 Hello, I'm Terry Fisher. This is the 11th of 12 lectures on copyright. The topic for today is supplements to copyright. Included in that topic are two main clusters of legal rules, the doctrine of secondary liability, and the rules recently adopted by many countries that reinforce so-called technological protection measures. As usual, I'll be focusing on the law in the United States, but I will also mention how the issues addressed today are implicated by multilateral treaties and how countries other than the United States handle them. During portions of the lecture, I'll be using a map of copyright law, the current version of which can, as usual, be downloaded from my home page, the address of which is tfisher.org. If copyright law were always obeyed, either because people voluntarily complied with its provisions or because they were perfectly enforced, the rules we consider today would almost certainly not exist. But, as I'm sure you know, copyright law is not always obeyed. Indeed, broadly speaking, the frequency of disobedience seems to be increasing. Some level of disobedience is not necessarily terrible. We tolerate moderate levels of illegality in lots of fields. For example, violations of speed limits and of rules prohibiting the possession of certain drugs are common and have not, as yet, proven socially catastrophic. Indeed, in the context of copyright law, some degree of disobedience may be affirmatively beneficial. Infringement provides a mechanism by which people who could not afford the prices at which copies of copyrighted works are sold can gain access to those works. Because, as you know, copyrighted works are non-rivalrous. No one is injured when poor people gain access to copyrighted works for free. If people who could and otherwise would pay for access to the works begin to obtain them illegally for free, then the copyright owners do, of course, forfeit revenue. But so long as the levels of illegality remain moderate, the resultant leakage is tolerable and, as I say, arguably socially beneficial. If the leakage becomes too severe, however, then copyright owners begin to suffer serious injuries and all of the various values advanced by copyright are imperiled. Lawmakers, in such circumstances, feel pressure to address the problem in some way. How? One obvious answer is to increase the civil and criminal penalties for engaging in copyright infringement. By making illegal conduct more costly, lawmakers could reduce its incidents. We'll consider strategies of this or next week in the last lecture in this series when we discuss remedies. For now, I'll note only that increasing penalties is not always efficacious and can have some serious side effects. In this lecture, we'll consider two other ways in which lawmakers have attempted to curb copyright infringement and to reduce the associated leakage of the system. The first of those strategies consist of bringing pressure to bear on third parties, specifically parties who do not themselves violate any of the exclusive rights enjoyed by copyright owners, but who enable or encourage violations by others. The basic idea is that if we can force the third parties to withdraw their support for the infringers or, better yet, induce those third parties to act affirmatively to curb infringement, we can increase the levels of compliance with the law. Before plunging into the details that currently implement this broad strategy, we should pause to consider the theories underlying this approach as a whole. There are two general approaches used to justify and shape the strategy. The first is simple but important. Encouraging illegality is widely seen as immoral. The person who encourages law breaking may not be as blame worthy as the person who engages in it, but is still blame worthy to some extent and thus rightly subject to legal penalties. As we've seen, two of the general theories of copyright, the fairness theory and the personality theory, are founded at least in part on moral considerations. Viewed the lenses of those theories, authors and artists deserve either rewards for their labor or continuing control over projections of their personalities. Conduct that fails to respect their rights is immoral. Encouraging conduct that fails to respect authors and artists' rights is thus also immoral, perhaps to a lesser degree but immoral nonetheless and thus properly subject to legal penalties. Sentiments of this sort, as we'll see, color many judicial opinions in this field. The second approach is more complicated and less intuitive. It's associated with the welfare theory of copyright and more broadly with the utilitarian approach to law in general of which the welfare theory of copyright is one branch. This second approach is sometimes called gatekeeper theory. That term was invented by Professor Renier Crackman, who pioneered this argument. In a seminal article, Crackman points out that in a diverse array of contexts, the law enlists third parties to frustrate or penalize recalcitrant primary wrongdoers. Examples include the liability sometimes imposed on bartenders or social hosts when their drunk customers or guests cause injuries to themselves or others, penalties imposed on accountants when their clients engage in fraud, and penalties employed on employers who hire illegal immigrants, in other words, employers who facilitate the unlawful behavior of the immigrants themselves. Crackman offers the following analytical framework to guide determinations of when it makes sense to employ this general technique. Successful gatekeeping is likely to require, one, serious misconduct that practical penalties cannot deter, two, missing or inadequate private gatekeeping incentives, three, gatekeepers who can and will prevent misconduct reliably, regardless of the preferences and market alternatives of wrongdoers, and four, gatekeepers whom legal rules can induce to detect misconduct at reasonable cost. Close quote. For subtle application of this framework to a variety of problems, many but not all of which involve securities regulation, I encourage you to consult Crackman's article, which is available in the spring 1986 issue of the Journal of Law, Economics and Organization. Our concern here is, of course, not the general theory of gatekeeper liability, but with copyright law. As applied to copyright, Crackman's guidelines would suggest that penalties should be imposed on third parties in hopes of suppressing infringing behavior by others, only if, one, otherwise, the incidence of copyright infringement would be unacceptably high, because direct infringers cannot be controlled by socially acceptable sanctions. Two, the third parties left to their own devices would not intervene to curb infringement and indeed might foster it. Three, the third parties we might target are in a position to effectively suppress infringement. In other words, the direct infringers cannot engage in unlawful behavior without their aid. And four, the socially economic costs of penalizing the third parties are not unacceptably high. In many of the contexts I'll be discussing in this lecture, the first two requirements are probably met. The third and fourth, however, are not so invariably satisfied. When assessing the imposition of secondary liability in a particular context or case, you should ask yourself, if we penalize this particular third party, will the incidence of direct infringement diminish, or will the direct infringers just find some other enabler? And what are the social costs of imposing secondary liability in this setting? This last question will be especially salient when dealing with so-called dual-use technologies. In other words, technologies that can be and are used both to facilitate illegal behavior and to facilitate lawful and socially beneficial behavior. When considering the use of secondary liability to suppress such technologies, you should consider carefully whether the social benefits of blocking the bad uses exceed the social harms of blocking the good uses. If not, then the use of secondary liability reduces rather than enhances net social welfare. So to review, deployments of secondary liability in copyright law can and frequently are evaluated or justified from one of two perspectives, the immorality of helping someone to violate the rights of others, and the possible, though not inevitable, net benefits to social welfare of enlisting gatekeepers to control otherwise resistant forms of misconduct. With those two perspectives in mind, let's turn to the law. In the United States, the liability of third parties for facilitating the infringing behavior of others is managed by two offsetting sets of rules. The first set consists of doctrines of contributory and vicarious liability. The second consists of a set of statutory, quote, safe harbors, close quote, which are embodied in section 512 of the statute that immunize organizations that otherwise might be liable either for direct infringement or more likely for contributory or vicarious infringement. This doctrinal structure should by now be familiar to you. The doctrines of contributory and vicarious infringement give copyright owners a reasonably generous set of rights. Section 512 then carves out of those rights some specific exceptions and limitations. This pattern, I hope you see, resembles the relationship between section 106 on one hand and sections 107 through 122 on the other. Broad grants of rights subsequently qualified by exceptions. The history behind this particular incarnation of the structure is unusual, but the structure itself is typical of copyright law. I will first briefly outline the main features of these opposed sets of rules and then examine a few of the cases in which courts have struggled to apply them. The doctrines of contributory and vicarious infringement were developed by the courts with little or no guidance from the legislature. Sometimes these doctrines are said to be rooted in the language of section 106 of the statute, which, as you can see, gives copyright owners the exclusive right to do or to authorize any of the things we have considered in the past four lectures. Third parties who encourage copyright infringement might be said to be authorizing the infringing behavior, which, as you can see, is section 106 for bids. But this is a pretty thin read on which to rest a massive doctrinal edifice. It's more accurate and honest to acknowledge that the courts have developed these doctrines on their own and that the copyright statute does not meaningfully guide them. The two doctrines are close cousins but have different origins. Contributory infringement emerged from general tort law. It's said to implement the general principle that one who directly contributes to a tort should be held responsible along with the tort fissure himself or herself. The role played by the moral principle, I mentioned a few minutes ago, should be apparent in this principle. By contrast, vicarious infringement is an outgrowth of the law of respond yet superior, the branch of the law of agency that governs the responsibility of employers for the misconduct of their employees. In the early 20th century, the courts extended the respond yet superior principle well beyond employment relations to govern a variety of relationships in which defendants did not themselves engage in copyright infringement but had economic interests that were intertwined with those of parties who did engage in copyright infringement. By the middle of the 20th century, the two doctrines had evolved to contain the following requirements. To hold a defendant liable for contributory infringement, a plaintiff must show three things. A, that someone had engaged in or was engaging in direct infringement. B, that the defendant had actual or constructive knowledge of that infringement. And C, that the defendant materially contributed to that infringement. By contrast, to hold a defendant liable for vicarious infringement, a plaintiff must show three somewhat different things. A, that someone had engaged in or was engaging in direct infringement. B, that the defendant benefited financially from that infringement. And C, that the defendant had the right and ability to supervise the direct infringement. In other words, to stop it and fail to do so. Note that while actual or constructive knowledge is essential to contributory infringement, it's not necessary for vicarious infringement. In that sense, vicarious infringement partakes more of the principle of strict liability than its contributory infringement cousin. The classic illustration of these two doctrines was distilled from a set of cases in the early 20th century that involved dance halls. Suppose that a musical group without permission performed some copyrighted musical compositions in front of a public audience. The playlist, in other words, the set of songs the group plays, had been selected by the group's manager. The owner of the hall, in which the performance takes place, keeps a portion of the ticket prices paid by the members of the audience and makes no effort to prevent the group from playing the songs without permission. Under these circumstances, the owners of the copyrights in the songs would have three causes of action. A claim against the group for direct infringement, namely, as you know by now, a violation of the public performance right embodied in section 106.4. A claim against the manager for contributory infringement, because although the manager himself did not publicly perform any compositions, he plainly knew of the band's plan and encouraged it. And finally, a claim against the owner of the hall for vicarious infringement, because even if the owner did not know of the band's plan, he is profiting from the band's behavior, and he failed to exercise his clear power to stop them. All of this is straightforward, I hope. Now let's consider a few modern cases where the application of these principles is less clear-cut. A prosaic but influential case was decided by the Court of Appeals for the Ninth Circuit in 1996. The defendant, Cherry Auction, was the operator of this flea market located in Fresno, California. A flea market, otherwise known as a swap meat, is a marketplace where a large number of independent vendors sell merchandise, typically inexpensive or used merchandise, to customers who come hunting for bargains. In this instance, the vendors, as is typical, paid modest rental fees to Cherry Auction. Cherry Auction provided those vendors booth space, operated the parking facilities, and advertised the marketplace. In addition to collecting fees for the vendors, Cherry Auction collected entrance fees from the customers. Finally, Cherry Auction reserved the right to exclude any vendor for any reason. The plaintiff, Fano Visa Incorporated, owns the copyrights in a large number of Latino sound recordings. Fano Visa complained several times at Cherry Auction that some of the vendors in the flea market were selling pirated copies of Fano Visa's recordings to no avail. Finally, Fano Visa brought suit against the flea market. Because Cherry Auction was not itself copying or distributing Fano Visa's works, Cherry was not liable for direct copyright infringement. But if the facts were as Fano Visa alleged, then some of the vendors were surely violating Section 106.3 and were not shielded by the first sale doctrine embodied in Section 109A. If the reasons why the vendors were engaged in copyright infringement are not clear to you, you should pause here to review the first segment of lecture number eight. Fano Visa contended that Cherry Auction was secondarily liable for the vendor's unlawful behavior, both under the doctrine of contributory infringement and under the doctrine of vicarious infringement. The trial court was unpersuaded and dismissed the suit for failure to state a claim upon which relief could be granted. The Court of Appeals for the Ninth Circuit reversed and remanded the case. In the opinion explaining its decision, the Ninth Circuit clarified and arguably expanded both secondary liability doctrines. With respect to contributory infringement, the court ruled that Fano Visa had sufficiently alleged knowledge of the infringing sales on the part of Cherry Auction. More importantly and controversially, the court ruled that, quote, material contribution, close quote, of the sort required by the doctrine of contributory infringement could be established by showing that the defendant, quote, provided the site and facilities for known infringing activity. Close quote. With respect to vicarious infringement, the Ninth Circuit ruled that Cherry Auction controlled the flea market site and had unconstrained authority to expel any vendor. It thus plainly had the right and ability to supervise the infringing activity. More importantly and controversially, the court ruled that the, quote, financial interest required to establish vicarious liability could be established by showing that the infringing behavior, quote, enhanced the attractiveness of the defendant's venue to potential customers. Close quote. In other words, that the infringing conduct acted as a draw pulling customers toward the defendant's site and thus enabling the defendant to earn more money. It should be apparent that this is an expansive interpretation. Taken literally, it would encompass many kinds of behavior in which the financial benefit to the defendant is more indirect than the sort enjoyed by the dance hall owners. This concludes our examination of the basic principles of secondary liability. After the break, we'll examine a set of recent cases that have applied or modified those principles in context in which defendants supply goods or services that are sometimes used for infringing purposes and sometimes for non-infringing purposes.