Glossary of Words and Phrases Relating to Internet Law

Interactive Online Entertainment Law

By:  Rob Hassett, Suellen W. Bergman and Lori M. Brill


Analog – derived from the word “analogous.” Applies in electronic transmission and storage of audio, visual and audio-visual works. The transmitted and/or stored version is similar to but not actually the same as the original. Quality degrades with serial copying.

Clickwrap – an agreement formed by a purchaser manifesting assent to the terms of an agreement online by pointing and clicking a mouse.

Cookies – small files that a Web site server places on a Web site users’ personal computer in which the Web site server stores its own information about the user which allows a Web site server to recognize the user and store the user’s preferences. Use of cookies can create privacy issues.

COPPA – Children’s Online Privacy Protection Act of 1998. The Act takes effect on April 21, 2000, and is not retroactive. According to Senator Richard Bryan (D –NV), who introduced the Act, the primary goals of the legislation are to enhance parental involvement in children’s online activities, maintain the security of personally identifiable information of children collected online, and protect children’s safety and privacy.

COPA – Child Online Protection Act. This was an anti-pornography act that was enacted by Congress but was held unconstitutional the first time a court reviewed it for violating the free speech clause of the First Amendment.

Cybersquatter – one who attempts to profit by registering a domain name which incorporates the trademark of a trademark owner with the hope of selling the mark at a profit back to the owner. This term is frequently used to describe anyone who registers domain names in bad faith.

Cybersquatting – the act of being a “cybersquatter.”

Digital – electronic technology that generates, stores, and processes data in terms of two states: positive and non-positive (positive is expressed or represented by the number 1 and non-positive by the number 0). Relevant here is that audio, visual and audio-visual works may be stored digitally (in other words as data), enabling one to create exact (quality does not degrade with serial copying) copies.

Dilution (Trademark or Service Mark) – use of the same or a similar mark in a manner which may or may not be deceptive or confusing but which lessens the capacity of the mark to identify and distinguish goods or services or which tarnishes the mark. Such action is not prohibited under federal law unless the mark meets the definition of “famous.”

DMCA – Digital Millennium Copyright Act of 1998, among other things, designed to implement the treaty signed in December 1996 at the WIPO Geneva Conference.

Domain Names – word names for Internet addresses (e.g., “”) which map to unique Internet Protocol (IP) numbers (e.g., that serve as the actual routing addresses on the Internet.

DNS – domain name system; translates Internet names into the IP numbers needed for the transmission of information across the network.

DNSO – refers to the domain name supporting organization of ICANN. It is divided into groups which are charged with the responsibility of providing advice and consultation to ICANN on various topics. For example, Working Group C is responsible for providing ICANN with advice and consultation regarding whether and under what circumstances additional top level domain names should be allowed.

DVD – Digital Video Disk.

Ethernet – a local area network (LAN) developed by Xerox, Digital, and Intel; it is the most widely used LAN access method.

EU – European Union.

Framing – the act of splitting a browser window into multiple, independently controllable regions.

Hijacking (of domain name) – registration of a competitor’s mark as a domain name.

HDML – Handheld Device Markup Language; allows a Web site to be portable so visitors can view the site on their mobile phones, pagers, and other small devices.

Home Page – the first Web page that is supposed to be displayed upon bringing up a Web site with a Web browser.

HTML – Hypertext Markup Language; the authoring language used to create documents on the World Wide Web which defines the structure and layout of a Web document.

Http – Hypertext transfer protocol; the underlying protocol used by the World Wide Web. Http defines how messages are formatted and transmitted and directs how Web browsers and servers should respond to various commands.

Hypertext – a linkage between related text commonly used on World Wide Web pages.

ICANN – The Internet Corporation for Assigned Names and Numbers; the non-profit organization that is responsible for domain name registration. (This responsibility was assigned to ICANN by the United States government.)

Internet – an internet is a large network made up of many smaller networks; the Internet is comprised of interconnected networks in over seventy countries and connects individual, academic, commercial, government, and military networks.

Internet Address – format for addressing a message to an Internet user.

ISP – Internet Service Provider; a company that provides access to the Internet. For a monthly fee, the ISP gives a user a password, username, software package, and access phone number.

Link (Hyperlink) – a direct connection between Web sites, Web pages or places on the same Web page.

Markup Language – a computer language that describes how a Web page should be formatted.

Metatag – a hidden word or label in a file of a Web site used to draw the attention of Internet search engines to that Web site.

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

Napster – available at, this software can be used to find and download MP3 versions of freely available music (legal) and/or commercial proprietary music (illegal). With necessary technological protections, a version of Napster, or something similar, that allows payment by credit card for downloaded versions of music will likely recharge the industry.

NSI – Network Solutions, Inc.; the largest domain name registrar and the manager of the registry for the gTLD’s.

RAM – Random Access Memory; a computer’s primary work space.

Register – to reserve a domain name.

Registrar – companies, such as NSI and, that have been authorized by ICANN to register top level domain names for the public.

Registry – a database of top level domain names. NSI manages the “registries” for .com, .net and .org, among others.

Ripper – software which enables the user to digitally copy songs from a CD into MP3 and other formats.

Rio – a brand of portable MP3 player.

ROM – Read Only Memory; a memory chip which permanently stores instructions and data.

SDMI – Secure Digital Music Initiative; the SDMI was established to protect music companies’ copyrights on the Web and was designed to prevent serial copying.

Search Engine – a directory which retrieves Web sites responsive to a user’s search request.

Shrinkwrap License – license agreements included under the shrinkwrap covering of software packages.

Spam – unsolicited bulk e-mail.

TCP/IP – A communications protocol developed under contract from the U.S. Department of Defense to internetwork dissimilar systems. It is currently used to connect computers over the Internet.

TLD – Top level domain name; the Internet domain name space is constructed as a hierarchy which is divided into top-level domains (TLDs), with each TLD then divided into second-level domains (SLDs), and so on. More than 200 national, or country-code, TLDs (ccTLDs) are administered by their corresponding governments or by private entities with the appropriate national government’s acquiescence. A small set of gTLDs (generic TLDs) do not carry any national identifier, but denote the intended function of that portion of the domain space (for example, .com was established for commercial users, .org for not-for-profit organizations, and .net for network service providers). (Registrars do not screen for the actual function of the entity and will register gTLDs to entities without regard to whether the domain space properly corresponds to the identifier; i.e. many commercial entities have registered an Internet address ending in “.org.”)

UCITA – Uniform Computer Information Transactions Act; a proposed uniform commercial law for the information economy that would apply to computer software licensing and certain online transactions. The Virginia legislature has passed a bill to enact a version of the UCITA in that state, and it has been signed by the governor.

UETA – Uniform Electronic Transactions Act. UETA grants legal recognition of electronically produced and transmitted signatures, records, transactions, and contracts. A version of UETA has been enacted in California and Pennsylvania.

URL – Uniform Resource Locator; identifies the address where a Web page is stored.

Web Browser – a computer program which allows a user to view pages on the World Wide Web.

Webcasting – live or delayed streaming of audio or video on the Internet.

Web Page – a document on the World Wide Web. Each Web page is identified by a unique URL.

Web Server – a computer with software that can respond to a Web browser’s request for a page and sends the page to the Web browser through the Internet.

Website – a related collection of Web pages and files that includes a home page.

WIPO – World Intellectual Property Organization. An agency of the United Nations. WIPO is responsible for promoting the protection of intellectual property throughout the world and administers international intellectual property conventions and various multilateral treatises dealing with administrative and legal aspects of intellectual property.

World Wide Web – an Internet system that links documents by providing hypertext links from server to server.

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

Rights of Privacy and Publicity in Interactive Media


By Rob Hassett, Casey Gilson P.C., Atlanta, Georgia

Earlier versions of this article appeared in the program materials for the internet law seminar sponsored by NBI, Inc. which was held in Atlanta, Georgia on February 18, 1998 and the January 1997 issue of The Multimedia & Technology Licensing Law Report published, at that time, by Warren, Gorham & Lamont, and currently published by West Group. That article was based on program materials developed by the writer in connection with his presentation at the Cutting Edge Music Conference in New Orleans, Louisiana in August of 1996.

The writer wishes to thank Lori Brill and Lynn Hassett, attorneys in his law firm when he wrote the article, as well as Adam Alexander, an attorney at the law firm of Cooper & Scully, in Dallas, Texas, for their help in updating this Article.

© 2000 Rob Hassett, All Rights Reserved.


Today, interactive media incorporates video, music and still photography. When may a producer of interactive media use an individual’s name, likeness, or identity without permission? Restrictions on the use of names, likenesses and identities of individuals are governed by the right of publicity and two categories of the right of privacy.


Section 46 of the Restatement of the Law Third, Unfair Competition, states in pertinent part:

One who appropriates the commercial value of a person’s identity by using without consent the person’s name, likeness, or other indicia of identity for purposes of trade is subject to liability for the relief appropriate. (1)

Section 652A of the Restatement of the Law, Torts 2d, states in pertinent part:

The right of privacy is invaded by: … (b) appropriation of the other’s name or likeness…; (c) unreasonable publicity given to the other’s private life….; (2)

The elements of appropriation of invasion of privacy are the same as for violation of the right of publicity with one exception. The invasion of the right of privacy is a personal tort and it generally may not be assigned or inherited. Whereas, the right of publicity, a property right, may generally be assigned and inherited. See, e.g., Martin Luther King Jr. Center For Social Change v. American Heritage Products, 250 Ga. 135, 296 S.E.2d 697 (Ga. 1982).


English common law did not recognize the right of privacy or publicity except to the extent that such rights existed tangentially under copyright and trademark law. In 1890, Samuel D. Warren and future Supreme Court Justice Louis D. Brandeis wrote an article arguing that a right of privacy should exist. Samuel D. Warren & Louis D. Brandeis, The Right to Privacy, 4 Harv. L. Rev. 193 (1890). The first court to accept the right of privacy was the Georgia Supreme Court in Pavesich v. New England Life Ins. Co., 122 Ga. 190, 50 S.E. 68 (1905). The Georgia Supreme Court held that Mr. Pavesich stated a claim against New England Life for alleged wrongful use of his picture in an advertisement for the Defendant’s insurance products. Today, privacy and publicity rights are based on state common and statutory law. Because these rights are relatively new and different legislatures and courts decide how they apply, there are variations in the interpretation and application of these rights.


Since the Pavesich case, some form of the right of privacy relating to appropriation and/or the right of publicity has been adopted either by statute or court decision in every state that has addressed the issue. Minnesota and Virginia appear to be the only states which have rejected right to privacy involving giving unreasonable publicity to an individual’s private life. See Hendry v. Conner, 303 Minn. 317, 226 N.W.2d 921 (1975) and Williams v. Nathan, 21 Med. L. Rptr. 1339 (E.D. Va. 1993); Brown v. American Broadcasting Co., 704 F.2d 1296 (4th Cir. 1983).

Written Consent

To avoid violating these rights, the best approach is to obtain a written consent from each person whose name, likeness, or identity will be included in a multimedia production. There are three reasons why consent should be obtained in writing. First, unless in writing, some state statutes provide that such consents are not valid. See, J. Thomas McCarthy, The Right of Publicity and Privacy, § 10.6 (1996). Second, there could be a dispute about the existence of an oral consent. Finally, unless the consent is in writing, there could be confusion concerning its scope.

Uses Permitted

There are often situations in which it is impractical to obtain written consent, and one must decide whether or not to use a particular photograph or video for an interactive media production. Situations in which such use is permitted include the reporting of newsworthy events and uses in which no person is identified or identifiable. Courts generally hold the reporting of newsworthy events to be allowed under the First Amendment which forbids any laws “abridging the freedom of speech or of the press.”

Assuming that the individual is not violating anyone’s copyrights, there are four circumstances in which the use of photographs, films and/or videos is permitted. First, the use of photographs, films and videos of buildings or other structures taken from public streets and similar non-restricted areas in which individuals are not recognizable does not violate anyone’s privacy or publicity rights. The exception to this rule is the unusual situation where false information or embarrassing private facts about an individual connected with a building or structure is included in the production. The reason is that privacy and publicity rights relate to individuals and not to buildings or other structures. See, e.g., Jaubert v. Crowley Post-Signal, Inc., 375 So.2d 1386 (La. 1979).

Second, only individuals who are recognizable in a photograph or video have any claim for misappropriation of likeness or identity. Therefore, morphing pictures and videos so individuals are not recognizable eliminates any privacy and publicity right claims. See, e.g., Cheatham v. Paisano Publications, 891 F.Supp. 381 (W.D. Ken. 1995), where the Court said that there was a jury question whether or not the Plaintiff’s posterior was recognizable in the particular photograph.

In Pesina v. Midway, 948 F. Supp. 40 (N.D. Ill.1996), a martial artist hired to model for characters of the coin operated arcade games Mortal Kombat and Mortal Kombat II alleged that use of his name and likeness in subsequent home video games violated his common law right of publicity. Mr. Pesina’s movements had been captured on video, digitized, and incorporated into the games after extensive editing. The district court granted Midway’s motion for summary judgment in part because Midway was able to show that the public did not recognize Mr. Pesina within the game. “[A]fter comparing Mr. Pesina and the game character, Johnny Cage, who allegedly resembles the plaintiff, only 6% of 306 Mortal Kombat users identified Mr. Pesina as the model.” Id. at 42. The brief use of Pesina’s name in the game (for eight seconds only when a player won), although unauthorized, also was held to not constitute a right of publicity claim.

Third, photographs, videos, and films taken of participants and spectators in connection with a newsworthy event may be used in photo essays and documentaries of the event. In Cheatham v. Paisano Publications, supra, the Plaintiff was a jean “designer” who wore one of her own “designs” to a Kentucky bikers’ convention. She had cut out the bottom of a pair of jeans and replaced it with fishnet fabric. A magazine published a photo essay of the event which included pictures of her wearing her special outfit. She sued the magazine and claimed that it misappropriated her identity. In dismissing her claim, the Court held that the photo essay was a report of a newsworthy event. See also, Time, Inc. and Steve Kagan v. Sand Creek Partners, L.P., 825 F.Supp. 210 (S.D. Ind. 1993). The Court in Cheatham also held that use of the Plaintiff’s pictures on T-shirts was not a protected newsworthy use and, if the Plaintiff were recognizable from the picture, then Plaintiff would have a basis for a claim.

There are limitations on the use of name, likeness, and identity in connection with reporting news. For example, in the movie “Woodstock” there is an extensive interview with an individual responsible for cleaning latrines. This interviewee sued for misappropriation of his right of privacy. The Court held that he was made an “involuntary performer” due to the extensive interview and allowed the case to proceed to trial. See Taggart v. Wadleigh-Maurice, Ltd., 489 F.2d 434 (3d Cir. 1973). Additionally, copying a performer’s entire performance goes beyond the allowed reporting of a newsworthy event and constitutes a violation of the performer’s right of publicity. See Zacchini v. Scripps-Howard Broadcasting, Co., 433 U.S. 564 (1977). Also where a performance is staged using actors, such as a professional wrestling match, it is unlikely a Court would hold it to be newsworthy. See, e.g., Ventura v. Titan Sports, Inc., 65 F.3d 725 (8th Cir. 1995).

Finally, use of names, pictures and identities in connection with the production of biographies of newsworthy individuals is permissible. In Harris Matthews v. Random House, 15 F.3d 432 (5th Cir. 1994), the Fifth Circuit U.S. Court of Appeals, applying Texas law, held that a book detailing the author’s and her ex-husband’s experiences as undercover agents did not violate the privacy or publicity rights of her ex-husband. Information concerning their activities and convictions were the subject of news reports. Thus, it was a matter of public record and considered newsworthy events. See, also, Mickey Dora v. Frontline Video, Inc., 18 Cal. Rptr. 2D 790 (Cal. App. 1993), in which Mickey Dora, a surfing legend, appeared in a video documentary entitled “The Legends of Malibu.” The Court held that the use of Dora’s picture was newsworthy.

Uses Not Permitted

There are at least three (3) categories of uses of names, likenesses, and identities of individuals which are never permissible. Those uses involve advertising, using actors and actresses, and exceeding the scope of agreements limiting use of interviews or photographs. First, use of an individual’s name, likeness, or identity in advertising, without that individual’s consent is not permitted. For example, in Town & Country Properties, Inc. v. Riggins, 249 Va. 387, 457 S.E.2d 356 (1995), the Plaintiff, who had been a successful football player for the Washington Redskins, transferred his interest in a house he owned in Virginia to his ex-wife as part of a divorce settlement. When his wife decided to sell the house, she placed his name and picture prominently on flyers promoting her sale of the house. The Supreme Court of Virginia held that Riggins had a claim for infringement of what was, in effect, his right of publicity. See also, Pooley v. National Hole-N-One Assoc., 89 F. Supp. 2d 1108 (D.C. Az. 2000) (holding that Plaintiff’s right of publicity was violated because Defendant used video footage of Plaintiff making a “hole in one” in a commercial manner to promote its fundraising program). The aforementioned situation is treated differently from the use of an individual’s name, picture, or identity in connection with advertising in a legitimate newsworthy context. This kind of advertising is permitted. See, e.g., Montana v. San Jose Mercury News, Inc., 40 Cal. Rptr. 2d 639 (6th Cir. 1995); Lane v. Random House, Inc., 23 Med. L. Rptr. 1385 (D.D.C. 1995). Second, there is no exception to privacy and publicity rights with respect to individuals performing as actors and actresses in dramatic productions. See, e.g., Ventura v. Titan Sports, Inc., supra.

Third, even where use is newsworthy and does not constitute advertising, unauthorized usage is illegal in instances where the limited purpose for which the interview or pictures was intended is exceeded. In Multimedia WMAZ, Inc. v. Kubach, 212 Ga. App. 707, 443 S.E.2d 491 (Ga. App. 1994), the Plaintiff appeared on a television program in which he was interviewed about having contracted AIDS. Prior to the program, the Plaintiff and Defendant reached an understanding that the Plaintiff’s face would be disguised digitally so that he could not be identified. Apparently, due to the negligence of station employees, the Plaintiff was recognizable at the beginning of the show. The Court held that the Plaintiff had a claim. See also, Daughtry v. Booth & Random House, 23 Med. L. Rptr. 1215 (Glynn County, Georgia Superior Court 1994).


Parodies are entitled to a substantial degree of First Amendment protection. However, this protection must be balanced against intellectual property rights. See, for example, the Supreme Court’s application of the Doctrine of Fair Use in the copyright law context in Luther R. Campbell, et al. v. Acuff-Rose Music, Inc., 114 S.Ct. 1164 (1994). In Cardtoons, L.C. v. Major League Baseball Players Ass’n, 838 F. Supp. 1501 (N.D. Okla. 1993), the Plaintiff sought a declaratory judgment claiming that it was not a violation of the publicity rights of well-known baseball players to produce and distribute cards with caricatures and names similar to those baseball players and containing text on the back that ridicules the players. The Tenth Circuit Court of Appeals balanced the publicity rights of the baseball players against the Plaintiff’s First Amendment right to use parody to criticize activities of public figures. The Court held that the Plaintiff was entitled to produce and distribute the cards. But see, White v. Samsung Electronics America, 971 F.2d 1395 (9th Cir. 1991) in which the Ninth Circuit Court of Appeals held, over two vigorous dissents, that a print advertisement using a robot that mimicked and parodied the persona of Vanna White infringed her right of publicity. Critics argued that celebrities’ monopolization of words, names and images of general cultural significance would lead to the depletion of the public domain and the stifling of free expression.(3) However, recently, the Ninth Circuit Court of Appeals held that California’s right of publicity protects against uses of one’s image in advertising. Newcombe v. Adolph Coors Co., 157 F.3d 686 (9th Cir. 1998).

Artistic and Literary Uses

Many times artists employ the use of a name or likeness of a real person in their artistic and literary projects. Although this may not fall under the umbrella of newsworthy events, the First Amendment’s right to free speech often shields forms of expressive art. “The use of the name of a real person as the name … in a title of a work of entertainment” can be immune from liability where it has “some real artistic relevance” to the work and is “not chosen just to exploit the publicity value of the person”. J. Thomas McCarthy, 2 Rights of Publicity and Privacy § 8:72 (2d ed. 2000).

First amendment protection and the right of publicity recently clashed in a case involving the music industry. In Parks v. LaFace Records, 76 F. Supp. 2d 775 (E.D. Mich. 1999), Rosa Parks sued the Defendants to prevent the use of her name as the title of a rap song written, performed, marketed and distributed by the Defendants. Ms. Parks objected to the use of her name due to the content of the song. The United States District Court for the Eastern District of Michigan held that “because the title ‘Rosa Parks’ is not ‘wholly unrelated’ to Defendants’ song, and because the title is the name of an expressive work and not a disguised commercial for a product” the right of publicity did not exist. Id. at 782.

In Guglielmi v. Spelling Goldberg, 25 Cal. 3d 860, 603 P.2d 454 (1979), the Supreme Court of California skirted the issue by declaring that the right of publicity is not descendible. However, in Chief Justice Bird’s concurrence, he discussed the issue of whether the use of a celebrity’s name and likeness in a fictional film exhibited on television constituted an actionable infringement of that person’s right of publicity. Id. The Chief Justice emphasized that film is “a significant medium for the communication of idea”…and “is protected by the constitutional guarantees of free expression”. Id. at 865. Film is an expression of ideas and is entitled to constitutional protection irrespective of its contribution to the market place. The nature of celebrity and prominence is that they will invite creative comment. Chief Justice Bird concluded that in this situation the value of first amendment protections outweighs the right of publicity. Additionally, the use of likeness in advertisements of the film was considered merely an adjunct to the exhibition of the film and therefore, not actionable. Id.

Although many instances encompass the use of famous personalities, cases involving private individuals also arise. Recently, the Second Circuit, upheld a New York Court of Appeals ruling stating that a Plaintiff could not recover under New York’s right of privacy statute “regardless of any false implication that might be reasonably drawn from the use of her photographs to illustrate” a magazine column on sexual regrets. Messenger v. Gruner + Jahr Printing and Publ’g, 208 F.3d 122 (2nd Cir. 2000). This decision was based on the determination that the column was newsworthy, the Plaintiff’s picture bore a relationship to the article and the article was not an “advertisement in disguise.” Id. The model whose photograph accompanied the article was not informed of its use prior to publication. Individuals are cautioned to review the pertinent statutes and/or common law in each state. The case in question was in New York, a jurisdiction which has exemptions to the laws of right of publicity which many other states do not follow.

Advertising Versus Other Use

Under the law in most states, use of a person’s name, likeness, or picture other than as part of a public event or for a newsworthy purpose would not be allowed. See, e.g., Estate of Elvis Presley v. Robb Russen, 513 F.Supp. 1339 (D.Ct. N.J. 1981) where an Elvis impersonator was held to have violated the rights of the Elvis estate. In some states, misappropriation of privacy rights and publicity rights prohibit only advertising. Courts applying Tennessee and Virginia law have construed applicable statutes that way. See, e.g., Apple Corps. Ltd. v. A.D.P.R., Inc., 843 F.Supp. 342 (M.D. Tenn. 1993) (holding that a band impersonating the Beatles could not be restricted from performing its act but was restricted from advertising it). See also, Williams v. Nathan, 21 Med. L. Rptr. 1339 (E.D. Va. 1993). On the other hand, although the California statute relating to privacy and publicity rights prohibits only use of an individual’s name, likeness, or identity in advertising, the California common law dictates that individuals have such rights in situations not involving advertising. See, e.g., Perfect 10, Inc. v. Talisman Communs. Inc., 2000 U.S. Dist. LEXIS 4564 (C.D. Ca. 2000). In Perfect 10, the Court granted a default judgment to Plaintiff as a result of Defendant’s appropriation of photographs of Plaintiff’s assignors. The photographs were appropriated for the purpose of advertising and soliciting “sale of photographs and other works on Defendant’s website and for the purpose of selling the appropriated photographs through paid subscriptions to restricted areas of Defendant’s website.” The Court ruled that this constituted a violation of California’s right of publicity law. See also, Dora v. Frontline Video, Inc., 15 Cal. App. 4th 536 (1993).

Unreasonable Publicity Concerning Private Facts

The tort of unreasonable publicity of private facts is applicable only where the facts being publicized are not newsworthy or, if arguably newsworthy, go beyond the “information to which the public is entitled, and becomes a morbid and sensational prying into private lives for its own sake.” See, e.g., Baugh v. CBS, Inc., Group W. Television, 28 F.Supp. 745 (N.D. Cal. 1993), infra. In addition, the facts must be at least relatively confidential. In Cox Communications v. Lowe, 173 Ga. App. 812, 328 S.E.2d 384 (Ga. App. 1985), a prison inmate who incidentally appeared in a television report concerning prison abuse had no claim for public disclosure of the fact that he was imprisoned as his incarceration was a matter of public record. In Batts v. Capital City Press, Inc., 479 So.2d 534 (La. App. 1985), the Louisiana Court of Appeals held that because the Plaintiff was attacked in a public place, the information was public and could not be the subject of a claim for public disclosure of embarrassing private facts. Haynes v. Alfred A. Knopf, Inc., 8 F.3d 1222 (7th Cir. 1993), involved a book which detailed historical events. In the book, the writer discusses the life stories of various individuals. In a section regarding a particular woman, the author disclosed information about the woman’s ex-husband. The District Court rejected the ex-husband’s claim regarding publicity given to embarrassing private facts on the grounds that the information disclosed was either public record or publicly known prior to publication of the book. On the other hand, in Baugh v. CBS Company, Inc. Group W Television, 828 F.Supp. 745 (N.D. Cal. 1993), the Court held that there was a jury question whether the producers and broadcasters of Street Stories had gone too far in publicly disclosing private facts about a woman who was the victim of spousal abuse. See also, Johnson v. Sawyer, 4 F.3d 369 (5th Cir. 1993), in which a Texas court held that the IRS was liable for wrongfully disclosing confidential information relating to a taxpayer’s tax return.

With the explosion of the Internet, the rights of publicity and privacy have entered a new battlefield. In a manner of seconds, photography, music and streaming video can be distributed to subscribers worldwide, posing increasing threats to the protection of these rights. Once posted on the Web, users can copy items almost instantaneously. This issue of unreasonable publicity of private facts was recently addressed in Michaels v. Internet Entertainment Group Inc., et. al., 5 F.Supp. 2d 823 (D.C. Cal. 1998). Singer Bret Michaels and actress Pamela Anderson Lee sought to enjoin Defendants from disseminating videotape via the Internet of Michaels and Lee engaged in sexual intercourse. Plaintiffs filed a preliminary injunction, inter alia, for violation of right of privacy and right of publicity. The Defendant argued that Ms. Anderson’s nude appearances in magazines, movies and publicly distributed videotapes rendered the facts on the Michaels videotape no longer private. The Court disagreed concluding that the private facts depicted on the video were not public by either the “virtue of Lee’s professional appearances or by dissemination of the Tommy Lee videotape.”(4) Id. at 841. Furthermore, the Court disposed of the newsworthiness argument by noting that the “privilege to report newsworthy information is not without limit. ‘Where the publicity is so offensive as to constitute a morbid and sensational prying into private lives for its own sake, it serve no legitimate public interest and is not deserving of protection’.” Id. at 840 (citing Diaz v. Oakland Tribune, Inc., 188 Cal. Rptr. 762 at 767 (1983)). However, the United States District Court granted summary judgment to Paramount Pictures and Viacom noting that the California Supreme Court had recently restated the principle that the newsworthiness defense was to be construed broadly and reiterated that it is “not limited to high-minded discussion of politics and public affairs.” Michaels v. Internet Entertainment Group Inc., et. al., 48 U.S.P.Q. 2d (BNA) 1891(D.C. Cal. 1998).

Right to Privacy on the Internet


Right to privacy has become a fervently debated topic with the advent of the Internet. Concerns over improper use of information gathered on-line has prompted special interest groups and Congress to regulate the dissemination of personal information. The latest developments concerning privacy on the Internet relate to the passage of the Children’s Online Privacy Protection Act of 1998 and the effect of the European Privacy Directive.

Children’s Online Privacy Protection Act of 1998 (COPPA)

The Children’s Online Privacy Protection Act of 1998 (COPPA), 15 U.S.C. §§ 6501, et. seq. prohibits the collection and distribution of personal information regarding children under 13 and restricts distribution and use of that information. This Act became effective April 21, 2000 and rules written by the Federal Trade Commission govern its operation. The applicable rules are available in the federal register at 16 C.F.R. Part 312 and at These rules apply to Web sites that target children under 13 years old or know that personal information is being provided by children under 13 years old. For the first two years after implementation, the more verifiable forms of parental consent are only required for those activities that pose the greatest risk to the safety and privacy of children (i.e., disclosing personal information to third parties or making that information publicly available through chatrooms or similar activities). The more reliable methods are mail, use of credit cards and digital signatures. The less reliable method is e-mail from a parent (because it is easier for a child to send that form of consent and pretend it is from a parent).

European Union Privacy Directive

The European Union (EU), in its European Union Privacy Directive, has granted broad rights to individuals whose personal information is collected and stored in databases. (For the official text of the European Union Privacy Directive, see Official Journal of the European Communities of 23 November 1995 No L. 281 p. 31. For an unofficial version, visit This EU position, based on the idea that privacy is a fundamental human right, is more rigorous than that of the United States. The United States does not provide as extensive access to individuals to review personal information and has relatively few restrictions on the its use.(5) The conflict between the EU position and the US position has threatened international electronic commerce.(6) Therefore, the US Department of Commerce negotiated with EU representatives and proposed safe harbor principles for American companies to utilize in determining whether they comply with EU data protection laws. See Joint Report on Data Protection Dialogue to the EU/US Summit, June 21, 1999. The data privacy accord “safe harbor” provision was approved in May 2000. Now, the European parliament and the European Union executive body must decide on a plan. The plan is expected to be approved in July.(7)

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

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

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


It is always better to obtain a written consent which permits the use of the name, likeness, or identity of any individual appearing in or who is the subject of disclosure of events in any publication or production. As outlined above, there are limited situations in which one may make such use without permission. However, because of the legal uncertainty in this area, it is necessary to have competent counsel review the situation presented prior to any such proposed use.

1 This videotape depicting sexual relations between Lee and her husband Tommy Lee was widely distributed.

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

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

4 Jason Spingard-Koff, European Union OKs “Safe Harbor,” Wired News, May 31, 2000.

5 Relief is granted in the form of an injunction and recovery of the value of the appropriation.

6 Note that there are two other categories of the right of privacy, wrongful intrusion and false light, that are not addressed in this article.

7 Michael Higgins, A Pitch for the Right of Publicity, IP Magazine, December 1998.

Rob Hassett is an attorney with Hassett Cohen Goldstein & Port, LLP in Atlanta, Georgia.

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

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

WordPress, Themes and the GPLv2


by Rob Hassett and Mike Schinkel


There has been a long brewing debate in the software world regarding whether commercial developers who write and distribute their own separate code to work with software licensed using version 2 of the GNU General Public License must license their software under that version of the GPL.

In the summer of 2010 a debate emerged on blog posts and via Twitter regarding this issue between Matt Mullenweg, founder of WordPress, Automattic and the WordPress Foundation, and Chris Pearson founder and CEO of DIYThemes. Mr. Mullenweg and Mr. Pearson resolved their differences. However the question they addressed remains unanswered.

We read many of the postings on this topic, most of which were very informative and for which we are grateful. Our goal is to provide an objective and dispassionate view of the relevant license in hopes to establish some clarity regarding the issue.

This article does not constitute legal advice and is general information only.


WordPress is software that is used to create blogs and websites, including the website on which this article is posted: It is open source and is licensed to others under Version 2 of the General Public License, administered by the Free Software Foundation (the “GPLv2“). To operate WordPress must have what is referred to as a “Theme” which is a collection of scripts, images, and other files that collectively establish the look and some of the functionality for a website based on WordPress and WordPress itself currently includes one default Theme. Many developers, including commercial developers, offer other Themes, Plugins and other software and services for use with WordPress.

A user may separately download and install WordPress and a Theme. The user then separately opens the programs and activates the Theme, which interacts with WordPress to create websites and/or blogs.

Chris Pearson created a Theme named “Thesis “which became a popular Theme for use with WordPress. Matt Mullenweg contended that Thesis was a “work based on WordPress,” under the GPLv2, which, if true, would have serious legal consequences discussed below. Chris Pearson said it was not.

There is some indication that at some point in the past and maybe currently some of the Thesis code was copied from WordPress code. If that was true at the time of the dispute, there is no question that Thesis was subject to the requirements of the GPLv2, but that possibility is not the subject of the debate. The debate, and the focus of our analysis, is over whether add-on software, such as Theme software, that does not incorporate any code from a prior “Program,” licensed under the GPLv2, may be subject to the requirements of the GPLv2. We are not aware of any court decision that has clearly answered this question.

Requirements of the GPLv2

A developer may choose whether or not to comply with the GPLv2 with respect to a particular Program. However, if the developer copies, prepares derivative works of or distributes that Program without complying with the terms of the GPLv2, the developer would be liable for copyright infringement. If all the developer does is copy, use, study and modify the Program, without distributing it, the GPLv2 license does not require the developer to do anything.

However, if the developer distributes either the Program or a “work based on the Program,” the developer is required to meet certain requirements including, but not limited to, licensing the Program, and any “work based on the Program,” under the GPLv2 and making the source code available. So if a developer creates a “work based on the Program”, that developer may sell copies of it, but is required to provide the source code, if asked, and the purchaser is entitled to make and distribute copies of such new work in competition with the developer. It is the authors’ understanding, based on hearing Mr. Pearson’s comments on the audio interview where he discusses this issue with Mr. Mullenweg, that Mr. Pearson did not want to enable his customers to sell copies of Thesis in competition with him.

The relevant legal question then is whether a Theme that does not include code from WordPress, but works together with WordPress, will constitute a “work based on the Program” under GPLv2. If so, its distribution without compliance with the GPLv2 constitutes copyright infringement. If it is not, its distribution without compliance is permitted.

GNU and WordPress Views

Attorneys who are associated with the open source movement say that a portion of most Themes constitute “works based on WordPress.”

The following is posted on the GNU website under “Frequently Asked Questions” relating to GPLv2:

If a program released under the GPL uses plug-ins, what are the requirements for the licenses of a plug-in?

It depends on how the program invokes its plug-ins. If the program uses fork and exec to invoke plug-ins, then the plug-ins are separate programs, so the license for the main program makes no requirements for them.

If the program dynamically links plug-ins, and they make function calls to each other and share data structures, we believe they form a single program, which must be treated as an extension of both the main program and the plug-ins. This means the plug-ins must be released under the GPL or a GPL-compatible free software license, and that the terms of the GPL must be followed when those plug-ins are distributed.

If the program dynamically links plug-ins, but the communication between them is limited to invoking the ‘main’ function of the plug-in with some options and waiting for it to return, that is a borderline case.

The following are portions of an opinion of James Vasile of the Software Freedom Law Center, which was posted by Matt Mullenweg on the WordPress website:

You asked the Software Freedom Law Center to clarify the status of themes as derivative works of WordPress, a content management software package written in PHP and licensed under version 2 of the GNU General Public License.

On the basis of that version of WordPress, and considering those themes as if they had been added to WordPress by a third party, it is our opinion that the themes presented, and any that are substantially similar, contain elements that are derivative works of the WordPress software as well as elements that are potentially separate works. Specifically, the CSS files and material contained in the images directory of the “default” theme are works separate from the WordPress code. On the other hand, the PHP and HTML code that is intermingled with and operated on by PHP code derives from the WordPress code.

The PHP elements, taken together, are clearly derivative of WordPress code. The template is loaded via the include() function. Its contents are combined with the WordPress code in memory to be processed by PHP along with (and completely indistinguishable from) the rest of WordPress. The PHP code consists largely of calls to WordPress functions and sparse, minimal logic to control which WordPress functions are accessed and how many times they will be called. They are derivative of WordPress because every part of them is determined by the content of the WordPress functions they call. As works of authorship, they are designed only to be combined with WordPress into a larger work.

HTML elements are intermingled with PHP in the two themes presented. These snippets of HTML interspersed with PHP throughout the theme PHP files together form a work whose form is highly dependent on the PHP and thus derivative of it.

These writers focus on one or both of the following:

(1) the fact that the PHP that is incorporated into the Theme has to correspond with the PHP in WordPress, and

(2) the fact that there is heavy and extensive interaction between the Word Press and the Theme software.


“A work based on the Program” is defined in the GPLv2 as follows:

 A “work based on the Program” means either the Program or any derivative work under copyright law: that is to say, a work containing the Program or a portion of it, either verbatim or with modifications and/or translated into another language.

If this definition had ended with “any derivative work under copyright law,” it would be necessary to determine the meaning of the term “derivative work” under the Copyright Act. Instead the GPLv2 defines the term for us. To the extent important here the phrase is defined as:

a work containing the Program or a portion of it, either verbatim or with modifications

Any developer creating Themes for WordPress would generally need to either examine the WordPress software, or material about that software, to be able to understand how to create the Theme. The Theme would need to be able to communicate with, provide instructions to and receive instructions from the WordPress software. However the Theme would not need to contain any part of the WordPress software or a portion of it, either verbatim or with modifications. Therefore what is distributed would not need to be the “WordPress software or any work based on the WordPress software.”

The fact that PHP in the Theme software has to correspond with the PHP in the WordPress software is not legally relevant to whether the Theme software that is distributed contains all or portions of the WordPress software. Likewise, the fact that a lot of interaction happens between WordPress and the current active Theme after that Theme is distributed to an end user is also legally irrelevant to whether the Theme itself contains all or any part of the WordPress software.

Therefore, inasmuch as the commercial vendors of Themes, including Thesis, are able to avoid including any of the WordPress source code in those Themes, such vendors should be able to avoid being required to take any action to be in compliance with the GPLv2 .


Under the totally different language of the GPLv3, which was first made available for use in 2007, a provider of software, such as WordPress, would have a much stronger claim that distributing Themes without making the source code available to potential competitors was an infringement.

The revisions in the GPLv3 will not help WordPress require Themes to be licensed via GPL. WordPress, and its revisions, were licensed under the GPLv2, without any language permitting licensees to use a later version, and as such there is no actions its controllers could take that would cause future versions of WordPress to be subject to the GPLv3.

Advocacy of GPL-licensing of Themes

Even though our analysis tells us there is no legal requirement for commercial Theme vendors to license Themes for WordPress using GPLv2 we expect there will still be a strong interest on the part of “the WordPress community” to see that most if not all Themes are and/or continue to be licensed via GPLv2. One of the authors, the one who is a participant in the WordPress community, actively supports this ideal.

As such we suggest to Automattic, to WordPress and its foundation, and to the WordPress community at large that they collectively work to continue to encourage Theme vendors to license their offerings via GPL, and that they proactive look for ways to help ensure those who would otherwise choose not to license via GPL are enticed to do so because of the collective benefits they gain from the supportive community.

Or said more simply, without the GPLv2 to require Themes to be licensed via GPL it becomes an “unregulated market” and the WordPress community should employ classic market incentives to encourage adoption of the GPL.

Advisability of Settling Dispute

As far as whether Mr. Pearson’s settling was a smart move, it very likely was. First, if any of the WordPress code was copied into Thesis, his application was governed by the GPLv2 regardless of whether a court agreed with our analysis. Second, litigation is very exhausting and expensive and regardless how sure anyone is about what is the correct answer to a legal question, it is not possible to know how a court will rule. All that a lawyer can provide is an opinion. Third, he was having to deal with marketing and public relations pressure from the WordPress community that likely outweighed the value of not complying.

Rob Hassett is an attorney in technology, entertainment and corporate law with Casey Gilson P.C. in Atlanta, Georgia. He also is a co-author of volume 5, on Internet and Interactive Media law, of the ten volume publication entitled “Entertainment Industry Contracts,” published by Lexis/Nexis and has, on many occasions, taught in the Professional Education Program at Georgia Tech. Mr. Hassett is the founder, editor and publisher of this website:

Mike Schinkel is an entrepreneur in Atlanta, Ga. He was founder and CEO of catalog mail order retailer Xtras, Inc that was recognized in 1999 by the Inc 500 as #123 fastest growing private company in the USA. Today Mike is an active participant in the WordPress developer community, a consultant advising companies on their WordPress Business Strategies, a software developer building WordPress plugins for those companies, and a co-founder of and partner in The Business Of WordPress Conference.

The Fair Use Doctrine and New Media Technology

By:  Rob Hassett

Casey Gilson P.C.

Atlanta, Georgia

770-512-0300 Ext. 557


Adam H. Alexander

In-House/Corporate Counsel

Sammons Corporation

Dallas, Texas


Background and Summary

An earlier version of this article first appeared in the program materials for the conference sponsored by the Entertainment & Sports Law Sections of the Georgia, Florida & Tennessee Bar Associations which was held in Dana Point, California from November 6 through November 8, 1997. This advanced level article addresses the subject of copyright fair use on the Internet. (12 Pages)

The law of copyright has evolved with technological change, with each new technological advancement creating complicated questions of copyright interpretation and application. Nevertheless, the new technologies . . . have been made to fit within the overall scheme of copyright law and to serve ends which copyright was intended to promote. The Internet is no exception; . . . it must be judged in reference to the already flexible considerations which fair use affords.(1)



The policy goals of the Copyright Act are found in the Constitution. The progress of science and the useful arts is fostered by granting the individual who has expressed his or her idea the limited monopoly to profit from its dissemination.(2) This limited grant is “intended to motivate the creative activity of authors and inventors by the provision of a special reward, and to allow the public access to the products of their genius after the limited period of exclusive control has expired.”(3) In this way, the Copyright Act rewards the author and benefits the public.

An important outgrowth of this policy is the idea/expression dichotomy. This concept insures that no author can protect his or her idea; only his or her expression of that idea.(4) For reasons that will become apparent, this concept is instrumental in protecting First Amendment rights and in helping one recognize some of the goals of fair use under the Copyright Act.

With respect to the First Amendment, the idea/expression dichotomy “[strikes] a definitional balance between the First Amendment and the Copyright Act by permitting free communication of facts while still protecting an author’s expression.”(5) Because of this balance, “[c]opyright laws are not restrictions on freedom of speech [because] copyright protects only the form of expression and not the ideas expressed.”(6) An example of this idea can be found in the balance between copyright and the First Amendment rights of disseminating the news. The news element is the “history of the day” and is thus entitled to very little copyright protection.(7) However, “copyright assures those who write and publish factual narratives . . .that they may at least enjoy the right to market the original expression contained therein as just compensation for their investment.”(8)

In addition to the idea/expression dichotomy, the fair use doctrine assists in allowing others to build upon the ideas contained within copyrighted works without eliminating copyrights.(9) The fair use doctrine is an old common law idea that was not a part of original the Copyright Act in 1790. Something akin to the fair use doctrine existed in England as far back as 1710, and appeared in the States compliments of Justice Story as a judicially created doctrine in Folsom v. Marsh in 1841.(10) As Justice Story would later explain,

in truth, in literature, in science, and in art, there are, and can be, few, if any, things, which in an abstract sense, are strictly new and original throughout. Every book in literature, science and art, borrows, and must necessarily borrow, and use much which was well known and used before.(11)


Fair use remained a judge-made doctrine until the passage of the 1976 Copyright Act,(12) yet to this day remains an equitable doctrine.


The fair use doctrine is now set out in §107 of the Copyright Act and reads as follows:

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes 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.(13)

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

Section III of this article will discuss the manner in which a court determines each of these factors as well as how they are weighed together. Fair use is an affirmative defense which is raised after a prima facie case of copyright infringement has been established.(14)

When Congress incorporated fair use into the Copyright Act, it intended §107 “‘to restate the present judicial doctrine of fair use, not to change, narrow, or enlarge it in any way and intended that courts [would] continue the common law tradition of fair use adjudication.”(15) This intent, together with the language of the statute, “permits [and requires] courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster.”(16)

The application sought by Congress has been recognized and affirmed time and again by the Supreme Court. The case by case analysis is required by statute and there are no bright-line rules or short cuts.(17) Accordingly, all four factors are to be explored and weighed together in light of the purposes of copyright and never to be treated in isolation.(18) As a means of guidance, Congress provided examples of the types of uses which are generally considered fair uses. These examples are meant to be illustrative and not limiting; indeed, “whether a use referred to [as an illustration] is a fair use in a particular case will depend upon the application of the [four] determinative factors.”(19)

Case by case analysis has resulted in inconsistent, sometimes conflicting decisions in cases with similar fact patterns. Identical cases have found courts reversing each other as a case works its way through the appellate process. For example, in Michigan Document Services v. Princeton University Press, the district court found “willful” infringement and no application of the fair use doctrine.(20) A three-judge panel of the 6th Circuit Court of Appeals reversed the district court, finding that the copying was permissible fair use.(21) A rehearing en banc resulted in another reversal, with a slight majority of the active 6th Circuit judges finding that the copying in question was not a fair use.(22) These reversals and re-reversals serve not as an example of how a court misapplied the fair use analysis, but are simply illustrative of how difficult the issues can be and how “reasonable minds can differ” on close questions of judgment as different individuals weigh the different factors.(23)

Problems of analysis and precedent are often compounded by technology. The development of modern technology and communications has radically changed the way in which the public perceives copyrighted material.

The fortunes of the law of copyright have always been closely connected with freedom of expression on the one hand, and with technological improvements in the means of dissemination, on the other. Successive ages have drawn different balances among the interest of the writer in the control and exploitation of his intellectual property, the related interest of the publisher, and the competing interest of society in the untrammeled dissemination of ideas.(24)

The radio, cassette recorders, photocopiers, VCRs, and computer have all been initially thought to render the fair use doctrine obsolete.(25) However, the doctrine has remained unchanged and continues to apply successfully to new technologies. The Internet will be no different. All that will be required, as in the past, is creative thinking and logical application of the four factors while keeping in mind the goals of copyright.


A. Statutory Examples:

Congress provided examples of the types of uses that might constitute fair use. Examples cited that may constitute fair use are those “for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research. . .”(26) It is important to realize that this list does not create a presumption of fair use, and indeed many uses that might at first seem to be included within the list have been found unfair. For example, in American Geophysical Union v. Texaco, the Second Circuit found that photocopying articles from a scholarly journal (to which Texaco subscribed) for use by Texaco researchers was not a fair use.(27) Likewise, in Los Angeles News Service v. KCAL-TV Channel 9, the Ninth Circuit held that a television news program’s use of a videotape of the Reginald Denny beating during the L.A. riots was not fair use.(28) These are just two of the numerous examples of uses that are named in the statute (research, news-reporting), yet were nevertheless found to be infringing.(29)

B. §107(1) Factor One – The Purpose and Character of the Use:

The first determination that must be made under factor one is the nature and objectives of the user.(30) Invariably, this boils down to whether the use is commercial in nature. Prior to Luther K. Campbell v. Acuff-Rose Music (the case involving 2 Live Crew’s recording of a parody version of Roy Orbison’s “Oh Pretty Woman“), it was widely believed that a commercial use by the alleged infringer created a presumption against fair use. Indeed, the Supreme Court itself had held in Harper & Row v. Nation Enterprises (where The Nation magazine had included unauthorized excerpts of former President Gerald Ford’s unpublished memoirs before authorized excerpts were to be published in Time magazine) that “[every] commercial use of copyrighted material is presumptively an unfair exploitation of the monopoly privilege that belongs to the owner of the copyright.”(31) However, in Campbell, the Court explicitly reversed itself, noting that for commercial uses to be presumptively unfair would swallow the permitted uses if they were for profit.(32)

The other side of the question regarding purpose and character of the use is whether the use is transformative. The Supreme Court described a transformative work as one which “supersedes the objects of the original,” or adds something new, with a further purpose or different character, altering the copyrighted work with new expression, meaning or message.(33) Justice Souter has suggested that using an original “to get attention or to avoid the drudgery in working up something fresh” indicates non-transformative use. The transformative nature of the new work will be considered together with the issue of whether the work is commercial. In Campbell, the Supreme Court noted that while

transformative use is not absolutely necessary for a finding of fair use, the goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works. Such works lie at the heart of the fair use doctrine’s guarantee of breathing space within the confines of copyright, and the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.(34)

When analyzing the commercial nature of a work with its transformative nature, a sliding scale is created. The closer the new work is to direct copy, the smaller the range of permitted commercial uses. The more transformative the new work, the greater the range of allowed commercial uses. Weighing all of these factors together, a trial court will articulate the “winner” on this factor, and to what extent that party prevailed. A finding on this first factor is not dispositive however, for all four factors must be considered together.

C. §107(2) Factor Two – The Nature of the Copyrighted Work:

This analysis focuses exclusively on the copyrighted work that has been infringed. It is made up of two major determinations: how close the original is to the “core of copyright protection” and whether the original is published. First, a court must determine what level of protection should be accorded the copyrighted work. This is achieved by determining how close the original is to the core of copyright protection – how creative or highly expressive a work is versus its being factual in nature. Copyright provides higher protections to creative works, but also “recognizes a greater need to disseminate factual works than works of fantasy or fiction.”(35) While it is obvious that a news broadcast would receive less protection than a science fiction motion picture, courts must often make difficult decisions under this factor, and reasonable people can differ as to how a work should be characterized.

[Even] within the field of fact works, there are gradations as to the relative proportion of fact and fancy. One may move from sparsely embellished maps and directories to elegantly written biography. The extent to which one must permit expressive language to be copied, in order to assure dissemination of the underlying facts, will thus vary from case to case.(36)

For example, in numerous cases in different courts over the same copyrighted material, different determinations were reached regarding the nature of the works of L. Ron Hubbard, the founder of the Church of Scientology.(37) While some judges found Hubbard’s works to be very creative and imaginative,(38) others found Hubbard’s writings more factual and informative.(39)

Second, a court will determine whether or not a work is published. While this is ordinarily a relatively easy finding, the implications are great. The scope of fair use is narrower with respect to unpublished works.(40) Again, policy goals of the Copyright Act are at work. The Supreme Court said it best in Harper & Row:

While even substantial quotations might qualify as fair use in a review of a published work or a news account of a speech that had been delivered to the public or disseminated to the press, the author’s right to control the first public appearance of his expression weighs against such use of the work before its release. The right of first publication encompasses not only the choice whether to publish at all, but also the choices of when, where, and in what form to publish a work.(41)

Thus, published works, while still protected, are nevertheless available to be transformed into new works, commented upon, criticized, or utilized in teaching or research. An example of the published/unpublished determination can be found in yet another Church of Scientology case where the court ultimately found fair use of published works, but against fair use with respect to unpublished works posted on the Internet.(42)

D. §107(3) Factor Three – The Amount and Substantiality of the Portion Used:

This factor is also made up of two elements: a quantitative analysis and a qualitative analysis. With respect to the quantitative element, the extent of the permissible copying varies with the purpose and character of the use as determined in factor one as well as foreshadowing the fourth statutory factor by revealing the degree to which the new work may serve as a market substitute for the original or its potentially licensed derivatives.(43) For example, in Harper & Row, the Court said that substantial quotations of Ford’s memoirs would have been permissible had Nation not “scooped” Time, thus destroying the commercial value of the serialization rights (factor four).

When measuring this factor, courts often use percentages to express the amount of copying that has taken place. However, because no percentage can be called a bright line, courts also will simply characterize the amount of copied material. Some will do both.(44) Because “no plagiarist can excuse the wrong by showing how much of his work he did not pirate,”(45) a second analysis is warranted.

The second portion of this analysis measures the qualitative element of the copied work. The closer the copied material comes to the “heart” of the original work, the less fair use is allowed. In Harper & Row, Nation had taken only 300 words from Ford’s entire manuscript. However, those words constituted “the heart of the book” as they dealt with Nixon’s pardon. As one editor testified at the trial, the chapter on the pardon was “the most interesting and moving part of the entire manuscript.”(46) Likewise, the Court in Campbell found that the use of the opening guitar riff from Roy Orbison’s Oh Pretty Woman, was the heart of that work. It too was the portion taken by 2 Live Crew and incorporated into the new work.(47) A problem under this determination is deciding who measures the “heart” of the work. In many cases, it is the portion taken by defendant that is deemed the “heart” of the work. In one case involving raw video news footage, the Ninth Circuit held this factor against the defendant who had taken only several seconds of footage for use on the evening news. The court reasoned that in preparing a newscast, editors selected the most effective and illustrative scenes from the raw footage available.(48) The analysis was similar in Michigan Document Services v. Princeton University Press where an 8-5 split full panel of the Sixth Circuit held that a commercial copyshop’s reproduction of substantial segments of copyrighted works of scholarship was not fair use when bound into “coursepacks” and sold to students for use in fulfilling reading assignments given by university professors.(49) The panel noted that the excerpts were selected by the professors, and that alone could serve as an indicia of the heart or “value” of the copied work.

Balancing these two determinations together provides another opportunity for courts and reasonable people to differ. While copying of entire works generally causes this factor to tilt toward the original author, other cases are not so clear cut. Courts have had to consider the amount and substantiality of portions taken from photographs(50) and film clips,(51) motion picture series characters and plots,(52) television series,(53) children’s book series,(54) and radio programs,(55) just to name a few.

E. §107(4) Factor Four – Effect of the Use on the Market:

The Supreme Court stated in Harper & Row that the fourth statutory factor, the effect on the potential market, was “undoubtedly the single most important element of fair use.”(56) Although a couple of recent appellate court opinions have suggested that the Supreme Court may have now abandoned that idea and considers no one factor to be more important than the others,(57) one can easily surmise that this is the most important factor to the litigants, and probably the motivating factor in the lawsuit.

Like the other factors and elements of the fair use analysis, the fourth factor does not operate in a vacuum. Determinations and characterizations made in factors one through three will affect the outcome of factor four. “Market harm is a matter of degree, and the importance of this factor will vary, not only with the amount of harm, but also with the relative strength of the showing on the other factors.”(58)

The burden of proof to show market effect hinges on whether the court has determined the use to be commercial or non-commercial. If the challenged use is non-commercial, the burden of showing market effect (usually harm) lies with the copyright holder. Conversely, the party asserting the fair use defense has the burden of showing no market effect if their use has been deemed commercial in nature.(59)

Once the burden has been laid upon the appropriate party, market harm (or lack thereof) can be shown several ways. First, a party can show the direct effect on the market. An example of this can be found in Sega Enterprises v. Maphia, et. al.(60) Sega involved a BBS (which is a computer bulletin board accessible to users by modem) which offered 22 video games created or licensed by Sega as well as six “beta” versions of games soon to be released. Subscribers to the BBS could upload or download games onto the system. The defendant sold “converters” that allowed the downloaded data to be converted into a game that could be played on a Sega machine. Obviously, this was not a fair use. The infringement competed in the marketplace with its original author.

A second way to measure market harm is to “show that if the challenged use should become widespread, it would adversely affect the potential market for the copyrighted work.”(61) Evidence of “substantial harm”(62) would weigh against a finding of fair use because the licensing of derivatives is an important economic incentive to the creation of originals. This is the preferred test. A commercial use infringer is thus burdened with the awesome task of showing that if its use were to become prevalent, that it still would not affect the potential market for the copyrighted work.

“Potential market” includes the market for derivative works as well as licensing possibilities. While this initially would seem to be almost limitless, it is in fact limited by common sense. As the Second Circuit recognized in American Geophysical, a copyright holder with no license agreement can always claim some degree of adverse effect on its potential licensing revenues because of the defendant’s use.(63) However, “[t]he market for potential derivative uses includes only those that creators of original works would in general develop or license others to develop.”(64) In fairness, only “traditional, reasonable, or likely to be developed markets” are considered. Evidence of a copyright holder’s current and future plans for derivative works or licensing would be highly probative in defining the copyrighted work’s “potential market.”(65) A defendant may be permitted to fill a market niche that the copyright owner has no interest in occupying.(66) Likewise, if the copyright holder has an interest or has begun to exploit a licensing market, then potential revenues from such licenses are appropriately considered under the fourth factor.(67)

An illustrative case applying this factor is Infinity Broadcasting v. Kirkwood.(68) Kirkwood had placed radio receivers in each of America’s ten largest radio markets. Through use of a touch-tone telephone, his customers could dial into a receiver in a particular city and listen to a broadcast in these cities in real-time. Kirkwood’s service thus rebroadcast copyrighted radio programs for a profit and without the payment of royalties to any of the radio stations which he made available to his customers. The court found that Kirkwood’s use was fair. This decision was based in large part on the fact that Kirkwood served a different market than the radio stations. Infinity’s purpose, the court said, was to generate revenues from advertisers and syndication rights, thus their market was the masses. The parties had stipulated however, that Kirkwood’s service was not intended for the general public, but had been marketed to radio stations, consultants, advertisers, performance rights organizations and others in the advertising and entertainment industries.(69) The court determined that Kirkwood’s service had no impact on the value of Infinity’s copyrighted programs as a means of generating advertising or syndication revenues.(70)

Other examples of the nuances of the fourth factor demonstrate that while the market must be “traditional and reasonable”, the harm experienced by that market may go beyond the normal economic harms. In Dr. Seuss Enterprises v. Penguin USA,(71) the court found market harm from the adverse affect on Dr. Seuss’s reputation and good will resulting from the defendant’s book about the O.J. Simpson murder trial.(72) In Metro-Goldwyn-Meyer v. American Honda,(73) the court found market harm in loss of potential endorsement value and “tie-in” marketing of products with motion pictures.(74) Market harm is not always found just because litigants are market competitors. In Sega Enterprises v. Accolade,(75) the Ninth Circuit Court of Appeals found that notwithstanding the fact that the parties were competitors and that Sega would suffer minor economic loss, Accolade’s copying of a limited amount of source code in the process of reverse engineering that code was permissible because it was necessary for Accolade to produce games compatible with the Sega player.(76) As these examples have shown, the fourth factor analysis has evolved into an amorphic and sometimes unwieldy determination. Counsel should always consider the wide variety of arguments that can be made under this factor.(77)


As mentioned earlier, new technologies in multimedia and especially the Internet have heightened concern among many that copyrights will no longer be respected in the digital age. This has resulted in a spate of bills being introduced into Congress in an effort to amend the Copyright Act for purposes of clarification and sometimes to grant immunities.(78) Regardless of the outcome of these bills, the fair use defense still remains a viable argument in the face of infringement. The following are a series of scenarios and hypotheticals which are provided to show the range of situations in which the fair use defense could be raised in the context of the Internet.

• Al browses on-line and “surfs the web.” As he does so, Al’s computer makes copies onto its hard drive of every page viewed during Al’s on-line session. While it’s generally considered that there is an implied license for users to do this, one court has suggested that this is also a fair use.(79)

Ÿ While surfing the web at the office, Betty visits There she sees an interesting but rather long story on the life of Princess Diana. Not having time to read it, Betty prints it out to read on the train ride home. Betty’s use is similar to media/time shifting which was approved by the Supreme Court in Sony.(80) It also is permissible to make copies for convenience,(81) and clearly making a single hard copy of an interesting article on the web would constitute fair use under both Sony and American Geophysical.

Ÿ Charlie is concerned about the plight of Angola. He maintains a non-commercial(82) web site espousing the increase in U.S. aid to Angola and detailing the conditions of Angolans and the corruption in their government. To lend credibility to his position, Charlie copies sections of text as well as some photos and maps from magazines and news-related web sites such as which are incorporated into his web site. Charlie’s use of the copyrighted material is probably fair. Newsgroup discussions and web sites of current events, political or celebrity figures, social movements, news or editorial commentary would generally be fair(83) because 1) news-related and factual materials are accorded lower protections than other types of copyrighted materials;(84) 2) comment and criticism are recognized fair uses under §107; 3) the copied portions are only what was necessary to convey the facts or ideas;(85) 4) the use is non-commercial in nature;(86) and 5) there is a First Amendment free expression aspect to web sites of this type. This is reflected in the idea that the scope of fair use is wider when the use relates to issues of public concern.(87)

• Dolly is a big fan of daytime soap operas, particularly All My Children. While watching each day, Dolly faithfully takes notes detailing the plot twists of the show. Later, she updates the non-commercial web site she maintains as a sign of her devotion to the show. It contains an on-going general plot summary dating back to 1993 along with Dolly’s commentary on the characters and her predictions about where the show should go. She also provides a means for visitors to exchange commentary about the show with each other. Dolly has many “regulars” and has even proudly posted a letter she received from the head writer of All My Children commending her on her home page.(88) Dolly’s use would most likely be fair, in large part because her use is transformative, non-commercial and because she does not cause any market harm. Her commentary and predictions would be sufficiently transformative to negate what little market harm she might do to the show. Further, there seems to be little market for syndication of daytime soap operas after they have aired, and Dolly’s letter from the head writer would seem to be an acquiescence.

• Eddie, Dolly’s cousin, is a devoted fan of the sitcom Seinfeld. Like Dolly, he too maintains a web site to pay homage to his favorite show. As a matter of fact, there are about 75 other web sites maintained by people like him. But Eddie’s site is very popular, and for good reason. By visiting his page, one can download audio and video clips of the show Eddie dubbed off his VCR. Eddie also has posted the entire script (along with stage directions) of every Seinfeld episode. After Eddie started getting over a thousand “hits” a day on his site, he decided to start selling advertising on his page to off-set his expenses and make a little money on his hobby. Eddie’s use is not fair. Not only is his use commercial, but the extent of his copying rises to a level where it could potentially interfere with the market for derivative works or decrease the syndication value of the show.(89) It is possible that a person who missed Seinfeld on Thursday night could visit Eddie’s site and read the script, as well as see and hear some of the “highlights” of the show without having to rent a video or tune-in to the re-run.(90)

• Frank just developed a new technology that will provide a means by which “micropayments” can be made for viewing material on-line. For example, as a part of a user’s monthly access fee with his Internet provider, he deposits a sum into a debit account. Now when he visits the New York Times site on-line, he is presented with an initial menu page. When he selects a story to read, several cents are deducted from his account. Frank’s invention could have profound effects on the Internet, because now, every hyperlink is potentially commercial in nature(91) and market harm under the fourth factor would be more easily shown. This technology, by the way, is only a few years from reality.

• Gertrude is a consumer activist. She heads an organization called LobbyWatch which publicizes the activities of lobbyists to those outside the beltway. Her principal targets are the lobbying activities of big tobacco, the gun lobby, and insurance carriers. Gertrude’s web site regularly posts flyers and mass mailings that such groups send to their members (Gertrude is on the mailing list) and form-letters that such groups mail to Congressional representatives which Gertrude surreptitiously obtains from a friend who is a Capitol Hill staffer. Gertrude posts the letters in their entirety, and offers no comment on the page with them. In an effort to frustrate Gertrude, several of the lobbyists began placing copyright notices on their letters before sending them out . They then bring suit against LobbyWatch for copyright infringement. Gertrude’s assertion of the fair use defense presents some interesting questions. Gertrude’s use would be considered comment or criticism, and arguably news, scholarship or research. Gertrude’s use is non-transformative. Although the use of the letters would be competitive in the sense the user is criticizing the lobbying efforts, such type of use is not considered to affect the market as is relevant under the fourth fair use factor.(92) There is a First Amendment aspect to Gertrude’s use in that it fosters public debate in the marketplace of ideas. The lobbyists letters are surely eloquent, but would likely be held to be of a factual or informative nature.(93) Additionally, their nature as brief, persuasive documents would make it difficult to separate the ideas contained within them from their expression.(94)

With respect to the letters that Gertrude received from the lobbyists which they mailed to their constituents, her use would likely be held fair. The posting of documents she obtained surreptitiously however, may not be fair use. Assuming the letters to the Congressmen were held to be unpublished, this would militate against an application of fair use. Gertrude’s acts could also be found to constitute bad faith, and as such would weigh against her under the fair use analysis.(95)

This hypothetical is an example of how complex a fair use fact pattern and analysis can become in the face of competing interests and policies. The outcome of a case such as this could vary from court to court and could be easily be overturned numerous times on its way through the appellate process.


The old adage “the more things change, the more they stay the same” is particularly appropriate when discussing the effect of new technology on the fair use defense to copyright infringement. While the fair use doctrine dates back to the English common law, it can still be applicable in today’s digital age. A steady eye on the underlying policies of the fair use doctrine and a creative commitment to applying the doctrine to the challenges of multimedia, digital and Internet technologies will allow the practitioner to confidently raise the fair use defense in the face of the most sophisticated technological infringement claims.



1 Religious Technology Center v. Lerma, 40 U.S.P.Q.2d 1569 (E.D.Va. 1996).

2 U.S. Constitution, Art. I, Sec. 8.

3 Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 429 (1984).

4 Nimmer On Copyright §1.10[B][2].

5 Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 556 (1985) quoting Consumers Union of U.S. v. General Signal Corp. 724 F.2d 195, 203 (2nd Cir. 1983).

6 Harper & Row, 471 U.S. at 556 (explaining Justice Brennan’s concurrence in N.Y.Times v. U.S. 403 US 713, 726 (1971)).

7 International News Service v. Associated Press, 248 U.S. 215, 234 (1918).

8 Harper & Row, at 556-57.

9 Luther R. Campbell v. Acuff-Rose Music, Inc., 114 S. Ct. 1164 (1994) citing Carey v. Kearsley, 4 Esp. 168, 170, 170 Eng. Rep. 679, 681 (K.B. 1803) (Lord Ellenborough).

10 See Id. at 12-13. All citations to the Campbell decision are to 1994 U.S. LEXIS 2052 pagination.

11 Emerson v. Davies, 8 F. Cas. 615, 619 (No.4,436) (CCD Mass. 1845).

12 Campbell, at 15.

13 The statute is clearly influenced by Justice Story’s early judicial doctrine. In Folsom v. Marsh, Story set forth what became the basis for statutory fair use: “look to the nature and objects of the selections made, the quantity and value of the materials used, and the degree in which the use may prejudice sale, or diminish the profits, or supersede the objects, of the original work.” 9 F. Cas. 342, 348 (No. 4,901)(CCD Mass. 1841).

14 Nimmer On Copyright §13.05; a prima facie case of copyright infringement is established by the plaintiff showing: 1) ownership of the copyright, and 2) copying of the constituent elements of the work that are original. Nimmer, at §13.01.

15 Campbell, at 16 (quoting H.R. Rep. No. 94-1476, p. 66 (1976); S. Rep. No. 94-473, p. 62 (1975)) (hereinafter Senate Report).

16 Campbell, at 16 (quoting Stewart, et. al v. Abend, 495 US 207, 236 (1990)).

17 Campbell. at 17; Nation at 560; Sony at 448.

18 Campbell, at 17.

19 Campbell, at 17 (quoting Senate Report at 62).

20 855 F. Supp. 905 (E.D. Mich. 1994).

21 74 F.3d 1512 (6th Cir. 1996); 1996 WL 648261

22 99 F.3d 1381 (6th Cir. 1996), cert. denied, 117 S. Ct. 1336 (1997).

23 “The malleability of fair use emerges starkly from the fact that all three [of the Supreme Court’s recent fair use decisions – Harper & Row, Sony, and Campbell] were overturned at each level of review, [and]two of them split opinions at the Supreme Court level.” Nimmer, at §13.05.

24 B. Kaplan, An Unhurried View of Copyright, vii-viii (1967).

25 Religious Technology Center v. Lerma, 40 U.S.P.Q.2d 1569 (E.D.Va. 1996).

26 §107

27 37 F.3d 881 (2nd Cir. 1994).

28 108 F.3d. 1119 (9th Cir. 1997).

29 Conversely, the Supreme Court found the taping of programming for later viewing to be a non-infringing fair use although “time-shifting” is not one of the named uses. Sony, 464 U.S. 417 (1984).

30 American Geophysical Union v. Texaco, 60 F.3d 913, 922, n. 8 (2nd Cir. 1994).

31 Harper & Row, at 562; citing Sony, at 451. In Harper & Row, the Supreme Court said the use of the excerpts was not a fair use.

32 Campbell, at 28-33. In Campbell, the Supreme Court sent the case back for further proceedings.

33 Campbell, at 19.

34 Campbell, at 19-20.

35 Harper & Row, at 563.

36 Id. at 563, quoting Gorman, Fact or Fancy? The Implications for Copyright, 29 J. Copyright Soc. 560, 561 (1982).

37 “[R]easonable people can disagree over how to classify Hubbard’s works.” New Era Publications Int’l v. Carol Publishing Group, 904 F.2d 152, 158 (2d Cir. 1989).

38 “The undisputed evidence shows that L. Ron Hubbard’s works are the product of his creative thought process, and not merely informational.” Bridge Publications, et. al. v. Vien, 827 F. Supp. 629, 635-36 (S.D. Cal. 1993)

39 Religious Technology Center v. Lerma, 908 F.Supp. 1362, 1367 (E.D.Va. 1995).

40 Harper & Row, at 564.

41 Id.

42 Religious Technology Center v. Netcom, 1995 U.S. Dist. LEXIS 16184 (N.D.Cal. 1995).

43 Campbell, at 34 citing Sony, at 449-50, Harper & Row, at 564, and Leval, Toward a Fair Use Standard, 103 Harv. L. Rev. 1105, 1123 (1990).

44 See Harper & Row, at 565. The Court mentions a percentage, but then says infringing article “structured around quotes which serve as dramatic focal points.”

45 Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d. 49, 56 (2d Cir. 1936).

46 Harper & Row, at 565.

47 Campbell, at 37. The Court recognized that in cases of parodies, taking the heart of the original is necessary because it is assured of conjuring up the original in the minds of the parodist’s audience. The Court further said that a parodist should take no more than is necessary to conjure up the original.

48 Los Angeles News Service v. Audio Video Reporting Service, 973 F.2d 791 (9th Cir. 1992).

49 99 F.3d 1381 (6th Cir. 1996), cert. denied, 117 S. Ct. 1336 (1997).

50 See Art Rogers v. Jeff Koons, 960 F.2d 301 (2d Cir. 1992) (photograph of couple holding eight puppies copied by defendant in sculpture not fair use); Leibovitz v. Paramount Pictures, 948 F. Supp. 1214 (S.D.N.Y. 1996) (Leslie Neilsen advertisement for upcoming film Naked Gun 33 1/3: The Final Insult held fair use parody of Demi Moore’s nude, pregnant photo for cover of Vanity Fair).

51 See Monster Communications, Inc. v. Turner Broadcasting System, Inc., 935 F.Supp. 490 (S.D.N.Y. 1996) (court denies plaintiffs request for injunction against the release of Turner’s When We Were Kings, a movie about the life of Muhammad Ali; court finds that Turner is likely to show that its use of less than two minutes of footage from Ali’s 1974 heavyweight title fight is a fair use).

52 See Metro Goldwyn Mayer, Inc. v. American Honda Motor Co., 900 F.Supp. 1287 (C.D.Cal. 1995) (Honda Del Sol commercial which portrays “a high-thrill chase of the ultra-cool British charmer and his beautiful and alarming sidekick by a grotesque villain in which the hero escapes through wit, aided by high-tech gadgetry” held not fair use of “classic James Bond adventures”).

53 See Twin Peaks Productions, Inc. v. Publication Int’l, Ltd., et. al., 996 F. 2d 1366 (2d Cir. 1993) (Defendant’s book describing aspects of the first season of the Twin Peaks television series and which contained information on characters detailed plot summaries and trivia held not fair use of series copyrights); Castle Rock Entertainment v. Carol Publishing, 955 F. Supp. 260 (S.D.N.Y. 1997) (Defendant’s Seinfeld Aptitude Test, a book consisting of trivia about the show, identified and appropriated the most important elements of the sitcom Seinfeld – no fair use).

54 See Dr. Seuss Enterprises v. Penguin Books USA, 109 F.3d 1394 (9th Cir. 1997) (Defendant’s book The Cat NOT in the Hat about the Brown/Goldman murders and OJ Simpson’s trial held not fair use of the Cat in the Hat).

55 See Infinity Broadcasting v. Kirkwood, 965 F.Supp 553, 557 (S.D.N.Y. 1997) (court held third factor against defendant’s service based on “fairness” because neither party could show the extent of actual retransmission, let alone the content, and defendant’s service allowed subscribers to monitor radio programs in distant cities 24 hours a day).

56 Harper & Row, at 566, citing Nimmer §13.05

57 See American Geophysical, 60 F. 3d, at 926.

58 Campbell, at 42, n. 21.

59 Sony, at 451.

60 948 F. Supp 923 (N.D.Cal. 1996).

61 Harper & Row, at 568, quoting Sony, at 451.

62 Campbell, at 46.

63 American Geophysical Union v. Texaco, Inc., 60 F.3d 913 (2d Cir. 1994).

64 Campbell, at 44.

65 Litigants should always address the market for derivatives and licenses. In Campbell, 2 Live Crew asserted that its use of the song Pretty Woman was a parody. While the Court did find the band’s use to be parody, the Crew was put at a disadvantage under factor four because they failed to address the potential market for a non-parody rap version of Pretty Woman. The Court sent the case back for further proceedings on this issue.

66 Twin Peaks Productions, Inc. v. Publication Int’l, Ltd., et. al., 996 F. 2d 1366, 1377 (2d Cir. 1993).

67 American Geophysical, at 930.

68 965 F. Supp 553 (S.D.N.Y. 1997).

69 These were the typical users of Kirkwood’s service who used it to monitor advertising, gather statistical data for performance rights organizations, or audition on-air talent.

70 This is a good place to remind the reader of the impact of the other three factors in the overall outcome of a fair use determination. The court found factor one favored Kirkwood because although his retransmissions were not transformative, they were for a limited and different purpose than used by Infinity. As Kirkwood’s use was for a commercial purpose, many courts would have held that this factor favored Infinity. Factor two went to Infinity with the recognition that its copyright was predominately a compilation composed of independently copyrighted works (songs, commercials). Factor three went to Infinity as well because Kirkwood offered the possibility of retransmission of entire copyrighted works.

71 109 F.3d 1394 (9th Cir. 1997).

72 The defendant’s book was an attempt at parody entitled The Cat NOT in the Hat! The court borrowed a market harm test from the Second Circuit which sought to “strike a balance between the benefit the public will derive if the use is permitted and the personal gain the copyright owner will receive if the use is denied. The less adverse effect that an alleged use has on the copyright owner’s expectation of gain, the less public benefit need be shown to justify the use.” Id at 1403, quoting MCA, Inc. v. Wilson, 677 F.2d 180, 183 (2d Cir. 1981).

73 900 F.Supp. 1287 (C.D.Cal. 1995).

74 The court found the fourth factor to tip in favor of MGM because Honda’s use of the James Bond-like character and scenes diluted the market value of movie tie-ins and endorsements by Bond movies. The court specifically noted the arrangements to feature the BMW Z3 Roadster in the movie Goldeneye. “The court can very well imagine [that] a majority of the public, when viewing the Honda commercial and a future BMW ad, would come to the conclusion that James Bond was endorsing two automobile companies.” Id. at 1301.

75 Sega Enterprises, Ltd. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1992).

76 Significant to this case was the fact that deconstructing Sega’s code was essential to allow Accolade to produce a game to be played on the Sega game player. After noting that it was free to consider public benefit resulting from a particular use, the court held that “an attempt to monopolize the market by making it impossible for others to compete runs counter to the statutory purpose of promoting creative expression and cannot constitute a strong equitable basis for resisting the invocation of the fair use doctrine.” Accolade, 977 F.2d at 1523-24.

77 When the potentially infringing uses are parody or criticism, courts have recognized since Campbell that even if the use is commercial in nature, the parody or criticism does not generally cause market harm to the copyright holder because the two uses serve different purposes. Authors do not typically also produce parodies of their own works nor can a criticism, scathing though it may be, compete in the marketplace with the original. See Campbell, at 40-48.

78 See, e.g., WIPO Copyright and Performance and Phonograms Treaty Implementation Act of 1997 (introduced in the Senate); Digital Copyright Clarification and Technology Education Act of 1997 (introduced in the Senate). Both available at <>

79 Religious Technology Center v. Netcom On-Line, et. al., 1995 U.S. Dist. LEXIS 18173 (N.D.Cal. 1995). This court suggests that browsing on-line is the functional equivalent of reading a book in a library (although thousands can read at once) and that there is not, at least at this point, a market for licensing the temporary copying of digital works onto computer screens to allow browsing. Id. at 47.

80 Sony, at 455 n. 40.

81 American Geophysical, 60 F.3d at 923.

82 The term “non-commercial” web site will be used to refer to those sites which do not derive revenues through subscriptions, passwords, advertisements or other commercial support. Such sites are typically maintained by individuals who pay for the site out of their own pocket.

83 Compare Religious Technology Center v. Lerma, 40 USPQ 2d 1569 (E.D.Va. 1996) (even though defendant’s use was non-commercial, posting entire unpublished works went beyond fair use).

84 “The law generally recognizes a greater need to disseminate factual works than works of fiction or fantasy.” Harper & Row, at 563.

85 The greater the portion taken from the original, the less it looks like fair use. “[N]o more of a work may be taken than is necessary to make the accompanying comment understandable.” Supermarket of Homes, Inc. v. San Fernando Valley Board of Realtors, 786 F.2d 1400, 1409 (9th Cir. 1986).

86 However, the more transformative the use, the more commercial the site could be. The new work must be more than “merely the product of ‘the facile use of scissors.’ [or cut and paste as the case may be].” Maxtone-Graham v. Burtchaell, 803 F.2d 1253, 1260 (2d Cir. 1986) (quoting Folsom v. Marsh, at 345). See supra Section III.A.

87 National Rifle Association v. Handgun Control Federation of Ohio, 15 F.3d 559 (6th Cir. 1994).

88 These facts are a variation on one of many Beverly Hills 90210 sites on the web. One site in particular claimed “visits” from cast members and posted a letter from the show’s executive producer who offered suggestions and inside information.

89 Seinfeld’s producers, it turns out, have asserted their rights when individuals have sought to “cash in” on the show’s popularity. See Castle Rock Entertainment v. Carol Publishing, Inc., 955 F. Supp. 260 (S.D.N.Y. 1997). The court held that a Seinfeld trivia book took too much and competed in a marketplace which the plaintiff was likely to enter.

90 In Twin Peaks Productions v. Publications International, 996 F.2d 1366 (2nd Cir. 1993), the defendant’s unauthorized book about the characters, story and social phenomena of the first season of the television series Twin Peaks was found to make an unfair use of the copyrighted scripts of the show. The defendant’s detailed plot summaries, the court said, would allow someone to read the book to find out what happened the first season instead of renting a video. “The author of Twin Peaks cannot preserve for itself the entire field of publishable works that wish to cash in on the Twin Peaks phenomenon. But it may rightfully claim a favorable weighing of the fourth fair use factor with respect to a book that reports the plot in such extraordinary detail as to risk impairment of the market for the copyrighted works themselves or derivative works that the author is entitled to license.” Id.

91 See Pamela Samuelson, The Copyright Grab, Wired, Jan. 1996, available at <> Samuelson’s article, among other things, criticizes a proposal, adamantly rejected to date, to exclude any material for which payments could be collected on a reasonable basis for even de minimus copying from being available under fair use.

92 It is unlikely that a lobby group would ever license this type of use, so the market analysis may be more akin to that of parody or criticism. There is no protectable derivative market for criticism. Courts have realistically acknowledged that it is “unlikel[y] that the creators of . . . works [would] license critical reviews . . . of their own product.” Campbell, at 45. Even if a court found Gertrude and the lobbyists to be competitors, it is likely that greater principals of public concern and freedom of expression issues would be over-riding. More than one court has factored in public concern and benefit when analyzing the fourth factor. See National Rifle Association v. Handgun Control Association, 15 F.3d 559 (6th Cir. 1994) (use was fair because it was related to petitioning the government on legislation and commenting of public issues); Sega Enterprises v. Accolade, Inc., 977 F.2d 1510, 1523 (9th Cir. 1992) “Public benefit need not be direct or tangible, but may arise because the challenged use serves a public interest.”

93 See Religious Technology Center v. Lerma, 40 U.S.P.Q. 2d 1569 (EDVa 1996) (works that were intended to be informational in nature rather than creative further from the core of copyright protection).

94 See Harper & Row, at 564 (President Ford’s characterization of the “smoking gun” difficult to convey without using his exact words).

95 See Religious Technology Center v. Netcom On-Line, 1995 U.S. Dist. LEXIS 16184 (N.D. Cal. 1995) (obtaining copies in an unauthorized manner, while not fatal to a fair use defense, tends to weigh in plaintiff’s favor and will be considered among the other factors). Often in such close cases, courts will look for “bad guy” behavior on the part of one party.

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

© 1997, Rob Hassett, Atlanta, Georgia. All Right Reserved.

Governing the Internet

By Rob Hassett

Casey Gilson P.C.

Six Concourse Parkway, Suite 2200

Atlanta, GA 30328

(770) 512-0300


This article was prepared for the seminar on Advanced Internet and Computer Law sponsored by the National Business Institute scheduled for October 29, 1998 in Atlanta. This advanced level article addresses such questions as who “owns” the Internet, the current role of the U.S. government, and the future of the domain naming system. (25 pages)


The writer wishes to thank the following individuals for providing information and/or assistance in preparing these materials:

1. Jay Fenello, who is the President of Iperdome, Inc. ( Jay is currently serving as a member of the Steering Committee for the International Forum on the White Paper (IFWP) to assist in setting up the structure for a new domain name system. (

2. Bruce Hassett, a brother of the writer, who is currently employed with GTE Internetworking. GTE acquired BBN, including the BBN Planet network, approximately one year ago. (

3. Lynn Hassett, the writer’s wife, who is an attorney in the same law firm as the writer.

4. The staff of the Competitive Pricing Division of the Federal Communications Commission (FCC) Common Carrier Bureau. (

5. Ellen Rony, who is a co-author of “The Domain Name Handbook.” (

6. Richard Sexton, who participated in some aspects of the development of the Internet.


To understand the current operation of the Internet and the controversies concerning the domain name system, it is necessary to understand the relevant history.



In 1957, the Soviet Union launched the first man-made satellite, Sputnik, which surprised most Americans who had assumed that the United States was far ahead of the Soviet Union technologically. As a consequence, President Dwight Eisenhower established the Advanced Research Projects Agency (“ARPA”). ARPA was set up as an agency of the Department of Defense but was established for the purpose of promoting scientific research.(2)

ARPA sponsored computer research and development at major universities throughout the country including research into time-sharing systems, computer graphics and improving computer programming languages. At the time, computers were extremely expensive and the sharing of resources was difficult not only because there was no network but because the computer languages, protocols, etc. were not compatible. In 1966, officials at ARPA decided to set up a network among computers at major universities. This network became known as the “ARPANET.”(3) The contract to build ARPANET was awarded to a small consulting firm in Boston, Bolt, Bernek & Newman (which of course later established the “BBN Planet” network). BBN set up a network information processor (“NIP”) at each participating university. The NIP’s were used to send and receive all messages.(4) Performance testing was contracted to the Network Measurement Center at UCLA. Two individuals that became very prominent in the construction of the Internet, Vince Cerf and Jon Postel, were students at UCLA that worked part-time at the Network Measurement Center.(5) These individuals, as well as many others, overcame significant technological obstacles in making the ARPANET operational. Jon Postel retains a central role in the operation and development of the Internet to this day.

B. Network Working Group.

One of the problems that the universities had to deal with was that although connections could be made through the ARPANET, it was necessary to agree upon protocols to allow communications between the incompatible computers at the various universities. Representatives from the various universities met and formed an open group called the Network Working Group or “NWG.” Possibly because they had no authority, the students followed the pattern set by one of their members who wrote up minutes of their first meeting and called minutes of all of their meetings “Requests For Comments” to set the tone that anyone could contribute.(6) By 1972, Jon Postel had become the editor and distributor of the Requests For Comments.(7)

C. Other Networks.

As time went on ARPANET became obsolete. The network for military computers was taken over by the MILNET network and the academic links were taken over by the network established by the National Science Foundation (the “NSFNet”).(8) Other commercial networks were also set up.


In order to link the different networks, it was necessary to come up with a new advanced set of protocols which ultimately became the Transmission-Control Protocol and the Internet Protocol now referred to as “TCP/IP”. An individual named Bob Kahn, while employed by ARPANET and working with Vince Cerf, developed the first version of TCP which led to the ability to connect multiple networks of multiple computers.(9)

E. Current Configuration of the Internet.

Currently, the Internet is a network of networks. With few exceptions such as MILNET, which is operated by the U.S. Military, the networks are privately owned. GTE currently owns and operates the BBN Planet network. WorldCom owns and operates the UUNET network. AT&T, MCI, Sprint and many other companies own and operate other networks that are part of the Internet. The networks, which include all of those referred to in the previous sentence, that provide high capacity nationwide connections are also known as “backbones.”

Access to the servers and information that reside on all of the networks that form the Internet can be made through any of those networks. Such access can be obtained through the larger national (and even International) networks (run by the Tier 1 providers such as GTE, UUNET, MCI, etc.), the smaller regional networks (such as Erols, BellSouth, etc.), or the local ISP’s which buy their network transit from one of the larger providers.

How does a computer connected to any one of the networks that forms the Internet successfully connect to a computer located on a different network? The Internet works because the separate networks that form the Internet connect, or peer, with each other. There are two types of peering: public and private.

Public peering, where many networks connect to each other through a large network switching system, occurs at several different public exchange points around the world. The concept of public peering points was originally established by the National Science Foundation. There are many public exchange points. Some of the more well-known ones are MAE East (Washington, D.C., operated by MFS), Sprint NAP (northern New Jersey operated by Sprint), MAE West (Palo Alto, operated by MFS) and LINX (London). Virtually all of the networks that make up the Internet peer at one or more of the public exchange points. Because of the tremendous traffic, serious bottlenecks can occur at these exchange points.

With this in mind, many of the larger providers have established private agreements among themselves to establish private peering — i.e., transfer of traffic via a dedicated, high-speed circuit between two companies’ networks, thereby avoiding the bottlenecks at the public exchange points. Companies will only agree to peer with those companies that they expect will receive as much data as they send. With companies like UUNET and GTE, that is not a problem because both networks will dump about the same amount of traffic onto each other. However, if one company only has web sites (i.e., does not offer dial-up access or direct-connect business access), then that company will tend to dump a lot more traffic on the other networks than the reverse. This imbalance has resulted in certain networks refusing to privately peer with certain other networks.(10)

It is possible to trace the route of one’s packets(11) from one’s own computer to most web sites (tracing to some of the larger ones is blocked). First, connect to your Internet service provider, bring up a DOS prompt and at the DOS prompt type in: “tracert www.[second level domain name (such as “internetlegal”)].[top level domain name (such as “com”)]. From Atlanta it is evident that MindSpring is connected directly at least to “alternet” which is “UUNET.”

F. Initial Domain Naming System.

In 1982, Jon Postel and others developed a new standard for email which they named “simple mail transfer protocol.” As the number of computers connected to the Internet multiplied, it was necessary to develop a new addressing scheme. A group of engineers led by Paul Mockapetris, who was at that time employed by the Information Sciences Institute at the University of Southern California in Marina del Rey (“ISI”), and including Jon Postel, who was at that time and still is employed by ISI, and Craig Partridge, who was at that time employed by BBN, developed what is now referred to as the domain naming system (“DNS”). It was eventually decided that the initial generic top level domain names would be: (12)

(1) “edu” for university sites;

(2) “gov” for government sites;

(3) “com” for company or commercial sites;

(4) “mil” for military sites;

(5) “org” for non-profit organization sites;

(6) “net” for network service providers; and

(7) “int” for international treaty entity sites.

III. Ownership.

From the above, it is clear that almost all of the networks of the Internet as well as the exchanges are owned by private companies just as are most telephone facilities. TCP/IP specifications were developed by government employees. Consequently, any copyrights in those specifications are in the public domain.(13) Assuming the protocols constituted statutory subject matter and met other requirements, the United States could have owned patent rights in these protocols provided the U.S. had filed an application within the required one (1) year period, but apparently did not do so. TCP/IP is therefore available without restriction, although there may be proprietary rights in derivative versions.

IV. FCC Regulations.

The Federal Communications Commission (“FCC”) has the authority to regulate “interstate and foreign commerce in communication by wire and radio.”(14) The state public utility commissions have the right to regulate such communications that are intrastate.(15) Prior to enactment of the Telecommunications Act of 1996, the FCC made a distinction between “basic” and “enhanced” communication services. Basic services were standard voice transmission services. Enhanced services were defined as:

services, offered over a common carrier transmission facilities used in interstate communications, which employ computer processing applications that act on the format, content, code, protocol, or similar aspects of the subscriber’s transmitted information; provide the subscriber additional, different, or restructured information; or involve subscriber interaction with stored information.

Examples of enhanced services are protocol processing, alarm monitoring, voice messaging and electronic publishing as well as the provision of access to data networks such as commercial online services and the Internet.(16) Providers of basic services were considered to be communications common carriers. Common carriers are prohibited from:

Unreasonably denying requested services or from unreasonably discriminating in the terms and conditions of service, and are subject to various other requirements and fees.(17)

Although the Telecommunications Act of 1996 categorizes services as “telecommunications” versus “information,” the FCC has, for the most part, continued to apply the same dichotomy construing what were considered “basic” services as “telecommunications” services and construing what were referred to as “enhanced” services as “information” services. For telecommunications services, other than those provided over the Internet as discussed below, the FCC requires that tariffs be filed. Tariffs are documents provided to the FCC which set forth the terms, rates and conditions under which services will be provided. Telecommunications service providers are required to file tariffs for ordinary telephone services and for the portion of frame relay services which involve transport, but not for the protocol relay or addressing component. Copies of tariffs are available for a fee from ITS, Inc. (

Using the Internet and encryption software, it is possible to set up a virtual private network that, although in many cases where multiple sites are involved would be significantly less expensive, provides functionality that can, many times, be substituted for a private frame relay network. To this date, the FCC has chosen not to require that tariffs be filed on or to impose universal access charges (which are imposed generally on telecommunications services) either for services of Internet access providers or for transmissions over the Internet backbones.(18)

V. Government Legacy Functions.

A. Initial Structure.

There are four (4) functions essential to the operation of the Internet that continue to be provided under contracts with agencies of the United States government.(19)

(1) The assignment of numerical addresses (Internet Protocol or “IP” numbers) to Internet users. Every computer while connected to the Internet is assigned a unique IP number. Numbers can be assigned dynamically to dial-up users so that any user has a unique IP number only during the time of the connection. Therefore, to provide dial-up access, ISP’s only need to have enough IP numbers to equal the number of users at any one time. Each second level domain name requires a permanent IP address. Without a change of technology, there cannot be more than four (4) billion unique numerical addresses. One-third (1/3) of those have already been assigned. The replacement of the IP protocol with proposed IPv6 as currently configured would allow for a virtually unlimited number of IP addresses.

(2) Management of the system of registering names for Internet users. This includes the system of assigning top-level domains, second-level domains, and so on. This function, combined with “(3)” below, is referred to as the “domain naming system” or “DNS.”

(3) The operation of the root server system. There are thirteen (13) root servers including the “A” root server operated by Network Solutions, Inc. (NSI). The “A” root server contains what is supposed to be the authoritative data base of the top level domain name servers including the servers for the international top level domain names and the servers for each of the country specific domain names. All the other root servers point to the “A” server for this information. The U.S. government plays a role in about half of these root servers. From letters I have seen, the other root servers are operated by volunteers who believe that they were given that authority by Jon Postel and/or his organization, IANA.

(4) Protocol assignment. This involves management of the protocols that are used to operate the Internet.

Initially, ARPA (the name was changed to the “Defense Advanced Research Projects Agency” or “DARPA” in 1984) contracted to have the domain name functions administered by the Stanford Research Institute (SRI). (20) Through a contract with DARPA, in 1987 SRI also took over the assignment of numerical addresses from ISI. ISI continued to oversee the operation of the root server system and the protocol assignments.


Jon Postel was in charge of the Internet services provided by the Information Sciences Institute. Mr. Postel named his group at ISI the: “Internet Assigned Number Authority” or “IANA.”(21) After the responsibility for the international domain names and IP numbers was transferred to the Stanford Research Institute, IANA retained responsibility, under contracts with DARPA, for the other functions referred to above and later with the National Science Foundation, for managing the .us top level domain and registering other country specific top level domains. Eventually, IANA again assumed responsibility for assigning IP numbers and assigned blocks of Internet protocol numbers to three (3) non-profit organizations, APNIC for the Asia-Pacific region, RIPE NCC for Europe, and ARIN for the western hemisphere and South Africa(22) and also to a number of profit corporations for reassignment including @Home for the cable industry, AT&T and BBN Planet. Each of these five (5) organizations act as registries for the IP numbers they assign.

There has been a lot of misinformation about where IANA’s authority came from, but the reality is that it was always through government contracts.

The IANA home page reads:

The IANA is chartered by the Internet Society (“ISOC”) and the Federal Network Council (“FNN”) to act as the clearinghouse to design and coordinate the use of numerous Internet Protocol parameters. (See,

This information has been quoted and accepted by the media. None of it is true. As is pointed out in The Domain Name Handbook, supra, at 123, ISOC and FNC didn’t exist in 1988 when IANA was first formed. The authors of The Domain Name Handbook, supra, quote an email they received in response to a questioning of this authority from Anthony Rutkowski, the former president of the Internet Society. Mr. Rutkowski’s letter said in pertinent part:

Just to note – in case you’re writing history here – that although Jon and some others include this rendition, there is no such thing as a charter by either the Internet Society or the FNC. I was running the Society at the time that Jon distributed an e-mail message to the Society Board that was entitled “Charter.” He was told in subsequent messages that this meant nothing. Neither the Society as a non-profit corporation, or the FNC as an interagency committee [of the United States government] are in the business of “chartering.” What Jon prepared was an excerpt of the description of the activity for which he is funded by NSF. It’s an important function – but that is what it is – an NSF funded editor activity.


In any event by the end of 1989, what had been the ARPANET had been replaced by NSFNet and certain regional networks.(23) In 1991, Congress passed the “High Performance Computing Act” which authorized NSF to provide computing and network infrastructure. At that time, NSF assumed responsibility for the registration of domain names. NSF redelegated the function of registering domain names from SRI International to Government Systems, Inc.(24) Finally, NSF entered into an agreement dated January 21, 1993 transferring domain name registration activities for the international top level domain names to Network Systems, Inc. (NSI).(25)

According to Article 7 of the agreement, NSI was to provide these services through September 30, 1998. So here we are in September of 1998, when I am writing this paper, and it is still not clear who will administer the international top level domain names after September 30. It also isn’t clear who will be responsible for allocating blocks of numerical addresses, managing the root server system and managing the Internet protocol suite in the future.


NSI is, understandably, fighting hard to try to retain the current top level international commercial names that it administers: .com, .net and .org. Among other arguments, NSI claims that it has ownership rights in at least a portion of the DNS database.(26) The U.S. government would argue that since NSI has been administering these top level domain names under contract with NSF, NSI hasn’t acquired any rights in those top level domain names.(27)

By Amendment 4 to its contract with NSF, NSI was, in September of 1995, permitted to start charging $100 upfront for the first two (2) years and $50 per year thereafter for all second level domain names that it issued and to retain seventy (70%) percent of those funds.(28) Beginning April 1, 1998, NSI was no longer required to remit thirty (30%) percent of its funds as directed by NSF and dropped its fees to $70.00 for the first two (2) years and $35.00 per year thereafter.(29)

NSI has had to deal with a number of lawsuits relating to domain name disputes. NSI issued its first domain name dispute policy, apparently for the purpose of protecting NSI from lawsuits, on July 28, 1995. Revisions were issued on October 23, 1995 and September 9, 1995.(30) The most recent revision is dated February 25, 1998 and is available at This policy requires that any registrant agree to defend, indemnify and hold harmless Network Solutions and its officers, directors, employees and agents for any loss or damage relating to registration of a domain name. Since most web site registrants do not sign this document, much less personally fill out any of the information or even go to the site (this is ordinarily handled by the ISP for the registrant) this indemnity is likely enforceable, if at all, only against a very small percentage of registrants.(31) In the earlier version there was an arbitration clause that any disputes were subject to arbitration in San Diego, California, where NSI’s parent corporation was located. However, that arbitration procedure is no longer included in the latest domain name dispute policy.

The newest policy favors claimants to domain names that have registered their domain name on the principal register of the United States Patent & Trademark Office or the equivalent of any other country.(32) Where the owner of a registered mark provides written notice to a domain name registrant that the registrant’s domain name violates the trademark rights of the complainant, the domain name registrant may send a copy of such notice to NSI. If the registration predates the date the domain name registrant obtained the domain name, NSI may request proof that the registrant also has a registered trademark or service mark that pre-dates the date of the notice. If no proof of prior registration is provided, and assuming no court action is filed within thirty (30) days of NSI’s request for proof of registration, NSI may then put the registrant’s domain name on hold. Just to show how absurd a policy giving priority to registered marks can be, note that although registration in the United States Patent & Trademark Office takes an average of ten (10) months, registration in Tunisia can be completed in a matter of days and doesn’t require proof of use or intent to use the mark in Tunisia or anywhere else. See,

E. Policy Oversight Committee.

Over the years, the Network Working Group appears to have been replaced by the Internet Society (“ISOC”), the Internet Activities Board and other groups in which many internet insiders including Mr. Postel, are prominent. As more and more of the .com and .net second level domain names were taken, it became apparent that additional international top level domain names should be available. There are situations in which second level domain names can be generic such as “flowers,” “schools,” and “bricks” and there can be other situations where more than one company has a legitimate right to a particular mark such as “Delta.” Additionally, having more top level domain names would allow the grouping of web sites by category. Examples would be “.law” and “.med.” Jon Postel recognized this at least as early as May 3, 1996 when he proposed the addition of up to fifty new registries that would have the exclusive right to administer name assignments. He also recommended adding thirty new international top level domains per year for five years so that at the end the fifty new registries would each have exclusive right to administer three new top level domain names.(33)

IANA, the Internet Society (ISOC), the International Trademark Association (INTA) and other organizations elected representatives to the Internet International Ad Hoc Committee (IAHC) which was formed to review Mr. Postel’s proposal as modified by ISOC. There were eleven members elected to the committee. Mr. Postel is not listed as a member. Three of the eleven were attorneys.(34) The Committee issued its “Generic Top Level Domain Memorandum of Understanding” in which it proposed adding seven new generic top level domain names and twenty-eight new registrars who would compete among themselves to register second level domains in the generic top level domains. The committee appointed a “Policy Oversight Committee” to oversee administration of the top level domain names. The POC ultimately decided the additional top level domains should be:

.arts, . firm, .info, .nom, .rec, .shop and .web.(35)

The overall policies were set forth in the POC’s Memorandum of Understanding on the generic top level domain names space of the Internet domain name system (gtld-Mou).(36) The POC also decided that additional domain names could be added “if, in consultation with the PAB and CORE, the POC should later determine, that the interests of the users of the Internet would be best served by the creation of additional gTLDs.”

The question one would ask is what caused the POC to drop from the one hundred fifty domain names initially planned by Mr. Postel to only seven. The Committee was apparently strongly influenced by the difficulties having additional top level domain names would likely create for the owners of trademarks and service marks. The more top level domain names there are, the more opportunity there is for registration of second level domains that infringe existing trademarks and service marks. The counter-argument is that not allowing additional top level domain names to avoid wrongful use of trademarks is like prohibiting the building of additional shopping centers because that makes it more likely that service marks of existing stores will be infringed.

Although a number of criteria, including payment of $10,000, were established for anyone desiring to apply to be a registrar, and there were only certain times when applications have been allowed, more than ninety have been granted to date and it was contemplated that additional registrars will be established in the future.(37) Of course, with severe restrictions on the number of generic top level domain names, it was no longer possible to give exclusive registration rights for any one international top level domain name to any one registrant.

Probably the most controversial aspect of the POC proposal is the proposal to set up a domain name challenge panel (ACP) administered through the World Intellectual Property Organization of the United Nations (WIPO) arbitration and mediation center which is headquartered in Geneva, Switzerland. Anyone registering a second level domain name would be required to agree, as a condition of registration, that any decisions regarding the assignment, registration and use of a particular domain name would be subject to arbitration before the ACP. Then any third party could challenge a domain name holder’s right to use a domain name through this arbitration process. The POC also provided for any applicant registering a domain name to elect, at the time of registering such domain name, whether to be subject to on-line arbitration of all issues (which would include such issues as ultimate rights to use the claimed service marks and damages).(38)

F. NTIA Proposal.

In recent years, there have been individuals that have attempted to introduce additional top level domain names into the Internet root system. These groups and individuals argue that, except for restrictions needed only to avoid interfering with the proper operations of the Internet, the addition of top level domain names should be governed by the market; and whoever first offers a top level domain name and is able to attract sufficient second level domain names to make the use of such domain names financially feasible should be permitted to own and operate their own international top level domain name registries. These groups and individuals have strongly objected to the gTLD-Mou proposals arguing that the proposals would create an authoritative operation answerable to no one other than themselves and which would have no free market incentive to encourage improvements and efficiency. These individuals and groups (the free market parties) relayed their concerns and objections to Congress and the White House. Ira Magaziner, who has headed up various policy initiatives for the Clinton Administration, was assigned the responsibility for putting together a task force to deal with the issues. The National Telecommunications and Information Administration of the United States Department of Commerce headed by Mr. Magaziner came out with a preliminary proposal entitled the “Green Paper” which was published in the Federal Register on February 20, 1998 in which recommendations were made.(39) Among other things, in the “Green Paper” NTIA had proposed the formation of a non-profit corporation to be fairly representative of a variety of interested communities to take over the legacy functions; but, to avoid delay, proposed to go ahead and add five additional international top level domain names before the new non-profit corporation was formed. After receiving extensive comments, NTIA issued a second paper known as the “White Paper” on June 5, 1998, in which NTIA decided to leave the addition of any new international top level domain names to the new proposed non-profit organization and essentially urged all interested groups to get together and come up with solutions that address the needs and concerns of all interested parties subject to certain overall principles.(40) The principles were that the non-profit corporation was to be established in the United States, would assure stable, undisrupted, operation of the Internet, would be representative of all the various interests associated with the Internet, would operate in an open manner, would promote competition and would come up with balanced solutions related to the trademark issues.

As an indication of the determination of the Internet insiders with regard to the MoU-POC proposal, in January of 1998, just before the Green Paper was to come out, Jon Postel, who operates the root name server located at ISI, sent emails to the operators of the other root name servers telling them to point their servers to the ISI server bypassing NSI’s “A” root server. Six of the operators complied with this request. Mr. Postel announced that this was just a test of the server system but the timing would certainly indicate that it was a threat. The White House apparently pressured Mr. Postel into discontinuing the “test.”(41)


After the NTIA in the “White Paper” had urged all interested parties to work together on a plan, a number of trade associations representing diverse Internet interests put together a working group to attempt to reach a consensus on the structure for the proposed non-profit corporation. A committee, referred to as the Steering Committee for the International Forum on the White Paper (IFWP), was formed. Four meetings were held. The first meeting took place in Reston, Virginia on July 1-2, 1998, the second in Geneva, Switzerland on July 24-25, 1998, the third in Singapore on August 11-13, 1998 and the fourth in Buenos Aires, Argentina on August 20-21, 1998. (42) No resolution has been reached by these parties to date. Consequently, it is possible that the NSF contract with NSI, that is due to expire on September 30, 1998, may have to be continued and IANA will continue to administer the functions that it oversees for some additional time.

1 The writer is currently Co-Chair of the Subcommittee on Policies for Managing Generic Top Level Domains of the Special Committee on Trademarks and the Internet of the Intellectual Property Law Section of the American Bar Association. The views expressed in this paper are those of the writer alone.

2 Katie Hafner and Matthew Lyon, Where Wizards Stay Up Late, Chapter 1 (1996).

3 Where Wizards Stay Up Late , id. at 40-42. As stated, the original purpose of the ARPANET was to allow communication and the sharing of resources between research computers. The media has reported, and it has been repeated extensively, that ARPANET was originally set up to allow military communications to survive a nuclear strike. The development of packet data technology at Rand Corporation, which was eventually useful in setting up the ARPANET, was done for this purpose, but that was never the purpose of ARPANET. Where Wizards Stay Up Late, supra, 9-10.

4 Where Wizards Stay Up Late, supra, at 102.

5 Where Wizards Stay up Late, supra, at 141.

6 Where Wizards Stay Up Late, supra, at 144.

7 Where Wizards Stay Up Late , supra, at 145.

8 Where Wizards Stay Up Late, supra, at 245 and 249. See, also, Ellen Rony and Peter Rony, The Domain Name Handbook, 1998 at 91.

9 Where Wizards Stay Up Late, supra, at 226.

10 Kate Gerwig, Service Providers Still In Peering Dither, InternetWeek, 8/31/98.

11 A packet is a set of data organized in a specific way for transmission such as over the Internet. See, e.g., Harry Newton, Newton’s Telecom Dictionary, Flatiron Publishing (1998).

12 Where Wizards Stay Up Late, supra, at 252-253.

13 See 17 U.S.C. §105.

14 47 U.S.C. §151.

15 See, e.g., O.C.G.A. §46-2-20.

16 See, Kevin Werbach, Digital Tornado, The Internet and Telecommunications Policy, March 1997, Opp. Working Paper No. 29 available at:

17 See, Kevin Werbach, Digital Tornado, The Internet and Telecommunications Policy, supra.

18 See, e.g., The Federal Communications Commission Report To Congress released April 10, 1998 entitled “The Matter of Federal-State Joint Board On Universal Service.” ( Note that the United States Court of Appeals for the 8th Circuit recently held that FCC rules not allowing local telephone companies to assess access charges on internet service providers is a proper exercise of the FCC’s jurisdiction. See, Southwestern Bell Company, Bell Telephone Company, et al. v. Federal Communications Commission (U.S. Ct. App.). (

19 See, National Telecommunications and Information Administration of the United States Department of Commerce (NTIA) so-called “White Paper” entitled Management of the Internet Domain Name System dated June 5, 1998 (

20 The Domain Name Handbook, supra, at 115.

21 National Telecommunications and Information Administration “White Paper,” supra.

22 The Domain Name Handbook, supra, at 138 and 123. See, also, the NTIA White Paper, supra.

23 See Where Wizards Stay Up Late, supra, at 256.

24 The Domain Name Handbook, supra, at 126 and 127.


26 The Domain Name Handbook, supra, at 171.

27 The original database was, of course, transferred from Government Systems, Inc. to NSI at the direction of NSF. Under the circumstances applicable here, it is unlikely that there are any enforceable copyrights in the additions to the database made by NSI. See, Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340 (1991). Anyone should have the right to copy the database to the extent it is openly accessible. Whether NSI would be required to turn over any confidential portions of the database would depend on the interpretation of the NSF-NSI contract which is beyond the scope of this paper. Copyright issues for this presentation are being addressed in other materials being provided with this reference manual. For other articles about copyright law, see our law firm web site at


29 See the Internic Registration and Renewal (re-registration) fees: Fact Sheet (

30 The Domain Name Handbook, supra, at 142.

31 Of course NSI would probably argue that the ISP is acting as an agent and, acting on behalf of its customer, has agreed to the indemnification provision by submitting the application to NSI. For the enforceability of clickwrap and similar agreements, see the portion of the paper provided by this author on Electronic Commerce relating to Online Contracting included with these seminar materials.

33 The Domain Name Handbook, supra, at 522.

34 The Domain Name Handbook, supra, at 524.

35 See the gltd-Mou Request for Comments Results – Last Update March 16, 1998 (


37 It would seem that having an unlimited number of registrars competing with each other and registering the same domain names would create conflicts and disagreements about who registered a particular domain name first; however, individuals working on the issue say that with available software, this should not be a problem.

38 See the Memorandum of Understanding for the Internet Council of Registrars (CORE-Mou) a copy of which is available at

39 (

40 See

41 Rajiv Chandrasekaran, Internet Reconfiguration Concerns Federal Officials, The Washington Post, 1/31/98.

42 See

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

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

Online Contracting

by Rob Hassett

This article was prepared for the seminar on Advanced Internet and Computer Law sponsored by the National Business Institute scheduled for October 29, 1998 in Atlanta. This advanced level and lengthy article addresses legal issues relating to online contracting. (43 pages)


The writer wishes to thank Robert Port, who is of counsel to the writer’s law firm, for his help in preparing this section of these materials.


Online contracting takes place over the Internet, over online services such as America Online and through private networks such as has traditionally been the case with electronic data interchange.(1) Online contracting can be broken down into four (4) categories:

(1)  The online ordering of software, books, parts and other products with shipment by common carrier;

(2)  The online ordering of digitally formatted products such as computer software and sound recordings followed by transmission of the products to the customer;

(3)  The online ordering of, followed by access to, databases, encyclopedias and other similar services; and

(4)  Any other agreements which are negotiated or confirmed online, including real estate purchases, development agreements and joint venture agreements.

The law governing online contracting is unsettled. Model acts have been proposed to clarify that law and to conform it to current commercial practices.

The subject of online contracting is addressed in this article as follows:

Section II – current and proposed laws;

Section III – requirements for a binding agreement;

Section IV – determination of terms included in any agreement

Section V – requirement that agreement be in writing and/or signed and satisfaction of those requirements; and

Section VI – applicability of implied warranties.


A. Current Law.

In determining what body of law governs an online transaction, the first question is whether or not the transaction is governed by Article 2 of the Uniform Commercial Code (UCC). The UCC has been adopted in every state other than Louisiana.(2) Different rules apply to transactions governed by the UCC than to those outside its scope. Differences include whether or not the parties are required to agree to all of the essential terms of the agreement in order to have a binding contract, the circumstances under which the contract is required to be in writing and what, if any, implied warranties are applicable.

Article 2 is entitled “sales” and expressly covers “transactions in goods.”(3) Determining whether some transactions are covered is easy. An online agreement for the providing of services is not governed by Article 2, whereas an online contract for the sale of hardware is governed by Article 2.

What if the transaction involves the providing of both goods and services? Most courts that have addressed the issue, including the Georgia courts, apply the “predominant nature” test. Applying this test, the courts determine whether the transaction predominantly involves goods or services. If it predominantly involves a sale of goods, Article 2 applies. If services are the predominant feature of the transaction, traditional common law rules on contract interpretation govern.(4)

What about an online contract for a license for computer software? Must the transaction be a “sale” to be governed by Article 2 or is any “transaction” covered? There is no definition of “transaction” in the Uniform Commercial Code. The Uniform Commercial Code defines “goods” in pertinent part as follows:

“Goods” means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities …. and things in action.(5)

Most courts that have decided the issue have held that licenses of computer software are governed by Article 2.(6) A few courts have held to the contrary.(7)

Another question is how to treat computer software, movies and music that are ordered and transmitted online. If these products were placed on a compact disk, CD ROM or tape and shipped, they would be subject to Article 2. However, when downloaded from a web site, the answer is not clear. The writer was not able to find any case on point. There are a few cases that are somewhat analogous. An Ohio court held that the sale of metered amounts of electricity was governed by Article 2.(8) A Pennsylvania court held that the supplying of water was governed by Article 2.(9)

On the other hand, a New York court held that electricity is not governed by Article 2.(10) A Pennsylvania court held that the providing of cable television programming was not governed by Article 2.(11)

Interestingly, the United States Patent & Trademark Office views a mark associated with software transmitted over the Internet as a service mark rather than a trademark. This supports the argument that products delivered by online transmission are outside Article 2. In spite of this, the writer believes that applying current law most courts would hold that such transactions were governed by Article 2. The reason is that whether transmitted or shipped, these products are still moveable and therefore constitute goods and there is no reason to apply different rules to products that provide the same function because of the manner in which they are delivered.

What law applies to the online accessing of databases and other information? Again, there are no cases directly on point. The only somewhat analogous case is one in which an Illinois court held that demographic information and mailing lists provided to a publisher of a magazine would be covered by Article 2.(12) The writer believes that most courts would not apply Article 2 to these transactions simply because accessing information from databases is just too far removed from the definition of “goods.” It does not create an inconsistency to treat accessing of databases differently from the purchase of goods as the purposes are completely different.

There is one other Georgia Act that applies. The Georgia Electronics Records and Signatures Act was enacted in 1997. This Act defines “an electronic signature” and a “record” and provides for when an “electronic signature” and/or a “record” can substitute for a signature and/or a writing.(13)

B. Proposed New Laws.

1.  Introduction. There are two model codes currently subject to review and revision which will, in some form, eventually be recommended for adoption by the states. Each would have a major impact on online contracting. One is proposed Article 2B to the UCC. The other is the Electronic Transactions Act. The scope and purpose of each are discussed below. The impact on various issues important to online contracting are discussed in later sections.

2.  Article 2B. The National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI) are responsible for overseeing updates to the Uniform Commercial Code. In 1995 a committee was formed to draft a separate UCC article to specifically address software licensing and electronic commerce. Various versions have been proposed and debated. The goal is to propose a version that most, if not all, of the state legislatures will adopt. The latest version was reported on August 1, 1998, which is the version referred to in this paper.(14)

Section 2B-103 of proposed Article 2B governs the scope of the Article and reads in pertinent part:

Except as otherwise provided in Section 2B-104 on excluded transactions and in subsection (b), this article applies to:

(1)  Any transaction that creates a software contract, access contract, or license; and

(2)  Any agreement to provide support for, maintain, or modify information related to a contract within the scope of this article.

Section 2B-102 of Article 2B provides the following definitions important to Section 2B-103:

(1)  “Access contract” means a contract to electronically obtain access to, or information in electronic form from, an information processing system. ….

(24) “Information” means data, text, images, sounds, mask works, or works of authorship. (Regarding this definition, the reporter’s notes show that “works of authorship” is based on the definition set forth in Section 102 of the Copyright Act.(15) Copyright law protects work of authorship which include literary works, musical works (i.e., songs), pictorial and graphic works, motion pictures and other audiovisual works and sound recordings. Literary works have been defined to include computer programs.)

(44)  “Software” means a computer program, any informational content included in the program, and any supporting information provided by licensor as a part of an agreement.

(28) “License” means a contract that authorizes access to or use of information or of informational rights and expressly limits the contractual rights or permissions granted … “License” includes an access contract …

(27) “Informational rights” include all rights and information created under laws governing, patents, copyrights, mask works, trade secrets, trademarks, publicity rights, or any other law that permits a person, independently of contract, to control or preclude another person’s use of the information on the basis of the right holder’s interest in the information.

(25) “Information processing system” means an electronic system or facility for generating, sending, receiving, storing, displaying, or processing electronic information.

Section 2B-104 of Article 2B sets forth transactions excluded from the Article, providing in pertinent part:

This article does not apply to the extent that a transaction:


(8)  is a license of a linear motion picture or sound recording or of information to be included therein, except in connection with providing access to such motion picture or sound recording under an access contract covered by this article.

With respect to online transactions, to the extent Article 2B is enacted as currently configured:

(1)  The online purchase of goods (other than computer software) followed by the shipment of the goods by common carrier would not be covered;

(2)  The online placement of an order for computer software followed by a shipment or transmission of that computer software would be covered;

(3)  The online ordering of audio recordings and videos would not be covered when recorded on CD ROM or by other media and shipped by common carrier;

(4)  The online ordering of audio recordings and videos followed by transmission appears to be covered as it would be a “contract to electronically obtain …. Information” and is therefore an “access contract;”

(5)  The online ordering and transmission of any interactive media products and any licensing of interactive media products would be covered; and

(6)  The online ordering and obtaining of information over private lines, through access to web sites, through email or in any other online manner would be covered.

2. Uniform Electronic Transactions Act. In 1996 the NCCUSL approved a Drafting Committee to “draft an act consistent with but not duplicative of the Uniform Commercial Code, relating to the use of electronic communications and records in contractual transactions.”(16) The proposed Act is entitled the “Electronic Transactions Act” (ETA).

Under Section 103, the scope of the ETA would be as follows:

Except as otherwise provided in Section 104, this Act applies to electronic records and electronic signatures that relate to any transaction.

Section 104(b) provides that any transaction subject to the ETA that is also subject to the UCC or any other applicable law is to be construed consistent with that other substantive law and, where such construction is unreasonable, that the UCC or other substantive law will control.


A. Current Law.

1.  General Law. Under common law there is no agreement, even where the parties agree that there is an agreement, unless the parties have agreed to all of the terms. Georgia has adopted this principal in O.C.G.A. §13-3-1 as follows:

Essentials of Contracts Generally.

To constitute a valid contract, there must be parties able to contract, a consideration moving to the contract, the assent of the parties to the terms of the contract, and a subject matter upon which the contract can operate. Any acceptance of an offer must be unconditional, unequivocal, and without variance of any sort.(17)

O.C.G.A. §13-3-2 reiterates the above as follows:

Contract incomplete without assent of parties to terms thereof; withdrawal of bid or proposition by party

The consent of the parties being essential to a contract, until each has assented to all the terms, there is no binding contract; until assented to, each party may withdraw his bid or proposition.

2.  Article of the Uniform Commerical Code. With regard to transactions and goods covered under the scope of Article 2 of the UCC, assent to all of the terms is not required for the parties to be bound by a contract. All that is required is that the parties agree, either expressly or by their conduct, that they have an agreement and agree to the quantity of goods being purchased. Section 204 of Article 2 of the UCC reads in pertinent part:

Formation in General

(1)  A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

(2)  An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

(3)  Even though one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

B.  Proposed Laws.

1.  Article 2 B.

The currently proposed version of Section 2B – 202 is composed of five provisions, three of which are the same as the three provisions of Section 204 of Article 2 except that the first provision of Article 2B Section 202 expressly provides that a contract may be formed by the “operations of electronic agents which recognize the existence of a contract.” Section 2B – 202 goes further to provide:

(d) In the absence of conduct or performance by both parties to the contrary, a contract is not formed if there is a material disagreement about a material term, including scope.

The reporter’s note to this section states that the addition of (d) emphasizes that if there is a material disagreement about a material term, and the parties’ conduct does not indicate otherwise, there is no agreement. It is likely that if there was a material disagreement about a material term in a licensing transaction, it would involve the scope of the license and make it impossible to determine a remedy. A court construing a license under Article 2 would likely treat a disagreement about the scope of a license in the same way as Article 2 treats a disagreement about quantity — determine that there was insufficient information to fashion a remedy and therefore that there was no enforceable licensing agreement.


A.  Current Law.

1.  General Law. Inasmuch as outside the UCC the parties must agree to all material terms of the agreement in order to have an agreement, if the agreement is enforceable, all the material terms have been agreed upon. These are the terms included in the agreement.

2.  Article 2. Under Article 2 of the UCC, the parties have a contract whenever they agree they have a contract or their conduct indicates that they have a contract. This is true even if they have not agreed to all the terms, provided they have agreed to sufficient terms for the court to fashion a remedy, i.e., the quantity of the goods involved. So what happens when the forms sent by each of the parties, or the parties’ conduct, show that the parties have agreed that they have a contract and agree on the quantity of goods to be purchased but have a conflict about the other terms? This is answered by Section 2-207 of the UCC. That section reads as follows:

Additional terms in acceptance or confirmation.

(1)  A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(2)  The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless,

(a)  The offer expressly limits acceptance to the terms of the offer;

(b)  They materially alter it; or

(c)  Notification of objection to them has already been given or is given within a reasonable time after notice of the additional terms is received.

(3)  Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this title.

The terms “merchants” and “between merchants” are defined in Section 2-104 of the UCC as follows:

(1)  “Merchant” means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.

(3)  “Between merchants” means any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.

Under 2-207(2) where the transaction is “between merchants” (in other words where the online customer “is chargeable with the knowledge or skill of a merchant”) then the proposed additions by the online customer could end up being additions to the contract. To avoid this kind of situation from arising, anyone selling goods over the Internet should include a clause expressly limiting acceptance to the terms of the offer and not ship where different terms are proposed by a customer.

The more interesting provision is 2-207(3), which provides that where the parties’ conduct recognizes the existence of a contract and the parties have in fact agreed on a quantity term, the terms of the contract are those on which the parties agree “together with any supplementary terms incorporated under any other provisions of this title.” This is what as known as the “Battle of the Forms” or the “knockout” clause in that the terms on which the forms of the parties “disagree” are “knocked out.” The courts are not clear as to how the battle of the forms should apply. In American Aluminum Products Co., Inc. v. Binswanger Glass Co., 194 Ga. App. 703, 391 S.E.2d 688 (1990) regarding whether specifications in a proposal were part of the contract, the court held that the counter-proposal constituted the contract and did not apply O.C.G.A. §11-2-207(3) to knock out any conflicting terms. A New York court has also held that the terms of a counter-proposal constituted the entire contract and the “knockout” rules wouldn’t apply.(18) However, there are many situations in which the “knockout” provisions have been held to apply.(19) The trick is that the rule applies only if the forms sent by each of the parties are all part of the agreement. An example would be Party A emails its proposal with its terms and conditions to Party B. Party B emails back that the proposal is accepted including its own different terms and conditions. Then Party A ships the goods. The “knockout” rule would apply. On the other hand, if Party B does not indicate acceptance of Party A’s proposal and sends a counterproposal and then Party A ships the goods then the “knockout” rule wouldn’t apply. This is because by shipping the goods, A has accepted B’s counterproposal. As can be seen from reading the cases, the actual application of all of these rules is more difficult than the discussion of the rules themselves.

The lesson here is that for mass market online transactions, the seller should make sure that goods are shipped only following express and unqualified acceptance of the seller’s terms. Those online sellers that are not involved in mass market transactions have to make sure there is a procedure to examine all messages received to avoid a “battle of the forms” surprise. Even where a seller’s proposal provides that “no change in terms is allowed,” shipping goods in response to a counterproposal that does change the terms is going to be construed by a court either to be an acceptance of the counter-proposal or as an agreement to which the “knock out” rule should apply. Note that when warranty disclaimers are “knocked out” the agreement is going to be governed by the default terms of the code which include such terms as implied warranty provisions – in other words the buyer wins.

B. Proposed Laws.

If enacted as presently proposed, Article 2B would cover online transactions involving:

(a) The online ordering and shipment or transmission of computer software, whether copies are sold or licensed;

(b) Computer software development agreements entered into online;

(c) The online ordering of “linear” movies and sound recordings followed by transmission;

(d) The online ordering and transmission of interactive media including educational CD ROM titles and computer games; and

(e) The online access to databases and/or other information.

Where Article 2B applies the following sections would be relevant to determining the terms of the agreement:







Section 2B-102. DEFINITIONS.

Section 33. MERCHANT

Section 11. CONSUMER


Applying these provisions, the terms of an agreement would be determined as follows:

(1)  If the terms proposed by each of the parties agree, the parties are governed by those terms, except to the extent that the court considers any of such terms to be unconscionable.

(2)  The new scheme will permit sellers other than in mass-market transactions to obtain an agreement that certain terms will be subject to later agreement with minimal risk if agreement is not reached, but impose substantial costs on sellers who do not provide all the terms of the agreement to mass-market purchasers prior to purchase. In any transaction, other than a mass-market transaction, where a term is to be fixed by later agreement and the parties intend not to be bound until the term is so fixed, if the parties are not able to reach agreement on that term, each party must return all copies of information and other materials already received and return any sums paid for performance which has not been received. Contractual use restrictions will continue to apply. For mass-market transactions, terms that were not available when the purchaser obtained the software or information and to which the purchaser is not willing to later agree, entitle the purchaser to a refund, reimbursement of any reasonable expenses incurred relating to the return, and compensation for any foreseeable loss caused by the installation.(20)

(3) An acceptance which contains terms that vary, but not materially, from the terms of the offer results in the terms of the contract being those of the offer except that, between merchants, the proposed non-material additional terms become part of the contract unless notice of objection has been given or is given within a reasonable time.

(4) Where the terms that vary result in a material conflict, a contract is not formed unless all of the other circumstances, including the conduct of the parties, indicate that an agreement existed. If neither party agrees to the other party’s terms and the parties go ahead and act as though they have a contract anyway, the contract is considered to be formed by “conduct” and, rather than apply the “knockout” rules of the current Article 2, the court is supposed to take into account all relevant circumstances to determine the intent of the parties.

(5) Where either of the parties to an online transaction include in their standard form language that any agreement is conditioned on acceptance of their terms, such conditional language will have no effect unless the party using such form acts in a manner consistent with the language such as refusing to perform when its terms are not accepted.

With respect to most issues, Article 2B would simply clarify ambiguities in current law by codifying the law that the courts would likely apply anyway. There are a few differences in determining what terms would apply including:

(1) The knockout rule under 2-207 would be replaced by a sort of “all of the circumstances” determination by a court of the intent of the parties;

(2) Clickwrap licenses(21) would be enforceable but only to the extent they were accepted by the purchaser after the purchaser had an opportunity to review all of the terms. However, there would not be a lack of certainty about whether they would be enforceable at all. (Clickwrap licenses in the mass-market context would require reimbursement to the purchaser of all costs and expenses associated with a purchase if the purchaser did not accept the license after having an opportunity to review all of the terms.)

(3) With regard to access to databases which is currently governed by general common and statutory law outside of the UCC, the major difference is that where the parties make it clear that they believe they have an agreement, even if they haven’t agreed to all of the terms, they would have an agreement.

Also, it should be noted that Article 2B encourages, but does not require, that the parties set up commercially reasonable procedures for determining the authenticity of orders and provides that where one of the parties requires that a procedure be followed that is not commercially reasonable, the risk of loss falls on the party requiring such unreasonable procedure.(22)

C. Clickwrap Licenses.

Except where there may be a statute of frauds issue (requirements of writings and signatures are discussed later in this paper), clickwrap licenses are as likely to be enforceable to the same extent as agreements in any other form.(23) The writer is aware of only one case that apparently involved the enforceability of clickwrap licenses.(24) In that case, the United States District Court for the Northern District of California granted a preliminary injunction relying in part upon a claim for breach of contract for the defendant’s allegedly breaching the terms of service for using its e-mail service. The court did not discuss how the agreement was entered into and just assumed it was enforceable; however, agreements with “Hotmail” are clickwrap agreements.

Although there are no cases directly addressing the issue of enforceability of clickwrap licenses, there have been cases addressing the enforceability of shrinkwrap licenses. (Shrinkwrap licenses are licenses included with computer software that provide that the purchaser manifests assent by opening the package.) The 5th Circuit, applying Louisiana law (Louisiana is the only state that has never enacted Article 2 of the UCC), in the first case considering the enforceability of a shrinkwrap license, held that it was unenforceable.(25) In that case, the Plaintiff, Vault Corporation, had developed software which Vault’s software developer customers embedded in their software to prevent their end user customers from using the software on more than one computer. When the Vault Corporation sold its software, it included a shrinkwrap license that was expressly authorized by a Louisiana statute and prohibited reverse engineering of the software. The defendant, Quaid, had purchased the software and reversed engineered it. The 5th Circuit held that the shrinkwrap license and the related statute were unenforceable because they were “preempted” by copyright law.(26)

In Step-Saver Systems v. Wyse Technology and The Software Link, 939 F.2d 91 (3rd Cir. 1991), The Software Link had provided an operating system for Step-Saver to use for its professional office customers. The operating system did not work properly. Step-Saver had ordered many copies of the package. Step-Saver would telephone The Software Link and place an order for a number of copies. The Software Link would accept the order and promise, on the telephone, to ship the goods promptly. After the telephone order, Step-Saver would send a purchase order, detailing the items to be purchased, their price and shipping and payment terms. The Software Link would ship the order promptly along with an invoice. The invoice would contain terms essentially the same as the purchase order. No reference was made during the telephone calls or on the purchase orders or in the invoices to any disclaimer of warranties. There was a shrinkwrap license enclosed with the software packages that disclaimed all warranties and limited damages. The shrinkwrap license did provide that the customer could return the software for a full refund if the customer didn’t accept the shrinkwrap license. The court applied the “battle of the forms” rules and determined that the agreement was complete with the telephone conversation when the goods were ordered coupled with the purchase order. The court held that the shrinkwrap license was sent after the fact and therefore could have no effect under the circumstances. The Software Link’s shrinkwrap license was also held unenforceable for the same reasons in Arizona Retail Systems, Inc. v. The Software Link, 831 F.Supp. 759 (D. Ariz. 1993).

In ProCD, Inc., v. Matthew Zeidenberg and Silken Mountain Web Services, Inc., 86 F.3rd 1447 (7th Cir. 1996), ProCD had developed and was selling copies of a CD ROM with a database of telephone numbers. Zeidenberg purchased the CD ROM at a store. The box showed that inside there was a shrinkwrap license. The shrinkwrap license provided that the purchaser was only receiving a license and that the purchaser was not to make copies of the product. Zeidenberg then made copies of the database onto his own web site and was providing access to the database to customers for a fee. There was no “battle of the forms” issue because the outside of the box gave notice to Zeidenberg at the time of purchase that the purchase would be subject to a license contained inside the box. The court rejected the preemption decision of Vault Corporation, supra, and held that the shrinkwrap license was enforceable. The court thus provided a way for database developers to protect their databases (by contract) even though the database here was probably not protectable under copyright law.(27) A district court for the Southern District of California in a case involving copying from a computer game,(28) the 7th Circuit again in a case involving a shrinkwrap license sent with a Gateway computer,(29) and an appellate court in New York state which allowed Gateway 2000 to require that any disputes be resolved by arbitration in Chicago, Illinois(30) have all approved and followed the decision in ProCD, supra.

Note that as discussed in end note 24, Article 2B, Section 2B-208 would modify the ProCD case somewhat in that where a mass-market purchaser could not view the terms of the license until the mass-market purchaser had taken the package home, the mass-market purchaser would also be entitled to reimbursement of all related expenses.


A. When is a writing and/or signature required?

1. Current law.

(a) General.

Every state of which the writer is aware, including Georgia, has a “statute of frauds” that requires certain agreements to be in writing and signed by the party to be charged in order to be enforceable. The Georgia statute reads in pertinent part:

To make the following obligations binding on the promisor, the promise must be in writing and signed by the party to be charged therewith or some person lawfully authorized by him:

(1) A promise by an executor, administrator, guardian, or trustee [to be personally liable for the debts of the estate, etc.];

(2) A promise to answer for the debt … of another;

(3) Any agreement made upon consideration of marriage …;

(4) Any contract for sale of lands, or any interest in, or concerning land;

(5) Any agreement that is not be performed within one year from the making thereof;

(6) Any promise to revive a debt barred by a statute of limitations; and

(7) Any commitment to lend money.(31)

Every state of which the author is aware will enforce agreements that are covered by the statute of frauds, even if not in writing or not signed, under certain specified circumstances. Those exceptions are:

(1) When the contract has been fully executed;

(2) Where there has been performance on one side, accepted by the other in accordance with the contract; or

(3) Where there has been such part performance of the contract as would render it a fraud by the party refusing to comply if the court did not compel a performance.(32)

The only sections of the general statute of frauds that are likely to have much effect on online transactions are the ones relating to sales of interests in land and to agreements not to be performed within one (1) year. Where the transaction is governed by Article 2 of the UCC, there is some controversy about whether courts would still also apply the general statute of frauds. The courts of which the writer is aware have held that if Article 2 applies, the general statute does not apply.(33) That leaves at least transactions involving an interest in land and agreements providing access to databases for more than a year subject to the general statute.

Can a transaction that takes place purely over the Internet result in a writing signed by the person to be charged? The answer to this question is likely to vary from jurisdiction to jurisdiction. In Department of Transportation v. Norris, 222 Ga. App. 361; 474 S.E.2d 216 (1996) the Georgia Court of Appeals held that the plaintiff’s claim was subject to dismissal because the plaintiff had not timely provided an “ante litem” notice. The requirement was that notice of any claim against the state must be given in writing within twelve (12) months of the date the loss was discovered or should have been discovered. The plaintiff had mailed and faxed the notice within the requisite period but the mailed notice was received after the expiration of the twelve months. The court decided that the facsimile transmission did not satisfy the statutory requirement that notice be given in writing stating in pertinent part:

Such a transmission is an audio signal via a telephone line containing information from which a writing may be accurately duplicated, but the transmission of beeps and chirps along a telephone line is not a writing, as that term is customarily used.

On certiorari, the Georgia Supreme Court reversed the Court of Appeals decision holding that the mailing of the notice was sufficient and left open the question of whether the sending of a facsimile constitutes notice in “writing.”(34)

In considering what constitutes a writing, it is also necessary to consider what constitutes a signature. In Troutt v. Nash AMC/Jeep, Inc., 157 Ga. App. 399, 278 S.E.2d 54 (1981), Troutt argued, among other things, that an automobile dealer was liable for failure to “sign the installment agreement” as required by the Georgia Motor Vehicle Sales Finance Act. The Act at that time provided in pertinent part:

A retail installment contract shall be in writing, shall be signed by both the buyer and the seller …

The installment agreement was fully typed out and filled in and the name of the dealer was on the paperwork. However, no one had signed on behalf of the dealer. Even though the Georgia Motor Vehicle Sales Finance Act is separate from the Uniform Commercial Code, the court applied the definition provided under the Uniform Commercial Code which reads:

“Signed” includes any symbol executed or adopted by a party with present intention to authenticate a writing,

in holding that the printed name of the dealership on the form was sufficient to constitute a signature. If definitions under the Uniform Commercial Code are going to be applied outside the code, then it is appropriate to apply the definition of “written” or “writing” in O.C.G.A. §11-1-201 (46) which reads:

“Written” or “writing” includes printing, typewriting, or any other intentional reduction to tangible form.

Does the completion and online transmission of an order form, or other online communication such as an email message, constitute a “reduction to tangible form”? When an order or email is transmitted with the intention of entering into an agreement, it is certainly expected that the recipient will save the order or message in some way such as on the hard drive of a server. That is sufficient to meet the definition of “fixed in a tangible medium of expression” under the Copyright Act which reads in pertinent part:

A work is “fixed” in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.(35)

Under this analysis, it would be helpful for the parties to an agreement subject to the general statute of frauds to type in their name next to or with the addition of language substantially the same as:

I intend this to be my signature and for this document to be considered a writing.

Even assuming the Georgia appellate courts do not resurrect the rule that electronic transmissions, such as faxes, are not writings, there is a problem with the above analysis. Since the decision in Troutt v. Nash AMC/Jeep, Inc., supra, the Georgia Legislature enacted the “Georgia Electronic Records and Signatures Act” which became effective April 22, 1997.(36) Section 10-12-4. Agreement to Electronic Record or Signature reads in pertinent part:

Any person may, but shall not be required to, accept or agree to be bound by an electronic record which is executed or adopted with an electronic signature and, where that acceptance or agreement is otherwise required to be witnessed or notarized, which is witnessed or notarized, using an electronic signature. Where a person or other entity accepts or agrees to be bound by an electronic record as provided in this Code section, then:

(1) Any rule of law which requires a record of that type to be in writing shall be deemed satisfied;

(2) Any rule of law which requires a signature shall be deemed satisfied, and

(3) Any rule of law which requires a witness or notary shall be deemed satisfied by the electronic signature of such witness or notary.

“Electronic signature” is defined as:

an electronic or digital method executed or adopted by a party with the intent to be bound by or to authenticate a record, which is unique to the person using it, is capable of verification, is under the sole control of the person using it, and is linked to data in such a manner that if the data are changed, the electronic signature is invalidated.(37)

The term “Record” is defined as:

information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form. “Record” includes both electronic records and printed, typewritten and tangible records.(38)

Section 10-12-2 of the Act relating to construction reads:

The provisions of this chapter shall be construed to promote the development of electronic government and electronic commerce.

So here we have a statute that was designed to promote electronic commerce but seems to provide that at least where the statute of frauds is applicable to be effective an electronic signature must be “unique to the person using it,” “capable of verification,” under the “sole control” of the person using it and be “linked to data in such a manner that if the data are changed the electronic signature is invalidated.”

Although it is by no means clear, without a new statute, it was reasonably likely that a court would have held that a clickwrap agreement or email with language showing that the parties intended that what they were transmitting be a signed writing would be held to constitute a signed agreement. With this statute, that proposition is very questionable and anyone needing to meet the requirements of the statute of frauds should assure that both parties are utilizing an encryption methodology to accomplish the requirements of the statute. It should be noted that the Georgia Electronic Signature Act is as liberal as any that have been enacted and other electronic signature statutes, such the Utah statute, require that much more elaborate procedures be followed, such as requiring the use of certification authorities.(39)

B. Uniform Commercial Code.

Although the above discussion regarding what constitutes a “writing” and/or “signature” also applies to any online transactions governed by the Uniform Commercial Code, there is more to consider with respect to transactions governed by the UCC.

2-201 of the Uniform Commercial Code entitled “Formal Requirements; Statute of Frauds” reads in pertinent part:

(1) Except as otherwise provided in this Code section, a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.

(2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) of this code section against such party unless written notice of objection to its contents is given within ten days after it is received.

(3) A contract which does not satisfy the requirements of subsection (1) of this Code section but which is valid in other respects is enforceable:

(a) If the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate the goods are for the buyer, has made either a substantial beginning of their manufacturer or commitments for their procurement; or

(b) If the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or

(c) With respect to goods for which payment has been received, made and accepted or which have been received and accepted.

Under the Uniform Commercial Code where the price equals or exceeds $500, a signed writing is required subject to the exceptions set forth above. However, the only term that must be in writing under Article 2 is the quantity of goods shown. Where the transaction is between merchants, all that is needed is a ” writing in confirmation” that is “sufficient against the sender” sent to the other party unless written notice of objection is given within ten (10) days after the writing is received.

When a transaction is between merchants, there still must be proof that a confirmation was sent.(40) The question remains in connection with an online transaction, even when the transaction is between merchants, whether the transmission of an order form and/or sending of an email constitutes a “writing” in Georgia unless it meets the requirements of The “Electronic Signatures Act” and, in other states, unless it meets requirements of other statutes of that nature.

C. Transfer of Copyrights

The Copyright Act provides that a voluntary “transfer of copyright ownership” is not valid unless made in a signed writing. The courts have interpreted this provision to also apply to exclusive licenses.(41) In order to protect one’s ownership of a copyright, or exclusive rights therein, it is necessary to record the transfer.(42) The words “writing” and “signed” are not defined in the Copyright Act. There is an open question whether interpretations of these terms under State law including construction under proposed acts would be accepted by Federal courts in construing the Copyright Act.

2. Proposed Laws

A. Article 2B. Section 2B-201 entitled “FORMAL REQUIREMENTS” provides that agreements requiring the payment of $5,000 or more are not enforceable unless there is a “record” which is “authenticated” by the party against which enforcement is sought or unless the contract involves a license with an agreed duration of less than one year. These requirements also do not apply if performance is provided and accepted or to the extent that the party against whom enforcement is sought admits the agreement. Additionally, like the Article 2 provision relating to “merchants,” Article 2B provides that between merchants where one merchant sends an authenticated record to the other merchant confirming an agreement and the other merchant does not respond within ten (10) days, such confirmation satisfies the statute of frauds with respect to both merchants. This section further provides that no other statute of frauds is applicable which has been assumed, but not expressly stated, with regard to the writing and signature requirements stated in Article 2.

Section 2B-113 entitled “LEGAL RECOGNITION OF ELECTRONIC RECORDS AND AUTHENTICATION” provides that a record or authentication may not be denied legal effect solely on the grounds that it is in electronic form.

So Article 2B, in order to avoid the technicalities that may be implied by the words “writing” and “signature,” uses the term “record” and “authentication” and expressly provides that electronic form is acceptable. To the extent Article 2B is enacted, it would be a simple matter to add language to order forms and emails so as to comply with the Article 2B statute of frauds. The problem is that even if enacted, Article 2B would not affect a substantial portion of online transactions including those involving the sale of goods, other than computer software, which are not transmitted in the online transaction.

In light of the requirements of the Georgia Electronic Records and Signatures Act, it is likely that even if Article 2B were enacted in Georgia, those transactions which are not covered by Article 2B would still be subject to unenforceability not expected by the parties acting in the ordinary course of business. Even if that statute were changed, the same risk would continue from similar and, in many cases, far stricter electronic signature statutes that have been enacted in many other states.

B. Electronic Transactions Act.

Under the proposed Electronic Transactions Act, if enacted in its current form, all online transactions in which the parties show that they intended the transmission to constitute a writing and to incorporate their signature would satisfy the statute of frauds in those states that passed that statute. Even if enacted in every state, the Electronic Transactions Act would not directly affect Section 204 of the Copyright Act and therefore would not directly apply to the transfer of copyrights.


A major reason that licensees of software have tried to avoid application of the Uniform Commercial Code is to avoid imposition of implied warranties and the other warranty provisions of Article 2. Under common law, warranties were not implied. However, in light of the Uniform Commercial Code courts have, from time to time, applied Article 2 of the Uniform Commercial Code by analogy and held that implied warranties were applicable other than in connection just with the sale of goods.(43) The 5th Circuit in 1964 held that under Florida law implied warranties apply under common law.(44) On the other hand, there have been many cases in which the courts have held that implied warranties were not applicable outside of Article 2. With respect to online transactions, the implied warranties of Section 2-314 would apply to any purchases of goods and likely licenses of computer software and other goods, whether obtained through shipment or by transmissions. Although an implied warranty relating to accuracy of a database probably should not be governed by Article 2, any company offering information in a database would be taking an unreasonable risk not to include a disclaimer since, as stated above, courts might, by analogy, apply implied warranties to transactions that are not covered by Article 2. For example the Restatement of Torts 2d Section 552 provides that a provider of information is liable for failure to exercise care in obtaining or communicating information.

Proposed Article 2B-404 would provide that ordinarily there is no implied warranty of the accuracy of databases. Article 2B would apply the warranty only where the provider of information is a merchant in a “special relationship of reliance” with the purchaser of the information.(45)


1 Electronic Data Interchange (EDI) is the process whereby standardized forms or documents are transferred online for placing orders, billing, etc. See, Harry Newton, Newton’s Telecom Dictionary, Flatiron Publishing,1998. The ABA offers a form trading partner agreement for use in ongoing EDI transactions between the same parties.

2 Benjamin Wright and Jane K. Winn, The Law of Electronic Commerce, Aspen Law & Business, 3rd Ed. (1998)

3 See, e.g., O.C.G.A. §11-2-102.

4 See, Corporate Counsel’s Guide To The Uniform Commercial Code, Business Laws, Inc. at pp. 2.001 – 2.002 (1997) and J. Lee Gregory, Inc. v. Scandinavian House, L.P., 209 Ga. App. 285, 433 S.E.2d 687 (1993).

5 See, e.g., O.C.G.A. §11-2-105.

6 Validity, Construction and Application of Computer Software Licensing Agreements, 38 ALR 5th 1 and see, Schroeders, Inc. v. Hogan Systems, Inc., 522 N.Y.S.2d 404 (N.Y. Supp. Ct. 1987, Colonial Life Ins. Co. v. Electronic Data Systems Corporation, 817 F.Supp. 235 (D.N.H. 1993), Advent Systems v. Unisys Corp., 925 F.2d 670 (3rd Cir. 1991), and NMP Corporation v. Parametric Technology Corporation, 958 F.Supp. 1536 (N.D. Okla., 1997).

7 See, Michael D. Scott, Scott On Computer Law, 2nd Edition, Section 7.09[B].

8 See, Cincinnati Gas & Electric Co. v. Goebel, 28 Ohio Misc. 2d, 502 N.E.2d 713 (1986).

9 See, Gall v. Allegheny County Health Department, 555 A.2d 786 (Penn. 1989).

10 See, Farina v. Mohawk Power Corp., 438 N.Y. Sub. 2d 645 (1981).

11 See, Kaplan v. Cablevision of Pa., Inc., 671 A.2d 716 (1996).

12 See, Colonial Life Ins. Co. v. Electronic Data Systems Corporation, 817 F.Supp. 235 (D.N.H. 1993).

13 O.C.G.A. §10-12-1 et. seq.

14The latest versions may be downloaded from and from

15 See, 17 U.S.C. §102.

16 See, Prefatory Note to Uniform Electronic Transactions Act. The Act is available at Copies may also be obtained from the National Conference of Commissioners of Uniform State Laws, 211 East Ontario Street, Suite 1300, Chicago, IL 60611. The most recent draft of the Uniform Electronic Transactions Act (ETA) was prepared for the July 24-31, 1998 meeting of the National Conference of Commissioners of Uniform State laws.

17 See, Panfel v. Boyd, 187 Ga. App. 639, 371 S.E.2d 222 (1988).

18 See, CVS, Inc. v. Auburn Plastics, Inc., 67 A.D.2d 811, 413 N.Y.Supp.2d 50 (1979).

19 See, Corporate Counsel’s Guide To The Uniform Commercial Code, supra, pp. 2.088 and 2.089 and Diamond Fruit Growers, Inc., 794 F.2d at 1444 (9th Cir. 1986)

20 Contrary to ProCD, Inc. v. Zeidenberg and Silk & Mountain Web Services, Inc., 86 F.3rd 1147 (7th Cir. 1996), and other recent cases, a shrinkwrap license in connection with a license for computer software enclosed in a box in connection with a retail (mass market) sale where the purchaser is only notified that there is a license and for which the terms are not available until the purchaser has opened the box and/or installed the software would be subject, under Article 2B, not only to the right of refund; but also, to reimbursement of reasonable expenses and costs.

21 A clickwrap license is a license agreed to by a purchaser using a mouse to click an on-screen button to indicate assent to an agreement.`

22 Sections 2B-114, 2B-115 and 2B-116.

23 See, CompuServe, Inc. v. Richard S. Patterson, 89 F.3d 1257 (6th Cir. 1996). The 6th Circuit Court of Appeals held that an attorney who entered into a “shareware registration agreement” which required that the attorney type “agree” at various points in the document was bound by its terms including being subject to jurisdiction in the State of Ohio on any dispute regarding the agreement.

24 See, Hotmail Corporation v. Van Money Pie, Inc., 47 U.S.P.Q. 2nd (BNA) 1020 (1998); 1998 U.S.Dis. Lexis 10729 (April 16, 1998).

25 See, Vault Corporation v. Quaid Software Limited, 847 F.2d 255 (5th Cir. 1988).

26 Of course the court’s holding would imply that if preemption didn’t apply that the shrinkwrap license would be enforceable. Most courts that have decided the issue have held that agreements prohibiting reverse engineering and disclosure of confidential information are not preempted by the Copyright Act because they involve an agreement between consenting parties, and therefore are different from copyright which is imposed by law. See, e.g., Computer Associates v. Altai, 982 F2d 693 (2nd Cir. 1992).

27 See, e.g., Feist Publications, Inc. v. Rural Telephone Company Service, 499 U.S. 340 (1991). See also the section on copyright law being provided with this manual. For additional materials on copyright law, see the writer’s law firm web site at There is some concern among commentators that to allow unlimited use of shrinkwrap and clickwrap licenses to protect material not otherwise protected by copyright law could vitiate the copyright fair use doctrine.

28 See, Microstar v. Formgen, Inc., 942 F.Supp. 1312 (S.D. Cal. 1996).

29 See, Rich Hill and Enza Hill v. Gateway 2000, Inc., 105 F.3rd 1147 (7th Cir. 1997).

30 1998 N.Y. App. Div. Lexis 8872.

31 O.C.G.A. §13-5-30.

32 See, e.g., O.C.G.A § 13-5-31.

33 Corporate Counsel’s Guide To The Uniform Commercial Code, supra, at pp. 2.058 – 2.060.

34 See, Norris v. Department of Transportation, 268 Ga. 192, 486 S.E.2d 826 (1997).

35 See, 17 U.S.C. §101.

36 O.C.G.A. §10-12-1, et. seq.

37 See, O.C.G.A. §10-12-3.

38 O.C.G.A. §10-12-3.

39 See, Utah Digital Signatures Act, Utah Code Ann. §46-3-101, et. seq. (Supp. 1996).

40 See, Entertainment Sales Co. v. SNK, Inc., 232 Ga. App. 669, 1998 Ga. App. Lexis 641 (April 15, 1998).

41 See, 17 U.S.C.A. §§101 and 204.

42 See, 17 U.S.C.A. §205.

43 See, e.g., Holmes v. Worthey, 159 Ga. App. 262, 282 S.E.2d 919 (Ga. App. 1981) in which the court held that although ordinarily implied warranties wouldn’t apply, where a seller/builder is in direct privity with the buyer, the buyer has an implied warranty .

44 Sperry Rand Corp v. Industrial Supply Corp., 337 F.2d 363 (5th Cir. 1964).

45 Section 2B-404.

Rob Hassett is an attorney who practices in technology, entertainment and corporate law with Casey Gilson P.C. in Atlanta, Georgia.

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

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

The Law of the Internet – Copyright

By:  Rob Hassett

Hassett Cohen Goldstein, LLP

990 Hammond Drive

Suite 990 Atlanta, GA 30328

(770) 393-0990

The writer wishes to thank his wife, Lynn Hassett, an attorney in his law firm, and Adam Alexander, formerly a law student at Emory University Law School, now practicing law at the firm of Cooper & Scully, PC in Dallas, Texas, for their help in preparing this section of these materials.

Background and Summary

This article first appeared in the program materials for the internet law seminar sponsored by NBI, Inc. which was held in Atlanta, Georgia on February 18, 1998. This intermediate level article addresses the subject of copyright law as it relates to the internet. (18 Pages)


Article I, Section 8 of the Constitution of the United States reads in pertinent part:

The Congress shall have power …;


To promote the Progress of Science and useful Arts by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

Protection of works of authorship that are fixed in any “tangible medium of expression” is governed by Chapters 1 through 8 and Chapter 10 of Title 17 of the United States Code.(1) State law with respect to such works is pre-empted by federal law.(2) State law still applies with respect to rights in sound recordings fixed before February 15, 1972 and with respect to works that are not fixed in any tangible medium of expression.

The United States has been a party to numerous treaties regarding copyright law. The most important treaty is the Berne Convention to which the United States became a party in 1989. The Berne Convention provides that each member nation will protect the works of each other member nation’s citizens at least as well as it protects the works of its own citizens; as well as sets forth standards that must be met regarding the protection of works of authorship by all member nations. The process of proposing amendments to the Berne Convention is administered by the World Intellectual Property Organization (“WIPO”) which is an agency of the United Nations headquartered in Geneva, Switzerland.(3)


A. General Principles

17 U.S.C.A. §102 reads in pertinent part:

(a) Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated either directly or with the aid of a machine or device. Works of authorship include the following categories:

(1) Literary works;

(2) Musical works, including any accompanying words;

(3) Dramatic works, including any accompanying music;

(4) Pantomimes and choreographic works;

(5) Pictorial, graphic, and sculptural works;

(6) Motion pictures and other audiovisual works;

(7) Sound recordings; and

(8) Architectural works.

(b) In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery regardless of the form in which it is described, explained, illustrated, or embodied in such work. (Emphasis added.)

In part (b), Congress codified the pre-existing case law that held that copyright law protects the expression of an idea but not the idea itself. It is thought that the idea/expression dichotomy is required by the First Amendment prohibition against enactment of any law that would abridge freedom of speech.(4) The basic concept is that copyright cannot monopolize an idea or concept. This has resulted in rules that are especially important to the Internet including:

(1) If there are only a limited number of ways to express an idea (for example, to write a computer program accomplishing a particular function) the idea and expression are said to merge and the coding is not protected by copyright law.(5)

(2) Scenes a` faire, which are stock literary devices such as incidents, characters or settings which, as a practical matter, are indispensable or at least standard in the treatment of a given topic are not protected by copyright law. The reasoning is that standard expression is so close to the non-protectable idea itself that the expression provides nothing new or additional over the idea, see, e.g., Atari, Inc. v. North American Phillips Consumer Electronics Corp., 672 F.2d 607 (7th Cir.), cert. denied, 459 U.S. 880 (1982).

(3) Expression is also not protectable where it is required by particular standards in the industry or considerations of efficiency, see, e.g., Data East U.S.A., Inc. v. Epyx, Inc., 862 F.2d 204 (9th Cir. 1989).

Additionally, whether an aspect of a work is an idea or expression of an idea is a matter of degree. Exact copying of the language of a novel, play or computer program is a copyright infringement. Writing a novel using no more than the same overall general plot as another novel or writing a computer program performing the same function as another is not a copyright infringement. Paraphrasing a novel or following a detailed plot outline is an infringement. See, Twin Peaks Productions, Inc. v. Publication Int’l, Ltd., et al., 996 F.2d 1366 (2d Cir. 1993) (finding detailed plot summaries of television series to be infringement). Paraphrasing linear computer code or following the structure, sequence and organization of that code has been held to be an infringement.(6)

B. Non-Literal Elements of Computer Software

The non-literal elements of computer software are elements of the software other than the source code and object code such as the overall layouts, menus, structure and look and feel. At one point there appeared to be a significant amount of protection for the non-literal elements of computer software. The courts even went so far as to apply the notion that taking the “total concept and feel” of a computer program (which had been found to be illegal with respect to television characters)(7) constitutes a copyright infringement.(8)

In the 1990’s the courts began restricting protection of non-literal elements in computer programs under copyright law. The two leading cases in this regard are Computer Associates, Inc. v. Altai, Inc.(9) and Lotus Dev. Corp. v. Borland Int’l, Inc.(10)

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

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

The second step is filtration of each level of abstraction. Here the court filters out the following at each level:

(a) Elements that constitute ideas or are dictated by efficiency;

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

(c) Elements taken from the public domain.

The third step is the comparison test. From the filtration step, the court has determined what of the plaintiff’s program is protectable expression and then the court determines whether or not the “defendant copied any aspect of this protected expression, as well as an assessment of the copied portion’s relative importance with respect to the plaintiff’s program.” The Court of Appeals also held that the district court’s appointment of its own expert witness was appropriate. Following these tests, the court held that there was no infringement. The court did hold that there was a possibility of misappropriation of trade secrets. The court said that state trade secret law is not pre-empted under Section 301 of the Copyright Act.

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

We hold that the Lotus menu hierarchy is an uncopyrightable method of operation. We do not consider whether it could also be a system, process, or procedure.

The Supreme Court granted certiorari to Lotus on an appeal from the First Circuit Court of Appeals decision, but the Supreme Court affirmed by default when it turned out that the Justices were equally divided on the issue.(11)

As courts became reluctant to protect non-literal elements of computer programs under copyright law, courts, at the same time, became more comfortable with granting patent protection to computer programs.(12)

Shifting much of the protection for non-literal elements of computer programs from copyright to patent law has created a situation that makes it much more difficult for start up companies to protect their software because of the much higher expense of filing for patent protection. In the writer’s view it also allowed for monopoly protection of some matters that would not have ever been protected by copyright law that are too easy to create in the software context to fairly be the subject of patent protection. There is so much programming code created every day that much of the software for which patent protection is granted is already being used by others in the industry who just have not gone to the trouble of applying for a patent. The writer submits that a modified hybrid of trade secret, patent and copyright law should be developed for the protection of computer software.

C. Screen Displays – Web Pages

The Copyright Office has taken the position that registration of an underlying computer program automatically covers the screen displays. The applicant need only describe the work as “computer programs.” However, if the application includes “screen displays” in its description of the work, the applicant will be required to include a printout or videotape of the screen display showing sufficient copyrightable authorship to support a claim to copyright in the screen display.(13) Note that computer programs are generally registered as literary works on Form TX (“TX” refers to “text”). For works on the Internet that are predominantly visual works of art, which is the typical case now, Form VA (“VA” refers to “visual arts”) should be used. Where audiovisual authorship predominates, which is likely to be more and more often the case in the future for Internet sites, the work should be registered as an audiovisual work on Form PA (“PA” refers to “performing arts”).

D. Data Bases

Also important to Internet issues is the protectability status of online data bases. An author has copyrights in his original contributions to a compilation, but not in the underlying works being used.(14) At one time there was a split in the circuits about whether compilations of pure facts could be protected by copyright if there was no originality involved based on the labor and effort used in the compilation. See, e.g., Leon v. Pacific Telephone & Telegraph Co., 91 F2d 484 (9th Cir. 1937). This “sweat of the brow” line of cases was overruled in Feist Publications, Inc. v. Rural Telephone Service Co.,(15) where the Supreme Court held that there was no copyright infringement in copying a telephone book because there was no creativity involved in compiling it. The Court pointed out that placing names in alphabetical order and adding addresses was standard and not creative.(16) In Matthew Bender & Company, Inc. v. West Publishing Co.,(17) it was held that copying West Publishing compilations of Federal and District Court cases was not an infringement. West had successfully argued in West Publishing Co. v. Mead Data Central, Inc.,(18) that it had a protectable interest in selection of the order in which it assembled the case decisions.

At the December 1996 WIPO conference in Geneva, the United States representative proposed that the Berne Convention be amended so that the time and effort that went into developing data bases would be sufficient to allow for copyright protection – the current rule in Europe. The United States scientific community and others effectively lobbied the White House to withdraw this proposal.(19)


Section 106 of the Copyright Act reads in pertinent part:

Subject to Sections 107 through 120, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:

(1) To reproduce the copyrighted work in copies or phonorecords;

(2) To prepare derivative works based upon the copyrighted work;

(3) To distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease or lending [this provision does not apply to redistribution of an authorized copy, see Section 109 of the Copyright Act];

(4) In the case of literary, musical, dramatic, and choreographic works, pantomimes and motion pictures, and other audiovisual works, to perform the copyrighted work publicly [this provision does not apply to sound recordings, see Section 114 of the Copyright Act];

(5) In the case of literary, musical, dramatic, and choreographic works, pantomimes and pictorial, graphics, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and

(6) In the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission [this provision is modified by Section 114 of the Copyright Act – see the discussion of “musical works” below].

To the extent that each of these exclusive rights have special relevance to online use, they are discussed in Part VIII below. For an in-depth discussion of how the exclusivity of these rights is affected by the doctrine of fair use under Section 107 of the Copyright Act, see the article on Fair Use In New Media Technology by Rob Hassett and Adam Alexander included with these materials.


Copyrights in a work of authorship vest initially in the individual author unless the work is a “work made for hire” in which case the employer is considered to be the author.(20) A transfer of copyright ownership may only be made in writing.(21) A work may be a work made for hire only if it:

(1) Is a work prepared by an employee within the scope of his or her employment, or

(2) It is a work prepared as a contribution to a collective work, an audiovisual work or one of the other categories of work listed under the definition of “work made for hire” under Section 101 of the Copyright Act and “the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.”

Ownership can be a problem where a company employs another company as an independent contractor to create a web site. Under those circumstances, without a writing to the contrary, the commissioning company would not own the copyrights in that web site.(22) This is contrary to the law that applied before the 1976 Copyright Act became effective in 1978. Where a company pays for an independent contractor to develop a web site and does not have a written agreement as to ownership, the company would arguably have an implied license to do whatever it wished with the web site, but couldn’t prevent the independent contractor from also using those portions of the web site developed by the independent contract. Of course, the independent contractor would not be permitted to use materials contributed by others and would be subject to any privacy and publicity rights of any individuals whose name and/or likeness appeared in the web site.


Prior to January 1, 1978, registration was required to maintain ownership of a copyright in a work. Currently, all that is required for ownership is that the work be fixed in a tangible medium of expression. Registration in the Copyright Office is still advisable. With some minor exceptions, unless a work is registered before an infringement occurs, the copyright owner may not recover statutory damages (damages which a judge may award under Section 504 without proof) or attorney’s fees (which a judge may otherwise award under Section 505).(23) Additionally, with some minor exceptions, registration is required prior to the filing of a lawsuit for copyright infringement.


Prior to March 1, 1989, when the United States became a member of the Berne Convention, it was required that copyright notices be placed on works in order to maintain ownership in the copyrights in those works. Notice of a copyright is no longer required for ownership. Nevertheless, it is recommended that copyright notices be placed on any work. Adding the notice prevents a defendant’s claim of innocent infringement in mitigation of damages on the grounds that the infringer did not realize that a copyright was claimed. A copyright notice on visually perceptible copies consists of the following:

© [year of first publication] [name of the copyright owner]

Note that the word “Copyright” or the abbreviation “COPR” are also both acceptable but in order to comply with requirements under what is known as the U.C.C. Convention, it is recommended that a “©” be used. It is also advisable to add the language “all rights reserved” at the end of the notice as that is still required in some Latin American countries. Where the work is a sound recording and the owner wishes to give notice of the copyrights in the sound recording, a “p in a circle” should be used.(24)


Rights relating to music are being treated separately in these materials. This is because the law relating to some aspects of music is different and, also, because, as a result of industry practices, music rights are handled differently from rights in other works.

There are two separate sets of rights relating to every sound recording and/or audiovisual work involving music. First, there are rights in the underlying song or composition. These typically belong to the author – the songwriter or composer – and to their publisher. Second, there are rights in the sound recording itself. These typically belong to the record company.

1. Licenses of Rights in the Underlying Song

Before any discussion as to the rights of the author of a musical work, it must be determined who the author is. Generally, the author is the actual writer or co-writers. However, where the writer is employed by another or is an independent contractor, the work may be deemed a “work made for hire”, and the author, and owner of the copyright of the work, may be the employer or person who commissioned the work. See, the discussion regarding “OWNERSHIP” hereinabove.

With respect to songs that are released as singles, or as part of albums, most songwriters enter into agreements with publishers who pitch the song to record companies and performers and handle administrative matters for the writer. Most songwriters and composers are also affiliated with either the American Society of Composers, Authors and Publishers (“ASCAP”) or Broadcast Music, Inc. (“BMI”). These organizations license their catalogs of songs on a yearly basis to radio stations, television stations, restaurants, and other operations that publicly perform music. ASCAP and BMI then allocate and distribute the money (performance royalties) they receive based on the relative volume of use of the songs in their catalogs. The royalties are usually evenly divided between the publisher and the songwriter. However, where music is written as “works made for hire,” as is often the case for music for commercials or product jingles, the composer may not be entitled to ASCAP and/or BMI performance royalties.

In addition to performance royalties, songwriters may also receive what are called mechanical royalties. Mechanical royalties are based on the number of copies of the sound recording of the song distributed. After a recording of the song is released, other performers are permitted to record their versions of the song, provided they comply with the compulsory license provisions of Section 115(c) of the Copyright Act and pay the set royalty (currently 6.95 cents per song per copy of any recording sold). This set royalty is referred to as the “statutory rate”. See 37 CFR § 255.3(h). The rate is determined by ad hoc Arbitration Royalty Panels appointed and convened by the Library of Congress. Because the compulsory processes – such as the statutory provisions for accounting and notice provisions – are somewhat cumbersome, most record companies do their own negotiating of mechanical royalties for new recordings of previously released songs. The statutory rate is still used as a basis. The Harry Fox Agency in New York City administers the issuance of mechanical licenses and the receipts of royalties for many publishers of previously recorded songs.

Sometimes producers wish to include pre-existing music in their audiovisual work. For that purpose, the producer must acquire synchronization licenses for use of music embodied in their audiovisual work.(25) Synchronization licenses are generally negotiated with either the publisher or the Harry Fox Agency.

2. Rights in Sound Recordings

Rights in sound recordings are treated differently. Traditionally there have been no performance rights in sound recordings. Record companies owning copyrights in the sound recordings of songs on their records, earn income from the sale of the records and from the synchronization of those sound recordings for film, television, and other audiovisual uses. Thus, unlike the owner of the underlying song, record companies do not receive any performance royalties from ASCAP, BMI or anyone else, for radio airplay and other public performance uses of the recording.

It should be noted that in many other countries, especially in Europe, the owners of sound recordings do have performance rights in sound recordings. However, because the United States does not grant reciprocal rights, no royalties are collected for the performance rights for sound recordings owned by American companies when those songs are played, for example, on radio stations in countries that do recognize this right.(26)

There is one exception to the rule that U.S. law does not allow for the payment of performance royalties for performances of sound recordings. On November 1, 1995, President Clinton signed into law the Digital Performance Right in Sound Recordings Act of 1995 which provides for owners of sound recordings and recording artists to receive performance royalties for certain digital performances. This Act is discussed below under Internet related issues.


A. Reproduction

Under Section 106(1), a copyright owner has exclusive right to “reproduce the copyrighted work … ” Whenever a computer program is used (or a web page is viewed) a copy is made on to the random access memory (“RAM”) of a computer. When copies are transmitted over the Internet, transitory copies are made throughout the transmission. Copying into RAM in conjunction with using a computer program has been held to be a violation of the exclusive rights of the copyright holder under Copyright Act Section 106(1).(27) The U.S. representative at the WIPO conference in December of 1996 urged amending the Berne Convention to explicitly provide that the making of transitory copies in connection with Internet transmissions would be an infringement. This proposal was successfully opposed by the telephone companies and Internet Service Providers (“ISP’s”) because they were concerned that it would create an additional source of liability. See, John Browning Africa 1 Hollywood 0 Wired Magazine, March 1997, at 61. Nevertheless, a statement was issued that: “the reproduction right … fully appl[ies] in the digital environment, and particularly to the use of digital works in digital form … [and] that the storage of a protected work in digital form in an electronic medium constitutes a reproduction.”(28)

Although no court has decided the issue at this time, it is not clear whether the making of transitory copies as part of Internet transmissions constitutes the sort of reproduction governed by §106(a) but the copying onto RAM in connection with viewing a copy is certainly an infringement.(29) Telephone companies and routers are probably not liable for their part in transmissions over the Internet which do involve the making of transitory copies.(30)

B. Performances

Because the licensing rights for copying and distribution of music are handled separately from the licensing of the rights of public performances, it is necessary to differentiate online copying and distribution from online performances. The writer knows of no cases on this issue to date. Several authors have asserted that where performances can be viewed in the process of downloading, there is probably a performance, and otherwise there is not.(31)

C. Criminal Liability

Until recently, Section 506(a) of the Copyright Act read:

Any person who infringes a copyright willfully and for purposes of commercial advantage or private financial gain shall be punished as provided in Section 2319 of Title 18. [Emphasis added]

Because of the requirement of “commercial advantage” or “private financial gain” it was recently held that individuals placing copyrighted materials on the Internet where users could make copies for free had not committed any crime. This leaves copyright owners vulnerable to actions by individuals who are not concerned about civil liability. Congress has remedied this situation by passage of the “No Electronic Theft” (“NET”) Act which was signed into law by President Clinton on December 16, 1997. The Act changes Section 506(a) to read:

Any person who infringes a copyright either willfully –

(1) For purposes of commercial advantage or private financial gain; or

(2) By the reproduction or distribution, including by electronic means, during any 180/day period, of one or more copies or phonorecords of one or more copyrighted works, which have a total retail value of more than $1,000 shall be punished …(32)

D. Liability of ISP’s and OSP’s

Section 230(c)(1) of the Telecommunications Act of 1996 states:

Treatment of publisher or speaker. — No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.

This statute has been held to bar liability of an ISP or OSP for defamatory or obscene material posted by one of its customers.(33) This statutory limitation of liability for ISP’s and OSP’s has not, to date, been extended to copyright.

Two bills are now pending in Congress that would limit the liability of ISP’s and OSP’s for copyright infringement by adding a Section 512 to the Copyright Act.(34) In the meantime, ISP’s and OSP’s must rely on court decisions.

In Religious Technology Center, et al. v. Netcom On-Line Communication Services, Inc.,(35), the plaintiff held the copyrights in the Church of Scientology’s writings. A former member of the Church, Erlich, had placed Church of Scientology materials on a news group on the Internet through a bulletin board service connected to the internet through the national Internet service provider, Netcom. The plaintiff sued Netcom for its involvement in the claimed copyright infringement. Netcom moved for summary judgment. The court first decided that Netcom was not liable for direct infringement. Netcom had argued that Erlich, not Netcom, had actually placed the copies on the Netcom server. The court held that following the logic that Netcom had not actually made the copies and for policy reasons, Netcom would not be liable for direct infringement. The Court held that, unlike in Playboy Enterprises v. Frena,(36) Netcom was not liable for distribution or for publicly displaying the copies. In rejecting the argument that Netcom could be liable for direct infringement for distribution and public display, the court said in pertinent part:

No purpose would be served by holding liable those who had no ability to control the information to which the subscribers have access, even though they might be in some sense helping to achieve the Internet’s automatic “public distribution” and the users’ “public” display of files.

The court next dealt with the plaintiff’s contributory infringement claim against Netcom. The court said in pertinent part:

[Contributory] infringement will be established where the Defendant “with knowledge of the infringing activity,” induces, causes or materially contributes to the infringing conduct of another.

The court held that there was a fact question about whether Netcom, after receiving notice, should have known that the copies that Erlich was posting were infringing. It stated that:

[w]here a DBS operator cannot reasonably verify a claim of infringement, either because of a possible fair use defense, the lack of copyright notices on the copies, or the copyright holder’s failure to provide the necessary documentation to show that there is a likely infringement, the operator’s lack of knowledge will be found reasonable and there will be no liability for contributory infringement for allowing the continued distribution of the work on its system.

Finally, the court rejected the contention that Netcom was vicariously liable which requires:

[that] the Defendant:

(1) Has the right and ability to control the infringer’s acts; and

(2) Receives a direct financial benefit from the infringement.

The Court found that there was no direct financial benefit because Netcom received the same monthly sum regardless of whether Netcom did or didn’t post the material.

E. Framing

“Framing” is discussed in the segment of these materials relating to unfair competition. Although the writer knows of no case on point, it is likely that a court would hold that framing constitutes a derivative work.

F. Music Issues

On November 1, 1995, President Clinton signed the Digital Performance Right In Sound Recordings Act of 1995 into law. This act is codified in Sections 106(6), 114, 115(c)(3) and 115(d) of the Copyright Act. This new addition to the Copyright Act provides a performance right in sound recordings when the sound recordings are transmitted over a service that is either interactive (the customer can choose the song they wish to hear) or where the sender is charging a subscription fee. There is a provision for compulsory (referred to in the statute as “statutory”) licensing where the sender is charging a fee with the exception that the statutory licensing set up does not apply in certain situations where members of Congress felt that a service would in fact be providing copies, rather than performances, of the sound recordings.(37) Where the service is interactive (the customer can choose which song they wish to download) or in the other situations described in Endnote 37 below, the sender is required to negotiate a license with the owner of the sound recording, but may follow a compulsory procedure to pay a set rate for a mechanical license for the underlying compositions.

Other than for subscription and interactive services, there is no performance license required, even on the Internet, for sound recordings. However, licenses are almost always necessary when a musical work and sound recordings, not owned by the web site owner, are used. Examples are:

(1) It may be necessary for the web site developer/manager to copy musical works and sound recordings onto the server (they may not be playable directly from a purchased copy) in which case a reproduction license for the underlying work and sound recording would be required;

(2) Viewers of the web site may copy, or be capable of copying, the musical work and the sound recording onto their own computer which would also require a reproduction license (since Real Audio and Real Player do not allow for a viewer to make copies of a recording of an audiovisual work, the writer does not believe a reproduction license would be necessary to cover those transmissions);

(3) If the music is performed as the web site is being downloaded, a performance right for the underlying musical work would be required;

(4) If a sound recording of a musical work is being synchronized with an audiovisual work, a synchronization license (a form of the right to make derivative works) would be required for both the musical work and the sound recording.(38)


1 Chapter 9 of Title 17 provides protection relating to the design of semi-conductors. Chapter 11 prohibits the unauthorized recording of live musical performances.

2 See 17 U.S.C.A. §301.


4 Nimmer on Copyright §1.10 [B] [2].

5 Nimmer, at §2.18[J]. See also, Kearn River Gas Transmission Co. v. Coastal Corp., 899 F.2d 1458, 1464 (5th Cir.), cert. denied 498 U.S. 952 (1990).

6 Whelan Associates, Inc. v. Jaslow Dental Laboratory, Inc., 797 F.2d 1222 (3rd Cir. 1986).

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

8 See, generally, Scott On Computer Law, Second Edition, Section 3.47(C)(1).

9 982F.2d 693 (2d Cir. 1992).

10 489 F.3rd 807 (1st Cir. 1995). See also, Softel, Inc. v. Dragon Medical & Scientific Communications, Inc., 118 F.3rd 955 (2nd Cir. 1997).

11 116 S.Ct. 804 (1996).

12 See the paper by Bill Marvin on Patent Law included with these materials.

13 See, 53 Fed. Reg. 21817 (June 10, 1988).

14 See, e.g., 17 U.S.C. § 103.

15 499 U.S. 340 (1991).

16 See, also, Bell South Advertising & Publishing Corp. v. Donnelley Information Publishing, Inc., 999 F.2d 1436 (11th Cir.1993); and Warren Publishing, Inc. v. Microdos Data Corp., 115 F.3rd 1509 (11th Cir. 1997).

17 1997 W.L. 266972 (S.D. N.Y. May 19, 1997).

18 616 F. Supp. 1571 (D.Minn. 1985) affirmed 799 F.2d 1219 (8th Cir. 1986).

19 John Browning, Africa 1 Hollywood 0, Wired Magazine March 1997 at 61 (

20 §201(a) and (b) of the Copyright Act.

21 See, §204 of the Copyright Act.

22 See, e.g., Community For Creative Non-Violence v. Reid, 490 U.S. 730 (1989) (holding that the employer of an artist as an independent contractor to create a sculptural work did not own the copyrights in the sculptural work after paying for it).

23 See generally, § 412 of the Copyright Act.

24 Copyright Act §§ 401 and 402.

25 Sometimes performance licenses are also required. ASCAP and BMI do not cover every type of performance – for example, they do not grant performance licenses to, or collect payments from, movie theaters.

26 Howard Siegle & Paul Karl Lukacs, A Mega-Million Dollar Musical Mea Culpa, Are U.S. Record Companies Overlooking A Fortune In International Public Performance Royalties?, 15 Ent. & Sports Law., Vol. 15., No. 303, Fall 1997.

27 Mai Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993).

28 Meca Jung and Stephen D. Rosenboro, The WIPO Treaties, The International Battle Over Copyright Cyberturf, 15 Ent. & Sports Law., Vol. 15, No. 3, Fall 1997.

29 Mai Systems Corp. v. Peak Computer, Inc., supra. Note 27.

30 See, e.g., Religious Technology Center v. Netcom On-Line Communication Services, Inc., 907 F.Supp. 1361 (N.D. Cal. 1995) (holding that an ISP wouldn’t be directly liable for material placed on its server because it would not be reasonable to hold ISP’s liable and because ISP’s are not actually the ones making the copies).

31 Jeffrey P. Cunard, et al. Internet & Online Law, Section 6.08(4) (Kent B. Stuckey, ed., 1997).

32 See the information posted regarding H.R. 2265 at

33 See, e.g., Zeran v. American Online, Inc., 958 F.Supp. 1124 (E.D. Va. 1997), aff’d 129 F.3d 327 (4th Cir. 1997).

34 See, generally, H.R. 2180 and S. 1146,

35 907 F.Supp. 1361 (N.D. Cal. 1995).

36 839 F.Supp. 1552 (N.D. Fla. 1993).

37 The owner of the sound recordings is not required to provide a statutory license both where the license is interactive and in other situations where the drafters of the legislation felt that such transmittal could substitute for purchases of copies of the sound recordings such as situations where more than four (4) selections by the same artist are played in any three-hour period, more than three selections in total from any one sound recording are played in any three-hour period, and where a list of the sound recordings to be transmitted is being provided in advance.

38 For an in-depth analysis relating to incorporating music into a web site, see, Al Kohn and Bob Kohn, Kohn on Music Licensing, 1236 – 1250 (1996).

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

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


Five Most Common Legal Mistakes Involving Commercial Websites

July 2008 Article for Business to Business Magazine

by Rob Hassett

Do you have a privacy policy posted on your business website?  If so, did you have an attorney review it?  If the answer to this question is “no,” there is a good chance that there is a difference between what you state in your privacy policy and what your actual practices are.  If there is, you could be subject to actions by the Federal Trade Commission and by private companies and individuals for fraud.  In a recent case, a jury awarded $4.5M in damages against a company that helped students apply to colleges online, because the policy stated that personal information was not being shared, but it was.  This is an example of the type of legal mistakes that are often made in connection with commercial websites.

 The five most common legal mistakes involving commercial websites are:

             1.         The company’s privacy policy does not accurately state what the true privacy policy of the company is.  If nothing else, you should make sure that your privacy policy says that in the event of the sale of your business, you reserve the right to transfer the data you have collected from customers to the purchasers of the business, while making it clear that the new owners will continue to be subject to the commitments that you make regarding privacy.

             2.         The business is required to have a privacy policy but does not.  There are a number of laws that  require the posting of a privacy policy under certain circumstances including the Graham Leach Bliley Act (GLB), which applies only to “financial institutions,” but which defines the term “financial institutions” very broadly; the Health Insurance Portability and Accountability Act (HIPAA), which applies to health care providers, health care plans and “health care clearing houses” (i.e. companies that collect and sort health related billing data); the Children’s Online Privacy Protection Act (COPPA), which applies to websites that are directed to children under 13 or knowingly obtain data from children under 13; and the California Online Privacy Protection Act , which requires that any commercial website that collects data from individuals residing in California post their privacy policies.  The consequences of not complying with privacy laws can be very severe.  Violations of GLB can result in a bank’s loss of FDIC insurance – which would likely put the bank out of business.  Violations of HIPAA can result in criminal penalties of up to 10 years in prison and a $250,000 fine.  For violations of COPPA, Mrs. Fields Cookies paid a civil penalty of $100,000 and Hershey’s paid $85,000.  Violations of the California Online Privacy Protection Act can result in private lawsuits — possibly a business person’s worst nightmare.

             3.         Third parties are able to post materials on the website and the company fails to post a “Copyright Policy” and file a designation of a representative to receive any complaints regarding copyright infringement with the U.S. Copyright Office.  Properly posting such a policy helps to insulate the company from liability for the posting of infringing materials by third parties.

             4.         Failure to screen  all photos of individuals posted on the website.  Posting of a recognizable individual on a website without permission of that individual that is not posted for a newsworthy purpose, or other situation protected by the First Amendment freedom of speech clause, can result in liability.

             5.         Failure of the owner to register copyrights in the owner’s website.  If ownership of the copyrights in the website are owned by the owner of the website, but the owner of the website does not register the copyrights in the U.S. Copyright Office, the owner may still register the copyrights after an infringement and sue to stop such copying and collect damages provable (it is very difficult to prove any) but may not recover what are called statutory damages (much easier to prove) or attorney fees.


Any business owner with a website should take steps to assure that the use of the website is not resulting in a violation of another person’s rights and is taking all steps to protect its own rights.

Rob Hassett is an attorney who practices in technology, entertainment and corporate law with Casey Gilson P.C. in Atlanta,Georgia.

This article provides general information only and does not constitute legal advice.  Any reader should consult with his or her own attorney before making any decisions regarding legal matters.

Will Internet Radio Stations That Stream Music Have to Shut Down?

First Published in the Atlanta Lawyer March 2009

by Rob Hassett

Creative and adventurous entrepreneurs, who could never afford to buy a broadcast radio station, have set up many internet radio stations that stream music and offer features that could only be made available over the internet. allows you to find stations that play almost  any type of music imaginable. Yahoo’s Launchcast, (, now  managed by CBS Radio, ( and Pandora, ( allow you to type in names of favorite artists or songs and will then play songs, based upon those choices. With Pandora you can set up as many “channels” as you want, with each based on a different artist or set of artists (i.e. with each song by the artist selected or an artist with a similar sound). Although Congress has passed laws to promote experimentation, growth and development on the internet by limiting liability exposure of the owners of commercial websites, Congress has also  passed laws that have put internet radio, and all that it offers, on the verge of extinction.

In the United States, songwriters (and publishers for songwriters) have traditionally received “public performance” royalties when their songs were played on broadcast radio and in other public forums. Royalties for songs are collected by ASCAP, BMI and SESAC and, for internet radio, total royalties have been in the range of 3.5 – 5% of gross income derived from the broadcast of the music. Owners of the copyrights in sound recordings have traditionally received  no royalties for public performances in the United States. This continued to be the case until enactment of the Digital Performance Right in Sound Recordings Act of 1995. This Act provided that copyright owners of sound recordings would have a public performance right in  audio recordings that were transmitted by a station requiring a subscription, such as satellite radio, and in any digital transmission that was “interactive.”  In 1998, the Digital Millennium Copyright Act was enacted, which, among other things, included provisions, codified in 17 USC § 106(6) and §114, that expanded performing rights of  the owners of sound recordings to include sound recordings transmitted digitally over the internet (i.e. via internet radio). In connection with this right, Congress also provided for a set  (“statutory”) royalty rate to be established for non-interactive internet radio stations that met  certain other criteria. If not decided by negotiation among stakeholders, it provided that the royalty rate would be determined by an ad hoc Copyright Arbitration Royalty Panel.  The statutory rates would only apply if the webcast was not “interactive” and other criteria were met, such as, limiting notice of when songs would be played, to make it unlikely that webcast streaming would become a substitute for music downloads.

2 Problems
There were two problems with Congress’ approach. First, to benefit from a set royalty rate (which would be better for each station than having to negotiate separately with each record label), the station could not be “interactive.” Unfortunately, Congress defined “interactive” broadly and ambiguously so many stations do not know whether they are interactive or not.  Second, Congress’ wording of the standard the arbitrators were to use for determining the statutory rates encouraged the arbitrators to impose unreasonably high royalties.

Determining Whether a Station Is Interactive
The definition of “interactive” set forth in the Digital Millennium Copyright Act reads, in pertinent part, as follows:

An “interactive service” is one that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording, whether or not as part of a program, which is selected by or on behalf of the recipient.  17 USC § 114(j)(7).

The phrase “a program specially created for the recipient” is ambiguous. As referred to in the above Introduction, using advanced techniques, some of the most popular internet radio stations utilize input from the listener to create a “personalized station.” So does that result in programs that are “specially created for the listener”?

In 2001, Sony BMG, and other record labels, filed a lawsuit against Launchcast internet radio for copyright infringement, claiming Launchcast was an “interactive” radio station and had no right to stream music under the statutory license granted to non-interactive radio stations. On November 3, 2005, the United States District Court for the Southern District of New York held that whether or not Launchcast was “interactive” was a jury question. Arista Records, Inc. v.  Launch Media, Inc., 2005 WL 2898735 (S.D.N.Y.), and on April 27, 2007, a jury found that Launchcast was not interactive. Sony BMG said it would appeal. As of this writing, the author has not seen any order relating to the appeal of that decision.

Statutory (Set) Rates
For reasons that are likely related to which groups had the more effective lobbyists, the standard for determining statutory rates as provided for in the acts referred to above, was made much more favorable to existing satellite radio, than to webcasters. The Digital Performance Right in Sound Recordings Act of 1995, in a provision codified at 17 USC § 801(b), directed ad hoc Copyright Arbitration Panels to set royalty rates for pre-existing satellite radio that are reasonable and are calculated to maximize the availability of creative works to the public, to afford the copyright owner a fair return on his or her investment and the copyright user a fair income, to consider the contributions and risks taken by each party and to minimize any disruptive impact on the industries involved. The Digital Millennium Copyright Act, in a provision codified at 17 USC §§ 114(f) (2) (A), directed the Copyright Arbitration Royalty Panels to set royalty rates for webcasters (as well as others including new, i.e. not  preexisting, satellite radio stations) “that would have been negotiated between a willing buyer and a willing seller.” No language indicated that the Panels should be concerned about maximizing the availability of creative works or the disruptive impact on internet radio.  As a result, in 2002, royalties for internet radio were set at an amount that would put many internet radio stations, already earning little if any money, out of business. Webcasters appealed the decision to the D.C. Circuit Court of Appeals. The D.C. Circuit Court of Appeals affirmed the decision. See, LLC v. Library of Congress, 394 F.3d 939 (D.C. Cir. 2005); and See generally, Melville B. Nimmer and David Nimmer, Nimmer on Copyright 8-352.  (Rel.61-8/2003).  In 2002, partly because of concerns over the adverse effects of the high rates, Congress passed  the Small Webcaster Settlement Act of 2002. The new Act led to an agreement among the participating stake holders of an alternative rate equal to 5% of expenses or 8% of gross revenues, depending on which is greater, through 2002 for “small webcasters,” with increases scheduled for 2003 and 2004. See, Nimmer on Copyright, 8-352.12 (Rel.61-8/2003).

Current Royalties for Webcasting
On March 7, 2007, the Copyright Royalty Judges, who had replaced the ad hoc Copyright  Arbitration Panels and are sometimes referred to as the Copyright Royalty Board, set the rates for webcasting beginning at .08 cents per performance for 2006 with yearly increases reaching  .19 cents per performance for 2010, with a minimum fee of $500 per channel per year. The $500 per channel fee could be interpreted to require the payment of much more than the rates per song for stations like Pandora, that permit each user to set up multiple “stations.” Daniel McSwain, Radio and Internet Newsletter, “CRB Coverage,” March 2, 2008.; See also, “free103point9 Newsroom,” tp:// On  April 17, 2007, the Copyright Royalty Board rejected an appeal. David DeJean, Information Week, April 17, 2007. “Copyright Royalty Board Puts Internet Radio On Death Watch,”; See also,  “free103point9 Newsroom”,

In contrast, based on the differences in the statutory formulas for setting royalties for webcasters versus pre-existing satellite radio, in 2006, the Copyright Royalty Judges set royalty rates for  pre-existing satellite radio that were much more favorable to the owners of the radio stations, resulting in fees of anywhere between 6.0% to 8.0% of gross income. Most internet radio stations would much prefer having their royalties based on their revenue rather than on the number of times songs are played.
An appeal from the order setting the rates for webcasters was filed in the US Court of Appeals for the District of Columbia. No court decision has been published to date. David Oxenford, Broadcast Law Blog,; See also, “free103point9 Newsroom”

Finally, on October 1, 2008, Congress enacted the Webcaster Settlement Act that permits the 4 webcasters and SoundExchange (the collecting agency for the record labels and performers) to negotiate rates lower than the statutory rates, which helps only to the extent the record labels recognize that internet radio can promote the sale of records and be another source of revenue.

The law relating to internet radio is still evolving, but up to now fails to support internet radio as it has other web based businesses. The royalty payments required for internet radio have been set at levels so high that they could cause many popular webcasters to shut down. As Congress did with pre-existing satellite radio, to “unleash the power of the internet,” with respect to internet radio, Congress should set standards for maximum royalties that do not exceed 8% of a radio station’s gross income.

Rob Hassett is an attorney with Casey Gilson P.C. in Atlanta and focuses on technology, entertainment and corporate law.

Spam Laws and Entertainment

By Rob Hassett

Casey Gilson P.C.

Six Concourse Parkway, Suite 2200

Atlanta, Georgia 30328

(770) 512-0300, ext. 557

Law Firm Website:

Personal Website:

Posted: May 8, 2006

* Mr. Hassett is a co-author of Volume 5 (which volume is entitled Internet and Interactive Media) of the 10 volume treatise entitled Entertainment Industry Contracts which is published by Lexis Nexus.  This article is adapted from Chapter 109Q of Volume 5 of that treatise.

109Q.01   Background

One of the goals of any entertainment oriented website is to encourage individuals to view the site.  Websites generally earn income by selling products or services, charging for subscriptions or advertising.  No matter what approach is used, the more “eyeballs” the better.  Therefore, one of, if not the primary, goal of any entertainment website is to attract viewers.

One way to attract viewers is by sending promotional emails to customers and potential customers.  However, if the email is unsolicited, or, even if consented to, if the recipient believes it is unsolicited or if the recipient otherwise does not want it, the sender risks serious adverse consequences which may include:

(1)       Alienation of customers and potential customers irritated by the email;

(2)       Blocking of all email from the sender either by the recipient or by the recipient’s use of certain types of software and services that block out all email from a sender’s address; and

(3)       Violating applicable law including incurring substantial civil and/or even criminal penalties.

109Q.02         Alienation of Customers and Potential Customers

Most recipients of spam hate receiving it and a significant percentage of recipients of email will in effect “boycott” any vendor that sends them unsolicited email.  Unfortunately, many spammers will weigh this fact against the fact that a significant portion of the population (according to some reports, as high as eight (8%) percent) will, on at least some occasions, purchase products or services in which they are interested from a vendor they learn about from spam.  Still, the likely alienation of customers and potential customers should be enough, without more, to dissuade most owners of entertainment websites from trying to attract viewers by using unsolicited email.

109Q.03         Blocking of Emails

Email recipients can take steps to block a substantial percentage of email sent to them by spammers.  One option, available to most recipients of email, is to intentionally block all email from a particular email address or from an entire domain.  There are two (2) major drawbacks to this approach.  First, many times the spammers use the return email addresses of other innocent parties. This practice, called spoofing, is illegal and even criminal, but does make it impossible for any recipient to be sure that they are blocking email from the address of the spammer as opposed to the address of an innocent third party.  Second, this approach is reactive, as opposed to proactive, in that the recipient must first receive the unwanted email before being able to block future email from that same address.

There are also software programs, such as the “SafetyBar” software available at, that are community based and use algorithms to redirect email received that purportedly constitutes spam into a spam folder.  Such software does not rely on the purported return address to determine whether an email is spam.  Instead the software blocks emails based on whether a certain number of its over 1 million users report that they have seen the email and that it is spam.  If the email is confirmed as spam, then it is sent to the spam folders of all users of the software (the users can always view the software and elect to receive email from that source).  Then, using proprietary algorithms, emails from the same source, which, as addressed above, may not be the same as the purported return address on the email, are also blocked.

Additionally, many business users run all of their email through outside spam and virus blocking services such as the service available from AppRiver at and Postini at  With these services the user routes all email to a particular domain through the spam and virus blocking service of the third party provider.  The advantage of these third party services is that the email is blocked before it ever reaches the user’s computer and so the services are much better for users who also view their email with BlackBerries, cell phones and other wireless devices.  Products like SafetyBar work only on the computer on which the software resides and so are no help for blocking spam to BlackBerries and similar devices.

The problem for the owner of a website is that if the owner sends out mass emails not wanted by the recipients, with widespread use of the above described software and/or services, all emails from that owner may be blocked.  In that situation a customer who, by signing up, is supposed to receive  an email,  may never receive it and, if they do not check to see what is blocked, may never know they did not receive it.

109Q.04         Anti-Spam Laws

Prior to January 1, 2004 there was no federal law prohibiting spam.  However, 29 states had enacted laws prohibiting unsolicited email.  There was variation among these statutes.  The most restrictive statutes were Delaware’s (prohibited all unsolicited bulk commercial email) and California’s (prohibited all unsolicited commercial email).  Other states included one or more of the following four prohibitions on commercial and/or bulk email:

(1)       Must not include false or missing routing information, misleading subject line and/or use another’s domain name;

(2)       Must not include sexually explicit material;

(3)       Must include “ADV” or “ADV ADLT” (or similar, but differing) language in the subject line (generally at the beginning); and/or

(4)       Must include an easy method to opt out from future emails.

One question many lawyers had was whether the Delaware and California laws were constitutional.  If constitutional, the law in these states would legally prohibit most unsolicited commercial email.  With respect to commercial speech that concerns lawful activity and is not misleading, the test of constitutionality is:

(1)       Is there a substantial governmental interest;

(2)       Does the law directly advance that governmental interest; and

(3)       Is there a reasonable fit between the purpose of the restriction and the scope of the restriction?

The Delaware and California statutes did meet the first two tests.  There is a substantial governmental interest in reducing unsolicited commercial email in that there is now so much of it that it slows down the Internet and most people hate receiving it.  A prohibition on unsolicited commercial email advances that interest since, if spammers are prohibited from sending unsolicited commercial email to Delaware and California, their citizens would, at least theoretically, not receive any.

The interesting question is whether or not the third test is met.  Is there a reasonable relation between the objective being achieved and the scope of the restriction?  There are certain other, less drastic, ways to reduce unsolicited commercial email such as requiring “ADV” in the subject line.  With “ADV” in the subject line any individual or ISP could screen out the email.  Proponents of the Delaware law would probably argue that the constitutionality of the Delaware law is supported by the cases holding that the federal anti-fax statute, which prohibits all unsolicited faxes, is constitutional.  However, there is no way for individual fax machine owners to screen out unwanted faxes while there is a way to screen out unsolicited commercial bulk email other than to bar all of it.

In any event the state laws only applied to unsolicited “commercial” email.  The reason is that under the “free speech” clause of the First Amendment to the U.S. Constitution any restriction of non-commercial speech must be narrowly tailored (in other words there is less room to go beyond what is necessary to advance the interest of concern).  So sending out a bulk email that contains primarily informative, literary or artistic content, even if it also contains a promotional or advertising element, would seemingly not have been barred under any state law.

All of the state statutes of which the author is aware defined “unsolicited” as having no pre-existing relationship.  So if there was a pre-existing relationship, these statutes would not apply.

Until January of 2004, there was no federal law expressly prohibiting spam.  Probably partially due to lobbying by bulk emailers who were operating in the United States and believed themselves to be vulnerable to lawsuits based on state anti-spam laws at the end of 2003 Congress enacted a federal anti-spam law that became effective as of January 1, 2004.  The bulk emailers who lobbied for passage probably preferred one anti-spam law that applied across the country and allowed mass emailings provided certain requirements were met as opposed to a large number of different, sometimes contradictory, laws that in a few states completely prohibited mass commercial emailings.  The Act is entitled:  “The Controlling the Assault of Non-Solicited Pornography and Marketing Act” and is referred to as the “CAN-SPAM Act of 2003.”  Most  sections of the Act are codified at 15 USC 7701 et. seq.  Important features of the CAN-SPAM Act include:

(1)       It only applies to “commercial electronic mail.”  “Commercial electronic mail” is defined as “electronic mail . . . the primary purpose of which is the commercial advertisement or promotion of a commercial product or service (including content on an Internet website operated for a commercial purpose).”  The Federal Trade Commission was assigned the task of enacting regulations for determining “the primary purpose of an electronic mail message.”  One reason the Act was written to apply only to “commercial email” was to reduce the likelihood of a court finding that the Act violates the free speech clause of the first amendment.  The term “commercial email” is ambiguous.  However, an email newsletter with primarily informative or entertainment content concerning computers, the Internet, news, sports,  political or other matters sent out by an entity that promotes nothing or includes ads and/or solicitations which are placed deep in the newsletter and from multiple sources would not, in the opinion of the author, be within the scope of the CAN-SPAM Act.  On the other hand, an email from an entertainment website inviting recipients to try out the site would certainly be within the scope.  Whether an emailed newsletter from a business, such as a law firm, that provides goods and services but does not distribute, in either a printed or electronic format, publications as its main business is within the scope of the CAN-SPAM Act can be a close question.  The author believes that if the newsletter consisted primarily of informative material, it would not be considered “commercial” and therefore not subject to the requirements of the Act.

(2)       The Act “supersedes any statute, regulation or rule of a State or political subdivision of a State that … regulates or restricts the use of electronic mail to send commercial messages, except to the extent that such statute, regulation, or rule prohibits falsity or deception [or laws that are not specifically focused on electronic mail such as state trespass, contract or tort law or state laws that relate to acts of fraud or computer crime].”

(3)       The law does not prohibit the sending of commercial email messages, but instead prohibits certain activities in conjunction with sending out such electronic mail.

(4)       Unlike the state laws, although an exemption may be introduced by regulation, the Federal law does not exempt email just because there is a prior relationship between the parties except that it does provide an exception from requirements not related to deception as to the source of the email to the extent the email is a follow-up to a previous transaction such as related to warranty rights.  It is important to note that this exemption does not, by definition, apply if the email contains advertising or a solicitation.

(5)       Unlike as was the case under state law, obtaining a consent only exempts a spammer from being required to clearly and conspicuously indicate that a commercial email is an advertisement or solicitation (See “7(g)” below).  The state law prohibitions only applied to email that was “unsolicited.”

(6)       The following constitute criminal violations:

(a)      Assessing a computer without authorization and sending out multiple commercial email messages from such computer (some of the worst spammers have been using computers of unaware consumers with fixed connections to the Internet such as over cable modems or DSL to send out their commercial email);

(b)      Deceiving recipients of email as to the source of the email message (this would cover one of the most insidious, but common, practices whereby spammers “spoof” the email domain name of an unknowing website owner misleading all email recipients into believing that that innocent website owner sent the spam thereby harming the reputation of the website owner).

(7)       The following constitute civil violations:

(a)       The above criminal violations can also be the basis for civil claims;

(b)       Inclusion of deceptive subject headings;

(c)        Failure to include a functioning return electronic mail address;

(d)       Failing to clearly provide an opportunity to decline further communications via email;

(e)       Continuing to send email ten (10) days after being requested to stop;

(f)         Failing to provide a valid physical postal address of the sender; and

(g)  Failing to clearly and conspicuously indicate that the message is an advertisement or solicitation.

(8)       Any sexually oriented email must contain a warning in the subject heading.

(9)       The prohibitions apply to any person that “initiates” a commercial electronic mail message which includes both originating or transmitting the message and procuring the origination or transmission of the message.  So a website owner that hires a bulk emailer to send out the emails can be liable for all the above violations.

(10)     A supplier of products or services to an affiliate (an entity in which the supplier holds a greater than 50% controlling or economic interest) or to an unrelated third party when the supplier has actual knowledge of a violation is required to take reasonable actions to prevent the transmission of or detect and report to the Federal Trade Commission the sending of commercial email with misleading information in the header of the email regarding the sender of the email.

(11)     Enforcement of criminal penalties is handled by the United States Department of Justice.  The right to enforce civil penalties is vested in the Federal Trade Commission except for bulk emailers which are regulated by specific agencies such as member banks of the Federal Reserve System, brokers and dealers under the Securities & Exchange Commission and insurance companies under state insurance commissioners, with respect to which enforcement of civil penalties is vested in such other agencies.  There are no private rights of action.  Attorney Generals of various states can file actions on behalf of the citizens of those states.  For certain violations, application service providers may file actions to recover damages to them.

(12)     Penalties and liabilities include:

(a)       For a criminal violation – fines up to $500,000 for organizations and $250,000 for individuals and imprisonment for up to 5 years and forfeiture of all gross proceeds obtained as a result of the offense and of any equipment, and/or software used to commit or facilitate the offense;

(b)       For a civil violation –

(i)         If subject to enforcement by specific agencies such as the Securities & Exchange Commission, penalties are set by the statute specific to regulation of those agencies; otherwise, penalties are set under the Federal Trade Commission Act and include penalties of up to $11,000 per violation.

(ii)        Enforcement by states – the attorney general of any state may file a civil action on behalf of residents of the state denominated as an action “as parens patriae” – the courts are unclear as to whether that money is kept by the state or provided to the citizens –  equal to the greater of $250 per email to each recipient in the state or the amount of actual damages proved.  The court may triple the award and also award attorney fees.

(c)        Internet Access Services – have the right to file actions to enjoin actual losses and collect up to $100 per email per recipient.

The FTC reports on its website ( that it has already filed actions for violations of the Anti-Spam Act, although the descriptions of cases on the website indicate that the initial actions are against spammers that are involved in some sort of deception as opposed to other types of violations such as failures to indicate that the spam is an advertisement or promotion.

Various state cases have held that the sending of large volumes of unsolicited email to the customers of particular internet service providers, after being notified not to do that, can constitute trespass under state law because of the damage to the computers of the internet service providers.

For additional information about anti-spam laws see Professor David Sorkin’s excellent website at and the Federal Trade Commission’s website concerning its anti-spam activities at

109Q.05         Foreign Anti-Spam Laws

Although beyond the scope of this Chapter, the sending of promotional email to residents of many countries outside the United States, including countries that are members of the European Union and Canada, is restricted by the laws of those countries.

109Q.06         Conclusions

To avoid alienating customers, being added to numerous block lists and violating applicable law, choices for website owners are:

(1)       Not to use email to promote the website;

(2)       Send email only to visitors to the website that have consented to the sending of email to them, or have otherwise consented to receiving email at seminars, trade shows and the like, not to exceed the scope of such consents and comply with the provisions of the CAN-SPAM Act that apply even when a consent has been obtained; or

(3)       Include an ad in established well-received email publications such as emails sent daily by the New York Times, the emails sent weekly by email services such as the Leebow Letter published by (see, or the CNET newsletter available at (

Because of the uncertainty about what constitutes “commercial electronic mail” the undersigned is currently cautioning clients against sending “educational” emails that are apparently sent for the purpose of drawing potential customers to a website except in strict compliance with the CAN-SPAM Act.  Although a very strong argument can be made that if informative and where directly promotional material is only a minor part of such emails and placed toward the end, such emails are not covered by the CAN-SPAM Act, unless and until it is made clear by applicable regulations or case decisions that such emails are not covered, the potential exposure is too great to justify sending those materials out except in compliance.  Additionally, no matter how valuable the newsletters may be, many recipients will block further emails from such address which could interfere with later communications.

Even if the bulk email your client is planning to send out is in compliance with federal law, it is also necessary for your client to comply with the terms of use of its own internet service provider.    Also, if the volume of email being sent out is sufficiently large, your client may receive a notice to stop sending to customers of a particular ISP and, if not stopped, there are cases that would indicate that action could be considered trespass.

© 2006 LexisNexis and Rob Hassett, All rights reserved.

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