existence of infringing material on their systems and thus limit their liability for damages to those for innocent infringement. Again, this problem has been a part of the cost of doing business for many other distributors of material that is provided to them by others.375

Clearly, on-line service providers play an integral role in the development of the NII and facilitate and promote the free exchange of ideas.376 But that has not been grounds for removing or reducing liability for copyright infringement. One can perform these functions without infringing or facilitating the infringement of the copyrighted expression of others.

On-line service providers have a business relationship with their subscribers. They -- and, perhaps, only they are in the position to know the identity and activities of their subscribers and to stop unlawful activities.37 And, although indemnification from their subscribers may not reimburse them to the full extent of their liability and other measures may add to their cost of doing business, they are still in a better position to prevent or stop infringement than the copyright owner. Between these two relatively innocent parties, the best policy is to hold the service provider liable.

The on-line services provide subscribers with the capability of uploading works because it attracts subscribers and increases usage for which they are paid. Service providers reap rewards for infringing activity. It is difficult

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375 See P. GOLDSTEIN, COPYRIGHT, § 1.15, at 45 (1989) ("The exercise of due diligence... can reduce, but never entirely exclude, the risk of a copyright infringement claim. Copyright law's rule of strict liability poses particularly hard problems for an intermediary, . . . which must accept on faith its author's representation that he originated the work.").

376

The same can be said of other information providers and facilitators, such as book stores, photocopying services, photo finishers, broadcasters, etc.

377

The subscriber may be unknown -- particularly in the case of anonymous messages to everyone but the service provider.

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to argue that they should not bear the responsibilities. We are not aware that cost/benefit analyses have prompted service providers to discontinue such services. The risk of infringement liability is a legitimate cost of engaging in a business that causes harm to others, and that risk apparently has not outweighed the benefits for the more than 60,000 bulletin board operators currently in business.

There has been tremendous growth in the on-line service industry over the past several years, and it shows no signs of reversing the trend under current standards of liability. Other entities have some of the same costs of doing business, have instituted practices and taken appropriate precautions to minimize their risk of liability, such as indemnification agreements and insurance.

The Supreme Court has stated:

Intention to infringe is not essential under the
Act. And knowledge of the particular selection to
be played or received is immaterial. One who
hires an orchestra for a public performance for
profit is not relieved from a charge of
infringement merely because he does not select
the particular program to be played. Similarly,
when he tunes in on a broadcasting station, for
his own commercial purposes, he necessarily
assumes the risk that in doing so he may infringe
the performing rights of another.379

378

379

Some estimates of the number of BBS operators are as high as 100,000.

See Buck v. Jewell-LaSalle Realty Co., 283 U.S. 191, 198-99 (1931) (citations omitted) (at the time, infringement of the public performance right required that the performance was "for profit"); see also ABKCO Music, Inc. v. Harrisongs Music, Ltd., 722 F.2d 988, 999 (2d Cir. 1983) ("the problems of proof inherent in a rule that would permit innocent intent as a defense to copyright infringement could substantially undermine the protections Congress intended to afford copyright holders").

During the deliberations preceding enactment of the 1976 general revision of the Copyright Act, changes to the standards of liability were "considered and rejected.' 380 For instance, Congress was asked to alter the standard for vicarious liability for business owners whose independent contractors directly infringed the public performance right in copyrighted works (such as owners of dance halls).381

A well-established principle of copyright law is
that a person who violates any of the exclusive
rights of the copyright owner is an infringer,
including persons who can be considered related
or vicarious infringers.... The committee has
decided that no justification exists for changing
existing law, and causing a significant erosion of
the public performance right."

Congress also determined that the innocent infringer provision, which allows reduction of damages for innocent infringers "is sufficient to protect against unwarranted liability in cases of occasional or isolated innocent infringement, and it offers adequate insulation to users, such as broadcasters and newspaper publishers, who are particularly vulnerable to this type of infringement suit."383 Congress believed that "by establishing a realistic floor for liability, the provision preserves its intended deterrent effect; and it would not allow an infringer to escape simply

380 See, e.g., HOUSE REPORT at 159-60, reprinted in 1976 U.S.C.C.A.N. 5775-76. Within the cable compulsory licensing provisions, one narrow exemption from liability was granted with respect to secondary transmissions by independent carriers that provided transmission capacity for the distribution of superstation signals to local cable operators. See 17 U.S.C. § 111(a)(3) (1988). This exemption is only available if the primary transmission is made for reception by the public at large. If the primary transmission is limited to at particular segment of the public, such as subscribers to a service, the exemption does not apply and the standards for copyright liability are fully applicable.

382

HOUSE REPORT at 159-60, reprinted in 1976 U.S.C.C.A.N. 5775-76.

383

HOUSE REPORT at 163, reprinted in 1976 U.S.C.C.A.N. 5779.

because the plaintiff failed to disprove the defendant's claim of innocence."384

Commentators have supported Congress' decision:

Innocent intent should no more constitute a
defense in an infringement action than in the case
of conversion of tangible personalty. In each case
the injury to a property interest is worthy of
redress regardless of the innocence of the
defendant. Moreover, a plea of innocence in a
copyright action may often be easy to claim and
difficult to disprove. Copyright would lose much
of its value if third parties such as publishers and
producers were insulated from liability because of
their innocence as to the culpability of the
persons who supplied them with the infringing
material. 385

386

Infringement may be alleged against service providers, such as BBS operators, in NII-related cases. As noted earlier, the court in Playboy found the BBS operator directly liable for the display of the unauthorized copies on the service, as well as the distribution of unauthorized copies to subscribers. The court held:

There is irrefutable evidence of direct copyright
infringement in this case. It does not matter that
[the operator] may have been unaware of the
copyright infringement. Intent to infringe is not

384

385

Id.

3 NIMMER ON COPYRIGHT § 13.08 at 13-291 (1994). See P. GOLDSTEIN, COPYRIGHT § 9.4 at 162 (1989) ("the standard rationale for excluding innocence as a defense to copyright infringement is that, as between the copyright owner and the infringer, the infringer is better placed to guard against mistake"; "the strict liability rule should discipline an infringer, who might otherwise mistakenly conclude that his copying will not infringe the copyrighted work, to evaluate the legal consequences of his conduct more carefully").

386

Playboy Enterprises Inc. v. Frena, 839 F. Supp. 1552 (M.D. Fla. 1993).

needed to find copyright infringement. Intent or
is not an element of

knowledge
infringement.

387

In Sega Enterprises Ltd. v. MAPHIA,388 the court issued a preliminary injunction against the BBS operator, finding a prima facie case was established for both direct infringement, based on the BBS operator's permitting the uploading of the copyrighted games onto the BBS, and contributory infringement, based on the operator's "role in copying [Sega's copyrighted video games], including provision of facilities, direction, knowledge and encouragement. At least two other relevant cases are pending one against a commercial on-line service provider30 and another against

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11389

388

389

Sega Enterprises Ltd. v. MAPHIA, 857 F. Supp. 679 (N.D. Cal. 1994).

Id. at 686-87. With regard to the contributory liability issues, the court found that the BBS operator had knowledge of the uploading and downloading of unauthorized copies of Sega's copyrighted video games and that it solicited the copying of the games. Id. at 683.

390 See Frank Music Corp. v. CompuServe Inc., Civil Action No. 93 Civ. 8153 (JFK) (S.D.N.Y.) (complaint filed Nov. 29, 1993). The Complaint alleges that defendant, by providing access to its BBS by subscribers, engaged in: (1) "permitting, facilitating and participating in the recording of performances of the [Plaintiffs' works] into, and storing such recordings in, CompuServe's computer database by permitting and enabling its paying subscribers to upload such performances thereto"; (2) "maintaining a storage of unauthorized recordings of [the Plaintiffs' works] (uploaded by its subscribers) in and as part of CompuServe's computer database"; and (3) "permitting, facilitating and participating in the recording (i.e., re-recording) of the performances of [the Plaintiffs' works] (theretofore stored in its computer database) by permitting and enabling its paying subscribers to download such recorded performances therefrom." Complaint at 6-7. In addition, the Plaintiffs allege that CompuServe had "control over the nature and content of materials stored in its Bulletin Board and downloaded therefrom"; that CompuServe "had actual knowledge of, or in the exercise of reasonable diligence could have determined, the nature and content of materials stored in its Bulletin Board and downloaded therefrom"; and that CompuServe "had actual notice, or in the exercise of reasonable diligence could have determined, that recordings of [the Plaintiffs' works] were uploaded (recorded) to, stored in, and downloaded (re-recorded) from its computer database." See Complaint at 7.