Internet Legal Issues: Part I

There really is no such thing as "Internet law." Instead, there are a number of laws that apply to things that are done on the Internet. In this brief Overview, we'll discuss several laws that are important for doing business on the Internet. Here are the laws we'll cover:

• Copyright
• Copyright Ownership
• Copyright Licenses
• Other Intellectual Property Laws
• Privacy and Defamation
• Contracts
• Sales

Our coverage of each law is brief and limited to United States law. For fuller coverage of U.S. law on these topics, consult our book Multimedia Law and Business Handbook (see the order form at the end of this book).

There are many laws in addition to the ones discussed here that apply to activities on the Internet -- for example, criminal laws, obscenity laws, consumer protection laws, laws regulating advertising, and export control laws. For information on laws not covered in this book and on other countries' laws, please consult other publications or your attorney.

Copyright Law

Contrary to what some people think, copyright law applies to the Internet. If you copy copyrighted graphics, text, photos, or music and use that material in your Web site without permission, you are opening yourself up to a lawsuit for copyright infringement.

Copyright Basics

Found some great content for your Web site? Chances are that it's protected by copyright. Here's why:

• Copyright protection is available for text, art, graphics, photos, and music (both compositions and recordings) and is easy to obtain.
• Copyright protection lasts a long time. The copyright term for a work created by an individual after January 1, 1978 is the life of the author plus 50 years. For a work created by an employee within the scope of the employment after January 1, 1978 -- "work made for hire" -- the term is 75 years from the date of first "publication" (distribution of copies to the general public) or 100 years from the date of creation, whichever expires first.

You may be familiar with copyright registration and copyright notice. Under current U.S. law, registration and notice are optional. Copyright protection arises automatically when an "original" work of authorship is "fixed" in a tangible medium of expression.

A work is "original" as long as it owes its origin to the author (as opposed to being copied from some preexisting work). A work can be original without being novel, unique, creative, or valuable. A work is "fixed" when it is made "sufficiently permanent or stable to permit it to be perceived, reproduced, or communicated for a period of more than transitory duration." Forms of "fixation" include writing, typing, dictating into a tape recorder, entering into a computer, and videotaping.

The Copyright Owner's Rights

Before you use copyrighted material owned by a third party on your Web site, you should determine whether it is necessary to obtain permission from the owner. For most uses, permission should be obtained.

You need permission if your use of the material without permission would violate one of the copyright owner's five exclusive rights in the copyrighted work. Those rights are as follows:

• Reproduction Right. The reproduction right is the right to copy, duplicate, transcribe, or imitate the work in fixed form. Scanning is one way of exercising the reproduction right.
• Modification Right. The modification right (also known as the derivative works right) is the right to modify the work to create a new work. A new work that is based on a preexisting work is known as a "derivative work." Altering a photograph is an exercise of the modification right, as is creating an interactive version of a novel.
• Distribution Right. The distribution right is the right to distribute copies of the work to the public by sale, rental, lease, or lending.
• Public Performance Right. The public performance right is the right to recite, play, dance, act, or show the work at a public place or to transmit it to the public. In the case of a motion picture or other audiovisual work, showing the work's images in sequence is considered "performance." Sound recordings -- recorded versions of music or other sounds -- do not have a public performance right except for a special "digital performance right," a license to which would be required to use a sound recording on the Internet.
• Public Display Right. The public display right is the right to show a copy of the work directly or by means of a film, slide, or television image at a public place or to transmit it to the public. In the case of a motion picture or other audiovisual work, showing the work's images out of sequence is considered "display." Making material available for Internet users to look at on your Web site is considered public display.
• Anyone who violates any of the exclusive rights of a copyright owner is an infringer.

Example: John scanned Photographer's copyrighted photograph, altered the image by using digital editing software, and included the altered version of the photograph in John's Web site. If John used Photographer's photograph without permission, John infringed Photographer's copyright by violating the reproduction right (scanning the photograph), the modification right (altering the photograph), and the public display right.

• A copyright owner can recover actual, or in some cases, statutory damages from an infringer. Those who use infringing material provided by others can also be liable for infringement.

Example: Suppose John (in the example above) was a Web site developer who used Photographer's photo in a Web site which John created for Client. Client's use of the photo in Client's Web site makes Client an infringer, too (even if Client had no intent to infringe and didn't know that John used Photographer's photo without permission).

In Forms 1, 2, 3, and 6, we remind you that you can be liable for copyright infringement for using material prepared for you by others, and we recommend things you can do to protect yourself.

Employers are liable for infringement done by their employees within the scope of the employment. Whether a system operator, Internet service provider, bulletin board provider, Web site provider, or Chat Room provider is liable when someone using the operator's or provider's facilities commits copyright infringement through those facilities is currently being debated.

Forms 4, 8, and 9 include provisions to help protect employers, Chat Room providers, and Web site providers from liability for infringement by employees and users.

Avoiding Infringement

How can you use copyrighted material without running the risk of being sued for infringement? Get permission -- known as a "license" -- from the copyright owner. Licenses are discussed in a later section of this Overview.

There are a number of myths concerning the necessity of getting a license. Here are five. Don't make the mistake of believing them:

• Myth #1: "The work I want to use doesn't have a copyright notice on it, so it's not copyrighted. I'm free to use it."
• Most published works contain a copyright notice. However, for works published on or after March 1, 1989, the use of copyright notice is optional. The fact that a work doesn't have a copyright notice doesn't mean that the work is not protected by copyright. This statement is true for material you find on the Internet, too. While you are free to copy and use public domain material (discussed later in this section of the Overview) that you find on the Net, much of the material on the Net is protected by copyright -- whether or not it has a copyright notice on it.
• And Web sites themselves are protected by copyright as "compilations" of preexisting material.
• Myth #2: "I don't need a license because I'm using only a small amount of the copyrighted work."
• It is true that de minimis copying (copying a small amount) is not copyright infringement. Unfortunately, it is rarely possible to tell where de minimis copying ends and copyright infringement begins. There are no "bright line" rules.
• Copying a small amount of a copyrighted work is infringement if what is copied is a qualitatively substantial portion of the copied work. In one case, a magazine article that used 300 words from a 200,000-word autobiography written by President Gerald Ford was found to infringe the copyright on the autobiography. Even though the copied material was only a small part of the autobiography, the copied portions were among the most powerful passages in the autobiography. Copying any part of a copyrighted work is risky. If what you copy is truly a tiny and nonmemorable part of the work, you may get away with it (the work's owner may not be able to tell that your work incorporates an excerpt from the owner's work). However, you run the risk of having to defend your use in expensive litigation. If you are copying, it is better to get a permission or a license (unless fair use applies). You cannot escape liability for infringement by showing how much of the protected work you did not take.
• Myth #3: "Since I'm planning to give credit to all authors whose works I copy, I don't need to get licenses."
• If you give credit to a work's author, you are not a plagiarist (you are not pretending that you authored the copied work). However, attribution is not a defense to copyright infringement.
• Myth #4: "My Web site will be a wonderful showcase for the copyright owner's work, so I'm sure the owner will not object to my use of the work."
• Don't assume that a copyright owner will be happy to have you use his or her work. Even if the owner is willing to let you use the work, the owner may want to charge you a license fee. Content owners view the Internet as a new market for licensing their material.
• Myth #5: "I don't need a license because I'm going to alter the work I copy."
• Generally, you cannot escape liability for copyright infringement by altering or modifying the work you copy. If you copy and modify protected elements of a copyrighted work, you will be infringing the copyright owner's modification right as well as the reproduction right.

When You Don't Need a License

You don't need a license to use a copyrighted work in two circumstances: (1) if your use is fair use; (2) if the material you use is factual or an idea. And you don't need a license to use works that are in the public domain.

Fair Use

You don't need permission to use a copyrighted work if your use is "fair use." The "fair use" of a copyrighted work is not an infringement of copyright. Copyright owners are, by law, deemed to consent to the fair use of their works by others. Examples of fair use are quoting passages from a book in a book review; summarizing an article, with brief quotations, for a news report; and copying a small part of a work to give to students to illustrate a lesson.

Unfortunately, it is difficult to tell whether a particular use of a work is fair or unfair. Determinations are made on a case-by-case basis by considering four factors:

• Factor #1: Purpose and character of use. The courts are most likely to find fair use where the use is for noncommercial purposes, such as a book review.
• Factor #2: Nature of the copyrighted work. The courts are most likely to find fair use where the copied work is a factual work rather than a creative one.
• Factor #3: Amount and substantiality of the portion used. The courts are most likely to find fair use where what is used is a tiny amount of the protected work. If what is used is small in amount but substantial in terms of importance, a finding of fair use is unlikely.
• Factor #4: Effect on the potential market for or value of the protected work. The courts are most likely to find fair use where the new work is not a substitute for the copyrighted work.

There's been some confusion about how fair use applies to the Internet. Some people think that using someone else's copyrighted material on the Internet is fair use, because the "culture" of the Internet is that it's okay to do this ("everyone does it"). And some think that copying and using material that you find on the Internet is also fair use. However, under current law, there is no absolute fair use right to post someone else's copyrighted material on the Internet or to use material you find on the Internet. If copyrighted material is used on the Internet or copied from the Internet without the owner's permission, whether the use is fair use will be decided by considering the four factors discussed above.

Because getting a license to use copyrighted material can be complicated and costly, you may be tempted to skip the licensing process and just rely on fair use. Before you yield to that temptation, please consider these guidelines:

• If you are creating a Web site for purely noncommercial purposes -- for a nonprofit organization to use in providing information, for example -- it is possible that you can justify copying small amounts of material as fair use.
• If you use copyrighted content on a Web site for a for-profit company -- even an "information only" Web site -- or on a Web site that serves any commercial use, it will be hard to succeed on a fair use defense. It's better to get permission.
• If your Web site serves traditional "fair use" purposes -- criticism, comment, news reporting, teaching, scholarship, and research -- you have a better chance of falling within the bounds of fair use than you do if your Web site's purpose is entertainment or business.

Ideas or Facts

You don't need a license to copy facts from a protected work or to copy ideas from a protected work. The copyright on a work does not extend to the work's facts. This is because copyright protection is limited to original works of authorship, and no one can claim originality or authorship for facts. You are free to copy facts from a copyrighted work.

Public Domain

You don't need a license to use a public domain work. Public domain works -- works not protected by copyright -- an be used by anyone. Because these works are not protected by copyright, no one can claim the exclusive rights of copyright for such works. For example, the plays of Shakespeare are in the public domain.

Works enter the public domain in several ways: because the term of the copyright expired, because the copyright owner failed to "renew" his copyright under the old Copyright Act of 1909, or because the copyright owner failed to properly use copyright notice (of importance only for works created before March 1, 1989, at which time copyright notice became optional). The rules regarding what works are in the public domain are too complex for this Overview, and they vary from country to country. Material that is in the public domain in this country may be protected by copyright in other countries.

The only easy-to-apply rule for determining when works are in the public domain is that a copyright that was in existence before January 1, 1978 and was renewed has a term of 75 years (and terms always run to the end of the calendar year). Consequently, in 1997, all works first "published" before January 1, 1922 are in the public domain in the United States.

Works created by federal government officers and employees as part of their official duties are not protected by copyright. This rule does not apply to works created by state government officers and employees.

Copyright Ownership

Are you planning to hire a freelancer to create content for your Web site? Or are you planning to hire a Web site developer to create a Web site for you? Or perhaps you have employees who will be creating a Web site or Web site content for you? Or do you create material for others to use on their Web sites?

If your answer to any of these questions is "yes," you need to understand copyright law's ownership rules. The Copyright Act has "default rules" on ownership which apply if the parties to a transaction do not reach their own agreement on ownership. We'll discuss these rules here. They can always be varied by agreement of the parties.

The basic rule is that ownership of copyright initially belongs to the author or authors of the work.

Example: Sarah, a photographer, took a photograph of the Lincoln Memorial. Sarah is the author of the photograph and the initial owner of the copyright in the photograph.

The "author" is generally the individual who created the work. However, when an employee creates work within the scope of the employment, the employer is considered the "author." Unless the parties have agreed otherwise in a signed written document, the employer owns the copyright of a work made for hire.

Example: As part of his job, John, an employee of Big Company's marketing department, created a Web site for Big Company. Even though John created the Web site, Big Company is the author for copyright purposes. Big Company owns the copyright in the Web site (unless John and Big Company have agreed in a signed contract that John owns the copyright).

A different rule applies, however, when an independent contractor (freelancer) creates material for a client. When a hiring party and an independent contractor fail to address the issue of ownership of copyrights in works created by the independent contractor, the copyrights are owned by the independent contractor.

Example: Client hired Freelance Graphic Designer on a project basis to create graphics for Client's Web site. If Client and Designer did not address the issue of copyright ownership, Designer owns the copyright in the graphics -- even though Client paid Designer to create them.

There are two ways for a party who hires an independent contractor to obtain ownership of the material created by the contractor:

• (1) A written, signed assignment, which is a transfer of copyright ownership.
• (2) A written, signed work for hire agreement, which can only be used for works commissioned for use as:
• A contribution to a collective work.
• Part of a motion picture or other audiovisual work.
• A translation.
• A supplementary work.
• A compilation.
• An instructional text.
• A test or answer material for a test.
• An atlas.

Because a work for hire agreement can only be used for contributions to these types of works -- and because these agreements have other limitations -- we recommend that you get an assignment if you want to get copyright ownership of material created for you by a freelancer. Form 1 and Form 6 both include assignment provisions.

Many people think that a hiring party who commissions and pays for material automatically owns the copyright in the material created by a freelancer. That's wrong.

Assignments

When a copyright is assigned, the assignee (individual or company to whom it is assigned) becomes the owner of the exclusive rights of copyright in the protected work.

Example: Tom, an individual working on his own, created search engine software and then assigned the copyright in the software to Software Company. After the assignment, Software Company has the exclusive right to reproduce and distribute the software. If Tom starts selling the software, he will be infringing Software Company's rights as copyright owner.

The ownership of copyright may be transferred in whole or in part. Examples of partial transfers are an assignment of the copyright for a term of 10 years (time limitation) and an assignment limited to California (geographic limitation). In addition, the individual exclusive rights (reproduction, modification, and so forth) can be transferred. Assignments are common in many industries -- for example, music composers often assign copyrights in their compositions to music publishers.

An assignment is not valid unless it is in writing and is signed by the owner of the rights conveyed or the owner's authorized agent. An assignment can be recorded in the Copyright Office to give others "constructive notice" of the assignment. Constructive notice is a legal term that means you are presumed to know a fact (because it is a matter of public record) even if you have no actual knowledge of the fact.

Owning a Copy

Copyright law distinguishes the ownership of a copy of a protected work (a print of a photograph, a compact disc, a book, a diskette) from ownership of the intangible copyright rights. The transfer of a copy of a work does not transfer any rights in the copyright. Thus, purchasing a book (a copy of a literary work, in copyright terminology) does not give you permission to make copies of the book or to post parts of the book on your Web site. You do have a right to resell (distribute) that copy. This exception to the copyright owner's rights is known as the "first sale doctrine."

Copyright Licenses

A license is a copyright owner's grant of permission to use a copyrighted work in a way that would otherwise be copyright infringement. A copyright owner who grants a license is known as a licensor. A party receiving a license is known as a licensee.

A copyright license can be exclusive or nonexclusive. An exclusive license is a license that does not overlap another grant of rights.

Example: Author granted Publisher the exclusive right to sell Author's novel in the United States. She granted Movie Developer the exclusive right to create and distribute a movie version of the novel. Both Publisher and Developer have exclusive licenses. There is no overlap between the two licenses.

Under copyright law, an exclusive license is considered a transfer of copyright ownership. An exclusive license, like an assignment, is not valid unless it is in writing and signed by the owner of the rights conveyed. A nonexclusive license is valid even if it is not in writing (but you should always get a license in writing so you'll have proof of the license and its terms).

The content licenses in this book are nonexclusive.

Getting a License

You'll find two content license agreement forms in this book, Form 2, for licensing text, and Form 3, for licensing photos and video footage. However, before you start filling out forms, you need to determine who owns the copyright in the material you want to use and determine what rights you need.

Finding the Owner

If the work you want to use contains a copyright notice (many works do, although use of copyright notice is now optional), the name on the notice is your starting point for locating the copyright owner. The name in the notice is the name of the copyright owner at the time the copy of the work containing that notice was published -- but not necessarily the work's creator or the current copyright owner.

The copyright owner named in the notice may have assigned the copyright to someone else after your copy was published. You need to get permission from the current owner.

If the copyright in the work has been registered with the U.S. Copyright Office, one way to find the current owner is to request an "assignment search" from the Copyright Office. Such a search costs $20 per hour. For more information, contact the Copyright Office at (202) 707-3000 or visit the Copyright Office's Web site at http://lcweb.loc.gov/copyright. Information also is available by fax-on-demand at (202) 707-2600.

Getting permission to use material you find on the Internet can be particularly tricky. If you want to use material posted by someone other than the copyright owner, but with the owner's permission, you need permission from the owner, not from the poster.

Example: Online Service Provider got Author's permission to post a chapter from Author's new book on OSP's commercial online service. If Big Company wants to use part of the chapter on its Web site, Big Company needs permission from Author (not from OSP).

Getting permission to use material you find on the Net is complicated by the fact that some people post copyrighted material they do not own, without getting permission from the copyright owner. If someone has posted copyrighted material in violation of the copyright owner's exclusive rights, getting the poster's permission to use the copyrighted material will do you no good. The poster has no right to authorize you to use the material. You need the owner's permission.

Example: John, a fan of the cartoon strip "Peanuts," used an image of Snoopy on his Web site without getting permission from the copyright owner. Sue saw Snoopy on John's Web site and wants to use the image on her Web site. Getting permission to copy Snoopy from John is worthless, since John does not own the copyright (and is himself probably an infringer of the owner's exclusive rights).

Do not assume that the person who posted a document on the Internet is the owner. Ask questions: Who created the document? What is its origin? If there's any doubt about whether the person who put the document up is the owner, don't use the document.

If the work you want to use incorporates several different copyrightable works, you may need more than one license.

Example: Web Publisher wants to use text and an illustration from Bookco's book in an online magazine. Bookco does not own the copyright on the illustration, the freelance artist who created the illustration does (Bookco just has the artist's permission to use the illustration). To use the text and the illustration, Web needs permission from Bookco and the artist.

If you want to use a photograph or video footage that prominently features a copyrighted work -- particularly a work of fine art such as a sculpture or painting -- you may need to obtain a license from the featured work's copyright owner. Because ownership of the copyright in a work is distinct from ownership of a copy, the owner of the copy of the work is probably not the copyright owner for the work.

Example: Mr. Rich gave Web site Developer permission to photograph several copyrighted paintings from Mr. Rich's private art collection and use the photographs in Developer's Web site design projects. Unless Mr. Rich owns the copyrights in the paintings, Developer should get permission to use the images of the paintings from the copyright owners (the artists, most likely).