CYBER LAW EXTRACTS CyberLaw is an educational service focusing on legal issues concerning computer technology. CyberLex reports legal developments touching the computer industry. CyberLaw and CyberLex are distributed monthly throughout the United States. CyberLaw and CyberLex began in 1990 as a column for Stanford University's Macintosh User Group, and was then called The Legal Side. Shortly afterward, the column began to be regularly published by Macintosh user groups on both coasts. CyberLaw and CyberLex have appeared in The Active Window (a publication of the Boston Computer Society), The MacValley Voice (a publication of the MacValley Users Group, in the Los Angeles area), and in BMUG's Newsletters and Memos, among others. In the last year, CyberLaw and CyberLex have also been regularly published by PC user groups, appearing in PC Report (a publication of the Boston Computer Society) and in Blue Notes (a publication of the San Francisco Personal Computer Users Group). Beginning a few months ago, CyberLaw and CyberLex were made available on The WELL, a teleconferencing system on the Internet. CyberLaw and CyberLex are now the most widely syndicated columns for computer users in the United States. This is a remarkable accomplishment for their author, a California attorney who is not paid for this educational service and who struggles very early on Saturday and Sunday mornings (while wife and two small children sleep) to put the columns together. Much of the source material for CyberLaw is provided free of charge by attorneys around the country. CyberLaw and CyberLex are trademarks of Jonathan Rosenoer. CyberLaw and CyberLex are not intended as legal advice, and do not include all information necessary to evaluate any actual business transaction or legal dispute. Specific legal steps should only be taken after consultation with an attorney. [CyberLaw (tm) 7/94] INFORMATION & INFRASTRUCTURE by Jonathan Rosenoer I. Altering An Old Coat As the pace of information technology quickens and increasing attention is paid to the national information infrastructure (NII), a working group chaired by the Commissioner of Patents and Trademarks, Bruce Lehman, is examining the intellectual property implications of the NII. Lehman's Working Group on Intellectual Property Rights has issued a preliminary draft report, in which the Working Group reviews the state of the law and recommends certain changes in the Copyright Act, among other things. According to the Group, the nation's intellectual property laws are beginning to fit like a tight coat under the weight of technological innovation. "There is no need for a new [coat]," says the Group, "but the old one needs a few alterations." II. Fixation & Publication The Working Group observes that under the Copyright Act, one fundamental test for copyright protection is fixation "in any tangible medium of expression, now known or later developed, from which [an original work of authorship] can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." Digital formats, such as floppy disks, CD-ROMs and other digital storage devices, have been found sufficiently stable so that works in such formats meet the fixation requirement. "Works are not sufficiently fixed if they are 'purely evanescent or transient' in nature," observes the Working Group. It questions, however, whether a work transmitted "live" via the NII, where no copy has been made prior to or simultaneous with transmission, meets the fixation requirement. "Publication" was a key requirement for protection under the Copyright Act. Publication under the Act is, "[T]he distribution of copies or phonorecords of a work to the public by sale or other transfer of ownership, or by rental, lease, or lending. The offering to distribute copies or phonorecords to a group of persons for purposes of further distribution, public performance or public display constitutes publication. A public performance, or display of a work does not of itself constitute publication." This definition, notes the Working Group, was intended to make clear there is no "publication" if a work does not change hands. If a sufficient number of copies of a work were offered to an online service (such as a bulletin board system) operator or others for upload onto the NII, the Group states that publication may occur. IV. Exclusive Rights The Copyright Act grants owners certain exclusive rights, including the right to reproduce a work. According to the Working Group, in the absence of a defense the reproduction right is infringed whenever a work is "uploaded" from a user's computer to a bulletin board system or other server, downloaded from such a system or server, or transferred from one computer network user to another. The Working group also states that an infringing copy is made, "When a work is placed into a computer, whether on a disk, diskette, ROM, or other storage device or in RAM for more than a very brief period.... When a printed work is 'scanned' into a digital file.... When other works -- including photographs, motion pictures, or sound recordings -- are digitized.... Under current technology, when a user's computer is being used as a 'dumb' terminal to 'look at' a file resident on another computer (such as a BBS or Internet host)...." Modification of the content of a downloaded file, states the Group, is also an infringement of a copyright owner's right to prepare derivative works. The right to distribute copies is another important right held by the copyright owner. But this right is qualified by the "first sale" doctrine, which allows the owner of a particular copy of a work to sell or otherwise dispose of possession of that copy. (Notably, the owner of a copy of a computer program may not rent, lease or rent that copy for commercial advantage.) Concerned that an owner could retain a work and simply provide another person with a copy, the Group suggests the first sale doctrine is not appropriate to transactions involving digitized works. With the exception of sound recordings, the right to perform a work publicly is another of the exclusive rights granted by the Copyright Act. States the Working Group, "When any NII user visually 'browses' through copies of works in any medium (but not through a list of titles or other 'menus' that are not copies of the works), a public display occurs. A display is 'public' on the same terms as a 'performance'; therefore, virtually all NII uses would appear to fall within the law's current comprehension of 'public display.'" V. Technology & Fair Use On the matter of "fair use" (which the Working Group believes to be a limitation on the rights of copyright owners, not a right of users), the Working Group acknowledges an argument that "the Copyright Act would be unconstitutional if such limitations did not exist, as they provide some alleviation of First Amendment and other concerns." Given recent court decisions, the Group anticipates litigation in the gray area between commercial uses that involve no "transformative" use by users which "will likely always be infringing" and "nonprofit educational transformative uses [which] will likely often be fair." The Group foresees that "technological means of tracking transactions and licensing will lead to reduced application and scope of fair use." VI. Infringement A person who infringes on the exclusive rights of a copyright holder is an infringer of copyright. As held in a recent court decision, "innocent" infringement is infringement all the same. In cases where there is no direct evidence of copying, the original work may be compared with the alleged infringing work to determine whether the two are sufficiently similar to infer copying and, therefore, infringement. In cases where the end product is not substantially similar to a copyrighted work, the Working Group notes that a finding of infringement may be based on the initial input of a copyrighted work into a user's computer. "Direct participation in infringing activity," notes the Working Group, "is not a prerequisite for infringement liability..." Infringement actions may be based on vicarious liability (e.g., a supervisor being held liable for the acts of an employee) or contributory infringement (e.g., a BBS operator who has knowledge of the uploading and downloading of unauthorized copies of a copyrighted video game, and who also solicited the copying). On liability of operators of online systems for infringing material posted onto and downloaded from their systems, the Group notes that in one case an operator was held directly liable for the display and distribution of unauthorized copies of a copyrighted work, and in the other the operator was held liable for contributory infringement. (See, __Playboy Enterprises Inc. v. Frena__, 839 F.Supp. 1552 (M.D. Fla. 1993), __Sega Enterprises Ltd. v. MAPHIA__, No. C 93-4262 CW, 1994 U.S.Dist. LEXIS 5266 (N.D. Cal. Mar. 28, 1994).) Two recent libel cases may also provide guidance in this area. In those cases (one involving a television network and the other involving CompuServe), liability was not imposed for transmission of alleged defamatory material where it could not be shown that the defendant did not know or have reason to know of the defamatory content of the material at issue. (See, __Auvil v. CBS "60 Minutes__," 800 F.Supp. 928 (E.D. Wash. 1992), __Cubby Inc. v. CompuServe Inc.__, 776 F.Supp. 135 (S.D.N.Y. 1991).) VII. Encryption & Other Matters Other subjects reviewed by the Working Group include conflict of laws issues, international copyright treaties (with a focus on the principle of national treatment), copyright harmonization, private copying royalty systems, moral rights, patent and trademark law (the first case on the relationship between trademarks and Internet site names is pending). Technology may, of course, be used to restrict unauthorized access to copyrighted works. The Working Group discusses encryption as a method for controlling access at the file level, and notes there is an ongoing review of government policy concerning export of computer and networking technologies. (The Group notes the Audio Home Recording Act requires recording and interface devices to control serial copying.) "Software-based systems for tracking and monitoring uses of copyrighted works," says the Group, "are contemplated in the development of the NII." Electronic licenses, "analogous to the 'shrink-wrapped' licenses used for prepackaged software," may also be used in connection with works offered through the NII. IX. Request For Comments Comments on the Working Group's Preliminary Draft (available by Gopher at iitf.doc.gov or via Telnet to the same address, logging in as Gopher) are due by September 7, 1994. They may be sent to: The Commissioner of Patents & Trademarks, U.S. Patent & Trademark Office, Box 4, Washington, D.C. 20231 -- Attention: Terri A. Southwick, Attorney-Advisor, Office of Legislative & International Affairs. Comments may also be sent via the Internet to nii-ip@uspto.gov. CyberLaw (tm) is published solely as an educational service. The author, a California attorney, is Executive Editor of LEXIS COUNSEL CONNECT CALIFORNIA. He may be contacted at jrosen03@reach.com or cyberlaw@cyberlaw.com; questions and comments may be posted on America Online (go to keyword "CYBERLAW"). Copyright (c) 1994 Jonathan Rosenoer; All Rights Reserved. CyberLaw is a trademark of Jonathan Rosenoer. CyberLaw on the World Wide Web (http://www.portal.com/~cyberlaw/cylw_home.html) is made possible with support from Portal Communications Co., an Internet provider based in Cupertino, CA (ph. 408/973-9111). [CyberLaw (tm) 11/93] THE END OF FAIR USE I. A BIG HAIRY WOMAN A few weeks ago, the United States Supreme Court heard arguments in a case concerning a 1989 rap parody of the classic song "Oh, Pretty Woman," co-authored in 1964 by Roy Orbison and William Dee s. The song is "about a lonely man's romantic longing for a pretty woman he sees walking down the street." The parody, named "Pretty Woman" and created by the rap group 2 Live Crew, "taunt[s] a succession of unappealing women, including a 'big hairy wom an,' a 'bald headed women' and a 'two timin' woman.'" According to 2 Live Crew, the parody was "intended for a specific audience, young urban blacks," and its purpose "was to mock the banality of white centered rock-n-roll music by attacking one of its time honored ballads." In 1990, 2 Live Crew was sued for, among other things, copyright infringement by Acuff-Rose Music, Inc., assignee of the copyright to "Oh, Pretty Woman." 2 Live Crew defended on the grounds that its parody is a protected "fair use" of the original song, and this argument was accepted by the trial court but rejected by the Sixth Circuit Court of Appeals. At the Supreme Court, 2 Live Crew argues, among other things, that the Sixth Circuit erred in giving undue weight to the fact its parody was published as part of a commercial endeavor. This case is important to computer software publishers and hardware manufacturers, because at its heart the case is a call for a balancing of an author's right to compensation for his work and the p ublic's interest in the widest possible dissemination of ideas and information. This issue has been emerging with increased frequency in computer litigation, particularly with respect to user interfaces and interoperable software and hardware. II. COPYRIGHT FOR AUTHORS For years, authors and publishers have argued they are entitled to vigorous enforcement of copyright law to protect monopoly rights regarding use of their products. They claim copyright law supplies authors with the incentive to create and disseminate ideas, and argue, as a matter of fairness and justice, that ownership of works created should be exclusive and absolute. In the 2 Live Crew case, these concepts are expressed by a number of interested third parties as follows:"Congress has given broad protection and a bundle of exclusive rights to the owners of copyrights in musical works intending that, through exploitation of their rights, they will be rewarded for their creativity and motivated to compose and publish additional musical works." III. THE RIGHTS OF THE PUBLIC But these views are not universally accepted. In __The Nature of Copyright__, a recent book written by a professor of law, L. Ray Patterson, and a professor of English, Stanley W. Lindberg (both at the University of Geor gia), the authors sharply dispute fundamental propositions forwarded on behalf of authors and publisher. For example, according to Patterson and Lindberg: "A common presumption seems to be that, without copyright, authors would not create and publishers would not disseminate works -- a presumption whose logic fails in the face of reality. Thousands of books consisting of public- domain works [(i.e., those not protected by copyright law)] -- including works by Chaucer, Shakespeare, Milton, Pope, Swift, Austin, so forth -- are published now without copyright protection. And both radio and television were born, prospered, and passed through their golden years without the benefit of copyright protection for live broadcasts. "Significantly, Patterson and Lindberg observe that "the nature and purpose of copyright law has dimmed" and its "fundamentals are now largely obscured" in a process "vigorously cultivated by copyright owners in promoting an industry-oriented view as to the rights copyright entails ." They suggest the rights of the public "are far more important than most of us have been led to believe." And they bolster this view by recounting the origin of copyright law not as an author's right, but as a statute to protect the public from publis hers. IV. COPYRIGHT AS TRADE REGULATION As set forth in __The Nature of Copyright__, copyright began in England as a publisher's right. To establish the right to print and publish a book, the title of a manuscript (the "copy") had to be registered with th e Stationers' Company (a group of bookbinders, printers, and booksellers granted a charter by the sovereign). The right so perfected was an exclusive right to publish in perpetuity. The foundation of the right, however, was only an agreement between the members of the Company.The stationers, being good businessmen, worked for many years for a public law that would forbid anyone to print a book in violation of the stationers' copyright. This desire neatly coincided with the sovereign's desire to control the press through licensing. Beginning in 1557, most printing was allowed only by the members of the Stationers' Company. In 1710, more than 15 years after the end of legally sanctioned censorship in England, Parliament enacted a law (the Statute of An ne) to protect copyright. But it was titled, "An act for the encouragement of learning, by vesting the copies of printed books in the authors or purchasers of such copies during the times therein mentioned." Evidently, Parliament's motivation in passing the statute did not coincide with the interests of the booksellers. According to Patterson and Lindberg, "[The Statute of Anne] transformed the stationers' copyright -- which had been used as a device of monopoly and an instrument of censorship -- into a trade-regulation concept to promote learning and to curtail the monopoly of publishers.... The features of the Statute of Anne that justify the epithet of trade regulation included the limited term of copyright, the availability of copyright to anyone, a nd price-control provisions. Copyright, rather than being perpetual, was now limited to a term of fourteen years, with a like renewal term being available only to the author (and only if the author were living at the end of the first term)." The Statute of Anne also created a public domain for literature. "Under the old system, all literature belonged to some booksellers forever, and only literature that met the censorship standards as administered by the booksellers could ever appear in print. "Passage of the Statute of Anne led to a long campaign by the booksellers to secure from the courts a perpetual copyright for authors -- which could be assigned to publishers. According to Patterson and Livingston, with time obscuring the design of Parliament in enacting the Statute of Anne, '[C]opyright came to be viewed as a natural-law right of the author as well as the statutory grant of a limited monopoly. The result ever since has been confusion as to the nature of copyright: one theory holding that copyr ight's origin occurs at the creation of a work, the other that its origin exists only through the copyright statute."Over time, publishers were able to use the authors' rights argument to gain enlargement of the rights of copyright. But as noted by Patterson and Lindberg, the notion of copyright as an author's right was and remains a fiction -- authors assign their entire rights to publishers, who then gain the whole benefit of copyright law. V. FAIR USE & THE FIRST AMENDMENT The public interest factor was not, however, written out of American law. To the contrary, the U.S. Constitution expressly states that the purpose of Copyright laws is "[t]o __Promote the Progress of Science and useful Arts__...." And a significant limitation on the rights of copyright holders is found in the "fair use" doctrine, set out at Section 107 of the Copyright Act as follows,"[T]he fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified ..., for purpose's such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include: (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. "Interestingly, Patterson and Lindberg also note the relationship between copyright law and the free speech rights guaranteed by the First Amendment. As described above, copyright formerly served as a tool of censors in England. The authors posit that Parliament, in creating a statutory copyright "was concerned with rendering copyright ineffective not only as an instrument of monopoly but also as a device of censorship." They state, "Whether or not the drafters of the U.S. Constitution fully comprehended the free-speech values in the provisions of the Statute of Anne we cannot know, but we do know tha tthey made direct use of the wording of the statute's title, and it is clear that those words incorporate free-speech values. The three policies that the copyright clause [of the U.S. Constitution] mandates -- the promotion of learning, the preservation of the public domain, and the protection of the author -- are consistent with and essential to free-speech rights." The relationship of the First Amendment to copyright law has also been argued in the 2 Live Crew case respecting the "fair use" doctrine. In the 2 Live Crew case, Acuff-Rose Music argues "there is no need for a separate First Amendment analysis [in this case] because First Amendment protections are 'already embodied in the Copyright Act's distinction between copyrightable expression and uncopyrightable facts and ideas, and the latitude for scholarship and comment traditionally afforded by fair use." One must not forget, Acuff-Rose Music urges, that copyright owners are protected by First Amendment values -- "protections afforded the copyri ght owner are themselves an 'engine of free expression,' supplying authors with 'the economic incentive to create and disseminate ideas.'" These views are shared by Michael Jackson, Mac Davis, Dolly Parton, and a number of songwriter associations, who filed a "friend of the court" brief. In a separate "friend of the court" brief filed on behalf of the estates and trusts of Ira and George Gershwin, Alan Jay Lerner, Frederick Lowe, and Cole Porter, among others, there is asserted the view that exclusive rights of copyright are not antithetical to First Amendment values. "These views are disputed, however, in papers filed on behalf of a number other "friends of the court": Home Box Office, Comedy Partners (doing business as Comedy Central, a cable television service), Fox Inc. (producer, through a subsidiary, of among other things, "In Living Color" and "The Simpsons"), Mad magazine and National Broadcasting Company, Inc. HBO and the others state that in certain cases, "monopoly rights in expression are at odds with the freedom of expression guaranteed by the First Amendment." They add that mechanical application of the "fair use" analysis may eviscerate First Amendment rights. To protect First Amendment rights, "copyright law should be tailored to accomplish its intended purpose, i.e., promoting creative achievement...."; the focus of the fair use test should be to assess the legitimacy of a new work, "not merely to recite the statutory factors." Congress, itself, did not intend the four statutory fair use factors be the exclusive means of assessing fair use in all circumstances. These points are echoed in papers submitted by another "friend of the court," the American Civil Liberties Union ("ACLU"). According to the ACLU, "To be sure, fair use 'creates tensions between the Copyright Act's goal of protecting an author's works and first amendment principles of ensuring the unimpeded flow of information ....' The doctrine therefore calls for a careful balancing of the 'interests of authors and inventors in the control and exploitation of their writings and discoveries on the one hand, and society's competing interest in the free flow of ideas, information, and commerce on the other ...." (Citations omitted.) The ACLU also notes the U.S. Supreme Court has observed that a case-by-case determination of fair use claims is required and that the inquiry need not be limited to consideration of the four statutory fair use factors. With regard to "fair use," itself, Acuff-Rose Music takes the position there are no presumptively fair uses of a copyrighted work. Acuff-Rose Music claims the first step in the fair use analysis (the purpose and character of the use) should be taken in light of a presumption that __every commercial use of copyrighted material is unfair __. The presumption does not apply because the alleged infringer may make a profit, but, according to Acuff-Rose Music, only "where the user is capitalizing primarily on the commercial appeal of the copyrighted material itself...." 2 Live Crew notes, however, that this limitation is a recent construction by Acuff-Rose Music -- the Sixth Circuit had announced simply "that the admittedly commercial nature of the derivative work ... requires the conclusion that the first factor weighs against a finding of fair use." Whether the alleged infringing use is of a commercial nature is just the beginning, says 2 Live Crew. The court should then proceed to whether there has been a productive and creative use of the original that is the source of the commercial appeal of the new work, rather than the previous success of the existing work. The Harvard Lampoon, Inc., which also filed a brief as a "friend of the court," observes, "In performing the fair use analysis, courts have historically favored 'productive' uses, where the copier adds an original contribution to the copied work, over 'non-productive' uses, where the copier appropriates the original without adding a socially valuable creative element."This view is apparently shared by a number of songwriters and composers, who argue in this case that a copier is to be credited if the new work "serves a transformative purpose, i.e., uses and transforms a limited portion of a prior copyrighted work in the course of creating a new work for a socially desirable purpose..." In the 2 Live Crew case, the debate over the second and third steps in the analysis (concerning the nature and amount used of the copyrighted work) centered upon whether a creative work should be subject to a greater degree of copyright protection than a factual work, and whether 2 Live Crew had taken more from the original than reasonably necessary. On the fourth step in the analysis (the effect of the use upon the market or value of the copyrighted work), Acuff-Rose Music emphasizes that a "copyright holder __need not have suffered actual competitive injury__. Rather, as the statute itself provides, there must be only 'potential' for such injury." (Emphasis added.) And where "the intended use [by the alleged infringer] is for commercial gain," Acuff-Rose Music maintains, "__the likelihood [of future harm] may be presumed__." (Emphasis added); in reality, this means that the proponent of the fair use must prove a negative -- "that the use does not reduce the market for plaintiff's work.") 2 Live Crew acknowledges that courts have placed much importance on the fourth fair use factor and observes that a presumption of harm is reasonable where the alleged infringing user is exploiting the commercial appeal of the original. In this case, however, 2 Live Crew claims the appeals court erred by examining whether there has been an impairment of the copyright owner's ability to license the copyrighted work for future works of the __same type as the alleged infringing one__ (in this case, a rap parody of "Oh, Pretty Woman"). The court should have focused, instead, on the market for the original copyrighted product and whether the new use adversely affected the existing and/or potential market for the original. As noted in __The Nature of Copyright__, one of the problems in the 2 Live Crew case really is that the four statutory fair use factors have no substantive content: "The first, for example, implies that a nonprofit educational use is more likely than a commercial use to qualify as a fair use, although the wording in no way excludes commercial fair use. The second factor -- the nature of the work -- does not even imply what kind of work is relevant for fair-use purposes, and the third and fourth factors appear to be similarly devoid of any guidance for their application." VI. TO RESTORE THE PUBLIC INTEREST Clearly, the Supreme Court has a great opportunity to clarify the law and restore the public interest as a respected end in copyright analysis. And the decision in this case will have an immediate effect on computer hardware and software manufacturers, many of whom have been struggling to bring innovative and useful products to market in the face of unyielding opposition from entrenched companies who have expended vast sums to persuade Congress and courts of a view of copyright law that protects their monopolies. The importance of this case should not be underestimated -- if 2 Live Crew is not allowed to "mock the banality of white centered rock-n- roll music," we may be condemned to live with mundane software and hardware standards marketed by companies that have little incentive to develop new and useful products. (The lower court citations for the 2 Live Crew case are __Campbell, et al. v. Acuff-Rose Music, Inc.__, 754 F.Supp. 1150 (M.D. Tenn. 1 991), 972 F.2d 1429 (6th Cir. 1992). The Supreme Court case number is 92-1292. Copies of the briefs in the 2 Live Crew case were kindly made available to the author by: the Copyright Society of the U.S.A., Northern California Chapter; Steven F. Reich, Esq. of Covington & Burling, attorneys for the ACLU; Steven R. Kaye, Esq. of Proskauer Rose Goetz & Mendelsohn, attorneys for certain composers, songwriters, and other amici curiae ((friends of the court)); Sidney S. Rosdeitcher of Paul, Weiss, Rifkind, Wharton & Garrison, attorn eys for Acuff-Rose Music, Inc.; Daniel M. Waggoner, Esq. of Davis, Wright, Tremaine, attorneys for HBO, et al.; Robert Loeffler, Esq. of Morrison & Foerster, attorneys for The Harvard Lampoon, Inc.; and Marvin E. Frankel, Esq. of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, attorneys for Michael Jackson, et al.) CyberLaw (tm) is published solely as an educational service. The author, a California attorney, is Executive Editor of California Counsel Connect. He may be contacted at jrosen03@reach.com, jrsnr@well.sf.ca.us, or cyberlaw@aol.com; questions and comments may be posted on America Online (go to keyword "CYBERLAW"). Copyright (c) 1993 Jonathan Rosenoer; All Rights Reserved. CyberLaw is a trademark of Jonathan Rosenoer. CyberLex (tm) [11/93] Notable legal developments reported in November 1993 include the following: # Mark Abene (aka Phiber Optik), 21, was sentenced to 1 year and 1 day in prison after pleading guilty in federal court to one felony count of conspiracy for membership in a group of computer hackers named MOD, or Masters of Deception. Abene apologized for his deeds, noting that he was dismayed they were misconstrued as malicious. According to prosecutors, only 2 members of MOD (John Lee and Julio Fernandez) made any money from their misdeeds -- $800 from another hacker for phony information on how to break into the TRW system. Prosecutors state that MOD members obtained access to a number of computer networks, cheated phone companies and the Tymnet computer network out of hundreds of thousands of dollars worth of services, and obtained phone numbers and credit reports of celebrities, among other things. (San Jose Mercury News, November 4, 1993, 1E.) # Microsoft announced the first prison sentence of a convicted software pirate. Benny S. Lee of Freemont, California, began a 1-year federal sentence after pleading guilty to a misdemeanor. A co-defendant received a 6-month home-detention sentence. The case began when Microsoft sued Lee and others for selling 25,000 bootleg copies of MS-DOS valued at $1.8 million. Lee and the co- defendant lost a civil case and were fined $5.3 million -- Lee, however, was only found liable by the jury for $18,000 in damages. Both men declared bankruptcy and did not pay the fine. The matter was referred to the U.S. Attorney's office, which filed criminal proceedings. (San Jose Mercury News, November 2, 1993, 3E.) # Michael Lafaro, president of MJL Design of New York, and one of MJL's technicians face up to 7 years in jail and fines of $10,000 and $5,000, respectively, under a new New York state law for computer tampering. After a client became engaged in a payment dispute with MJL, the men allegedly infected the client's computer with a virus that would automatically shut down the business's access to information. (New York Times, November 23, 1993, A1.) # Compton's New Media, of Carlsbad, California, announced it received a patent (No. 5,241,671) that extends to virtually any database that uses more than just text to retrieve information, such as on-line services and interactive television. The patent holds that Compton's invented the "multimedia search system using a plurality of entry path means which indicate interrelatedness of information." Compton's also announced that it intends to collect royalties of as much as 3% from rival multimedia software makers. (San Jose Mercury News, November 17, 1993, 1H; New York Times, November 28, 1993, p.10.) # MFS Communications Inc. of Omaha, Nebraska, has asked the Federal Communications Commission to end the current pricing system that subsidizes basic phone services at low prices even in hard-to-reach places. According to MFS, these subsidies have become an impediment to an open market. For example, regulators have blocked new competitors in California from offering intrastate long-distance service at a price much lower than Pacific Bell's, because Pacific Bell would have to replace artificially high prices for intercity connections by raising below-cost prices for basic services. MFS argues that the current system should be replaced with a system in which all companies in the market contribute to a pool used to underwrite low-income customers and people in hard-cost areas. (New York Times, November 2, 1993, C3.) # A court declared valid a basic patent held by Spectrum Information Technologies Inc. covering key methods for sending computer data over cellular networks. (San Jose Mercury News, November 18, 1993, 1G.) # The Business Software Alliance, which includes Microsoft, Lotus and WordPerfect , endorsed the North American Free Trade Agreement and hailed its definition of software as "literary work" deserving the highest level of protection against copyright infringement. (San Jose Mercury News, November 4, 1993, 3E.) # The United States Government has written to protest a Japanese proposal that Japanese copyright law legalize "reverse engineering" (decompilation) of computer software. (New York Times, November 22, 1993, C2.) # The National Writers Union announced it will file suit in federal court against the country's largest newspapers and information services to determine if writers should get paid when their stories are read or reproduced electronically. (San Jose Mercury News, November 9, 1993, 6E.) CyberLex (tm) is published solely as an educational service. Copyright (c) 1993 Jonathan Rosenoer; All Rights Reserved. CyberLex is a trademark of Jonathan Rosenoer. CyberLaw (tm) [4/93] Search & Seizure I. Liberty & Cyberspace Three years ago, a small publisher of role-playing games in Texas was raided by the United States Secret Service. Government agents carted away computers, one of which ran the company's computer bulletin board system (BBS), hundreds of floppy disks, and drafts of a soon-to- be-published book and of magazine articles. The seized material was held for months, which led to the layoff of a number of the company's employees. No-one at the company was arrested or charged with a crime. The owner of the company, Steve Jackson, appealed for help and managed to gain the attention of some prominent members of the computer community. The case came to be viewed by many as a struggle for civil liberties in the new electronic frontier, known as Cyberspace. Steve Jackson and his supporters were vindicated recently, when a Federal District Court ruled that the Secret Service had violated federal statutes protecting publishers and the privacy of electronic co mmunications with regard to its raid of the company. II. The Saga Begins The saga of Steve Jackson and his company began in the summer of 1989, when the Secret Service was contacted by a representative of BellSouth (a Regional Bell Operating Company) who advised that there had been a theft of sensitive data from BellSouth's computer system. The stolen data was described as "an internal, proprietary document that described the control, operation and maintenance of BellSouth's 911 emergency system." This report led the Secret Service and the U.S. Attorney's office in Chicago into a larger investigation, concerning a national group of computer hackers called the "Legion of Doom" (LOD). A member of LOD had allegedly entered a BellSouth computer and copied the 911 document to his own computer. The 911 document was then allegedly sent to a BBS in Illinois, from which it was downloaded by a student named Craig Neidorf and edited for and distributed in a publication named __Phrack__. One person who received __P hrack__ was Loyd Blankenship, also a member of LOD. Notably, the 911 document is not a computer program and has nothing to do with accessing a 911 system. It simply details who does what in the telephone company bureaucracy regarding customer complaints and equipment failures, among other things. For the Secret Service, BellSouth estimated the cost of the 911 document at $79,449. But in July 1990, during Neidorf's trial, it was disclosed that the 911 document was available to the public directly from BellSouth for about $20. (Upon this disclosure, the prosecution of Neidorf collapsed -- leaving him owing over $100,000 in legal fees.) In early 1990, the Secret Service learned that another LOD member had posted a message on a BBS maintained by Blankenship, allegedly "inviting other BBS participants to send in encrypted passwords stolen from other computers, which Blankenship and [the other member of LOD] would decrypt and return...." After seeking additional information, the Secret Service decided to obtain search warrants to obtain evidence against them, including a search warrant for the offices of Blankenship's employer, Steve Jackson Games, Inc. Steve Jackson Games, as described by its lawyers, "publishes role- playing games in book form, magazines, a book about game theory, boxed games, and game-related products. The company's games are played not on computers, but with dice, a game book or books, and lots of imagination." As part of its business, the company runs a BBS (the "Illuminati" BBS) that allows outside callers to dial in and, as outlined by Steve Jackson, "read messages left by [the company], read public messages left by others who have called the bulletin board, leave public messages for other callers to read, send private electronic mail to other persons who called the bulletin board, and 'download' computerized files to their own computer." Like the typical BBS, the Illuminati BBS stored electronic mail, including mail that had been sent but not yet received. In February 1990, there were 365 users of the Illuminati BBS and, according to the trial court, Blankenship was a "co-sysop" of the BBS. III. The Raid On March 1, 1990, Steve Jackson Games was raided by the Secret Service. They seized and carried away a computer found on Blankenship's desk, a disassembled computer next to his desk, the computer running the Illuminati BBS, over 300 computer disks, and various documents and other materials. Among the seized items were drafts of a book titled __GURPS Cyberpunk__, which was to be published within days or weeks of the raid, and drafts of magazines and magazine articles. ("GURPS" stands for "Generic Universal Game Role Playing System.") According to the company's attorneys, a Secret Service agent called __GURPS Cyberpunk__ "'a hand book for computer crime' in Mr. Jackson's presence, (although the government now claims that the book was not the target of the search and admits it was not evidence of any crime). "For Steve Jackson Games, the raid was a calamity. It was suffering severe cash flow problems, and the seizure caused substantial delays in publication and the termination of 8 employees. The bulk of the seized material was not made available to the company until late June 1990, and no printed copies of __GURPS Cyberpunk__ were ever returned. The raid also caused wide concern across the United States. From the outset, as noted by the company's lawyers, many saw the case as one in which,"The Secret Service, on exceedingly weak pretense, invaded the office of an upstanding, hard-working small businessman, and nearly put him out of business. The Secret Service shut down a working BBS -- a new, powerful means of public and private communication -- with __no__ evidence that anything unlawful was transpiring there. Shutting down the "Illuminati" was like clearing or closing down a park or meeting hall, simply because one of hundreds of the people gathered there was under vague suspicion."This view was later validated by the trial court, which found that, "[P]rior to March 1, 19 90, and at all other times, __there has never been any basis for suspicion__ that [Steve Jackson Games, Steve Jackson, or any of the other individuals who subsequently sued the Secret Service as a result of the raid] have engaged in any criminal activity, violated any law, or attempted to communicate, publish, or store any illegally obtained information or otherwise provide access to any illegally obtained information or to solicit any information which was to be used illegally." (Emphasis added.) IV. The Lawsuit After the raid, Steve Jackson Games, Steve Jackson and 3 users of the Illuminati BBS filed suit against the United States Secret Service, the United States of America, and several government employees who had been involved in the raid. The plaintiffs brought causes of action for violation of the following: the Fourth Amendment to the U.S. Constitution; the Privacy Protection Act, 42 U.S.C. 2000aa et seq.; the Wire and Electronic Communications Interception and Interception of Oral Communication Act, 18 U.S.C. 2510 et seq.; and, the Stored Wire and Electronic Communications and Transactional Records Act, 18 U.S.C. 2701 et seq. (The latter 2 statutes are part of the Electronic Communications Protection Act, or ECPA.) V. Fourth Amendment With respect to the Fourth Amendment, the plaintiffs argued that "probable cause to believe that a crime has occurred ... does not automatically give license to search every place that a suspect may frequent," and also that "there must be probable cause to believe that the __type__ of materials sought are located at the place to be searched." "The search warrant," continued the plaintiffs, "did not establish probable cause that evidence of any crime would be found at [Steve Jackson Games]," and the search of the company "was broader than justified by any facts in the warrant." In response, the government argued that even if the plaintiffs were correct, they still had to prove that "these defects were so obvious that no reasonable officer could have believed the warrant to be valid, in light of the information [the officer] possessed." Because a court determination in favor of the plaintiffs could have resulted in an immediate appeal that would delay the balance of their case, the plaintiffs dropped their Fourth Amendment claims to focus their case on the Privacy Protection Act and ECPA claims. VI. Privacy Protection Act The Privacy Protection Act concerns the investigation and prosecution of criminal offenses and, in relevant part, prohibits government employees from searching for or seizing any "work product materials" possessed by a person reasonably believed to have a purpose to disseminate to the public a newspaper, book, broadcast, or other similar form of public communication. "Work product materials" are defined to include materials, not including contraband, the fruits of a crime, or things used as the means of committing a crime, created or prepared for the purpose of communicating such materials to the public. At the time of the raid on Steve Jackson Games, the Secret Service was advised that the company was in the publishing business. No significance was attached to this information, however, as the Secret Service agents involved in the raid were oblivious of the provisions of the Privacy Protection Act. Notwithstanding the fact that the Secret Service had failed to make a reasonable investigation of Steve Jackson Games "when it was apparent [its] intention was to take substantial properties belonging to the [company], the removal of which could have a substantial effect on the continuation of business," the trial court declined to find that on March 1, 1990, any government employee had reason to believe that the property to be seized would be "work product material" subject to the Privacy Protection Act. But during the raid, the Secret Service had been advised of facts that put its agents on notice of probable violations of that Act. Indeed, the Secret Service continued to detain the company's property through late June 1990 despite the fact that, as observed by the trial court, "[i]mmediate arrangements could and should have been made on March 2, 1990, whereby copies of all information seized could have been made." ((returned?)) The refusal of the Secret Service to return the company's information and property violated the Privacy Protection Act, and the court awarded Steve Jackson Games its expenses ($8,781) and economic damages ($42,259). VII. ECPA The trial court did not find, however, that the Secret Service had violated the Electronic Communications Interception and Interception of Oral Communication Act. According to the trial court, "the Secret Service intended not only to seize and read [the communications stored on the Illuminati BBS], but, in fact, did read the communications and thereafter deleted or destroyed some communications either intentionally or accidentally." But the Secret Service had not "intercepted" communications within the meaning of the latter Act, ruled the court, apparently on the grounds that only the contemporaneous acquisition of a communication is prohibited thereby. In support of this ruling, the court looked to the Congressional enactment of the Stored Wire and Electronic Communications and Transactional Records Act, among other things. This statute protects the content of electronic communications in electronic storage and sets out specific requirements for the government to follow to obtain the "disclosure" of such communications. One such requirement is that there be "reason to believe the contents of a[n] ... electronic communication ... are relevant to a legitimate law enforcement inquiry." Although the Secret Service wanted to seize, review and read all electronic communications, public and private, on the Illuminati BBS, the Secret Service did not advise the Magistrate Judge who issued the warrant for the raid on Steve Jackson Games "that the Illuminati board contained private electronic communications between users or how the disclosure of the content of these communications could relate to [the] investigation." The court commented that it was not until June 1990 that the plaintiffs were able to determine the reasons for the March 1, 1990, seizure, "and then only with the efforts of the offices of both United States Senators of the State of Texas." Simply stated, "[t]he procedures followed by the Secret Service in this case virtually eliminated the safeguards contained in the statute." Lacking sufficient proof of compensatory damages, the court assessed statutory damages in favor of the plaintiffs, in the am ount of $1,000 for each plaintiff. VIII. Further Information Further information concerning this case may be found in the opinion of the United States District Court in __Steve Jackson Games, Inc., et al. v. United States Secret Service, et al.__, No. A-91 -CA-346-SS (W.D. Tex. 3/12/93). For background information on this case and other related cases, see B. Sterling, __The Hacker Crackdown__ (1992), and John Perry Barlow, __Crime & Puzzlement__(1990) (Copies of the arguments filed with the trial court and of the court's opinion were kindly made available to the author by Peter D. Kennedy, Esq., of George, Donaldson & Ford, attorneys for Steve Jackson Games, Inc. and the other plaintiffs.) CyberLaw (tm) is published solely as an educational service. The author may be contacted at jrsnr@well.sf.ca.us; cyberlaw@aol.com; questions and comments may be posted on America Online (go to keyword "CYBERLAW"). Copyright (c) 1993 Jonathan Rosenoer; All Rights Reserved. CyberLaw is a trademark of Jonathan Rosenoer. CyberLex (tm) [4/93] Notable legal developments reported in April 1993 include the following: # The Ninth Circuit Court of Appeals has ruled that an independent service provider violated copyright laws by loading operating software licensed to its client into the random access memory of its client's computer in the course of fixing the computer. (__MAI Systems Corp. v. Peak Computer Inc., et al.__, 93 C.D.O.S. 2596 (9th Cir. 4/9/93)). ((This is non sequitur.)) # The White House has announced the development of a computer chip, called the "Clipper Chip," that encodes voice and data transmissions using a secret algorithm. The chip is to work with an 80-bit, split key escrow system. Two escrow agents would each hold 40-bit segments of a user's key, which would be released to law enforcement agents upon presentation of a valid warrant. After the announcement, several groups expressed concern that, among other things, the algorithm used cannot be trusted unless it is public and open to testing. (New York Times, April 16, 1993, A1; San Jose Mercury News, April 16, 1993, 1A, and April 17, 1993, 11D;Wall Street Journal, April 19, 1993, A5.) # The CIA has warned U.S. high-tech companies that the French government may be spying on them. (San Jose Mercury News, April 27, 1993, 11E.) # Kevin Poulson, a hacker already scheduled to be tried on 14 federal felonies, has been indicted on 19 more felony counts in which he is accused of using telephone and computer skills to ensure that he and two alleged accomplices would win radio station call-in contests. Prizes in those contest included a pair of Porsche cars and more than $20,00 in cash. (San Jose Mercury News, April 22, 1993, 1F.) # InterDigital Communications Corp. has filed suit for patent infringement against Oki Electric Industry Co., of Tokyo. The suit concerns a data communication technique called code division multiple access (CDMA), developed by a San Diego-based company, and CDMA-based phones that Oki plans to manufacture, among other things. InterDigital holds many patents on a rival technique called time division multiple access, used by several cellular phone companies. (Wall Street Journal, April 19, 1993, 7B.) # 20 Japanese telecommunications companies announced that they will join Motorola's Iridium project, a planned digital cellular telephone network linked by 66 orbiting satellites. (San Jose Mercury News, April 3, 1993, 11D.) # The nation's local phone companies offered to build the "information superhighway" promoted by Vice President Al Gore if they are allowed to go back onto the long-distance phone business, to manufacture equipment, and to provide video programming over phone lines. (San Jose Mercury News, April 16, 1993, 3C.) # Apple Computer, Inc. is fighting a $290 million claim by the IRS for back taxes for the years 1987 and 1988 relating to the value of property transferred between foreign and domestic units of the company. (San Jose Mercury News, April 3, 1993, 9D.) # A federal judge overturned a jury verdict that AMD did not have the right to use Intel microcode in AMD chips, and granted a new trial. The basis for the court's ruling was that Intel had failed to produce critical documents that would have allowed AMD fairly to present its defense. The verdict had stopped AMD from selling a clone of Intel's 486 microprocessor. Within 2 weeks, Intel sued AMD alleging that AMD's 486 clones and an AMD chip not yet on the market violate Intel copyrights. (San Jose Mercury News, April 17, 1993, 1A, and April 29, 1993, 1C; New York Times, April 17, 1993, p.17.) # The Commerce Department has imposed permanent import duties of up to 11.45% on Korean-made computer memory chips, following an International Trade Commission finding of "dumping" by South Korean manufacturers. (San Jose Mercury News, April 23, 1993, 1C .) # Taiwan has adopted a set of copyright law revisions. (San Jose Mercury News, April 23, 1993, 3C.) # The International Trade Commission has agreed to investigate claims by a Mississippi inventor that 20 computer disk-drive manufacturers are violating a patent he holds for placing carbon coating on computer disks by importing drives that use the technology. One manufacturer, Connor Peripherals Inc., has filed suit to declare the inventor's patent invalid. (San Jose Mercury News, April 27, 1993, 9E.)Cy berLex (tm) is published solely as an educational service. Copyright (c) 1993 Jonathan Rosenoer; All Rights Reserved. CyberLex is a trademark of Jonathan Rosenoer.