not narrowly tailored because it did not do such things as allow phone customers to opt in or opt out (assuming that there is a serious desire by telephone company customers to have their personal calls tracked and used for marketing purposes). This indicates that some anti-spam statutes may violate free speech if they completely prohibit spam without considering other alternatives.

This case has been criticized because:

(1) it allows telephone companies that track customer calls to use that information to market to those customers, and

(2) this analysis could support a First Amendment right to send spam, as there is a First Amendment right to send “junk mail.”

As in other spam cases, U.S. West involves a “captive,” as opposed to a “voluntary,” audience.(49)

To date, the cases that have held spam to be illegal involved claims of Internet Service Providers and Intel(50) that spam is a form of trespass. This analysis of spam as a trespass is not as vulnerable to a First Amendment attack as a state or federal statute prohibiting spam. See, e.g., CompuServe, Inc. v. Cyber Promotions, Inc., 962 F. Supp. 1015 (S.D. Ohio 1997) (holding that a private company’s motion seeking a court to enjoin “spam trespass” did not constitute state action subject to a First Amendment attack).(51)

2. Courts are now beginning to enforce the prohibition against trespass via spam with serious sanctions.

In America Online v. The Christian Bros., ___ F. Supp. 2d ___, No. 98 Civ. 8959, (S.D.N.Y. 1999), the Court found that the defendant’s unsolicited bulk e-mail had damaged the plaintiff’s business, trademark, service mark, and goodwill. The defendant had unlawfully obtained mailing lists of the plaintiff’s member’s e-mail addresses and sent over twenty million messages which included fraudulent headers misrepresenting that the messages came from the plaintiff. Since the defendant defaulted, the Court awarded the plaintiff $17,940 in hardware processing costs; treble damages of $389,020 for lost advertising revenue; $24,625 in attorney fees; and $200,000 in punitive damages, for a total of over $600,000 dollars.(52)

B. Federal Legislation

A proposed federal statute regarding unsolicited bulk e-mail was introduced in the House on May 5, 1999: the Internet Freedom Act, 106 H.R. 1686. This Act, in proposed Section 104, entitled “Protection from Fraudulent Unsolicited E-Mail,” would amend 18 U.S.C. §1030 such that, inter alia, it would be a violation of the Act to “intentionally and without authorization initiate the transmission of a bulk unsolicited electronic mail message to a protected computer with knowledge that such message falsifies an Internet domain, header information, date or time stamp, originating e-mail address or other identifier” or to sell or distribute a computer program which (a) “is designed or produced primarily for the purpose of concealing the source or routing information of bulk unsolicited electronic mail messages(53) in a manner prohibited by” the Act, (b) “has only limited commercially significant purpose or use other than to conceal such source or routing information,” or (c) “is marketed by the violator or another person acting in concert with the violator and with the violator’s knowledge for use in concealing the source or routing information of such messages.” The Act provides for the following potential damages for various offenses: injunctive relief and other equitable relief, actual monetary losses, statutory damages of $15,000 per violation or an amount of up to $10 per message per violation, whichever is greater; reasonable attorneys’ fees, and other litigation costs. Because this language is written broadly enough to prohibit noncommercial anonymous bulk e-mailings, it arguably violates the First Amendment. See, ACLU of Georgia v. Miller, 977 F.Supp. 1228 (N.D. Ga. 1997).

C. State Legislation

Some states have passed laws regarding unsolicited e-mail.

1. Washington State: Wash. Rev. Code §19.190.020 (1999), entitled “Unsolicited or Misleading Electronic Mail — Prohibition,” provides as follows:

(1) No person, corporation, partnership, or association may initiate the transmission of a commercial electronic mail message from a computer located in Washington or to an electronic mail address that the sender knows, or has reason to know, is held by a Washington resident that:

(a) Uses a third party’s Internet domain name without permission of the third party, or otherwise misrepresents any information in identifying the point of origin or the transmission path of a commercial electronic mail message; or

(b) Contains false or misleading information in the subject line.

(2) For purposes of this section, a person, corporation, partnership, or association knows that the intended recipient of a commercial electronic mail message is a Washington resident if that information is available, upon request, from the registrant of the Internet domain name contained in the recipient’s electronic mail address.

2. Nevada’s statute focuses on spam which contains advertisements. Nev. Rev. Stat. 41.730, entitled “Liability of Persons Who Transmit Items of Electronic Mail That Include Advertisements,” provides:

1. Except as otherwise provided in Nev. Rev. Stat. 41.735,(54) if a person transmits or causes to be transmitted to a recipient an item of electronic mail(55) that includes an advertisement, the person is liable to the recipient for civil damages unless:

(a) The person has a preexisting business or personal relationship with the recipient;

(b) The recipient has expressly consented to receive the item of electronic mail from the person; or

(c) The advertisement is readily identifiable as promotional, or contains a statement providing that it is an advertisement, and clearly and conspicuously provides:

(1) The legal name, complete street address and electronic mail address of the person transmitting the electronic mail; and

(2) A notice that the recipient may decline to receive additional electronic mail that includes an advertisement from the person transmitting the electronic mail and the procedures for declining such electronic mail.

2. If a person is liable to a recipient pursuant to subsection 1, the recipient may recover from the person:

(a) Actual damages or damages of $10 per item of electronic mail received, whichever is greater; and

(b) Attorney’s fees and costs.

3. In addition to any other recovery that is allowed pursuant to subsection 2, the recipient may apply to the district court of the county in which the recipient resides for an order enjoining the person from transmitting to the recipient any other item of electronic mail that includes an advertisement.

3. California has also passed a law dealing with unsolicited bulk e-mail (which also applies to unsolicited faxes(56)). This California Statute requires that the sender of unsolicited advertisements advise the e-mail recipient that the e-mail is an advertisement by placing the characters “ADV:” first in the subject line and also requires that the sender provide the recipient a return address or a toll-free number where the recipient can request that the sender refrain from sending additional unsolicited e-mail. See Cal. Business & Professions Code §17538.4. (Division 7, Part 3, Chapter 1) (Deering 1999), entitled “Unsolicited fax or e-mail.”(57)

V. Privacy

The latest developments concerning privacy on the Internet relate to the passage of the Children’s Online Privacy Protection Act of 1998 and the effect of the European Privacy Directive.

A. Legislation

The Children’s Online Privacy Protection Act of 1998 (COPPA), 64 Fed. Reg. 22750 (April 27, 1999), forbids the collection and distribution of minors’ personal information(58) without parental consent and restricts distribution and use of that information. This Act is intended to provide protection to the individually identifiable data of children as collected by Internet Service Providers or Web site operators, and it is effective as of April 21, 2000.(59) The Act is implemented by FTC rules which were published in the Federal Register on October 21, 1999:(60)

Of particular importance is the COPPA requirement that, with certain exceptions, Web sites obtain “verifiable parental consent” before collecting, using, or disclosing personal information from children. Section 312.5 of the proposed rule sets forth this requirement along with the following performance standard:

An operator must make reasonable efforts to obtain verifiable parental consent, taking into consideration available technology. Any method to obtain verifiable consent must be reasonably calculated, in light of available technology, to ensure that the person providing consent is the child’s parent. (64 Fed. Reg. 22756)

In its discussion of this section, the Commission identified a number of methods an operator might use to obtain verifiable parental consent, including a print-and-send form signed by the parent and mailed or faxed to the Web site; a credit-card transaction initiated by the parent; a call made by the parent to a toll-free number; or an e-mail accompanied by the parent’s valid digital signature. The Commission also solicited comment on whether there are other e-mail based mechanisms that could provide sufficient assurance that the person providing consent is the child’s parent. (64 Fed. Reg. 22756, 22762)(61)

COPPA requires:

(a) The Web site must provide notice, including types of personal information collected, how such personal information is used and whether such personal information is disclosed to third parties;

(b) The Web site must not condition its use on a child’s disclosing more personal information than is necessary; the site must give the parent the right to review and delete personal information of the child;

(c) Parental consent must be required to collect information from children, but for two years, more reliable methods (i.e. mail, use of credit cards, and digital signatures) are only required for those activities that pose the greatest risk to the safety and privacy of children (i.e. disclosing personal information to third parties or making it publicly available through chat rooms or similar activities);

(d) Web sites which only use a child’s personal information for the Web site’s internal use can obtain parental consent via e-mail.

B. European Union Privacy Directive

The European Union (EU), in its European Union Privacy Directive,(62) has granted broad rights to individuals about whom personal information is collected and stored in databases. This EU position, based on the idea that privacy is a fundamental human right, is more rigorous than the United States’ position, which does not provide as extensive access to individuals to review this kind of information and has relatively few restrictions on the use of such personal information.(63) This conflict between the EU position and the US position has threatened international electronic commerce.(64) Therefore, the US Department of Commerce negotiated with EU representatives and proposed safe harbor principles for American companies to use in determining whether they comply with EU data protection laws.(65) The “safe harbor” arrangement is expected to be finalized in the Fall of 1999.(66)

Major companies are now requiring sites in which they advertise to meet these standards and the proposed safe harbor provision. For example, IBM’s policy(67) on personal information states that it will inform the consumer how it will use the personal information collected:

At IBM, we intend to give you as much control as possible over your personal information. In general, you can visit IBM on the Web without telling us who you are or revealing any information about yourself. There are times, however, when we may need information from you, such as your name and address. It is our intent to let you know before we collect personal information from you on the Internet.

If you choose to give us personal information via the Internet that we or our business partners may need — to correspond with you, process an order or provide you with a subscription, for example – it is our intent to let you know how we will use such information. If you tell us that you do not wish to have this information used as a basis for further contact with you, we will respect your wishes. We do keep track of the domains from which people visit us. We analyze this data for trends and statistics, and then we discard it.

VI. What constitutes an enforceable agreement entered into over the Internet?

Agreements entered into over the Internet generally take one of two forms, either an exchange of e-mail or clickwrap. Clickwrap agreements are agreements formed by a purchaser manifesting assent to the terms of an agreement online by pointing and clicking a mouse. An agreement based on an exchange of e-mails relating to subject matter which does not require a signed writing to be enforceable has been held to be effective. See, e.g., CompuServe, Inc. v. Richard S. Patterson, 89 F.3d 1257 (6th Cir. 1996). The controversies regarding the enforceability of agreements entered into over the Internet involve the enforceability of clickwrap agreements and whether agreements entered into over the Internet constitute signed writings.

A. Clickwrap Agreements

The authors are not aware of any cases to date that directly address the issue of whether clickwrap agreements are enforceable. There is one case that implicitly holds that they are enforceable. A number of cases deal with whether shrinkwrap agreements (which we believe provide a useful legal analogy) are enforceable. The most important issue addressed by courts today regarding the enforceability of shrinkwrap agreements is whether or not shrinkwrap agreements are pre-empted by copyright law.

1. The case that implicitly held that clickwrap licenses are enforceable is Hotmail Corp. v. Van Money Pie, Inc., ___ F. Supp. 2d ___, 47 U.S.P.Q. 2d (BNA) 1020 (N.D. Cal. 1998); 1998 U.S. Dist. Lexis 10729 (April 16, 1998). In that case, the United States District Court for the Northern District of California granted the plaintiff a preliminary injunction in a case alleging that the defendants breached the terms of a service contract for using the plaintiff’s e-mail service. Without discussing the issue, the Court in that case implicitly held that the defendants were obligated to the terms of service on the Hotmail Web site. Users of that service agreed to those terms by clicking the “I agree” button.

2. In ProCD, Inc., v. Zeidenberg, 86 F.3rd 1447 (7th Cir. 1996), ProCD developed and sold copies of a CD ROM containing a database of telephone numbers. The CD ROM box informed the consumers there was a shrinkwrap license inside the box. The shrinkwrap license provided that the purchaser was only receiving a license and the purchaser could not make copies of the product. Zeidenberg copied the database onto his own Web site and then provided access to the database via his Web site to customers for a fee. The Court rejected the holding of Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988), that shrinkwrap licenses are pre-empted by copyright law, and held that the ProCD shrinkwrap license was enforceable.(68) The Court thus provided a way for database developers to protect their databases (by contract) even though copyright law would probably not protect the database here.(69)

a. Several courts have followed the ProCD decision: Microstar v. Formgen, Inc., 942 F. Supp. 1312 (S.D. Cal. 1996) (copying from a computer game); Hill v. Gateway 2000, Inc., 105 F.3rd 1147 (7th Cir.), cert. denied, 522 U.S. 808, 118 S.Ct. 47, 139 L.Ed.2d 13 (1997) (shrinkwrap license sent with a Gateway computer); Brower v. Gateway 2000, Inc., 246 A.D.2d 246, 676 N.Y.S.2d 569, 37 U.C.C. Rep. Serv. 2d (CBC) 54 (N.Y. App. Div. 1st Dep’t 1998) (allowed Gateway 2000 to require that any disputes be resolved by arbitration in Chicago, Illinois); and Mortenson Co., Inc. v. Timberline Software Corp., 93 Wash. App. 819, 831, 970 P.2d 803, 809 (1999) (upheld a shrinkwrap license agreement, included in the software, which was fairly standard and contained an “accept-or-return” provision).(70)

A case which tangentially addressed the shrinkwrap issue is Step-Saver Sys. v. Wyse Tech. and The Software Link, 939 F.2d 91 (3rd Cir. 1991), where the Court applied the “battle of the forms” rules and determined that the parties’ agreement was complete when the goods were ordered via telephone coupled with the purchase order. The Court held that the shrinkwrap license was sent after the fact and thus had no effect. The Software Link’s shrinkwrap license was also held unenforceable for the same reason in Arizona Retail Sys., Inc. v. The Software Link, 831 F. Supp. 759 (D. Ariz. 1993).

b. Note that Section 112 of the Uniform Computer Information Transactions Act (UCITA), discussed infra, would slightly modify the holding in ProCD. UCITA provides that where a mass-market purchaser licensee does not have an opportunity to review a mass-market license or a copy of it before becoming obligated to pay and does not agree to the license after having the opportunity to review it, the licensee is entitled to return the product and (1) is entitled to reimbursement of any reasonable expenses incurred in complying with the licensor’s instructions for return or destruction of the computer information or, in the absence of instructions, incurred for return postage or similar reasonable expense in returning it; and, in some circumstances, (2) is entitled to compensation for any reasonable and foreseeable costs of restoring the licensee’s system. See UCITA Section 112.

3. Preemption. Generally, it appeared that the copyright pre-emption barrier raised in Vault Corp., supra, had been buried by ProCD and its progeny. However, in a case involving claims relating to the pitching of a marketing concept (which did not involve any kind of online agreement but could have repercussions in the online context), the United States District Court for the Western District of Michigan held that the claim was pre-empted by copyright law. See Wrench, LLC v. Taco Bell Corp., 51 F. Supp. 2d 840, 51 U.S.P.Q.2d (BNA) 1238 (W.D. Mich. 1999). The Court denied the claim of a company that had pitched the Chihuahua concept to Taco Bell and claimed Taco Bell used the concept without paying for it. The Court held that any implied contract was pre-empted by copyright law. The Court distinguished ProCD on the somewhat nebulous grounds that the ProCD agreement was in effect at the time of purchase (i.e. before use of the product) whereas the Taco Bell agreement was not supposed to take effect unless Taco Bell started using the Chihuahua concept (i.e. after use of the concept). Note that use or copying of a product (i.e. a copyrighted item) is the same action which triggers liability under copyright law.

B. Signed Writings.

Both clickwrap agreements and e-mail exchanges may cover transactions where signed writings are required under the applicable statute of frauds. A number of states now have some kind of a digital signature act. Most of these acts require that, to satisfy any statute of frauds, the electronic signature must be:

1. Unique to the person using it,

2. Capable of verification, and

3. Under the sole control of the person using it.

See, e.g., Georgia Electronic and Signatures Act at O.C.G.A. §10-12-3 et seq. as originally enacted; the Utah Digital Signatures Act, Utah Code Ann. §46-3-101, et seq. (Supp. 1996). Before the enactment of O.C.G.A. §10-12-3 et seq., an argument could be made in Georgia that anything intended to be a signature would constitute a signature. See, e.g., Troutt v. Nash AMC-Jeep, Inc., 157 Ga. App. 399, 278 S.E.2d 54 (1981), which held that the printing of a company name at the bottom of a form constituted a signature, permitting a car dealer to meet certain state law requirements of providing a signed form. The latest developments in this area are discussed below.

1. The newest version of Georgia’s statute,(71) The Georgia Electronic and Signatures Act, which provides for broad acceptance of electronic signatures, reads, in pertinent part, as follows:

(a) Records and signatures shall not be denied legal effect or validity solely on the grounds that they are electronic.

(b) In any legal proceeding, an electronic record or electronic signature shall not be inadmissible as evidence solely on the basis that it is electronic.

(c) When a rule of law requires a writing, an electronic record satisfies that rule of law.

(d) When a rule of law requires a signature, an electronic signature satisfies that rule of law.

(e) When a rule of law requires an original record or signature, an electronic record or electronic signature shall satisfy such rule of law.

(f) Nothing in this Code section shall prevent a party from contesting an electronic record or signature on the basis of fraud.

O.C.G.A. §10-12-4 provides further as follows:

The term “electronic signature” is defined as “a signature created, transmitted, received, or stored by electronic means and includes but is not limited to a secure electronic signature.”(72) O.C.G.A. §10-12-3. The term “record” is defined as “information created, transmitted, received, or stored either in human perceivable form or in a form that is retrievable in human perceivable form.” O.C.G.A. §10-12-3.

2. The proposed Uniform Electronic Transactions Act (UETA). This Act provides that “an electronic record or signature may not be denied legal effect or enforceability solely because it is in electronic form” and that “if a law requires a record to be in writing, an electronic record satisfies the law”(73) has been approved by the National Conference of Commissioners on Uniform State Laws, and the Conference has voted to present the Act to states for adoption.(74)

The Electronic Transactions Act has been passed in California. California’s Governor signed the Uniform Electronic Transactions Act on September 16, 1999, and it was chaptered (Chapter No. 428) by the Secretary of State on the same date. See CA S.B. 820.

3. The Uniform Computer Information Transactions Act (former proposed UCC Article 2B).

The legal rules for computer information transactions which was to be promulgated by the National Conference of Commissioners on Uniform State Laws(75) as Article 2B of the Uniform Commercial Code. Instead it is being proposed as the Uniform Computer Information Transactions Act (UCITA).(76) The Act is the first general commercial statute to provide comprehensive procedures and rules for computer software licensing. Most of those rules would also be appropriate for a broad range of transactions outside UCITA’s scope, and it is expected that they will form the model for several future articles of the UCC as they did for the Uniform Electronic Transactions Act (UETA), which was approved at the same time.(77) The provisions include:

an express recognition of electronic records as the equivalent of writings, rules for attribution of electronically generated messages, methods for establishing authentication, rules for allocating losses caused by electronic errors, and rules for determining when electronic messages are deemed to be effective. A particularly noteworthy provision recognizes the enforceability of agreements made by the interaction of “electronic agents,” even if no human was directly involved in either or both sides of the “negotiation.”(78)

Software publishers and computer manufacturers strongly support UCITA, but it is as strongly opposed by a wide range of groups who contend UCITA “favors big business at the expense of consumers and small businesses.”(79) UCITA is controversial because:

UCITA represents a movement toward licensing of information in its many forms and away from the sale of copies as traditionally understood under copyright law. UCITA would enforce the broad [consumer] use of “shrink-wrap” and computer “click-on” licenses (called “mass-market licenses” in UCITA). By licensing rather than selling something, a vendor can wield more control of the downstream use of the product. Placing new constraints on the use of information in mass-market transactions can, in turn, constrain the use of information for important public purposes such as democratic speech, education, scientific research, and cultural exchange. Many believe that UCITA fails to appreciate the strong public interest in prohibiting new restrictions on information exchange.

The scope of UCITA is extremely broad. “Computer information,” under UCITA, includes everything from copyrighted expression, such as stories, computer programs, images, music and Web pages; to other traditional forms of intellectual property such as patents, trade secrets, and trademarks; to newer digital creations such as online databases and interactive games. Although the statute claims to be limited to information in electronic form, it allows other transactions to “opt-in” to being governed by UCITA.

Many legal community commentators are of the opinion that UCITA (or something like it) is not necessary or, at least, it is premature. This view is based on the opinion that existing common law and copyright law are developing appropriately to handle the new types of information-based transactions emerging in the information economy.

The American Law Institute (ALI), consumer advocacy groups, libraries, and the Federal Trade Commission have continued to criticize and/or oppose the UCITA proposal and prior UCC 2B drafts, yet their concerns have not been addressed. Instead, NCCUSL intends to push the UCITA proposal as quickly as possible to state legislatures.

A Quick Look at the Uniform Computer Information Transactions Act (UCITA), American Association of Law Libraries: Washington Affairs, July 15, 1999.(80)

4. Assignment of Copyright By Email.

Ballas v. Tedesco, 41 F.Supp. 2d 531 (D.N.J. 1999). This case addresses the issue of whether an exchange of e-mails can satisfy the requirement that assignments of copyrights are not effective unless they are in writing and signed by the transferor. See, Copyright Act §201(d). Tedesco wanted to produce a CD of dance music for Ballas. Ballas would pay Tedesco a fee for the musical arrangements and production of the CD, and Ballas would have the exclusive right to manufacture copies of the CD for sale. Negotiations, via e-mail, were unsuccessful, and the parties did not agree on terms of the arrangement. The parties agreed that the music content copyright belonged to the Defendant. The Court enjoined the Plaintiff from making or selling the music on the CD because the Court found that there was no valid assignment of the copyright since there was no written assignment.

VII. Jurisdictional Issues

A. People v. World Interactive Gaming Corp., N.Y. Sup. Ct., N.Y. Co. (July 24, 1999). According to the Internet Newsletter, August 1999, a New York trial court has held that a gambling site in Antigua that would not allow gambling on the site if anyone gave an address in a state that prohibited gambling but did not take any other further steps to verify the address’ accuracy constituted a violation of New York State’s prohibitions on gambling and the Federal Wire Act, the Travel Act, and the Interstate Transportation of Wagering Paraphernalia Act.

B. Coastal Video Communications Corp. v. Staywell Corp., 59 F. Supp. 2d 562 (E.D. Va. 1999). In a copyright case where one company alleged that its employee handbook had been infringed by another company, the District Court held that whether there was long-arm statute jurisdiction depended on whether the defendant had actually sold its publication, not just attempted to sell its publication, in Virginia. The Court also said that even if such copies were sold in Virginia, that would not be enough to grant specific jurisdiction in that case because the declaratory judgment action that had been filed does not “arise from the sale of the defendant’s publication” but rather from its very existence. Perhaps the lesson from this case is, in order to obtain jurisdiction, file an infringement action in a copyright case instead of a declaratory judgment.

C. Where a Virginia resident sued out of state defendants for posting allegedly defamatory material (one defendant posted the material on servers in Virginia via “AOL” and the other defendant posted the material on servers outside Virginia but was held by the Court to be doing business in Virginia from its Web site), a District Court for the Eastern District of Virginia held that there was a tort in the State of Virginia, and there were sufficient minimum contacts to allow for jurisdiction. Bochan v. LaFontaine, 1999 U.S. Dist. LEXIS 8253 (E.D. Va. 1999).

D. In a similar case, Melvin v. Doe, Cir. Ct. of Loudoun County, Civil No. 21942 (June 24, 1999), a Virginia Court held that where both the plaintiff and the defendant were Pennsylvania residents, even though a tort may have occurred in Virginia by defamatory material being placed on the AOL server in Virginia, there were not sufficient minimum contacts to meet the jurisdiction requirements for personal jurisdiction.

E. In Mink v. AAAA Dev., 190 F.3d 333 (5th Cir. 1999), the Fifth Circuit articulated a structure for determining when a court can assume jurisdiction of a company with a presence in cyberspace.

1. The Fifth Circuit followed the sliding scale in Zippos Mfg. Co. v. Zippo Dot Com, 952 F. Supp. 1119, 1124 (W.D. Pa. 1997), setting out three levels of Internet business.(81)

a. First, companies which merely advertise or post information about their business on the Internet with “passive” Web sites cannot be sued out of state simply because they maintain the Web site. In Mink, the company’s Web site “provides users with a printable mail-in order form, AAAA’s toll-free telephone number, a mailing address, and an electronic mail (“e-mail”) address, [and] orders are not taken through AAAA’s website [sic]. This does not classify the website [sic] as anything more than a passive advertisement.” Mink at 337.

b. The second category consists of companies whose Web site allows a user to exchange information with a host computer. Citing Zippos, the Court reasoned that the exercise of jurisdiction is determined by the level of interactivity. Mink at 336.

c. The companies which enter into contracts with out-of-state residents that involve the knowing and repeated transmission of computer files over the Internet, can be sued in the home state of the out of state residents. Id.

VIII. Conclusion

As the practical possibilities for using the Internet for entertainment purposes grow, the tension between the desire to take advantage of the enormous potential benefits of the Internet and to protect traditional legal rights also grows. Legal questions that seemed obscure and academic only six months ago are now important and practical. This tension is likely to increase exponentially in the future as the Internet, and its successors, become the major distribution method for entertainment.

1  Sandburg, Brenda, Lockheed Suit Over Domain Names Crashes, The Recorder/Cal Law, Oct. 26, 1999.

2  Note that the Hatfield case, which held that there was no liability, occurred prior to the enactment of the Anticyersquatting Act.

3  As found by the Court, Playboy Enterprises (PEI):

owns federally registered trademarks for the terms Playboy, Playmate, Playmate of the Month, and Playmate of the Year. The term Playmate of the Year is sometimes abbreviated “PMOY.” PEI does not have a federally registered trademark in the abbreviation “PMOY,” although PEI argues that “PMOY” is worthy of trademark protection because it is a well-known abbreviation for the trademark Playmate of the Year.

Playboy Enters., 7 F.Supp.2d at 1100.

4  A “metatag” is a hidden word or label in a Web page which often includes keywords to draw the attention of Internet search engines to that Web page. See Kaplan, Carl S., Former Playboy Model Wins Rights to Use Keywords, Cyber Law Journal, Dec. 17, 1999.

5  The Court also found that, with respect to the metatags, there is no trademark infringement where defendant has used Playboy’s trademarks in good faith to index the content of her Web site.

6  See Former Playboy Model Wins Right to Use Keywords, Cyber Law Journal, Dec. 17, 1999, (wysiwyg://66//http://www.nytimes.com/library/tech/99/12/cyber/cyberlaw/17law.html); Playboy Enters., Inc. v. Welles, Case No. 98-CV-0413-K, Judge Judith Keep (S.D. Cal. Dec. 1, 1999) (http://www.terriwelles.com/order_01.htm).

7 Id.

8 See Slind-Flor, Victoria, False Signs on the I-Highway, Nat’l L.J., Jan 5, 2000.

9 See, also Kaplan, Carl S., Copyright Decision Threatens Freedom to Link, Cyber Law Journal, Dec. 10, 1999.

10 See also Kaplan, Carl S., Judges Pick David Over Goliath in Domain Name Suits, Cyber Law Journal, Sept. 17, 1999.

11 See also Groner, Jonathan, Court Rejects Trademark for “Best Beer in America,” Legal Times, Dec. 13, 1999.

12 Kettmann, Steve, E-Riots Threaten Etoys.com, Wired News, Dec. 15, 1999; Mirapaul, Matthew, Etoys Lawsuit is No Fun for Artist Group, New York Times, Dec. 9, 1999. See also Priority of Parties’ Use of Marks on Web Pages Too Close to Call, E-Commerce Law Weekly, Dec. 14, 1999, pp. 219-220. The parties ultimately settled Etoys.com v. etoy.com.

13 See Riffer, Jeff, New Federal Law on Cybersquatting Signed, The Internet Newsletter, Dec. 1999, pp. 1-2.

14 See Porsche Cars North America, Inc. v. porsch.com, supra.

15 The Anticybersquatting Consumer Protection Act provides a non exhaustive list of factors that a court may consider when measuring an alleged infringer’s bad faith intent. These factors include:

(a) whether the registrant holds trademark or other intellectual property rights to the domain name;

(b) whether the domain name is the registrant’s legal name;

(c) whether the registrant had engaged in prior use of the domain name in connection with the bona fide offering of any goods or services;

(d) whether the registrant intended to divert consumers from the mark owner’s online location;

(e) the registrant’s prior conduct including whether the person had offered to sell or transfer the domain name to the mark owner or a third party for financial gain, without having an intent to use the domain name to offer goods or services;

(f) whether the registrant had provided misleading information when applying for the registration of the domain name; and

(g) whether the registrant was “warehousing” multiple domain names that mirror the trademarks of others.

Gilbert, Robert D., Significant Changes in Law Offer Cyberspace Protections for Trademark Owners, e-Commerce Law & Strategy, Vol. 16, No. 8, Dec. 1999, pp. 1-4 at 4. See also Riffer, Jeffrey K, Anticybersquatting Consumer Protection Act Targets “Bad Faith” Domain Name Holders, Nat’l L.J., Jan 7, 2000.

16  John Tesh Sues for Trademark Infringement and Cybersquatting, E-Commerce L. Weekly, Jan. 31, 2000.

17 Shepherd, Ritchenya A., Cyberpirates Now May Have to Walk the Plank, The National Law Journal, Dec. 16, 1999.

18 See also Jones, Leigh, Federal Cybersquatter Law Survives Test, N.Y.L.J., Jan 18, 2000.

19 See a copy of the undersigned’s “Internetlegal Report” for January 2000, a copy of which is attached hereto as Exhibit “B,” addressing issues relating to the addition of generic TLDs.

20 Information about this policy is available at http://www.icann.org/udrp/udrp.htm

21 The policy sets forth several factors to consider as evidence of registration and use in bad faith, including facts which indicate that the registrant

(1) had registered the domain “primarily for the purpose of selling, renting, or otherwise transferring the domain name registration to the complainant who is the owner of the trademark or service mark or to a competitor of that complainant, for valuable consideration in excess of documented out-of-pocket costs directly related to the domain name;”

(2) has “registered the domain name in order to prevent the owner of the trademark or service mark from reflecting the mark in a corresponding domain name,” provided that the registrant has “engaged in a pattern of such conduct;”

(3) has registered the domain name “primarily for the purpose of disrupting the business of a competitor;” or

(4) by using the domain name, intentionally attempted to attract, for commercial gain, Internet users to its site or other online location, “by creating a likelihood of confusion with the complainant’s mark as to the source, sponsorship, affiliation, or endorsement of the registrant’s site or location of a product or service on its site or location.

22 Recall that 17 U.S.C. § 106 requires businesses that perform copyrighted music to first obtain permission from the copyright owner, such as the composer, publisher, or the agency representing the copyright owner (such as SESAC, ASCAP, or BMI) prior to performing copyright compositions.

23 Jonathan Band of Morrison & Foerster outlines steps that should be taken to benefit from the DMCA’s safe harbor provision for online service providers: online service providers should (1) adopt a written policy providing for termination of subscribers and account holders who are repeat offenders and post the policy on the Web site; (2) designate an agent to receive notification of claimed infringement from the copyright owner and post the agent’s contact information in a publicly accessible place on the Web site; and (3) register the designated agent with the Copyright Office according to interim regulations at 60 Fed. Reg. 59233, along with a filing fee. See http://www.sla.org/govt/band2html.

24 See Digital Millenium Copyright Act, Sec. 1201. Circumvention of copyright protection systems.

25 Digital Performance Right in Sound Recordings Act of 1995 (Public Law 104-39). See also, Regulations amended by the Copyright Office at 37 C.F.R. Part 201. The Digital Performance Right in Sound Recordings Act of 1995 gave record companies a limited performance right in sound recordings (i.e. the right to bar and/or receive statutory royalties for digital audio transmissions of recordings for which they hold a copyright, namely, interactive transmissions, and those for which a subscription fee was paid). The DMCA applied this right to audio streaming over the Internet, or Webcasting, discussed infra.

26 A Webcaster must meet the following conditions to qualify for the statutory license:

A. Pay royalties (discussed infra).

B. Sound recording performance complement: A Webcaster may not play in any three-hour period (1) more than three songs from a particular album, including no more than two consecutively, or (2) four songs by a particular artist or from a boxed set, including no more than three consecutively. This limit is called the “sound recording performance complement.” Retransmitters of over-the-air radio broadcasts are required, upon notice, to cease retransmissions of digital broadcasts that regularly exceed the sound recording performance complement. For analog broadcasts, retransmissions must cease, upon notice, if a substantial portion of the broadcast transmissions exceed the complement.

C. Prior announcements not permitted. Advance song or artist playlists generally may not be published. However, a Webcaster may name one or two artists to illustrate the type of music on a particular channel. DJ “teaser” announcements using artists’ names are permitted, but only those that do not specify the time a song will be played.

D. Archived programming. Archived programs — those that are posted on a Web site for listeners to hear repeatedly on-demand — may not be less than five hours in duration. Those that are five hours or more may reside on a Web site for no more than a total of two weeks. Merely changing one or two songs does not meet this condition.

E. Looped programming. Looped or continuous programs — those that are performed continuously, automatically starting over when finished — may not be less than three hours in duration. Again, merely changing one or two songs does not meet this condition.

F. Repeat of other programs limited. Programs under one hour in duration that are performed at scheduled times may be performed only three times in a two-week period, four times if one hour or more in duration.

G. Obligation to identify song, artist and album. When performing a sound recording, a Webcaster must identify the sound recording, the album and the featured artist, if receivers of the service are capable of displaying this information. This requirement took effect October 28, 1999.

H. Prohibition on falsely suggesting a link between recordings or artists and advertisements. A Webcaster may not perform a sound recording in a way that falsely suggests a connection between the copyright owner or recording artist and a particular product or service.

I. Obligation to take steps to defeat copying by recipient. A Webcaster must disable copying by a transmission recipient if in possession of the technology to do so, and must also take care not to induce or encourage copying by transmission recipients.

J. Requirement to accommodate technical protection measures. A Webcaster must accommodate the transmission of measures widely used by sound recording copyright owners to identify or protect copyrighted works, if it is technically feasible to transmit them without imposing substantial burdens on the transmitting entity.

K. Obligation to cooperate to defeat scanning. A Webcaster must cooperate with copyright owners to prevent recipients from using devices that scan transmissions for particular recordings or artists.

L. Transmission of bootlegs not covered. The statutory license is limited to transmissions made from lawful copies of sound recordings. It does not cover transmissions made from bootlegs or pre-released recordings (unless the performance of a pre-released recording is otherwise authorized by the copyright owner).

M. Automatic switching of channels. The Webcaster must not automatically and intentionally cause a device receiving the transmission to switch from one program channel to another.

N. Transmission of copyright management information. If technically feasible, transmissions by the Webcaster must be accompanied by the information encoded in the sound recording by the copyright owner that identifies the title of the song, the featured artist and other related information (if any).

See http://www.riaa.com/weblic/wlwcast.htm.

27 Sample Webcasting agreements of BMI, ASCAP, and SESAC are attached, with permission, at Appendix A.

28 Other Internet sites (a) serve as a secondary transmission sites for analog radio, (b) operate as facilitators for commercial radio stations (e.g. Broadcast.com), or (c) operate as a blended entertainment site and offer a mix of audio streaming and entertainment news. See Scherzer, Dov H., Statutory Fee Issues for Online Recordings, Ent. L. and Fin., Dec. 1999, Vol. 15, No. 9, pp. 1, 4-5.

29 The RIAA has reached an agreement with Musicmusicmusic Inc., which operates a service called RadioMoi. Richtel, Matt, Web Sites and Recording Labels at Impasse on Fees, N.Y. Times, Nov. 29, 1999.

30 Richtel, Matt, Web Sites and Recording Labels at Impasse on Fees, N.Y. Times, Nov. 29, 1999.

31 The RIAA submitted a Petition to Convene the Copyright Arbitration Royalty Panel (CARP) to the Copyright Office in July, 1999. “When the arbitration panel convenes, it will have six months to issue a recommendation. The Library of Congress will have an additional four months to approve the recommendation.” Scherzer, Dov H., Statutory Fee Issues for Online Recordings, Ent. L. and Fin, Dec. 1999, Vol. 15, No. 9, pp. 1, 4-5. “Separate from the its petition, the RIAA is continuing to negotiate voluntary license agreements with individual Webcasters in the hopes of setting a favorable precedent.” Id.

32 Scherzer, Dov H., Statutory Fee Issues for Online Recordings, Ent. L. and Fin., Dec. 1999, Vol. 15, No. 9, pp. 1, 4-5.

33 The Rio portable music player is a digital audio recording device. The Rio is a small device (roughly the size of an audio cassette) with headphones that allows a user to download MP3 audio files from a computer and to listen to them elsewhere.

34 See 17 U.S.C. §1001 et seq. (P.L. 102-563, at 4, 106 Stat. 4248).

35 Discord Surrounding Diamond Multimedia’s Rio Player is Ended Through Settlement Agreement, The Intellectual Property Strategist, Sept. 1999, Volume 1, Number 12, at 4. See generally, Houston, Randolph B. Jr., Let’s Get Digital, Texas Lawyer, Dec. 17, 1999.

36 Felch, Patricia A., Free-Lancers Victorious in Tasini, but Impact on Electronic Media Still Unclear, e-Commerce Law & Strategy, Nov. 1999, Vol. 16, No. 7, p. 4.

37 Id.

38 Id.

39 See Clarida, Robert W., Fair Use on the Web – a New Ballgame, Intellectual Property Strategist, Jan. 2000, Vol. 6, No. 4, p. 7; Slind-Flor, Victoria, Thumbnail Not Even Tiny Infringement, Nat’l L.J., Nov. 30, 1999. See also Los Angeles Times v. Free Republic, CV No. 98-7840-MMM (holding that “adding commentary to a verbatim copy of a copyrighted work or portions thereof does not transform the work [to a fair use], especially where the first posting of this article . . . often contains little or no commentary.”); Shepherd, Ritchenya A., Web Site Can’t Post News Stories, Nat’l L.J., Nov. 17, 1999.

40 See P.L. 105-298, 112 Stat. 2827.

41 Eric Eldred founded Eldritch Press in late 1995, and initially, Eldritch Press posted works of American literature by authors such as Nathaniel Hawthorne and Henry James. Now, Eldritch Press posts new works the moment they enter the public domain. Some of the works Eldritch Press posts are out of print or are not included in library collections, and therefore they are not obtainable by the public in any other way. See How Long is Too Long? Recent Congressional Copyright Giveaway Claimed Unconstitutional at http://eldred.ne.mediaone.net/pr-1999-01-12.txt.

42 See Eldred v. Reno, United States District Court for the District of Columbia, Case No. 1:99CV00065 JLG (filed January 11, 1999). Visit this Web site to view the pleadings in this case: http://cyber.law.harvard.edu/eldredvreno/legaldocs.html.

43 See http://www.kingkong.demon.co.uk/ccer/ccer.htm, a site that documents all renewals of 1923 book copyrights, representing works that the Copyright Term Extension Act keeps from the public domain.

44 Slotek, Jim, M-I-C . . . See you real soon . . . k-e-y . . ., Toronto Sun Times, Nov. 1, 1998; see also Naughton, John, Mickey Mouse Saved for Disney? Phew. What a Narrow Squeak, Guardian Unlimited, May 2, 1999.

45 See, Universal Cities, Inc. v. Reimerdes, S.D.N.Y., No. 00 Civ. 277 (LAK), (Jan. 20, 2000), and Control Association, Inc. v. McLaughlin, No. CV 786-804, Sup. Court Calif, (Jan. 21, 2000). In the California state court case, the Judge had caused quite a stir by denying a temporary restraining order; apparently the Judge initially believed that the use and information was focused properly on just allowing the playing of DVD’s on Unix systems. See, also, Godwin, Mike, Courts Enjoin Sites That Publish DVD Decryption Software, E-Commerce L. Weekly, Jan. 28, 2000.

46 For an indepth discussion of fair use, see the article on fair use at the authors’ Web site at http://www.internetlegal.com.

47 Spam is the name given for unsolicited e-mail messages which flood the Internet. Spam generally consists of commercial advertising (sometimes for adult oriented Web sites or get-rich-quick schemes).

48 See Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of N.Y., 447 U.S. 557, 562-563, 65 L.Ed.2d 341, 100 S.Ct. 2343 (1980).

49 Cf. Sable Communications v. FCC, 492 U.S. 115, 127-128, 109 S.Ct. 2829, 2837, 106 L.Ed.2d 93 (1989) (there is no captive audience problem where the listener of dial-a-porn must take affirmative steps to receive the communication).

50 See Intel v. Hamidi, Superior Court of California, County of Sacramento, Judge John R. Lewis, April, 1999.

51 In similar cases, the First Amendment issue was not raised. See, e.g., America Online v. IMS, 24 F. Supp. 2d 548 (E.D. Va. 1998); America Online v. Prime Data Sys., Inc., 1998 U.S. Dist. LEXIS 20226 (E.D. Va. 1998); America Online v. LCGM, Inc., 46 F. Supp. 2d 444 (E.D. Va 1998).

52 See also Balestier, Bruce, Big Fine for Spamming AOL Members, New York Law Journal, Dec. 14, 1999.

53 The Act defines the term “unsolicited electronic mail message” as “any substantially identical electronic mail message other than electronic mail initiated by any person to others with whom such person has a prior relationship, including prior business relationship, or electronic mail sent by a source to recipients where such recipients, or their designees, have at any time affirmatively requested to receive communications from that source.”

54 Nev. Rev. Stat. 41.735 provides immunity for persons who provide users with access to a network and applies to items of electronic mail obtained voluntarily.

55 Nev. Rev. Stat. 41.715 defines “electronic mail” as a message, a file or other information that is transmitted through a local, regional or global network, regardless of whether the message, file or other information is:

1. Viewed;

2. Stored for retrieval at a later time;

3. Printed onto paper or other similar material; or

4. Filtered or screened by a computer program that is designed or intended to filter or screen items of electronic mail.

56 In New Jersey, recipients of bulk unsolicited faxes are attempting to file a class action lawsuit under the 1991 federal Telephone Consumer Protection Act, 47 U.S.C. §227: Levine v. 9 Net Ave., HUD-L-7965-99. See Booth, Michael, Suit Seeks Class-Action Status For Receivers of Junk Faxes, New Jersey Law Journal, Nov. 10, 1999.

57 Cal. Business & Professions Code §17538.4 provides as follows:

(a) No person or entity conducting business in this state shall facsimile (fax) or cause to be faxed, or electronically mail (e-mail) or cause to be e-mailed, documents consisting of unsolicited advertising material for the lease, sale, rental, gift offer, or other disposition of any realty, goods, services, or extension of credit unless:

(1) In the case of a fax, that person or entity establishes a toll-free telephone number that a recipient of the unsolicited faxed documents may call to notify the sender not to fax the recipient any further unsolicited documents.

(2) In the case of e-mail, that person or entity establishes a toll-free telephone number or valid sender operated return e-mail address that the recipient of the unsolicited documents may call or e-mail to notify the sender not to e-mail any further unsolicited documents.

(b) All unsolicited faxed or e-mailed documents subject to this section shall include a statement informing the recipient of the toll-free telephone number that the recipient may call, or a valid return address to which the recipient may write or e-mail, as the case may be, notifying the sender not to fax or e-mail the recipient any further unsolicited documents to the fax number, or numbers, or e-mail address, or addresses, specified by the recipient.

In the case of faxed material, the statement shall be in at least nine-point type. In the case of e-mail, the statement shall be the first text in the body of the message and shall be of the same size as the majority of the text of the message.

(c) Upon notification by a recipient of his or her request not to receive any further unsolicited faxed or e-mailed documents, no person or entity conducting business in this state shall fax or cause to be faxed or e-mail or cause to be e-mailed any unsolicited documents to that recipient.

(d) In the case of e-mail, this section shall apply when the unsolicited e-mailed documents are delivered to a California resident via an electronic mail service provider’s service or equipment located in this state. For these purposes “electronic mail service provider” means any business or organization qualified to do business in this state that provides individuals, corporations, or other entities the ability to send or receive electronic mail through equipment located in this state and that is an intermediary in sending or receiving electronic mail.

(e) As used in this section, “unsolicited e-mailed documents” means any e-mailed document or documents consisting of advertising material for the lease, sale, rental, gift offer, or other disposition of any realty, goods, services, or extension of credit that meet both of the following requirements:

(1) The documents are addressed to a recipient with whom the initiator does not have an existing business or personal relationship.

(2) The documents are not sent at the request of, or with the express consent of, the recipient.

(f) As used in this section, “fax” or “cause to be faxed” or ” e-mail” or “cause to be e-mailed” does not include or refer to the transmission of any documents by a telecommunications utility or Internet service provider to the extent that the telecommunications utility or Internet service provider merely carries that transmission over its network.

(g) In the case of e-mail that consists of unsolicited advertising material for the lease, sale, rental, gift offer, or other disposition of any realty, goods, services, or extension of credit, the subject line of each and every message shall include “ADV:” as the first four characters. If these messages contain information that consists of unsolicited advertising material for the lease, sale, rental, gift offer, or other disposition of any realty, goods, services, or extension of credit, that may only be viewed, purchased, rented, leased, or held in possession by an individual 18 years of age and older, the subject line of each and every message shall include “ADV:ADLT” as the first eight characters.

(h) An employer who is the registered owner of more than one e-mail address may notify the person or entity conducting business in this state e-mailing or causing to be e-mailed, documents consisting of unsolicited advertising material for the lease, sale, rental, gift offer, or other disposition of any realty, goods, services, or extension of credit of the desire to cease e-mailing on behalf of all of the employees who may use employer-provided and employer-controlled e-mail addresses.

(i) This section, or any part of this section, shall become inoperative on and after the date that federal law is enacted that prohibits or otherwise regulates the transmission of unsolicited advertising by electronic mail (e-mail).

58 The Act defines “personal information” to include an individual’s first and last name, home and other physical address, e-mail address, social security number, and telephone number. 1999 S. 809; 106 S. 809.

59 15 U.S.C. §6501 et seq. A copy of the Act is available on the Federal Trade Commission Web site:

http://www.ftc.gov/privacy/index.html

60 16 C.F.R. Part 312. The Rules are available at the Federal Trade Commission Web site, supra.

61 See Benjamin I. Berman, Acting Secretary of the Federal Trade Commission, Federal Register Notice announcing Public Workshop on Proposed Regulations Implementing the Children’s Online Privacy Protection Act, Supplementary Information, June 23, 1999, 16 C.F.R. Part 312, Children’s Online Privacy Protection Rule at http://www.ftc.gov/os/1999/9906/kidsprivacy.htm.

62 For the official text of the European Union Privacy Directive, see Official Journal of the European Communities of 23 November 1995 No L. 281 p. 31. For an unofficial version, visit http://www.cdt.org/privacy/eudirective/EU_Directive_.html.

63 See, e.g., Mosceyunas, Anne K., On-Line Privacy: The Push and Pull of Self-Regulation and Law, Computer Law Section Newsletter, State Bar of Georgia, July, August, September, 1999, pp. 13-15; Cranman, Kevin A., Internet and Electronic Communication Privacy Issues: An Overview and Legislative Update, 14th Annual Computer Law Institute, Program Materials 1999, Part 10.

64 Winn, Jane K., Digital Signatures, Smart Cards, and Electronic Payment Systems, ICLE Fourteenth Annual Computer Law Institute, Sept. 24, 1999, p. 22.

65 See Joint Report on Data Protection Dialogue to the EU/US Summit, June 21, 1999.

66 Id.

67 See http://www.ibm.com/privacy/.

68 In Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988), the Fifth Circuit, applying Louisiana law, held that the shrinkwrap license was unenforceable. In this case, the Plaintiff, Vault Corporation, created software for Vault Corp.’s software developer customers to embed in their software to prevent their end user customers from using the software on more than one computer. When the Vault Corporation sold its software, it included a shrinkwrap license which was expressly authorized by a Louisiana statute and prohibited reverse engineering of the software. The defendant, Quaid, purchased the software and reversed engineered it. The Fifth Circuit held that the shrinkwrap license and the related statute were unenforceable because they were “pre-empted” by copyright law. The Court’s holding implies that if pre-emption does not apply, then the shrinkwrap license is enforceable. Most courts that have decided the issue have held that agreements prohibiting reverse engineering and disclosure of confidential information are not pre-empted by the Copyright Act because they involve an agreement between private consenting parties, and therefore are different from copyright which is imposed by statute. See, e.g., Computer Assoc. v. Altai, 982 F.2d 693 (2nd Cir. 1992).

69 See, e.g., Feist Publications, Inc. v. Rural Telephone Co. Serv., 499 U.S. 340, 111 S. Ct. 1282, 113 L.Ed. 2d 358 (1991). For additional materials on copyright law, see the writers’ law firm Web site at http://www.internetlegal.com. There is some concern among commentators that to allow unlimited use of shrinkwrap and clickwrap licenses to protect material not otherwise protected by copyright law could vitiate the copyright fair use doctrine.

70 This case dealt with the enforceability of a limitations of remedies clause contained in a shrinkwrap license.

71 See O.C.G.A. §10-12-2.

72 A “secure electronic signature” is defined as “an electronic or digital method executed or adopted by a party with the intent to be bound by or to authenticate a record, which is unique to the person using it, is capable of verification, is under the sole control of the person using it, and is linked to data in such a manner that if the data are changed the electronic signature is invalidated.” O.C.G.A. §10-12-3.

73 The Act provides, in Section 106, Legal Recognition of Electronic Records, Electronic Signatures, and Electronic Contracts:

(a) A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.

(b) A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.

(c) If a law requires a record to be in writing, or provides consequences if it is not, an electronic record satisfies the law.

(d) If a law requires a signature, or provides consequences in the absence of a signature, the law is satisfied with respect to an electronic record if the electronic record includes an electronic signature.

See UETA Sections 201, 301, and 401(a) (1998 Annual Meeting Draft); Uncitral Model Articles 5, 6, and 7.

74 A copy of the proposed Act is available online at www.law.upenn.edu/library/ulc/ulc.htm

75 The National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI) are responsible for overseeing updates to the Uniform Commercial Code. In 1995, a committee was formed to draft a separate UCC article to specifically address software licensing and electronic commerce. Various versions have been proposed and debated. The goal is to propose a version that most, if not all, of the state legislatures will adopt.

76 UCITA was approved by the National Conference of Commissioners on Uniform State Laws (NCCUSL) at its annual meeting in Denver at the end of July, 1999. Foster, Ed, UCITA Author Does Some Moonlighting for Money, Courtesy of Microsoft, InfoWorld: The Gripe Line, Oct. 11, 1999.

77 Graff, George L., Controversial Computer Act Offers Major Innovations: Proposed Uniform Statute for The Information Age Is Approved, Computer Law Strategist, Aug. 1999, Vol. XVI, No. 4.

78 Id.

79 Cassidy, Padraic, Attorneys General Object to Law Regulating Online Transactions, New Jersey Law Journal, Dec. 21, 1999.

80 See also http://www.ll.georgetown.edu/allwash/UCITA2html

81 For further analysis, see Koppel, Nathan, Cyber-Ad Jurisdiction Isn’t Automatic, Texas Lawyer, Sept. 27, 1999.

The information above is provided for general educational purposes and not as legal advice. Laws in areas in which we practice change continually and also vary from jurisdiction to jurisdiction. Therefore no visitor to our site should rely on any of the articles provided for legal advice, but should always consult their own attorney regarding legal matters.

© 2000, Rob Hassett, Atlanta, Georgia. All Right Reserved.

 

Recent Developments in Internet Law

Rob Hassett and Suellen W. Bergman

Hassett Cohen Goldstein & Port, LLP

990 Hammond Drive, Suite 990 Atlanta, GA 30328

(770) 393-0990

http://www.internetlegal.com

 

ACKNOWLEDGEMENTS

The writers wish to thank Robert Port, a partner in the above law firm, and Lori Brill, an associate in the above law firm, for their help in preparing these materials.

I.       Introduction

Over the past year, courts, Congress, and state legislatures have dealt with a number of different issues concerning the Internet, including:

1.         The enforceability of agreements entered into over the Internet;

2.         Spam;

3.         Under what circumstances is there liability for copying?

4.         How far will the courts go to restrict the use of marks as domain names, metatags and other uses on the Internet?

5.         What privacy rules apply?

6.         What is a Web site operator’s liability for a Web site which involves activity that is legitimate in some jurisdictions, but illegal in others?

These and other recent developments are discussed in this paper.

II.      What constitutes an enforceable agreement entered into over the Internet?

Agreements entered into over the Internet generally take one of two forms, either an exchange of  e-mail or clickwrap. Clickwrap agreements are agreements formed by a purchaser manifesting assent to the terms of an agreement online by pointing and clicking a mouse. An agreement based on an exchange of e-mails relating to subject matter which does not require a signed writing to be enforceable has been held to be effective. See, e.g., CompuServe, Inc. v. Richard S. Patterson, 89 F.3d 1257 (6th Cir. 1996). The controversies regarding the enforceability of agreements entered into over the Internet involve the enforceability of clickwrap agreements and whether agreements entered into over the Internet constitute signed writings.

A.        Clickwrap Agreements

The authors are not aware of any cases to date that directly address the issue of whether clickwrap agreements are enforceable. There is one case that implicitly holds that they are enforceable. A number of cases deal with whether shrinkwrap agreements (which we believe provide a useful legal analogy) are enforceable. The most important issue addressed by courts today regarding the enforceability of shrinkwrap agreements is whether or not shrinkwrap agreements are pre-empted by copyright law.

1.         The case that implicitly held that clickwrap licenses are enforceable is Hotmail Corp. v. Van Money Pie, Inc., (N.D. Cal. 1998) 47 U.S.P.Q. 2d (BNA) 1020 (1998); 1998 U.S. Dist. Lexis 10729 (April 16, 1998). In that case, the United States District Court for the Northern District of California granted the plaintiff a preliminary injunction in a case alleging that the defendants breached the terms of a service contract for using the plaintiff’s e-mail service. Without discussing the issue, the Court in that case implicitly held that the defendants were obligated to the terms of service on the Hotmail Web site. Users of that service agreed to those terms by clicking the “I agree” button.

2.         In ProCD, Inc., v. Zeidenberg, 86 F.3rd 1447 (7th Cir. 1996), ProCD developed and sold copies of a CD ROM containing a database of telephone numbers. The CD ROM box informed the consumers there was a shrinkwrap license inside the box. The shrinkwrap license provided that the purchaser was only receiving a license and the purchaser could not make copies of the product. Zeidenberg copied the database onto his own Web site and then provided access to the database via his Web site to customers for a fee. The Court rejected the holding of Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988), that shrinkwrap licenses are pre-empted by copyright law, and held that the ProCD shrinkwrap license was enforceable.(1) The Court thus provided a way for database developers to protect their databases (by contract) even though copyright law would probably not protect the database here. (2)

a.         Several courts have followed the ProCD decision: Microstar v. Formgen, Inc., 942 F. Supp. 1312 (S.D. Cal. 1996) (copying from a computer game); Hill v. Gateway 2000, Inc., 105 F.3rd 1147 (7th Cir.), cert. denied, 522 U.S. 808, 118 S.Ct. 47, 139 L.Ed.2d 13 (1997) (shrinkwrap license sent with a Gateway computer); Brower v. Gateway 2000, Inc., 246 A.D.2d 246, 676 N.Y.S.2d 569, 37 U.C.C. Rep. Serv. 2d (CBC) 54 (N.Y. App. Div. 1st Dep’t 1998) (allowed Gateway 2000 to require that any disputes be resolved by arbitration in Chicago, Illinois); and Mortenson Co., Inc. v. Timberline Software Corp., 93 Wash. App. 819, 831, 970 P.2d 803, 809 (1999) (upheld a shrinkwrap license agreement, included in the software, which was fairly standard and contained an “accept-or-return” provision).(3)

b.         Note that Section 112 of the Uniform Computer Information Transactions Act (UCITA), discussed infra, would modify ProCD somewhat because UCITA provides that where a mass-market purchaser licensee does not have an opportunity to review a mass-market license or a copy of it before becoming obligated to pay and does not agree, to the license after having the opportunity to review it, the licensee is entitled to return the product and (1) is entitled to reimbursement of any reasonable expenses incurred in complying with the licensor’s instructions for return or destruction of the computer information or, in the absence of instructions, incurred for return postage or similar reasonable expense in returning it; and, in some circumstances, (2) is entitled to compensation for any reasonable and foreseeable costs of restoring the licensee’s system. See UCITA Section 112.

A case which tangentially addressed the shrinkwrap issue is Step-Saver Sys. v. Wyse Tech. and The Software Link, 939 F.2d 91 (3rd Cir. 1991), where the Court applied the “battle of the forms” rules and determined that the parties’ agreement was complete when the goods were ordered via telephone coupled with the purchase order. The Court held that the shrinkwrap license was sent after the fact and thus had no effect. The Software Link’s shrinkwrap license was also held unenforceable for the same reason in Arizona Retail Sys., Inc. v. The Software Link, 831 F. Supp. 759 (D. Ariz. 1993).

3.       Generally, it appeared that the copyright pre-emption barrier raised in Vault Corp., supra, had been buried by ProCD and its progeny. However, in a case involving claims relating to the pitching of a marketing concept (which did not involve any kind of online agreement but could have repercussions in the online context), the United States District Court for the Western District of Michigan held that the claim was pre-empted by copyright law. See Wrench, LLC v. Taco Bell Corp., 51 F. Supp. 2d 840 (W.D. Mich. 1999), 51 U.S.P.Q.2d (BNA) 1238. The Court denied the claim of a company that had pitched the Chihuahua concept to Taco Bell and claimed Taco Bell used the concept without paying for it. The Court held that any implied contract was pre-empted by copyright law. The Court distinguished ProCD on the somewhat nebulous grounds that the ProCD agreement was in effect at the time of purchase (i.e. before use of the product) whereas the Taco Bell agreement was not supposed to take effect unless Taco Bell started using the Chihuahua concept (i.e. after use of the concept). Note that use or copying of a product (i.e. a copyrighted item) is the same action which triggers liability under copyright law. This case is in line with an earlier Louisiana case regarding shrinkwrap licenses: Vault Corp., supra.

B.      Signed Writings

Both clickwrap agreements and e-mail exchanges may cover transactions where signed writings are required under the applicable statute of frauds. A number of states now have some kind of a digital signature act. Most of these acts require that, to satisfy any statute of frauds, the electronic signature must be:

1.       Unique to the person using it,

2.       Capable of verification, and

3.       Under the sole control of the person using it.

See, e.g., Georgia Electronic and Signatures Act at O.C.G.A. §10-12-3 et seq. as originally enacted; the Utah Digital Signatures Act, Utah Code Ann. §46-3-101, et seq. (Supp. 1996). Before the enactment of O.C.G.A. §10-12-3 et seq., an argument could be made in Georgia that anything intended to be a signature would constitute a signature. See, e.g., Troutt v. Nash AMC-Jeep, Inc., 157 Ga. App. 399, 278 S.E.2d 54 (1981), which held that the printing of a company name at the bottom of a form constituted a signature, permitting a car dealer to meet certain state law requirements of providing a signed form. The latest developments in this area are discussed below.

1.       The newest version of Georgia’s statute, (4) Electronic Records and Signatures, which provides for broad acceptance of electronic signatures, reads, in pertinent part, as follows:

(a)        Records and signatures shall not be denied legal effect or validity solely on the grounds that they are electronic.

(b)        In any legal proceeding, an electronic record or electronic signature shall not be inadmissible as evidence solely on the basis that it is electronic.

(c)        When a rule of law requires a writing, an electronic record satisfies that rule of law.

(d)       When a rule of law requires a signature, an electronic signature satisfies that rule of law.

(e)        When a rule of law requires an original record or signature, an electronic record or electronic signature shall satisfy such rule of law.

(f)        Nothing in this Code section shall prevent a party from contesting an electronic record or signature on the basis of fraud.

O.C.G.A. §10-12-4 provides further as follows:

The term “electronic signature” is defined as “a signature created, transmitted, received, or stored by electronic means and includes but is not limited to a secure electronic signature.”(5) O.C.G.A. §10-12-3. The term “record” is defined as “information created, transmitted, received, or stored either in human perceivable form or in a form that is retrievable in human perceivable form.” O.C.G.A. §10-12-3.

2.       The proposed Uniform Electronic Transactions Act (UETA), which provides that “an electronic record or signature may not be denied legal effect or enforceability solely because it is in electronic form” and that “if a law requires a record to be in writing, an electronic record satisfies the law”(6) has been approved by the National Conference of Commissioners on Uniform State Laws, and the Conference has voted to present the Act to states for adoption. (7)

The Electronic Transactions Act has been passed in California. California’s Governor signed the Uniform Electronic Transactions Act on September 16, 1999, and it was chaptered (Chapter No. 428) by the Secretary of State on the same date. See CA S.B. 820.

3.       The Uniform Computer Information Transactions Act (former proposed UCC Article 2B). The legal rules for computer information transactions which was to be promulgated by the National Conference of Commissioners on Uniform State Laws (8) as Article 2B of the Uniform Commercial Code, instead is being proposed as the Uniform Computer Information Transactions Act (UCITA).(9) The Act is the first general commercial statute to provide comprehensive procedures and rules for computer software licensing. Most of those rules would also be appropriate for a broad range of transactions outside UCITA’s scope, and it is expected that they will form the model for several future articles of the UCC as they did for the Uniform Electronic Transactions Act (UETA), which was approved at the same time.(10) The provisions include:

an express recognition of electronic records as the equivalent of writings, rules for attribution of electronically generated messages, methods for establishing authentication, rules for allocating losses caused by electronic errors, and rules for determining when electronic messages are deemed to be effective. A particularly noteworthy provision recognizes the enforceability of agreements made by the interaction of “electronic agents,” even if no human was directly involved in either or both sides of the “negotiation.” (11)

Software publishers and computer manufacturers strongly support UCITA, but it is as strongly opposed by a wide range of groups. UCITA is controversial because:

UCITA represents a movement toward licensing of information in its many forms and away from the sale of copies as traditionally understood under copyright law. UCITA would enforce the broad [consumer] use of “shrink-wrap” and computer “click-on” licenses (called “mass-market licenses” in UCITA). By licensing rather than selling something, a vendor can wield more control of the downstream use of the product. Placing new constraints on the use of information in mass-market transactions can, in turn, constrain the use of information for important public purposes such as democratic speech, education, scientific research, and cultural exchange. Many believe that UCITA fails to appreciate the strong public interest in prohibiting new restrictions on information exchange.

The scope of UCITA is extremely broad. “Computer information,” under UCITA, includes everything from copyrighted expression, such as stories, computer programs, images, music and Web pages; to other traditional forms of intellectual property such as patents, trade secrets, and trademarks; to newer digital creations such as online databases and interactive games. Although the statute claims to be limited to information in electronic form, it allows other transactions to “opt-in” to being governed by UCITA.

Many legal community commentators are of the opinion that UCITA (or something like it) is not necessary or, at least, it is premature. This view is based on the opinion that existing common law and copyright law are developing appropriately to handle the new types of information-based transactions emerging in the information economy.

The American Law Institute (ALI), consumer advocacy groups, libraries, and the Federal Trade Commission have continued to criticize and/or oppose the UCITA proposal and prior UCC 2B drafts, yet their concerns have not been addressed. Instead, NCCUSL intends to push the UCITA proposal as quickly as possible to state legislatures.

A Quick Look at the Uniform Computer Information Transactions Act (UCITA), American Association of Law Libraries: Washington Affairs, July 15, 1999.(12)

4.         Ballas v. Tedesco, 41 F.Supp. 2d 531 (D.N.J. 1999). This case addresses the issue of whether an exchange of e-mails can satisfy the requirement that assignments of copyrights are not effective unless they are in writing and signed by the transferor. See, Copyright Act §201(d). In this case, Tedesco wanted to produce a CD of dance music for Ballas. Ballas would pay Tedesco a fee for the musical arrangements and production of the CD, and Ballas would have the exclusive right to manufacture copies of the CD for sale. Negotiations, via e-mail, were unsuccessful, and the parties did not agree on terms of the arrangement. The parties agreed that the music content copyright belonged to the Defendant. The Court enjoined the Plaintiff from making or selling the music on the CD because the Court found that there was no valid assignment of the copyright since there was no written assignment.

III.    Spam (13)

A.        Spam cases

1.         Hartford House, Ltd. d/b/a/ Blue Mountain Arts v. Microsoft Corp., CV 778550, Sup. Ct. Cal. Santa Clara County, 1998. Blue Mountain creates and sends electronic greeting cards. In this lawsuit, Blue Mountain charged that (1) Microsoft has a competing electronic greeting card Internet site and (2) Microsoft distributed a trial version of Internet Explorer which includes an e-mail filter that identifies Blue Mountain’s cards as spam and sends them into a junk mail folder instead of sending them to the intended recipient. On December 17, 1998, Judge Robert Baines ordered Microsoft to provide Blue Mountain with the necessary information to enable Blue Mountain to alter its e-mail notification messages and greeting cards to ensure that they pass through Microsoft’s anti-spam filtering tool in the beta version of Internet Explorer 5.0. (14)

2.         Intel v. Hamidi, Superior Court of California, County of Sacramento, Judge John R. Lewis, April, 1999. Ken Hamidi was dismissed from Intel in 1995. On six occasions between 1996 and 1998, he sent e-mail messages to over 30,000 Intel employees, which detailed his opinion of the company’s abusive and discriminatory employment practices. In April, 1999, Judge Lewis granted summary judgment to Intel, finding that Hamidi’s messages trespassed on Intel’s proprietary computer system and caused harm. This decision has been criticized (15) because (1) although there was arguably no state action,(16) Judge Lewis did not engage in any First Amendment analysis and (2) given the serious purpose of Hamidi’s messages and the minimal harm they caused to Intel’s computers, Hamidi’s free speech rights should prevail over Intel’s property rights in a fair balancing test.

3.         The Tenth Circuit, in U.S. West v. FCC, 182 F.3d 1224 (10th Cir. 1999), held that U.S. West could not be blocked by an FCC rule from using information obtained from customers regarding who the customers called, and other similar data, for marketing to those individuals because such prohibition was “a violation of the First Amendment.” The Court reasoned that such use constituted commercial speech, applied the First Amendment commercial speech analysis, and held that the proposed FCC rule was unconstitutional. The test (17) was as follows:

First, determine whether the commercial speech concerns lawful activity and is not misleading. If so, the speech can only be restricted if:

(1)        the government has a substantial state interest in regulating the speech;

(2)        the regulation directly and materially advances that interest; and

(3)        the regulation is no more extensive than necessary to serve the governmental interests.

Surprisingly, the Court found that the rule was not narrowly tailored because it did not do such things as allow phone customers to opt in or opt out (assuming that there is a serious desire by telephone company customers to have their personal calls tracked and used for marketing purposes). This indicates that some anti-spam statutes may violate free speech if they completely prohibit spam without considering other alternatives.

This case is troubling because:

(1)        it allows telephone companies that track customer calls to use that information to market to those customers, and

(2)        this analysis could support a First Amendment right to send spam.

As in other spam cases, U.S. West involves a “captive,” as opposed to a “voluntary,” audience. (18)

To date, the cases that have held spam to be illegal involved claims of Internet Service Providers and Intel,(19) that spam is a form of trespass. This analysis of spam as a trespass is not as vulnerable to a First Amendment attack as a state or federal statute prohibiting spam. See, e.g., CompuServe, Inc. v. Cyber Promotions, Inc., 962 F. Supp. 1015 (S.D. Ohio 1997) (holding that a private company’s motion seeking a court to enjoin “spam trespass” did not constitute state action subject to a First Amendment attack).(20)

B.        Federal Legislation

A proposed federal statute regarding unsolicited bulk e-mail was introduced in the House on May 5, 1999: Internet Freedom Act, 106 H.R. 1686. (21) This Act, in proposed Section 104, entitled “Protection from Fraudulent Unsolicited E-Mail,” would amend 18 U.S.C. § 1030 such that, inter alia, it would be a violation of the Act to “intentionally and without authorization initiate the transmission of a bulk unsolicited electronic mail message to a protected computer with knowledge that such message falsifies an Internet domain,(22) header information, date or time stamp, originating e-mail address or other identifier” or to sell or distribute a computer program which (a) “is designed or produced primarily for the purpose of concealing the source or routing information of bulk unsolicited electronic mail messages (23) in a manner prohibited by” the Act, (b) “has only limited commercially significant purpose or use other than to conceal such source or routing information,” or (c) “is marketed by the violator or another person acting in concert with the violator and with the violator’s knowledge for use in concealing the source or routing information of such messages.” The Act provides for the following potential damages for various offenses: injunctive relief and other equitable relief, actual monetary losses, statutory damages of $15,000 per violation or an amount of up to $10 per message per violation, whichever is greater; reasonable attorneys’ fees, and other litigation costs.

C.        State Legislation

Some states have passed laws regarding unsolicited e-mail.

1.         Washington State: Wash. Rev. Code § 19.190.020 (1999), entitled “Unsolicited or Misleading Electronic Mail — Prohibition,” provides as follows:

(1)        No person, corporation, partnership, or association may initiate the transmission of a commercial electronic mail message from a computer located in Washington or to an electronic mail address that the sender knows, or has reason to know, is held by a Washington resident that:

(a)        Uses a third party’s Internet domain name without permission of the third party, or otherwise misrepresents any information in identifying the point of origin or the transmission path of a commercial electronic mail message; or

(b)        Contains false or misleading information in the subject line.

(2)        For purposes of this section, a person, corporation, partnership, or association knows that the intended recipient of a commercial electronic mail message is a Washington resident if that information is available, upon request, from the registrant of the Internet domain name contained in the recipient’s electronic mail address.

2.         Nevada’s statute focuses on spam which contains advertisements. Nev. Rev. Stat. 41.730, entitled “Liability of Persons Who Transmit Items of Electronic Mail That Include Advertisements,” provides:

1.         Except as otherwise provided in Nev. Rev. Stat. 41.735, (24) if a person transmits or causes to be transmitted to a recipient an item of electronic mail (25) that includes an advertisement, the person is liable to the recipient for civil damages unless:

(a)        The person has a preexisting business or personal relationship with the recipient;

(b)        The recipient has expressly consented to receive the item of electronic mail from the person; or

(c)        The advertisement is readily identifiable as promotional, or contains a statement providing that it is an advertisement, and clearly and conspicuously provides:

(1)        The legal name, complete street address and electronic mail address of the person transmitting the electronic mail; and

(2)        A notice that the recipient may decline to receive additional electronic mail that includes an advertisement from the person transmitting the electronic mail and the procedures for declining such electronic mail.

2.         If a person is liable to a recipient pursuant to subsection 1, the recipient may recover from the person:

(a)        Actual damages or damages of $10 per item of electronic mail received, whichever is greater; and

(b)        Attorney’s fees and costs.

3.         In addition to any other recovery that is allowed pursuant to subsection 2, the recipient may apply to the district court of the county in which the recipient resides for an order enjoining the person from transmitting to the recipient any other item of electronic mail that includes an advertisement.

3.         California has also passed a law dealing with unsolicited bulk e-mail (which also applies to unsolicited faxes). This California Statute requires that the sender of unsolicited advertisements advise the e-mail recipient that the e-mail is an advertisement by placing the characters “ADV:” first in the subject line and also requires that the sender provide the recipient a return address or a toll-free number where the recipient can request that the sender refrain from sending additional unsolicited e-mail. See Cal. Business & Professions Code §17538.4. (Division 7, Part 3, Chapter 1) (Deering 1999), entitled “Unsolicited fax or e-mail.”(26)

IV.     Copyright

Several recent Internet related cases and statutes involve copyright issues, including the rights to sound recordings, distribution and derivative rights, and copyright term.

A.        Legislation

The Digital Millennium Copyright Act of 1998 (105 P.L. 304; 112 Stat. 2860)

1.         Exempts Internet service providers from liability for copyright infringement under certain circumstances;

2.         Makes it illegal to circumvent technology used to prevent copyright infringement(27) and, inter alia (this provision is to take effect two (2) years from October 28, 1998);

3.         Expands the rights of owners of sound recordings to restrict performance (or in some cases receive set royalties for) of their sound recordings from what was covered by the Digital Sound Recording Act of 1995 (28) to any sound recordings provided over the Internet whether or not it is via subscription or interactive (this provision is effective as of the date of enactment).

B.        RIAA v. Diamond Multimedia Sys., Inc., 29 F. Supp. 2d 624 (C.D. Cal. 1998) aff’d, 180 F.3d 1072 (9th Cir. 1999), 51 U.S.P.Q.2d (BNA) 1115.

The Court of Appeals for the Ninth Circuit affirmed the denial of a preliminary injunction finding that Diamond Multimedia, the maker of Rio,(29) had not violated the Audio Home Recording Act of 1992 (30) with the Rio because the Rio could not make copies except from a hard drive. The Court found that such copying was not covered by the Act. However, on August 4, 1999, Diamond Multimedia and the RIAA announced that they entered into a settlement agreement. RIAA’s general counsel and senior executive vice president, Cary Sherman, stated that this “announcement makes clear that the future of the digital music marketplace will be created in the marketplace itself, enabled by initiatives like SDMI [Secure Digital Music Initiative].”(31) While the authors have not been able to obtain details of the settlement reached between RIAA and Diamond Multimedia, one can infer from what has been published that the terms probably include a requirement that Diamond incorporate technology which prevents serial copying.

C. Tasini v. New York Times Co., 1999 U.S. App. LEXIS 23360 (2d Cir. 1999).

A federal district court in New York held that making publication information accessible on Lexis-Nexis and other similar data bases “constitutes reproduction and distribution of freelance contributions as part of that particular collective work.” Tasini v. The New York Times Co., 972 F.Supp. 804 (S.D.N.Y. 1997), 43 U.S.P.Q.2D (BNA) 1801. The District Court held that the publishers were protected by a privilege afforded to publishers of “collective works” under Section 201(c) of the Copyright Act, but the Second Circuit reversed this decision in Tasini v. New York Times Co., 1999 U.S. App. LEXIS 23360 (2d Cir. 1999). The Second Circuit concluded that “the Publishers’ licensing of Authors’ works to UMI for inclusion in these databases is not within the Section 201(c) revision privilege.” Id. at *22. The Court continued:

The relevant inquiry under Section 201(c), is . . . whether the republication or redistribution of the copyrighted piece is as part of a collective work that constitutes a “revision” of the previous collective work, or even a “later collective work in the same series.” If the republication is a “new anthology” or a different collective work, it is not within the privilege. H.R. Rep. No. 94-1476, at 122-23 (1976), reprinted in 1976 U.S.C.A.A.N. 5659, 5738. Because NYTO is for present purposes at best a new anthology of innumerable editions of the Times, and at worst a new anthology of innumerable articles from these editions, it cannot be said to be a “revision” of any (or all) particular editions or to be a “later collective work in the same series.”

Id. at *22-23. Accord Ryan v. Carl Corp., 23 F. Supp. 2d 1146, 1150 (N.D. Cal. 1998), 48 U.S.P.Q.2D (BNA) 1626 (commenting that “calling the reproduction of a single article a “revision” of a collected work, however, is more strained than even a flexible interpretation can withstand” and construing Section 201(c) of the Copyright Act in the authors’ favor).

D.        Challenging the constitutionality of Sonny Bono Copyright Term Extension Act of 1998 (CTEA).(32)

The Sonny Bono Copyright Term Extension Act of 1998 has been criticized as copyright overprotection, rather than copyright extension. This Act is important to the Internet because it reduces the benefits of those Internet sites that provide digital copies of public domain works.

Some have criticized the CTEA because it offers an extension of the term of copyrights for an author or creator without any reciprocal requirement of the author or creator. Also, the CTEA delays works from entering the public domain, without any corresponding benefit to society. One such critic of the CTEA, Lawrence Lessig, the Berkman Professor of Law at Harvard Law School, has filed a lawsuit on behalf of Eldritch Press,(33) a non-profit organization that posts literary works on the Internet when they have entered the public domain.(34)

Article I, Section 8 of the United States Constitution states that Congress may “promote the Progress of Science and useful arts, by securing for limited times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries” (emphasis added). In 1790, this limited time period of copyright was twenty-eight years. Subsequently, Congress enacted a series of extensions, which provide for copyright terms of up to seventy-five years. These extensions retroactively extended the copyright for works which were written many years ago that would otherwise soon enter the public domain.(35) The Sonny Bono Copyright Term Extension Act of 1998 has again retroactively extended the copyright terms; this extension is challenged in the Eldritch lawsuit. The plaintiffs argue that (1) the retroactive extension in the Sonny Bono Copyright Extension Act violates the constitutional “limited times” requirement for constitutional exclusive rights to “writings and discoveries” and (2) the retroactive and prospective extensions violate the First Amendment because they suppress speech without promoting any respective governmental interests. The Sonny Bono Copyright Extension Act has also been criticized by some as merely a vehicle which Disney (which lobbied for the Act) will benefit from, because Mickey Mouse would have entered the public domain in 2004. Under the Sonny Bono Act, however, Mickey will remain Disney’s copyright until 2023.(36)

V.      Domain Names and Marks

Domain names give an entity an Internet identity and enable the public to locate an entity on the Internet.

A.        Case law Registration of a competitor’s mark as a domain name (hijacking) was held to be legal in Juno Online Servs., L.P. v. Juno Lighting, Inc., 979 F.Supp. 684 (N.D. Ill. 1997), 44 U.S.P.Q.2D (BNA) 1913.

B.        Playboy Enters., Inc. v. Welles, 7 F.Supp.2d 1098 (S.D. Ca. 1998), 47 U.S.P.Q.2D (BNA) 1186, aff’d, 1998 U.S. App. LEXIS 27739 (9th Cir. 1998). A former playmate was permitted to state her association with Playboy (PEI)(37) on her own Web site. The heading of the defendant’s Web site is “Terri Welles–Playmate of the Year 1981,” and title of the link page is “Terri Welles–Playboy Playmate of the Year 1981.” Each of the pages uses “PMOY ’81” as a repeating watermark in the background. According to defendant, eleven of the fifteen free Web pages include a disclaimer at the bottom of the pages which indicates that the Web site is not endorsed by Playboy. Id. at 1100. Playboy moved for a preliminary injunction which would enjoin defendant from (1) using the trademarked term “Playmate of the Year” in the title of the home page and the link page; (2) from using the watermark “PMOY ’81” in the background; and (3) from using the trademarked terms “Playboy’ and ‘Playmate” in the meta-tagging of defendant’s site. The Court denied a preliminary injunction because the trademarks that defendant uses, and the manner in which she uses them, describe her and identify her. Therefore the Court held that the defendant has made a “fair use” of these marks(38) and her site was not confusingly similar to Playboy’s site.

C.        Playboy Enters., Inc. v. Netscape Communications Corp., 55 F. Supp. 2d 1070 (C.D. Ca. 1999). This case involves the sale of online banner ads keyed to specific search terms: “playboy” and “playmate.” The Court ruled that the terms “playboy” and “playmate” are generic and that Playboy has no monopoly on those words in all forms. Consequently, the Court denied Playboy’s request for a preliminary injunction against Excite, Inc. and Netscape Communications Corporation finding that the sale of those search keywords to third-party advertisers which operate adult entertainment sites does not constitute trademark infringement or dilution.

D. Avery Dennison Corp. v. Sumpton, 1999
U.S. App. LEXIS 19954 (9th Cir. 1999) 51 U.S.P.Q.2D (BNA) 1801. This was an appeal of a case in which an entity which maintained domain registrations for individual names that included among other surnames, “Avery.net” and “Dennison.net” was held not to have diluted the “Avery Dennison” mark. The Ninth Circuit reversed the District Court’s holding that there was dilution. The Ninth Circuit held that:

1.         The Avery Dennison mark was not famous because it was not “truly prominent and renowned” so that even marks “with such powerful consumer associations and even non-competing users can impinge on their value.” Avery, 1999 U.S. App. LEXIS 19954, *13. The Court pointed out that there were many registrations of marks and uses of the marks “Avery” and “Dennison” by others, and this factor weighs against those being famous marks.

2.         The Court also said that although “an intent to arbitrage” constituted a commercial use, an intent to “capitalize on the surname status of ‘Avery’ and ‘Dennison’ did not constitute a commercial use of a mark.” Id. at *30.

E.        Anti-Cybersquatting Consumer Protection Act

The United States Senate has passed a proposed act, entitled the Anti-Cybersquatting Consumer Protection Act (S. 1255), which would:

1.         Allow the bringing of an in rem action(39) against the domain name that had been registered in violation of the Act; and

2.         Permit recovery for cybersquatting, i.e. allow trademark holders to obtain civil damages from those who register domain name identifiers which are identical or similar to their mark: the trademark holder can recover damages of at least $1,000.00, but not more than $100,000.000 per domain name identifier.

F.         Ringling Bros.-Barnum & Bailey Combined Shows v. Utah Div. of Travel Dev., 170 F.3d 449 (4th Cir. 1999), 50 U.S.P.Q.2d (BNA) 1065, held that Ringling Brothers could not prevent Utah from using “The Greatest Snow on Earth” as a slogan for Utah’s winter sports attractions because the Federal Anti-Dilution law was held to require a showing of “actual economic harm” to the famous marks’ economic value by lessening its former selling power as an advertising agent for its goods or services. Proof of this harm should be demonstrated by surveys and showing actual loss.

G.        The First Circuit, in I.P. Lund Trading A.P.S. v. Kohler Co., 163 F.3d 27, 49 U.S.P.Q.2d (BNA) 1225 (1st Cir. 1998), specifically rejected the “lessening of demand for the product” test that had been applied by the Fourth Circuit in the Ringling Brothers case.

H.        ICANN

ICANN is the new non-profit body responsible for domain name system management, IP address allocation, and related functions. ICANN was established last year to (a) phase out the government’s involvement in the domain name system and (b) to end the monopoly held by Network Solutions Inc. (Nasdaq: NSOL), by opening up the registration of such popular domains as “.com” and “.net” to additional companies. In the past year:

1.         An Internet tax ICANN sought to impose was rejected. ICANN had funding problems and sought to impose a charge on all new Internet domain names payable to ICANN. A Congressional committee started an investigation and ICANN backed down on this.

2.         Open meetings were initiated. ICANN was originally holding closed-door meetings. Criticisms erupted and ICANN appears to have changed its procedures and now holds open meetings.

3.         Criticism by Ralph Nadar’s organization:

Ralph Nader, a consumer rights advocate, challenges how ICANN’s power is controlled and proposes “that the group’s authority should be based on a multilateral government charter that clearly defines and limits the organization’s authority.” He has previously criticized the “beleaguered organization for catering to corporate interests and overextending its authority.”(40)

a.         Nader argues that the right to have an Internet domain name should be considered on par with the right to have a street address, a phone number, or a name.

b.         Nader wants ICANN’s internal documents and budget available to the public.

c.         Nader invites public comment to his thirteen point proposal(41) at mailto:ralph@essential.

4.         An additional controversy exists regarding the registration of domain names. A number of entrepreneurs have also tried to change the organization of the domain naming systems by allowing for the private ownership of new top level domain names. Their proposal is that private companies that create a top level domain name and are able to obtain market acceptance of it should own the rights to register and run the registry of those domain names. Although the White House at one time appeared to favor this approach, ICANN has, to date, rejected any such proposal.

5.         The U.S.P.T.O. weighs in. The “Green Paper” and the “White Paper” were drafted under Ira Magaziner’s direction when he was in the White House. Mr. Magaziner appeared to be somewhat sympathetic to the proposed market-oriented approach for adding top level domain names. Becky Burr,(42) at the Department of Commerce, now appears to be in charge of policies regarding these issues and seems opposed to the marketing approach of adding top level domain names.

The U.S.P.T.O., as of May 18, 1999, allows the registration of second level domain names stating on its Web site at http://www.uspto.gov/web/offices/tac/domain/tmdomain.htm:

An Internet domain name that is used to identify and distinguish the goods and/or services of one person, from the goods of and/or services of others, and to indicate the source of the goods and/or services may be registered as a trademark in the U.S.P.T.O.

On the other hand, the U.S.P.T.O. is hostile to the registration of top level domain names stating in its policy dated September 29, 1999 in Guide No. 2-99 available at http://www.uspto.gov/web/offices/tac/notices/guide299.htm:

If a mark is composed solely of a TLD for “domain name registry services” (e.g., the services currently provided by Network Solutions, Inc. of registering .com domain names), registration should be refused under Trademark Act §§1, 2, 3 and 45, 15 U.S.C. §§1051, 1052, 1053 and 1127, on the ground that it the TLD would not be perceived as a mark. The examining attorney should include evidence from the NEXIS® database, the Internet, or other sources to show that the proposed mark is currently used as a TLD or is under consideration as a new TLD.

If the TLD merely describes the subject or user of the domain space, registration should be refused under Trademark Act §2(e)(1), 15 U.S.C. §2(e)(1), on the ground that the TLD is merely descriptive of the registry services.

The U.S.P.T.O. has also rejected applications to register proposed top level domain names for services other than just “domain name registry services.” The writers are unaware of the U.S.P.T.O. granting any registrations of proposed top level domain names to date regardless of the services with which those proposed domain names are associated.

VI.     Privacy

The latest developments concerning privacy on the Internet relate to the passage of the Children’s Online Privacy Protection Act of 1998 and the effect of the European Privacy Directive.

A.        Legislation

The Children’s Online Privacy Protection Act of 1998 (COPPA), 64 Fed. Reg. 22750 (April 27, 1999), forbids the collection and distribution of minors’ personal information(43) without parental consent and restricts distribution and use of that information. This Act is intended to provide protection to the individually identifiable data of children as collected by Internet Service Providers or Web site operators. The Act is supposed to be implemented by FTC rules which should be in place between eighteen and thirty months from COPPA’s enactment. The FTC has not yet issued any final rules, but interim rules were proposed on April 20, 1999:

Of particular importance is the COPPA requirement that, with certain exceptions, Web sites obtain “verifiable parental consent” before collecting, using, or disclosing personal information from children. Section 312.5 of the proposed rule sets forth this requirement along with the following performance standard:

An operator must make reasonable efforts to obtain verifiable parental consent, taking into consideration available technology. Any method to obtain verifiable consent must be reasonably calculated, in light of available technology, to ensure that the person providing consent is the child’s parent. (64 Fed. Reg. 22756)

In its discussion of this section, the Commission identified a number of methods an operator might use to obtain verifiable parental consent, including a print-and-send form signed by the parent and mailed or faxed to the Web site; a credit-card transaction initiated by the parent; a call made by the parent to a toll-free number; or an e-mail accompanied by the parent’s valid digital signature. The Commission also solicited comment on whether there are other e-mail based mechanisms that could provide sufficient assurance that the person providing consent is the child’s parent. (64 Fed. Reg. 22756, 22762) (44)

B.        European Union Privacy Directive

The European Union (EU), in its European Union Privacy Directive,(45) has granted broad rights to individuals about whom personal information is collected and stored in databases. This EU position, based on the idea that privacy is a fundamental human right, is more rigorous than the United States’ position, which does not provide as extensive access to individuals to review this kind of information and has relatively few restrictions on the use of such personal information.(46) This conflict between the EU position and the US position has threatened international electronic commerce.(47) Therefore, the US Department of Commerce negotiated with EU representatives and proposed safe harbor principles for American companies to use in determining whether they comply with EU data protection laws.(48) The “safe harbor” arrangement is expected to be finalized in the fall of 1999. (49)

Major companies are now requiring sites in which they advertise to meet these standards and the proposed safe harbor provision. For example, IBM’s policy(50) on personal information states that it will inform the consumer how it will use the personal information collected:

At IBM, we intend to give you as much control as possible over your personal information. In general, you can visit IBM on the Web without telling us who you are or revealing any information about yourself. There are times, however, when we may need information from you, such as your name and address. It is our intent to let you know before we collect personal information from you on the Internet.

If you choose to give us personal information via the Internet that we or our business partners may need — to correspond with you, process an order or provide you with a subscription, for example – it is our intent to let you know how we will use such information. If you tell us that you do not wish to have this information used as a basis for further contact with you, we will respect your wishes. We do keep track of the domains from which people visit us. We analyze this data for trends and statistics, and then we discard it.

VII.        First Amendment: Child Online Protection Act

The Child Online Protection Act was held unconstitutional in ACLU v. Reno, 1998 U.S. District Lexis 18546 (E.D. Pa. 1998) and ACLU v. Reno, 31 F.Supp. 2d 473 (E.D. Pa. 1999), but there have not been any decisions from the appellate level yet.

VIII.      Jurisdictional Issues

A.        There have also been some interesting recent cases relating to jurisdiction. First, according to the Internet Newsletter, August 1999, a New York trial court has held that a gambling site in Antigua that would not allow gambling on the site if anyone gave an address in a state that prohibited gambling but did not take any other further steps to verify the address’ accuracy constituted a violation of New York State’s prohibitions on gambling and the Federal Wire Act, the Travel Act, and the Interstate Transportation of Wagering Paraphernalia Act. People v. World Interactive Gaming Corp., N.Y. Sup. Ct., N.Y. Co. (July 24, 1999).

B.        Coastal Video Communications Corp. v. Staywell Corp., 1999 U.S. Dist. LEXIS 11827 (E.D. Va. 1999). In a copyright case where one company alleged that its employee handbook had been infringed by another company, the District Court held that whether there was long-arm statute jurisdiction depended on whether the defendant had actually sold its publication, not just attempted to sell its publication, in Virginia. The Court also said that even if such copies were sold in Virginia, that would not be enough to grant specific jurisdiction in that case because the declaratory judgment action that had been filed does not “arise from the sale of the defendant’s publication” but rather from its very existence. Perhaps the lesson from this case, if you desire to get jurisdiction, is to file an infringement action in a copyright case instead of a declaratory judgment.

C.        Where a Virginia resident sued out of state defendants for posting allegedly defamatory material (one defendant posted the material on servers in Virginia via “AOL” and the other defendant posted the material on servers outside Virginia but was held by the Court to be doing business in Virginia from its Web site), a District Court for the Eastern District of Virginia held that there was a tort in the State of Virginia, and there were sufficient minimum contacts to allow for jurisdiction. Bochan v. LaFontaine, 1999 U.S. Dist. LEXIS 8253 (E.D. Va. 1999).

D.        In a similar case, Melvin v. Doe, Cir. Ct. of Loudoun County, Civil No. 21942 (June 24, 1999), a Virginia Court held that where both the plaintiff and the defendant were Pennsylvania residents, even though a tort may have occurred in Virginia by defamatory material being placed on the AOL server in Virginia, there were not sufficient minimum contacts to meet the jurisdiction requirements for personal jurisdiction.

E.         In Mink v. AAAA Dev., 1999 U.S. App. LEXIS 22783 (5th Cir. 1999), the Fifth Circuit articulated a structure for determining when a court can assume jurisdiction of a company with a presence in cyberspace.

1.         The Fifth Circuit followed the sliding scale in Zippos Mfg. Co. v. Zippo Dot Com, 952 F. Supp. 1119, 1124 (W.D. Pa. 1997), setting out three levels of Internet business. (51)

a.         First, companies which merely advertise or post information about their business on the Internet with “passive” Web sites cannot be sued out of state simply because they maintain the Web site. In Mink, the company’s Web site “provides users with a printable mail-in order form, AAAA’s toll-free telephone number, a mailing address, and an electronic mail (“e-mail”) address, [and] orders are not taken through AAAA’s website [sic]. This does not classify the website [sic] as anything more than a passive advertisement.” Mink at *7.

b.         The second category consists of companies whose Web site allows a user to exchange information with a host computer. Citing Zippos, the Court reasoned that “the exercise of jurisdiction is determined by the level of interactivity.” Mink at *7 – *8.

c.         The companies which enter into contracts with out-of-state residents that involve the “knowing and repeated transmission of computer files over the Internet,” can be sued in the home state of the out of state residents. Mink at *8 -*9.

IX.     Conclusion

We are now at the point where there are judicial precedents and/or proposed statutes resolving many previously troubling Internet issues. Future cases are likely to focus more on reconciling the conflicts between intellectual property rights and/or privacy rights, on one hand, and free speech rights, on the other hand.

END NOTES

(1) In Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988), the Fifth Circuit, applying Louisiana law, held that the shrinkwrap license was unenforceable. In this case, the Plaintiff, Vault Corporation, developed software for Vault Corp.’s software developer customers to embed in their software to prevent their end user customers from using the software on more than one computer. When the Vault Corporation sold its software, it included a shrinkwrap license which was expressly authorized by a Louisiana statute and prohibited reverse engineering of the software. The defendant, Quaid, purchased the software and reversed engineered it. The Fifth Circuit held that the shrinkwrap license and the related statute were unenforceable because they were “pre-empted” by copyright law. The Court’s holding implies that if pre-emption does not apply, then the shrinkwrap license is enforceable. Most courts that have decided the issue have held that agreements prohibiting reverse engineering and disclosure of confidential information are not pre-empted by the Copyright Act because they involve an agreement between private consenting parties, and therefore are different from copyright which is imposed by statute. See, e.g., Computer Associates v. Altai, 982 F.2d 693 (2nd Cir. 1992).

(2) See, e.g., Feist Publications, Inc. v. Rural Telephone Company Service, 499 U.S. 340, 111 S. Ct. 1282, 113 L.Ed. 2d 358 (1991). For additional materials on copyright law, see the writers’ law firm Web site at http://www.internetlegal.com. There is some concern among commentators that to allow unlimited use of shrinkwrap and clickwrap licenses to protect material not otherwise protected by copyright law could vitiate the copyright fair use doctrine.

(3) This case also dealt with the enforceability of a limitations of remedies clause contained in a shrinkwrap license.

(4) See O.C.G.A. §10-12-2.

(5) A “secure electronic signature” is defined as “an electronic or digital method executed or adopted by a party with the intent to be bound by or to authenticate a record, which is unique to the person using it, is capable of verification, is under the sole control of the person using it, and is linked to data in such a manner that if the data are changed the electronic signature is invalidated.” O.C.G.A. §10-12-3.

(6) The Act provides, in Section 106, Legal Recognition of Electronic Records, Electronic Signatures, and Electronic Contracts

(a)        A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.

(b)        A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.

(c)        If a law requires a record to be in writing, or provides consequences if it is not, an electronic record satisfies the law.

(d)       If a law requires a signature, or provides consequences in the absence of a signature, the law is satisfied with respect to an electronic record if the electronic record includes an electronic signature.

See UETA Sections 201, 301, and 401(a) (1998 Annual Meeting Draft); Uncitral Model Articles 5, 6, and 7.

(7) A copy of the proposed Act is available online at www.law.upenn.edu/library/ulc/ulc.htm

(8) The National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI) are responsible for overseeing updates to the Uniform Commercial Code. In 1995, a committee was formed to draft a separate UCC article to specifically address software licensing and electronic commerce. Various versions have been proposed and debated. The goal is to propose a version that most, if not all, of the state legislatures will adopt.

(9) UCITA was approved by the National Conference of Commissioners on Uniform State Laws (NCCUSL) at its annual meeting in Denver at the end of July, 1999. Foster, Ed, UCITA Author Does Some Moonlighting for Money, Courtesy of Microsoft, InfoWorld: The Gripe Line, Oct. 11, 1999.

(10) Graff, George L., Controversial Computer Act Offers Major Innovations: Proposed Uniform Statute for The Information Age Is Approved, Computer Law Strategist, Aug. 1999, Vol. XVI, No. 4.

(11) Id.

(12) See also http://www.ll.georgetown.edu/allwash/UCITA2html

(13) Spam is the name given for unsolicited e-mail messages which flood the Internet. Spam generally consists of commercial advertising (sometimes for adult oriented Web sites or get-rich-quick schemes).

(14) A copy of this Order is attached as Appendix A.

(15) See William M. McSwain, The Long Arm of Cyber-Reach, 112 Harv. L. Rev. ___ (Issue 7, May, 1999).

(16) See, CompuServe, Inc. v. Cyber Promotions, Inc., 962 F.Supp. 1015 (S.D. Ohio 1997) in which the court held that enjoining the sending of spam to CompuServe’s customers was based on a trespass action that didn’t involve First Amendment considerations.

(17) See Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of N.Y., 447 U.S. 557, 562-563, 65 L.Ed.2d 341, 100 S.Ct. 2343 (1980).

(18) Cf. Sable Communications v. FCC, 492 U.S. 115, 127-128, 109 S.Ct. 2829, 2837, 106 L.Ed.2d 93 (1989) (there is no captive audience problem where the listener of dial-a-porn must take affirmative steps to receive the communication).

(19) See Intel v. Hamidi, supra.

(20) In similar cases, the First Amendment issue was not raised. See, e.g., America Online v. IMS, 24 F. Supp. 2d 548 (E.D. Va. 1998); America Online v. Prime Data Sys., Inc., 1998 U.S. Dist. LEXIS 20226 (E.D. Va. 1998); America Online v. LCGM, Inc., 46 F. Supp. 2d 444 (E.D. Va 1998).

(21) The text is attached as Appendix B.

(22) Because this language is written broadly enough to prevent noncommercial anonymous bulk e-mailings, it arguably violates the First Amendment. See, ACLU of Georgia v. Miller, 977 F.Supp. 1228 (N.D. Ga. 1997).

(23) The Act defines the term “unsolicited electronic mail message” as “any substantially identical electronic mail message other than electronic mail initiated by any person to others with whom such person has a prior relationship, including prior business relationship, or electronic mail sent by a source to recipients where such recipients, or their designees, have at any time affirmatively requested to receive communications from that source.”

(24) Nev. Rev. Stat. 41.735 provides immunity for persons who provide users with access to a network and applies to items of electronic mail obtained voluntarily.

(25) Nev. Rev. Stat. 41.715 defines “electronic mail” as a message, a file or other information that is transmitted through a local, regional or global network, regardless of whether the message, file or other information is:

1. Viewed;

2. Stored for retrieval at a later time;

3. Printed onto paper or other similar material; or

4. Filtered or screened by a computer program that is designed or intended to filter or screen items of electronic mail.

(26) Cal. Business & Professions Code §17538.4 provides as follows:

(a) No person or entity conducting business in this state shall facsimile (fax) or cause to be faxed, or electronically mail (e-mail) or cause to be e-mailed, documents consisting of unsolicited advertising material for the lease, sale, rental, gift offer, or other disposition of any realty, goods, services, or extension of credit unless:

(1) In the case of a fax, that person or entity establishes a toll-free telephone number that a recipient of the unsolicited faxed documents may call to notify the sender not to fax the recipient any further unsolicited documents.

(2) In the case of e-mail, that person or entity establishes a toll-free telephone number or valid sender operated return e-mail address that the recipient of the unsolicited documents may call or e-mail to notify the sender not to e-mail any further unsolicited documents.

(b) All unsolicited faxed or e-mailed documents subject to this section shall include a statement informing the recipient of the toll-free telephone number that the recipient may call, or a valid return address to which the recipient may write or e-mail, as the case may be, notifying the sender not to fax or e-mail the recipient any further unsolicited documents to the fax number, or numbers, or e-mail address, or addresses, specified by the recipient.

In the case of faxed material, the statement shall be in at least nine-point type. In the case of e-mail, the statement shall be the first text in the body of the message and shall be of the same size as the majority of the text of the message.

(c) Upon notification by a recipient of his or her request not to receive any further unsolicited faxed or e-mailed documents, no person or entity conducting business in this state shall fax or cause to be faxed or e-mail or cause to be e-mailed any unsolicited documents to that recipient.

(d) In the case of e-mail, this section shall apply when the unsolicited e-mailed documents are delivered to a California resident via an electronic mail service provider’s service or equipment located in this state. For these purposes “electronic mail service provider” means any business or organization qualified to do business in this state that provides individuals, corporations, or other entities the ability to send or receive electronic mail through equipment located in this state and that is an intermediary in sending or receiving electronic mail.

(e) As used in this section, “unsolicited e-mailed documents” means any e-mailed document or documents consisting of advertising material for the lease, sale, rental, gift offer, or other disposition of any realty, goods, services, or extension of credit that meet both of the following requirements:

(1) The documents are addressed to a recipient with whom the initiator does not have an existing business or personal relationship.

(2) The documents are not sent at the request of, or with the express consent of, the recipient.

(f) As used in this section, “fax” or “cause to be faxed” or ” e-mail” or “cause to be e-mailed” does not include or refer to the transmission of any documents by a telecommunications utility or Internet service provider to the extent that the telecommunications utility or Internet service provider merely carries that transmission over its network.

(g) In the case of e-mail that consists of unsolicited advertising material for the lease, sale, rental, gift offer, or other disposition of any realty, goods, services, or extension of credit, the subject line of each and every message shall include “ADV:” as the first four characters. If these messages contain information that consists of unsolicited advertising material for the lease, sale, rental, gift offer, or other disposition of any realty, goods, services, or extension of credit, that may only be viewed, purchased, rented, leased, or held in possession by an individual 18 years of age and older, the subject line of each and every message shall include “ADV:ADLT” as the first eight characters.

(h) An employer who is the registered owner of more than one e-mail address may notify the person or entity conducting business in this state e-mailing or causing to be e-mailed, documents consisting of unsolicited advertising material for the lease, sale, rental, gift offer, or other disposition of any realty, goods, services, or extension of credit of the desire to cease e-mailing on behalf of all of the employees who may use employer-provided and employer-controlled e-mail addresses.

(i) This section, or any part of this section, shall become inoperative on and after the date that federal law is enacted that prohibits or otherwise regulates the transmission of unsolicited advertising by electronic mail (e-mail).

(27) See Digital Millenium Copyright Act, Sec. 1201. Circumvention of copyright protection systems.

(28) Digital Performance Right in Sound Recordings Act of 1995 (Public Law 104-39).

(29) The Rio portable music player is a digital audio recording device. The Rio is a small device (roughly the size of an audio cassette) with headphones that allows a user to download MP3 audio files from a computer and to listen to them elsewhere.

(30) See 17 U.S.C. §1001 et seq. (P.L. 102-563, at 4, 106 Stat. 4248).

(31) Discord Surrounding Diamond Multimedia’s Rio Player is Ended Through Settlement Agreement, The Intellectual Property Strategist, Sept. 1999, Volume 1, Number 12, at 4.

(32) See P.L. 105-298, 112 Stat. 2827.

(33) Eric Eldred founded Eldritch Press in late 1995, and initially, Eldritch Press posted works of American literature by authors such as Nathaniel Hawthorne and Henry James. Now, Eldritch Press posts new works the moment they enter the public domain. Some of the works Eldritch Press posts are out of print or are not included in library collections, and therefore they are not obtainable by the public in any other way. See How Long is Too Long? Recent Congressional Copyright Giveaway Claimed Unconstitutional at http://eldred.ne.mediaone.net/pr-1999-01-12.txt.

(34) See Eldred v. Reno, United States District Court for the District of Columbia, Case No. 1:99CV00065 JLG (filed January 11, 1999). Visit this Web site to view the pleadings in this case: http://cyber.law.harvard.edu/eldredvreno/legaldocs.html.

(35) See http://www.kingkong.demon.co.uk/ccer/ccer.htm, a site that documents all renewals of 1923 book copyrights, representing works that the Copyright Term Extension Act keeps from the public domain.

(36) Slotek, Jim, M-I-C . . . © you real soon . . . k-e-y . . ., Toronto Sun Times, Nov. 1, 1998; see also Naughton, John, Mickey Mouse Saved for Disney? Phew. What a Narrow Squeak, Guardian Unlimited, May 2, 1999.

(37) As found by the Court, Playboy Enterprises (PEI):

owns federally registered trademarks for the terms Playboy, Playmate, Playmate of the Month, and Playmate of the Year. The term Playmate of the Year is sometimes abbreviated “PMOY.” PEI does not have a federally registered trademark in the abbreviation “PMOY,” although PEI argues that “PMOY” is worthy of trademark protection because it is a well-known abbreviation for the trademark Playmate of the Year.

Playboy Enterprises, 7 F.Supp.2d 1098, 1100.

(38) The Court also found that, with respect to the meta tags, there is no trademark infringement where defendant has used Playboy’s trademarks in good faith to index the content of her Web site.

(39) This statute would allow a court to order the cancellation or forfeiture of the domain name or the transfer of the name to the owner of the trademark. It will make it possible for plaintiffs to go after domain names as a group rather than being forced to sue each of the registrants individually. See Porsche Cars North America, Inc. v. porsch.com, 51 F. Supp. 2d 707 (E.D. Va. 1999), 51 U.S.P.Q.2d (BNA)1461, in which the Court rejected Porsche’s “in rem” claim to grab control of domain names incorporating versions of the “Porsche” name to avoid having to individually sue hundreds of registrants that had registered those domain names.

(40) Mack, Jennifer, Nader Proposes Limits to ICANN, ZDNet News, Sept. 27, 1999.

(41) A framework for ICANN and DNS Management

Initial Proposals (comments welcome)

version 1.02 September 25, 1999

1. ICANN’s authority should be based upon a multilateral government charter. That Charter should define and limit ICANN’s authority.

2. The charter should be based upon a limited purpose sui generis agreement among countries that express interest in working together, and that agree that ICANN’s role should be limited to tasks essential to maintaining an efficient and reliable DNS management, and that ICANN will not be used as an instrument to promote policies relating to conduct or content on the Internet. (Additional multilateral institutions may be desired to address electronic commerce issues, but ICANN itself should not become the foundation for a vast Internet governance institution. See http://www.cptech.org/ecom/cpt-wcpo.html)

3. ICANN should not use its power over domain registration policy to exclude persons from the use of a domain on issues that are not germane to managing the DNS system of mapping IP addresses into domain names. The right to have a domain on the Internet should be considered the same as the right to have a street address, a telephone number or a person’s name.

4. ICANN should identify a membership and elect its board of directors from its membership before it makes additional policy decisions (in those areas appropriate for action by ICANN).

5. Membership should be open to anyone who uses the Internet. There should be no fee associated with membership or voting rights.

6. The records of ICANN should be open to the public. The public should have rights to documents as, similar to rights provided in the US Freedom of Information Act.

7. The meetings of ICANN should be open to the public.

8. The public should be given an annual opportunity to review and comment on the ICANN budget.

9. The budget of ICANN should be subject to review by the countries that provide the ICANN charter. Fees associated with domain registration should only be spent on activities essential to the management of the DNS system.

10. National governments should be permitted to exercise discretion over policies relating to the use of country top level domains (.fr, .uk, .us, etc.).

11. For generic top level domains (.com, .org, .net, and new gTLDs), the domain space should be declared a public resource. The registrar or registries perform services on behalf of the users of the domains, and will not own the domain space. It should be possible to replace firms engaged in registration services and DNS management, without risking the stability of the Internet.

12. On matters of public interest (in the narrow areas where ICANN will operate), such as policies regarding the use of trademarks or the privacy of domain registration information, ICANN should make recommendations to the sui generis multinational body created to manage ICANN, and the multinational body should accept, reject or modify the recommendations, after giving the public a fully adequate opportunity to review and comment on the proposals.

13. On the issue of trademarks, the Charter should explicitly protect the public’s rights to parody, criticism and free speech. For example, domain names like GM-sucks.com, which would not be confused with GM.com, should be permitted.

(42) Becky Burr is the Associate Administrator of the National Telecommunication and Information Administration, Office of International Affairs.

(43) The Act defines “personal information” to include an individual’s first and last name, home and other physical address, e-mail address, social security number, and telephone number. 1999 S. 809; 106 S. 809.

(44) See Benjamin I. Berman, Acting Secretary of the Federal Trade Commission, Federal Register Notice announcing Public Workshop on Proposed Regulations Implementing the Children’s Online Privacy Protection Act, Supplementary Information, June 23, 1999, 16 C.F.R. Part 312, Children’s Online Privacy Protection Rule at http://www.ftc.gov/os/1999/9906/kidsprivacy.htm.

(45) For the official text of the European Union Privacy Directive, see Official Journal of the European Communities of 23 November 1995 No L. 281 p. 31. For an unofficial version, visit http://www.cdt.org/privacy/eudirective/EU_Directive_.html.

(46) See, e.g., Mosceyunas, Anne K., On-Line Privacy: The Push and Pull of Self-Regulation and Law, Computer Law Section Newsletter, State Bar of Georgia, July, August, September, 1999, pp. 13-15; Cranman, Kevin A., Internet and Electronic Communication Privacy Issues: An Overview and Legislative Update, 14th Annual Computer Law Institute, Program Materials 1999, Part 10.

(47) Winn, Jane K., Digital Signatures, Smart Cards, and Electronic Payment Systems, ICLE Fourteenth Annual Computer Law Institute, Sept. 24, 1999, p. 22.

(48) See Joint Report on Data Protection Dialogue to the EU/US Summit, June 21, 1999, which is attached as Appendix C.

(49) Id.

(50) See http://www.ibm.com/privacy/.

(51) For further analysis, see Koppel, Nathan, Cyber-Ad Jurisdiction Isn’t Automatic, Texas Lawyer, Sept. 27, 1999.

The information above is provided for general educational purposes and not as legal advice. Laws in areas in which we practice change continually and also vary from jurisdiction to jurisdiction. Therefore no visitor to our site should rely on any of the articles provided for legal advice, but should always consult their own attorney regarding legal matters.

© 1999, Rob Hassett, Atlanta, Georgia. All Right Reserved.

Inadvertent Disclosure of Email

By:  Robert C. Port, Esq.

Business Litigation/Securities Arbitration & Litigation

Cohen Goldstein Port & Gottlieb, LLP

990 Hammond Drive, Suite 990

Atlanta, Georgia 30328

(678) 775-3550 (Direct Dial)

(770) 901-9417 (Fax)

Email:  rport@cgpglaw.com

Web Site:  http://www.cgpglaw.com

 

Whoops! You’ve Got Mail!

With a click of the mouse, your opponent has inadvertently emailed to you a memo outlining case strategy, a summary of the weaknesses in your opponent’s case, or other highly sensitive privileged and confidential information. As the recipient of such obviously misdirected email, what are your professional and ethical obligations?

In determining a course of action, a number of professional and ethical obligations collide. On the one hand, Canon 7 of the Code of Professional Responsibility requires that an attorney “represent a client zealously.” Counsel is further encouraged to “always act in a manner consistent with the best interests of [the] client.” EC 7-9. Some argue that in our zealous representation of a client, we should be entitled to take advantage of any error or mistake by our opposition. We have, of course, no obligation to zealously protect the privileged communications of our opposition. In a case of inadvertent disclosure, it is the other attorney who arguably has breached his obligation to preserve the confidences and secretes of his client, and perhaps he or she ought to suffer the consequences. DR 4-101. Indeed, counsel has a statutory obligation not to disclose confidential communications. O.C.G.A. § 24-9-24. Moreover, if an attorney is placed in the position of trying to cure or protect the opponent’s inadvertent disclosure of privileged communications, we are necessarily placed in direct conflict with the interests of our client.

On the other hand, our duty of zealous representation must be executed concurrently with the ethical obligation to “act[] in a manner that promotes public confidence in the integrity and efficiency of the legal system and the legal profession.” Attorneys must also be mindful of the ethical obligation to “conduct [ourselves] so as to reflect credit on the legal profession and to inspire the confidence, respect, and trust of . . . clients and of the public; and to strive to avoid not only professional impropriety but also the appearance of impropriety.” EC 9-2; EC 9-6. Finally, attempts to use such inadvertently disclosed information may precipitate a motion to exclude the evidence, or a motion to disqualify receiving counsel, which may cause harm to the receiving attorney’s client.

ABA Pronouncements

In 1992, the ABA recognized that advances in technology had made it “technologically more likely that through inadvertence, privileged or confidential materials will be produced to opposing counsel by no more than the push of the wrong speed dial number on a facsimile machine.” ABA Formal Opinion 92-368 (1992), entitled “Inadvertent Disclosure of Confidential Materials.” In considering such inadvertent disclosures, the ABA opined that: “A lawyer who receives materials that on their face appear to be subject to the attorney-client privilege or otherwise confidential, under circumstances where it is clear they were not intended for the receiving lawyer, should refrain from examining the materials, notify the sending lawyer and abide the instructions of the lawyer who sent them.”

More recently, in proposed Rule 4.4, the ABA Ethics 2000 Commission has modified the suggested obligations of an attorney who has received an inadvertent disclosure of confidential documents. Proposed Rule 4.4(c) provides that “a lawyer who receives a document and has reason to believe that the document was inadvertently sent shall promptly notify the sender.” The requirement in Formal Opinion 92-368 that the receiving lawyer abide by the instructions of the sender has been eliminated, leaving it to the person making the mistaken disclosure to take whatever protective measures they deem appropriate. The Comment further observes that other questions raised by the disclosure, such as whether the original documents must be returned to the sender, or whether the privilege has been waived by the disclosure, are questions of law beyond the scope of the proposed Rule. (Id). The Reporter’s Notes further observe that a lawyer who voluntarily returns a document unread “commits no act of disloyalty by choosing to act in accordance with professional courtesy.”

Court and State Bar Ethics Rulings

In considering these issues, some courts have followed ABA Formal Opinion 92-368, or reached conclusions that are consistent with that Opinion. These courts generally evaluate the mistaken disclosure under a subjective analysis to determine whether there was an intention to waive the attorney/client privilege. As set forth by the court in Bank Brussels Lambert v. Credit Lyonnais (Suisse), S.A.160 F.R.D.437 (S.D.N.Y. 1995), “The rationale behind this view is twofold. First, these courts reason that privilege belongs to the client, so an act of the attorney cannot effect the waiver. . . . Second, a ‘waiver’ is by definition the intentional relinquishment of a known right, and the concept of a ‘inadvertent waiver’ is therefore inherently contradictory” 160 F.R.D. at 442 (citations omitted).

Other courts, however, take a strict objective approach, finding that any inadvertent disclosure of privileged documents is a waiver, notwithstanding the client’s subjective intent. See, e.g., Wichita Land & Cattle Co. v. American Federal Bank, F.S.B. 148 F.R.D.456, 457 (D.D.C. 1992). Still other courts (and perhaps the majority) have undertaken a balancing analysis, considering a number of factors to determine whether the inadvertent disclosure waives the privilege. Such factors include “(1) the reasonableness of the precautions taken to prevent disclosure; (2) the time taken to rectify the error; (3) the scope of the discovery; (4) the extent of the disclosure; and (5) the overriding issue of fairness.” See, e.g., Harmony Gold U.S.A, Inc. v. Fasa Corp., 169 F.R.D. 113, 116 (N.D. Ill. 1996).

State Bar Ethics opinions are similarly divided. For example the District of Columbia ethics committee held that it would not be improper to retain and use confidential documents inadvertently sent by opposing counsel, if it was not facially obvious that the documents were confidential, and the recipient had to read the documents before determining that they were not intended for him. However, if the recipient knows of the inadvertent disclosure before the materials are examined, he must return them unread, and may commit an ethical violation if he reads or uses them. District of Columbia Ethics Opinion No. 256 (1995). Maine’s Ethics Commission, on the other hand, concluded that a lawyer receiving an inadvertently produced confidential document “may use the document and the information contained in it to the extent permitted by the rules of procedure and evidence” Maine Ethics Opinion 146 (1994). Kentucky’s Bar has found that while lawyers should follow ABA Opinion 92-368, and the use of inadvertently disclosed information is “discouraged”, an attorney who retains and uses privileged documents inadvertently sent to him will not be disciplined if a good faith argument can be made that a waiver of the privilege occurred. Kentucky Ethics Opinion E-374 (1995). Most bar ethics committees agree that an attorney who receives inadvertently disclosed confidential information must notify the other lawyer. See, e.g., Florida Ethics Opinion 93-3 (1994); Maine Ethics Opinion 146 (1994); Ohio Ethics Opinion 93-11 (1993); Illinois Opinion 98-04 (1999). Illinois’ Ethics Committee also specifically finds that the lawyer who inadvertently sent the material “has a duty to advise a client that confidential information was inadvertently transmitted to and read by opposing counsel.” Id.

Georgia Law

Unfortunately for the Georgia practitioner, The Code of Professional Responsibility does not directly address this issue, nor do the presently proposed revisions to the Code. Additionally, there are no formal advisory opinions considering this issue, and research has failed to uncover any Georgia appellate cases directly on point.

However, Georgia cases do provide some guidance. In Revera v. State, 223 Ga. App. 450, 477 S.E.2d 849 (1996), the Court of Appeals, relying on O.C.G.A. § 24-9-24 and McKie v. State, 165 Ga. 210, 140 S.E. 625 (1927), stated that “[t]he privileged nature of a confidential communication is not lost or waived even if the attorney should voluntarily or inadvertently produce a transcript of the communication.” In Revera, the court held it error for the State to use a confidential communication to refresh a witness’ recollection. See, also, Marriott Corp v. American Academy of Psychotherapist,157 Ga. App. 497, 277 S.E.2d 785 (1981) (no waiver of privilege found merely because plaintiff, without explanation, had obtained a copy of a privileged communication).

If the rationale of these case is followed, counsel’s inadvertent production of confidential email should not automatically be deemed a waiver of the privilege. Instead, each case should be tested on its individual facts to determine whether counsel’s inadvertent disclosure should be imputed to the client as either an intentional or careless waiver of privilege. Presumably, the court would undertake the type of balancing test adopted by other jurisdictions.

Decisions from the federal district courts in both the Northern and Middle Districts of Georgia have adopted a balancing test to determine whether an inadvertent disclosure has waived the privilege. In Briggs & Stratton Corp. v. Concrete Sales & Services, 176 F.R.D 695, 699 (M.D. Ga. 1997), Judge Owens found that the “case by case approach is the better approach” for resolving these issues. Subsequently, in In re: Polypropylene Carpet Antitrust Litigation, 181 F.R.D. 680 (N.D. Ga. 1998), Judge Murphy adopted the balancing tests set forth by Judge Owens in Briggs & Stratton in finding that a box of Department of Justice investigatory documents inadvertently disclosed during the course of litigation should be returned. Judge Murphy, however, refused to disqualify receiving counsel. The Court further held that “a party has a professional obligation to notify the court and its adversaries if it comes into possession of such documents.” Counsel should be aware, however, that Judge Carnes of the Northern District has adopted a strict, objective rule, finding that the “inadvertent disclosure of privilege documents waives the privilege.” BellSouth Advertising & Publishing Corp. v. American Business List, Inc, 1992 U.S. Dist. LEXIS 17679 (N.D. GA. 1992).

Conclusion

Until the Georgia bar or Georgia Appellate courts specifically address this issue, counsel receiving inadvertently disclosed email must proceed thoughtfully and with caution. At a minimum, opposing counsel should be notified. Presumably, if the recipient intends to use such information during discovery or at trial, the fact of the inadvertent disclosure will become known in due course. Both receiving and sending counsel should consider the various circumstances related to the disclosure, including the precautions, if any, taken by the opponent to avoid disclosure, the extent of the disclosure, the type of information disclosed, and the measures taken by the opponent to try to rectify the disclosure. Counsel for the recipient must further consider the risks of disqualification or other pre-trial motions attempting to mute the damage done by the disclosure. All counsel must proceed in a fashion that zealously represents their client’s interest, while remaining mindful of their profession and ethical obligations to the court and the public.

The information above is provided for general educational purposes and not as legal advice. Laws in areas in which we practice change continually and also vary from jurisdiction to jurisdiction. Therefore no visitor to our site should rely on any of the articles provided for legal advice, but should always consult their own attorney regarding legal matters. 

©2000 Robert C. Port. All Right Reserved.

* Robert C. Port is a partner with Cohen Goldstein Port & Gottlieb, LLP, Atlanta, Georgia, where he practices business litigation, securities arbitration & general litigation. He received his J.D., with Honors, from the University of North Carolina in 1983.

 

Five Most Common Legal Mistakes Involving Commercial Websites

July 2008 Article for Business to Business Magazine

by Rob Hassett

Do you have a privacy policy posted on your business website?  If so, did you have an attorney review it?  If the answer to this question is “no,” there is a good chance that there is a difference between what you state in your privacy policy and what your actual practices are.  If there is, you could be subject to actions by the Federal Trade Commission and by private companies and individuals for fraud.  In a recent case, a jury awarded $4.5M in damages against a company that helped students apply to colleges online, because the policy stated that personal information was not being shared, but it was.  This is an example of the type of legal mistakes that are often made in connection with commercial websites.

 The five most common legal mistakes involving commercial websites are:

             1.         The company’s privacy policy does not accurately state what the true privacy policy of the company is.  If nothing else, you should make sure that your privacy policy says that in the event of the sale of your business, you reserve the right to transfer the data you have collected from customers to the purchasers of the business, while making it clear that the new owners will continue to be subject to the commitments that you make regarding privacy.

             2.         The business is required to have a privacy policy but does not.  There are a number of laws that  require the posting of a privacy policy under certain circumstances including the Graham Leach Bliley Act (GLB), which applies only to “financial institutions,” but which defines the term “financial institutions” very broadly; the Health Insurance Portability and Accountability Act (HIPAA), which applies to health care providers, health care plans and “health care clearing houses” (i.e. companies that collect and sort health related billing data); the Children’s Online Privacy Protection Act (COPPA), which applies to websites that are directed to children under 13 or knowingly obtain data from children under 13; and the California Online Privacy Protection Act , which requires that any commercial website that collects data from individuals residing in California post their privacy policies.  The consequences of not complying with privacy laws can be very severe.  Violations of GLB can result in a bank’s loss of FDIC insurance – which would likely put the bank out of business.  Violations of HIPAA can result in criminal penalties of up to 10 years in prison and a $250,000 fine.  For violations of COPPA, Mrs. Fields Cookies paid a civil penalty of $100,000 and Hershey’s paid $85,000.  Violations of the California Online Privacy Protection Act can result in private lawsuits — possibly a business person’s worst nightmare.

             3.         Third parties are able to post materials on the website and the company fails to post a “Copyright Policy” and file a designation of a representative to receive any complaints regarding copyright infringement with the U.S. Copyright Office.  Properly posting such a policy helps to insulate the company from liability for the posting of infringing materials by third parties.

             4.         Failure to screen  all photos of individuals posted on the website.  Posting of a recognizable individual on a website without permission of that individual that is not posted for a newsworthy purpose, or other situation protected by the First Amendment freedom of speech clause, can result in liability.

             5.         Failure of the owner to register copyrights in the owner’s website.  If ownership of the copyrights in the website are owned by the owner of the website, but the owner of the website does not register the copyrights in the U.S. Copyright Office, the owner may still register the copyrights after an infringement and sue to stop such copying and collect damages provable (it is very difficult to prove any) but may not recover what are called statutory damages (much easier to prove) or attorney fees.

 CONCLUSION

Any business owner with a website should take steps to assure that the use of the website is not resulting in a violation of another person’s rights and is taking all steps to protect its own rights.

Rob Hassett is an attorney who practices in technology, entertainment and corporate law with Casey Gilson P.C. in Atlanta,Georgia.

This article provides general information only and does not constitute legal advice.  Any reader should consult with his or her own attorney before making any decisions regarding legal matters.

Will Internet Radio Stations That Stream Music Have to Shut Down?

First Published in the Atlanta Lawyer March 2009

by Rob Hassett

Introduction
Creative and adventurous entrepreneurs, who could never afford to buy a broadcast radio station, have set up many internet radio stations that stream music and offer features that could only be made available over the internet. www.live365.com allows you to find stations that play almost  any type of music imaginable. Yahoo’s Launchcast, (http://music.-yahoo.com/launchcast/), now  managed by CBS Radio, (http://yahoo.client.shareholder.com/) and Pandora, (http://www.pandora.com/) allow you to type in names of favorite artists or songs and will then play songs, based upon those choices. With Pandora you can set up as many “channels” as you want, with each based on a different artist or set of artists (i.e. with each song by the artist selected or an artist with a similar sound). Although Congress has passed laws to promote experimentation, growth and development on the internet by limiting liability exposure of the owners of commercial websites, Congress has also  passed laws that have put internet radio, and all that it offers, on the verge of extinction.

Background
In the United States, songwriters (and publishers for songwriters) have traditionally received “public performance” royalties when their songs were played on broadcast radio and in other public forums. Royalties for songs are collected by ASCAP, BMI and SESAC and, for internet radio, total royalties have been in the range of 3.5 – 5% of gross income derived from the broadcast of the music. Owners of the copyrights in sound recordings have traditionally received  no royalties for public performances in the United States. This continued to be the case until enactment of the Digital Performance Right in Sound Recordings Act of 1995. This Act provided that copyright owners of sound recordings would have a public performance right in  audio recordings that were transmitted by a station requiring a subscription, such as satellite radio, and in any digital transmission that was “interactive.”  In 1998, the Digital Millennium Copyright Act was enacted, which, among other things, included provisions, codified in 17 USC § 106(6) and §114, that expanded performing rights of  the owners of sound recordings to include sound recordings transmitted digitally over the internet (i.e. via internet radio). In connection with this right, Congress also provided for a set  (“statutory”) royalty rate to be established for non-interactive internet radio stations that met  certain other criteria. If not decided by negotiation among stakeholders, it provided that the royalty rate would be determined by an ad hoc Copyright Arbitration Royalty Panel.  The statutory rates would only apply if the webcast was not “interactive” and other criteria were met, such as, limiting notice of when songs would be played, to make it unlikely that webcast streaming would become a substitute for music downloads.

2 Problems
There were two problems with Congress’ approach. First, to benefit from a set royalty rate (which would be better for each station than having to negotiate separately with each record label), the station could not be “interactive.” Unfortunately, Congress defined “interactive” broadly and ambiguously so many stations do not know whether they are interactive or not.  Second, Congress’ wording of the standard the arbitrators were to use for determining the statutory rates encouraged the arbitrators to impose unreasonably high royalties.

Determining Whether a Station Is Interactive
The definition of “interactive” set forth in the Digital Millennium Copyright Act reads, in pertinent part, as follows:

An “interactive service” is one that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording, whether or not as part of a program, which is selected by or on behalf of the recipient.  17 USC § 114(j)(7).

The phrase “a program specially created for the recipient” is ambiguous. As referred to in the above Introduction, using advanced techniques, some of the most popular internet radio stations utilize input from the listener to create a “personalized station.” So does that result in programs that are “specially created for the listener”?

In 2001, Sony BMG, and other record labels, filed a lawsuit against Launchcast internet radio for copyright infringement, claiming Launchcast was an “interactive” radio station and had no right to stream music under the statutory license granted to non-interactive radio stations. On November 3, 2005, the United States District Court for the Southern District of New York held that whether or not Launchcast was “interactive” was a jury question. Arista Records, Inc. v.  Launch Media, Inc., 2005 WL 2898735 (S.D.N.Y.), and on April 27, 2007, a jury found that Launchcast was not interactive. Sony BMG said it would appeal. As of this writing, the author has not seen any order relating to the appeal of that decision.

Statutory (Set) Rates
For reasons that are likely related to which groups had the more effective lobbyists, the standard for determining statutory rates as provided for in the acts referred to above, was made much more favorable to existing satellite radio, than to webcasters. The Digital Performance Right in Sound Recordings Act of 1995, in a provision codified at 17 USC § 801(b), directed ad hoc Copyright Arbitration Panels to set royalty rates for pre-existing satellite radio that are reasonable and are calculated to maximize the availability of creative works to the public, to afford the copyright owner a fair return on his or her investment and the copyright user a fair income, to consider the contributions and risks taken by each party and to minimize any disruptive impact on the industries involved. The Digital Millennium Copyright Act, in a provision codified at 17 USC §§ 114(f) (2) (A), directed the Copyright Arbitration Royalty Panels to set royalty rates for webcasters (as well as others including new, i.e. not  preexisting, satellite radio stations) “that would have been negotiated between a willing buyer and a willing seller.” No language indicated that the Panels should be concerned about maximizing the availability of creative works or the disruptive impact on internet radio.  As a result, in 2002, royalties for internet radio were set at an amount that would put many internet radio stations, already earning little if any money, out of business. Webcasters appealed the decision to the D.C. Circuit Court of Appeals. The D.C. Circuit Court of Appeals affirmed the decision. See, Beethoven.com LLC v. Library of Congress, 394 F.3d 939 (D.C. Cir. 2005); and See generally, Melville B. Nimmer and David Nimmer, Nimmer on Copyright 8-352.  (Rel.61-8/2003).  In 2002, partly because of concerns over the adverse effects of the high rates, Congress passed  the Small Webcaster Settlement Act of 2002. The new Act led to an agreement among the participating stake holders of an alternative rate equal to 5% of expenses or 8% of gross revenues, depending on which is greater, through 2002 for “small webcasters,” with increases scheduled for 2003 and 2004. See, Nimmer on Copyright, 8-352.12 (Rel.61-8/2003).

Current Royalties for Webcasting
On March 7, 2007, the Copyright Royalty Judges, who had replaced the ad hoc Copyright  Arbitration Panels and are sometimes referred to as the Copyright Royalty Board, set the rates for webcasting beginning at .08 cents per performance for 2006 with yearly increases reaching  .19 cents per performance for 2010, with a minimum fee of $500 per channel per year. The $500 per channel fee could be interpreted to require the payment of much more than the rates per song for stations like Pandora, that permit each user to set up multiple “stations.” Daniel McSwain, Radio and Internet Newsletter, “CRB Coverage,” March 2, 2008.  http://textpattern.kurthanson.com/crb/58/webcast-royalty-rate-decision-announced; See also, “free103point9 Newsroom,” tp://blog.free103point-9.org/labels/internet%20radio.html. On  April 17, 2007, the Copyright Royalty Board rejected an appeal. David DeJean, Information Week, April 17, 2007. “Copyright Royalty Board Puts Internet Radio On Death Watch,”  http://www.informationweek.com/blog/main/archives/2007/04/copyright_royal.html; See also,  “free103point9 Newsroom”, http://blog.free103point9.org/labels/internet%20radio.html.

In contrast, based on the differences in the statutory formulas for setting royalties for webcasters versus pre-existing satellite radio, in 2006, the Copyright Royalty Judges set royalty rates for  pre-existing satellite radio that were much more favorable to the owners of the radio stations, resulting in fees of anywhere between 6.0% to 8.0% of gross income. Most internet radio stations would much prefer having their royalties based on their revenue rather than on the number of times songs are played.
An appeal from the order setting the rates for webcasters was filed in the US Court of Appeals for the District of Columbia. No court decision has been published to date. David Oxenford, Broadcast Law Blog, http://www.broadcastlaw-g.com/archives/internet-radio-nab-joins-thefray-on-internet-radio-appeals-and-a-request-for-stay-are-filed-and-a-settlement-offer-is-madeto-noncommercial-webcasters.html; See also, “free103point9 Newsroom”  http://blog.free103point9.org/labels/internet%20radio.html.

Finally, on October 1, 2008, Congress enacted the Webcaster Settlement Act that permits the 4 webcasters and SoundExchange (the collecting agency for the record labels and performers) to negotiate rates lower than the statutory rates, which helps only to the extent the record labels recognize that internet radio can promote the sale of records and be another source of revenue.

Conclusion
The law relating to internet radio is still evolving, but up to now fails to support internet radio as it has other web based businesses. The royalty payments required for internet radio have been set at levels so high that they could cause many popular webcasters to shut down. As Congress did with pre-existing satellite radio, to “unleash the power of the internet,” with respect to internet radio, Congress should set standards for maximum royalties that do not exceed 8% of a radio station’s gross income.

Rob Hassett is an attorney with Casey Gilson P.C. in Atlanta and focuses on technology, entertainment and corporate law.

WordPress, Themes and the GPLv2

Featured

by Rob Hassett and Mike Schinkel

Introduction

There has been a long brewing debate in the software world regarding whether commercial developers who write and distribute their own separate code to work with software licensed using version 2 of the GNU General Public License must license their software under that version of the GPL.

In the summer of 2010 a debate emerged on blog posts and via Twitter regarding this issue between Matt Mullenweg, founder of WordPress, Automattic and the WordPress Foundation, and Chris Pearson founder and CEO of DIYThemes. Mr. Mullenweg and Mr. Pearson resolved their differences. However the question they addressed remains unanswered.

We read many of the postings on this topic, most of which were very informative and for which we are grateful. Our goal is to provide an objective and dispassionate view of the relevant license in hopes to establish some clarity regarding the issue.

This article does not constitute legal advice and is general information only.

Background

WordPress is software that is used to create blogs and websites, including the website on which this article is posted: www.internetlegals.com. It is open source and is licensed to others under Version 2 of the General Public License, administered by the Free Software Foundation (the “GPLv2“). To operate WordPress must have what is referred to as a “Theme” which is a collection of scripts, images, and other files that collectively establish the look and some of the functionality for a website based on WordPress and WordPress itself currently includes one default Theme. Many developers, including commercial developers, offer other Themes, Plugins and other software and services for use with WordPress.

A user may separately download and install WordPress and a Theme. The user then separately opens the programs and activates the Theme, which interacts with WordPress to create websites and/or blogs.

Chris Pearson created a Theme named “Thesis “which became a popular Theme for use with WordPress. Matt Mullenweg contended that Thesis was a “work based on WordPress,” under the GPLv2, which, if true, would have serious legal consequences discussed below. Chris Pearson said it was not.

There is some indication that at some point in the past and maybe currently some of the Thesis code was copied from WordPress code. If that was true at the time of the dispute, there is no question that Thesis was subject to the requirements of the GPLv2, but that possibility is not the subject of the debate. The debate, and the focus of our analysis, is over whether add-on software, such as Theme software, that does not incorporate any code from a prior “Program,” licensed under the GPLv2, may be subject to the requirements of the GPLv2. We are not aware of any court decision that has clearly answered this question.

Requirements of the GPLv2

A developer may choose whether or not to comply with the GPLv2 with respect to a particular Program. However, if the developer copies, prepares derivative works of or distributes that Program without complying with the terms of the GPLv2, the developer would be liable for copyright infringement. If all the developer does is copy, use, study and modify the Program, without distributing it, the GPLv2 license does not require the developer to do anything.

However, if the developer distributes either the Program or a “work based on the Program,” the developer is required to meet certain requirements including, but not limited to, licensing the Program, and any “work based on the Program,” under the GPLv2 and making the source code available. So if a developer creates a “work based on the Program”, that developer may sell copies of it, but is required to provide the source code, if asked, and the purchaser is entitled to make and distribute copies of such new work in competition with the developer. It is the authors’ understanding, based on hearing Mr. Pearson’s comments on the audio interview where he discusses this issue with Mr. Mullenweg, that Mr. Pearson did not want to enable his customers to sell copies of Thesis in competition with him.

The relevant legal question then is whether a Theme that does not include code from WordPress, but works together with WordPress, will constitute a “work based on the Program” under GPLv2. If so, its distribution without compliance with the GPLv2 constitutes copyright infringement. If it is not, its distribution without compliance is permitted.

GNU and WordPress Views

Attorneys who are associated with the open source movement say that a portion of most Themes constitute “works based on WordPress.”

The following is posted on the GNU website under “Frequently Asked Questions” relating to GPLv2:

If a program released under the GPL uses plug-ins, what are the requirements for the licenses of a plug-in?

It depends on how the program invokes its plug-ins. If the program uses fork and exec to invoke plug-ins, then the plug-ins are separate programs, so the license for the main program makes no requirements for them.

If the program dynamically links plug-ins, and they make function calls to each other and share data structures, we believe they form a single program, which must be treated as an extension of both the main program and the plug-ins. This means the plug-ins must be released under the GPL or a GPL-compatible free software license, and that the terms of the GPL must be followed when those plug-ins are distributed.

If the program dynamically links plug-ins, but the communication between them is limited to invoking the ‘main’ function of the plug-in with some options and waiting for it to return, that is a borderline case.

The following are portions of an opinion of James Vasile of the Software Freedom Law Center, which was posted by Matt Mullenweg on the WordPress website:

You asked the Software Freedom Law Center to clarify the status of themes as derivative works of WordPress, a content management software package written in PHP and licensed under version 2 of the GNU General Public License.

On the basis of that version of WordPress, and considering those themes as if they had been added to WordPress by a third party, it is our opinion that the themes presented, and any that are substantially similar, contain elements that are derivative works of the WordPress software as well as elements that are potentially separate works. Specifically, the CSS files and material contained in the images directory of the “default” theme are works separate from the WordPress code. On the other hand, the PHP and HTML code that is intermingled with and operated on by PHP code derives from the WordPress code.

The PHP elements, taken together, are clearly derivative of WordPress code. The template is loaded via the include() function. Its contents are combined with the WordPress code in memory to be processed by PHP along with (and completely indistinguishable from) the rest of WordPress. The PHP code consists largely of calls to WordPress functions and sparse, minimal logic to control which WordPress functions are accessed and how many times they will be called. They are derivative of WordPress because every part of them is determined by the content of the WordPress functions they call. As works of authorship, they are designed only to be combined with WordPress into a larger work.

HTML elements are intermingled with PHP in the two themes presented. These snippets of HTML interspersed with PHP throughout the theme PHP files together form a work whose form is highly dependent on the PHP and thus derivative of it.

These writers focus on one or both of the following:

(1) the fact that the PHP that is incorporated into the Theme has to correspond with the PHP in WordPress, and

(2) the fact that there is heavy and extensive interaction between the Word Press and the Theme software.

Analyses

“A work based on the Program” is defined in the GPLv2 as follows:

 A “work based on the Program” means either the Program or any derivative work under copyright law: that is to say, a work containing the Program or a portion of it, either verbatim or with modifications and/or translated into another language.

If this definition had ended with “any derivative work under copyright law,” it would be necessary to determine the meaning of the term “derivative work” under the Copyright Act. Instead the GPLv2 defines the term for us. To the extent important here the phrase is defined as:

a work containing the Program or a portion of it, either verbatim or with modifications

Any developer creating Themes for WordPress would generally need to either examine the WordPress software, or material about that software, to be able to understand how to create the Theme. The Theme would need to be able to communicate with, provide instructions to and receive instructions from the WordPress software. However the Theme would not need to contain any part of the WordPress software or a portion of it, either verbatim or with modifications. Therefore what is distributed would not need to be the “WordPress software or any work based on the WordPress software.”

The fact that PHP in the Theme software has to correspond with the PHP in the WordPress software is not legally relevant to whether the Theme software that is distributed contains all or portions of the WordPress software. Likewise, the fact that a lot of interaction happens between WordPress and the current active Theme after that Theme is distributed to an end user is also legally irrelevant to whether the Theme itself contains all or any part of the WordPress software.

Therefore, inasmuch as the commercial vendors of Themes, including Thesis, are able to avoid including any of the WordPress source code in those Themes, such vendors should be able to avoid being required to take any action to be in compliance with the GPLv2 .

GPLv3

Under the totally different language of the GPLv3, which was first made available for use in 2007, a provider of software, such as WordPress, would have a much stronger claim that distributing Themes without making the source code available to potential competitors was an infringement.

The revisions in the GPLv3 will not help WordPress require Themes to be licensed via GPL. WordPress, and its revisions, were licensed under the GPLv2, without any language permitting licensees to use a later version, and as such there is no actions its controllers could take that would cause future versions of WordPress to be subject to the GPLv3.

Advocacy of GPL-licensing of Themes

Even though our analysis tells us there is no legal requirement for commercial Theme vendors to license Themes for WordPress using GPLv2 we expect there will still be a strong interest on the part of “the WordPress community” to see that most if not all Themes are and/or continue to be licensed via GPLv2. One of the authors, the one who is a participant in the WordPress community, actively supports this ideal.

As such we suggest to Automattic, to WordPress and its foundation, and to the WordPress community at large that they collectively work to continue to encourage Theme vendors to license their offerings via GPL, and that they proactive look for ways to help ensure those who would otherwise choose not to license via GPL are enticed to do so because of the collective benefits they gain from the supportive community.

Or said more simply, without the GPLv2 to require Themes to be licensed via GPL it becomes an “unregulated market” and the WordPress community should employ classic market incentives to encourage adoption of the GPL.

Advisability of Settling Dispute

As far as whether Mr. Pearson’s settling was a smart move, it very likely was. First, if any of the WordPress code was copied into Thesis, his application was governed by the GPLv2 regardless of whether a court agreed with our analysis. Second, litigation is very exhausting and expensive and regardless how sure anyone is about what is the correct answer to a legal question, it is not possible to know how a court will rule. All that a lawyer can provide is an opinion. Third, he was having to deal with marketing and public relations pressure from the WordPress community that likely outweighed the value of not complying.

Rob Hassett is an attorney in technology, entertainment and corporate law with Casey Gilson P.C. in Atlanta, Georgia. He also is a co-author of volume 5, on Internet and Interactive Media law, of the ten volume publication entitled “Entertainment Industry Contracts,” published by Lexis/Nexis and has, on many occasions, taught in the Professional Education Program at Georgia Tech. Mr. Hassett is the founder, editor and publisher of this website: TellMeSomethingIDontAlreadyKnow.com

Mike Schinkel is an entrepreneur in Atlanta, Ga. He was founder and CEO of catalog mail order retailer Xtras, Inc that was recognized in 1999 by the Inc 500 as #123 fastest growing private company in the USA. Today Mike is an active participant in the WordPress developer community, a consultant advising companies on their WordPress Business Strategies, a software developer building WordPress plugins for those companies, and a co-founder of and partner in The Business Of WordPress Conference.

Impact of Apple vs. Franklin Decision

Featured

By Rob Hassett

Casey Gilson, P.C.

Six Concourse Parkway, Suite 2200

Atlanta, GA 30328

(770) 512-0300

http://www.internetlegal.com

 

Background and Summary

This article first appeared in the December 5, 1983 issue of Computer World and addressed the decision of the U.S. Court of Appeals for the Third Circuit regarding the Apple Computer v. Franklin Computer Corporation lawsuit. This was a very important case both to copyright law in general and to the evolution of the computer industry. (3 Pages)

On August 30, 1983 the U.S. Court of Appeals for the 3rd Circuit filed an opinion deciding that operating system computer programs contained only within computer hardware (in this case on chips) can be the subject of copyright.

According to the opinion, engineers at Franklin Computer Corp. copied operating system programs developed and used by Apple Computer, Inc. so that programs designed for the Apple II computer could also be run on the Franklin Ace computer. Apple Computer filed suit claiming copyright infringement. Apple Computer requested that the trial judge bar Franklin from using, copying or selling those programs until the trial of the case, an understandable request inasmuch as the final trial could be delayed for years.

In deciding whether to grant a request of this type, the courts generally consider two factors. First, is the moving party likely to prevail on the merits of the case at the trial? Second, what are the relative harms that will occur to each of the parties if the motion is granted, as opposed to if the motion is denied?

Four-Front Attack

In addition to the usual legal arguments on procedure, Franklin’s attorneys argued that the programs, or portions of the programs, were not protectable under the copyright laws anyway. They launched a four-front attack.

First, they argued that at least a portion of the programs were written in machine language, more an engineering than a written phenomenon. Since copyright laws apply to expressions, not engineering phenomena, the programs were not subject to copyright.

Second, some of the programs were contained on a read-only memory (ROM), which was only a three-dimensional device rather than in a written code that could be protectable under copyright laws.

Third, the operating system programs constituted ideas as opposed to mere expressions, copyright laws not being applicable to ideas.

Franklin’s attorneys also argued the “big guy, little guy” point that Franklin might be out of business if the motion were granted. If the motion were denied, Apple Computer would suffer, at the most, only the loss of some sales.

The trial court had denied Apple Computer’s motion. It reasoned that it was unclear at the juncture that the copyright laws applied. It bought the “big guy, little guy” argument that the harm to Apple Computer of denying the motion was greatly outweighed by the harm to Franklin of granting the motion. The stage was thus set for the appeal by Apple Computer.

Reversed the Ruling

The 3rd Circuit Court of Appeals reversed the ruling of the trial judge and sent the case back down for further determinations. The Court of Appeals held that:  Programs in machine language were copyrightable.

Whether programs were contained on a ROM chip or anywhere else made no difference.

The court also said that where properly “copyrighted material was concededly copied,” the balancing of harm tests normally applied in the determination of whether to grant a preliminary injunction was inapplicable: So much for the “little guy” whose actions were taken with wide open eyes. The Court of Appeals left two questions open for further determination by the trial judge.

First, the Court of Appeals restated the doctrine that it is only the expression of ideas, and not the idea themselves, that can be copyrighted. The court went on to adopt the rule that if an idea may be expressed in only one way, the idea and expression are said to be the same thing and, in that situation, even the expression may not be copyrighted.

Subject of Debate

The question of what is an idea has long been the subject of debate; but the Court of Appeals went on to say that the general function of translating source code into object code qualifies as an idea. The court cautioned that even though the function of translating such code in general was an idea, the function of translating any particular programs, such as Apple-compatible software, was not covered by this noncopyrightability rule if translation of other non-Apple-compatible software could be accomplished by different expressions.

Second, the court left it to the trial judge to decide whether Apple Computer had properly complied with the statutory formalities pertaining to copyright registration.

Although Apple Computer has overcome major obstacles in the lawsuit, it would, for the following reasons, be premature to say that Franklin has lost the case at the trial level:

It may be determined that one or more of the most important operating programs were governed by the idea-expression merger doctrine and are, therefore, not copyrightable.

It may be determined that various copyright registrations procedures were not followed.

It should be noted that if Franklin does lose the lawsuit, but survives the damages awarded, Franklin can be positioned to develop its own programs to obtain Apple Computer compatibility.

Not Copied

Indications are that the operating systems for the other major compatible systems were not copied. This decision would, therefore, be unlikely to affect companies manufacturing most of the other compatibles. There is a question of how well the “non-copy” compatibles work.

If Apple Computer ultimately prevails, what effect, if any, will this decision have on purchasers of the Franklin Ace? Will these people be considered to be infringers of the Apple Computer operating system? Are these systems subject to seizure?

Every case must be considered on its own facts. However, the copyright laws bar copying or publishing materials without permission of the owner, not the use of them. The few appellate courts that have decided the issue have held that wrongfully copied materials in the possession of subsequent purchasers are not subject to seizure for copyright infringement, with limited exceptions related to imported copies. Note that the use of application software generally requires that the application software be copied onto RAM which would seem to arguably make users of application software liable for infringement.

Regardless of the ultimate outcome of this case, the opinion will presently discourage any producer or intended producer of compatibles from copying operating system programs. In most cases, the risk will far outweigh the development cost savings.

The above information is provided for general educational purposes and not as legal advice. Laws in areas in which we practice change continually and also vary from jurisdiction to jurisdiction. Therefore no visitor to our site should rely on any of the articles provided for legal advice, but should always consult their own attorney regarding legal matters.

The information above is provided for general educational purposes and not as legal advice. Laws in areas in which we practice change continually and also vary from jurisdiction to jurisdiction. Therefore no visitor to our site should rely on any of the articles provided for legal advice, but should always consult their own attorney regarding legal matters.       

 © 1983 Rob Hassett, Atlanta, Georgia. All Rights Reserved.