Digital Millennium Copyright Act of 1998

January 21, 2001


Neil J. Rosini

Summary of the digital Millennium Copyright Act of 1998

The Digital Millennium Copyright Act, signed into law on October 28, 1998, implements the World Intellectual Property Organization (WIPO) Copyright Treaty and WIPO Performances and Phonogram Treaty, signed in 1996. With certain limitations, the Act also affords copyright infringement liability protection to Internet service providers; amends provisions relating to ephemeral recordings; and causes transferees of rights in motion pictures to be bound by collective bargaining agreements. Summaries of these provisions follow below.1 (Bear in mind that the actual legislation is detailed and lengthy and this summary is not intended as a substitute. The original text should be consulted in all instances.)

WIPO Treaties Implementation (Sections 101-105)

Commencing two years from the date of enactment (i.e., October, 2000), the Act prohibits anyone from de-scrambling a work or de-crypting an encrypted work or otherwise avoiding or deactivating a technological measure that controls access to a work protected under U.S. copyright law. Congress’s embrace of this concept, however, is somewhat tentative. First, during the two-year deferral period and during each succeeding three-year period, the Library of Congress will determine whether unlicensed users of copyrighted works are being “adversely affected” in their “ability to make non-infringing uses” such as for nonprofit, archival, preservation and educational purposes, criticism, comment, news reporting, teaching, scholarship or research. The Librarian will then publish a list of classes of copyrighted works for which non-infringing uses are – or are likely to be – so adversely affected, and the prohibition against circumvention will not apply to those works for the ensuing three year period.

The Act also bans technology, products, services, devices and components that are primarily designed or produced for the purpose of (a) de-scrambling a work or de-crypting an encrypted work or otherwise avoiding or deactivating a technological measure that effectively controls access to a work protected by U.S. copyright or (b) circumventing the protection afforded by a technical measure that “prevents, restricts, or otherwise limits the exercise of a right of a copyright owner”; provided (in either case) the suspect item has “only limited commercially significant purpose or use” other than such circumvention or is marketed for such a prohibited use.

The Act, however, contains a host of exceptions to this general rule. First, it specifically preserves the fair use defense and all other “rights, remedies, limitations, or defenses to copyright infringement” . The Act contains further specific exemptions, under certain circumstances, for nonprofit libraries, archives and educational institutions; law enforcement, intelligence and other government activities; reverse engineering to achieve “interoperability of an independently created computer program,” research to identify and analyze flaws and vulnerabilities of encryption technologies; protection of personally identifying information; and good faith testing, investigating or correcting a computer security flaw or vulnerability. There is also an exception regarding devices and technologies that govern access of minors to materials on the Internet.

Effective 18 months after the date of enactment, the Act bans most consumer analog video recording devices that do not conform to certain copy control technology, and effective on the date of enactment, prohibits the redesign of various analog recorders to delete certain control technology previously in place.

Use of the control technology is forbidden, however, to deter certain consumer uses, such as making copies of free over-the-air television broadcasts. Also, the copy control requirements do not apply to professional analog video recorders or to the sale of “previously owned” analog videocassette recorders if legally manufactured and sold when new.

In another provision aimed at benefiting copyright owners, the Act prohibits falsifying, altering or removing “copyright management information.” Such information may include the title and other information identifying the work; the name of and other identifying information about the author, the copyright owner and (with certain exceptions) the performer, writer or director; terms and conditions for use of the work; identifying numbers or symbols; and such other information prescribed by the Register of Copyrights. Exceptions are provided in the case of certain analog transmissions if not removing or altering the information is technically not feasible or would create an undue financial hardship, and provided that copyright infringement is not the objective. Exceptions are also provided for certain deviations from the “digital transmission standard for the placement of copyright management information,” once that standard comes into being. (Emphasis added.)

In civil actions, violations of these provisions may be remedied by injunctive relief; the impounding of the offending device or product (and eventual destruction or modification); the award of damages, which may be trebled in the case of repeated violations; and the recovery of costs including reasonable attorneys’ fees. Certain innocent violators, however, may avoid paying damages or at least have them reduced. Those who violate the copy control provisions or the copyright management information provisions willfully and for purposes of commercial advantage or private financial gain are subject to criminal penalties of up to $500,000 in fines, or imprisonment for up to five years, or both, for the first offense. The penalties double for any subsequent offense.

Unless otherwise noted, the effective date is the date of enactment (October 28, 1998), except for a number of amendments that are deferred until the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty take effect with respect to the United States.

Limitation of Liability for Copyright Infringement (Sections 201-203)

Effective upon enactment, the Act eliminates copyright infringement liability for online service providers in a variety of circumstances. The term “service provider” means (a) “a provider of online services or network access, or the operator of facilities therefor,” including (b) an entity offering the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of material of the user’s choosing, without modification to the content of the material as sent or received. In connection with transitory digital network communications (discussed in the immediately following paragraph), the definition is limited to part (b) of the previous sentence.

First, service providers will not be held liable for infringement if they merely transmit, route or provide connections for material through a system or network or by reason of intermediate and transient storage in the course of such transmission, provided: (a) the transmission was initiated by someone other than the service provider; (b) the transmission or storage is carried out through an automatic technical process; (c) the service provider does not select the recipients of the material except as an automatic response to a request; (d) copies are not available for a longer period than is reasonably necessary for the transmission; and (e) the material is transmitted without modification of its content.

Service providers are relieved of liability for infringement of copyright by reason of intermediate and temporary storage of material on a system or network (i.e., “system caching”) if (a) the material comes from a source other than the service provider; (b) it is transmitted through the system at the direction of a third person (not the source); (c) the storage is carried out through an automatic technical process; (d) the material is transmitted without modification; (e) the service provider complies with rules concerning the “refreshing, reloading, or other updating of the material” when specified by the source within industry guidelines; and (f) the service provider does not interfere with the “ability of technology associated with the material” to return data to the source of the material, within certain limitations. Furthermore, in order to enjoy the exemption from liability, the service provider must generally avoid interference with conditions imposed by the source of the material to be satisfied by third parties seeking access (such as paying a fee or giving a password); and the service provider must respond expeditiously to remove, or disable access to, material that is claimed to be infringing by a copyright owner, if the material has previously been removed from the originating site or is subject to a court order to that effect.

The Act also shields service providers from liability for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network, provided: (a) the provider does not have actual knowledge that the material is infringing or awareness of facts from which infringing activity is apparent; (b) the service provider does not receive a financial benefit directly attributable to the infringing activity in a case in which the service provider has the right and ability to control such activity; and (c) upon notification of claimed infringement, the provider responds expeditiously to remove or disable access to the material alleged to infringe. The section also requires the service provider to designate an agent to receive notifications of claimed infringement and specifies the elements that must be included in an effective notice.

Service providers are further preserved from liability for infringement of copyright by reason of referring or linking users to an online location containing infringing material through the use of “information location tools” such as a directory, index, reference, pointer or hypertext link, again subject to certain provisos such as lack of actual knowledge, lack of awareness of facts or circumstances from which infringement is apparent, lack of a directly attributable financial benefit, and expeditious action to remove or disable access to material that is claimed to infringe.

Finally, service providers are relieved of liability should they, in good faith, disable access to or remove material which is alleged to be infringing or which is apparently infringing whether or not it is ultimately determined to be infringing, subject to certain exceptions relating to material residing at the direction of a subscriber.

Service providers can lose these protections if they fail to adopt a policy providing for termination of repeat offenders or if they fail to accommodate “standard technical measures” used by copyright owners to identify or protect copyrighted works.

Ephemeral Recordings (Sections 402 and 405)

Broadcast stations and others may make “ephemeral” recordings for limited uses in connection with licensed transmissions of sound recordings and graphic works (but not motion pictures or audiovisual works). This limitation on the rights of copyright owners previously applied solely to analog broadcasts and did not explicitly embrace statutory licenses of the public performance right in sound recordings; it now applies explicitly to licensed nonsubscription performances of sound recordings in a digital format benefiting subscription music services, webcasters and others with statutory licenses.

This exemption, however, applies only to the first copy. Transmitting entities such as webcasters with statutory transmission licenses, who may wish to make additional “ephemeral” phonorecords to use, for example, on different servers or to make transmissions at different transmission rates or using different transmission software, may obtain a statutory license to do that as well.

To qualify as an “ephemeral recording” the copy or phonorecord must meet certain criteria, such as (a) it must be used solely by the transmitting organization that made it; (b) no further copies or phonorecords may be reproduced from it; (c) it may be used solely for a transmitting organization’s own permitted transmissions; and (d) with the exception of archival preservation, it must be destroyed within six months from the date of first transmission.

Amendments to the Statutory Licensing Scheme in Section 114 (Section 405)

Perhaps the most important changes wrought by the Act, respecting new media, are found in the amendments to §114, which pertains to the scope of exclusive rights in sound recordings and the related statutory licensing scheme for publicly performing them.

In a 1995 amendment to the Copyright Act, a public performance right in sound recordings was first recognized in the U.S. with respect to certain digital transmissions. Owners of sound recordings were given the new exclusive right to “perform a copyrighted work publicly by means of a digital audio transmission” subject to various limitations on the scope of those exclusive rights. Pursuant to the Digital Millennium Copyright Act of 1998, many of those limitations on the scope of exclusive rights were eliminated to the advantage of sound recording owners. For example, the amendments eliminated certain exemptions for nonsubscription transmission services other than nonsubscription radio broadcasts (for which an exemption remains). These changes require many nonsubscription webcasters to obtain licenses, who were not clearly required to do so before. On the bright side, from the webcasters’ point of view, many of them will be able to obtain those licenses with relative ease through a statutory licensing scheme applicable to many subscription and nonsubscription websites and others.

To be entitled to a statutory license, a transmission must be noninteractive and must fall within certain categories of subscription transmission, or “eligible” nonsubscription transmissions. Statutory licenses that are available for (a) noninteractive subscription transmission services that were in place in the same transmission medium on July 31, 1998, or (b) by noninteractive subscription satellite digital audio radio services licensed on or before the same date, are subject to two principal further conditions: (1) no transmission is permitted during any three-hour period on a particular channel of more than three different selections from any one record (with only two selections played consecutively) or four different selections by the same featured artist or from any set or compilation of phonorecords; and (2) no advance program schedules or prior announcements of titles are permitted.

In the case of “eligible” nonsubscription transmissions, and transmissions from relatively new subscription services (i.e., those not mentioned in (a) and (b) just above), statutory licenses are subject to the foregoing restrictions and to a lengthy list of additional restrictions. By “eligible” nonsubscription transmissions is meant noninteractive, nonsubscription digital audio transmissions of audio programming that include sound recordings (including radio retransmissions) if the primary purpose of the service is not to sell, advertise or promote products or services other than sound recordings, live concerts and other music-related events (thereby leaving out, for example, self-promotional corporate websites).

Assumption of Contractual Obligations Related to Transfers of Rights in Motion Pictures (Section 406)

A new section of Part VI of Title 28 of the United States Code causes certain parties who are transferees of certain rights in motion pictures to be bound by collective bargaining agreements whether or not they assume those obligations as part of the rights acquisition. This provision applies only if the collective bargaining agreement to which a producer is subject requires it to obtain assumption agreements from transferees such as distributors. Where a producer does not comply with that obligation and fails to obtain an assumption agreement when required, this law will act as though the producer has in fact done so. It thereby ensures that transferees will be obligated to pay residuals accruing after the date of transfer. Moreover, any remedies for breach of those obligations set forth in the applicable collective bargaining agreement will apply to the transferee.

This provision applies generally to transfers of copyright ownership (including an assignment or exclusive license) if the transfer is executed on or after October 28, 1998, the effective date of this section. Two important exceptions apply for: (1) transfers that are limited to public performance rights, thereby exempting mere exhibitors; and (2) transfers consisting solely of a mortgage, hypothecation or other security interest, or a subsequent transfer by the secured party, so that banks and others providing financing for motion pictures will not be made subject to the assumption of collective bargaining obligations merely because they obtain a security interest.

Moreover, the provision only applies (a) if the transferee knows or has reason to know that such collective bargaining agreement was or will be applicable to the motion picture or (b) in the event (under certain circumstances) that the transferor does not have the financial ability to satisfy an arbitration award. “Reason to know” includes constructive notice arising from recordation in the Copyright Office or from online publication by the relevant union “at a site available to the public,” of information identifying the motion picture as subject to a collective bargaining agreement (provided the transfer occurs within certain time windows relative to completion, copyright registration and publication of the motion picture). Furthermore, if the transferee is aware of facts and circumstances from which it is apparent that a collective bargaining agreement was or will be applicable, the transferee will still be bound, even in the absence of actual or constructive notice. According to the legislative history, this might include information about the budget, location of principal photography, identity of the talent, or the existence of a personal service contract that references terms or conditions of collective bargaining agreements.

A further provision allows a transferee to defer performance under the collective bargaining agreement in question in the event of a bona fide dispute between the union and a prior transferor, until that dispute is resolved. Another section makes the transferor who fails to notify the transferee of an applicable collective bargaining obligation, before execution of the transfer, liable to the transferee for any damages suffered as a result. United States District Courts have jurisdiction to resolve disputes relating to these collective bargaining provisions and to award reasonable attorneys’ fees to the prevailing party.


1 The Act also introduces an exemption from copyright liability for certain computer maintenance and repair activities; and protection for boat hull designs. These provisions are not discussed in this summary.