Internet and Intellectual Property

2012-07-17 14:26:20

Digital home computing and the Internet have brought about a crisis in intellectual property law by raising new issues and multiplying the possibilities for infringement of intellectual property rights. Copyright Law is particularly affected, but computers and the Internet also raise trademark, patent, and trade secret issues. Copyright Digital computers make it possible to make multiple copies of creative works, including books, music, and movies, in very little time, with no loss of quality. The Internet enables copiers to share these copies with millions of users worldwide. Problems arise, however, when the shared works are protected by copyright.

Recent additions to the U.S. copyright code addressing digital copying include the No Electronic Theft Act, which allows the government to prosecute those who sell copies of copyrighted material and also those who give copies away, and the Digital Millennium Copyright Act (DMCA), which prohibits the circumvention of copy-protection measures and provides safe harbors protecting Internet service providers (ISPs) from liability for copyright infringement by their users.

When an unauthorized person reproduces, distributes, publicly displays or performs, or prepares a derivative work, the copyright is infringed unless an exception applies. Infringement may be direct, contributory, or vicarious. In an Internet context, applicable exceptions may include the right to make backup copies, fair use, the first sale doctrine, and the four DMCA safe harbors for ISPs.

Backup copies: While ordinarily the purchaser of a copyrighted work has the right to make a backup copy, Title I of the DMCA has the practical effect of prohibiting the making of digital backup copies of copy-protected recordings.

Fair use: Copying a copyrighted work ‘‘for purposes such as criticism, comment, news reporting, teaching, scholarship, or research’’ is permissible if the use is fair. Fairness is determined by examining four factors: ‘‘(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work’’ (17 U.S.C. } 107).

Copying a music recording one has purchased on to one’s computer for personal listening is fair use, but copying music for large numbers of anonymous individuals to access over the Internet is not (Napster, 239 F.3d 1004). Copying a movie one has purchased for personal use might be fair use, but if the copying required the circumvention of copy-protection technology, it would still be prohibited under the DMCA (17 U.S.C. } 1201).

First sale doctrine: The copyright holder’s control over a lawful copy of the work is limited to its first sale; the purchaser or recipient may dispose of that lawful copy as he or she wishes (17 U.S.C. } 109). The first sale doctrine does not create a right to make copies of the work and does not include the right to display the copy somewhere other than the place where it is located, such as by posting it on the Internet.

ISP safe harbors: Title II of the DMCA protects ISPs from liability for copyright infringement for material passing through their servers if certain requirements are met. There are safe harbors for ISPs for transitory communications, system caching, storage of information on systems or networks at the direction of users, and information location tools (17 U.S.C. } 512). Without these safe harbors, ISPs would be unable to function; policing all content transmitted over, cached on, stored on, or located via a network would be prohibitively time-consuming and expensive. ISPs may be required to remove or block copyright-infringing content once the copyright owner complies with certain notice procedures.

Contributory and vicarious infringement: Third parties may be liable for copyright infringement by others through contributory or vicarious liability. Both require underlying direct infringement by another. Contributory infringement also requires actual or constructive knowledge of the violation and a material contribution to the direct infringer’s activities (Fonovisa, 76 F.3d 259). Vicarious infringement requires the vicarious infringer to have the right and ability to control the direct infringer’s actions and to receive a direct financial benefit from the infringing activity (Fonovisa, 76 F.3d 259).

Copyright infringement has been perhaps the most contested battlefield in Internet law. The 1997 No Electronic Theft Act targets direct infringers such as warez traders (who copy and share copyrighted software); some critics claim that a subgroup of warez traders, those who trade in abandonware (software no longer sold, distributed or supported by the copyright owner), actually perform a useful social function by keeping alive programs that might otherwise be lost forever.

The most visible struggle is over peer-to-peer (P2P) file-sharing networks, which allow users to exchange files, including copyrighted music, movies, photographs, programs, and books, with large numbers of other users. File-sharing technology has evolved in direct response to the law. After the content industry’s victory against (92 F.Supp.2d 349), the model of a centralized site storing copies for download was abandoned in favor of Napster’s model, in which files were stored on users’ computers and the central site maintained only a directory of files and search tools.

This model, it turned out, also gave rise to thirdparty liability for copyright infringement (239 F.3d 1004), so two new models were adopted. In virtual private network (VPN)-based systems, encryption kept the content of the traded files secret from all except the sender and the recipient; a VPN-based system, Aimster, was nonetheless found to give rise to third-party liability. (334 F.3d 643). Second, supernode- based systems place the directory, files, and search tools on the users’ computers; there is no central site. This technology powers KaZaA, Grokster, and other popular P2P systems. It survived court challenges in the Netherlands, but in June 2005, the U.S. Supreme Court held that it could give rise to thirdparty liability under U.S. Copyright Law, provided the other requirements were met (125 S.Ct. 2764). Further legal battles over file-sharing seem likely.


The Internet can assist in traditional forms of trademark infringement (such as the sale of fake Rolex watches), as anyone with an e-mail account knows. It also gives rise to a new form of trademark infringement: the use of trademarks to alter search-engine results. Some search engines (but not Google) use Web site metatags in the search process. These metatags are invisible to most users, but visible to the search engines. Using a competitor’s name in a metatag may divert traffic from the competitor’s site. At the same time, provisions must be made for fair use: for example, it would be difficult for a Volkswagen repair shop to explain its business without using the word ‘‘Volkswagen.’’ The Ninth Circuit explained in Playboy Enterprises, Inc. v. Welles, 279 F.3d 796 (9th Cir. 2002), that use of a trademarked term is permissible as a nominative fair use if three conditions are met:

First, the product or service in question must be one not readily identifiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder (279 F.3d at 801).

Trademark issues also arise when one user registers a domain name that includes or closely resembles a mark. Sometimes this occurs innocently; sometimes it is ‘‘cybersquatting’’—done deliberately to inconvenience or extort money from the mark holder. The Anti-Cybersquatting Consumer Protection Act provides a test for distinguishing between the two and provides remedies for cybersquatting.

Other Issues

Some controversy has arisen over the granting of ‘‘business method patents’’ for, among other things,’s ‘‘one-click’’ ordering system. Patents of this sort, however, are authorized by the federal circuit’s decision in State Street Bank & Trust v. Signature Financial Group, Inc., 149 F.3d 1368, Fed. Cir. 1999, and arguably required under TRIPs, the World Trade Organization’s intellectual property agreement.

The Internet also provides a cheap, quick, and often untraceable means of destroying a trade secret. As cases like Religious Technology Center v. Lerma, 908 F. Supp. 1362 (E.D. Va. 1995), have shown, making a trade secret available online, at least for a few days, is probably enough to deprive the secret of further protection under the Economic Espionage Act or the Uniform Trade Secrets Act.


References and Further Reading

  • ‘‘A Fine Balance: How Much Copyright Protection Does the Internet Need?’’ Economist Technology Quarterly (Jan. 25, 2003): 12.
  • Efroni, Zohar, A Guidebook to Cybersquatting Litigation: The Practical Approach in a World, University of Illinois Journal of Law, Technology and Policy (2003): 457.
  • Goldman, Eric, A Road to No Warez: The No Electronic Theft Act and Criminal Copyright Infringement, Oregon Law Review 82 (2003): 369.
  • Leaffer, Marshall. Understanding Copyright Law, 3rd ed. New York: Matthew Bender, 1999.
  • Lessig, Lawrence. Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity. New York: Penguin, 2004.
  • Litman, Jessica. Digital Copyright: Protecting Intellectual Property on the Internet. Amherst, NY: Prometheus, 2000.
  • McCarthy, J. Thomas et al. McCarthy’s Desk Encyclopedia of Intellectual Property, 3rd ed. Washington, D.C.: Bureau of National Affairs, 2004.

Cases and Statutes Cited

  • A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001)
  •, Inc. v., Inc., 239 F.3d 1343 (Fed. Cir. 2001)
  • Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996)
  • In re Aimster Copyright Litigation (Aimster II), 252 F. Supp.2d 634 (N.D. Ill. 2002); affirmed in part, 334 F.3d 643 (7th Cir. 2003); certiorari denied sub nom Deep v. Recording Industry Ass’n of America, Inc., 124 S.Ct. 1069 2004
  • MGM Studios, Inc. v. Grokster, Ltd., 259 F.Supp.2d 1029 (C.D. Cal. 2003), affirmed, 380 F.3d 1154 (2004); reversed, 125 S.Ct. 2764 2005
  • Playboy Enterprises, Inc. v. Welles, 279 F.3d 796 (9th Cir. 2002)
  • Recording Industry Association of America v. Diamond Multimedia Systems, Inc., 180 F.3d 1072 (9th Cir. 1999)
  • Recording Industry Association of America, Inc. v. Verizon Internet Services, 240 F.Supp.2d 24 (D.D.C. 2003); reversed, 351 F.3d 1229 (D.C. Cir. 2003); certiorari denied, 125 S.Ct. 309 and 125 S.Ct 347 2004
  • Religious Technology Center v. Lerma, 908 F. Supp. 1362 (E.D. Va. 1995)
  • Religious Technology Center v. Netcom On-Line Communication Services, Inc., 907 F.Supp. 1361 (N.D. Cal. 1995)
  • Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 1984
  • State Street Bank & Trust v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1999)
  • UMG Recordings, Inc., v., Inc., 92 F.Supp.2d 349 (S.D.N.Y. 2000)
  • Anti-Cybersquatting Consumer Protection Act, 15 U.S.C. } 1125(d)
  • Copyright Act of 1976, 17 U.S.C. }} 101-1332
  • Digital Millennium Copyright Act, 16 U.S.C. } 512, 1201-04
  • Economic Espionage Act of 1996, 18 U.S.C. } 1831 et seq.
  • Lanham Trademark Act, 15 U.S.C. }} 1052, 1058, 1059, 1125-1127
  • No Electronic Theft Act, 17 U.S.C. }} 101, 506-07
  • Patent Code, 35 U.S.C. }} 1-376
  • National Conference of Commissioners on Uniform State Laws, Uniform Trade Secrets Act, as amended 1985, available at (visited November 16, 2004)
  • Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, Apr. 15, 1994, 33 I.L.M. 81 (1994)

See also Copyright Law and Free Exercise; Intellectual Property and the First Amendment; Internet Filtering at Libraries and Free Speech