The online copyright auction: how high will the bidding go?

• Author: Jones, Lori L.

1. INTRODUCTION

   The Internet makes it possible for millions of people to buy and sell just about anything online. (1) Internet auction sites, such as eBay, provide a forum for these transactions to occur. (2) By offering 4,700 different categories of goods and services, eBay gives its users easy access to engage in economic commerce. (3)

   This easy access to e-commerce, however, comes at a cost to many copyright owners. (4) With the advancements in technology, the standards of traditional copyright law must fight to keep up. (5) Indeed, a recent decision stated that, "[t]he world wide web has progressed far faster than the law and, as a result, courts are struggling, to catch up." (6)

   The struggle is evident in the analysis of vicarious liability cases leading up to and into the age of the Internet. (7) It is also evidenced in the recent decision of Hendrickson v. eBay, Inc., (8) where a court for the first time interpreted the safe harbor provisions of the Digital Millennium Copyright Act (DMCA). (9) The court's interpretation resulted in protection for eBay from secondary liability for copyright infringement. (10)

   Although the facts in Hendrickson proved favorable to eBay, the holding illustrates a move away from providing copyright protection on the Internet and a move toward protecting e-commerce. (11) Nonetheless, post-eBay case law shows that it is still too early to determine the lasting effects. (12) It is apparent that the widespread access to information and e-commerce will play an important role in the decision of whether an online service provider is liable for copyright infringement. (13) Only time will tell how the law will balance the importance of e-commerce with the rights of copyright holders.

2. EBAY: THE ONLINE AUCTION

   eBay is an online service provider ("OSP") that offers a venue for individuals to buy, sell and trade millions of items. (14) As an OSP, eBay does not directly participate in the buying and selling of goods and services as a traditional auctioneer would. (15) In contrast, eBay maintains that it merely provides a forum for its users to "offer, sell, and buy just about anything, at anytime, from anywhere." (16)

   Despite the attempt to downplay its function, however, eBay readily admits that it is "the world's largest online marketplace." (17) In addition to its auction format, eBay also offers its users a fixed marketplace method, where users can choose to sell or purchase goods or services at a fixed price. (18) Regardless of whether the user selects the auction or fixed market place option, eBay claims no responsibility for the truth or accuracy of goods and services bought and sold on its site. (19)

   On any given day, eBay adds approximately one million new goods or services to its database, servicing approximately 42.4 million users on global scale. (20) eBay requires that its users become members and sign user agreements before listing and selling items. (21) Qualified users then interact in the initial transactions under assumed screen names, which ensures a level of privacy. (22)

   In the case of an auction, eBay automatically sends an e-mail to both the seller and highest bidder at its conclusion. (23) eBay then reveals the identities of the parties only after consummation of the transaction. (24) Although users control the transaction, in terms of pricing and communicating, eBay does receive a listing fee and a percentage of the final sale. (25)

   The high number of users, coupled with the private nature of the auction process, creates an environment for copyright infringement to thrive. (26) The copyright holder is placed in a difficult, if not impossible, position of securing its property rights. (27) The scope of infringement includes all forms of copyrighted materials, including books, movies, music recordings and software. (28) The most serious form of copyright infringement, in terms of monetary loss, comes from the piracy of motion pictures and music, which results in billions of dollars in lost profits. (29)

   In an attempt to educate its users on the basics of copyright law, eBay provides general guidelines and fundamental rules pertaining to copyright. (30) eBay also offers a Verified Rights Owner Program (VeRO) to all holders of intellectual property that focuses on protecting copyrights and trademarks. (31) Members of VeRO receive certain benefits, including response to infringement allegations and limited information about eBay users. (32) One key benefit VeRO offers is the ability to conduct automatic searches for possible infringing goods. (33) Although VeRO members can report alleged incidents of copyright infringement directly to eBay staff, non-members must report such infringements directly to the copyright owner. (34)

   eBay claims that the sheer number of users makes it prohibitively difficult to assure copyright protection. (35) Despite eBay's attempts to curtail and remedy alleged secondary copyright infringements, it continues to stress its lack of responsibility and ability to monitor its site. (36) This inability of police power over items posted for sale provides a basis for contention regarding secondary liability for OSP's. (37)

3. EVOLUTION OF COPYRIGHT LAW

   1. Early Statutory Protection: The 1976 Copyright Act

      The 1976 Copyright Act ("Act") governs traditional copyright issues, providing protection for original works of authorship fixed in a tangible medium of expression. (38) The author obtains a bundle of rights if the work is sufficiently original and fixed in tangible form. (39) Registration of the copyrighted work is not required to file suit for copyright infringement, but it does allow for statutory remedies, such as obtaining attorney's fees in litigation. (40)

      The Act grants owners exclusive control over their copyrighted work. (41) Copyright holders have exclusive rights to carry out themselves or authorize others to: 1) reproduce work in copies or phonorecords; 2) prepare derivative works; 3) distribute copies or phonorecords; 4) perform work publicly; 5) display copyrighted work publicly; 6) and perform work publicly through digital audio transmission if such work is a sound recording. (42) In some cases, however, a copyright owner's rights are limited. (43)

      The Internet posed many problems for the effect of the 1976 Copyright Act, as it did not address a system or provide guidelines for guarding against online copyright infringement. (44) Vast amounts of information, including copyrighted material in every form, became available to millions of people to use and copy illegally. (45) In response to the need for an enhanced form of protection for copyright holders on the Internet, Congress enacted the Digital Millennium Copyright Act. (46)

   2. Digital Millennium Copyright Act

      In 1998, Congress passed The Digital Millennium Copyright Act (DMCA) in order to balance the need for copyright protection on the Internet with the growth of e-commerce. (47) According to the legislative history, "[t]his bill recognizes the significance of our copyright laws as America and the world have become increasingly computerized. The Internet is rapidly changing our lives, and our copyright laws must keep pace." (48) To keep pace so to speak, the DMCA encouraged copyright owners to publish their work on the Internet with the assurance that the newly established guidelines would protect their copyrighted work. (49) The DMCA also emphasized the importance of cooperation between copyright owners and Internet service providers in the fight against copyright infringement on the Internet. (50)

      1. DMCA Provisions Governing Copyright Protection on the Internet

         The DMCA also responded to the negative economic impact of foreign piracy, which amounts to an estimated 15 billion dollars each year. (51) Thus, in Article I of the DMCA, Congress included global online guidelines to protect copyrighted work by incorporating the World Intellectual Property Organization Copyright Treaty and the World Intellectual Property Organization Performances and Phonograms Treaty. (52) The two international treaties established copyright protection and management systems, articulated penalties for circumventing such systems, and designated forms of copyrighted material entitled protection. (53)

         Title II of the DMCA directly addressed the balance sought by Congress to protect copyrighted materials and promote e-commerce by limiting the liability of copyright infringement of OSP's. (54) This ensured, in effect, that copyright protection did not come at a cost to the expansion of the Internet and e-commerce. (55) The language in these provisions went beyond the language in the 1976 Copyright Act, expanding protection from television broadcast systems to digital transmissions, systems and networks. (56)

      2. Safe Harbor Provisions

         Section 512 of Title II of the DMCA provides safe harbor provisions for service providers that limit liability for copyright infringement on the Internet. (57) The DMCA defines a service provider as 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." (58) The definition also encompasses a "provider of online services or network access, or the operator of facilities thereof." (59) The DMCA does not specify whether the definition of "service provider" encompasses online service providers, Internet service providers, or both. (60)

         The first safe harbor provision, found in 17 U.S.C. [section] 512(a), applies when copyright infringement results when the service provider transmits, routs and provides connections for storing the material in the course of the above. (61) The service provider can avoid liability if a third party creates the transmission, an automatic process controls the transmission, routing or connection, and a third party selects the...