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