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MEDIA LAW & POLICY
Spring 2013 | Volume 20 | Number II
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MEDIA LAW & POLICY
Spring 2013 | Volume 20 | Number II
Table of Contents
INTELLECTUAL PROPERTY LEGAL DEVELOPMENTS 2011-2012: THE YEAR IN
REVIEW
PETER BROWN & RICHARD RAYSMAN.. ......................................................................................... 143
THE LEGAL PROTECTION OF EUROPEAN BROADCASTERS-CHALLENGES POSED
BY NEW SERVICES
PETER MATZNELLER & ANNE YLINIVA-HOFFMANN. ..................................................................... 157
MEDIA LITERACY: NO LONGER THE SHRINKING VIOLET OF EUROPEAN
AUDIOVISUAL MEDIA REGULATION?
DR. TARLACH MCGONAGLE .......................................................................................................... 187
TOLLS ON THE BROADBAND COMMUTE: STATE LIMITATIONS ON INTERSTATE
TELEWORK
NICOLE BELSON GOLUBOFF .......................................................................................................... 213
TECHNOLOGY LAW IN THE DIGITAL AGE: CURRENT DEVELOPMENTS
RICHARD RAYSMAN ...................................................................................................................... 239
FCC ANCILLARY JURISDICTION OVER INTERNET AND BROADBAND
MICHAEL BOTEIN .......................................................................................................................... 269
Media Law & Policy assumes no responsibility
for the views expressed by the authors in the contents of this issue
Media Law & Policy
INTELLECTUAL PROPERTY LEGAL DEVELOPMENTS 2011-2012: THE YEAR IN
REVIEW
Peter Brown*
Richard Raysman**
I. INTRODUCTION
The Internet has become an indispensable tool, one that has become an integral part of our
lives. It is utilized in almost every aspect of daily life: to gather information, to conduct financial
transactions, to communicate through social networks, and to sell or purchase items. However, along
with the Internet’s obvious benefits, it also presents unique issues and has resulted in new and
unexplored territory for those in the legal field. For example, online retailers collect, store, and share
consumer information, sometimes without the consumer’s knowledge. The ability to easily create
and use websites may allow online retailers to more easily sell counterfeit goods, sometimes without
the consumer having any knowledge.
This article will address several legal issues pertaining to the Internet. Recent developments in
online behavioral advertising and data collection will be addressed, followed by a discussion of
contributory online trademark infringement in relation to the sale of counterfeit goods. Both are
issues whose extent of risk and impact are not fully understood, are still being explored, and are not
clear-cut.
First, the authors explore what is known as behavioral or targeted advertising; advertising that
is tailored to each consumer.1 Typically, consumers are unaware that their online activities are being
tracked in this manner, since most sites do not collect personal information (e.g., a consumer’s name
or address), but instead track a consumer through the use of cookies.2 While contextual advertising,
or what seems to be the more traditional form of advertising, is simply random advertisements
popping up on someone’s Internet browser, behavioral advertising gives companies the ability to
track a consumer’s online behavior and target advertisements toward that individual consumer.3 This
form of advertising can be beneficial to both the advertiser and the consumer, but some inherent
privacy risks exist with this practice and raise valid concerns on the part of the consumer.4
The discussion explores online data collection, and considers the legal steps taken to regulate
this form of advertising. Potential issues involved with the practice of sharing consumers’
* Partner, Baker & Hostetler LLP. B.A., Dartmouth College (1968); J.D., Columbia University School of Law (1972).
** Partner, Holland & Knight LLP. B.S., MIT (1968); J.D., Brooklyn Law School (1973).
1
KATHLEEN ANN RUANE, CONG. RESEARCH SERV., RL 34693, PRIVACY LAW AND ONLINE ADVERTISING: LEGAL ANALYSIS OF
DATA GATHERING BY ONLINE ADVERTISERS SUCH AS DOUBLE CLICK AND NEBUAD 1 (2008).
2
See Yoriko Matsuda et al., Data Collection: Defining the Customer, DIRECT MARKETING ON THE INTERNET,
http://web.mit.edu/ecom/www/Project98/G2/data.htm. See Scott Killingsworth, Website Privacy Policies In Principle and In
Practice, 618 PRACTISING L. INST.: PATS., COPYRIGHTS, TRADEMARKS, & LITERARY PROP. COURSE HANDBOOK SERIES NO. G000DZ 667, 672, 726 (2000).
3
Ruane, supra note 1.
4
See id. at 1, 12.
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information with third parties are discussed, along with the regulations evolving in an attempt to
address the issue. As the authors discuss, advertisements are also appearing on smartphones, and
alleged misuses have resulted in lawsuits. Last, the article discusses whether the online marketing
industry’s self-regulation will meet the needs of the Federal Trade Commission (FTC) and Congress.
II. ROLE OF THE INTERNET IN SALES AND MARKETING
Online retailers and others are using new technologies to collect, store, manipulate, and share
ever-increasing amounts of consumer data at very little cost. The latest techniques in online targeted
advertising depend upon capturing consumer web browsing, social media, and location-based mobile
service data over time. However, recently the ease with which companies collect and combine online
information from consumers has raised some concerns about consumer privacy. Some consumers
are troubled by the sharing of their information or compiling of comprehensive profiles, others have
no idea that it is taking place, and still others may be aware of such online data collection but view it
as a worthwhile tradeoff for innovative products and convenience.
This article will discuss the current legal landscape surrounding online behavioral advertising
and data tracking, including recent actions by the marketing industry and Federal Trade Commission
(FTC) and the latest developments surrounding geolocation and the development of a Do Not Track
web browsing mechanism.
A. Behavioral Advertising Generally
Generally speaking, behavioral advertising is the tracking of a consumer's online activities
(e.g., search engines queried, web pages visited, e-commerce activities) to deliver advertising
targeted to that individual consumer's interests. The practice, which is typically invisible to
consumers, allows businesses to align their ads more closely to the inferred interests of their
audience.5 In many cases, the information collected is not personally identifiable in the traditional
sense and is "anonymized" by the data collectors – that is, the information does not include the
consumer’s name, physical address, or similar identifier that could be readily used to identify the
consumer in the offline world.6
Online data collection can be either active or passive. Active data collection requires a user to
deliberately share personal data, such as completing an online purchase or survey.7 Passive data
collection, on the other hand, includes capturing user preferences and usage behavior without
consumer interaction, such as the placing of "cookies" on a user’s computer or mobile device that
contain unique identifiers and browsing history information to track a user's online movements.8
Generally speaking, a cookie is a small text file that a website’s server places on a computer’s Web
browser. The cookie transmits information back to the website’s server about the user's browsing
activities on the site, including pages viewed, the time and duration of visits, search engine queries,
and whether an online advertisement was clicked on.9
5
Ruane, supra note 1.
6
Emily Steel & Julia Angwin, On the Web's Cutting Edge, Anonymity in Name Only, WALL ST. J., Aug. 4, 2010, at A1.
7
See supra note 2.
8
Id.
9
Tech Target: Software Quality, Definition: Cookie, http://searchsoftwarequality.techtarget.com/definition/cookie.
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The sharing of this collected data among third parties is poorly understood by individuals and
is not necessarily communicated transparently to users by many websites and applications. When a
user visits a website, beyond the site’s own first-party advertising cookies, the site might also insert
third-party advertising network cookies onto the user’s computing device containing a unique ID
number.10 Some websites (e.g. Wikipedia) do not place any tracking cookies,11 while other hightraffic sites place multiple cookies onto a user’s computer that transmit details about their visitors to
outside network advertisers.12 The practice of placing ordinary browser cookies has been upheld by
courts, and in one notable case, a federal district court held that website visitors do not suffer a
cognizable "economic loss" from the collection of their data.13 Ordinarily, computer users can delete
browser cookies by using tools within their Web browser to prevent third parties from associating the
user's browsing history information with their subsequent web activity.14
However, some entities have purportedly sidestepped consumer choices regarding behavioral
advertising through certain technological techniques, such as using supercookies (or “Flash cookies”)
which "respawn" browser cookies in a different location without notice to or consent of the user.15
The practice has prompted numerous civil actions.16 The placing of supercookies has also resulted in
enforcement actions.17
Once a Web user's browsing data is collected and stored in a browser cookie, it can be
aggregated by third party firms, or network advertisers that select and deliver advertisements across
the Internet on websites that participate in their networks. In subsequent web surfing sessions, if a
user visits websites that are served by the same advertising network, the networks can analyze the
10
Julia Angwin, The Web’s New Gold Mine: Your Secrets, WALL ST. J., Jul. 30, 2010, available at
http://online.wsj.com/article/SB10001424052748703940904575395073512989404.html.
11
What They Know: Wikipedia.org Privacy Policy & Online Tracking Data, WALL ST. J. (Jul. 30, 2010),
http://blogs.wsj.com/wtk/2010/07/30/wikipediaorg/.
12
See What They Know: YouTube.com Privacy Policy & Online Tracking Data, WALL ST. J. (Jul. 30, 2010),
http://blogs.wsj.com/wtk/2010/07/30/youtubecom/. See also What They Know, WALL ST. J. (Jul. 30, 2010),
http://blogs.wsj.com/wtk/.
13
See In re DoubleClick, Inc. Privacy Litig., 154 F. Supp. 2d 497, 500 (S.D.N.Y. 2001).
14
Rick Maybury, How do I find and delete browser cookies?, THE TELEGRAPH, Jul. 17, 2011, available at
http://www.telegraph.co.uk/technology/advice/8641184/How-do-I-find-and-delete-browser-cookies.html. See Michael King,
How to Delete Cookies, PCWORLD (Nov. 2, 2011), http://www.pcworld.com/article/242939/how_to_delete_cookies.html.
15
Jonathan Mayer, Tracking the Trackers: Microsoft Advertising, THE CTR. FOR INTERNET AND SOC’Y AT STANFORD L. SCH.
(Aug. 18, 2011), http://cyberlaw.stanford.edu/node/6715. See Jennifer Valentino-DeVries, ‘Supercookie’ Code Seen on Hundreds
of Sites, Wall St. J. (Aug. 22, 2011), http://blogs.wsj.com/digits/2011/08/22/supercookie-code-seen-on-hundreds-of-sites/.
16
See LaCourt v. Specific Media, Inc., No. SACV 10–1256–GW(JCGx), 2011 WL 2473399 (C.D. Cal. Apr. 28, 2011) (court
dismissed a CFAA claim by individuals who alleged an advertising network installed Flash cookies on users' computers without
consent; plaintiff's inability to delete or control cookies may constitute a de minimis injury, but such injury was insufficient to
meet the CFAA $5,000.00 threshold).
17
See In re ScanScout, Inc., FTC File No. 1023185 (Settlement announced Oct. 8, 2011) (online advertiser agreed to settle FTC
charges that it deceptively claimed that consumers could opt out of receiving targeted ads by changing their browser settings to
block cookies, when in fact, the advertiser used Flash cookies that couldn't be blocked by browser settings).
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browsing history information associated with that computer and update the cookie.18 A profile forms
over the course of many website visits. Digital profiles become “contextual” maps, drawing on
immediate web surfing activities or upon more complex behavioral relationships as software
analyzes web surfing data and creates a demographic profile, predicting an age range, likes/dislikes,
current interests, level of income and education. Subsequently, when a computer user visits a web
page on which the ad network provides advertisements, the network uses a behavioral profile to
select tailored advertisements to serve on that computer.19 Profiles are sold daily to advertisers in
online exchanges which nearly instantaneously (while a website is loading) deliver targeted ads to
web users.20
B. Legal Landscape
There are several players in the debate over behavioral advertising and data tracking: (1)
privacy watchdog groups advocating for tighter regulation; (2) private litigants who have brought
suits over alleged violations of federal electronic privacy laws; (3) Congress and the FTC, which are
prompting the industry into implementing tighter self-regulation; and (4) the advertising industry,
which has released new self-regulatory principles and technical methods to provide notice and
transparency to website users regarding online advertising practices.21
Most notably, in December 2010, the FTC stated that the industry's efforts to address privacy
through self-regulation have been "too slow" and it continued with its initiative to encourage the
industry to offer consumers greater transparency and control with respect to online information
gathering. Accordingly, the FTC staff released a report announcing a proposed framework that
would apply broadly to online and offline commercial entities that collect, maintain, share, or
otherwise use consumer data that can be reasonably linked to a specific consumer, computer or
device.22 Moreover, the same year, the U.S. Department of Commerce issued its own green paper on
data privacy, echoing many of the FTC principles and concerns, and affirming the importance of
transparent privacy practices.23
In addition, Congress has waded into the debate. There have been a host of bills in both
chambers of Congress addressing privacy, online advertising and data tracking.24 In the Senate, for
18
Fact and Fiction: The Truth About Browser Cookies, LIFEHACKER (Feb. 21, 2010), http://lifehacker.com/5461114/fact-andfiction-the-truth-about-browser-cookies. See Alexis Madrigal, I'm Being Followed: How Google—and 104 Other Companies—
Track Me on the Web, THE ATLANTIC, Mar. 1, 2012, available at http://www.nationaljournal.com/tech/i-m-being-followed-howgoogle-and-104-other-companies-track-me-on-the-web-20120301.
19
Id. See also Privacy and Data Security: Protecting Consumers in the Modern World: Hearing Before the S. Comm. on
Commerce, Sci., and Transp., 112th Cong. 3 (2011).
20
Magrigal, supra note 18.
21
Iab. Self-Regulatory Program for Online Behavioral Advertising Factsheet, available at
http://www.iab.net/media/file/OBA_OneSheet_Final.pdf.
22
FED. TRADE COMM’N, PROTECTING CONSUMER PRIVACY IN AN ERA OF RAPID CHANGE: A PROPOSED FRAMEWORK FOR BUSINESS
AND POLICYMAKERS vi, vii (Dec. 2010), available at http://www.ftc.gov/os/2010/12/101201privacyreport.pdf.
23
See THE U.S. DEP’T OF COMMERCE, INTERNET POLICY TASK FORCE, COMMERCIAL DATA PRIVACY AND INNOVATION IN THE
INTERNET ECONOMY: A DYNAMIC POLICY FRAMEWORK (Dec. 2010), available at
http://www.ntia.doc.gov/files/ntia/publications/iptf_privacy_greenpaper_12162010.pdf.
24
See Do Not Track Me Online Act, H.R. 654, 112th Cong. (2011).
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example, there were at least two bills introduced, most notably, a bill co-sponsored by John Kerry
and John McCain (S. 799), the Commercial Privacy Bill of Rights Act of 2011. This would have,
among other things, instituted certain security requirements upon data collectors, given individuals
the right to opt-out of any information collection that is unauthorized by the Act and provide
affirmative opt-in consent for the collection of sensitive information.25 Both senators have also
called upon the FTC to finalize its 2010 preliminary report on online privacy so that the legislation
can move forward.26
In step with the FTC's policy reports, industry associations have outlined their own set of
principles embracing transparency and accountability in an attempt to avoid increased scrutiny and
restrictive privacy legislation. The industry has encouraged the use of an ‘Advertising Option Icon’
that users can click on to obtain basic information on the organization that served the ad, the location
of its advertising policy and methods on how to opt-out of such targeted advertisements in the
future.27 Consistent with the accountability provisions in its self-regulatory principles, the Council of
Better Business Bureaus recently announced that it had completed compliance cases under the
industry's Self-Regulatory Principles for Online Behavioral Advertising against six companies,
principally remedying inaccessible or quick-expiring consumer opt-out mechanisms.28
In addition, at the end of 2011, the Digital Advertising Alliance, which represents the leading
marketing associations, released its “Self-Regulatory Principles for Multi-Site Data” that established
industry standards governing the use of so-called "multi-site data," which is web browsing
information collected from a computer or other device over an extended time period and across nonaffiliated websites. The principles exempt certain practices, including the collection of data for
system management, market research or product development, or where the data has or will go
through a "de-identification process," which is defined as when an entity "has taken reasonable steps
to ensure that the data cannot reasonably be re-associated or connected to an individual or connected
to or be associated with a particular computer or device."29
C. 'Do Not Track'
The FTC, in its 2010 staff report, enunciated a privacy framework, including explicit support
for a so-called "Do Not Track" option to allow users to limit the collection and use of data regarding
their online searching and browsing activities, such as through the placement of a persistent setting
25
Commercial Privacy Bill of Rights Act of 2011, S. 799, 112th Cong. § 202 (2011).
26
The FTC issued its final report on protection of privacy in March 2012. See FED. TRADE COMM’N, PROTECTING CONSUMER
PRIVACY IN AN ERA OF RAPID CHANGE: RECOMMENDATIONS FOR BUSINESS AND POLICYMAKERS (Mar. 2012), available at
http://ftc.gov/os/2012/03/120326privacyreport.pdf. See also Adam M. Veness, FTC Issues Long-Awaited Privacy Report, NAT’L
L. REV. Mar. 26, 2012. See also John Kerry, John Kerry: We Need A Commercial Privacy Bill of Rights, THINK PROGRESS (Mar.
21, 2012), http://thinkprogress.org/justice/2012/03/21/449508/john-kerry-commercial-privacy-bill-of-rights/?mobile=nc.
27
Iab, supra note 21.
28
Press Release, Better Bus. Bureau, Accountability Program Achieves Voluntary Compliance with Online Behavioral Advert.
Self-Regulation (Nov. 8, 2011).
29
Digital Advert. Alliance, Self-Regulatory Principles for Multi-Site Data, 8 (Nov. 2011), available at
http://www.aboutads.info/resource/download/Multi-Site-Data-Principles.pdf.
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on the consumer’s browser signaling the consumer’s privacy choices.30 The FTC staff suggested that
such a mechanism should be different from the Do Not Call telemarketing program in that it should
not require a “registry” of unique identifiers.31 In its view, the most practical method would likely
involve the placement of a persistent setting, similar to a cookie, on the consumer’s browser
signaling the consumer’s choices about being tracked and receiving targeted ads.32
Both Internet Explorer33 and Firefox have added Do Not Track capabilities to their most recent
browsers, though a spokesman for Mozilla’s Firefox web browser stated that about 5% of desktop
users have turned on the Do Not Track tool (as compared with 17% of mobile users).34 For users of
the browser tool, it is up to the visited websites to honor users' Do Not Track requests and ultimately,
it may be difficult for a user to ascertain which websites and ad networks are respecting their choices.
In response to this inherent problem, the World Wide Web Consortium, an industry group, released a
draft of Do Not Track standards that define the methods for users to indicate their preferences,
techniques for websites to inform users whether they honor Do Not Track preferences, and a
mechanism for permitting the user to grant site-specific exemptions to their Do Not Track
preference.35
D. Geolocation
The latest generation of smartphones used by consumers lend themselves to numerous other
uses beyond basic communication, including mapping and GPS functionalities and a myriad of
downloadable personal or business applications—or "apps." Because consumers carry their mobile
devices with them at all times, marketers see great potential in providing consumers with real-time,
location-based advertising.36 There are two principal ways location-based advertising works.
Geolocation social networks, such as Foursquare, permit users to share their location with friends by
"checking-in" to an establishment or venue, which often gives rewards to frequent visitors.37 In
addition to business listings and map locations served on request and ranked by proximity to the user,
30
FED. TRADE COMM’N, supra note 22.
31
Id. at 67.
32
Id. at 66.
33
Nick Wingfield & Julia Angwin, Microsoft Adds Do-Not-Track Tool to Browser, WALL ST. J. (Mar. 14, 2011), available at
http://online.wsj.com/article/SB10001424052748703363904576200981919667762.html. See Michael Muchmore, The State of
'Do Not Track' in Current Browsers, PCWORLD (Mar. 27, 2012), http://www.pcmag.com/article2/0,2817,2402168,00.asp. See
also MOZILLA FIREFOX. Do Not Track, http://dnt.mozilla.org/.
34
Alex Fowler, Mozilla Publishes Developer Guide on DNT; Releases DNT Adoption Numbers, MOZILLA PRIVACY BLOG (Sept.
8, 2011), http://blog.mozilla.com/privacy/2011/09/08/mozilla-publishes-developer-guide-on-dnt-releases-dnt-adoption-numbers/.
35
See Roy T. Fielding & David Singer, Tracking Preference Expression (DNT), Working Draft, WORLD WIDE WEB
CONSORTIUM, (Mar. 13, 2012), http://www.w3.org/TR/tracking-dnt/. See also Roy T. Fielding, Tracking Preference Expression
(DNT), Working Draft, WORLD WIDE WEB CONSORTIUM, (Nov. 14, 2011), http://www.w3.org/TR/2011/WD-tracking-dnt20111114/.
36
See Adrianne Jeffries, For Advertisers, Location-Based Services "Blew Up Overnight," READWRITEWEB (Sept. 8, 2010),
http://www.readwriteweb.com/archives/for_advertisers_location-based_services_blew_up_ov.php.
37
See FOURSQUARE, https://foursquare.com/about/ (last visited Apr. 1, 2012). See also Corina Mackay, The Future of
Geolocation: What is Coming?, SOCIAL MEDIA EXAMINER (Apr. 21, 2011), http://www.socialmediaexaminer.com/the-future-ofgeolocation-what-is-coming/.
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providers are also rolling out location-based mobile advertising platforms that would serve ads to
users' mobile phone based on their movements.38
Given the personal nature of geolocation, it is not surprising that disputes have arisen over its
alleged misuse. For example, in In re iPhone Application Litigation, users claimed that Apple
violated their privacy rights by unlawfully allowing third-party apps that run on the iPhone and iPad
to collect and make use of, for commercial purposes, personal consumer information (including
address book, cell phone numbers, geolocation, photographs, SIM information) without user
consent.39 Plaintiffs claimed that such data could be merged to effectively “deanonymize”
consumers.40 The court dismissed the action for lack of standing, with leave to amend.41 The court
found that plaintiffs failed to allege a tangible injury, particularly since the complaint failed to
particularize which apps tracked their data, the resulting harm and Apple’s culpable conduct.42,43
In addition, Apple argued that its terms of service barred claims stemming from third-party
apps (e.g., “The Application Provider of each Third-Party Product is solely responsible for that
Third-Party Product”).44 Apple also argued that claims based on the design of the iPhone operating
system were barred by the iOS Software License Agreements.45 The court declined to rule that the
licenses were an absolute bar, but ordered plaintiffs to explain in an amended complaint why Apple
shouldn’t be immunized from suit based upon its terms of service.46 The court also found the
plaintiffs’ Computer Fraud and Abuse Act (CFAA) claim deficient, because, among other things,
negligent software design cannot form a CFAA computer fraud claim.47
In response to privacy concerns over geolocation, the mobile phone industry and Congress
have advanced potential solutions. There were at least two bills introduced into Congress concerning
geolocation privacy.48 The Senate bill would require any company that obtaining a customer’s
38
See Erin Griffith, Is Location-Based Mobile Advertising Real? Answer: yes, according to LocalResponse, Adweek (Oct. 13,
2011), available at http://www.adweek.com/news/technology/location-based-mobile-advertising-real-135758. See also Ryan
Kim, Mobile advertisers paying 4x more for location-based impressions, GIGAOM (Nov. 2, 2011),
http://gigaom.com/2011/11/02/mobile-advertisers-paying-4x-more-for-location-based-impressions/.
39
40
In re iPhone Application Litigation, No. 11–MD–02250–LHK, 2011 WL 4403963 at *2 (N.D. Cal. Sept. 20, 2011).
Id.
41
Id. at *7.
42
Id. at *4.
43
See also Low v. LinkedIn, No. 11–CV–01468–LHK, 2011 WL 5509848 (N.D. Cal. Nov. 11, 2011) (plaintiffs alleged that a
social media site disclosed “personally identifiable browsing histories” to third-party advertising companies via cookies; court
dismissed the action, with leave to amend, for lack of Article III standing due to the plaintiffs' failure to allege a particularized
harm).
44
45
Id. at *7.
Id.
46
Id. at *8.
47
Id. at *11.
48
See Location Privacy Protection Act of 2011, S.1223, 112th Cong. (2011). See also Geolocation and Privacy Surveillance
(GPS) Act, S. 1212, 112th Cong. (2011). See also Geolocation and Privacy Surveillance (GPS) Act, H.R. 2168, 112th Cong.
(2011).
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location information from his or her smartphone or other mobile device to (1) get that customer’s
express consent before collecting the location data; and (2) get that customer’s express consent
before sharing the location data with third parties.49
E. Regulatory Future
The growth of geolocation and other new technologies brings the promise of innovative ways
to provide consumers with better products and services. However, advances in such technologies stir
up privacy concerns. With the release of the online marketing's industry's latest consumer privacy
initiatives, it remains to be seen whether such self-regulatory efforts -- the behavioral advertising
principles, the ‘Advertising Option Icon’, the multi-site principles -- will satisfy the FTC and
members of Congress currently considering limits on the practice of behavioral advertising and data
tracking.
III. LIABILITY ISSUES
As the Internet is being accessed through computers, smartphones, and tablets, consumers,
rulemakers, and advertisers alike, are all still discovering the extent to which the broad reach of the
Internet can be both helpful and harmful. A number of areas of regulation are fairly unexplored. As a
result, certain aspects of Internet use, including use of behavioral/targeted advertising, raise many
new and unforeseen legal issues.
Similar to the area of behavioral advertising, another unexplored territory that has become
exponentially more serious and complicated due to the growth of the Internet is contributory
trademark infringement. Part of the reason for an increase in focus in the legal arena results from the
difficulty in tracking the infringers, and the ease of infringement from overseas. This specific area of
trademark infringement is tied to the increase in unauthorized sales of goods and sales of knockoff
products. As a result of this ability of others to use the Internet for such purposes, trademark owners
have shifted their focus to contributory infringers, such as service providers and payment processors,
instead of those parties directly infringing on their trademark.50 The article also explores the state of
online trademark infringement and the growing trend of the courts finding service providers,
payment processors, or online advertisement network providers liable for contributory trademark
infringement. The authors also discuss notice and takedown procedures through various court
decisions.
IV. ROLE OF THE INTERNET IN CONTRIBUTORY TRADEMARK INFRINGEMENT
The ubiquity of the Web, on computers, mobile phones, and tablets, offers businesses the
opportunity to connect with consumers throughout the world in ways they never could before.
Unfortunately, along with the success of legitimate e-commerce, the distribution and sale of
counterfeit products through professional-looking websites has also increased dramatically,
particularly in the clothing, consumer electronics, pharmaceutical and footwear industries.
49
S.1223, § 3.
50
See Press Release, Dep’t of Justice, Federal Courts Order Seizure of 150 Website Domains Involved in Selling Counterfeit
Goods as Part of DOJ, ICE HSI and FBI Cyber Monday Crackdown (Nov. 28, 2011). See also Press Release, U.S. Immigration
& Customs Enforcement, Sweetheart, but fake, deals put on ICE "Operation Broken Hearted" protects consumers from
counterfeit Valentine's Day goods (Feb. 14, 2011). See also Louis Vuitton Malletier SA v. Akanoc Solutions, Inc., 658 F.3d 936
(9th Cir. 2011).
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While estimates of the harm differ greatly among analysts, the sale of counterfeit and knockoff
goods has been reported to cost American creators and producers billions of dollars per year.51
Online infringement harms many facets of the economy: trademark owners suffer lost sales and lost
brand value; consumers receive inauthentic products, or, at worst, dangerous goods; and federal and
state governments lose tax revenues and incur law enforcement costs.52 In many cases, consumers
are not fully aware of the nature of a transaction, since such virtual stores have legitimate-sounding
domain names, often accept payment through major credit card companies, and run online
advertisements from trusted providers, all portraying the appearance of legitimacy.
As part of the task of policing their marks, many trademark owners maintain a close watch on
counterfeit goods on the Internet and take an aggressive stance against unauthorized uses and sales,
including bringing suit against sellers of knockoff goods. However, many so-called rogue web
sellers are located abroad and rely solely on digital means to communicate, making it especially
difficult to locate and permanently shut them down. As a result, trademark owners have begun to
seek recovery from a number of third-party online entities, including Internet service providers,
payment processors, and online ad network providers, all of whom may play some role (knowingly
or unknowingly) in enabling consumers to access an infringing website, purchase content and
products, and view advertisements.
This section will discuss contributory trademark infringement in general and recent actions by
trademark owners against online service providers for contributory liability for the sales of
counterfeit goods. It will also review the ongoing Congressional debate surrounding online
intellectual property infringement.
A. Contributory Infringement
Contributory trademark infringement is a judicially created doctrine that derives from the
common law of torts. There are two ways in which a party may commit contributory infringement:
first, if a provider “intentionally induces another to infringe a trademark,” and the second, more
commonly pled theory, if a provider “continues to supply its [product or service] to one whom it
knows or has reason to know is engaging in trademark infringement.”53 On its face, the Inwood test
applies to manufacturers and distributors of goods. However, courts have extended the test to service
providers that exercise sufficient control over the means of the infringing conduct. Indeed, several
circuit courts have determined that a plaintiff must establish that the service provider have “direct
control and monitoring of the instrumentality used by a third party to infringe.”54
B. Notice and Takedown Principles
51
Press Release, Patrick Leahy, U.S. Sen. for Vt., Senators Introduce Bipartisan Bill To Combat Online Infringement (Sept. 20,
2010). See also Targeting Websites Dedicated to Stealing American Intellectual Property: Hearing Before the S. Comm. on the
Judiciary, 112th Cong. (2011) (Statement of Al Franken, U.S. Sen. for Minn.).
52
See Press Release, Patrick Leahy, U.S. Sen. for Vt., Senate Judiciary Committee Unanimously Approves Bipartisan Bill To
Crack Down On Rogue Websites (May 26, 2011). See also The Preventing Real Online Threats to Economic Creativity and Theft
of Intellectual Property Act: Hearing Before the S. Comm. on the Judiciary, 112th Cong. (2011) (Statement of Patrick Leahy,
U.S. Sen. for Vt.).
53
Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854 (1982).
54
See Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980 (9th Cir. 1999). See also Perfect 10, Inc. v. Visa Intern.
Service Ass'n, 494 F.3d 788 (9th Cir. 2007). See also Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93 (2d Cir. 2010).
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Ultimately, the contours of contributory trademark liability are fashioned by the courts. The
Digital Millennium Copyright Act's (DMCA) safe harbors protect qualifying websites and online
service providers from copyright liability, and essentially seek to offer strong incentives for service
providers and copyright owners to cooperate and deal with online copyright infringement.55 While
there is no similar statutory counterpart under trademark law, in recent years, trademark holders and
online providers have borrowed the principles from the DMCA safe harbors in creating a de facto
notice and takedown regime to combat the online sale of counterfeit or unauthorized goods. While
not mandated by statute, recent court decisions have underscored the importance for online providers
of instituting a program for responding to trademark-related takedown notices.
One of the most notable decisions that affirmed this idea was Tiffany (NJ) Inc. v. eBay, Inc., in
which an appeals court upheld the judgment in favor of the defendant on the plaintiff's trademark and
dilution claims.56 In that case, the district court found, after a bench trial, that eBay, an online
marketplace, had generalized knowledge that some portion of the Tiffany goods sold on its website
might be counterfeit, but that such knowledge was insufficient to impose a duty upon eBay to remedy
the problem.57 As such, the court found that eBay was not liable for contributory trademark
infringement.58
The court specifically held that eBay was not willfully blind and did not ignore the information
it was given about counterfeit sales on its website.59 Rather, eBay spent millions of dollars to
identify and remove counterfeit listings and consistently developed and improved its anti-fraud
measures.60 The court rejected the plaintiff’s argument that generalized notice that a percentage of
the plaintiff’s goods being sold on the defendant’s site were counterfeit required the site to
preemptively remedy the problem.61
C. Liability for Online Service Providers
Websites selling counterfeit or knockoff goods can be elusive since they are often located
abroad, can quickly reappear under a different domain name following a cease and desist letter or
adverse judgment, and have no appreciable assets for a plaintiff to recover.62 As such, aggrieved
trademark holders have begun to allege contributory infringement claims against various online
55
Digital Millennium Copyright Act, 17 U.S.C. § 512 (1998).
56
Tiffany, supra note 54.
57
Id. at 107.
58
Id. at 109.
59
Id. at 110.
60
Id. at 100, 109.
61
Id. at 106. See also Sellify Inc. v. Amazon.com, Inc., No. 09 Civ. 10268(JSR), 2010 WL 4455830 (S.D.N.Y. Nov. 4, 2010)
(contributory trademark infringement claims dismissed because there was no evidence that Amazon.com had particularized
knowledge of, or direct control over, its affiliate’s disparaging, keyword-triggered ads and when Amazon gained knowledge of
the ads, it acted promptly to disable the affiliate’s account).
62
Press Release, Dep’t of Justice, Federal Courts Order Seizure of 150 Website Domains Involved in Selling Counterfeit Goods
as Part of DOJ, ICE HSI and FBI Cyber Monday Crackdown (Nov. 28, 2011). See also Press Release, U.S. Immigration &
Customs Enforcement, Sweetheart, but fake, deals put on ICE "Operation Broken Hearted" protects consumers from counterfeit
Valentine's Day goods (Feb. 14, 2011).
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providers that materially contribute to an online retailer’s ability to make a profit off of counterfeit
goods. These parties enable U.S. consumers to access the infringing website, purchase content and
products, and view advertisements; without the services provided by these entities, the financial
incentive to run an infringing website is greatly diminished. In the past year, at least two notable
online trademark disputes went to trial, with juries finding in favor of the trademark owner.
In Louis Vuitton Malletier SA v. Akanoc Solutions, Inc., the Ninth Circuit affirmed a jury
verdict of contributory trademark infringement against a web host that ignored multiple takedown
notices and knowingly enabled infringing conduct by leasing packages of server space, bandwidth
and IP addresses to foreign-based websites that sold the plaintiff’s knockoff goods.63 To prevail, the
plaintiff had to establish that the defendant continued to supply its services to one who it knew or had
reason to know was engaging in trademark infringement and that the defendant had direct control and
monitoring over the “means of infringement.”64 The court rejected the defendant’s argument that the
servers and internet services provided were not the “means of infringement,” rather that the websites
themselves were the sole means of infringement.65 Instead, the appeals court stated that even though
they exist in cyberspace, “websites are not ethereal” and would not exist without physical roots in
servers and internet services and that defendants had direct control over the “master switch” that kept
the websites online.66
In another dispute, a golf equipment company brought suit against, among others, the web
hosting company that participated in the design and support of the websites selling knockoff golf
gear.67 While the defendant web host denied any knowledge that its clients were selling counterfeit
golf clubs, the plaintiff countered that beyond offering hosting services, the defendant provided extra
coaching and counseling advice to the site operators on search engine optimization, website
development, and locating preferred vendors, and otherwise should have known about the nature of
the site given its domain name, <www.copycatclulbs.com> and its slogan as the “one stop shop for
the best COPIED and ORIGINAL golf equipment on the internet.”68 At trial, a jury found the web
host liable for willful secondary trademark infringement and awarded the plaintiff over $770,000 in
damages.69
Another dispute involving trademark holders was resolved after the threat that a contributory
infringement claim might proceed to trial. In Gucci America, Inc. v. Frontline Processing Corp., the
court found that a national retailer could proceed with contributory infringement claims against
various credit card processors based upon sufficient allegations that the providers exerted sufficient
control over the infringing transactions and knowingly provided its services to an internet merchant
63
Louis Vuitton Malletier SA v. Akanoc Solutions, Inc., 658 F.3d 936, 940, 941 (9th Cir. 2011).
64
Id. at 942.
65
Id.
66
Id. at 942-943.
67
Roger Cleveland Golf Co., Inc. v. Prince, No. 09-02119 (D. S.C. filed Mar. 14, 2011).
68
Roger Cleveland Golf Co., Inc. v. Price, No. 2:09-CV-2119-MBS, 2010 WL 5019260, at *1, *3
(D. S.C. Dec. 3, 2010).
69
Roger Cleveland, supra note 67.
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that sold “replica” products.70 The court denied the defendants’ motion to dismiss, concluding that
the defendants facilitated the replica website’s ability to efficiently transact sales for counterfeit
products by enabling customers to use personal credit cards to pay for purchases.71
The court found that the plaintiff made substantial allegations that the defendants knew that the
replica site traded in counterfeit products, or were willfully blind to that fact, including: one
defendant charged a higher transaction fee for processing credit cards for high risk replica goods
merchants; and another helped the counterfeit goods website set up a system to avoid chargebacks,
requiring customers to check a box that said “I understand these are replicas” and otherwise assisted
in refund requests from customers that necessitated an investigation of products sold.72
Notably, the Gucci court distinguished the case from Perfect 10, Inc. v. Visa Int’l Service
Ass’n, where the Ninth Circuit declined to hold a credit card processor liable for contributory
trademark and copyright infringement for the unauthorized reproduction and display of Perfect 10’s
images by certain websites and users.73 The court pointed out that in the Perfect 10 dispute, the
plaintiff failed to allege that the credit card service provider had the “power to remove infringing
material” because the infringement occurred on the third-party websites and a credit card transaction
was not needed for the websites to continue posting infringing photographs.74 In the Gucci case,
however, the court stated that the plaintiff’s allegations were concerned primarily with the sale of
tangible counterfeit goods to customers, which allegedly could not be accomplished without the
defendants’ ability to process the credit card-based purchases.75
Beyond payment processors and website design and management providers, at least one court
has considered the secondary liability (in the copyright context) of an online advertising network
company that placed third-party advertisements on an allegedly infringing website and shared the
proceeds with the website owner. In Elsevier Ltd. v. Chitika, Inc., the court found that an online
advertising provider that was not familiar with the content of an allegedly infringing free download
site and had not received any notice of infringing activity from the plaintiff was not liable for
contributory copyright infringement.76 The court also noted, in dicta, that the defendant did not
“materially contribute to the infringement” merely because the shared advertising revenue made it
easier for the website owner’s infringement to be profitable.77
D. ‘Rogue Website’ Legislation
Recent court decisions have given trademark holders some ammunition in seeking recovery for
infringement against responsible service providers. Regardless, rights holders maintain that they still
70
Gucci America, Inc. v. Frontline Processing Corp., 721 F.Supp.2d 228, 253 (S.D.N.Y. 2010).
71
Id. at 252-253.
72
Id. at 249, 252.
73
Perfect 10, Inc. v. Visa Inte’l Service Ass’n, 494 F.3d 788, 804-805 (9th Cir. 2007).
74
Id. at 807.
75
Gucci America, supra note 70, at 252-253.
76
Elsevier Ltd. v. Chitika, Inc., No. 11–10026–RGS, 2011 WL 6008975 at *4-5, (D. Mass. Dec. 2, 2011).
77
Id. at *5-6.
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possess a limited number of effective remedies to fight online purveyors of infringing goods,
particularly legal tools that would hamper websites located abroad from continuing to sell infringing
goods on the Internet.78,79
V. CONCLUSION
As this piece illustrates, the Internet is a vast, ever-changing, and expanding technology that
continues to create new and unforeseen legal issues for regulators, advertisers, and consumers alike.
78
Press Release, Patrick Leahy, U.S. Sen. for Vt., Leahy: Senate Should Focus On Stopping Online Theft That Undercuts
Economic Recovery (Jan. 23, 2012).
79
Congress has tried to seek a legislative solution that would give the Department of Justice and content owners an expedited
process for cracking down on U.S.-directed foreign rogue websites that traffic in pirated or counterfeit goods or digital
entertainment.
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THE LEGAL PROTECTION OF EUROPEAN BROADCASTERS – CHALLENGES
POSED BY NEW SERVICES
Peter Matzneller*
Anne Yliniva-Hoffmann**
I. INTRODUCTION
Digitisation and convergence, especially the enormous increase in capacity and performance in
the case of Internet access, computers and storage media, have simplified and speeded up the
distribution and consumption of programme content. This impacts on all electronic media, but
particularly on broadcast services, under the European definition. In addition to the growth in the
number of legal services, piracy has benefited from the greater efficiency of the new technologies.
Digital signals can be copied in high quality and distributed, and programmes delivered via the
Internet are particularly vulnerable. The programme-carrying signals are often the direct objective
and “quarry” of the pirates, and broadcasters are trying to protect their signals by technical means.
Digital identification systems, such as watermarks and fingerprints, are suitable for marking and
recognising stolen signals and are being employed. There are also technical protection measures to
prevent unauthorised access to and/or the (further) use of the audiovisual content. The problem of
protecting the broadcast signal has been raised once again, and perhaps even more clearly than in the
past, as a result of the considerable stepping up of the broadcasters’ own Internet activities, that is to
say the live broadcasting of programmes using this particular distribution channel (web- and
simulcasting) and making available to the user for individual access at any time and place
audiovisual content that has already been broadcast or is scheduled to be broadcast in the near future.
This also applies, incidentally, to services available from broadcasters for mobile reception devices.
All this once again raises the question of whether the protection granted broadcasters is sufficient. Is
the existing legal framework capable of meeting the challenges brought about by technological
progress and the introduction of new business models?
The protection of broadcasters is governed by an entire range of legal provisions at both
international and Council of Europe level, as well as by EU law. These measures will not be outlined
individually here as they were the subject of an earlier article.1 It is worth briefly mentioning the
considerable degree of heterogeneity that characterises these provisions. This applies for example to
the definition of broadcasting - in the European rather and U.S. sense - as the subject of legal
protection. In some cases, it does not cover the distribution of broadcast signals via wire-bound
technologies or sometimes only refers to television (as in the U.S.) and often – at least explicitly –
does not include distribution using new transmission channels, such as the Internet or the mobile
telephone networks. Especially in the latter context, it must be assumed that the legal instruments
* Research Associate at the Institute of European Media Law (EMR), Saarbrücken/Brussels. B.A., Leopold-Franzens University
(2007); LL.M. Eur., Europa-Institute at University of Saarland (2009).
** Institute for Eurpoean Media Law (EMR), Saarbrücken/Brussels.
1
See Lucie Guibault & Roy Melzer, The Legal Protection of Broadcast Signals, 2004-10 IRIS PLUS, LEGAL
OBSERVATIONS OF THE EUROPEAN AUDIOVISUAL OBSERVATORY (2004), available at
http://www.obs.coe.int/oea_publ/iris/iris_plus/iplus10_2004.pdf.en.
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Spring 2013 │ Volume 20 │ Number II
mainly leave out of account those transmissions preceded by an individual user request. Both
programmes broadcast originally on the Internet in linear form (webcasting) and non-linear
programmes (on-demand services) are consequently not protected. This inconsistency concerning the
level of protection intended also exists in other areas, for example with regard to the actions for
which broadcasters are granted exclusive exploitation rights after an item has been broadcast.
Differences also exist in the way in which any public or third party interests that may stand in the
way of comprehensive protection are mentioned.2 The extent and content of provisos and derogations
accordingly differ, for example on the question of reporting daily news events, on use for science and
research purposes, on private use and so on.
In many cases, the inconsistency in the amount of protection afforded in this context continues
at the national level. It is also due to the fact that, although international legal instruments normally
lay down a minimum degree of protection, states can go further either individually or collectively
(for example in connection with the harmonisation of provisions through EU law).3 This may seem
surprising bearing in mind the increased global dimension of audiovisual content distribution
resulting from the digitisation and convergence process (especially in the form of the Internet). This
may explain the need for reform perceived by many observers.
This article primarily discusses the protection afforded the European broadcaster’s
programme-carrying signal as the object of the copyright-related protection that it has been granted.
It also includes a discussion of the idea that some broadcasters can enjoy copyright protection with
regard to programme content on the basis of either primary or derived law. Furthermore, it takes
account of the fact that the extent of the broadcaster's legal protection is also determined by the
nature of the authorisation rights4 granted to copyright holders and by the extent to which reference is
made to the latter.5 The protection of the broadcast signal is based on the (technical and
organisational) efforts made by the broadcaster for transmission purposes. Broadcasters should not
have to tolerate third parties benefiting from their investments without being able to defend
themselves. Here, the parallel to the protection under competition law provided at the domestic level
becomes clear (protection against the unlawful exploitation of another’s work – “business
parasitism”; prohibited competitive edge brought about by a breach of the law). It will accordingly
also be necessary to discuss some issues connected with this.
In the following, the challenges and problems caused by current developments will be
discussed in depth (section II). An overview will then be provided of the present state of the debate
on whether and, if so, to what extent broadcasters need new or additional legal protection (section
III). A brief summary of the conclusions drawn is provided in section IV.
2
See the overview of the individual measures in the ZOOM part of this IRIS plus.
3
For reasons of space, it is not possible here to provide a more comprehensive review of the protection of broadcasters provided
by national provisions, whether it be the protection of copyright or copyright-related rights or both.
4
This means the exclusive (exploitation) rights to which the rightsholder is entitled with respect to permitting or prohibiting the
use of its works, i.e. granting or refusing usage rights. If national law permits the use without requiring permission in certain
defined cases or following an examination and a consideration of the mutual interests involved in an individual case, then the
authorisation right is (usually) replaced by the right to appropriate remuneration. As far as retransmission by cable is concerned,
where the transmission right is affected as a sub-right of the right of public performance, collecting societies exercise the power
to grant usage rights, but this does not apply to a broadcaster’s own programmes.
5
See A. Blocman, Conseil d’Etat Cancels the Conventions of Two Terrestrially Broadcast Digital TV Channels, 2008-5 IRIS
PLUS, LEGAL OBSERVATIONS OF THE EUROPEAN AUDIOVISUAL OBSERVATORY, 7-8 (2008).
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II. NEW OFFERS OF AUDIOVISUAL PROGRAMME CONTENT AND THE PROTECTION OF
BROADCASTERS
In this age of digitisation and convergence, the broadcast signal can be captured in various
ways: apart from the permission-free use of programme content by “viewing” or “listening,” there is
also the possibility of (direct) access to the signal, which can be obtained for example by breaching a
conditional access system or through the unauthorised onward transmission of the signal. In addition,
the signal can be (indirectly) used for offering already broadcast content for downloading or
distribution via so-called streaming. It is first necessary to store the signal before it is retransmitted.
The possibility for the user to access programmes that have already been broadcast is increasingly
becoming the focus of attention.
The following selection of types of use made possible by new business models is based on the
circumstances in which the user seeks access to the broadcast signal or its content. Portals and
navigators are examples of arrangements that make it easier for the user to choose from various
programmes or locate a specific programme (see II.1. below). In the case of virtual video recorders
and "intelligent recording software," the primary aim is to satisfy the user’s interest in storing
programme content already selected (II.2.). So-called peer-to-peer technologies turn the (mere)
receiver into a device for offering content to additional users at the same time (II.3.). Programs or
devices that make it possible to circumvent measures that provide protection against the unauthorised
use of conditional access services enable content that is not (legally) available in this way to be
accessed (II.4.). While the applications mentioned normally target private use, the very popular bigscreen showings of major sports events constitute a special form of the public use of television
programmes. Although they are permission-free for the viewers themselves, this raises a number of
questions for the organisers of such events (II.5.). Here, as in the case of ad-skipping technology or
the ability to supplement the television signal with Internet content accessible on the screen (II.6.),
the interest of third parties in offering services that exploit the attractiveness of the content carried by
the broadcast signal in pursuit of their own aims, including commercial objectives, becomes
particularly clearly evident.
It emerges that, depending on the situation, various intellectual property rights and
authorisation rights of broadcasters may be affected. However, unlawful interference with rights
granted does not always occur. Given the services and technologies now available, it is hard to avoid
the impression that they have often been conceived with certain “gaps” in the broadcasters’
protection in mind. For example, they take advantage of any technical criteria limiting the application
of the (related) rights or – adopting the user perspective – are tailored to existing exceptions from the
protection of the signal and limitations to that protection. Here, the question of the lawfulness of a
private copy and the amount of scope allowed for its use becomes relevant again and again.
A. Portals and Navigators
A number of interesting services enable the user to access audiovisual content (that is being or
has been transmitted by the broadcaster) by “sorting” the items available. Such portals may supply
professionally produced content only (II.1.1.) or they may also be based on content made available
by users themselves. However this “user-generated content” (UGC) may contain legally protected
material owned by third parties (II.1.3.). Combinations of the two types of content may be found at
one and the same portal. Electronic programme guides, as an advanced form of navigator, have a
function comparable to that of a portal in the sense described above (II.1.2.). Some portals give
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potential users the impression that they provide a largely fixed range of items while others serve as a
starting-point from which users can actually call up content by means of varying degrees of
interaction (own search and/or selection). The following examples show that this difference may
have a role to play for the legal assessment.
1. Portals
Portals are understood to be services that enable users to access programme content by taking
one or more selection steps. They are organised either in the form of real-time onward transmission
or make programmes available on a time-shifted basis.
a. Live or Library Access to Television Programmes
In a case brought by the Warner Bros. and Universal film studios against the online TV service
Zattoo, the Landgericht Hamburg (Hamburg Regional Court) ruled on 8 April 20096 that the
defendant was in breach of German copyright law.
With its portal Zattoo.de, Zattoo offers a service through which programmes are provided at
the same time as they are broadcast on public free-to-air television. In order to do this, it captures and
encrypts the broadcasters’ signals. To this end, the signals are not stored permanently but only
temporarily. The data are then forwarded to Zattoo’s registered customers, who can view the
programmes they want using the free software available. The transmissions are subject to territorial
limitations in accordance with the agreements reached with the broadcasters concerned. The service
is funded by advertising. In the case in issue, several feature films in which the plaintiff film studios
held the exclusive exploitation rights had been retransmitted via the Zattoo service. The public
service broadcasters ARD and ZDF had broadcast the films in question with the relevant licence
from the plaintiffs and at the same time permitted, subject to their agreement with the collecting
societies concerned, the simultaneous and unaltered retransmission via Zattoo. The plaintiffs
considered that their right in the public transmission had been breached and applied for an injunction.
The Regional Court allowed the claim for injunctive relief against Zattoo under section 97(1)
in conjunction with sections 2(1)(6), 2(2) and 15(2) of the Urheberrechtsgesetz (Copyright Act),7
stating that, according to the national treatment principle enshrined in section 121(4) of the Copyright
Act in conjunction with Article 2 and 5 of the Revised Berne Convention, the protection of the
United States based plaintiffs had to be assessed under German law. In the court’s opinion, contrary
to the assumption of the contracting broadcasters and Zattoo, the latter’s service could not be
classified as cable retransmission within the meaning of sections 20b and 87 of the Copyright Act, so
that the broadcasters had no effective contractual agreement to transfer the rights. Although the
wording of the Act allowed the term “cable system” to be interpreted to mean that it included the
network infrastructure used by Zattoo (the Internet), the historical context and the intention of the
legislature militated against such an interpretation. The court pointed out that when the rule was
introduced in 1998 in transposition of Directive 93/83/EEC8 it related to the retransmission of
6
Landgericht Hamburg [LG] [Hamburg Regional Court] Apr. 8, 2009 (Ger.), available at
http://www.landesrecht.hamburg.de/jportal/portal/page/bshaprod.psml;jsessionid=D0EE59E4F4B727BF37EAB3766448FAB8.jp
j4?showdoccase=1&doc.id=KORE220512009&st=ent.
7
Urheberrechtsgesetz vom 9. September 1965 [Urheberrechtsgesetz] [German Copyright Law], Sept. 9, 1965,
BUNDESGESETZBLATT, Teil I [BGBL. I] at 1273, last amended by Art. 2 Abs. 53 (Article 2, ¶ 53), Dec. 22, 2011, BGBL. I at 3044
(Ger.).
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programmes via the existing coaxial cable network. The technologies and business models for the
transmission of such programmes via the Internet did not yet exist. Nor did the preparatory
documents for the Act allow the conclusion to be drawn that the legislature intended the term “cable
system” to be understood without reference to a specific technology and therefore subject to change.
The same applied, the court went on, to the preparatory documents for the enactment of the directive
and for Article 11bis(1)(2) of the Revised Berne Convention, which explicitly made the exercise of
the broadcasters’ rights subject to the relevant domestic legislation. It was also necessary to note that,
according to the sytematic built into the law, a narrow interpretation had to be given to section 20b of
the Copyright Act, in which the statutory requirement for rights to be managed collectively by
collecting societies constituted considerable interference with freedom of contract. Consequently,
section 20b of the Copyright Act could not be applied to the service provided by Zattoo.9 The right
concerned was the right of public performance under section 15(2) of the Copyright Act, which
comprised the right of transmission (section 20) and the right to make publicly accessible (section
19a). However, Zattoo had no licence to exploit those rights and the permission of the film studios
themselves was required to retransmit the films on the Internet.
In this context, it is also worth mentioning the judgment of the Paris Tribunal de Grande
Instance (Regional Court) of 18 June 2010. The proceedings concerned an action brought by the
French private broadcasters M6 and W9 against the company SBDS Active, which provides the
Internet service tv-replay.fr.10 The main objective of the service is the collection and user-friendly
compilation of references to individual programmes in the freely available media libraries of
France’s best-known television channels (catch-up TV). The broadcasters considered the
unauthorised public transmission of their programmes to be a breach of their copyrights. In the
court’s opinion, however, the service only provides the user with assistance in finding the desired
programmes, whereas they are actually accessed via the original provider. The court therefore came
to the conclusion that a mere compilation of references did not constitute the public transmission of
the content and therefore rejected the plaintiffs’ claim of a breach of Article L 122-2 of the French
Intellectual Property Code.11
b. Indexing Services
Similar to the portal described above, there are other services that make audiovisual content
easily accessible to users. However, they do this without remaining on the surface of the web (in the
8
See id; Übergangsregelung bei Umsetzung der Richtlinie 93/98/EWG [Transitional provision in implementation of Directive
93/98/EEC] (1998) (especially in context of the cable retransmission right, see P. Bernt Hugenholtz, SatCab Revisited: The Past,
Present and Future of the Satellite and Cable Directive, 2009-8 IRIS PLUS, LEGAL OBSERVATIONS OF THE EUROPEAN
AUDIOVISUAL OBSERVATORY, (2009), available at http://www.obs.coe.int/oea_publ/iris/iris_plus/iplus8_2009.pdf.en.
9
German Patent and Trade Mark Office, Arbitration Board, Case Sch-Urh 07/08 (settlement proposal), Feb. 22, 2010.
10
Tribunal de grande instance [TGI] [ordinary court of original jurisdiction] Paris, June 18, 2010 (Fr.), available at
http://www.legalis.net/spip.php?page=jurisprudence-decision&id_article=2941.
11
The court also held that there had been no breach of the sui generis database protection right resulting from the transposition of
the Database Directive 96/9/EC. Although the television channel had set up a database, it could not prove that considerable
investments had had to be made for this, as required by Article L 341-1 of the Intellectual Property Code. The unfair competition
claim was also dismissed – M6 and W9 had claimed that their refinancing by carrying advertising was being made more difficult,
whereas tv-replay.fr was making money itself from the advertising on its website. However, the reason for dismissing this claim
was that M6 and W9 had advanced the same arguments as those already employed to support the allegation of a breach of
copyright.
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figurative sense) but locate items hidden in the depths of the Internet. As a rule, they supply
references to content for which they evidently lack the right of exploitation in the form concerned.
The indexing service TV Links was the subject of a legal dispute in the United Kingdom. It
provided links to other websites from which television programmes, films and similar items could be
called up. The court acquitted the company of the charge of copyright violation and therefore of a
breach of its duties as an Internet service provider. In the court’s opinion, merely providing links to
audiovisual content “directly” available on the Internet did not constitute a public performance.12
Also in the United Kingdom, the High Court recently delivered a judgment on the Usenet
indexing website Newzbin.13 This registration based service addresses its users as “members” and –
depending on the status acquired – calls on them “only” to collect sources of, inter alia, audiovisual
content on the Usenet or to add information on existing content and feed the file produced (so-called
“reports”) into a database. According to the operators of the website, about 250 such “editors” are
involved in this work. Depending on the nature of the membership rights, the sources can be
searched with varying ease. The court held that this service breached the ban on communicating
copyrighted works to the public without the rightsholder’s permission within the meaning of section
20(2)b of the Copyright, Designs and Patents Act 1988 (CDPA). The service, it said, was not limited
to merely making simple references available to television programmes, films, etc., but it offered its
users an active facility that extended far beyond that. As a result of the detailed configuration of the
premium membership area together with the additional options available (more precise searches,
automatic downloads) the operators of Newzbin had also conveyed the impression to their paying
members that they were authorised to grant permission to copy the film. Making available the
“reports” and technical user support and the fact that the service provider was aware that its conduct
was in breach of copyright was also to be seen as involvement in the breach of copyright by its users
resulting from their unlawful copying of copyrighted works within the meaning of section 16 of the
CDPA.14
Another case involves focusing on the technical aspects of the transmission of stored
audiovisual content to the user: in the case of streaming and so-called “progressive downloads” of
audio and video items, the content called up individually by the user is transmitted in packages.
Unlike "persistent downloads," the content begins to play before all of it has been transmitted.
Another difference from a download is that the content transmitted is not permanently recorded on
the user’s device because the data stream is normally only stored temporarily in the user’s cache.15 In
12
See Regina v. Rock & Overton, Crown Court at Gloucester, Feb. 9, 2010 (Eng.), available at
http://www.obs.coe.int/oea_publ/legal/reginavsrockoverton.pdf; see also David Goldberg, TV Links Acquitted of Copyright Theft
Charges, 2010-4:1/26 IRIS, LEGAL OBSERVATIONS OF THE EUROPEAN AUDIOVISUAL OBSERVATORY (2010), available at
http://merlin.obs.coe.int/iris/2010/4/article26.en.html.
13
See Twentieth Century Fox Film Corporation & Anor v. Newzbin Ltd [2010] EWHC (Ch) 608 (Eng.), available at
http://www.bailii.org/ew/cases/EWHC/Ch/2010/608.html.
14
Cf. Landgericht Hamburg [LG] [Hamburg Regional Court] Jan. 28, 2009 (Ger.), available at http://openjur.de/u/306525_u_255-07.html (Comparable situation in Germany, in which the court establishes that a Usenet service is liable for breaches of
copyright by its members if it is not only aware of the abuse of its service but clearly solicits this and makes software available
and considerably facilitates the imroper use of the Usenet).
15
See JURGEN ENSTHALER, HANBUCH URHEBERRECHT UND INTERNET (COPYRIGHT AND INTERNET GUIDE) 3 B 49 (2d. ed. 2010).
This has to be distinguished from so-called live streaming, for example of a broadcaster’s programme, where the relevant data
stream is transmitted by the provider at a fixed time (such as simulcasting in the form of the parallel transmission of a television
programme via the Internet).
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the case of streaming services, which are currently the subject of much discussion, the broadcast
signal and, often the logos of the television broadcasters are used without authorisation, and the
platform providers generate income from the programme concerned using their own marketing
concept (for example, “in-stream advertising”). They also benefit from the high carrying capacity and
the relatively low costs of setting up and maintaining the service. The portal kino.to,16 for example,
offers free downloads of films, series and documentaries in German via streaming. It also redirects
the user to websites where (normally illegally) copied films – allegedly in close co-operation with
kino.to – have been uploaded. The user can view the films offered at any time by means of Internet
access on his/her own PC. Here the question arises as to whether those who make use of such
offerings are also in breach of copyright if they produce an unauthorised copy. Depending on the
software employed to play the audiovisual content (video player), such a copy may be illegal when
the entire content rather than only parts of it are saved temporarily on the recipient’s PC and the
memory is not (automatically) deleted at comparably short intervals, for example when the computer
is shut down. German legal commentators generally agree that the private copying exception
pursuant to section 53(1) of the Copyright Act does not apply here because a copy, which was
obviously unlawfully produced or made publicly available, is being used for making a further copy
or copies.17
2. Electronic Programme Guides
Electronic programme guides (EPGs) are available to help viewers select the programmes they
want to watch. While the teletext service, which is incorporated by the broadcaster into the broadcast
signal, is text-based and often only contains brief items of information, EPGs, which are often
provided by third parties (manufacturers of reception devices such as set-top boxes or operators of
technical platforms such as cable networks), offer users more detailed information in the form of
overviews of programme schedules, text and (moving) images and, like a portal, “guide” them to the
programmes themselves. They are closer to the broadcast signal in the way they are organised and
their use is more akin to the traditional situation involving a (simple) television set. That is why they
will be discussed here in section II.1. and separately from hybrid TV (see II.6.2.).18
Problematic in this connection is the use by the EPG providers of accompanying materials
(text and, especially, images) owned by the television channels. These providers usually take the
content concerned directly from the information pages (“press lounges”) made available by the
broadcasters themselves. It is a matter of debate whether the accompanying materials in the EPGs
may be used “copyright-free” or whether the EPG providers have to acquire the necessary licences.
The Oberlandesgericht Dresden (Dresden Court of Appeal – OLG) decided on 15 December
2009 in appeal proceedings between the collecting society Verwertungsgesellschaft Media (VG
Media) and the online programme magazine tvtv.de that television broadcasters may demand a
licence fee for the EPG use of their programming information. With this decision, the OLG
16
Further information is available at:
http://rsw.beck.de/rsw/shop/default.asp?sessionid=681E4C40E7624985BAFDB1E615369699&docid=298438&highlight=kino.t
o.
17
Friedrich Radmann, Kino.ko – Filmegucken kann Sünde sein, 54 ZEITSCHRIFT FÜR URHEBER- UND MEDIENRECHT [Journal of
Copyright and Media Law] 387 (2010).
18
For further information on EPGs, see also Searching for Audiovisual Content, published by the European Audiovisual
Observatory, IRIS Special 2008-2.
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confirmed the lower court’s judgment and rendered it final.19 VG Media had demanded that tvtv.de
should not use for its EPG any of the text or images owned by the broadcasters represented by the
collecting society as the copyrights and related rights existing in the works had been granted to those
broadcasters. The OLG allowed VG Media’s application against tvtv.de to order it to cease copying
the text and images and making them publicly available on the Internet, basing its decision on section
97(1) of the Copyright Act in conjunction with sections 2(1)(1) and 2(1)(5) and sections 72(1), 19a
and 16. The defendant company, it said, could not rely on section 50 of the Copyright Act, which
permitted the use of copyrighted works in the case of reporting on daily news events because the text
and images used for the programme guide lacked the necessary connection to any event that had
taken place (the programme had yet to be broadcast).
Another interesting judgment in this context was delivered by the Bundesgerichtshof (Federal
Supreme Court – BGH) on 19 November 2009. First of all, that court established that the
unauthorised inclusion of 593 film stills in an online archive and making them available to view and
download did not constitute cinematographic exploitation within the meaning of section 91 of the old
version of the Copyright Act (now section 89(4)).20 This was not altered by the fact that the Internet
offering was advertised as an “online film scene archive.” The mere fact that the photographs
originated from a film did not mean their use could be regarded as cinematographic exploitation
within the meaning of section 91 of the Copyright Act, so the online database provider had not
breached the filmmaker’s right to cinematographic exploitation (of stills produced when making a
cinematographic work). At the same time, however, the BGH sent the case back to the Court of
Appeal, instructing it to examine once again to what extent the plaintiff was entitled to damages for a
breach of the right in the photographs pursuant to section 72 of the Copyright Act. For procedural
reasons, with which the BGH did not agree, the Court of Appeal had dismissed this claim despite
acknowledging that it subsisted in principle.
3. Portals Predominantly Designed for UGC
Platforms like YouTube, Google Video, Dailymotion, Clipfish, MyVideo and many others
offer users the possibility of making their own video content and/or content produced by them
publicly available and exchanging it among themselves. However, these platforms often contain
items that are, at least partially, protected by third party copyright and their use has not been
permitted by the relevant rightsholder. In many cases, the items consist of recordings from
broadcasters’ programmes that – illegally – find their way onto the video platforms. The platforms
co-operate in different ways with the rightsholders. First, television broadcasters have their own socalled “channels” on these websites; second, the portals employ technical measures to mark content
in order to meet their obligations to protect the copyright and related rights of third parties.21
19
Compare VG Media v. tvtv.de, Landgericht Leipzig [LG Leipzig] [Leipzig Regional Court] May 22, 2009 (Ger.), available at
http://openjur.de/u/31830.html, and VG Media v. tvtv.de, Oberlandesgericht Dresden [OLG Dresden] [Dresden Appeals Court]
Dec. 15, 2009 (Ger.), available at http://openjur.de/u/32285.html with VDZ v. VG Media, Landgericht Köln [LG Köln]
[Cologne Regional Court] Dec. 23, 2009 (Ger.), available at http://openjur.de/u/140813.html.
20
Bundesgerichtshof [BGH] [Federal Court of Justice] Nov. 19, 2009 (Ger.), available at http://juris.bundesgerichtshof.de/cgibin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=d9b548f83e71a11d7287655e9a513e12&nr=52132&pos=0&anz=1.
21
For other instances of intermediary liability, especially (preventive) filtering obligations, see Christina Angelopoulos, Filtering
the Internet for Copyrighted Content in Europe, 2009-4 IRIS PLUS, LEGAL OBSERVATIONS OF THE EUROPEAN AUDIOVISUAL
OBSERVATORY 3 (2009), available at http://www.obs.coe.int/oea_publ/iris/iris_plus/iplus4_2009.pdf.en; see also Francisco Javier
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a. Mediaset v. YouTube
The Tribunale Ordinario di Roma (Rome District Court)22 decided on 16 December 2009 in
proceedings between the media company Mediaset and the video platform YouTube, which belongs
to Google, that YouTube had to delete all content complained about by Mediaset in this context.
Mediaset had accused the portal of making available illegally uploaded video and audio files
from broadcasts in which it held the rights, in particular episodes of the television programme
“Grande Fratello” (Big Brother). Mediaset demanded that the platform cease these activities and pay
damages of EUR 500 million for breach of copyright. In a decision on a part of the action, the court
allowed Mediaset’s application and ordered that the content in issue be taken down, stating that
YouTube was not to be regarded as a hosting provider but a publisher and was consequently fully
responsible for the published content. YouTube’s objection that its function was limited to making
web space available was, the court went on, untenable in view of its obvious and repeated conduct in
breach of copyright.
From the point of view of authors’ rights, the agreement announced at the end of July 2010
between the Italian collecting society Società Italiana degli Autori ed Editori (SIAE) and YouTube is
interesting in this connection.23 The agreement provided for the payment of compensation for
rightsholders if their copyrighted works are used in any form on the video platform. However, it is
not expected to have any influence on the above-mentioned proceedings as Mediaset is not
represented by SIAE.
b. Viacom v. YouTube
On 23 June 2010, a court in New York24 dismissed the action filed against YouTube by the
media company Viacom, to which, inter alia, the music channel MTV and the Paramount films
studios belong. The subject of the legal dispute was videos – including MTV videos – that users had
uploaded onto the platform without the rightsholders’ permission. Viacom saw in this a breach of its
reproduction, distribution and performance rights and accused YouTube of doing nothing to prevent
these rights’ violations and demanded damages.
The court dismissed this claim with reference to the provisions of the Digital Millennium
Copyright Act (DMCA).25 According to the limitation on liability contained in that Act, the operator
cannot be held liable for breaches of the law committed by third parties if it is not, and did not have
to be, aware of those breaches. In addition, it must work with the rightsholders and take down any
potentially infringing material without delay,26 and YouTube had met those obligations. Viacom
announced its intention to appeal against the decision.
Cabrera Blázquez, User-Generated Content Services and Copyright, 2008-5 IRIS PLUS, LEGAL OBSERVATIONS OF THE EUROPEAN
AUDIOVISUAL OBSERVATORY 5 (2008), available at http://www.obs.coe.int/oea_publ/iris/iris_plus/iplus5_2008.pdf.en.
22
Tribunale Ordinario di Roma, 16 dicembre 2009 (It.) available at http://www.tgcom.mediaset.it/res/doc/sentenzatribunale.pdf.
23
See Press Release, Società Italiana degil Autori ed Editori, SIAE and YouTube Sign a License Agreement (July 28, 2010),
available at http://www.siae.it/edicola.asp?click_level=0500.0100.0200&view=4&open_menu=yes&id_news=9444.
24
Viacom Int'l. Inc. v. YouTube, Inc., 718 F.Supp. 2d (S.D.N.Y. 2010).
25
Digital Millennium Copyright Act of 1998, 17 U.S.C. § 512 (2006).
26
17 U.S.C. §§ 512(c), (m), (n) (2006). See also Landgericht Hamburg [LG Hamburg] [Hamburg Regional Court], April 20,
2012 (Ger.), available at http://gmriccio.wordpress.com/2012/04/29/hamburg-district-court-gema-v-youtube-english-translation.
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B. Personal Video Recorders (PVRs) and Intelligent Recording Technologies (IRTs)
The term PVR refers to a service provider’s offer to record specific programmes and make
them available later for downloading. IRTs enable users to make copies of broadcast content both
from analogue radio and streamed Internet radio broadcasts.
1. Personal Virtual and Online Video Recorders
In order to be able to avail themselves of a PVR service, users have to register with the
relevant provider. In accordance with the procedure laid down by the provider, they determine what
programmes from what channels are to be recorded for them. The provider receives the broadcasters’
signals and records the programmes chosen by the user. The recording is then stored on the
provider’s hard drives in an online archive reserved exclusively for the registered user (“online video
recorder”). The user can access this archive at any time, download the recordings and/or store them
on his/her own PC.
a. ProSiebenSat1 and Others v. Shift.TV
In the cases of ProSiebenSat1 v. Shift.TV,27 RTL v. save.tv28 and RTL v. Shift.TV29 (all
decisions dating from 22 April 2009), the Bundesgerichtshof (BGH) considered PVRs and examined,
inter alia, whether the services concerned were in violation of broadcasting rights. The plaintiff
television stations regarded the PVR service as violating their broadcasting rights under section 87(1)
of the Copyright Act and sought injunctive relief, information and damages from the PVR providers.
The BGH initially examined whether storing the programmes in the user’s online archive
interfered with the broadcasters’ exclusive reproduction rights (sections 87(1)(2) and 16 of the
Copyright Act) and ruled that this was not the case. In principle, it said, recording programmes on the
user’s online video recorder interfered with the plaintiff’s reproduction rights as the PVR had to be
considered an “image and sound carrier” within the meaning of section 16 of the Copyright Act.
However, the question arose as to whether the provider or the user was the producer of the copy. The
lower court had regarded the provider as the producer as it offered an overall service package that, on
the basis of standard assessment criteria, was not limited to making storage space available.
Consequently, and also because the service was free of charge, the copy was not a private copy
within the meaning of section 53(1) of the Copyright Act. The BGH did not share this assumption,
stating that anyone who made the copy had to be assessed on the basis of purely technical and
mechanical criteria and, therefore, according to who physically makes it by technical means. If the
producer of the copy acted on the instructions of a third party who had it made for his/her own
private use, then under section 53(1), second sentence, of the Copyright Act the responsibility for this
act had to belong to the individual commissioning the copy. The key criterion here, in the court’s
27
Bundesgerichtshof [BGH] [Federal Court of Justice] Apr. 22, 2009 (Ger.), available at http://juris.bundesgerichtshof.de/cgibin/rechtsprechung/document.py?Gericht=bgh
&Art=en&sid=b2ddd48d74f4aa0eea54f8d38aaf2ab0&nr=48391&pos=1&anz=2.
28
Bundesgerichtshof [BGH] [Federal Court of Justice] Apr. 22, 2009 (Ger.), available at http://juris.bundesgerichtshof.de/cgibin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=7f170b3f18d677efe88700097d51e60b&nr=48390&pos=1&anz=2.
29
Bundesgerichtshof [BGH] [Federal Court of Justice] Apr. 22, 2009 (Ger.), available at http://juris.bundesgerichtshof.de/cgibin/rechtsprechung/document.py?Gericht=bgh
&Art=en&sid=db97285140686c9068a05b3a52637261&nr=48686&pos=1&anz=2.
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view, is whether the producer in the case in issue merely acted “as a necessary tool”30 – exercising
the function of a duplicating device – or whether it “brings about a copyright-relevant use to an
extent that can no longer be reconciled with the private use exception.”31 In the first case, the court
went on, responsibility for making the copy had to be assumed to belong to the individual
commissioning it, in the second to the actual producer.32 In the second case, the consequence was
that neither the exception for private use pursuant to section 53(1), first sentence, of the Copyright
Act nor the limitation laid down in section 53(1), second sentence applied, as the copy was not free
of charge. As the facts had not been sufficiently clarified by the lower courts, the BGH decided that it
should be assumed in the defendant’s favour that the recording of the programmes chosen by the
customer had been made “fully automatically without any (human) outside influence” – in other
words that it had been produced by the customer. The BGH also discussed whether the
retransmission to the PVR of the programmes received via a (satellite) aerial breaches the right to
retransmit a broadcast (sections 87(1)(1) and 20 of the Copyright Act). A retransmission within the
meaning of the relevant provisions was, it said, to be understood to mean a simultaneous
retransmission. If it was assumed (as the BGH did) that the recording process – and in consequence
the use of the PVR – had been carried out by the customer, then the decisive issue was whether the
signal received by the defendant had been sent on simultaneously to the PVR. This question had to
be answered in the affirmative. That process could also be a “transmission” within the meaning of
section 20 of the Copyright Act as it involved “uses involving a work being made publicly available
by means of wireless signals” and in a way in which the "transmission of the work (concerned) can
be described as a communication to the public."33 The service offered by the defendant was not
limited to retransmitting the signals received to the customers’ PVRs but also involved making
available the very reception facilities with which the customers were able to view the programmes
received. As the facts had been insufficiently clarified by the lower courts, the BGH was unable to
judge in this particular case whether the transmission of the programme was in the form of a
retransmission to an "audience."
The BGH ruled that making the stored programmes available for interactive retrieval did not
breach the exclusive right to communication to the public (sections 87(1)(2) and 19a of the Copyright
Act). If storing the programmes on the PVR was assumed to have been carried out by the defendant,
then the latter had communicated the programmes to the public within the meaning of section 19a of
the Copyright Act by enabling the customer to retrieve them at any time and at any place. However,
the “public communication” element, which required that the broadcast be made available to a
majority of members of the public (section 15(3) of the Copyright Act) was lacking. In the case
30
Bundesgerichtshof [BGH] [Federal Court of Justice] Feb. 25, 1999 (Ger.), available at http://lexetius.com/1999,808.
31
Bundesgerichtshof [BGH] [Federal Court of Justice] Dec. 10, 1998 (Ger.), available at http://www.online-recht.de/
vorent.html?BGH981210+auswahl=1&st_num=1&case=-i&pattern=OLG+D%FCsseldorf&mark=
32
It is worth comparing this judgment with a decision of the Munich Court of Appeal concerning a case of copying “in the real
world”. See Oberlandesgericht [OLG] [Munich High Regional Court], 29 U 5494/02, Mar. 20, 2003, Zeitschrift für Urheber –
und Medienrecht 911, 2004 (Ger.). The case involved a so-called “coin-operated CD copier”, that is to say a machine that
enabled a customer to make a copy on his/her own blank CD of a recording he/she had provided. The offer of this service was
worded in such a way that even assistance from the shop staff should be ruled out. The court assumed in that case that the
“producer” of the copy was the customer and not the service provider.
33
Bundesgerichtshof [BGH] [Federal Court of Justice] July 8, 1993 (Ger.) available at
http://dejure.org/dienste/vernetzung/rechtsprechung?Text=I%20ZR%20124/91.
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concerned, the individual recordings were only available to the (individual) customer. The crucial
factor was that at the time the offer to record future broadcasts and make them available for retrieval
was made to the general public “the work concerned ... [could] not be accessed” by the defendant to
enable it to be retrieved by the public.The BGH also considered whether the possibility existing at
any time for programmes with content unsuitable for children and young people to be called up had
any effect on aspects of competition law and the protection of minors in the media.34 After due
consideration, it affirmed that there had been a breach of sections 5(1) and 3(1) of the
Jugendmedienschutz-Staatsvertrag (Inter-State Agreement on Youth Protection in the Media –
JMStV)35 and, consequently, ruled that the plaintiff was entitled to injunctive relief under sections 3
and 4(11) of the Gesetz gegen den unlauteren Wettbewerb (Unfair Competition Act – UWG).36 The
plaintiff and the defendant were in competition with one another as a result of the action in issue
despite the fact that their companies belonged to different branches of the industry. The defendant
had breached section 5(1) and 3(1) of the JMStV because it was easy to circumvent the age
verification system it had employed to protect children and young people from unsuitable content.
One purpose of section 5 of the JMStV, the court said, was “to regulate market behaviour in the
interests of the market players”. As there was a danger of repetition, the claim for injunctive relief
was justified.
Summarising its conclusions, the BGH established that the availability of Internet based PVRs
“may breach the broadcasters’ copyright-related rights under the Copyright Act and is as a rule
unlawful”.37 As the BGH was of the opinion that the lower court had not sufficiently clarified all
aspects, it remanded the case for reconsideration and a decision.
b. Twentieth Century Fox and others v. Cablevision
In the United States, the Supreme Court38 on 29 June 2009 confirmed an appeal court’s
judgment39 in favour of Cablevision against several film producers who had filed an action for breach
of copyright. In proceedings before the District Court, American media companies (including
Twentieth Century Fox and Universal City Studios Productions) successfully brought an action
against the cable television operator Cablevision, which offered registered customers a PVR service.
The plaintiffs considered that the service had breached their copyrights as Cablevision was copying
their programmes and communicating them to the public without authorisation. The PVR service
was, they claimed, comparable to video-on-demand services and accordingly required a licence. The
Court of Appeals rejected this argument, stating that, although the programmes were recorded at a
central facility, the actual copying was done by the users themselves – with no influence on the part
of Cablevision, which only made the system available. Furthermore, the court went on, the fact that
34
See supra note 29.
35
Jugendmedienschutz-Staatsvertrag [JMStV] [Inter-State Agreement on Youth Protection in the Media] April 1, 2010 (Ger.),
available at: http://www.kjm-online.de/files/pdf1/_JMStV_Stand_13_RStV_mit_Titel_english.pdf.
36
Gesetz gegen den unlauteren Wettbewerb [UWG] [The Act Against Unfair Competition], March 3, 2010, BGBI. I at 254 (Ger.)
available at http://www.gesetze-im-internet.de/englisch_uwg/the_act_against_unfair_competition.pdf.
37
See supra note 29.
38
Cable News Network, Inc. v. CSC Holdings, Inc., 129 S.Ct. 2890 (2009).
39
Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008).
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every registered user could only retrieve the recording made for him/her ruled out the assumption of
a public performance, so that the PVR service did not differ substantially from a traditional VCR and
the private copy for home use made on it.
c. M6 and Others v. Wizzgo
The Paris Tribunal de Grande Instance (TGI, a regional court) came to a different conclusion40
in two decisions dated 6 August and 25 November 2008. In the proceedings concerned, several
French television channels (M6, W9, NT1 and TF1) brought an action against Wizzgo, a PVR
provider, because they believed the service had breached their copyrights.
In both cases, the court ruled (without giving any reasons) that a programme recorded by
means of a PVR was not to be described as a private copy of the user and that this constituted a copy
unlawfully made by Wizzgo (followed by its communication to the public). It ordered the provider to
pay damages and prohibited it from continuing to offer the PVR service.
2. Intelligent Recording Software
“Intelligent recording software” explicitly relies on the exception made for private copies in
German law (section 53 of the Copyright Act). With the help of such programs, copies of broadcast
content are made by employing the software to record music items automatically and depositing the
file on the user’s PC. The software cuts out all advertising and news items.
Rightsholders’claim in this connection that this automatic generation of copies of
copyrighted content runs counter to the original idea of a private copy, which would lose the
subordinate role it has had up to now, so that the standard fee for a private copy should be increased.
Some people also demand a ban on such programs as control over the procedure does not lie with the
private individual but a third party, namely the program provider and the operator of the necessary
server.
No response in terms of actual legislation has so far been given to the question raised by the
German Federal Ministry of Justice in 2009 after the completion of the reform of copyright
legislation41 concerning the extent to which a statutory ban on “intelligent recording software” would
be conceivable.
C. Peer-to-Peer Technologies
Peer-to-Peer (P2P) technology is severely criticised by many people as it enables a group of
users that it has helped to set up to exchange files for which the necessary rights in the content
exchanged have often not been cleared.
1. Joost
However, the online service provided by Joost.com is an example of the lawful application of
these technologies. The free Joost software automatically forwards the relevant data, especially
40
Tribunal de grande instance [TGI] [ordinary court of original jurisdiction] Paris, Aug. 6, 2008 (Fr.), available at
http://www.foruminternet.org/specialistes/veille-juridique/jurisprudence/IMG/pdf/tgi-par20080806.pdf; Tribunal de grande
instance[TGI] [ordinary court of original jurisdiction] Paris, Nov. 25, 2008 (Fr.), available at
http://www.juriscom.net/documents/tgiparis20081125-Wizzgo.pdf.
41
Cf. Nicola Lamprecht-Weissenborn, “Second Basket” of Copyright Reform Approved, 2007-10: 9/15 IRIS LEGAL
OBSERVATIONS OF THE EUROPEAN AUDIOVISUAL OBSERVATORY (2007), available at
http://merlin.obs.coe.int/iris/2007/10/article15.en.html.
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among users connected to the P2P network. Only when part of the content is temporarily unavailable
on the users’ computers connected to the P2P network is it supplied from a central memory location.
The service comprises both video on demand and linear channels comparable to traditional television
broadcasts. Users can also participate in blogs, online chats and news services. For the content
distributed by Joost, the provider negotiates licence agreements with the rightsholders, for instance in
the United States with Viacom and Warner. In Germany, Joost concluded agreements with 13
content providers at its launch in 2009. According to Joost itself, it is possible to carry out the central
monitoring of the content exchange procedure and thus establish whether it meets the conditions of
the licences acquired by Joost.42 Geographic markets are separated from one another using
geolocation technology. Joost is financed by advertising.
2. CyberSky
On the other hand, in the following case P2P technology appears in the unfavourable (because
unlawful) light alluded to above: the pay-TV operator Premiere (now Sky Deutschland) sought an
injunction against the operator of CyberSky TV software under section 97(1) in conjunction with
section 87(1) of the Copyright Act.43 In the plaintiff’s opinion, the distribution of software that
enables users to set up a P2P network and quickly exchange large quantities of data within that
network interferes with the exclusive right under section 87(1) of the Copyright Act to retransmit
their broadcast signals and make them publicly accessible. Moreover, the networks set up permitted
the exchange of entire television programmes with only a minimal time delay. The software was
advertised as having this feature, and particular emphasis was placed on the fact that pay-TV
programmes could also be exchanged in this way if one of the P2P users received a programme as
part of a subscription and fed it into the network. In the opinion of the BGH, breaches of copyright
by subscribers are to be feared as a result of bringing the software into circulation and specifically
advertising it for an unlawful use, so the defendant was accordingly liable for the impending
breaches of the law. The court regarded the fact that the plaintiff had not employed any copy
protection mechanism as insignificant, stating that the rights violation claimed did not involve the
unauthorised storage or copying of Premiere’s programmes but their unauthorised retransmission to
non-subscribers, which violated the plaintiff’s exclusive transmission right enshrined in section
87(1)(1) of the Copyright Act.44 For these reasons, the BGH granted the plaintiff’s application for an
injunction concerning the distribution and advertising of the software.
D. Technical Measures for Protection Against Unauthorised Use and the Making of Private
Copies
1. Digital Rights Management (DRM)/Technical Protection Measures (TPM)
42
About Joost.com, JOOST.COM, http://www.joost.com/about/joost/ (last visited Apr. 15, 2012). By the publishing date of this
article, Joost was no longer in service.
43
Bundesgreichtshof [BGH] [Federal Court of Justice] Jan. 15, 2009 (Ger.) available at http://juris.bundesgerichtshof.de/cgibin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=
f76fc892eefcdc29a6d8736952874ce8&nr=48631&pos=0&anz=1.
44
Id. In the view of the BGH, this also provided grounds for denying a claim under the Gesetz über den Schutz von
zugangskontrollierten Diensten und von Zugangskontrolldiensten (Act on the legal protection of services based on, or consisting
of, conditional access), which transposed Directive 98/84/EC.
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Both providers and distributors of media content – for example, offline in the case of DVDs
and online in connection with pay-TV services – can employ various technical measures to protect
items from unauthorised access (for example, encrypting and access authorisation systems) and/or
unauthorised reproduction (copy protection) or make it easier to investigate rights violations
(watermarks). In this context, broadcasters’ current plans concerning “new” technical measures to
protect their signals are interesting. For example, through use of the CI Plus technology45
broadcasters can decide how the user can proceed with the signal received: for instance, in
accordance with the so-called “usage rules information”, which is also transmitted, it is determined
whether the user is in principle to be given authorisation to record programmes and whether they
may also be shared with others. The problem consequently arises that technical protection measures
may result in users not being able to exercise the right which is in principle granted to them to make
copies for private use (without the provider’s consent).46 It is therefore not hard to understand why
digital rights management (DRM) has for a long time led to the offer of programs or devices that
(also) enable access restrictions to be circumvented.
In 2003, the Frankfurt Court of Appeal gave its opinion on the ban on the production, import
and distribution of circumvention devices designed or adapted to permit the unauthorised use of a
conditional access service. The court made it clear in its decision that this ban also covers devices
originally not put on the market for the purpose of circumventing conditional access and went on to
say that determining the purpose of a device not only followed from the manufacturer’s instructions
but also from a consideration of all the circumstances involved. In the court’s opinion, such factors as
the technical knowledge of potential users, existing practices or advice from third parties could even
override the different purpose stated by the manufacturer.47
2. (Link With) Private Copies
In 2006, France’s Cour de Cassation, the country’s highest appellate court, had to rule on the
extent to which a copy protection mechanism (in this case DRM) is compatible with the private copy
exception.48 The action had been brought by a citizen who had been prevented from making a copy
on a VHS cassette by the copy protection installed on his legally acquired DVD and regarded this as
a breach of his “right to a private copy”. The court ruled that there was no right to a private copy but
only an exception to the copyright protection. With reference to the three-step test, it said making a
copy of a DVD on a VHS cassette adversely affected the normal use of the work, so that the
installation of the technical protection mechanism was lawful.49 Protection mechanisms, including
45
COMMERCIAL INTERFACE PLUS (Apr. 15, 2012), http://www.ci-plus.com/index.php (This also enables a check to be made to see
whether any advertising skipping technology installed in the user’s devices can be effectively employed (see also II.6.1. below).
46
Press Release, Consumer Rhineland-Palatinate, IAAF World Cup in HDTV: Consumer Sees HD + and CI + is Highly Critical
(Aug. 3, 2009) available at http://www.verbraucherzentrale-rlp.de/UNIQ133462682228733/link591451A.html (Critics also
complain that it is possible to extensively monitor what the end user does with the programmes).
47
Oberlandesgericht Frankfurt [OLG Frankfurt] [Frankfurt Appeals Court], Case no. 6 U 7/03, June 5, 2003 (Ger); see also Ingo
Beckendorf, Illicit Decoding of Conditional Access Services, 2003-8:14/28 IRIS LEGAL OBSERVATIONS OF THE EUROPEAN
AUDIOVISUAL OBSERVATORY (2003), available at http://merlin.obs.coe.int/iris/2003/8/article28.en.html.
48
Cour de cassation [Cass.] [supreme court for judicial matters] 1e civ., Feb. 28, 2006, Bull. civ. I, No. (Fr.), available at
http://www.foruminternet.org/telechargement/documents/cass20060228.pdf.
49
For a further discussion of rights management systems and their relationship with private copies, see Francisco Javier Cabrera
Blázquez, Digital Rights Management Systems (DRMs): Recent Developments in Europe, 17.1 MEDIA L. & POL’Y 2 (2007).
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DRM, are protected by the French regulations implementing the Copyright and Related Rights Act of
2006, which makes it a punishable criminal offence to possess or use devices that enable a technical
protection mechanism installed in a work to be rendered inoperative or one or more information
elements that identify the rightsholder to be destroyed.50
A decision delivered in 2007 by the Aix-en-Provence Court of Appeal also related to the
private copy exception. In that decision, the court ordered a student to pay damages and a fine for a
breach of Articles L 335-2 and L 335-3 of the French Intellectual Property Code51 of 1992. The
accused had collected 507 different film titles by downloading them from the Internet and copying
borrowed CD-ROMs, lent some to friends and distributed some on P2P networks. He had also
watched some of the films with friends. In the Court of Appeal’s opinion, his conduct had resulted in
a breach of the ban on copying, making publicly available, performing and distributing copyrighted
works without the rightsholder’s permission. The court dismissed the defendant’s claim in respect of
the private performance and private copy exceptions pursuant to section L 122-5(1) and (2) of the
Intellectual Property Act on the ground that showing various films in a group of friends was not
covered by the term "inner family circle," which had to be subjected to a narrow interpretation. Also,
lending the copied CD-ROMs to friends did not constitute “private use” as it resulted in the
defendant losing control over the further use and distribution of the works by his friends. With regard
to the private copy of the downloaded films, the court ruled that the defendant could not rely on the
private copy exception if the work to be copied had not been legally acquired.52
Many European legislatures have provided for rightsholders to be compensated for losses of
revenue that may be caused by the exploitation of the exception granted under domestic law to make
a “private copy”. Private broadcasters (represented by VG Media) recently brought a state liability
action against the Federal Republic of Germany on the ground that it had not properly transposed
Directive 2001/29/EC.53 The aim of the action was to secure a share of the receipts of copying fees
levied on blank media (section 54(1) of the Copyright Act) as compensation for private recordings
(section 53 of the Copyright Act). In contrast to holders of other copyright-related rights,
broadcasters are excluded from the levy (section 87(4) of the Copyright Act), and the plaintiff
considered this incompatible with Article 5(2)(b) of the Directive, stating that Article 2(e) of the
Directive provided that it was always the broadcaster that held the reproduction right. It went on to
state that Article 5(2)(b) provided that the rightsholders should “receive fair compensation” in
connection with the private copy exception. These rules had not been properly transposed into
German law, which was why the plaintiff was claiming damages with reference to state liability
under Community law.
50
Décret 2006-1763 du 23 décembre 2006 relatif à la répression pénale de certaines atteintes portées au droit d'auteur et aux
droits voisins [Decree No. 2006-1763 of December 23, 2006 on the Criminal Punishment of Certain Infringements of Copyright
and Related Rights], JOURNAL OFFICIEL DE LA REPUBLIQUE FRANCAISE [J.O][OFFICIAL GAZETTE OF FRANCE], Dec. 30, 2006, p.
20161.
51
Loi 92-597 du 1 juillet 1992 relative au code de la propriete intellectuelle [Law No. 92-597 of July 1, 1992 on the Intellectual
Property Code], JOURNAL OFFICIEL DE LA REPUBLIQUE FRANCAISE [J.O.] [OFFICIAL GAZETTE OF FRANCE], July 1, 1992, (amended
by Loi 97-283 du 27 mars 1997 [Law No. 97-283 of March 27, 1997]).
52
Cour d’appel [CA] [regional court of appeal] Aix-en-Provence, 5th Chamber, Sept. 5, 2007 (Fr.), available at
http://www.juriscom.net/documents/caaixenprovence20070905.pdf.
53
See Directive 2001/29/EC, of the European Parliament and of the Council of 22 May 2001 on the Harmonisation of Certain
Aspects of Copyright and Related Rights in the Information Society, 2001 O.J. (L 167) 10.
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The Kammergericht Berlin (Berlin Court of Appeal) agreed with the lower court and dismissed
the claim,54 stating that it presupposed that section 87(4) of the Copyright Act had to be incompatible
with mandatory Community provisions. Moreover, that violation had to constitute an obvious and
significant breach of Community law. It could not be definitively concluded from the wording of
Article 5(2)(b) of the Directive that the “fair compensation” had to be made through a share of the
levy on devices – or, indeed, through a “reward, indemnification or payment”. The member states
were given considerable scope with regard to enacting relevant provisions, and this view was
supported both by Recitals 35 and 38 and the genesis of the Directive, according to which the “fair
compensation” was to be understood as a generic term and given a flexible interpretation. This
flexibility also allowed the rightsholders concerned to be treated differently. As was clear from the
preparatory documents, the domestic legislature had decided not to allow the broadcasters a share of
the levy on devices as they received payment for the production of sound carriers and films and the
permission to make private copies did not affect the “core area” of their copyright entitlement under
section 87(1) of the Copyright Act.55 This core area was the right of retransmission and of public
performance. In contrast, the manufacture and sale of copies formed the core of the activity of the
sound carrier and film producers, and that area was directly affected by the right to make private
copies. The defendant had not exceeded the broad legislative scope granted it by the Directive, so
that no obvious and significant breach of Community law had taken place and the claim made by VG
Media was ill founded. No leave to appeal against this judgment on points of law was granted.
E. Public Viewing Exhibitions
Public viewing exhibitions involve live television images being broadcast at locations
accessible to the public – usually in connection with popular major sports events such as the recent
football World Cup.56 The broadcasts are shown in public venues or at open-air locations as part of
(large-scale) specially organised events, as well as at schools, sports clubs and local council
premises.
It is first of all difficult to draw a firm distinction between a private celebration (such as a
World Cup party) and public viewing exhibitions of television broadcasts in their various
manifestations – organised event or not, commercial or non-commercial – and the different issues
involved, such as the licences required (for example from GEMA, the Fédération Internationale de
Football Association (FIFA) or the Union of European Football Associations (UEFA)57). In the case
of a party held by an exclusively private group of people, with guests who know one another, no
54
Kammergericht Berlin [KG][Berlin Court of Appeal] Apr. 14, 2009 (Ger.), available at
http://www.gerichtsentscheidungen.berlinbrandenburg.de/jportal/portal/t/1ckl/bs/10/page/sammlung.psml?pid=Dokumentanzeige&showdoccase=1&js_peid=Trefferliste&d
ocumentnumber=116&numberofresults=187&fromdoctodoc=yes&doc.id=KORE406372009%3Ajurisr01&doc.part=L&doc.price=0.0&doc.hl=1#focuspoint.
55
DEUTSCHER BUNDESTAG: DRUCKSACHE [BT] 16/1828, (Ger.), available at
http://dipbt.bundestag.de/dip21/btd/16/018/1601828.pdf, at 16.
56
Fabian Reinholz, Lizenzgebühren für Public Viewing?, 6 KOMMUNIKATION & RECHT 364 (2010)(Ger.).
57
On public performances as far as UEFA is concerned, see Union of European Football Associations, UEFA Public Viewing
Terms and Conditions for matches of the UEFA European Football Championship 2008, available at
http://www1.uefa.com/MultimediaFiles/Download/Competitions/Finals08/68/63/77/686377_DOWNLOAD.pdf. The discussion
here is limited to the rules established by FIFA and GEMA.
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licences are necessary – with the exception of any television licence fees payable. Such a party
differs from the public performance in that it is not directed at the general public.
FIFA requires all exhibitors to apply to it for a licence but only demands licence fees in the
case of commercial events. The public exhibition is commercial when the exhibitor carries it out for
commercial purposes, which is assumed to be the case when an admission charge is made,
sponsorship is involved or other business benefits are obtained.58 Expressly excluded are “pubs, clubs
and bars” (paragraph 1 of the relevant FIFA regulations). FIFA stipulates what broadcast coverage is
to be selected (paragraph 2; with any pay-TV costs payable by the exhibitor). The broadcast coverage
must be simultaneous and shown in its entirety (paragraphs 4 and 7) and no sponsors that are not
FIFA marketing affiliates may be involved. An exception may be made for local sponsors if they are
not competitors of FIFA marketing affiliates (paragraph 5). Public viewing exhibitions are
considered non-commercial59 when no admission charges are made (paragraph 10) and no sponsors
are involved (paragraph 5). Non-commercial organisers are not obliged to pay any licence fees but
are subject to the same (strict) conditions concerning the choice of match broadcast coverage
(paragraph 2) and the form of the coverage (paragraph 7).
In Germany, GEMA60 manages – irrespective of any obligation to obtain a licence from FIFA
– the rights concerning any music played during a public viewing exhibition as well as the rights of
journalists and sports reporters of which the management has been assigned to it by the collecting
society VG Wort. It draws a distinction between public exhibition that does not have the character of
an event – in pubs, retail stores or similar locations – which is subject to a lower rate, and public
exhibition that does have the character of an event, is advertised separately from the normal business
operation, involves additional services and is often accessible against payment of an admission
charge. The relevant rate is payable on a case-by-case basis.
From the copyright point of view, it needs to be pointed out that the FIFA regulations do not
have the force of law and that any claims are always determined by reference to domestic law. In
Germany, section 87(1)(3) of the Copyright Act gives broadcasters the exclusive right to allow the
public to view or listen to their programmes against payment of an admission charge. However, this
right is transferable under section 87(2) of the Copyright Act, so FIFA can in principle exploit the
television rights after they have been acquired. In this case too, however, it follows from the wording
of the provision that a public viewing exhibition may only be prohibited if it is accessible "against
payment of an admission charge," which is to be understood as the direct payment for admission to
an event,61 and any indirect payment, for example charges added to prices of food and drink. It is the
predominant view, however, that this does not include the involvement of a sponsor,62 so the
58
See International Federation of Association Football (FIFA), FIFA Regulations for Public Viewing Exhibitions, available at
http://pt.fifa.com/mm/document/tournament/loc/01/12/91/88/fwc2010_regulations_for_commercial_public_viewing_exhibitions
_100330.pdf.
59
See International Federation of Association Football (FIFA), Non-Commercial Public Viewing Events of the 2010 FIFA World
Cup South Africa, available at http://www.fifa.com/mm/document/tournament/loc/01/12/91/96/fwc2010_regulations_for_noncommercial_public_viewing_exhibitions_100330.pdf
60
Public viewing exhibition rates for the 2010 World Cup: https://www.gema.de/presse/pressemitteilungen/pressedetails/article/gema-bietet-sondertarif-zur-fussball-wm.html
61
Reinholz, supra note 56, at 366.
62
Id. at 366.
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obligation to obtain a licence under the FIFA regulations goes beyond what can be demanded under
the German Copyright Act. A public viewing exhibition organised without making an admission
charge cannot be effectively prohibited under section 87(1)(3) of the Copyright Act.
F. Ad-Skipping and Hybrid TV
Broadcasters’ rights may also be affected due to unfair competition. There are parallels here to
the core copyrights and related rights granted broadcasters (to protect their investments), to which we
shall now turn our attention.
1. Skipping Commercial Messages
In the context of “traditional” television, the BGH had to pass judgment on a case in 2004
involving a complaint by a private, advertising funded television station, which had sued the
manufacturer of a device programmed to switch automatically at the beginning of a commercial
break to another television channel not interrupted by advertising.63 The plaintiff considered this
practice a breach of section 1 of the Gesetz gegen den unlauteren Wettbewerb (Unfair Competition
Act). In particular, it claimed, it constituted an impediment to its business and a “general disruption
of the market”. The court ruled that the plaintiff had not been actually impeded in any way as the
defendant neither exerted direct influence on its transmissions nor the commercials they contained.
The device merely offered viewers the possibility of cutting out the advertising. The court also
denied that there had been a general disruption of the market because, although the distribution of the
device made its economic activity more difficult, the plaintiff was not yet threatened to an extent that
jeopardised its livelihood.
2. Hybrid TV
So-called Hybrid TV is a technology that is mainly available from manufacturers of reception
devices (television sets, set-top boxes) and permits both the reception of programmes broadcast by
radio waves and of content available via broadband Internet using the Internet Protocol (IP).
In particular, Hybrid TV makes it possible to create an “Internet framework” for displaying
television signals on-screen. This can be used to display different types of content that will normally
have been specially adapted for this purpose. The non-broadcast content that the user can access is
always controlled by the company that makes the application available through the use of the end
devices it markets. This control is mainly possible by pursuing a so-called “walled-garden” policy, in
which case it is rendered impossible to switch to the open Internet. There are, however, end devices
that impose virtually no restrictions on this, i.e. involve no or very little control.
The incorporation of access to IP-based content/applications not controlled by the
manufacturer is, among other things, the subject of a standard accepted on 1 July 2010 by the
European Telecommunications Standards Institute (ETSI) in version 1.1.1 of the HbbTV64
specification.65 In the broadcasters’ opinion, its importance mainly lies in the fact that they can
63
Bundesgerichtshof [BGH] {Federal Court of Justice] June 24, 2004 (Ger.), available at http://juris.bundesgerichtshof.de/cgibin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=95f0c7769655158b8ee1219b652f0b18&nr=30179&pos=0&anz=1.
64
HBBTV (July 16, 2012), http://www.hbbtv.org.
65
European Telecommunications Standards Institute, Hybrid Broadcast Broadband TV, ESTI TS 102 796 (June 2010).
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program applications that permit the retrieval of content via media libraries and/or are suitable for the
supplementary display of (audiovisual) commercial communication. The question of what
information the user can retrieve – when this program is employed – can accordingly be decided by
different bodies.
Hybrid TV also raises both competition and copyright related issues with regard to
broadcasters’ rights. In Germany, television stations regard as a breach of the Unfair Competition
Act the conduct of an Internet provider that in response to an enquiry from a user places its content
next to the actual television picture or even superimposes it on it. They claim that the Internet
provider unfairly exploits its competitors’ prior outlays (investment in infrastructure, setting and
developing the signal range) and is thus in breach of section 1 of the Unfair Competition Act. This
view can be countered by reference to a BGH judgment in 2004 establishing that unfair competition
can always be ruled out when the user himself/herself brings about the situation complained of by
taking an autonomous decision.66 This is the case here: it is entirely up to the user to decide to what
extent he/she makes use of the services of an Internet provider in addition to receiving the actual
television signal.
Broadcasters’ rights enshrined in section 87 of the German Copyright Act may also be affected
by the new technologies. Here, too, in the rightsholders’ opinion the Internet provider is easily able to
turn the television broadcasters’ prior investments to its own advantage. However, as superimposing
Internet-based content on the television signal does not result in its being changed or copied,
retransmitted or made publicly accessible or the subject of a public performance, the protection
afforded by section 87 does not apply. Broadcasters are therefore clearly endeavouring to bring about
a widening of the scope of the relevant provision that would result in also giving protection to a
“further exploitation” involving a new technical development.67
G. Interim Conclusions: New Services and Legal Challenges
The discussion of current economic and technical developments and their legal classification in
the previous parts of this section has shown that the assessment is not always entirely clear.
It is obvious that the unlawfulness or, indeed, lawfulness of new business models based on the
audiovisual content distributed by broadcasters first of all depends of their actual technical features –
including in the case of functionally comparable services. Second, the decisive factor is the scope of
the provisions protecting the broadcast signal (and the exceptions to these provisions) in an
individual case and, in particular, what rights are actually affected. Even within one legal system, but
even more when a comparative analysis is made of different systems, it is in the details that
differences emerge. For example, although European Union directives have harmonised national
provisions in respect of individual issues – including bringing about a minimum level of protection –
the nature and/or interpretation of rights in individual states and/or the limits imposed on them may
differ from one another, which may be the reason why the impression is gained that the protection is
(has become) “porous”.
66
See BGH, supra note 63.
67
Cf. Kitz, Hybride Empfangsgeräte – Prüfstein für Europäisches Medienordnung in: Festschrift aus Anlass des 20-jährigen
Bestehens des Instituts für Europäisches Medienrecht, Kleist/Rossnagel/Scheuer (EMR), vol. 40, Baden-Baden 2010.
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III. THE CURRENT LEGAL DISCUSSION AT THE INTERNATIONAL LEVEL
At the international level, the existing level of protection for broadcasters is felt to be
problematic. In 1996, the Performances and Phonograms Treaty, a WIPO treaty in favour of other
holders of copyright-related rights, was adopted. Its clear purpose was to take account of the
challenges expected as a result of digitisation. Broadcasters were not included at that time, which
explains why great efforts continue to be made to push through amendments to existing agreements
and treaties and/or create new instruments. During the 22nd session of the Standing Committee on
Copyright and Related Rights (SCCR) held in June 2011, the commitment on WIPO level towards
the development of a new Treaty on the Protection of Broadcasting Organizations has been
substantiated by the establishment of some detailed elements for a Draft Treaty on the Protection of
Broadcasting Organizations.68 These were grounded on an informal consultation meeting of the
WIPO Members with observers on the protection of broadcasting organizations as well as technical
experts (14-15 April 2011). The participants of the meeting agreed that the Chair should outline a
non-paper on this issue for the 22nd session, considering the impact of technological – particularly
digital – development as well as following a technology-neutral and signal-based approach. The
Elements for a Draft Treaty on the Protection of Broadcasting Organizations delineate the objectives
and define the scope and object of protection of the Treaty to come under negotiation. Such
commitment has been further affirmed by the conclusions of the SCCR to its 23rd session held in
November and December 2011,69 during which the delegations of South Africa and Mexico
presented a draft version of such Treaty and a work plan was drawn up.70 In this plan the WIPO
Members were called upon to comment the proposal of the named delegations, which should then
revise the proposal at hand. The outcome of this should subsequently build the base of the next
session. According to the work plan the scheduling of a Diplomatic Conference on the topic in due
time shall be aimed at. Informal consultations on the protection of broadcasting organizations held
during the 23rd session resulted in further statements of intent.71 During the 24th session from 16-25
July 2012, the SCCR reaffirmed its commitment to work, on a signal-based approach, towards
developing an international treaty to update the protection of broadcasting and cablecasting
organizations in the traditional sense. In this regard, the Committee adopted a text titled "Working
document for a treaty on the protection of broadcasting organizations," which will constitute the
basis of further text-based discussions.72
68
WIPO, Elements for a Draft Treaty on the Protection of Broadcasting Organizations, STANDING COMM. ON COPYRIGHT AND
RELATED RIGHTS (May 30, 2011), http://www.wipo.int/edocs/mdocs/copyright/en/sccr_22/sccr_22_11.pdf.
69
WIPO, Conclusions of the Twenty-Third Session of the Standing Committee on Copyright and Related Rights, STANDING
COMM. ON COPYRIGHT AND RELATED RIGHTS (Dec. 2, 2011),
http://www.wipo.int/edocs/mdocs/copyright/en/sccr_23/sccr_23_ref_conclusions.pdf.
70
WIPO, Draft Treaty on the Protection of Brodcasting Organizations: Proposal Presented by the Delegations of South Africa
and Mexico, STANDING COMM. ON COPYRIGHT AND RELATED RIGHTS (Nov. 28, 2011),
http://www.wipo.int/edocs/mdocs/copyright/en/sccr_23/sccr_23_6.pdf.
71
WIPO, Report on the Informal Consultations on the Protection of Broadcasting Organizations: Prepared by the Chair of the
Informal Consultations on the Protection of Broadcasting Organizations, STANDING COMM. ON COPYRIGHT AND RELATED RIGHTS
(Jan. 27, 2012), http://www.wipo.int/edocs/mdocs/copyright/en/sccr_23/sccr_23_9.pdf.
72
WIPO, Conclusions of the Twenty-fourth Session of the Standing Committee on Copyright and Related Rights, STANDING
COMM. ON COPYRIGHT AND RELATED RIGHTS (Jul. 25, 2012)
http://www.wipo.int/edocs/mdocs/copyright/en/sccr_24/sccr_24_ref_conclusions.pdf. WIPO, Draft Agenda for the Twenty-fifth
177
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The Council of Europe Committee of Ministers decided that at least the Council of Europe
should strive to bring about internationally binding rules on the protection of broadcast signals in
order to be able to safeguard audiovisual content against piracy, and it instructed the Steering
Committee on the Media and New Communication Services to carry out the necessary work.73 This
initiative was taken after an international treaty on neighbouring rights for broadcasters (the so-called
WIPO Broadcasting Treaty) had been discussed under the auspices of WIPO for a long time but had
come to a standstill without any appreciable results in 2007, when the negotiations were broken off
because of insurmountable differences of opinion on fundamental issues.74 The aim of the
consultation carried out, in which the European Community and its member states (as well as the
then applicant countries Bulgaria and Romania) were involved and issued statements,75 was to bring
about the revised, modernised and balanced protection of broadcasters in view of the complex
developments in the area of the communication and information technologies. On December 13,
2011, the Council of the European Union confirmed that the European Commission will be entitled
to participate in these negotiations on behalf of the European Union as regards matters falling within
the Union’s competence and in respect of which the Union has adopted rules. The member states
shall participate on their own behalf in the negotiations only in so far as matters that arise in the
course of the negotiations fall within their competence.76
The Council of Europe’s Steering Committee initially decided to set up a group of experts,
which then took stock of the rules of protection applying under international and European law. With
reference to a Committee of Ministers recommendation adopted in 2002,77 the group reached the
conclusion in 2008 that there was a need for a stronger initiative. In the course of 2009, the Steering
Committee took important preliminary decisions concerning this initiative, among other things the
setting up of an ad hoc advisory group. At a consultation meeting held at the end of January 2010, the
group identified several aspects that would have to be taken into account in the creation of a binding
instrument.78
Session: Prepared by the Secretariat, STANDING COMM. ON COPYRIGHT AND RELATED RIGHTS (Sep. 7, 2012),
http://www.wipo.int/edocs/mdocs/copyright/en/sccr_25/sccr_25_1_prov.doc.
73
Steering Committee on the Media and New Communications Services (Nov. 29, 2011-Dec. 2, 2011), available at
http://www.coe.int/t/dghl/standardsetting/media/cdmc/CDMC(2011)028_en.pdf.
74
Non-Paper on the WIPO Treaty on the Protection of Broadcasting Organisations (Apr. 20, 2007), available at
http://www.wipo.int/edocs/mdocs/copyright/en/sccr_s2/sccr_s2_paper1.pdf
75
See Submission to the WIPO on the Treaty for the Protection of Broadcasting Organisations, THE EUROPEAN COMMUNITY AND
(July 20, 2006),
http://ec.europa.eu/internal_market/copyright/docs/wipo/wipo-broadcasting2006_en.pdf.
ITS MEMBER STATES AND THE ACCEDING STATES BULGARIA AND ROMANIA
76
Decision of the Council and of the Representatives of Governments on the Member States Meeting Within the Council on the
Participation of the European Union and its Member States in negotiations for a Convention of the Council of Europe on the
Protection of the Rights of Broadcasting Organisations, (Dec. 13, 2011),
http://register.consilium.europa.eu/pdf/en/11/st18/st18061.en11.pdf; Press Release, Council of the European Union, 3139th
Council Meeting, Environment (Dec. 19, 2011),
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/envir/127063.pdf; Memorandum from the General
Secretariat of the Council of the European Union to the Permanent Representatives of the Committee/Council (Dec. 8, 2011),
available at http://register.consilium.europa.eu/pdf/en/11/st18/st18062-ad01.en11.pdf.
77
Recommendation Rec (2002)7 of the Committee of Ministers to Member States on Measures to Enhance the Protection of the
Neighbouring Rights of Broadcasting Organisation, COUNCIL OF EUR., COMM. OF MINISTERS (Sept. 11, 2002),
http://www.ebu.ch/CMSimages/en/leg_ref_coe_r2002_7_nr_110902_tcm6-4398.pdf.
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However, the Steering Committee, on its meeting from March 27-30, 2012, agreed that the
question of neighboring rights of broadcasting organizations will be put on hold awaiting
developments within the European Union.79 This is remarkable insofar as the Council of the
European Union, as mentioned above, already confirmed in December 2011 the competences of the
European Commission to participate in the respective negotiations.
Summarising the state of the discussion at the level of WIPO and in the context of the new
Council of Europe initiative, the key aspects include the following:
 Clear definitions: There is general agreement on the need to clarify what activities of
broadcasters should enjoy rights protection and how signals should be treated before they
are broadcast. The term “broadcasting” should be defined in a technology-neutral way
and a signal-based approach should be adopted.
 Clarification of the time aspect with regard to the object of protection: According to one
opinion, the strictly signal-based approach logically means that a treaty based on it would
not cover any uses to which the signal is put after it has been broadcast as these uses no
longer relate to the signal but to the broadcast and recorded content. In our opinion,
however, the effectiveness of the protection of the signal also requires the inclusion of
actions undertaken after the recording has been made – and the inclusion of the relevant
copyright-related rights. “Signal-based protection” should be understood to mean that the
compilation of the content and its transmission result in its protection.
 Clarification of the area of application as far as content is concerned: According to the
discussions, linear services are to be covered irrespective of the methods and platforms
via which they are distributed. However, in the WIPO negotiations no agreement was
reached on whether a future treaty should also refer to webcasting. Broadcasters called
for exclusive rights for programmes transmitted over the Internet, but critics saw in this a
threat to freedom of expression and information on the Internet. The European
Community was moving towards having simulcasting at any rate fall within the scope of
the protection provided.80 There is disagreement in particular on whether on-demand
services should be covered. One view is that they are already protected under other
provisions, for example by the copyright protection of databases or the protection of
conditional access services. This view is countered by reference to the fact that the
distribution of the signal provided by the broadcasters serves the purpose in both cases of
transmitting content to the user, so that no distinction should be drawn with regard to the
object of protection.
 Object of protection: The elements on which the 1961 Rome Convention and other
international treaties are based should be included here, in particular investments carried
out, programme planning and organisation, preparation for public reception, liability for
rights acquired and the publisher’s responsibility.
78
Consultation Meeting on the Protection of Rights of Broadcasting Organisations (Jan. 28-29, 2010), available at
http://www.coe.int/t/dghl/standardsetting/media/MC-S-NR/MC-S-NR_2010_Misc1rev%20EN%20Meeting%20Report.pdf.
79
Steering Committee on the Media and Information Society, (Mar. 27-30, 2012), available at
http://www.coe.int/t/dghl/standardsetting/media/CDMSI/CDMSI_2012_002Rev_Abridged_report_en.pdf.
80
Cf. WIPO, Proposal of the European Community and its Member States, STANDING COMM. ON COPYRIGHT AND RELATED
RIGHTS (June 24, 2003), http://ec.europa.eu/internal_market/copyright/docs/wipo/wipo-broadcasting_en.pdf.
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




Scope of protection: A binding instrument should grant broadcasters exclusive rights,
comparable to the creators’ authorisation rights, with regard to the retransmission, public
performance (against an admission charge), recording, reproduction of recordings,
making publicly accessible, further transmission and distribution of their protected
broadcasts. Here, too, the individual rights should be defined in a technology-neutral
way.
Pre-broadcast signals: The need to protect such signals (for example raw data or content
that is transferred but not broadcast) is in principle recognised. If this content were not
protected, third parties could easily appropriate it and claim rights in it in some form or
other.
Obligation to protect technical rights management measures: No agreement on this was
reached in the WIPO negotiations. Supporters argued that this was a fundamental aspect
that clearly showed the need for a new instrument. Broadcasters had no obligation to
introduce technical measures to manage their rights but if they did so those measures also
had to be protected. Others held the view that this would make it harder for the general
public to access information already in the public domain. Moreover, they pointed out, it
was to be feared that the mere fact that this protection was enshrined in law would result
in the more extensive use of technical measures.
Duration of protection: With regard to the duration of the protection afforded, no
agreement could be reached either in the WIPO negotiations or in the ad hoc group’s
initial deliberations. Those holding the view that the signal should only be protected until
the time of the recording logically regarded the introduction of a specified duration as
superfluous because only simultaneous transfers would be covered in any case. The
proposals of the supporters of the principle of protection beyond the time of the recording
varied between 20 and 50 years.
Exceptions to and limitations on rights: In the WIPO negotiations, no agreement was
reached on the arrangements concerning exceptions and limitations. The consultation at
the Council of Europe came out against drawing up an exhaustive list and in favour of
employing the three-step test approach. In the WIPO negotiations, the European Union
unequivocally supported drawing up an exhaustive list of possible exceptions and
limitations.81
IV. CONCLUSIONS AND FUTURE OUTLOOK
The controversies surrounding personal video recorders and portals illustrate with respect to all
new services how different national ways of addressing issues can be. On the one hand, PVR services
(offered by providers that are independent of television broadcasters) are generally regarded as
unlawful in Europe (Wizzgo in France and Shift.TV and save.tv in Germany), whereas in the United
States the same service (offered by a cable TV operator, Cablevision) was considered lawful. On the
other hand, in the case of the legal disputes concerning the various types of portal it is clear that a big
distinction has to be drawn between cases where the user is simply guided to the broadcasters’
81
See supra note 53.
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Media Law & Policy
(original) services (tv-replay.fr) and those where the “service” is much more extensive, especially
because it enables unlawfully produced copies of programmes to be made more or less directly
accessible (Newzbin). The reason for a portal being able to avoid a verdict of illegality, with the
result that the broadcasters cannot take any action against it, is sometimes to be found in the
exceptions for such services contained in provisions outside copyright law that limit their liability
under certain circumstances. A great deal depends in an individual case on how much and, in
particular, how promptly the providers co-operate with the rightsholders (see on the one hand the
U.S. case Viacom v. YouTube and on the other hand the Italian case of Mediaset v. YouTube). Finally,
it has become clear that the effectiveness of the protection also depends on the systematic
arrangements for (and interpretation of!) exceptions in favour of third parties – in this area, the
greater harmonisation of the legal approaches seems just as difficult as it is necessary. An example
that might be mentioned here is the view still held today by a German court of appeal that – with
reference to a view expressed by the legislature and irrespective of the enormous increase in the
capacity of broadband Internet access for private individuals and of the storage media they possess –
the core of the protection of broadcasters is not protection against (private) copying.
The discussion concerning the legal protection of broadcasters and the need to adapt it to
current challenges shows that extremely complex questions are involved. They are also complex
given the need to formulate any changes to neighbouring rights in a way that ensures that the
protection granted to creators and other rightsholders is not adversely affected. The reform debate
will be continued, both at the Council of Europe at a first (regular) meeting of the Steering
Committee’s ad hoc advisory group82 and by WIPO, whose SCCR – after having presented a study
produced on this subject at its 21st session in November 201083 – proceeded to formulate a Draft
Treaty on the Protection of Audiovisual Performances after having reached an agreement on the
transfer of rights from the performed to the producer.84
V. AMERICAN PERSPECTIVES***
A. Portals and Navigators
Section 512(c) of the Copyright Act attempts to balance the rights of copyright-owning
broadcasters with the interests of the digital-consuming public. Commonly referred to as the “Safe
Harbor” provision, this part of the Copyright Act is aimed at protecting online service providers
(OSP’s) of digital content from liability of copyright infringement. In order to be free from liability,
the OSP must not have knowledge that the material it posts is infringing, must not receive a financial
*** Co-Authors William Palka, B.S., Syracuse University (2009); J.D., New York Law School (2013) and Ryan G. Lewis, B.S.,
Villanova University (2009); J.D., New York Law School (2013).
82
Cf. WIPO, Study on the Socioeconomic Dimension of the Unauthorized Use of Signals – Part III: Study on the Social and
Economic Effects of the Proposed Treaty on the Protection of Broadcasting Organizations, STANDING COMM. ON COPYRIGHT AND
RELATED RIGHTS (Aug. 4, 2010), http://www.coe.int/t/dghl/standardsetting/media/MC-S-NR/default_en.asp
83
WIPO, Study on the Socioeconomic Dimension of the Unauthorized Use of Signals – Part III: Study on the Social and
Economic Effects of the Proposed Treaty on the Protection of Broadcasting Organization, STANDING COMM. ON COPYRIGHT AND
RELATED RIGHTS (Aug. 10, 2010), http://www.wipo.int/edocs/mdocs/copyright/en/sccr_21/sccr_21_2.pdf.
84
E.g., Press Release, World Intellectual Property Organization, Agreement on Transfer of Rights Paves Way to Treaty on
Performers’ Rights (June 24, 2011), available at http://www.wipo.int//pressroom/en/articles/2011/article_0018.html.
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benefit directly attributable to the infringing activity, and must remove the content expeditiously if
given warning by the copyright owner of infringing activity.85
While measures such as the safe harbor provision have been taken to protect OSP’s, legislation
has also been introduced that increases punishment for those who illegally transmit copyrighted
material for financial gain.86 In March 2011, the Intellectual Property Enforcement Coordinator
(IPEC) suggested that criminal enforcement of copyright laws were not adequate because there were
questions as to whether streaming copyrighted content constituted distribution of a copyrighted work
or performance of those works. If the streaming constituted distribution it was considered a felony,
while performance was merely classified as a misdemeanor.87 On May 12, 2011, a bill was
introduced in the Senate aimed at increasing penalties for criminal copyright infringement. Enacted
on June 20, 2011, the bill expanded felony infringement to include public performance of a work.88
Supporters of this bill argue that the law needs to be changed in order to keep up with advancements
of technology. Since illegal streaming over the Internet has become more popular and indicates an
infringement of the public performance right, supporters argue that the punishment for streaming
should be classified as a penalty.89 Opponents of the bill have argued that the law is too broad and is
likely to be misapplied. Some worry that bloggers who post infringing YouTube videos on their sites
may be targeted by the bill if they run the infringing material alongside advertising, which could be
evidence of “private financial gain.”90
1. Viacom v. YouTube
In April 2012, the Second Circuit reversed the district court’s grant of summary judgment to
YouTube in Viacom’s suit against the user generated content web site.91 The decision opened up the
door for future litigation against YouTube by ruling that “a reasonable jury could find that YouTube
had actual knowledge or awareness of specific infringing activity on its website.”92 Although the
court reversed the grant of summary judgment, it reaffirmed that the safe harbor provisions of the
DMCA protected YouTube so long as they removed infringing content expeditiously upon request.
85
17 U.S.C. § 512(c)(1)(2006).
86
S. 978, 112th Cong. § 1(a)(2011).
87
U.S. Intellectual Property Enforcement Coordinator, Administration’s White Paper on Intellectual Property Enforcement
Legislative Recommendations, March 2011, at 10, http://www.whitehouse.gov/sites/default/files/ip_white_paper.pdf.
88
See supra note 2; see also Brian T. Yeh, Illegal Internet Streaming of Copyrighted Content: Legislation in the 112th Congress,
CONGRESSIONAL RESEARCH SERVICE, 7 (Aug. 29, 2011), http://ipmall.info/hosted_resources/crs/R41975_110829.pdf.
89
Yeh, at 9 (citing Promoting Investment and Protecting Commerce Online: The ART Act, The NET Act, and Illegal Streaming:
Hearing Before the Subcommittee on Intellectual Property, Competition and the Internet of H. Comm. on the Judiciary, 112th
Cong., 1st Sess. (2011) (written statement of Maria A. Pallante, Register of Copyrights)).
90
Yeh, at 10 (citing Nathan Pollard, Senate Panel Mulls Online Streaming Bill, Takes No Vote Amid Lingering Concerns, June
15, 2011, BNA’S ELECTRONIC COMMERCE & LAW REPORT (quoting Senator Klobuchar)).
91
Viacom Int’l, Inc. v. YouTube, Inc., No. 10-3270-cv (2d. Cir. April 5, 2012), available at
http://www.ca2.uscourts.gov/decisions/isysquery/c5792ca8-db37-4107-b0f7-67548a6a5a5f/1/doc/10-3270_103342_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/c5792ca8-db37-4107-b0f7-67548a6a5a5f/1/hilite/.
92
Id. at 2.
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Some have analyzed that this decision will potentially cost Google/YouTube millions of dollars in
future litigation.93
2. Aereo
In March 2012, a group of broadcasters sued Aereo, an unlicensed service that provides
streaming television content to subscribers over the Internet onto personal mobile devices and
tablets.94 The broadcasters sought a preliminary injunction against Aereo and alleged that the
Internet company infringed the broadcasters’ public performance right and reproduction right and
alleged that the new service constituted unfair competition. In July, 2012, Aereo received an early
victory, as a federal district court judge denied the broadcasters’ request for a preliminary injunction.
The judge ruled that “although [the plaintiffs] have demonstrated that they face irreparable harm,
they have not demonstrated that the balance of hardships decidedly tips in their favor.”95 On April 1,
2013, the Second Circuit Court of Appeals essentially affirmed the district court’s decision, leaving
the case to proceed to trial.
B. Peer-to-Peer Technologies
The CyberSky TV decision mirrors the decision the United States Supreme Court handed
down in MGM v. Grokster in regards to advertising infringing features.96 In the 2005 case, the
Supreme Court applied the rule of inducement of infringement to Grokster's activities. The court
held that "one who distributes a device with the object of promoting its use to infringe copyright, as
shown by a clear expression or other affirmative steps taken to foster infringement is liable for the
resulting acts of infringement by third parties."97 "The classic instance of inducement is by
advertisement or solicitation that broadcasts a message designed to stimulate others to commit
violations."98
Traditionally the inducement rule has been used to hold liable an indirect infringer. The
District Court for the Southern District of California in Perfect 10 v. Megaupload, recently found that
"creat[ing] distinct websites, presumably in an effort to streamline users' access to different types of
media . . . [Megaupload] encourages and, in some cases pays its users to upload" copyrighted
media.99 The court found this action along with the knowledge of infringing activity taking place on
its websites to be volitional conduct and denied Megauploads motion to dismiss.100 The District
93
Sam Gustin, Federal Court Revives Landmark $1 Billion Viacom vs. YouTube Case, TIME BUSINESS, April 6, 2012,
http://business.time.com/2012/04/06/federal-court-revives-landmark-1-billion-viacom-vs-youtube-case/?iid=biz-main-lede.
94
See Complaint for Injunctive Relief and Damages (Mar. 1, 2012),
http://www.nab.org/documents/newsRoom/pdfs/030112_Aereo_complaint.pdf.
95
American Broadcasting Companies, Inc. v. Aereo, Inc., (S.D.N.Y 2012); see also Christina Warren, Aereo Gets Early Win in
Lawsuit Against Broadcasters, MASHABLE ENTERTAINMENT, July 11, 2012, http://mashable.com/2012/07/11/aereo-injunctiondenied/.
96
MGM Studios Inc. v. Grokster, Ltd., 545 U.S. 913(2005).
97
Id., at 936-37.
98
Id. at 937.
99
Perfect 10, Inc. v. Megaupload Ltd., 2011 U.S. Dist. LEXIS 81931 11-12 (S.D. Cal. 2011).
100
Id. at 12-13.
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Court for the Central District of California has issued permanent injunctions against websites such as
torrentbox.com and isohunt.com after finding they induced infringement.101 The court enjoined the
sites from hosting or providing access to any copyrighted works and assisting users in reproduction
of copyrighted works.102
C. Technical Measures for Protection Against Unauthorized Use and the Making of Private
Copies
In 1998, Congress passed the Digital Millennium Copyright Act (DMCA), part of which is
embodied in section 1201 of the Copyright Act.103 The DMCA concerns circumvention technological
protections designed to restrict access to and preserve the right to copyrighted works.104 The Act
prohibits individual acts of circumvention that control access to a work105, manufacturing or offering
devices that circumvent and provide access to a work106 or designed for the purpose of circumventing
a protection that protects an exclusive right of a copyright owner.107
In 2005, Sony BMG was using copy protected CDs to install digital rights management
(DRM) technology onto personal computers (PC).108 CDs purchased from Sony were installing a root
kit on to the consumers' PCs that enacted a restrictive DRM including possible incompatibility with
common devices used for playing the CDs.109 This resulted in a public relations fiasco for Sony
BMG. The means used to employ the software was criticized and eventually classified as "spyware"
by Computer Associates, which provided tools for its removal.110 This incident highlights the fragile
balancing a company must take to protect their intellectual property without alienating the consumer.
D. Public Viewing Exhibitions – Section 110 of the Copyright Act
Section 110 of the Copyright Act lists the types of performances and displays that are exempt
from copyright infringement.111 For example, food and drink establishments smaller than 3,750
gross square feet are among the exemptions under U.S. Copyright law, which explains why so many
restaurants and bars are permitted to show sporting events. Food and drink establishments larger
101
See Columbia Pictures Indus. v. Fung, 2010 U.S. Dist. LEXIS 91169 (C.D. Cal. 2010).
102
See id., at 20-30.
103
See 17 U.S.C. 1201 (2012).
104
See §1201(a)(1)(A).
105
§1201(a)(1).
106
§1201(a)(2).
107
§1201(b).
108
See Molly Wood, DRM this, Sony!, CNET.COM, Nov. 10, 2005, http://www.cnet.com/4520-6033_1-6376177-1.html.
109
Id.
110
See Suzi Turner, CA Targets Sony DRM as Spyware, ZDNET.COM, Nov. 8, 2005, http://www.zdnet.com/blog/spyware/catargets-sony-drm-as-spyware/698.
111
See generally 17 U.S.C. § 110 (2006).
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than 3,750 gross square feet are also exempt, although subject to restrictions regarding the size and
number of televisions broadcasting the sporting event.112
When it comes to the Super Bowl, America’s most-watched sporting event, the National
Football League (“NFL”) has sought to strictly enforce its copyright in recent years. In particular,
the NFL has targeted churches that violated federal copyright law when hosting gatherings for the
Super Bowl. For example, in 2007, the NFL warned Fall Creek Baptist Church in Indianapolis about
hosting a Super Bowl party that it planned on showing on its projector to about 400 people.113 Under
the Copyright Act, venues other than food and drink establishments smaller than 2,000 gross square
feet are exempt. Such venues that are larger than 2,000 gross square feet are also exempt so long as
they comply with the same restrictions imposed upon food and drink establishments.114 The NFL
targeted churches in large part because a significant number of churches had projection screens
exceeding the 55-inch maximum size restriction under the Copyright Act.115
On February 4, 2008, a bill was introduced in the United States Senate that sought to amend
the Copyright Act to provide an exemption for non-profit organizations.116 Although the bill was
never enacted into law, it caused enough publicity for the NFL to reverse its hard stance in seeking to
enforce its copyright against churches.117 While the NFL has relaxed its stance against churches,
these establishments still must comply with certain requirements in order to host Super Bowl parties
without facing potential liability. First, churches may not charge admission for any of its guests.
Second, churches must show the game on equipment that they use in the regular course of ministry at
their venue. Finally, although not explicitly required, churches should refrain from advertising the
event as a “Super Bowl” party since the NFL has trademarked the term.118
The NFL’s aggressive efforts in enforcing its copyright have caused some to criticize the
league for abusing and overstating its copyright protection under the current law.119 Since the
Copyright Act allows rights holders to define what constitutes infringement of their work, critics
argue that it adds an incentive for a powerful organization such as the NFL to issue warnings about
infringement that a court may deem to be fair use. Further, such organizations make it more
112
17 U.S.C. § 110 (5)(B)(ii) (2006).
113
Robert Marus, Church Super Bowl Parties OK as Long as NFL Rules Followed, Experts Say, ASSOCIATED BAPTIST PRESS,
Jan. 29, 2010, http://www.abpnews.com/content/view/4787/53/.
114
17 U.S.C. § 110 (5)(B)(i) (2006).
115
Id. See also Susan Fontaine Goodwin, Avoid Penalties of Super Bowl Copyright Infringement, COPYRIGHT COMMUNITY, Jan.
25, 2012, http://www.copyrightcommunity.com/avoid-being-tackled-by-super-bowl-copyright-infringement.
116
S. 2591 110th Cong. § 1 (2008).
117
Jacqueline L. Salmon, NFL Reverses Call on Church Parties, THE WASHINGTON POST, Feb. 21, 2008, available at
http://www.washingtonpost.com/wp-dyn/content/article/2008/02/20/AR2008022002772.html.
118
Goodwin, supra note 31.
119
See Tyler McCormick Love, Throwing the Flag on Copyright Warnings: How Professional Sports Organizations
Systematically Overstate Copyright Protection, 15 J. INTELL. PROP. L. 369 (2008).
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confusing for the general public to realize what constitutes infringement.120 As a result, innovation is
stifled, as businesses are prevented from profiting from fair use of copyrighted material.121
E. Recent Developments
In 2011, the United State Senate introduced the Protect IP Act (PIPA), an anti-piracy bill.122
Later in 2011, Representative Lamar Smith of Texas introduced PIPA’s counterpart in the House, the
Stop Online Piracy Act (SOPA).123 SOPA’s stated purpose was “[t]o promote prosperity, creativity,
entrepreneurship, and innovation by combating the theft of U.S. property, and for other purposes.”124
Both bills would permit the United States Justice Department and copyright-holders broader power in
seeking injunctions against copyright-infringing websites. While PIPA was aimed directly at foreign
web sites, SOPA targeted both foreign and domestic sites.125 Critics of the proposed legislation fear
that aggressive copyright-holders will further overstep their boundaries if the law was enacted.
Further, critics worry that social media web sites could be shut down if the sites linked to infringing
material.126 With the bill facing much scrutiny, Representative Smith withdrew his proposed
legislation in early 2012, stating, “I have heard the critics and I take seriously their concerns
regarding proposed legislation to address the problem of online piracy. It is clear that we need to
revisit the problem of foreign thieves that steal and sell American inventions and products.”127 Both
bills thus are now defunct, with the beginning of a new session of Congress.
120
Id at 389-90.
121
Id. at 396.
122
S. 968, 112th Cong. (2011).
123
H.R. 3261, 112th Cong. (1st Sess. 2011).
124
Id.
125
Luke Johnson, What is SOPA? Anti-Piracy Bill Explained, THE HUFFINGTON POST (Jan. 19, 2012, 3:27 PM),
http://www.huffingtonpost.com/2012/01/19/what-is-sopa_n_1216725.html.
126
Id.
127
Todd Wasserman, SOPA is Dead: Smith Pulls Bill, MASHABLE US & WORLD, Jan. 20, 2012,
http://mashable.com/2012/01/20/sopa-is-dead-smith-pulls-bill/.
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MEDIA LITERACY:
NO LONGER THE SHRINKING VIOLET OF EUROPEAN AUDIOVISUAL MEDIA
REGULATION?
Tarlach McGonagle*
I. INTRODUCTION
Media literacy is very much in the ascendant in European regulatory and policy-making circles
at the moment, prompting the suggestion that it has now lost its erstwhile shrinking-violet status in
the European audiovisual media sector. For a discussion of the term’s definitions, see Section II
infra.1
The article will commence with a brief exploration of selected theories surrounding media
literacy. More precisely, it will canvas the main rationales for promoting media literacy, definitional
issues, and the groups centrally implicated in media literacy initiatives – both as target groups and as
other stakeholders. The article will then identify, contextualise and scrutinise the key reference points
for the promotion of media literacy in the European audiovisual regulatory and policy frameworks.
Both the EU and the Council of Europe have adopted a number of legally binding and policy
instruments that aim to improve media literacy levels across Europe. Finally, the article will consider
the prospects for the future development of media literacy within European regulatory structures.
II. THEORETICAL APPROACHES
A. Rationales
Different rationales are advanced for the promotion of media education or literacy. According
to some experts, a coherent rationale could be developed if governments were to prioritise “the three
P’s of sound Public Policy:”
 Provision of media education for all their citizens;
 Participation of all their citizens in social, cultural and economic activities, and
 Protection of all citizens in need (either because of their age, their disabilities or their
income).2
*
Senior Researcher and Assistant Professor, Institute for Information Law (IViR), Faculty of Law, University of Amsterdam,
Netherlands. B.A., National University of Ireland, Galway (1998); LL.M., University of Essex (2001); Ph.D., University of
Amsterdam (2008). This is an updated and slightly adjusted version of an article with the same title that was published in
Susanne Nikoltchev, Ed., Media Literacy, IRIS plus 2011-3 (Strasbourg, European Audiovisual Observatory, 2011), pp. 7-27.
The author is very grateful to Kevin van ‘t Klooster, research intern at IViR, for his valuable research assistance and background
summaries relied on during the preparation of this article. He is also very grateful to Freek Ingen Housz, Department for Media,
Literature and Libraries at the Dutch Ministry of Education, Culture and Science, for sharing his keen insights into the
organisation and activities of the Mediawijzer.net initiative. Thanks are also due to Irene Andriopoulou, Media Researcher and
Head of the Media Literacy Department of the Hellenic Audiovisual Institute (IOM, website: www.iom.gr) for helpful
information provided about the IOM.
1
Discussion at note 10 infra et seq.
2
Divina Frau-Meigs & Jordi Torrent, Media Education Policy: Towards a Global Rationale, in MAPPING MEDIA EDUCATION
POLICIES IN THE WORLD 14, 20 (The United Nations Alliance of Civilization in co-operation with Grupo Communicar, Divina
Frau-Meigs & Jordi Torrent eds., 2009), available at http://unesdoc.unesco.org/images/0018/001819/181917e.pdf..
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While a coherent overarching rationale might be welcome from a theoretical perspective, its
absence should not and does not hamper the development of media literacy in practice. Indeed, the
diversity of rationales underpinning media literacy is instructive insofar as it captures the different,
cross-sectoral, multi-stakeholder interests involved.
For the purposes of this article, the main rationales for promoting media literacy have been
selected and organised as follows:
 Civic participation/empowerment;
 Bridging the digital divide;
 Risk reduction/protection from harmful content;
 Informed decision-making/consumer protection.3
These rationales have achieved resonance in academic discourse and in practice. The European
Broadcasting Union (an umbrella organisation representing the interests of public service
broadcasters and media in Europe), for instance, has organised its Principles on Media Literacy along
three main axes: “[b]ridging the digital divide,” “inform[ing] and empower[ing] citizens to
democracy,” and “creating a trusted space.”4 The relevance of these (groups of) rationales becomes
more evident after having summarised the essence of what media literacy is and involves, i.e., a
critical, civic activity with important technological and ethical ramifications, is described.5 Many
summaries exist, including the following one:
Learning to analyze news and advertising, examining the social functions of
music, distinguishing between propaganda, opinion and information, examining
the representation of gender, race and class in entertainment and information
media, understanding media economics and ownership, and exploring ways in
which violence and sexuality are depicted in media messages continue to matter
as important life skills. With the rise of digital media, there are a range of
important new media literacy skills, where we must consider issues of personal
and social identity, the complex interplay between what’s private and what’s
public, and legal and ethical issues. The powerful conceptual framework of
audiences and authors, messages and meanings, representations and realities can
deepen students’ reflexivity, critical thinking, and communication skills.6
A powerful participatory rationale underpins media literacy. Drawing on the foregoing citation,
media literacy can be described as “a prerequisite for full participation in late modern society,
involving as it does the critical skills of analysis and appreciation of the social dynamics and social
centrality of media as framing the cultures of the everyday.”7 It empowers individuals and enables
them to participate more fully in democratic societies, which are increasingly reliant on media and
information and communication technologies (ICTs).
3
For a rich exploration of relevant issues, see generally EMPOWERMENT THROUGH MEDIA EDUC. (Ulla Carlsson et al. Eds, 2008).
4
Empowering Citizenship Through Media Literacy: the Role of Public Service Media, EUROPEAN BROAD. UNION VIEWPOINT 1
(Feb. 3, 2012),
http://www3.ebu.ch/files/live/sites/ebu/files/Knowledge/Publication%20Library/Viewpoint_Media_literacy.pdf.
5
See generally Roger Silverstone, Regulation, Media Literacy and Media Civics, 26 MEDIA, CULTURE, AND SOCIETY 440, esp.
447 (2004), available at http://www.infoamerica.org/documentos_pdf/silverstone06.pdf
6
Renee Hobbs & Amy Jensen, The Past, Present, and Future of Media Literacy Education, 1 JOURNAL OF MEDIA LITERACY
EDUC. 1, 9 (2009).
7
Silverstone, supra note 4, at 448.
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The aim to reduce or eliminate the digital divide stems from the realisation that access to
digital resources and the ability to use them effectively is empowering in political, economic, social
and cultural terms. Disadvantage, in terms of digital capacity, can therefore create new societal
divisions or exclusions or exacerbate existing ones.
Analytical, evaluative and technological skills are required to protect against and minimise the
risk of adverse consequences from exposure to harmful media content. These skills facilitate the
making of “informed choices when using the Internet and other ICT’s by using and referring to
diverse media forms and content from different cultural and institutional sources; understanding how
and why media content is produced; critically analysing the techniques, language and conventions
used by the media and the messages they convey; and identifying media content and services that
may be unsolicited, offensive or harmful.”8 Similarly, by facilitating informed decision-making about
media content, these skills can also enhance awareness, alertness and consumer protection.
The process of forging a definition of media literacy necessarily draws on the rationales for
and objectives of media literacy. The consideration of its objectives sometimes includes an
itemisation of the competences that media literacy seeks to develop, as in the Preamble to the EU’s
Audiovisual Media Services Directive,9 or in the civil society initiative that culminated in the drafting
of the European Charter for Media Literacy. According to this Charter, media-literate people “should
be able to:
 Use media technologies effectively to access, store, retrieve and share content to meet
their individual and community needs and interests;
 Gain access to, and make informed choices about, a wide range of media forms and
content from different cultural and institutional sources;
 Understand how and why media content is produced;
 Analyse critically the techniques, languages and conventions used by the media, and the
messages they convey;
 Use media creatively to express and communicate ideas, information and opinions;
 Identify, and avoid or challenge, media content and services that may be unsolicited,
offensive or harmful;
 Make effective use of media in the exercise of their democratic rights and civic
responsibilities.10
In the same vein, some experts refer to “the 6 C’s of the Competences for media education:
Comprehension, Critical Capacity, Creativity, Consumption, Citizenship and Cross-Cultural
Communication.”11
The integration of the many diverse elements discussed in this section into a definition of
media literacy is no easy task, as will duly be explained.
B. Definitional Difficulties
8
Recommendation of the Committee of Ministers to Member States on Measures to Promote the Public Service Value of the
Internet, 1010th Sess., Rec. No. R 16 (2007), available at https://wcd.coe.int/ViewDoc.jsp?id=1207291.
9
See infra note 33.
10
The European Charter for Media Literacy, EUROMEDIALITERACY, para. 2, available at
http://www.euromedialiteracy.eu/charter.php.
11
Frau-Meigs & Torrent, supra note 1, at 20-21.
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On the back of the foregoing general introduction, it is useful to dwell on the question of how
media literacy is defined, because, as noted by a leading authority on the subject, Sonia Livingstone,
it “has consequences for the framing of the debate, the research agenda and policy initiatives.”12
The term, media literacy, has so far proved somewhat resistant to a fully consensual
definition.13 It means different things to different people in different sectors. As Livingstone notes,
“confusion” tends to arise when a given term is used “across diverse disciplines.”14 There is not even
agreement on the superiority of the term to other adjacent terms, like media education or media
literacy education. Different terms, reflecting different priorities, rationales and emphases, have been
in vogue during different periods of scholarship and policy-making.15 Whereas terminological
choices usually result from considered calculation, they can also, on occasion, result from the
convenience of convention. For the purposes of this article, the term media literacy will be used as
consistently as possible because it is the term preponderantly used in key regulatory texts at the
European level.16
The difficulty in defining the term media literacy stems partly from its compound nature: it
comprises two discrete terms, each of which is definitionally resistant in its own right. A recurrent
question in scholarship and in policy-making circles concerns the scope of the term media.
Increasingly, in the context of media literacy (at least), the term media is taken to be an inclusive
term, covering all types of media. In light of the contemporary reality of media convergence, an
inclusive understanding of media seems logical. An integrated approach to media literacy would
therefore also seem logical: “With the rapid growth of ICTs and the resulting convergence of new
and traditional media, it is necessary that media and information literacy be considered holistically
and applied to all forms of media, regardless of their nature and the technologies used.”17
Nevertheless, partly in recognition of the different functionalities of the plethora of media
operating today, it is debatable whether a unified form of “literacy” can be considered appropriate.
Distinctions are frequently made between media, digital and other types of literacy (e.g. search
engine literacy).18 These distinctions reflect, amongst other things, the different nature and
functionality of various media types. Following this horses-for-courses logic, it can be argued that
different literacies are required. As explored below, there is a marked tendency in European-level
regulatory and policy-making circles to accentuate the need for literacy in respect of digital or online
12
Sonia Livingstone, Media Literacy and the Challenge of New Information and Communication Technologies 7 COMM. REV. 3,
5 (2004), available at http://eprints.lse.ac.uk/1017/1/MEDIALITERACY.pdf.
13
For more on scholarly and civil society approaches to the term “media literacy” see W. James Potter, The State of Media
Literacy, 54 J. BROAD. AND ELECTRONIC MEDIA 675, 676 (2010).
14
Livingstone, supra note 10, at 5.
15
For an overview see Hobbs & Jensen, supra note 5.
16
For example, see infra note 31.
17
Abdul Waheed Khan, Foreword to MAPPING MEDIA EDUC. POLICIES IN THE WORLD 9-10 (Divina Frau-Meigs & Jordi Torrent
eds., 2009).
18
“Search engine literacy” was included as a sub-set of media literacy in para. 19 of the Recommendation of the Committee of
Ministers to Member States on the Protection of Human Rights With Regard to Search Engines, 1139thSess. Rec. No. R. 3
(2012), available at
https://wcd.coe.int/ViewDoc.jsp?Ref=CM/Rec(2012)3&Language=lanEnglish&Ver=original&BackColorInternet=C3C3C3&Ba
ckColorIntranet=EDB021&BackColorLogged=F5D383.
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media, due to the newness, relative complexity, and unfamiliarity of the underlying technologies for
many people. This implies that strategies to develop literacy have to engage the relationship between
technology and media dynamics, uses, and effects.
It is also useful to pry open the term literacy and group the main understandings of the term.
Some approaches emphasise that the primary aim of media literacy is to increase skills, build
knowledge, or both.19 Media literacy is also perceived as an activity or a “political, social, and
cultural practice.”20 As recalled from the previous section, media literacy can also be described as a
critical activity and a civic activity with moral underpinnings.21
Notwithstanding all of the aforementioned definitional difficulties, a definition of media
literacy has been developed and widely endorsed in academic, regulatory and policy-making circles.
Drawing on the work of others, Livingstone synthesises “media literacy” as “the ability to access,
analyze, evaluate, and create messages in a variety of forms.”22 These four components of the
definition point to: (i) the natural affinity of media literacy with questions of technological access to
media content; (ii) the centrality of critical, i.e., analytical and evaluative skills needed to interpret
and process media content, and (iii) the complementary nature of first-hand experience of production
and content-creation as a learning tool to enhance relevant critical competences.23 Livingstone
describes this as a “nonlinear, dynamic learning process” in which each component supports the
others: “Learning to create content helps one to analyze that produced professionally by others; skills
in analysis and evaluation open the doors to new uses of the Internet, expanding access, and so
forth.”24 Very significantly, the definition of media literacy relied upon by the European Commission
closely resembles Livingstone’s synthesised definition.
C. Key Target Groups and Constituents
Bearing in mind the four main rationales for the promotion of media literacy outlined above, a
number of target groups can be identified: children/minors; adolescents; parents; the public; the
elderly; persons with disabilities; linguistic minorities; the socially and economically deprived; media
users; consumers; etc.
There is a clear tendency to prioritise children/minors (and parents – by virtue of their
relationship to children). The protection and empowerment aims underlying that prioritisation
sometimes also include adolescents. Relevant strategies tend to focus on both formal, informal (e.g.
in the home) and non-formal (e.g. awareness campaigns outside of school and the home) education.
When measures promoting media literacy target other groups, strategies often differ. For
instance, when targeting general members of the public, lifelong/ongoing and non-formal educational
measures are likely to be preferred to formal educational measures. The public is, however, a very
19
Potter, supra note 11, at 679.
20
Id. at 680.
21
Silverstone, supra note 4, at 447 [this is actually on page 15 of document cited in the URL cited above].
22
Livingstone, supra note 10, at 3 .
23
For a detailed exploration of the interface between media literacy and user-generated content from a broadcasting perspective
see Martin Scott, GUIDELINES FOR BROADCASTERS ON PROMOTING USER-GENERATED CONTENT AND MEDIA AND INFO. LITERACY
(Commonwealth Broadcasting Assoc. & UNESCO, 2009).
24
Livingstone, supra note 10, at 5.
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diffuse term. It can therefore be useful to identify particular subsets of the public that have a
heightened need to acquire media literacy. The elderly, persons with disabilities and those suffering
from socio-economic disadvantage are all recognised as having particular needs in respect of the
various components of the definition of media literacy and based on the various rationales for
promoting media literacy: civic participation/empowerment, reduction of (informational)
inequalities, protection, informed decision-making.
It is important to reflect upon the extent to which the specific needs of these groups are
meaningfully catered to by existing regulatory and institutional frameworks, processes and initiatives
to promote media literacy at the European and national levels. This question will be revisited, after
having examined the approach taken by the European Union and the Council of Europe, in the
section, “Outlook,” below.
Media literacy has a broad constituency that extends well beyond its most obvious target
groups. Stakeholders typically include: regulatory authorities; policy-makers; administrative
authorities; media organisations and professionals; educational institutions and professionals; civil
society interest groups, etc. The involvement of stakeholders stretches from the international level to
the most local level. The roles of stakeholders vary enormously, depending on the nature of a given
measure, its aim(s) and target group(s), the context in which it is employed, etc.
An excellent illustration of the multiplicity and interconnectedness of themes, target groups
and stakeholders is provided by the Dutch media literacy expertise centre/network, Mediawijzer.net.25
It has developed an interactive Media Literacy map that is an adaptation of a subway map, with
stakeholders26 dotted along the main thematic lines, often intersecting.27 This map is divided into
three main sections, each of which is divided into sub-sections:
Media Use & Creation
Social Participation
Innovation
Information and strategic
Identity management
Innovation
skills
Empowerment
Practical skills
Copyright
Media consciousness
Responsible use and safety
The target groups, which are divided into “primary groups” (children, youth, parents, teachers)
and “secondary groups” (everyone/citizens, civil society, media professionals, elderly, the socially
disadvantaged, leaders), form the stops. By clicking on the stops, the user is transferred to the
relevant information linked to the specific target group and sub-category.
25
For an overview of the centre/network see Expertise centre for media literacy, MEDIAWIJZER,
http://www.mediawijzer.net/about-mediawijzer; See also Freek Ingen Housz, “Dutch Policy on Media Literacy and Digital
Skills”, in Susanne Nikoltchev, Ed., Media Literacy, op. cit., pp. 39-43.
26
The stakeholders featured on the map are children, youth, parents, teachers, leaders, civil society, media professionals,
everyone/citizens, and the socially disadvantaged.
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III. NORMATIVE APPROACHES AT THE EUROPEAN LEVEL
It is important to note the particular (de-)regulatory context in which the promotion of media
literacy has recently come to the fore in Europe. The promotion of media literacy has traditionally
often been coupled with the aim of preventing or minimising “negative media effects.”28 This
explains its prominence in the broader policy discourse about the protection of minors, especially in
an online environment.29 It also explains the EU’s promotion of media literacy in respect of
commercial communications.
The emergence of the promotion of media literacy as a policy and regulatory goal has also
coincided with strong deregulatory trends. In such a context, educational measures are presented as
alternatives to regulation. Writing in 2004, Roger Silverstone opined that “[v]ery little critical
attention ha[d] been given either to [media] literacy or [media] civics as an alternative to the
blunderbuss of media regulation, or to the possibility of developing an ethical agenda which would
inform such a project”.”30 More recently, regulatory emphases on media literacy have been criticised
by various expert commentators as being proxies for content regulation seeking to minimise the
effects of harmful media content.31 The criticism is that the promotion of media literacy has been
used to make the deregulatory thrust more palatable to those concerned about the protection of
individual fundamental rights and interests. The onus for the prevention of harm is shifted, the
argument runs, from public institutions to the private sphere.32 Jackie Harrison and Lorna Woods
capture the dilemma well when they observe that:
[R]eliance on information technology and the viewer not only changes the
relationship between the viewer and the regulatory system but may result in
some viewers failing to make active choices, instead relying on the default
positions programmed in by the technology. Regulation has been devolved to
the viewer, but in this instance, in effect, returns to an industry player. An
industry player, however, might not have primary regard to the public interest
(which is at least what regulators claim to do) or to the needs of citizen
viewers.33
28
Potter, supra note 11, at 690.
29
See Safer Internet Programme: Empowering and Protecting Children Online, EUROPEAN COMMISSION’S INFO. SOC’Y
THEMATIC PORTAL, http://ec.europa.eu/information_society/activities/sip/index_en.htm (Demonstrating the centrality of the goal
of promoting media literacy in the European Commission’s Safer Internet Programme); See also EU Kids Online, LSE MEDIA
AND COMMUNICATIONS, http://www.eukidsonline.net (last updated March 29, 2012) (Describing the work of the thematic network
funded by the Programme EU Kids Online II); See also Recommendation of the European Parliament and the Council on the
Protection of Minors and Human Dignity and on the Right of Reply in Relation to the Competitiveness of the European
Audiovisual and On-Line Information Services Industry 2006 O.J. (L 378) 72 (EU), available at http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:378:0072:0077:EN:PDF.
30
Silverstone, supra note 4, at 447.
31
See Divina Frau-Meigs, L’éducation aux medias est-elle nécessaire? A quelles conditions?, Les e-Dossiers de l’audiovisuel,
INA Sup (January 2011), http://www.ina-sup.com/node/1591; See also Brian O’Neill, Current Policy Developments in European
Media Literacy, 6 INT’L JOURNAL OF MEDIA AND CULTURAL POLITICS 235, 237 (2010).
32
Brian O’Neill, Media Literacy and Communication Rights: Ethical Individualism in the New Media Environment, 72 INT’L
COMM. GAZETTE 323, 325 (2012).
33
Jackie Harrison & Lorna Woods, European Broad. Law and Policy, 241 (Cambridge University Press, 2007).
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Silverstone’s enthusiasm for media literacy as an alternative to regulation and scepticism about
the manner in which media literacy is currently being promoted in regulatory frameworks are not
necessarily mutually exclusive. What Silverstone had in mind was a well thought-out, multi-stranded
approach to be developed progressively. The criticism of the current regulatory approach that media
literacy has been devised as a quick fix in an accelerated deregulatory process does not rule out the
suitability of a well-calibrated approach promoting media literacy. That goal is a real and legitimate
challenge for the future development of the media literacy agenda, as will be discussed below.
Meeting that challenge head-on requires an appreciation of the potential and limitations of media
literacy. It has been noted, for instance, that “moves to foster critical media literacy will not, of
themselves, be enough to eliminate the various detrimental aspects of content provision, such as
gratuitous violence in the media, the breach of consumer rights by media services, the lack of
authenticity and validity, and manipulation.”34
A. European Union
1. Audiovisual Media Services Directive
In the Introduction to this article, it was hinted that recent regulatory developments have been
decisive in altering the perceived status of media literacy in the European regulatory framework. A
major regulatory development was the explicit inclusion of media literacy in the Audiovisual Media
Services Directive (AVMSD).35 Alongside the AVMSD, media literacy has been steadily growing in
prominence on the EU agenda in recent years, and in particular on the agendas of the European
Commission, European Parliament, Council of the European Union and Committee of the Regions,
so much so that it can now be said to have reached the high-ground of policy-making for the
European audiovisual sector.36
The term media literacy is introduced and partially explained in Recital 47 of the Preamble to
the AVMSD:
‘Media literacy’ refers to skills, knowledge and understanding that allow
consumers to use media effectively and safely. Media-literate people are able to
exercise informed choices, understand the nature of content and services and
take advantage of the full range of opportunities offered by new
communications technologies. They are better able to protect themselves and
their families from harmful or offensive material. Therefore the development of
media literacy in all sections of society should be promoted and its progress
followed closely. The Recommendation of the European Parliament and of the
Council of 20 December 2006 on the protection of minors and human dignity
and on the right of reply in relation to the competitiveness of the European
audiovisual and on-line information services industry [footnote omitted] already
contains a series of possible measures for promoting media literacy such as, for
example, continuing education of teachers and trainers, specific Internet training
aimed at children from a very early age, including sessions open to parents, or
34
Committee of the Regions, Opinion on Regional Perspectives in Developing Media Literacy and Media Educ. in EU
Educational Policy, 2010 O.J. (C141) 16, para. 18.
35
See Directive 2010/13 of the European Parliament and of the Council on the Coordination of Certain Provisions Laid Down By
Law, Regulation or Administrative Action in Member States Concerning the Provision of Audiovisual Media Services, 2010 O.J.
(L95) 2 (EU).
36
O’Neill, supra note 30, at 324.
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Media Law & Policy
organisation of national campaigns aimed at citizens, involving all
communications media, to provide information on using the Internet
37
responsibly.
The introduction and explanation are heavily coloured by relevant EU priorities. The Recital
underscores the potential of media literacy to “allow consumers to use media effectively and safely,”
enable “people” to “exercise informed choices,” and better enable them to “protect themselves and
their families from harmful or offensive material.”38 These examples of the value of media literacy
together prompt a call for its development to be promoted in “all sections of society.”39
Recital 47 also calls for progress in the development of media literacy to be “followed closely”
and thereby sets up a new reporting obligation for the European Commission. The obligation is
provided for in the first sentence of Article 33 of the Directive, as follows:
Not later than 19 December 2011, and every 3 years thereafter, the Commission
shall submit to the European Parliament, to the Council and to the European
Economic and Social Committee a report on the application of this Directive
and, if necessary, make further proposals to adapt it to developments in the field
of audiovisual media services, in particular in the light of recent technological
developments, the competitiveness of the sector and levels of media literacy in
all member states.
This reporting obligation is unusual because the Directive does not create any (substantive)
obligation on EU Member States to promote media literacy. In other words, the Commission is
obliged to report periodically on "levels of media literacy in all member states," but there is no prior,
formal obligation on Member States to improve levels of media literacy. The cyclical nature of the
envisaged reporting could facilitate a close following of progress in the development of media
literacy across member states, but the first report, issued in May 2012, provided only very scant
information. It revealed that 28% of the EU's population has a basic level of critical understanding,
41% a medium level and 31%, an advanced level.40
2. Commission Communication
The European Commission adopted its Communication, titled “A European approach to media
literacy in the digital environment,” in December 2007.41 The European Parliament had earlier called
37
See Directive 2010/13 of the European Parliament and of the Council on the Coordination of Certain Provisions Laid Down By
Law, Regulation or Administrative Action in Member States Concerning the Provision of Audiovisual Media Services, 2010 O.J.
(L95) 2.
38
39
Id.
Id.
40
First Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and
the Committee of the Regions on the Application of Directive 2010/13/EU “Audiovisual Media Services Directive”, COM(2012)
203 final, 4 May 2012, p. 10. These statistics are based on monitoring conducted during the reference period for the report, 20092010: Danish Technological Institute and European Association for Viewers’ Interests, Testing and Refining Criteria to Assess
Media Literacy Levels in Europe, April 2011.
41
Communication from the Committee to the European Parliament, the Council, the European Economic and Social Committee
and the Comm. of the Regions, A European Approach to Media Literacy in the Digital Environment, COM (2007) 833 final (Dec.
20, 2007) (“A European Approach To Media Literacy in the Digital Environment”).
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on the Commission to adopt a Communication on education in media.42 The adoption of the
Communication also followed the establishment of an Expert Group on Media Literacy and a public
consultation on media literacy in 2006.43
The Communication states that media literacy is “generally defined as the ability to access the
media, to understand and to critically evaluate different aspects of the media and media contents and
to create communications in a variety of contexts.”44 As already mentioned above, this definition
resonates with the definition synthesised by Sonia Livingstone, thereby making for a measure of
consistency across academic and policy approaches at the European level. The Communication states
that a “European approach to media literacy should relate to all media” and identifies various levels
of media literacy: “feeling comfortable with all existing media;” “actively using media;” “having a
critical approach to media;” “using media creatively;” “understanding the economy of media and the
difference between pluralism and media ownership,” and “being aware of copyright issues which are
essential for ‘a culture of legality.’”45
An important section of the Communication, entitled “media literacy in the digital environment
– good practices,” concentrates on three areas: commercial communication, audiovisual works and
online. The three focus areas are designed to organise and group relevant priorities.
The Communication concludes by calling on member states to:
 encourage greater involvement by the authorities in charge of audiovisual and electronic
communication regulation in the improvement of the various identified levels of media
literacy;
 “promote systematic research into and regular observation of and reporting on the
different aspects and dimensions of media literacy;”
 “develop and implement codes of conduct and, as appropriate, co-regulatory frameworks
in conjunction with all interested parties at national level, and promote self-regulatory
initiatives.”46
The Communication was welcomed by the Council of the European Union as “a further
building block to European audiovisual policy.”47 The Council endorsed the Commission’s linking of
media literacy to “active citizenship in today’s information society.”48 It recognised the diversity of
efforts undertaken in member states to promote media literacy and the importance of identifying and
promoting relevant best practices, partly against the absence of “common criteria and indicators for
measuring media literacy.”49 The importance of education, training and teacher-training are also
42
Report on the transition from analogue to digital broadcasting: an opportunity for European audiovisual policy and cultural
diversity (2005/2212 (INI)), European Parliament Committee on Culture and Education (Rapporteur: Henri Weber), Doc. No.
A6-0075/2006, 23 March 2006, para. 9.
43
See generally Media Literacy Consultation, EUROPEAN COMM’N,
http://ec.europa.eu/culture/media/literacy/act_prog/consultation/index_en.htm.
44
See European Parliament Resolution on Media Literacy in a Digital World, EUR. PARL. DOC. INI 2129 (2008) at 3.
45
Id. at 4.
46
Id. at 8-9.
47
Council Conclusions on a European Approach to Media Literacy in the Digital Environment, 2008 O.J. (C140) 8 (EU).
48
Id.
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recognised. Finally, the Council invited member states to take further action, echoing the three
conclusions of the Communication, and additionally emphasising the need for a multi-stakeholder
approach, the usefulness of awareness-raising strategies and the desirability of integrating media
literacy into lifelong learning strategies.50
3. Commission Recommendation
The Commission’s Recommendation on media literacy in the digital environment for a more
competitive audiovisual and content industry and an inclusive knowledge society, adopted in 2009,51
follows the same definition of media literacy as the Communication.52 The essence of the
Recommendation is directly addressed to member states and the media industry – and surprisingly,
perhaps, not the educational sector, as such. The recommendations for member states are envisaged
as being “in cooperation with the authorities in charge of audiovisual and electronic communication
regulation and in collaboration with supervisory data protection authorities where appropriate.”53 The
recommendations focus on co- and self-regulatory initiatives, continued research, educational
measures (including lifelong learning) and awareness-raising activities. For their part, the
recommendations for the media industry focus on information-provision and awareness-raising
strategies.
Like the Commission’s Communication, the Recommendation elicited a number of responses
from other EU bodies. The Conclusions of the Council of the European Union on Media Literacy in
the Digital Environment welcomed the Recommendation and stressed as additional considerations:
inter alia: the multi-dimensional nature of efforts to promote media literacy (including self- or coregulatory initiatives); the relevance of different levels of access to, and understanding of, media and
new communicative technologies and the relevance of different educational models for promoting
media literacy.54
It also recognised one of the key ambiguities about the development of media literacy: while it
is clear that it “is a dynamic and evolving concept and that common understanding of the concept is
affected by cultural, technological, industrial and generational differences, it is also clear that, with
the development of a global internet as a key part of the communications infrastructure, the citizens
of Europe and of the rest of the world are increasingly facing and living in a media landscape with
similar features.”55 As such, the progressive development of criteria to assess levels of media literacy
in member states should also reflect differentiated approaches at state-level.
4. European Parliament
49
Id. at 9.
50
Id.
51
Recommendation on Media Literacy in the Digital Environment for a More Competitive Audiovisual and Content Industry and
an Inclusive Knowledge Society, COM (2009) 6464 final (Aug. 20, 2009).
52
Id. at 3-4.
53
Id.
54
Conclusions of the Council of the European Union on Media Literacy in the Digital Environment, 27 November 2009.
55
Id. at 3.
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The European Parliament provided a very structured and detailed examination of media
literacy issues in its 2008 Resolution on media literacy in a digital world.56 It first inventoried key
European and international (e.g. UNESCO) regulatory and policy reference points for media
education and literacy. It then placed media literacy and its importance in current-day societal and
communicative contexts, before setting out key principles for the promotion of media literacy.
Among the key principles, there is attention for the role of regulatory authorities for audiovisual and
electronic communications to cooperate at various levels to improve media literacy (levels) as part of
a broader multi-stakeholder approach involving the development of codes of conduct and common
regulatory initiatives.57 A wide range of stakeholders are identified: journalists, broadcasters and
media organisations, as well as, importantly: “libraries, adult education centres, citizens’ cultural and
media centres, further education and training establishments and citizens’ media (e.g. community
media).”58 A call is made on the Commission, in the context of Article 33, AVMSD, to devise media
literacy indicators “with a view to fostering media literacy in the EU in the long term.”59 The critical,
communicative and creative skills inherent in media literacy are dwelt upon,60 before its importance
for intellectual property rights, consumer information, democratic participation and the promotion of
intercultural dialogue is noted.61
A focus on aims and target groups followed, and then an exploration of access questions and
educational angles, e.g. in schools, as part of teacher training and for the elderly. One of the specific
listed aims of media education is to “shed light on copyright aspects of media use and on the
importance of respecting intellectual property rights, in particular regarding the Internet, as well as
on data and privacy security and the right of informational self-determination.”62
5. The Committee of the Regions
The Committee of the Regions, one of the EU bodies to which the Commission’s
Communication was formally addressed, has also responded to the Communication and engaged in
other ways with issues surrounding media literacy.
In its Opinion on “Media Literacy” and “Creative Content Online”63 the Committee stressed
that the reporting exercise envisaged under Article 33, AVMSD,64 and other related activities “must
allow for the differences and progress made in media literacy at regional level in Europe and provide
examples of good practice by local and regional authorities and other stakeholders.”65 It underscored
56
57
58
59
60
61
Supra note 42.
Id.
Id.
Id.
Id.
Id.
62
Id.
63
Opinion of the Committee of the Regions on Media Literacy and Creative Content Online, 2008 (CdR 94).
64
In the original text, reference is made to Article 26, AVMSD, which was previously the operative provision.
65
Id.
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the vital role that can be played by local and regional authorities in developing educational and other
collaborative projects on media literacy, targeting a variety of groups, “especially children and young
people, the disabled and social groups that are at risk of exclusion.”66
In its Opinion on regional perspectives in developing media literacy and media education in
EU educational policy, the Committee reaffirmed the role of local and regional authorities in respect
of media literacy.67 It also stressed the importance of media literacy from a consumer rights
perspective. It also tapped into one aspect of the debate outlined in the section of definitional
difficulties, above, by highlighting that “a clear and substantive distinction must be made between
the main components of media literacy, because the development of each component requires its own
strategy, players and resources.68”
6. Miscellaneous Developments
Finally, three recent developments which are likely to influence the future promotion of media
literacy within the European Commission also deserve mention: (i) the conclusion of the activities of
the Media Literacy Expert Group; (ii) the transfer of responsibility for the development of media
literacy from the Commission’s Directorate-General for Information Society and Media to its
Directorate-General for Education and Culture, and (iii) the explicit inclusion of “Enhancing digital
literacy, skills and inclusion” as a key prong of the Commission’s Digital Agenda for Europe.69
First, following requests by the European Parliament,70 industry players and a number of
member states, the European Commission established the Media Literacy Expert Group:
To analyse and define media literacy objectives and trends, to highlight and
promote good practices at European level and propose actions in the field. In
particular, certain issues should be highlighted such as the importance of
promoting the protection of children, young people and human dignity in the
media and support the creation of a media environment appropriate for citizens’
social, educational and cultural needs. Also, working on the development of
reliable means of evaluation is fundamental.71
The Expert Group, which comprised European media literacy experts from a variety of
backgrounds, held its first meeting in March, 2006 and its tenth and final meeting in December
2010.72 Having been involved in the preparation of the Commission’s Communication and
Recommendation on media literacy, the Expert Group was adjudged by the Commission to have
66
Id..
67
Opinion of the Committee of the Regions on regional perspectives in developing media literacy and media education in EU
educational policy, 2010 O.J. (C 141) 16, 29 May 2010.
68
Id.
69
Digital Agenda for Europe, EUROPEAN COMMISSION’S INFORMATION SOCIETY, Media Literacy Expert Group,
http://ec.europa.eu/information_society/digital-agenda/index_en.htm.
70
See Report on the transition from analogue to digital broadcasting: an opportunity for European audiovisual policy and cultural
diversity (2005/2212 (INI)), European Parliament Committee on Culture and Education, supra note 40.
71
Supra note 67.
72
See generally The EU Media Literacy Expert Group 2006-2010, EUROPEAN UNION, available at:
http://www.nordicom.gu.se/cl/publ/letter.php?id=138#The%20EU%20Media%20Literacy%20Expert%20Group%202006%20%202010.
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fulfilled its objectives and completed its work, which led to the decision to discontinue its activities.
The Expert Group provided a valuable forum in which various aspects of media literacy could be
discussed; its access to the Commission also facilitated the political development of the media
literacy agenda. It is too early yet to speculate on how the absence of such an expert forum will
impact on the further development of media literacy at the European level. There had been earlier
calls for the Audiovisual Media Services Directive’s Contact Committee to do more work on media
literacy.73
In addition, as with the previous development, it is still too soon to predict what the likely
consequences of the “re-location” of media literacy under DG Education and Culture will be.
Whereas this could suggest an intention to embed media literacy more firmly in an educational
approach, it does not necessarily imply that the topic will be sidelined from media regulatory policy.
This also houses it alongside the EU’s MEDIA Programmes,74 which is interesting in light of earlier
calls for a “specific strand on media literacy” to be included in future MEDIA Programmes.75
Finally, the Commission’s Communication, A Digital Agenda for Europe, states that the
“digital era should be about empowerment and emancipation; background or skills should not be a
barrier to accessing this potential.”76 As noted in the section titled Definitional Difficulties above,
digital literacy is not identical to media literacy but the terms do interface in some important ways
(See supra p. 6). The shared objective of avoiding or reducing social and other forms of exclusion is
relevant in this connection. The inclusion of the item “Enhancing digital literacy, skills and
inclusion” in the Communication prepares the ground for further EU-level cross-institutional action
in the field.77
B. Council of Europe
It was noted in the Introduction that there is considerable terminological variety in discussions
of media literacy. This observation is borne out by Council of Europe standard-setting texts with
focuses on media literacy. An astonishing array of different terms is used across those texts,
including: visual literacy, audiovisual literacy, mass-media education, media education, media
literacy, information literacy, media (and information) literacy and digital literacy. Notwithstanding
this high incidence of terminological variation, there is a broad overall congruence to the texts in
question, as relevant provisions for the promotion of media literacy are based on a few distinct
rationales (see further, infra).
1. European Ministerial Conferences on Mass/New Media Policy
73
Council Conclusions on a European Approach to Media Literacy in the Digital Environment, 2008 O.J. (C140) 8
(EU), supra fn. 48?
74
See generally European Commission, MEDIA, http://ec.europa.eu/culture/media/index_en.htm (Summarizing the MEDIA
Programmes).
75
Opinion of the Committee of the Regions on Media literacy and Creative Content Online,
2008 O.J. (C 325) 70 (EU); See also Resolution on Media Literacy in a Digital World, EUR. PARL. DOC. INI 2129 (2008).
76
Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee
and the Committee of the Regions, A Digital Agenda for Europe, at 24, COM (2010) 245 Final (May 19, 2010) (EC).
77
Id at 26-27.
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European Ministerial Conferences on Mass Media Policy have been held periodically since the
mid-1980s. Those conferences involved the participation of ministers (or their delegates) with
relevant portfolios at national level. As such, the Ministerial Conferences can be distinguished from
the day-to-day activities of the Council of Europe. Their relevance stems from their purpose to map
out future European media policy, supplemented by action plans for its implementation.
The promotion of media education or literacy has been an intermittently recurrent agenda item
at these European Ministerial Conferences. Resolutions adopted at the first two conferences called
briefly for the development of media education (and “a critical awareness”) as an integral part of the
tasks of general education78 and among viewers,79 without further elaboration. Resolutions adopted at
the third and fifth conferences focused on media education targeting the public at large and in respect
of new communications technologies and information services, again without any real elaboration.80
For its part, the sixth conference identified “media education and media literacy in new services” as
instrumental for “developing a critical and discerning attitude towards media content, as well as
ensuring greater awareness by individuals concerning the opportunities offered and challenges posed
by these services and thus contributing to greater social cohesion.”81
It was only at the seventh ministerial conference, “Integration and diversity: the new frontiers
of European media and communications policy,” held in Kyiv (Ukraine) in 2005, that media literacy
was explored in slightly more detail.82 In the context of the aim of enhancing protection of minors,
media literacy is put forward as a way of helping children “benefit from the positive aspects of the
new communication services and avoid exposure to harmful content.”83 The Action Plan adopted at
the conference advocates the promotion of media literacy in respect of all media and at all stages of
education and ongoing learning.84
At the first Conference of Ministers responsible for Media and New Communication Services
(in 2009, the ministerial conference was titled and calibrated differently in order to reflect changing
notions of the media),85 media literacy featured in the Resolution entitled “Towards a new notion of
78
Council of Europe, Media Division Directorate General of Human Rights, EUROPEAN MINISTERIAL
CONFERENCES ON MASS MEDIA POLICY: TEXTS ADOPTED, 16 (2006),
http://www.coe.int/t/dghl/standardsetting/media/doc/DH-MM (2006)004_en.pdf.
79
Id. at 15.
80
See id at 27-29; see also id. at 54-57.
81
Id. at 67.
82
7th European Ministerial Conference on Mass Media Policy Kyiv, 10-11 March 2005, COUNCIL OF EUROPE,
http://www.coe.int/t/e/com/files/ministerial-conferences/2005-kiev/.
83
Eur. Consult. Ass., Integration and diversity: the new frontiers of European media and communications policy,
7th European Ministerial Conference on Mass Media Policy, Resolution 3 (2005), available at
http://www.ebu.ch/CMSimages/en/leg_ref_coe_mcm_media_policy_100305_tcm6-36861.pdf.
84
Eur. Consult. Ass., Action Plan, 7th European Ministerial Conference on Mass Media Policy, Sub-theme 3, para.
4 (2005) (Discussing human rights and regulation of the media and new communication services in the Information
Society).
85
COUNCIL OF EUROPE, A New Notion of Media? Political Declaration and Resolutions, 1st Council of Europe Conference
of Ministers Responsible for Media and New Communication Services (May 28-29, 2009), available at
http://www.coe.int/t/dghl/standardsetting/media/MCM(2009)011_en_final_web.pdf; See also Tarlach McGonagle & Kim de
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media” and in its corresponding Action Plan.86 The Resolution identifies media literacy as “essential”
in the context of a people-centred, participatory, multi-stakeholder approach to the new media
environment.87 The Resolution calls for the recognition of media literacy “as part of the education for
democratic citizenship” and describes it as “a particularly important tool in optimising children’s and
young people’s comprehension, critical thinking, citizenship, creativity and critical awareness of the
media.”88 It views media literacy as a way to make people “critical, competent and responsible” in
their use of media and media-like services.89 The Action Plan seeks to pursue work on media literacy
in consultation with a range of stakeholders, including education specialists, “with the aim of making
users, creators and distributors of content (in particular children and young people) responsible,
informed and critical participants in the information society.”90 Non-formal education and the role of
the media are mentioned as meriting attention in relevant strategies.
The above overview of relevant provisions in policy texts adopted at periodic ministerial
conferences on mass/new media suggests that there has only been limited engagement with media
literacy to date. Relevant provisions prioritise children as a target group. They favour formalising
media education within broad educational settings, but also acknowledge the relevance of non-formal
and lifelong/ongoing education. They underscore the importance of multi-stakeholder approaches.
These summary priorities and observations are unpacked in various texts adopted by the Committee
of Ministers and the Parliamentary Assembly.
2. Committee of Ministers
The objective of promoting media literacy is adverted to, with varying levels of emphasis, in
several of the standard-setting texts adopted by the Committee of Ministers. The following table
provides an overview of selected Committee of Ministers texts containing focuses on media literacy:
Year Title
1985 Recommendation No. R (85) 8 on the
conservation of the European film heritage
1997
Recommendation No. R (97) 19 on the
portrayal of violence in the electronic media
Focus
Relevance of film heritage for
“mass-media education” and
“studies in universities and
research institutes”
Responsibilities of different
sectors
of
society
for
promoting
and
providing
media education; responsibility
of parents and teachers for
stimulating
children
and
adolescents to develop a
Para.
Preamble
Guidelines
Nos. 2, 4.
Beer, A Brave New Media World, MEDIAFORUM, 146-156 (2010), available at
http://www.ivir.nl/publicaties/mcgonagle/Mediaforum_2010_5.pdf.
86
A New Notion of Media? Political Declaration and Resolutions, supra note 87, at 7.
87
Id. at 4.
88
Id. at 5.
89
Id. at 6.
90
Id. at 8.
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2003
Recommendation Rec(2003)9 on measures to
promote the democratic and social contribution
of digital broadcasting
2006
Recommendation Rec(2006)12 on empowering
children in the new information and
communications environment
critical attitude, e.g. through
media education within the
family and in schools; shared
responsibility
for
media
education
(states,
those
responsible
for
content,
various sectors of society)
Media literacy as a key factor
in reducing risk of digital
divide; special mention of the
elderly and the less advantaged
sectors of the population
Structured
educational
approach from an early age;
identification
of
specific
harms,
disaggregation
of
multi-stakeholder approach
8
Numerous
preambular
and
substantive
paragraphs.
2007
Recommendation CM/Rec(2007)2 on media
pluralism and diversity of media content
2007
Recommendation CM/Rec(2007)3 on the remit
of public service media in the information
society
Recommendation
CM/Rec(2007)11
on
promoting freedom of expression and
information in the new information and
communications environment
2007
2007
2008
2009
Recommendation
CM/Rec(2007)16
on
measures to promote the public service value of
the Internet
Recommendation CM/Rec(2008)6 on measures
to promote the respect for freedom of
expression and information with regard to
Internet filters
Declaration on the role of community media in
promoting social cohesion and intercultural
Promotion of digital media
literacy to bridge the digital
divide
Public service media’s central
role in education, media
literacy and lifelong learning
Particular importance of media
education in empowering
individual users in the new
information
and
communications environment
Policies to protect/enhance the
right to education, incl. media
and
information
literacy;
promotion of media and
information literacy in formal
and non-formal education
sectors for children and adults
(to empower them in their use
of
media
technologies;
encourage
exercise
of
democratic rights and civic
responsibilities;
encourage
informed
choice-making
online)
Inform children and young
people about the benefits and
dangers of Internet content and
its filtering as part of media
education strategies in formal
and non-formal education
Multi-stakeholder approach,
direct involvement of citizens
203
2.2
21
Section I of
Guidelines
Appendix,
I – Human
Rights
and
Democracy;
II – Access
Preamble,
Guideline II
(iv)
Preamble &
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2009
2012
2012
2012
dialogue
and as part of lifelong learning
para. (iv)(c)
Recommendation CM/Rec(2009)5 on measures
to protect children against harmful content and
behaviour and to promote their active
participation in the new information and
communications environment
Inter alia, multi-stakeholder
approach; development of
Internet skills and literacy in
tandem with promotion of safe
and secure spaces on Internet
and labelling of online content;
awareness-raising;
school
curricula; countering sexism in
online content, etc.
Internal management and
resource allocation
Variety of information, content
and services; functioning of
search engines Iselecting,
ranking and prioritising search
results; implications for private
life, personal data); searchengine
literacy
and
its
incorporation into national
media literacy strategies
Rights of users of social
networking sights and rights of
others
1, 6, 8, 9,
Recommendation CM/Rec(2012)1 on public
service media governance
Recommendation CM/Rec(2012)3 on the
protection of human rights with regard to search
engines
Recommendation CM/Rec(2012)4 on the
protection of human rights with regard to social
networking services
14, 15, 16
33
6,
8;
Appendix
(19, 20)
4
The rationales advanced for the promotion of media literacy in the above texts (sometimes
separately and sometimes in parallel) can be grouped as follows:
 the civic empowerment of individuals;
 the reduction/elimination of the digital divide;
 the facilitation of informed decision-making, especially in respect of harmful and illegal
online content. On occasion, texts prise open the nature and objectives of media literacy, e.g. by deepening
levels of understanding of how the media work and by sharpening critical attitudes towards the
media. A sense of shared responsibility for media education91 has steadily grown into an explicit
insistence on the importance of a multi-stakeholder approach to the promotion of media literacy. This
is clearly a reflection of the increasingly complex constellation of involved parties. The enumeration
of relevant stakeholders facilitates the identification of specific roles for each, e.g. public service
media’s educational role92 and the roles expected of private-sector and civil-society actors.93
91
See generally COUNCIL OF EUROPE, RECOMMENDATION OF THE COMM. OF MINISTERS TO MEMBER STATES ON THE PORTRAYAL OF
VIOLENCE IN ELECTRONIC MEDIA, 607TH SESS., REC. NO. R(97)19 (1997), available at
http://www.coe.int/t/dghl/standardsetting/media/doc/CM/Rec(1997)019&ExpMem_en.asp.
92
See generally COUNCIL OF EUROPE, Recommendation of the Comm. of Ministers to Member States on the Remit of Public
Service Media in the Information Society, 985th Sess., Rec no. R (2007) 3 (2007), available at
https://wcd.coe.int/ViewDoc.jsp?id=1089759&BackColorInternet=9999CC&BackColorIntranet=FFBB55&BackColorLogged=F
FAC75.
93
See generally COUNCIL OF EUROPE, Recommendation on Empowering Children in the New Information and Communications
Environment, 974th Sess., Rec no. R(2006)12 (2006), available at
https://wcd.coe.int/ViewDoc.jsp?Ref=Rec(2006)12&Sector=secCM&Language=lanEnglish&Ver=original&BackColorInternet=
9999CC&BackColorIntranet=FFBB55&BackColorLogged=FFAC75.
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Finally, it is useful to draw attention to an attempt by the Committee of Ministers to identify
the different types of content that can prove harmful for children. Very often, reference is made in
policy documents to harmful content as an expansive and undifferentiated term. In its
Recommendation Rec (2006)12 on empowering children in the new information and
communications environment, the Committee of Ministers identifies selected types of harm, which
facilitates the follow-on task of devising appropriate, tailored strategies for countering them. It
recommends that Council of Europe member states should:
ensure that such skills enable children to better understand and deal with content
(for example violence and self-harm, pornography, discrimination and racism)
and behaviours (such as grooming, bullying, harassment or stalking) carrying a
risk of harm, thereby promoting a greater sense of confidence, well-being and
respect for others in the new information and communications environment.94
3. Parliamentary Assembly
The following table provides an overview of selected Parliamentary Assembly of the Council
of Europe (PACE) texts containing focuses on media education or literacy:
Year
1987
Title
Recommendation 1067 (1987) on the cultural
dimension of broadcasting in Europe
1989
Recommendation 1098 (1989) on East-West
audiovisual co-operation
Recommendation 1215 (1993) on the ethics
of journalism
1993
1995
1998
1999
2000
2002
2005
2007
2008
2009
Recommendation 1276 (1995) on the power
of the visual image
Resolution 1165 (1998), Right to privacy
Recommendation 1407 (1999), Media and
democratic culture
Recommendation 1466 (2000), Media
education
Recommendation 1586 (2002), The digital
divide and education
Recommendation 1706 (2005), Media and
terrorism
Recommendation 1789 (2007), Professional
education and training of journalists
Recommendation 1836 (2008), Realising the
full potential of e-learning for education and
training
Recommendation
1855
(2009),
The
regulation of audio-visual media services
Focus
(i)
(ii)
school courses;
adults and not only
parents
Audiovisual literacy, research,
teacher training and exchanges
Foster the setting up of citizens’
media associations; encourage
schools
to
provide
media
education
Visual images – part of literacy,
promotion
Governments – media education
wider scale – education on human
rights and responsibilities, privacy
Curricula
See below, for detailed analysis
Quality appreciation of digital
information
Curricula - terrorism
Para.
20(h)
15
5(iii)
7, 11(ii)
16(iii)
9(viii)
Numerous
provisions
G
10(iv)
Globalisation
of
media,
differences in cultural and media
practices
Digital literacy for all as strategy
against digital divide
7
Develop policy guidelines for new
means of content control, incl.
12.4
10
94
Id.
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2009
Recommendation
1882
(2009),
The
promotion of Internet and online media
services appropriate for minors
media literacy of users
Media literacy & harmful content,
children, adolescents, parents,
teachers, Internet and online
media services, opportunities and
risks
1, 18
A tentative pattern emerges from the above overview: the PACE tends to focus more on the
need to embed media education in formal and non-formal educational structures than on theoretical
justifications for the promotion of media education or literacy. It is only in its most recent relevant
texts that the PACE has begun to meaningfully engage with the specificities of media literacy’s
relevance in an online environment. Different target groups and stakeholders are identified, but in a
more limited fashion than in comparable texts adopted by the Committee of Ministers.
Recommendation 1882 (2009) is the text which sets out the potential roles for a diversity of
stakeholders in the most detailed way.
The PACE’s most sustained engagement with media education/literacy in a single text can be
found in its Recommendation 1466 (2000), entitled “Media education.”95 It sets out the essence of its
vision and ambitions in respect of media education/literacy.
The Recommendation defines media education of citizens as “teaching practices which aim to
develop media competence, understood as a critical and discerning attitude towards the media in
order to form well-balanced citizens, capable of making their own judgments on the basis of the
available information.”96
The PACE documents some examples of media effects, on the basis of which it identifies an
urgent need to develop media education in order to promote “active, critical and discerning use of the
media.”97 Media education teaches individuals to interpret and produce messages, select the most
appropriate media for communicating and, eventually, and have a greater say in the media offer and
output. It enables them to exercise their right to freedom of expression and right to information and is
beneficial for their personal development. Furthermore, it stimulates active democratic citizenship
and political awareness.
The PACE recommends that the Committee of Ministers: (i) call on Council of Europe
member states to encourage the elaboration and the development of media literacy programmes for
children, adolescents and adults, and (ii) teacher-training programmes in the field of media
education. It also calls for a (quantitatively and qualitatively) satisfactory offering of educational
programmes (including media education) to be provided by the different media.
C. Comparison of EU and Council of Europe Approaches
There is much commonality between the approaches to the promotion of media literacy
adopted by the EU and the Council of Europe, in terms of their objectives, thematic and
programmatic emphases and key target groups and stakeholders. The EU’s approach has more formal
circularity than that of the Council of Europe. This can be explained partly by shared textual
reference points and the formal exchanges that they engender between relevant actors within the EU
95
Parliamentary Assembly of the Council of Europe, 19th Sess. Rec No.1466 (June 17, 2000), available at
http://assembly.coe.int/main.asp?Link=/documents/adoptedtext/ta00/erec1466.htm.
96
97
Id. at para. 8.
Id.
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institutions. The existence of focal texts facilitates the incorporation of different intra-institutional
perspectives in policy-making. It also makes for coordinated action across different platforms at the
EU-level. The ability to embed media literacy simultaneously in different programmes facilitates a
diversified approach, financial underwriting and multi-annual planning - three essential requirements
for the progressive development of media literacy.
On the other hand, the less systematic and less formalised cross-referencing that is evident in
Council of Europe texts also has advantages, e.g. the ability to explore specific emergent themes in a
very detailed and contextualised way. Such an approach could usefully lend itself to, for example,
developing a multi-dimensional approach to media literacy for the elderly or the disabled (see
further, below). It is also important to note that the Council of Europe has steadily developed a very
practical approach to the promotion of media literacy through its Internet Literacy Handbook.98
IV. OUTLOOK AND CHALLENGES OF CONSOLIDATION AND FURTHER DEVELOPMENT
The previous section reveals that the main European-level regulatory focuses on media literacy
are based on the rationales of participation, protection and social inclusion and that they primarily
target children/minors and the public at large. It is useful at this juncture to attempt to explain why
other key target groups identified above are not more centrally positioned in regulatory provisions
(and their implementation). The elderly and persons with disabilities will be taken as sample key
target groups for present purposes, which will again implicate the rationales of participation,
protection and social inclusion.
A. The Elderly
The participatory capacities of the elderly are often largely shaped by the nature and level of
assistance and stimulation they receive to engage with new predominantly digital media or edemocracy. The relevance of participation of the elderly members of society has been underscored at
the EU level.99
There are good examples of structural and programmatic initiatives promoting media literacy
for the elderly at the national level. For instance, Ofcom UK has had a special Advisory Committee
on Older and Disabled People (ACOD) since 2004 that advises Ofcom about the interests and
opinions of older and disabled persons living in the UK.100 In its Annual Report for 2009/10, ACOD
called on Ofcom to “ensure that older and disabled people are equal players and full participants
across current and emerging convergent telecommunications and broadcasting technologies, new
media platforms and digital and traditional broadcast media.”101 Ofcom’s audit of media literacy
98
COUNCIL OF EUROPE, INTERNET LITERACY
HANDBOOK,http://www.coe.int/t/dghl/standardsetting/internetliteracy/hbk_EN.asp.
99
European Parliament Resolution on Media Literacy in a Digital World, supra note 58, at 14; See also European
Commission Study on Assessment Criteria for Media Literacy Levels Final Report, at 14, 87 (Oct. 2009), available
at
http://ec.europa.eu/culture/media/literacy/docs/studies/eavi_study_assess_crit_media_lit_levels_europe_finrep.pdf.
100
See generally Functions and Role of OFCOM, OFCOM, http://www.ofcom.org.uk/about/how-ofcom-is-run/committees/olderand-disabled-people/functions-and-role.
101
Advice to Ofcom, ACOD Annual Report 2009/10, OFCOM, http://www.ofcom.org.uk/about/how-ofcom-isrun/committees/older-and-disabled-people/annual-reports/2009-10/.
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across the UK contained a special focus on older people102 and over the past few years ACOD has
published numerous research reports on different aspects of media literacy for older people, e.g.
digital switchover issues and how manufacturers, suppliers and retailers can address the needs of the
elderly and disabled.103 The most recent research study, Next Generation Services for Older and
Disabled People,104 set out to identify and report:
(i) details of new and near-future Next Generation Services (NGS)105 that have the potential
to benefit older and disabled people’s lives;
(ii) the potential benefits from such services; and
(iii) the risks and challenges to the realisation of the potential benefits to older and disabled
people.106
In the Netherlands, the aforementioned Mediawijzer.net dedicates a dossier to assisting the
elderly in the digital environment.107 The goal of the dossier is to assist the elderly to find their way
along the digital freeway. One of the partners of Mediawijzer.net is SeniorWeb. In a joint
collaborative initiative with public libraries, SeniorWeb has created 370 education centres in which it
offers courses on media literacy for elderly members of society.108
Other initiatives at member-state level come from the BBC. Its ‘First Click’ campaign was
designed to help people who would not ordinarily use a computer to access a step-by-step beginner’s
guide to computers and the internet.109 Its ‘Give an Hour’ campaign “encourages digital-savvy
citizens to give an hour of their time to help someone else become media literate.”110 Both campaigns
include the elderly among their target groups.
2. Persons with Disabilities
The importance of persons with disabilities as a specific target group for media literacy goals
has been recognised explicitly inter alia by various EU bodies.111 Nevertheless, the recent studies
102
Ofcom Media Literacy Audit: Report on Media Literacy Among Older People, OFCOM (April 3, 2006),
http://www.ofcom.org.uk/advice/media_literacy/medlitpub/medlitpubrss/older/.
103
For details see Next Generation Services for Older and Disabled People, ADVISORY COMMITTEE ON OLDER AND
DISABLED PEOPLE (Sep. 13, 2010), http://www.ofcom.org.uk/files/2010/09/ACOD-NGS.pdf.
104
See Id.
105
Next generation services (NGS) are new and improved telecommunications services that make use of the speed and capacity
of next generation networks and are delivered to end users via next generation access.
106
Supra note 104, at iii.
107
Senioren op het web (Seniors on the Web), MEDIAWIJZER.NET, http://www.mediawijzer.net/dossiers/publiek/senioren-ophet-web.
108
Handig zoeken met internet, SENIORWEB, http://www.seniorweb.nl/handigmetinternet.
109
First Click campaign homepage, BRITISH BROADCASTING CORPORATION, www.bbc.co.uk/connect/campaigns/first_click.shtml.
110
Give an Hour campaign homepage, BRITISH BROADCASTING CORPORATION,
www.bbc.co.uk/connect/campaigns/give_an_hour.shtml.
111
See A European Approach To Media Literacy in the Digital Environment, supra note 41, at 5; See also European Parliament
Resolution on Media Literacy in a Digital World, supra note 57, at paras. 11; A Digital Agenda For Europe, at 24-27 COM
(2010); Opinion of the Committee of the Regions on Media Literacy and Creative Content Online 2008 O.J. (C 325) 70 (EU).
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commissioned by the European Commission pay little or no attention to the group or its specific
needs and interests. In the 2009 Study on Assessment Criteria for Media Literacy Levels, persons
with disabilities are not even mentioned in its recommendations.
However, this does not mean that European states do not pay attention to this group. For
instance, as already mentioned, the ACOD is a special Advisory Committee to Ofcom that addresses
the importance of older and persons with disabilities in society.
In the Netherlands, Mediawijzer.net also has a separate dossier devoted to media literacy for
persons with disabilities.112 The dossier contains background information, tips and a list of partner
websites for persons with disabilities. One of the partners is EDDY: Electronic Distance-learning for
Disabled Youngsters.113 This is a digital educational platform that assists high school students with
disabilities who are not able to attend classes due to their disabilities.
Aside from the obvious arguments of principle for directing media literacy at persons with
disabilities, there are also clear legal arguments to do so. The EU’s recent ratification114 of the United
Nations Convention on the Rights of Persons with Disabilities115 means that the Convention’s very
detailed, technology-attuned and forward-looking provisions on access to information and content
will have to be implemented at a national level. For instance, Article 9 (“Accessibility”) of the
Convention includes the obligations for States Parties to:
(f) Promote other appropriate forms of assistance and support to persons with disabilities to
ensure their access to information;
(g) Promote access for persons with disabilities to new information and communications
technologies and systems, including the Internet;
(h) Promote the design, development, production and distribution of accessible information
and communications technologies and systems at an early stage, so that these
technologies and systems become accessible at minimum cost.
These obligations are supplemented by those set out in Article 21 (“Freedom of expression and
opinion, and access to information”), including:
(c) Urging private entities that provide services to the general public, including through the
Internet, to provide information and services in accessible and usable formats for persons
with disabilities;
(d) Encouraging the mass media, including providers of information through the Internet, to
make their services accessible to persons with disabilities
Here, the “access” component to the definition of media literacy is of paramount importance.
112
Mediawijs met een beperking (Media Wise With Disabilities), MEDIAWIJZER.NET,
http://www.mediawijzer.net/?q=dossiers/professionals/mediawijs-met-een-beperking.
113
Project EDDY: Electronic Distance-Learning for Disabled Youngsters, LIESA (June 25, 2009),
http://www.liesa.nl/index.php?mod=front_page&pageid=545.
114
The treaty was ratified on Dec. 23, 2010. See A landmark victory as the European Union ratifies the United Nations
Convention on the Rights of Persons with Disabilities, CENTRE ON HUMAN RIGHTS FOR PEOPLE WITH DISABILITIES (Jan. 6, 2011),
http://www.disabilityaction.org/centre-on-human-rights/news/item/257/a-landmark-victory-as-the-european-union-ratifies-theunited-nations-convention-on-the-rights-of-persons-with-disabilities/.
115
Convention on the Rights of Persons with Disabilities, U.N. Doc. G.A. Res. 61/100 (Dec. 13, 2006).
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V. MEDIA LITERACY IN THE UNITED STATES**
Media literacy is a growing integral part of American culture, however it does not seem to be
getting the same attention as once did telephone, radio, and television.116 In the 1990s, the federal
Office of National Drug Control Policy incorporated media literacy education into student substanceabuse programs. States then started including media literacy education in their health education
instruction segments in order to help students to understand the different influences that may affect
their health decisions.117
In 2007, the Federal Trade Commission (FTC) announced in a statement to the United States
Senate that it planned to create a media literacy initiative.118 Following a series of data privacy and
security issues, the FTC decided that it would attack the issue not only from the business side, but the
consumer side as well. They have since created ftc.gov/YouAreHere, a website for children to play
games while learning media literacy skills. In 2010, the FTC introduced Admongo.gov. The purpose
of the campaign was to raise awareness of advertising and marketing messages, teach critical
thinking skills in order for tweens to better analyze and interpret advertisements, and demonstrate the
benefits of being an informed consumer. It is a single player game in an everyday setting where part
of the goal is to search for hidden advertisements. Both YouAreHere and Admongo have sections
dedicated to parents and teaches them ways to help supplement children’s media literacy education.
Unlike Canada and Europe, the United States does not have any centralized or national media
literacy education program,119 which is why YouAreHere and Admongo strongly encourage parent
and teacher participation. There are many privately funded and non-profit organizations dedicated to
promoting a more cohesive media literacy education, such as the National Association of Media
Literacy Education in particular. This organization is often cited in media literacy reports, but no
national policy for a media literacy education standard has been discussed.
The FTC recently published a report, “Protecting Consumer Privacy in an Era of Rapid
Change: Recommendations for Businesses and Policymakers.”120 The report puts forth best practices
for business to protect the privacy of American consumers and give them greater control over the
**
Jacqueline Merkher, B.F.A., Pratt Institute (2010); J.D., New York Law School (2013).
116
Media literacy is a term which has been used since the 1990s in the U.S. It refers to the ability to understand and process
online information. With the growing use of online media – from social websites to filing government forms – it is important that
users are well-versed enough in the online language to make educated decisions. The Federal Communications Committee refers
to media literacy as how to assess online media in general (see the FCC’s The Information Needs of Communities report from
2011, which can be found here: http://www.fcc.gov/info-needs-communities#read). The National Association for Media Literacy
Education (NAMLE) describes media as a system of “active inquiry and critical thinking about the messages we receive and
create.” Overall, media literacy involves, “adapting critical thinking skills to a multimedia age.” Being literate is no longer a
singular term. It refers to a much more abstract and multi-tiered way of understanding language and symbols, particularly on an
online platform.
117
See generally: FCC, THE INFORMATION NEEDS OF COMMUNITIES (2011) [herein after THE FCC MEDIA
INFORMATION REPORT], available at http://www.fcc.gov/info-needs-communities#read.
118
See generally: FTC, PREPARED STATEMENT OF THE FTC (Apr. 10, 2007), available at http://www.fcc.gov/info-needscommunities#read.
119
FCC MEDIA REPORT, supra note 2, at 221.
120
See generally: FTC REPORT, PROTECTING CONSUMER PRIVACY IN AN ERA OF RAPID CHANGE (2012) [hereinafter FTC REPORT],
available at http://www.ftc.gov/os/2012/03/120326privacyreport.pdf.
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collection and use of their personal data.121 While many media literacy initiatives by the FTC target
children and young consumers, this report focuses on the producer rather than the end user, and
criticizes the techniques used to create online programs and devices. The FTC also recommends that
Congress consider enacting general privacy legislation, data security and breach notification
legislation, and data broker legislation.122 The FTC brings up several points, including privacy by
design, simplified choice for businesses and consumers, and greater transparency.123 Interestingly, the
FTC has not tried to pass any sort of regulation, but only makes recommendations to online
companies.
The United States has not yet tried to regulate media literacy, but rather attempts to raise
awareness for both the producer and end user. Media literacy is on the rise, and being encouraged in
classrooms. Meanwhile, media literacy is also being addressed from the production point of view, in
order to make privacy a priority. Instead of trying to regulate media literacy, the government has put
the onus on producers and consumers to strike a balance of shrewd, discerning consumers and
privacy-driven producers. On the other hand, the European Union has a much more developed
program for media literacy. The EU has taken the stance that media literacy should be
comprehensive and part of a national program. In stark contrast, the EU has gone as far as trying to
craft policies for media literacy education.
VI. CONCLUSION
The best answer to the question posed in the title of this article is probably a qualified “yes,”
but challenges remain for the consolidation of media literacy’s new-found status within the European
audiovisual regulatory framework. Challenges also exist at the national level.124
The refinement that is likely to result from new reporting obligations and processes under the
AVMSD should facilitate the distillation of best practices and the development of bench-marking
activities. However, it has been noted that media literacy education in Europe is a “highly
contextualized activity that takes many forms in many different cultural and learning
environments.”125 The search for increased consistency across national and cultural situations for
reporting and evaluation purposes must leave sufficient space for the recognition and appreciation of
variation in strategies and progress at the national and sub-national levels.
In light of these challenges, there remains a need to continue to reflect on the position and role
of media literacy in European (and national) regulatory frameworks. It must not be (perceived as)
merely a sweetener for deregulation. A firm obligation on States to promote media literacy needs to
121
FTC REPORT, supra note 16, at 1.
122
FCC MEDIA REPORT, supra note 1, at 379.
123
At this stage of online development, the FTC chose to target regulation of producers (such as online companies and
technology companies) rather than consumers. As a precautionary measure, the FTC advises companies to make products and
services with the initial idea that they should always provide reasonable security for consumer data. This has a foreseeable end
goal: a standardized level of reasonable care in product and service design. The FTC also recommends that companies make it
easier for consumers to control the tracking of their online activities, a feature which has yet to be standardized for all online
services. Finally, the FTC recommends that online companies be much more visible with what information they collect on users.
124
See Emmanuelle Machet, Media Literacy – What Role for the Regulators?, BACKGROUND PAPER EPRA 2008/02 (2008) (A
comprehensive overview of regulatory issues at the national level), available at http://epra3production.s3.amazonaws.com/attachments/files/272/original/literacy_final.pdf.
125
Hobbs & Jensen, supra note 5, at 2.
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be introduced into the AVMSD, otherwise the reporting on levels of media literacy in EU Member
States envisaged by the Directive, will prove to be tokenistic. Genuine commitment to the
development of a multi-stakeholder approach to media literacy is essential in this respect.126
So far, the promotion of media literacy by the EU and the Council of Europe has resulted in
detailed engagement with the specificities of children as a target group and also, to a lesser extent,
adults and the public at large. Such detailed engagement could usefully be replicated in respect of
other target groups, e.g. the elderly, persons with disabilities, linguistic minorities, the
socially/economically disadvantaged. The same rationales for the promotion of media literacy for
children apply mutatis mutandis to these groups. Detailed engagement with the specificities of these
target groups must begin with an understanding of their particular needs and requirements – an
ongoing process facilitated by relevant multi-stakeholder involvement.
It has been claimed that “[t]he promise of media literacy, surely, is that it can form part of a
strategy to reposition the media user – from passive to active, from recipient to participant, from
consumer to citizen.”127 How long it will take to deliver fully on that promise remains to be seen.
126
See Brian O'Neill, Current Policy Developments in European Media Literacy, 6 INT’L J. of MEDIA AND CULTURAL POL., 240
(2010).
127
Sonia Livingstone, What Is Media Literacy?, 32 INTERMEDIA, 20 (2004).
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TOLLS ON THE BROADBAND COMMUTE: STATE TAX LIMITATIONS ON
INTERSTATE TELEWORK
Nicole Belson Goluboff*
I. INTRODUCTION
Broadband-enabled telecommuting offers critical benefits to individuals, businesses,
communities, and governments. These include economic, energy, environmental, and transportation
benefits. Although the advantages demand a regulatory environment that promotes telecommuting
(or “telework”), some states balk: they cling to anachronistic tax policies – or adopt new ones – that
discourage the practice.
This article examines two such telework-hostile policies. The first of these state policies,
known as the “convenience of the employer” rule, imposes a punitive tax on nonresidents of the state
who telecommute to in-state employers. The second punishes out-of-state businesses that employ instate telecommuters. The article describes the significant adverse consequences these policies can
have, and argues that, to realize the full promise of broadband, the policies should be dismantled.
Section II of this article details the key advantages of telework, including the enabling of more
people to work and businesses to hire.
Section III details the tax barriers. Section III-A looks at the convenience of the employer rule.
Focusing on the rule as applied in New York, this section explains how the convenience rule is
implemented in the Empire State, and why escaping the penalty the rule imposes is impossible for
most nonresident telecommuters. It describes the harm the rule causes workers, companies, states
applying the rule, and states where telecommuters live. The subsection further discusses two leading
cases upholding the rule against constitutional challenges. It then describes federal legislation that
has been proposed to abolish the rule – the Telecommuter Tax Fairness Act – and argues that this
legislation is a necessary cure for the problems the rule creates. Section III-A also discusses related
but distinct legislation that has been reintroduced in the United States House of Representatives, the
Mobile Workforce State Income Tax Simplification Act (the “Mobile Workforce Bill”). It explains
how the Mobile Workforce Bill differs from the Telecommuter Tax Fairness Act and why the Mobile
Workforce Bill must be amended to include the provisions of the Telecommuter Tax Fairness Act.
Section III-B addresses the policy of some states that subjects an out-of-state company to an
income-based tax when the company’s sole connection to the state is the employment of a single
telecommuter – or just a few telecommuters – within the state. The discussion includes a review of
two recent cases upholding a state’s authority to tax in these circumstances. It also reports on a
survey of state tax departments that suggests (but does not demonstrate definitively) a trend among
states to favor this policy. Section III-B examines the impact the business income tax policy can have
on the growth of telework, explaining how the policy can actually promote telework as well as
discourage it. However, because the potential of the policy to deter telework is much greater than its
potential to promote it, Section III-B details the negative impact the policy can have on employees,
employers, and the states applying the policy. It concludes that, instead of penalizing out-of-state
* Legislative Advisor to The Telework Coalition. B.A., Columbia University (1987); J.D., Columbia University School of Law
(1990).
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companies that employ a handful of in-state workers on a telecommuting basis, states should create
incentives for those companies to do so.
II. KEY BENEFITS OF TELEWORK
A. Telework Can Increase Employment
The National Broadband Plan (“NBP”), issued by the Federal Communications Commission
(“FCC”) in March 2010, rightly identifies telework’s capacity to increase employment as a key
reason to encourage the practice. Telework can boost the employment rate by enabling more
individuals to work and more businesses to hire.1
1. Telework Enables More People to Work
According to the NBP, “[m]aking telework a more widespread option [could] open …
opportunities for 17.5 million individuals.”2 These potential new teleworkers include, among others,
retirees, homemakers, and adults with disabilities.3
In addition to enabling such non-workers to enter the workforce, telework can help employees
who have been laid off return to work more quickly by broadening the region where they can search
for new jobs. It can also help workers who are repeatedly forced to relocate, like military spouses,
replace sporadic, fleeting engagements with sustained employment.4
2. Telework Enables More Businesses to Hire
Telework can make hiring easier for companies by making it less expensive.5 For example,
telework can reduce recruitment costs, making the firm an easy sell to applicants seeking flexible
or tech-savvy employers and eliminating employee relocation expenses.6 It can reduce real
estate and other overhead costs,7 allowing businesses to expand their staff without expanding
their facilities.
1
Nicole Belson Goluboff, The Telecommuter Tax Fairness Act of 2011: A Tool for Economic Recovery, STATE TAX NOTES, Dec.
5, 2011, 695, 695.
2
FCC, CONNECTING AMERICA: NATIONAL BROADBAND PLAN (2010), section 13.3, available at
http://www.broadband.gov/plan/13-economic-opportunity/#s13-3 [hereinafter NBP] (citing Comments of Connected Nation, Inc.
in response to NBP Public Notice #3, Sept. 22, 2009, at 16-17 [hereinafter Comments of Connected Nation]).
3
Id.
4
See, e.g., Goluboff, supra note 1, at 695-96. See also Moran Banai et al., Iraq and Afghanistan Veterans of America (“IAVA”),
IAVA Issue Report: [Unsung Heroes] Military Families After Ten Years of War, Dec. 2011, at 5, 13, available at
http://www.blueshieldcafoundation.org/sites/default/files/publications/downloadable/Unsung_Heroes.pdf (“Frequent moves are
one of the biggest challenges military spouses face when looking for full-time employment…. [Among IAVA’s]
recommendations to improve military families’ economic and financial situation [is to] … create greater flexibility for virtual and
tele-work for military spouses so they can keep their jobs when they move”).
5
Goluboff, supra note 1.
6
See, e.g., Culture Rx, Case Study: Gap Inc. Outlet, available at
http://info.gorowe.com/Portals/170696/docs/CaseStudy_GAPOutlet_09SEPT10.pdf (As a result of the company’s Results-Only
Work Environment (“ROWE”) pilot, during which employees were evaluated based on performance rather than presence, Gap
Inc. Outlet realized “[s]everal hundred thousand dollars in savings” from “reduced recruiting and relocation costs”).
7
See, e.g., David Wessel, Out of the Office but Still on the Job, WALL ST., J., Dec. 20, 2012, at A4 (“Today, nearly half - 47% of Aetna's 35,000 U.S. employees work [full-time] from home…. Aetna estimates that real-estate and related costs are 15% to
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Media Law & Policy
Telework also encourages hiring by offering a strong return on investment. It can improve
the results of recruitment efforts,8 enabling businesses to choose the most qualified candidates
from anywhere in the country, increase employee retention, and slash turnover costs.9 It can also
increase productivity.10 Specifically, it can increase the efficiency of both telecommuters and
their on-site colleagues; increase the number of hours available to telecommuters to get their
work done,11 decrease absenteeism,12 and decrease presenteeism (a phenomenon that involves
employees coming to the office when they are too sick to work effectively and could
compromise overall productivity by infecting co-workers).13 Further, telework can strengthen a
company’s business continuity plan, helping to assure that employees remain productive even
when a destructive storm, terrorist threat, flu pandemic, or other emergency renders work at the
main office impossible.14
25% lower than they would otherwise be - annual savings of about $80 million. Working at home has reduced Aetna's total office
space by 2.7 million square feet, the company estimates”); AT&T, 2011 Sustainability Report Issue Brief on Telecommuting,
available at http://www.att.com/gen/corporate-citizenship?pid=18039 [hereinafter AT&T 2011 Sustainability Report] (As a
result of its telework program, which included over 17,000 employees, AT&T “realized [a] … $6,500 potential cost reduction for
every telecommuter who gives up his or her workstation”); Culture Rx, Case Study: Suntell, available at
http://gorowe.web12.hubspot.com/Portals/170696/docs/Case_Study_SUNTELL.pdf (“Because [of ROWE], we were able to
move to a smaller space which resulted in a rent reduction of 30%”).
8
See, e.g., Press Release, Chief Financial Officers Look Beyond Employee Issues for Business Benefits of Work Life Flexibility
according to BDO Seidman, LLP and Work+Life Fit, Inc. Study (Sept. 11, 2008), available at
http://worklifefit.com/blog/2008/09/chief-financial-officers-look-beyond-employee-issues-for-business-benefits-of-work-lifeflexibility-according-to-bdo-seidman-llp-and-worklife-fit-inc-study [hereinafter BDO Seidman/Work+Life Fit Press
Release](88% of CFOs in the 2008 CFO Perspectives on Work Life Flexibility study gave flexibility a rating of “high” or
“moderate” for its ability to improve recruitment efforts).
9
See, e.g., AT&T 2011 Sustainability Report (AT&T’s telework program achieved a “72% lower turnover rate for
telecommuters”); BDO Seidman/Work+Life Fit Press Release (90% of CFOs in the 2008 CFO Perspectives on Work Life
Flexibility study gave flexibility a rating of “high” or “moderate” for its ability to improve employee retention). See also Culture
Rx, Gap Inc. Case Study: Quality and Productivity Through Trust (2012), available at
http://info.gorowe.com/Portals/170696/docs/results_only_work_environment_gap_case_study.pdf (As a result of Gap’s ROWE
pilot, “[s]everal hundred thousand dollars in savings were realized by reduced employee turnover costs”); Culture Rx, Case
Study: Best Buy, available at http://www.gorowe.com/about/case-study-best-buy [hereinafter Best Buy Study] (“Voluntary
turnover rates went down as much as 90% on ROWE teams. [F]or one team, this meant savings of $2.2 million over the course of
two years”).
10
See, e.g., AT&T 2011 Sustainability Report (An August 2010 telecommuting survey, which included more than 11,000
employees and their supervisors, “concluded that productivity increases, often dramatically, by enabling employees to perform
work away from their central job locations. It indicated that 98 percent of supervisors ‘agree’ or ‘strongly agree’ that their
employees are productive when working from their home office”). See also BDO Seidman/Work+Life Fit Press Release (75% of
CFO’s in the 2008 CFO Perspectives on Work Life Flexibility study gave flexibility a rating of “high” or “moderate” for its
ability to improve productivity); Best Buy Study (“Average of 41% increase in productivity on ROWE teams”).
11
AT&T 2011 Sustainability Report (94% of respondents to the August 2010 telecommuting survey indicated that time
employees “would have spent commuting [included] time that was given back to the company as additional productive time”).
12
Id. (In 2011, AT&T’s telework program achieved a “17 percent lower absentee rate for telecommuters”).
13
Press Release, CCH, CCH Survey Finds Most Employees Call in “Sick” for Reasons Other Than Illness (Oct. 10, 2007),
available at http://www.cch.com/press/news/2007/20071010h.asp (“Thirty percent of employers [said] they use telecommuting
programs as another way to deter presenteeism”).
14
See, e.g., Jolie Lee, Telework helps PTO employees stay productive through Sandy, FederalNewsRadio.com, Nov. 2, 2012,
available at http://www.federalnewsradio.com/367/3104184/Telework-helps-PTO-employees-stay-productive-through-Sandy
(“Despite the federal government closing its offices to the public … due to [S]uperstorm Sandy, the U.S. Patent and Trade Office
was still able to maintain a rate of 70 percent productivity, thanks to its telework policy…. The trademark assistance call center to
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B. Telework Can Shrink the Federal Deficit and Ease State Budgetary Woes
Telework’s capacity to fuel employment promises significant revenue gains and cost savings
for governments. Consider data provided in 2009 by Connected Nation, a non-profit organization
working to expand access to and use of broadband. According to the organization, the introduction
into the workforce of the 17.5 million new teleworkers described in Section II-A-1 of this article
could produce for the federal government an estimated net increase of more than $256 billion a year
in income tax revenue, social security revenue, and federal disability savings.15 The increased
spending power of these new workers would likely increase sales of goods and services, generating
greater business income tax revenue for the federal government.
The arrival of these new teleworkers would increase personal income tax and business income
tax revenue for state governments, too, and the same sales that would bring states greater business
income tax revenue would bring them greater sales tax revenue.16 In addition to the earnings of
individuals who use telework to enter the workforce, the earnings of employees who use telework to
return to the workforce following a layoff could also strengthen both federal and state treasuries.
Further, telework’s capacity to create jobs – and increase the number of taxpaying consumers –
is not the only reason it can boost federal and state tax revenue. Telework can also increase business
income tax revenue by enabling companies to operate more profitably – to be more productive at less
cost.
C. Telework Can Mitigate Energy, Environmental, and Transportation Challenges
By decreasing reliance on cars and mass transit, telework reduces the demand for fuel.17 This
reduced demand can help stabilize fuel prices and strengthen the country’s energy independence.
Telework can also reduce carbon emissions18 and traffic congestion – congestion that, in 2011,
cost the nation $121 billion in wasted time and fuel.19 Further, by reducing the wear and tear on roads
answer questions about the trademark process was fully operational during those two days, with ‘100 percent participation from
the work-at-home employees’”); Diane Brady, Sandy Puts Mobile Workers to the Test, BLOOMBERG BUSINESSWEEK, Oct. 30,
2012, available at http://www.businessweek.com/articles/2012-10-30/sandy-puts-mobile-workers-to-the-test (Ernst & Young
“has its 167,000 employees scattered around the globe, with most well-equipped to work from home. [As a result,] even with its
U.S. headquarters in Times Square and thousands of employees living in the path of Superstorm Sandy, [the company] was able
to essentially continue operating as it often does - virtually”). See also Centers for Disease Control and Prevention, Guidance for
Businesses and Employers To Plan and Respond to the 2009 - 2010 Influenza Season, Feb. 22, 2010, available at
http://www.cdc.gov/h1n1flu/business/guidance/ (As part of their flu pandemic plans, employers should “[e]xplore whether [they]
can establish policies and practices, such as flexible worksites (e.g., telecommuting) … to [increase] the physical distance among
employees and between employees and others if local public health authorities recommend the use of social distancing strategies.
[Employers should also ensure that they] have the information technology and infrastructure needed to support multiple
employees who may be able to work from home”).
15
Comments of Connected Nation at 17-19, available at http://apps.fcc.gov/ecfs/document/view?id=7020039177.
16
Goluboff, supra note 1, at 696.
17
AT&T 2011 Sustainability Report (Based on 2010 data, AT&T concluded that its “telecommuter population avoids 175
million commute miles per year, with annual fuel savings of approximately 8.7 million gallons”).
18
Id. (Based on 2010 data, AT&T concluded that its telecommuters achieve a reduction of over 76,000 metric tons of greenhouse
gas emissions per year).
19
David Schrank et al., Texas A & M Transportation Institute, 2012 Urban Mobility Report, Dec. 2012, at 1, 5, 23, available at
http://d2dtl5nnlpfr0r.cloudfront.net/tti.tamu.edu/documents/mobility-report-2012.pdf.
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and rails, telework can cut the costs of maintaining, repairing, and expanding transportation
infrastructure.
III. TAX BARRIERS TO TELEWORK
Notwithstanding the critical benefits telework offers, state tax authorities have embraced
policies that frustrate both individuals and companies seeking to adopt it. This section of the article
will examine two state tax policies that pose a significant threat to widespread reliance on telework –
one policy that imposes a penalty on telecommuters and one policy that imposes a penalty on
employers.
A. Tax Penalty Imposed On Telecommuters
1. The “Convenience Of The Employer” Rule: An Overview
Perhaps chief among the regulatory obstacles to telework is the convenience of the employer
rule. While a number of states maintain the rule,20 New York has earned considerable notoriety for its
vigorous enforcement of the rule. For this reason, this discussion will focus on the convenience rule
as New York applies it.21
Under the rule in New York, if nonresidents work for New York employers and telecommute
part-time – either for their own convenience or the convenience of their employer – they must
pretend that the days spent working at home were days spent working in New York. Because all
workdays are deemed New York days, they must pay taxes to New York on all of their wages – both
the wages earned in New York and the wages earned at home, outside New York.
The penalty the convenience rule imposes is steep: because the states where telecommuters
live can also tax the wages they earn at home, employees telecommuting to New York risk double
taxation – taxation once by their home state and a second time by New York. While some states
provide a credit to their telecommuting residents for taxes they pay New York on the wages they earn
at home, many telecommuters still face a fine: when New York’s tax rate is higher than the home
state’s tax rate, the telecommuter must pay the New York rate on the home state wages.
While telecommuters may be able to avoid the telecommuter penalty tax if they never come to
New York for work, conducting business in New York for just a few days or weeks could trigger
liability. By its terms, the convenience rule applies to a nonresident employee who “performs
services for his employer both within and without New York State.”22 It sets no minimum period of
20
N.Y. COMP. CODES R. & REGS. tit. 20, § 132.18(a); DEL. SCHEDULE W; 61 PA. CODE § 109.8; 316 NEB. ADMIN. CODE § 22003.01C(1).
21
N.Y. COMP. CODES R. & REGS. tit. 20, § 132.18(a) (“If a nonresident employee … performs services for his
employer both within and without New York State, his income derived from New York State sources includes that
proportion of his total compensation for services rendered as an employee which the total number of working days
employed within New York State bears to the total number of working days employed both within and without New
York State…. However, any allowance claimed for days worked outside New York State must be based upon the
performance of services which of necessity, as distinguished from convenience, obligate the employee to out-ofstate duties in the service of his employer. In making the allocation provided for in this section, no account is taken
of nonworking days, including Saturdays, Sundays, holidays, days of absence because of illness or personal injury,
vacation, or leave with or without pay”).
22
Id.
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time the nonresident must spend in New York before being subject to the rule. Thus, nonresidents
risk taxation in New York on 100 percent of their income even if they spend only a negligible
amount of time there.23
2. The “Employer Necessity” Test
As noted above, New York’s convenience rule applies to any nonresident employee of a New
York firm who works partly from home, either for his own convenience or his employer’s. If an
employee can prove that his telework arrangement is an employer “necessity,” rather than a mere
convenience, he may be permitted to allocate the wages he earned at home to his home state.
However, proving that telework is an employer necessity will often be impossible.
a. The Necessity Test Before May 2006
Before May 2006, New York maintained that telework was an employer necessity only if the
tasks the employee performed at home were of such a kind that they could not possibly be performed
at his employer’s office in New York. Consider, for example, the case of Manohar Kakar.24
Kakar, a resident of New Jersey, worked for a computer consulting firm located in Manhattan.
His job required him to work with highly confidential financial information, which his employer did
not want other employees to see. He initially worked in the New York City office. However, when
financial constraints forced the firm to reduce its office space, it created multi-purpose rooms for
employees to share, and the new, shared work space did not provide the privacy Kakar needed to
keep the financial data he managed confidential. As a result, his employer directed him to work parttime from home. The firm paid all the expenses associated with establishing and maintaining his
home office in New Jersey. Kakar subsequently moved to Arizona and continued to telecommute
from there. His firm paid all the expenses associated with his new home office, as well. As before, he
spent some days working in the New York office.
For the two tax years at issue, Kakar treated as New York income only the income he earned in
New York. New York, however, insisted that all of his compensation – including the pay he earned
in New Jersey and Arizona – was New York income. Kakar argued that he should be allowed to
allocate the wages he earned in New Jersey and Arizona to those states, rather than New York,
because working from home was an employer necessity. He based his claim of employer necessity
partly on the fact that there was inadequate workspace in his employer’s office to assure the privacy
he needed to work with the confidential data.
23
Cf. Huckaby v. N.Y. Div. of Tax Appeals, 4 N.Y.3d 427, cert. denied, 546 U.S. 976 (2005). (A Tennessee resident with a New
York employer spent approximately 75% of his work time working in Tennessee and 25% of his work time working in New
York. The telecommuter argued before the Court of Appeals that, “read and applied literally, the convenience of the employer
test would allow New York to tax 100% of the income of a nonresident who worked out of his employer’s place of business in
New York just one day a year” and that “due process demands proportionality in order to prevent [such] overreaching.” The
Court declined to resolve the issue: “Whether due process would countenance … taxation of 100% of the income of a
nonresident who spends a trivial amount of time working in New York … is simply not before us. We conclude that the minimal
connection required by due process plainly exists in this case where petitioner accepted employment from a New York employer
and worked in his employer’s New York office approximately 25% of the time”).
24
In re Kakar, N.Y. Div. of Tax Appeals, DTA No. 820440 (Feb. 16, 2006).
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The Division of Tax Appeals rejected Kakar’s argument, concluding that “with but a minimum
of ingenuity, arrangements could have been made to provide a secure work environment” for him.25
That is, even though the employer made the business decision to eliminate privacy in the main office,
New York took the position that the employer could easily restore privacy and obviate the telework
arrangement.
A key difficulty with the pre-2006 employer necessity test is that most telecommuters will be
hard-pressed to prove that the work they do at home cannot, under any circumstances, be done in a
New York office. Generally, the very reason employees can telecommute is that their work can be
done in more than one place.
b. The Necessity Test After May 2006
In May 2006, New York’s Department of Taxation and Finance issued guidance purporting to
offer a “revised position concerning the application of the convenience of the employer test.”26
Although New York made no changes to the convenience rule itself – the rule still required
nonresident employees to prove employer necessity in order to avoid the double tax threat – the goal
of the guidance appeared to be to make it easier for nonresident employees to prove employer
necessity. However, the “revision” was hollow: Proving employer necessity remains as hard to do
today as it was before the guidance was issued.
According to the guidance,
For tax years beginning on or after January 1, 2006, it is the Tax Department’s
position that in the case of a taxpayer whose assigned or primary office is in
New York State, any normal work day spent at the home office will be treated as
a day worked outside the state if the taxpayer’s home office is a bona fide
employer office…. Any day spent at the home office that is not a normal work
day would be considered a nonworking day.27
Thus, New York now requires telecommuters to establish two basic elements to demonstrate
that telework is necessary: (1) the days the telecommuter spends at home are “normal” work days;
and (2) the telecommuter’s home office qualifies as a “bona fide employer office.” Each of these
elements can be hard to prove.
i. “Normal Work Day”
According to New York, a “normal work day” is,
any day that the taxpayer performed the usual duties of his or her job. For this
purpose, responding to occasional phone calls or emails, reading professional
journals or being available if needed does not constitute performing the usual
duties of his or her job.28
25
Id.
26
N.Y. Dep’t of Tax. and Finance, Office of Tax Policy Analysis, Technical Services Div., New York Tax Treatment of
Nonresidents and Part-Year Residents Application of the Convenience of the Employer Test to Telecommuters and Others, TSBM-06(5)I (May 15, 2006) [hereinafter TSB-M-06(5)I].
27
28
Id. at 2.
Id.
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This definition of a “normal work day” may not encompass days that most employees and
employers regard as normal work days. For example, consider an oncologist at a university hospital
located in New York who is writing a paper on treatments for pancreatic cancer. He spends the day at
his home in New Jersey doing research, conducting a comprehensive review of the literature
published on the topic in the last twenty years. While at home, he receives some email messages and
phone calls, which he answers. Although both he and the university might consider the research day
a “normal work day,” New York might not agree. Rather, New York might insist that he was merely
“reading professional journals” and “responding to occasional phone calls or emails,” which – under
the state’s narrow definition – do not qualify the day as a “normal work day.”
ii. “Bona Fide Employer Office”
Even if a telecommuter can prove that the days he spent at home were “normal” work days, he
must also prove that his home office is a “bona fide employer” office. The test for such an office can
present an even greater challenge.
New York provides three categories of factors employees must use to determine if their home
offices qualify as a “bona fide employer office.” These categories include a “primary factor,” a set of
“secondary factors,” and a third set of factors called “other factors.” To satisfy the “bona fide
employer office” test, telecommuters must establish either:
a) “the primary factor, or
b) at least 4 of the secondary factors and 3 of the other factors.”29
The primary factor offers telecommuters absolutely no relief from the pre-2006 employer
necessity test, because it is the pre-2006 test. According to New York, a telecommuter’s home office
will satisfy the primary factor “[i]f the employee’s duties require the use of special facilities that” are
“available at or near the employee’s home” and “cannot be made available at the employer’s place of
business.”30 To illustrate the point, New York explains,
[I]f the employee’s duties require the use of specialized scientific equipment that
is set up at the employee’s home (or at a facility near the employee’s home) but
could physically be set up at the employer’s place of business located in New
York, then the home office would not meet this factor.31
Thus, just like the pre-2006 employer necessity test, the 2006 guidance provides that an
employee can prove telework is necessary if the nature of the work he does at home is such that it
cannot be done at the New York office. This test was virtually impossible to meet before 2006, and it
remains so.32
29
Id.
30
Id. at 3 (emphasis added).
31
Id. (emphasis added).
32
Comparing a case decided under the pre-2006 employer necessity test with New York’s illustration of the primary factor in the
2006 guidance underscores New York’s intent to preserve, rather than relax, the old test. Compare In re Fass v. State Tax
Comm’n, 68 A.D.2d 977 (App. Div. 3d Dept. 1979), aff’d, 50 N.Y.2d 932 (1980) (One element of the taxpayer’s job was to test
sports cars. To perform this job function, he needed access to “a garage to store [the vehicles] for testing and evaluation.” This
specialized facility - and others he needed for work - were “established … at [his] farm and residence in New Jersey…. [T]hey
were not available at or near his employers’ New York City offices.” The Court found that the work he did in New Jersey “could
not have been performed at his employers’ New York City office” and held that he “qualified for an allocation of his income”) to
TSB-M-06(5)I at 3 (“[I]f the employee’s duties require the use of a test track to test new cars,” a track “is available near the
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While telecommuters who are unable to satisfy the primary factor can still try to prove the
requisite number of both “secondary” and “other factors,” many of these factors are absent in the
typical telework arrangement. Consider, for example, the following conditions that might help
establish a “bona fide employer office:”
 The employer requires the employee to work from home as a condition of employment;
 The employer has a “bona fide business purpose” for establishing an office in the specific
locale where the employee lives;
 The employee meets or deals with clients, patients, or customers on a regular and
continuous basis at his home office;
 The employer pays the employee rent for the home office;
 The employer maintains a separate telephone listing for the employee’s home office;
 The employer lists the telecommuter’s home address on the company’s letterhead or
business cards;
 The employee uses his home office “exclusively” for work (that is, the employee never
makes a personal phone call, pays a bill, or shops on-line in his home office);
 The employee displays a sign at his home indicating that it is a company office; and
 The employer identifies the telecommuter’s home office as a company place of business
in its advertising.33
Because many of the secondary and other factors do not exist in most telework arrangements,
most home offices will not qualify. As a result, most telecommuters are just as likely to fail New
York’s “revised” employer necessity test as they were to fail the pre-2006 test it purported to replace.
3. The Harm the Convenience Rule Causes
The convenience rule causes considerable harm to workers, businesses, and states, including
both New York (and any other state applying the rule) and the states where telecommuters live.
a. How Workers Suffer
The convenience rule can make telework too expensive for individuals, preventing disabled
people, older Americans, caretakers, and others who cannot work full-time in a conventional office
setting from using broadband to join the workforce. By making telework unaffordable, the rule also
limits opportunities for Americans who have lost their jobs, are struggling to find local employment,
and need the option to telework to be able to include distant companies in their job searches. Further,
the rule harms workers who are currently employed but cannot use telework to reduce their
commuting costs, work/family conflicts, and carbon footprint.
employee’s home” and “is not available at the employer’s offices in New York City,” then the home office will satisfy the
primary factor, and the employee may qualify for an allocation of his income)(emphasis added).
33
TSB-M-06(5)I at 3-5.
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The convenience rule also generates considerable confusion for telecommuters and would-be
telecommuters. A New Yorker who relocates to a distant state and continues working for his New
York firm on a telecommuting basis can be startled to learn, upon receiving his first post-move
paycheck, that his firm has continued to withhold New York taxes on all of his salary. The surprise
can be especially disruptive for New Yorkers who moved to a no-tax state and mistakenly believed
they were leaving behind the obligation to pay taxes to New York (or any state) on 100 percent of
their income. Consider an older worker, who relocates to Florida but continues to telecommute to his
Manhattan employer as a way of phasing into retirement. He travels to New York occasionally to
meet with colleagues. He may have chosen to move to Florida, at least partly, because Florida does
not tax personal income, and he may have made long-term financial decisions based on the tax
savings he expected. The fact that he will still owe taxes to New York on his entire salary may raise
questions about the viability of his plans.
Workers who are considering telecommuting to an employer located in another state and who
realize, in advance, that they might have tax liability in the company’s state are often on no surer
footing than those who are blindsided. Even if a worker learns that the state where his employer (or
prospective employer) is located does have a convenience rule, he may find it difficult to determine
whether the rule covers him. For example, nonresidents of New York may be uncertain whether their
telework arrangements satisfy the multi-factor test for exemption from the convenience rule that New
York set forth in its 2006 guidance.34 Some workers considering telecommuting may abandon the
plan if the tax implications are too difficult to untangle.
b. How Businesses Suffer
By forcing employees to reject the telework option (either by making telework too expensive
or by making the tax consequences of telework inscrutable), the convenience rule prevents
businesses from growing a distributed workforce. As a result, companies struggle to take advantage
of the business benefits of telework identified in Section II-A-2 of this article.
In addition, the convenience rule slams payroll departments with needlessly complex
compliance challenges. For example, just as telecommuters and would-be telecommuters are often
confused about where they owe taxes, payroll personnel struggle to determine whether the company
must withhold income tax in the states where telecommuters live, the company’s state, or both. And
just as employees may dismiss telework because the tax consequences are impenetrable, companies
may reject telework because the administrative costs of sorting out their withholding obligations are
too great.
Even businesses with no interest in employing telecommuters can suffer because of the
convenience rule. As noted in Section III-A-1 of this article, New York’s convenience rule applies
only to nonresident employees who spend at least some time working in New York. Thus,
nonresidents can avoid the rule if they never travel to New York for work – if they telecommute on a
truly full-time basis or take jobs in other states. However, when nonresidents eliminate New York as
a work destination, they either do not patronize New York businesses at all or they patronize them far
less often. They do not buy five lunches per week in New York, buy memberships in New York
gyms, or go to movie theaters in New York after work. New York’s businesses lose revenue.
c. How States Suffer
34
TSB-M-06(5)I.
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When New York’s businesses are less profitable, the state loses sales tax revenue and business
income tax revenue. In addition, when nonresidents stay out of New York for work purposes, the
state loses personal income tax revenue: once nonresidents stop working in New York altogether,
New York has no opportunity to tax any part of their wages.35 Thus, the convenience rule, which is
intended to swell New York’s treasury, actually imperils it.
In addition to harming New York, the convenience rule harms the states where telecommuters
live. For example, states that give their telecommuting residents a credit for the taxes they pay to
New York on the wages earned at home forfeit to New York the personal income tax revenue that is
due to them. By surrendering that revenue, they finance New York’s public services – like police,
fire, and other emergency services – even as the telecommuters regularly work from home and
depend on the home state’s services. Indeed, the home states may be sustaining New York’s services
while making hard choices about which of their own they must curtail or shutter.
Another reason the convenience rule can harm workers’ home states is that, by preventing
jobless residents from using telework to take positions with remote companies, the rule may
needlessly prolong the unemployment of these workers and further diminish the home states’
personal income tax revenue. In addition, because unemployed residents are forced to limit their
purchases, the rule can shrink sales tax revenue, and since reduced sales yield less business income,
the rule can decrease business income tax revenue.
4. Constitutional Challenges to the Rule
Two taxpayers have argued that the convenience of the employer rule is not just
counterproductive, but unconstitutional. In Zelinsky v. Tax Appeals Tribunal of New York,36 the
taxpayer was a Connecticut resident and a professor at Cardozo Law School in Manhattan. His job
responsibilities included teaching, meeting with students, grading, research, and writing. During the
two taxes years at issue (1994 and 1995), Zelinsky divided his work time between New York and
Connecticut: he taught classes and met with students in Manhattan, and he did his grading, research,
and writing at home, in Connecticut. He spent the majority of his working days in Connecticut.
Treating the part of Zelinsky’s salary that he earned at home as Connecticut source income,
Connecticut taxed that income.37 Treating the part of his salary that he earned at home as New York
source income (i.e., applying its convenience of the employer rule), New York taxed that income,
too.
35
See, e.g., Edward A. Zelinsky, Combining the Mobile Workforce and Telecommuter Tax Acts, STATE TAX TODAY, Jul. 30, 2012
(“As a constitutional matter, the U.S. Supreme Court has distinguished between the broad authority of states to tax their residents'
incomes and the states' more limited power to tax nonresidents' incomes. A state has the plenary authority to tax all income of a
resident wherever that income is earned. However, that state has more limited, source-based authority to tax nonresidents. A state
can tax a nonresident only on the income the nonresident earns within the borders of that state”).
36
Zelinsky v. Tax Appeals Trib. of N.Y., 1 N.Y.3d 85 (2003), cert. denied, 541 U.S. 1009 (2004).
37
See Petition for a Writ of Certiorari at 13 n.6, Zelinsky v. Tax Appeals Trib. of N.Y., 541 U.S. 1009 (2004)(“Connecticut taxed
the petitioner on the basis of his status as a Connecticut resident. On the days when the petitioner worked at home, Connecticut
was also the State of source, i.e., the State … in which the petitioner’s income-producing activity (writing, research and grading)
actually occurred”).
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Zelinsky challenged New York’s application of the convenience rule in the New York courts,
claiming that application of the rule to him violated the Commerce and Due Process Clauses of the
U.S. Constitution. Specifically, he argued that the tax the convenience rule imposed was not fairly
apportioned, as the Commerce Clause requires, and that New York’s imposition of tax on his
Connecticut wages violated the prohibition in the Due Process Clause against extraterritorial
taxation. New York’s Court of Appeals denied both claims. Zelinsky appealed his case to the U.S.
Supreme Court, but the Court refused to hear his appeal.
Just under a year later, the New York Court of Appeals again upheld the convenience rule
against constitutional challenges. In Huckaby v. New York State Division of Tax Appeals,38 the
taxpayer was a Tennessee resident and a computer programmer with an organization based in
Queens, New York. During the two tax years at issue in his case (also 1994 and 1995), he spent
about 75 percent of his work time working from home, in Tennessee, and 25 percent of his work time
working in New York. As in Zelinsky’s case, the New York Department of Taxation and Finance
insisted that he allocate 100 percent of his income to New York and pay taxes on it.
Like Zelinsky, Huckaby challenged the Department’s position in the New York courts. He
argued that application of the convenience rule to him violated the Due Process Clause and the Equal
Protection Clause of the U.S. Constitution. However, in a 4-3 decision, the New York Court of
Appeals rejected his claims. Like Zelinsky, Huckaby appealed the decision to the U.S. Supreme
Court, and, as in Zelinsky’s case, the Supreme Court denied review. The Supreme Court’s refusal to
consider these two cases underscored for members of Congress the need for legislative relief:
Congress would have to do what the courts would not – remove the threat of double or excessive
taxation for telecommuting across state lines, ease telecommuters’ confusion about where they owe
taxes, and ease employers’ confusion about where to withhold.
5. The Telecommuter Tax Fairness Act
The Telecommuter Tax Fairness Act39 is the federal remedy lawmakers have proposed. This
legislation would prohibit states from taxing the compensation a nonresident earns when he is
physically present in a different state. For purposes of determining physical presence, states would be
barred from treating a nonresident individual as present in the state merely because he is working at
home for convenience or because his work at home or office at home fails a convenience of the
employer test, or any similar test. That is, states would not be able to force nonresidents to pretend
that they were present in the state when they were actually present in their home state.
Further, under the proposal, states would be prohibited from treating a period of time during
which a nonresident is physically present in another state and performing certain tasks there to be
time that is not normal work time, nonworking time, or uncompensated time – unless the
nonresident’s employer regarded the time that way.40 The goal of this provision is to bar a state like
New York from unilaterally asserting that days a nonresident elected to work from home were non-
38
Huckaby v. N.Y. Div. of Tax Appeals, 4 N.Y.3d 427, cert. denied, 546 U.S. 976 (2005).
39
H.R. 5615; S. 1811 (112th Cong.).
40
Id.
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working days or unpaid days and that, consequently, all of his compensation was earned in New
York and subject to New York tax.41
The legislation has been introduced in multiple sessions of Congress. In the 112th session,
Representative Jim Himes and Representative Chris Murphy (now Senator Murphy) introduced it in
the House, and Representative Rosa DeLauro co-sponsored it. Senator Joseph Lieberman (now
retired) and Senator Richard Blumenthal introduced the bill in the Senate. These lawmakers are all
from Connecticut, where many victims of the convenience rule reside. Efforts are underway to secure
reintroduction in the current session. It is possible that a new bill would bear a different name, but its
objectives would be the same.
In past sessions of Congress, the bill has generated considerable support both within and
outside government. Lawmakers from both sides of the aisle and all across the country signed on –
Maine, Massachusetts, New Jersey, Maryland, Virginia, and Georgia, Mississippi, Illinois, Kansas,
and Arizona, Washington State, and even New York.
The bill won the support of the FCC. In the National Broadband Plan, the FCC specifically
recommended that Congress take up the Telecommuter Tax Fairness Act because of the negative
impact the penalty has on telework adoption.42
Outside government, organizational stakeholders with a wide range of missions have also
endorsed telecommuter tax fairness. In addition to advocates for telework,43 such supporters have
included, for example, advocates for small businesses,44 taxpayers,45 transportation alternatives,46
homeowners,47 flexible work arrangements,48 work/life balance49 and energy security.50 Individuals
41
Nicole Belson Goluboff, Telecommuting Tax Confusion: Why the Federal Proposal for a Uniform Nexus Standard for MultiState Employees Won’t Work, STATE TAX BLOG (Oct. 22, 2012), available at http://www.bna.com/telecommuting-tax-confusionb17179870408.
42
NBP, Recommendation 13.6.
43
The Telework Coalition, www.telcoa.org.
44
Letter from Karen Kerrigan, President and CEO, Small Business & Entrepreneurship Council, to Senator Joseph Lieberman
(Jan. 5, 2012), available at http://www.sbecouncil.org/2012/01/05/s-1811-telecommuter-tax-fairness-act.
45
Letter from Jordan Forbes, Federal Government Affairs Manager, National Taxpayers Union, to Representative Jim Himes
(July 22, 2009), available at http://www.ntu.org/news-and-issues/taxes/hr2600-telecommuter-tax-fairness.html.
46
Association for Commuter Transportation Telework Council,
https://netforum.avectra.com/eWeb/DynamicPage.aspx?Site=ACT1&WebCode=Telework.
47
Modernizing the Tax Code: Updating the Internal Revenue Code to Help Small Businesses Stimulate the Economy, Hearing
Before the House Comm. on Small Business, 110th Cong., 2d Sess. (2008) (written testimony submitted by the American
Homeowners Grassroots Alliance), available at
http://www.americanhomeowners.org/AHGA/Testimony/simplifyandreducehomeownerstaxes.htm.
48
Workplace Flexibility 2010, Public Policy Platform on Flexible Work Arrangements, May 2009, available at
www.workplaceflexibility2010.org.
49
Take Back Your Time, Take Back Your Time Supports Telecommuting Bill, Newsletter, Spring 2010, available at
http://www.timeday.org/news_Spring2010.pdf.
50
Justin Horner, Telework: Saving Gas and Reducing Traffic from the Comfort of your Home, Mobility Choice white paper, Mar.
9, 2011, available at
http://www.mobilitychoice.org/index.php?option=com_content&view=article&id=408:telecommuting&catid=100:news&Itemid
=494.
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nationwide have called for telecommuter tax reform, as well: a petition in support of the bill includes
signatures from residents of nearly all of the 50 states.51
The broad support makes sense. As location becomes increasingly irrelevant to productivity,
there is simply no place for a tax that penalizes the use of broadband to reach the office and perform
work.
6. The Mobile Workforce State Income Tax Simplification Act
a. The Relation Between the Mobile Workforce Bill and the Telecommuter Tax
Fairness Act
The Mobile Workforce Bill is a federal proposal that would also affect the state income
taxation of interstate telecommuters. Like the Telecommuter Tax Fairness Act, a version of the
Mobile Workforce Bill has been introduced in multiple sessions of Congress. In the 112th Congress,
the measure passed in the House but stalled in the Senate Finance Committee.52 On March 20, 2013,
it was reintroduced in the 113th Congress as H.R. 1129.53
The Mobile Workforce Bill and the Telecommuter Tax Fairness Act both aim to simplify tax
compliance for multi-state workers and their employers. However, the two bills focus on different
aspects of the tax quagmire these workers and employers face.
When an employee, who works in multiple states, is considering his state income tax
obligations, a basic question is: what is my tax exposure in a state where I work but do not live?
This question consists of two parts:
1. Does the state where I am not a resident have authority to tax any of my salary?; and
2. If it does, what part of my salary can it tax?
The first part of the question addresses the issue of “nexus,” whether there is a sufficient
connection between the worker and the state to justify the state’s imposition of any tax at all on the
worker’s wages. The second part addresses the issue of “apportionment.” It assumes there is
sufficient nexus for the state to tax the worker’s income and asks how much of his income the state
may tax.54
The Mobile Workforce Bill concerns nexus. As things stand now, different states have
different standards for determining whether a nonresident has a nexus in the state. The disparity
among nexus standards is one reason multi-state workers struggle to determine where they owe taxes
and their employers struggle to determine where they must withhold. The aim of the Mobile
Workforce Bill is to eliminate this particular source of confusion by establishing a uniform nexus
51
The Telework Coalition, Support the Telecommuter Tax Fairness Act, available at
http://www.petitiononline.com/totp02/petition.html.
52
H.R. 1864; S. 3485 (112th Cong.).
53
H.R. 1129 (113th Cong.).
54
See Goluboff, supra note 41.
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rule:55 Under the legislation, a state would be permitted to tax the income of a nonresident employee
only if the employee was present and working in the state for more than 30 days during the year.56
The Telecommuter Tax Fairness Act, in contrast, addresses the second part of the multi-state
worker’s tax question – the part concerning apportionment.57 As the earlier discussion of the
Zelinsky case indicates,58 different states may apply different standards for determining how to
source the income an employee earns in multiple states and, therefore, how to apportion the tax on
that income. Connecticut, for example, treats income that a Connecticut resident with a New York
employer earns at home as Connecticut source income, subject to tax in Connecticut, while New
York applies a convenience rule and treats the income that Connecticut telecommuters choose to earn
at home as New York source income, subject to tax in New York. The disparity between these
sourcing and apportionment standards is another reason (in addition to the disparity among nexus
standards) that multi-state workers struggle to determine where they owe taxes and their employers
struggle to determine where they must withhold. A key goal of the Telecommuter Tax Fairness Act is
to eliminate this particular source of confusion by establishing a uniform rule. Under the
Telecommuter Tax Fairness Act, a state would be permitted to tax only the part of a nonresident’s
compensation that he earned when he was physically present in the state.
b. Why the Mobile Workforce Bill Must be Amended
While the Mobile Workforce Bill and the Telecommuter Tax Fairness Act address distinct
elements of the state income tax analysis for multi-state workers, the Mobile Workforce Bill is likely
to fail in its simplification mission unless it is amended to include the provisions of the
Telecommuter Tax Fairness Act.
A primary reason this amendment is necessary is that, if the convenience of the employer rule
is not eliminated, states will be able to use the convenience rule to dodge the core element of the
Mobile Workforce Bill: the 31-day threshold for nexus. New York, for example, will be able to
require nonresidents who telecommute part-time for convenience to treat their home state days as
New York days when figuring whether they spent 31 days or more in New York. Thus, a California
resident who works for a New York employer, telecommutes for convenience, and travels to New
York for work only 20 days during the year will have to pretend that he spent his California days in
New York. As a result, he will reach the 31-day threshold for nexus in New York without having
spent 31 days there – perhaps even before he has set foot in New York for the first time. The goal of
a uniform 31-day nexus standard will be defeated, and the current confusion caused by disparate
nexus rules will prevail.59
55
Id.
56
H.R. 1864; S. 3485 (112th Cong.).
57
See Zelinsky, supra note 35.
58
Section III-A-4.
59
The legislative history of the Mobile Workforce Bill underscores how real the risk is that New York and other states will use
the convenience rule to circumvent the 31-day nexus rule. Versions of the Mobile Workforce Bill introduced in the 109th and
110th Congressional Sessions provided that a state could tax the income of a nonresident employee only if he was “physically
present” and working in the state for the specified number of days. H.R. 3359 (110th Cong.); H.R. 6167 (109th Cong.). However,
in subsequent versions of the bill, the word “physically” was removed from the nexus rule. These later versions provided, instead,
that a state could tax a nonresident employee’s income only if he was “present” and working in the state for the specified period.
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Moreover, if the convenience of the employer rule is not eliminated, the current confusion will
do more than persist; it will get worse. Nonresident employees may be forced to use contradictory
standards for determining when a home state day qualifies as a home state day, depending on
whether they are addressing the nexus or apportionment part of the income tax question.
For example, suppose everyone agrees that, under the Mobile Workforce Bill, a taxpayer
trying to determine whether he has nexus in his employer’s state may treat his home state days as
home state days. Our California telecommuter, when determining whether he has nexus in New
York, counts as New York days only the days he was physically present in New York and determines
that he spent 40 days there. He concludes that, having spent more than 30 days inside New York, he
does have nexus there and is subject to New York tax. However, when he turns to the question of
apportionment – the question of how much of his income is subject to tax in New York – he will
have to apply the convenience of the employer rule. He will have to treat his California days – which
he just counted as California days for nexus purposes – as New York days. This fluctuating
characterization of home state days will only yield greater confusion.
To avoid these problems, lawmakers should revise the Mobile Workforce Bill. For example,
the 31-day nexus rule set forth in the bill should be amended to provide that:
(1) A state can tax a nonresident on wages he earned in the state only if the nonresident was
physically present in the state for more than 30 days during the year (rather than merely “present” in
the state, as the current version of the bill provides); and
(2) States may not apply a convenience of the employer test or any similar test to determine
whether the nonresident was physically present there.
Further, to assure that the bill truly simplifies the personal income tax analysis for multi-state
workers and their employers, the Mobile Workforce Bill should be amended to provide a uniform,
physical presence standard for determining, not just nexus, but apportionment, as well. Adding the
provisions of the Telecommuter Tax Fairness Act to the Mobile Workforce Bill would accomplish
this goal. As described in Section III-A-5 of this article, incorporating the terms of the Telecommuter
Tax Fairness Act would make clear that, when a nonresident employee does have nexus in a state, the
state would be able to tax only the part of his income that he earned when he was physically present
in that state and it would not be able to use a convenience of the employer test to determine whether
the nonresident was physically present. States would also be barred from treating days a nonresident
worked at home as non-working days or unpaid days, unless the nonresident’s employer considered
the days non-working or unpaid days.
To strengthen the Mobile Workforce Bill further, its sponsors should also adopt the
Telecommuter Tax Fairness Act’s scope of coverage: the Mobile Workforce Bill covers only
employees while the Telecommuter Tax Fairness Act covers both employees and independent
contractors. Amending the Mobile Workforce Bill to cover both employees and independent
contractors would ease tax compliance burdens for the greatest number of multi-state workers and
companies.60
B. Tax Penalty Imposed on Businesses
H.R. 2110 (111th Cong.); H.R. 1864; S. 3485 (112th Cong.). The removal of the word “physically” from the nexus rule leaves
any state free to apply a convenience rule and to force nonresidents to treat the days they worked outside the state for
convenience as if they were days the nonresidents were “present” inside the state.
60
Goluboff, supra note 41.
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Just like nonresident individuals, out-of-state (“foreign”) companies must have nexus in a state
before the state can subject them to income tax: they must have a sufficient connection with the state
– sufficient activity in the state – to justify the state’s imposition of tax. Another obstacle to telework
is the policy states may adopt of asserting that a foreign company has income tax nexus in the state
when its only connection to the state is that it employs a single telecommuter there. Some recent
cases have thrown a spotlight on this policy.
1. Telework as a Basis for Nexus in New Jersey: The Telebright Case
Telebright Corp. v. Director61 is the leading case addressing telework as a basis for corporate
income tax nexus. Telebright was a Delaware corporation with its principal place of business in
Maryland. Its business was developing software. In 2001, the company hired Srisathya Thirumalai, a
Maryland resident, to develop and write software code. She signed an employment contract, which
included various restrictive covenants. After a few years, due to her husband’s relocation, she moved
to New Jersey. Telebright agreed to retain her on a telecommuting basis.
Thirumalai travelled to Maryland approximately twice a year to attend company-wide
meetings, but otherwise worked entirely from home. Most of her assignments, which she received
daily at home by phone or email, consisted of writing software code. This code became part of a web
application Telebright supplied to its customers. She had no sales responsibilities.
Telebright had no activity in New Jersey apart from her presence. It did not maintain an office
or financial accounts in New Jersey, did not have other employees there, nor solicit sales there.
When Thirumalai first began telecommuting, the company gave her a laptop computer to use
for work. However, she later replaced it at her own expense. Telebright did not reimburse her for any
household bills related to her work or for the costs she incurred when she travelled to Maryland.
Telebright withheld New Jersey Gross Income Tax from Thirumalai’s paycheck. However, it
did not file New Jersey Corporation Business Tax returns. New Jersey’s Division of Taxation
determined that, under New Jersey’s tax law, the company was obligated to file such returns because,
by employing a telecommuter in New Jersey, it was “doing business” there.
Telebright challenged the Division’s determination before the Tax Court. The company argued
that it was not “doing business” within the meaning of New Jersey’s Corporation Business Tax Act
(“CBT Act”) and, therefore, was not subject to the Act. In addition, it argued that application of New
Jersey’s tax law to Telebright violated both the Due Process Clause and the Commerce Clause of the
U.S. Constitution. The Court rejected both the statutory and constitutional claims.
The Tax Court found that the company was “doing business” in New Jersey within the
meaning of the CBT Act, because it had an employee in the state who performed nearly all her duties
there. According to the Court, “[w]hile … Telebright … never maintained an office in New Jersey,
nor solicited business [t]here, its daily contact with the State through its employee is sufficient to
trigger application of the” Act.62 The fact that Telebright initially provided Thirumalai with a laptop
computer to use for work further supported the conclusion that the company was “doing business” in
New Jersey: it was “employing property” there.63
61
Telebright Corp. v. Director, 25 N.J. Tax 333 (2010), aff’d, 424 N.J. Super. 384 (2012).
62
Id. at 346.
63
Id. at 348.
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The Court noted that the fact that Thirumalai made a personal choice to move to New Jersey
was irrelevant to whether Telebright was subject to tax: “Ms. Thirumalai’s residence is not the
determinative factor. It is the location at which she receives her assignments, performs her
responsibilities and delivers her work product for Telebright that controls application of the CBT
Act…. From a substantive perspective, it is not relevant that she works in the same building in which
she resides.”64
Turning to Telebright’s claim that subjecting the company to tax violated the Due Process
Clause of the U.S. Constitution, the Court explained that there is no Due Process violation where the
company to which the state’s law is applied “has had ‘fair warning that [its] activity may subject [it]
to’” the state’s jurisdiction.65 Telebright’s “regular employment of Ms. Thirumalai” in New Jersey
gave it fair warning that it could be subject to the state’s laws.66 Telebright “acquiesced”67 in her
relocation to New Jersey, delivered her work assignments to her every day in New Jersey, and
supervised her in New Jersey. It also withheld New Jersey tax from her paycheck.68
Finally, the Court explained that a state’s tax on interstate economic activity satisfies the
Commerce Clause when the tax is applied to an activity that has a substantial nexus to the state, is
fairly apportioned, does not discriminate against interstate commerce, and is fairly related to the
services the state provides.69 The Court found that none of these Commerce Clause requirements
barred subjecting Telebright to the CBT Act.
With respect to the substantial nexus requirement, the Court said that Thirumalai’s “daily
presence in [New Jersey] for the purpose of carrying out her responsibilities as an employee of
Telebright is sufficient to” establish substantial nexus.70 It observed that Telebright “chose to
establish a work place for Ms. Thirumalai”71 in the state, “regularly enjoy[ed] the benefits of [the
state’s] labor market” by employing her,72 and had access to the state’s courts if she violated her
employment contract.73
The Court also indicated that Telebright enjoyed no protection from tax under P.L. 86-272,74 a
federal law that, in addition to the U.S. Constitution, limits states’ authority to assert income tax
64
Id. at 347.
65
Id. at 349 (alteration in original)(citation omitted).
66
67
68
Id.
Id.
Id.
69
Id. at 350 (citing Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977)).
70
Id. at 351.
71
Id.
72
Id. at 350.
73
Id. at 350-51.
74
Id. at 355 n.1.
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nexus over out-of-state companies. Under P.L. 86-272,75 states are not permitted to impose income
tax on a foreign corporation when the corporation’s activities within the state are limited to the
solicitation of orders for the sale of tangible personal property, the orders are sent outside the state
for approval or rejection, and approved orders are filled from outside the state.76 Because Thirumalai
“was not engaged in soliciting orders from customers on behalf of Telebright,” P.L. 86-272 provided
no relief for Telebright.77
In March 2012, New Jersey’s Appellate Division affirmed the Tax Court’s decision,
“substantially for the reasons set forth in [the Tax Court’s] opinion.”78 However, the analysis
included a number of distinct observations. For example, the Appellate Division agreed with the Tax
Court that Telebright was doing business in New Jersey. It noted, however, that under New Jersey’s
Administrative Code, a for-profit corporation that is “‘carrying out any of the purposes of its
organization’” in New Jersey is “doing business” there,79 Telebright’s full-time employee was
carrying out the purpose of the company in New Jersey by creating computer code that became part
of the company’s web-based service;80 and, this activity (for purposes of applying the Corporation
Business Tax) is no different from “a foreign manufacturer employing someone to fabricate parts in
New Jersey for a product that will be assembled elsewhere.”81
In affirming the Tax Court’s conclusion that subjecting Telebright to New Jersey tax did not
violate the Due Process Clause, the Appellate Division emphasized that Thirumalai produced
computer code for Telebright in New Jersey, Thirumalai was entitled to all the legal protections
afforded New Jersey residents, and, if she violated the restrictive covenants in her employment
contract, Telebright would be able to bring suit in the New Jersey courts to enforce the contract.82
According to the appellate court, the only issue under the Commerce Clause that Telebright
had preserved the right to challenge on appeal was whether the substantial nexus requirement was
satisfied. The company argued that employing one person in New Jersey is “de minimis and does not
create the ‘definite link’ or ‘minimum connection’ between Telebright and [the] State so as to justify
imposition” of the Corporation Business Tax.83 Telebright also argued that, “given the prevalence of
telecommuting, taxing businesses on the basis that their employees work from remote locations will
impose ‘unjustifiable local entanglements’ and an undue accounting burden on those businesses.”84
75
76
15 U.S.C. § 381 (2011).
Id.
77
Telebright Corp., 25 N.J. Tax at 355 n.1.
78
Telebright Corp. v. Director, 424 N.J. Super. 384, 388 (2012).
79
Id. at 390 (citing N.J. ADMIN. CODE tit. 18, § 18:7-1.9(a)(1)).
80
Telebright Corp. v. Director, 424 N.J. Super. at 390.
81
Id. at 390-91.
82
Id. at 392.
83
Telebright Corp. v. Director, 424 N.J. Super. at 393-94 (citations omitted).
84
Id. at 394.
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The Appellate Division indicated that having one employee in the state was not “de
minimis.”85 Thirumalai was producing part of the company’s product in New Jersey, and Telebright
“benefit[ted] from all … the protections New Jersey law affords [its] employee.”86 The fact that
Thirmualai worked from a home office, rather than an office owned by Telebright, was irrelevant to
the substantial nexus analysis, the Court said.87
With respect to the “regulatory burden”88 Telebright said the tax imposed, the appellate court
was not persuaded the burden would be onerous. Telebright was already withholding income tax
from Thirumalai’s salary. It was subject to New Jersey’s labor and anti-discrimination laws
concerning the employee and was obligated to “remain apprised”89 of those laws. According to the
court, the company offered “no explanation as to why the additional effort of calculating and paying
the [Corporation Business Tax] would constitute an undue burden on its conduct of interstate
commerce.”90
The Appellate Division noted repeatedly that Thirumalai worked for Telebright on a full-time
basis.91 Although the case did not require it to opine on the issue, had Ms. Thirumalai worked in
New Jersey only part-time, it is possible the Court might have reached a different conclusion.
2. Telework as a Basis for Nexus in California: The Warwick McKinley Case
New Jersey courts are not alone in adopting the view that an out-of-state company may have
income tax nexus in a state where its only connection is the presence of a telecommuter performing
activities not protected by P.L. 86-272 (“non-solicitation activities”).92 Consider the Warwick
McKinley case,93 decided in 2012 by the California State Board of Equalization.
Warwick McKinley, Inc. (“Warwick”), a company incorporated in Massachusetts, provided
“marketing and recruiting consulting services in the environmental, engineering/construction and
green technology sectors.”94 According to Warwick, the company had only one office, located in
Massachusetts; from 2006-2008, it had an employee who worked from home in California, but her
85
Id. at 393-95.
86
Id. at 395.
87
88
89
90
Id.
Id.
Id.
Id.
91
See, e.g., id. at 390 (“We add only that Telebright’s full-time New Jersey employee ‘carr[ies] out the purpose of its
organization’ here”)(alteration in original); Id. at 392 (The State “is imposing the tax because [Ms. Thirumalai] performs work
for Telebright on a full-time basis in this State. Taxing a business based on its employing one full-time employee in the taxing
state does not violate the Due Process Clause”); Id. at 395 (“The fact that Telebright’s full-time employee works from a home
office rather than one owned by Telebright is immaterial” to the substantial nexus analysis).
92
See discussion supra Part III-B-I.
93
In re Warwick McKinley Inc., No. 489090, 2012 Cal. Tax LEXIS 14 (State Bd. Equalization. Jan. 11, 2012).
94
Id. at *2.
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home office was not “‘publicly attributed’”95 to the company; calls for the employee were directed to
the Massachusetts office and forwarded to her cell phone; and the company had no clients in
California.96 Warwick registered in California only to provide workers compensation insurance for
the telecommuter.97
California’s Franchise Tax Board notified Warwick that “the activities of its employee in
California created a nexus with California sufficient to require the filing of a [2006] tax return”98 and
advised the company that failure to file by a specified date would result in an assessment of tax and
penalties. The Franchise Tax Board did not receive a return by that date and made the assessment.
Warwick appealed.
On appeal, the Equalization Board agreed with the Franchise Tax Board. According to the
Equalization Board,
By operating through its employee in California, [Warwick] was afforded
substantial and enduring benefits and protections of the state that enabled [the
company] to generate business for its recruiting services. Thus, we find that
[Warwick] conducted a regular, systematic and substantial connection with, and
physical presence within, California[,] establishing substantial nexus to support
the imposition of the corporate franchise tax….99
Further, although Warwick argued that the telecommuter “engaged in protected sales
activities as defined in P.L. 86-272,”100 the Equalization Board disagreed. The employee’s
activities in California consisted of consulting and recruiting services, not the solicitation of
sales of tangible personal property. Consequently, P.L. 86-272 did not protect Warwick from
taxation.101
3. Treating Telework as a Basis for Nexus: More Common Than Not?
In April 2012, Bloomberg BNA issued its 12th Annual Survey of State Tax Departments.102
One goal of this survey is to clarify the positions of state tax departments concerning whether
particular in-state activities, when conducted by out-of-state companies, would create income tax
nexus in the state for those companies.103 Telecommuting was one of the activities the survey
addressed.
95
Id. at *5.
96
Id. at *5-6.
97
Id. at *4.
98
Id. at *4-5.
99
Id. at *21-22.
100
Id. at *6.
101
Id. at *26.
102
2012 Survey of State Tax Departments, [19 Spec. Rep.] Multistate Tax Rep. (BNA), No. 4, (Apr. 27, 2012).
103
Id. at S-35.
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Specifically, Bloomberg BNA asked whether a foreign corporation would have income tax
nexus in the state if six or fewer employees telecommuted from their homes in the state and all of
these employees performed non-solicitation activities. Respondents were asked to assume that the
foreign company engaged in no activity in the state apart from the employment of these
telecommuters and activities that are protected by P.L. 86-272.104
Forty-two jurisdictions responded to the question, including 40 states, the District of Columbia,
and New York City. Of the 42 respondents, 35 reported that having six or fewer employees who
telecommute from their homes in the jurisdiction and who all perform non-solicitation activities
would create nexus for an out-of-state business. Consistent with the rulings in Telebright and
Warwick McKinley, New Jersey and California were among them.105
States were also asked to indicate whether they “would reach a different answer if the
corporation made no sales in [the] state or if the employees telecommute for only part of their total
work time.”106 Sixteen states responded affirmatively to both parts of this additional question,
asserting expressly that a few telecommuters would create nexus even if the company had no in-state
sales or the employees telecommuted only part-time.107
Notably, New Jersey’s response was incomplete. Citing the Tax Court’s opinion in Telebright
(where the Maryland company had a telecommuter but no sales in New Jersey), New Jersey reported
that six or fewer telecommuters performing non-solicitation activities would create nexus in New
Jersey even if the foreign company made no sales there. However, the state was silent on the subject
of whether nexus would be established if the employees telecommuted for only part of their total
work time.108 This silence strengthens the hypothesis that the New Jersey Appellate Division –
which repeatedly described the telecommuter in Telebright as a “full-time” employee – might not
have found that the company had nexus if the case had involved a part-time telecommuter.109
The results of the Bloomberg BNA survey appear to reflect a trend among states to treat
telework as a basis for income tax nexus: a majority of all states said the employment of just one
telecommuter who does not solicit sales would create nexus for a foreign company, and over 40
percent of that majority said there would still be nexus even if the company made no sales in the state
or the employee telecommuted only part-time. Nonetheless, Bloomberg BNA cautioned readers
about the limits of the survey results:
[The] annual survey offers insights for practitioners who must gauge whether a
corporation’s activities within a state could result in a tax assessment. Because
guidance, in the form of case law or statutes setting forth the types of activities
that trigger nexus and taxability, is lacking in many states, this survey fills in
essential details. However, because nexus determinations are fact-specific and
104
Id. at S-64 n.8, S-235, S-238.
105
Id. at S-64 to S-66.
106
Id. at S-238.
107
Id. at S-64 to S-66.
108
Id. at S-65 n.41.
109
See discussion supra Part III-B-I.
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subject to interpretation, the states’ answers should not be relied upon as
definitive policy statements.110
Indeed, in the 2013 survey, due to be published in April, 2013, Bloomberg BNA has inquired
more extensively about the factors that may influence a state’s position on whether telework is a
basis for income tax nexus:
The questionnaire for the survey that will be published in April [2013] asks
revenue officials to provide more details regarding issues such as … [t]he
income tax nexus consequences of telecommuting. For years, most states have
indicated that income tax nexus will result for an out-of-state corporation with
an employee that telecommutes from within the state’s borders. This year, we’re
asking these states if they would reach the same determination if the employee
[were] performing back-office administrative functions such as payroll.111
Thus, the appearance of a trend notwithstanding, companies considering whether to
authorize an employee to telecommute from out-of-state need to consider how the tax
authorities –and courts – in the telecommuter’s home state would view not telework in
general, but the particular telework arrangement the company is contemplating.
4. The Impact of Treating Telework as a Basis for Nexus
a. Impact of the Nexus Policy on the Growth of Telework
State policies that treat a foreign company’s employment of a limited number of in-state
telecommuters as a basis for nexus can have two somewhat contradictory effects: they can promote
telework as well as discourage it. This section will discuss both the positive and negative impact such
policies can have on telework’s growth.
i. How Treating Telework as a Basis for Nexus Promotes Telework
Telework has long been misperceived either as a dispensable perk that thriving businesses can
offer their workers or a special accommodation that an employer might make for a favored
employee. Similarly, telecommuters and would-be telecommuters have long battled the
preconception of managers that, on their telework days, employees are more likely to watch
television or play with their children than to work. However, when a state asserts that a
telecommuter’s work at home in the state constitutes sufficient business activity on the part of her
out-of-state employer to justify subjecting the company to tax, the state validates telework as real
work, a business practice that is profitable for corporations as well as employees.
The two opinions in the Telebright case underscore this point. For example, the New Jersey
Tax Court made clear that a foreign company’s employment of a telecommuter in New Jersey is a
form of interstate commerce that benefits the company.112 Discussing whether Telebright’s
110
2012 Survey of State Tax Departments, supra note 102, at S-9.
111
State Tax Snapshot: 2013 BBNA State Tax Department Survey to Cover Additional Topics, STATE TAX BLOG (Oct. 15, 2012),
http://www.bna.com/state-tax-snapshot-b17179870231/.
112
Nicole Belson Goluboff, As White House Seeks to Promote Telecommuting, States Are Raising Barriers Through
Counterproductive Tax Policies, 17 Multistate Tax Rep. (BNA) No. 7, at 369, 374 (Jul. 23, 2010).
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employment of Ms. Thirumalai satisfied the substantial nexus requirement of the Commerce Clause,
the Court said,
Telebright regularly enjoys the benefits of New Jersey’s labor market through
the employment of Ms. Thirumalai. When Ms. Thirumalai moved to New
Jersey[,] she became part of the talent available to employers in this State.
Telebright decided, presumably for business reasons, that Ms. Thirumalai is
valuable enough as an employee to warrant granting her permission to work
from home despite her relocation to New Jersey.113
Similarly, the Court made clear that Ms. Thirumalai’s days at home were true work days.114
Discussing whether Telebright was “doing business” within the meaning of New Jersey’s tax law, the
Court said,
It is the location at which [the employee] receives her assignments, performs her
responsibilities and delivers her work product for Telebright that controls
application of the [Corporation Business Tax] Act…. From a substantive
perspective, it is not relevant that she works in the same building in which she
resides.115
The Appellate Division shared the Tax Court’s view that Ms. Thirumalai’s telework days were
genuine work days. Discussing whether subjecting Telebright to tax was consistent with the Due
Process Clause, the Court explained that New Jersey was “imposing the tax because [Telebright’s
employee] performs work for Telebright on a full-time basis in this State.”116 Similarly, in its
discussion of whether the tax satisfied the substantial nexus requirement of the Commerce Clause,
the Court said, “The fact that Telebright’s full-time employee works from a home office rather than
one owned by Telebright is immaterial for purposes of [the substantial nexus analysis.] She is
producing a portion of the company’s web-based product here….”117
Thus, both courts recognized telework as commercial activity intended to serve the financial
interests of the company. In so doing, both helped to erode stubborn myths about telework that have
long stifled adoption of the practice.
ii. How Treating Telework as a Basis for Nexus Deters Telework
Despite the New Jersey courts’ well-informed understanding of telework, the conclusion they
reached as a result of that understanding – that a single telecommuter in the state established income
tax nexus for her out-of-state employer – can easily discourage other companies outside New Jersey
from offering telework opportunities to New Jersey residents. A firm with a veteran employee who is
forced to relocate to New Jersey for personal reasons may want, as Telebright did, to use telework to
retain that employee. But, in the wake of Telebright, it will likely decide that it must let the employee
go to avoid income tax exposure in New Jersey. Similarly, a company trying to recruit a uniquely
113
Telebright Corp., 25 N.J. Tax at 350 (emphasis added).
114
Goluboff, supra note 112.
115
Telebright Corp., 25 N.J. Tax at 347.
116
Telebright Corp. v. Director, 424 N.J. Super. at 392 (emphasis added).
117
Id. at 395 (emphasis added).
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qualified candidate in New Jersey – someone who would need to telecommute to accept the position
– may decide not to extend the job offer because of the corporate tax risk.
As a practical matter, treating the presence of a limited number of in-state telecommuters as a
basis for income tax nexus is much more likely to discourage telework than to promote it. States
weighing whether to adopt or retain such a nexus policy should consider the significant harm this
deterrent can cause. Workers, businesses, and even the states applying the nexus policy can suffer.
b. Impact of the Nexus Policy on Workers
Just like the convenience of the employer rule, the nexus policy articulated in Telebright harms
workers by restricting telework opportunities. It harms both workers who have jobs and workers who
have lost their jobs.
A worker who is currently employed and needs to start telecommuting from his out-of-state
home will not be able to do so if his employer does not want to risk tax liability in the worker’s home
state. For some employees denied the opportunity to telework, the consequences may include budgetstraining fuel or transit expenses, harrowing work/family conflicts, excessive fatigue from lengthy
commutes on congested roads or rails, and suboptimal productivity. For other employees denied
telework, the consequence may be unemployment: workers who must relocate to a distant state for
personal reasons, nonresident workers who become obligated to care for chronically ill or aging
family members, or nonresident workers who are struck with a long-term injury or illness themselves
may be forced to leave their jobs because interstate telework is not an option.
Similarly, employees who have been laid off and need the option of telecommuting to expand
the region where they can look for new work will not have that option if companies in other states
cannot abide the tax risk of hiring them as telecommuters. By shrinking the pool of businesses to
which unemployed Americans can apply, the nexus policy can prolong their unemployment.
c. Impact of the Nexus Policy on Businesses
Also like the convenience of the employer rule, a Telebright-type nexus policy harms
businesses. The businesses that suffer include both companies outside the state asserting nexus and
companies within that state.
The nexus policy harms foreign companies that want to employ telecommuters in the state by
forcing those companies to forego telework opportunities. These businesses may lose valued
employees or desired recruits who cannot make a daily commute to the firm. They may lose the costsavings, productivity increases, and emergency preparedness benefits that a widely distributed
workforce offers.
The nexus policy harms businesses inside the state asserting nexus as well, by threatening their
sales. As noted in Section III-B-4(b), when foreign companies are discouraged from employing the
state’s residents, unemployed residents may remain unemployed for a needlessly long time. And, as
noted in the discussion concerning the harmful effects of the convenience rule, when residents are
unemployed for an extended period, they lose buying power.118 Thus, they spend less money in the
state’s stores, recreational facilities, and other businesses, and the health of those businesses is
endangered.
118
See discussion supra Part III-A-3(c).
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d. Impact of the Nexus Policy on States
When the residents of the state asserting nexus cannot use telework to look outside the state for
work – and they remain unemployed for significant stretches of time – they generate less personal
income tax revenue for the state. And, as noted in the discussion of the convenience rule,119 when
their prolonged unemployment causes losses for the state’s businesses, the state can lose both sales
tax revenue and business income tax revenue.
Thus, while states may decide to treat telework as a basis for nexus in order to increase their
revenue, the strategy may very well backfire. Certainly states shrewd enough to recognize interstate
telework as commercial activity profitable to both businesses and workers should reject a nexus
policy that discourages the practice. But all states should reject such a policy. They should, instead,
adopt incentives for out-of-state companies to hire their residents to telecommute; states should make
it, not only effortless, but enticing for businesses nationwide to offer jobs to their residents on terms
that do not require those residents to abandon the state.120
IV. CONCLUSION
Given the profound challenges facing our nation that broadband-enabled telework can help
address – including intractable unemployment, steep government deficits, a dangerous oil addiction,
and inadequate transportation choices – workers and businesses should be encouraged to adopt the
practice. State tax policies that frustrate increased use of telework are grossly misguided.
The convenience of the employer rule, which threatens workers with double or excessive
taxation for telecommuting from one state to another, subverts the financial goals of businesses and
states as well as individuals. It also generates tremendous confusion for workers and corporations
trying to meet their tax obligations. The Telecommuter Tax Fairness Act, proposed federal legislation
that would abolish the rule, is a common sense solution. It would remove a powerful deterrent to
telework and simplify tax compliance considerably. Congressional lawmakers should reintroduce and
finally enact this long overdue measure.
The state policy of subjecting a foreign company to an income-based tax when the
company’s sole connection to the state is its employment of a small number of in-state
telecommuters is similarly destructive for individuals, businesses, and the very states imposing the
tax. Although this nexus policy reflects an enlightened understanding of telework as a business
management tool that is gainful for employers and employees alike, states maintaining the policy
apply this progressive understanding to achieve a backward result: the policies discourage out-ofstate companies from using telework to boost in-state employment. The wiser course would be to
create incentives for such companies to do so.
State taxes that impede interstate telework dim the promise of broadband. For this reason,
broadband advocates should urge Congress to enact the Telecommuter Tax Fairness Act. They
should also prevail upon states to reject nexus policies that deter companies from hiring broadband
commuters.
119
120
Id.
Goluboff, supra note 112, at 375.
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TECHNOLOGY LAW IN THE DIGITAL AGE: CURRENT DEVELOPMENTS
*
Richard Raysman
I. INTRODUCTION
The secure establishment, in business and personal use, of the Internet and other modes of
accessing information in digital form has raised novel and complex legal issues for today's
technology and intellectual property lawyers. The fast pace of this "information highway" stands in
stark contrast to the traditional landscape of commercial transactional and intellectual property law.
Many existing laws were not designed to deal with a technology that disseminates information at the
speed, with the convenience, and to the mass audience now possible in the modern information age.
Just as the number of Internet and wireless device users continues to multiply, the number of legal
issues of first impression continues to make technology law an exciting and engaging area of
practice.
The information technology industry is constantly changing, and its evolution continues apace.
New data and media formats, new applications and services, and new methods to access and store
data are constantly introduced into the business and consumer markets. It is not only important for
the technology law attorney to keep abreast of these changes, but also of the changes in the law. As
such, this article provides a concise resource of some of the latest legal developments in technology
law, data security and privacy, and e-commerce and licensing.1
II. SOCIAL NETWORKS AND ONLINE ADVERTISING
In recent years, online social network websites have received a fair amount of media coverage.
The attention has not only concerned their rapid growth and enormous popularity, but also, and
perhaps more importantly, has focused on the novel privacy issues that have emerged vis-à-vis the
websites and their members, as well as what party should be responsible for the posting of offensive
or infringing content or for offsite harms that result from social network interactions.
Broadly speaking, an online social network is a structure that allows its members to share
personal information and enables personal contacts through a website or other Internet portal.
Member pages of "core" social network websites usually contain information and audio and visual
content of a personal nature, though such information may vary widely among individual users.
Other interactive websites that allow for the viewing and sharing of media or bring together a
community of like-minded users often contain social networking features. Often, this data includes
the age, gender and personal interests and hobbies of the individual and is shared with others whom
the member determines to be “friends.”
*
Partner at Holland & Knight LLP. B.S., MIT (1968); J.D., Brooklyn Law School (1973).
1
For a more thorough discussion and consideration of these issues, please refer to Computer Law: Drafting and Negotiating
Forms and Agreements, co-authored by Richard Raysman and Peter Brown (Law Journal Press 1984-2012), Intellectual Property
Licensing: Forms and Analysis (Law Journal Press 1999-2012), co-authored by Richard Raysman, Edward A. Pisacreta,
Kenneth A. Adler and Seth H. Ostrow, and Emerging Technologies and the Law: Forms & Analysis (Law Journal Press 19942012), co-authored by Richard Raysman, Peter Brown, Jeffrey D. Neuburger and William E. Bandon, III. For a compendium of
recent articles and alerts that discuss technology law issues in greater depth, please visit www.hklaw.com and the Digital
Technology & E-Commerce Blog.
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In some instances, the social network websites themselves have used this data in connection
with marketers, albeit in different ways. In turn, this “sharing” has not only stoked the resentment of
some social networking members and privacy advocates, but also has drawn the attention of the
Federal Trade Commission (FTC), particularly with respect to online behavioral advertising. The
FTC defines online behavioral advertising as the tracking of consumers’ online activities in order to
deliver tailored advertising. The agency notes that in many cases, the information collected is not
personally identifiable in the traditional sense – that is, the information does not include the
consumer’s name, physical address, or similar identifier – rather, businesses generally use “cookies”
to track consumers’ activities and associate those activities with a particular computer or device.
In response, the FTC staff and industry groups, among others, have released best practices
guides for this nascent advertising model. Indeed, with the proliferation of social networking
websites and the marketing opportunities of behavioral advertising, it is likely that existing privacy
issues will continue to emerge as the online public and the websites themselves determine when
disclosure of personal information or online activities runs counter to users’ expectations, industry
principles, and emerging law.
In December 2010, the FTC issued a preliminary staff report to address the privacy issues
associated with new technologies and business models. The report outlined a proposed framework to
guide policymakers and other stakeholders regarding the best practices for consumer privacy.
Generally speaking, the proposed framework called on companies to build privacy protections into
their business operations, offer simplified choice mechanisms that give consumers more meaningful
control, and increase the transparency of their data practices. In its Final Report in March 2012, the
Commission adopted the staff’s preliminary framework with certain clarifications and revisions.2 The
FTC recommends that Congress consider baseline privacy legislation and the industry implement the
Report's final privacy framework through individual company initiatives and enforceable selfregulation. To the extent the Report's framework goes beyond existing legal requirements, it is not
intended to serve as a template for enforcement actions. Echoing the preliminary report, the FTC
prompts companies to: (1) adopt a “privacy by design” approach by building privacy protections into
their everyday business practices, including providing reasonable security for consumer data,
collecting only the data needed for a specific business purpose, retaining data only as long as
necessary to fulfill that purpose, safely disposing of data no longer being used, and implementing
reasonable procedures to promote data accuracy; (2) offer a simplified choice for businesses and
consumers and give consumers the ability to make decisions about their data at a relevant time and
context, including through a Do Not Track mechanism; and (3) make information collection and use
practices transparent.
The Final Report clarifies at least three important principles from the preliminary report.
First, the FTC addressed concerns about undue burden on small business. The Final Report's privacy
framework applies to “all commercial entities that collect or use consumer data that can be
‘reasonably linked’ to a specific consumer, computer, or other device, unless the entity collects only
2
See FTC REP., PROTECTING CONSUMER PRIVACY IN AN ERA OF RAPID CHANGE: RECOMMENDATIONS FOR BUSINESSES AND
POLICYMAKERS (Mar. 2012), available at http://www.ftc.gov/os/2012/03/120326privacyreport.pdf. See also U.S. DEP’T OF
COMMERCE, INTERNET POLICY TASK FORCE, COMMERCIAL DATA PRIVACY AND INNOVATION IN THE INTERNET ECONOMY: A
DYNAMIC POLICY FRAMEWORK (Dec. 2010) (stating that diminished trust in data privacy may impede innovative and productive
uses of new technologies, such as cloud computing systems, and stressed the need to enlist the expertise of the private technology
sector and consult existing best practices to create voluntary codes of conduct that promote informed consent and safeguard
consumer information).
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non-sensitive data from fewer than 5,000 consumers per year and does not share the data with third
parties.” Notably, the framework applies in all commercial contexts, both online and offline. As to
the definition of “reasonably linked,” the Final Report clarifies that data is not “reasonably linkable”
to the extent that a company: (1) takes reasonable measures to ensure that the data is de-identified;
(2) publicly commits not to try to re-identify the data; and (3) contractually prohibits downstream
recipients from trying to re-identify the data. Second, the FTC revised its approach to how
companies should provide consumers with privacy choices. The preliminary report had set forth a list
of five categories of “commonly accepted” information collection practices for which companies
need not provide consumers with choice (product fulfillment, internal operations, fraud prevention,
legal compliance and public purpose, and first-party marketing). Under the Final Report, the
Commission set forth a modified approach that focuses on the context of the consumer’s interaction
with the business. Under this approach, companies would not need to provide choice before
collecting and using consumers’ data for “practices that are consistent with the context of the
transaction, consistent with the company’s relationship with the consumer, or as required or
specifically authorized by law.” Although many of the “commonly accepted practices” previously
identified in the preliminary report would generally meet this standard, there may be exceptions. For
data collection practices requiring choice, the agency stated that companies should offer the choice at
a time and in a context in which the consumer is making a decision about his or her data. Moreover,
the Report stated that companies should obtain affirmative express consent before (1) using
consumer data in a materially different manner than claimed when the data was collected; or (2)
collecting sensitive data for certain purposes. Third, the FTC recommends that Congress consider
enacting targeted legislation to provide greater transparency for, and control over, the practices of
information brokers. The agency also called on Congress to enact legislation addressing data
security.
Last, the Final Report announced that the agency would focus its future policymaking efforts
on five main privacy items: (1) Do Not Track: The FTC summarized current industry efforts on this
front, but stressed that it would continue to work with these groups to complete implementation of an
easy-to use, persistent, and effective Do Not Track system; (2) Mobile Privacy: The Report calls on
mobile service companies to establish standards that address data collection, transfer, use, and
disposal, particularly for location data; (3) Data Brokers: To address the issue of transparency and
consumer control over data brokers’ collection and use of consumer information, the FTC stated that
it supports targeted legislation that would provide consumers with access to information about them
held by a data broker. The agency also advocated the creation of a centralized website where data
brokers could detail the access rights and other choices regarding consumer data; (4) Large Platform
Providers: The Report reemphasizes that large platforms (e.g., ISPs, operating systems, browsers,
and social media) that seek to comprehensively track consumers’ online activities raise heightened
privacy concerns; and (5) Promoting Enforceable Self-Regulatory Codes: The FTC will continue to
facilitate the development of industry-specific codes of conduct and will use the FTC Act to take
action against companies that engage in unfair or deceptive practices, including the failure to abide
by self-regulatory programs they join.
In January 2010, the Financial Industry Regulatory Authority (FINRA), the independent
regulator for securities firms doing business in the United States, issued Regulatory Notice 10-06, a
guidance to securities firms and brokers regarding the use of social networking websites for business
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purposes.3 Among its key provisions: (1) Recordkeeping Responsibilities: "Every firm that intends to
communicate, or permit its associated persons to communicate, through social media websites must
first ensure that it can retain records of those communications" as required by law; (2) Suitability
Responsibilities: Regarding recommendations of specific investment products, the Notice urges firms
to adopt specific policies, namely, prohibiting recommendations through social media websites
without approval of a registered principal, or in the alternative, maintaining a database of
recommendations previously approved by a registered principal that can be accessed by personnel;
(3) Interactive Forums: Real-time interactive communications from a blog or social network page
do not require such approval from a principal prior to posting, yet would require that the firm have in
place adequate supervisory procedures to minimize compliance risks, such as lexicon-based or
random reviews of such interactive electronic communications; (4) Social Media Restrictions:
Generally speaking, the Notice requires firms to adopt procedures to ensure that personnel using
social media websites are adequately supervised and trained; (5) Third-Party Content: FINRA does
not deem third-party posts as a firm's public communication subject to approval, content, and filing
requirements. However, the FINRA Notice states that third-party content might be ascribed to the
firm if the firm is “entangled” with the preparation of the content or has “adopted” or implicitly or
explicitly endorsed the third-party content.
In July 2009, leading industry associations developed a set of consumer protection principles
for online behavioral advertising, meant to correspond with the FTC Staff Report on the issue.4 The
industry's Self-Regulatory Program is broken down into seven principles, which propose that
participating organizations and websites, among other things, clearly disclose data collection and use
practices with links and disclosures on the Web page where the advertisement appears; permit
consumers to choose whether or not their data will be collected, used, or transferred to another entity
for behavioral advertising purposes; prohibit service providers from collecting data for behavioral
advertising purposes without affirmative consumer consent; adopt reasonable security practices and
limit data retention; obtain consent when making material changes to its data collection practices that
results in more data collection; and make special considerations for sensitive data, including not
collecting financial account numbers, Social Security numbers, pharmaceutical prescriptions, or
medical records for behavioral advertising purposes without consumer consent.
The Working Party, an independent European advisory body on data protection and privacy,
issued an Opinion informing social network websites on how they can work to comply with the EU
data protection law, including the 1995 Data Protection Directive (95/46/EC) (Directive).5 The
Opinion notes that social network website providers and, in many cases, third party application
providers, are data controllers under the Directive because they provide the means for the processing
of user data and undertake the basic service of user management (e.g. registration and deletion of
accounts). The Opinion makes clear that websites should maintain appropriate technical safeguards
to prevent unauthorized access of users' information and make available to users easy-to-use default
3
FINRA REGULATORY NOTICE 10-6, SOCIAL MEDIA WEBSITES: (Jan. 2010), available at http://www.finra.org/web/
groups/industry/@ip/@reg/@notice/documents/notices/p120779.pdf.
4
AM. ASS’N OF ADVER. AGENCIES ET AL., SELF REGULATORY PRINCIPLES FOR ONLINE BEHAVIORAL ADVERTISING (2009),
available at http://www.iab.net/media/file/ven-principles-07-01-09.pdf.
5
Article 29 Data Protection Working Party, Opinion 5/2009 on online social networking (June 12, 2009), available at
http://ec.europa.eu/justice/policies/privacy/docs/wpdocs/2009/wp163_en.pdf.
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settings to restrict access to users' personal information beyond their desired contacts. Regarding the
use of information, the Opinion states that websites should inform users of the different purposes for
which they process personal data, including using members' data for marketing functions, the sharing
of data with third-parties and the use of users' sensitive data. The Opinion also states that personal
data of users should be removed as soon as their accounts are deleted and that inactive accounts
should no longer be visible to the outside world.
In Facebook, Inc. v. Power Ventures, Inc., the Northern District of California looked at
whether a social network profile aggregating service may be liable for copyright infringement for
gaining consent from users to make copies of their social network profile pages and then "scraping"
the data from the social network for use on its own website.6 The court denied the defendant's
motion to dismiss, rejecting the defendant's argument that no infringement was possible because the
profile user pages were not protected by copyright and the social network website did not hold any
rights to user content. The court conceded that the defendant correctly asserted that the social
network website did not have a copyright on the user content the defendant sought, but found that if
the defendant first had to make a copy of a user’s entire profile page in order to collect that user
content, such action might violate the website's terms of use, citing Ticketmaster L.L.C. v. RMG
Techs, Inc.7 The court also refused to dismiss the “indirect” copyright infringement claims, finding
that the defendant's inducement of users to exceed their authorized usage and thereby allow the
defendant to make copies of their profile pages may support a contributory claim. The court also let
stand the social network's Digital Millennium Copyright Act (DMCA) claims for the defendant's
automated activities that allegedly circumvented certain anti-scraping technological measures on the
website that were designed to protect copyrighted content.
In further proceedings, the court granted the plaintiff's motion for summary judgment on its
CAN-SPAM and Computer Fraud and Abuse Act (CFAA) claims.8 The court rejected the
defendant's argument that because Facebook's own servers sent the commercial e-mails at issue, the
defendants did not “initiate” the e-mails as a matter of law. The court found that although Facebook
servers did automatically send the emails at the instruction of the defendant's software, it was clear
that the defendants’ actions – in creating a friend referral promotion with monetary incentives,
importing users’ friends to the guest list, and authoring the e-mail text – served to “originate” the emails as is required by the CAN-SPAM Act. Regarding the CFAA claim, the court found that the
defendant circumvented technical barriers to access Facebook website, and thus accessed the website
“without authorization” and that the plaintiff established that its losses exceeded the $5,000 CFAA
threshold by offering evidence of the IT costs of attempting to thwart the unauthorized access into its
network.
In Pietrylo v. Hillstone Restaurant Group, a jury found that an employer violated federal and
state computer privacy laws, and was liable for back pay and damages for terminating two employees
6
Facebook, Inc. v. Power Ventures, Inc., 2009 WL 1299698 (N.D. Cal. May 11, 2009). In further proceedings the court found
denied the plaintiff's motion on the pleadings on its state law computer fraud claim, finding that the defendant did not act
“without permission” within the meaning of Section 502 of the statute when Facebook account holders utilized the defendant's
website to access and manipulate their user content on Facebook, even if such action violated Facebook’s Terms of Use.
However, the court ruled that to the extent that the plaintiff can prove that in doing so, the defendant Power circumvented
Facebook’s technical barriers, the defendant may be held liable for violation of Section 502. See Facebook, Inc. v. Power
Ventures, Inc., 2010 WL 3291750 (N.D. Cal. July 20, 2010).
7
8
507 F. Supp. 2d 1096 (C.D. Cal. 2007).
Facebook, Inc. v. Power Ventures, Inc., 844 F.Supp.2d 1025 (N.D. Cal. 2012).
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after gaining unauthorized access to a private MySpace page that was created by the plaintiffs and
was critical of the company.9 The jury concluded that the company violated the federal Stored
Communications Act and the New Jersey state computer privacy law when a manager asked another
employee, presumably under the duress of maintaining her employment, for the password to the
private MySpace page and then shared its contents with upper management, resulting in the
termination of the plaintiffs. The jury also found that the employer was not liable for invasion of
privacy.
The court in Yath v. Fairview Clincs, N.P. determined that the “publicity” element of a state
law invasion of privacy claim, which required, in part, that the matter be made public by
communicating it to the public at large, was satisfied when private healthcare information was posted
on a publicly accessible social network website for 24 hours.10
In Romano v. Steelcase Inc., the court held that a defendant is entitled to compel production of
the plaintiff's social network data (including current and historical, deleted pages and related
information) based upon a review of the public portions of the plaintiff's social network pages that
allegedly revealed an active lifestyle that conflicted with the plaintiff's injury claims.11 Rejecting the
plaintiff's objections to producing her social network data, the court ruled that the information was
both material and necessary to the defense of this action and that the plaintiff could not hide relevant
information "behind self-regulated privacy settings."
In Moreno v. Hanford Sentinel, Inc., the court held that the author of an article posted to a
social network website cannot state a cause of action for invasion of privacy against the person who
submitted that article to a newspaper for republication.12 However, the court declined to dismiss the
9
Pietrylo v. Hillstone Rest. Group, No. 06-5754 (D. N.J. jury verdict June 16, 2009).
10
Yath v. Fairview Clinics, N.P., 767 N.W.2d 34 (Minn. Ct. App. 2009). See also Arenas v. Shed Media, 881 F.Supp.2d 1181
(C.D. Cal. 2011) (basketball player not likely to succeed on right of publicity claims against reality TV show due to the
availability of a "public interest" defense; plaintiff had made aspects of his personal life a matter of public concern based on his
series of posts to his Twitter account). But see Lalonde v. Lalonde, 2011 WL 832465 (Ky. Ct. App. Feb. 25, 2011) (holding that
under ordinary circumstances, “[t]here is nothing within the law that requires permission when someone takes a picture and posts
it on a Facebook page. There is nothing that requires permission when she [is] ‘tagged’ or identified as a person in those
pictures”).
11
Romano v. Steelcase Inc., 30 Misc.3d 426 (N.Y. Sup. Ct. Suffolk Cty. 2010). See also Thompson v. Autoliv ASP, Inc., 2012
WL 2342928 (D. Nev. June 20, 2012) (plaintiff ordered, with certain restrictions, to upload five years of social media materials
onto external hard drive for inspection; plaintiff’s public Facebook profile provided evidence of the plaintiff’s post-accident
activities and mental state and were relevant to the claims and defenses in the case); Davenport v. State Farm Mutual Auto. Ins.
Co., 2012 WL 555759 (M.D. Fla. Feb. 21, 2012) (finding that defendant's discovery requests for social media access were overly
broad and limited the defendant to discovery of photographs added to any social networking website since the date of the subject
accident that depict the plaintiff, including photos that she posted online or ones in which she was "tagged"; court denied
defendant's request that the plaintiff grant access to all electronic devices used by the plaintiff to access social networks,
commenting that the defendant did not have a generalized right to rummage at will through information that the plaintiff has
limited from public view). But see McCann v. Harleysville Ins. Co. of N.Y., 78 A.D.3d 1524 (N.Y. App. Div., 4th Dept. 2010)
(affirming lower court decision to deny of the defendant's motion to compel a signed authorization for access to the plaintiff's
social network account because defendant "failed to establish a factual predicate with respect to the relevancy of the evidence"
and essentially sought permission to conduct "a fishing expedition into plaintiff's Facebook account"); Tompkins v. Detroit
Metro. Airport, 278 F.R.D. 387 (E.D. Mich. 2012) (declining to allow the defendant to view the plaintiff's entire Facebook
account or all posted photographs, finding that public postings and surveillance photographs that showed the plaintiff holding a
toy dog and pushing a shopping cart did not belie the plaintiff's claims of injury and were not a sufficient predicate showing that
the private Facebook material would be reasonably calculated to lead to the discovery of admissible evidence); Mailhoit v. Home
Depot U.S.A., Inc., 285 F.R.D. 566 (C.D. Cal. 2012) (denying motion to compel social media postings relating to emotional
events or reactions as overly vague, but allows discovery into postings between plaintiff and fellow employees that referenced
her employment or the ongoing litigation).
12
Moreno v. Hanford Sentinel, Inc., 172 Cal.App.4th 1125 (2009).
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defendant's intentional infliction of emotional distress claim, concluding that it was a question of
fact, since reasonable people might differ on whether the defendant's action were extreme and
outrageous.
In Facebook Inc. v. Wallace, a social network was entitled to a preliminary injunction against
an alleged spammer who accessed user accounts without authorization or through phishing schemes
and allegedly perpetrated a widespread spam and phishing campaign.13
In a formal opinion, the Association of the Bar of the City of New York Committee on
Professional Ethics stated that a lawyer may not attempt to gain access to a social networking website
under false pretenses, either directly or through an agent.14 Rather, a lawyer should rely on discovery
procedures sanctioned by the ethical rules and case law to obtain relevant evidence, such as the
truthful “friending” of unrepresented parties or by using formal discovery devices such as subpoenas
directed to non-parties in possession of information maintained on an individual’s social networking
page.
III. PRIVACY RIGHTS AND DATA SECURITY
There is no comprehensive set of privacy rights or legislation in the United States addressing
the collection, storage, transmission or use of personal information on the Internet or in other
business environments. Instead, privacy has generally been protected by common law and by federal
and state legislation enacted as new technologies develop, to target specific privacy-related issues.
For example, the Electronic Communications Privacy Act (ECPA) is the federal statute that
updated wiretapping laws to include protection for electronic communications, such as emails. The
Act further proscribes the intentional use of the contents of any wire, oral, or electronic
communication, obtained through interception, and allows for both criminal penalties and civil
causes of action for violations of its provisions. Specifically, the ECPA protects “point-to-point”
electronic communications, or communications as they travel through cyberspace. The ECPA
contains two sections: Title 1 amended the Wiretap Act, and Title II created the Stored
Communications Act. Consequently, the ECPA established a two-tier system, creating separate
categories of violations predicated upon whether the electronic communications are accessed while
“in transit” or while “in storage.”
13
Facebook, Inc. v. Wallace, 2009 WL 840391 (N.D. Cal. Mar. 24, 2009). See also Facebook, Inc. v. Fisher, 2011 WL 250395
(N.D. Cal. Jan. 26, 2011) (large default judgment against spammers).
14
Ass'n of the Bar of N.Y.C. Comm. on Prof’l Ethics, Formal Op. 2 (2010) (Obtaining Evidence From Social Networking
Websites). See also NYCLA Comm. on Prof’l Ethics, Formal Op. 743 (2011) (a lawyer may search a prospective or sitting
juror's social networking profile, provided there is no contact or communication with the prospective or sitting juror and the
lawyer does not seek to "friend" jurors, or subscribe to their Twitter accounts, or otherwise contact them; if a lawyer discovers
juror misconduct, he or she must promptly bring such misconduct to the attention of the court, under N.Y. Rules of Professional
Conduct 3.5(d)); San Diego Cty. Bar Ass’n., Legal Ethics Op. 2 (2011) (rules of ethics bar an attorney from making an ex parte
friend request to a represented party because an attorney’s communication to a represented party intended to elicit information
about the subject matter of the representation is impermissible no matter what words are used in the communication; moreover,
an attorney may not send a friend request to an unrepresented witnesses without disclosing the purpose of the request); NY State
Bar Ass'n, Comm. on Prof’l Ethics, Op. 843 (2010) (lawyer representing a client in pending litigation may access the public
pages of another party's social networking website for the purpose of obtaining possible impeachment material for use in the
litigation); The Phila. Bar Ass’n Prof’l. Guidance Comm., Op. 2 (2009) (act of hiring an investigator to mislead a potential
witness by becoming social network "friends" with the witness in order to obtain access to personal pages for future impeachment
was deemed a violation of ethical rules); Carino v. Muenzen, 2010 WL 3448071 (N.J. Super. A.D. Aug. 30, 2010) (unpublished)
(searching prospective jurors in the courtroom is permissible).
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Although many privacy laws address the government's use of personal information, many
others address the use of personal information by private entities, whether it be financial, medical, or
sensitive consumer information, commercial messages sent via email, facsimile or SMS, or electronic
data intercepted during transmission or improperly accessed from data storage. Moreover, federal
and state data security laws that impact electronic privacy concerns have recently been enacted to
stem the scourge of malicious software and identity theft, and at least 46 states have passed some
form of a data security breach notification law requiring notice in the event of a qualifying data
breach of sensitive consumer information.
Advances in Internet technology have also allowed website operators and advertisers to collect,
compile and distribute personal information about users’ Internet browsing activities, both with and
without the user's consent. Such practices will almost always implicate privacy concerns.
In Patco Constr. Co. v. People's United Bank, the First Circuit held that a bank's security
procedures for a commercial account holder, who was the victim of fraudulent wire transfers, were
not commercially reasonable under UCC Article 4A.15 The appeals court reversed the lower court's
grant of summary judgment to the bank and remanded the case. The court concluded that the bank,
whose security system prompted users logging in to answer challenge questions on any transaction
over $1, increased the risk that such answers would be captured by keyloggers or other malware.
Moreover, the court concluded that the bank's failure to monitor and immediately notify customers of
abnormal transactions that had been flagged by its security software was not commercially
reasonable. The court stated that such collective failures taken as a whole rendered the bank's
security system commercially unreasonable under the UCC. The appeals court also reinstated some
of the plaintiff's common law claims, finding that while Article 4A displaced the plaintiff's
negligence claim, the plaintiff's breach of contract and breach of fiduciary duty were not preempted
by Article 4A because such claims were not inherently inconsistent or in conflict with the plaintiff's
overarching Article 4A claim. However, despite ruling that the bank's security procedures were not
commercially reasonable, the appeals court affirmed the denial of the plaintiff's summary judgment
claim. The court noted several disputed issues of fact surrounding the question of whether the
plaintiff had satisfied its obligations and responsibilities under Article 4A, or at least to the question
of damages.
Users alleging that a social media website disclosed “personally identifiable browsing
histories” and unique identifiers to third-party advertising companies via cookies have standing via
the Stored Communications Act (SCA), but failed to state a cognizable SCA claim on the merits
because LinkedIn was neither acting as a “electronic communication service” (e.g., email provider)
or “remote computing service” (e.g., virtual storage provider) when it disclosed LinkedIn IDs and
URLs of users' viewed pages to third parties.16 The court dismissed the plaintiffs' amended
complaint, including the plaintiffs' common law invasion of privacy claim because they failed to
meet the high standards for the type of invasion that is actionable (i.e., an intrusion that is “highly
15
Patco Constr. Co. v. People's United Bank, 684 F.3d 197 (1st Cir. 2012). See also Experi-Metal, Inc. v. Comerica Bank, 2011
WL 2433383 (E.D. Mich. June 13, 2011) (genuine issue of material fact as to whether the defendant bank accepted in "good
faith" fraudulent wire transfers initiated by unknown phishers in the plaintiff's name); Choice Escrow and Land Title, LLC v.
BancorpSouth Bank, No. 10-03531 (W.D. Mo. order denying motion regarding sufficiency of plaintiff’s responses at deposition
Aug. 20, 2012) (in a dispute between a customer and bank over unauthorized ACH wire transfers, UCC Article 4A preempts
indemnity provision whereby the customer agreed to indemnify the bank for any losses, costs, liabilities, or expenses).
16
Low v. LinkedIn Corp., 2012 WL 2873847 (N.D. Cal. July 12, 2012).
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offensive to a reasonable person”). The court also dismissed the plaintiffs' breach of contract claim
because the alleged decrease in the value of plaintiffs’ personal information did not constitute
cognizable contract damages for the purposes of a contract claim.
The Northern District of California held in Keller v. Electronic Arts, Inc. that a former college
athlete may proceed with right of publicity claims against a video game maker that designed a game
with virtual football players to resemble real-life college football athletes because the game maker's
use of the player's image was not sufficiently transformative that the First Amendment would bar his
California right of publicity claims as a matter of law.17 The court stated that the game maker's use
of the player's image was not transformative, because the game presented virtual players that were
nearly identical to their real-life counterparts (i.e. sharing the same jersey numbers, similar physical
characteristics and background information); depicted the plaintiff in the same setting he was known
for, namely, a collegiate football field; and allowed users to download actual team rosters and
players' names into the game. The court distinguished the Eighth Circuit's holding in C.B.C.
Distribution and Marketing v. Major League Baseball Advanced Media,18 which involved a
company's use of player's names and statistics for "fantasy sports" games, concluding that the
defendant's game “does not merely report or publish Plaintiff’s statistics and abilities. On the
contrary, [the defendant] enables the consumer to assume the identity of various student athletes and
compete in simulated college football matches.”
An individual who was the victim of his ex-spouse's installation of keylogging software on his
computer could not bring federal communications privacy or state law negligence claims against the
software maker for his emotional distress and humiliation, the Eastern District of Tennessee held in
Hayes v. SpectorSoft Corp.. The court dismissed the plaintiff’s complaint.19 The court found that the
plaintiff's federal communications privacy claim failed because plaintiff failed to rebut evidence of
the software maker's lack of intent to divulge the plaintiff's private communications and the software
maker's right to expect that its software should be used in accordance with the accompanying
licensing agreement. In addition, the court dismissed the plaintiff’s product liability claim, finding it
noticeably lacking in any suggestion of the kind of injury required by Tennessee law, namely,
personal injury, death, or property damage. The court also deemed the plaintiff's negligence claim
deficient, concluding that no authority suggested that a manufacturer of monitoring software owed a
duty to avoid emotional injury to the victim of the misuse of that software in violation of the
software's licensing agreement.
17
Keller v. Elec. Arts, Inc., 2010 WL 530108 (N.D. Cal. Feb. 8, 2010). But see The Univ. of Ala. Bd. of Trs. v. New Life Art,
Inc., 683 F.3d 1266 (11th Cir. June 11, 2012) (artist's First Amendment interests clearly outweigh whatever consumer confusion
that might exist concerning his paintings depicting University of Alabama football games; Lanham Act claims over the sale of
paintings, prints and calendars that include the University’s football crimson and white uniforms are dismissed); Hart v.
Electronic Arts, Inc., 808 F.Supp.2d 757 (D.N.J. 2011) (finding sufficient elements of the videogame maker's own expression in
the game such that its use of a former college football player's image in a NCAA football videogame was transformative and the
First Amendment barred plaintiff's right of publicity claim); Habush v. Cannon, 2011 WL 2477236 (Wis. Cir. Ct. June 8, 2011)
(attorneys right of publicity claims against a competing law firm that purchased their last names as keywords dismissed because
while the plaintiffs had shown that the keyword purchase was an unauthorized use under the statute, the plaintiff failed to show
that the use was done "unreasonably," given the general nature of competition and the fact that the competing law firm did not
use the plaintiffs' names in the advertisement text, among other things).
18
C.B.C. Distribution and Marketing v. Major League Baseball Advanced Media, 505 F.3d 818, 820-21 (8th Cir. 2007).
19
Hayes v. SpectorSoft Corp., 2009 WL 3713284 (E.D. Tenn. Nov. 3, 2009). But see Klumb v. Goan, 884 F.Supp.2d 644 (E.D.
Tenn. 2012) (finding that "interception" occurs when spyware automatically routes a copy of an email, which is sent through the
internet, back through the internet to a third party's email address when the intended recipient opens the email for the first time).
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In Markert v. Becker Technical Staffing Inc., the court held that the federal SCA is not violated
simply by reading printouts of emails that were electronically stored at one point; instead, the Act
attaches liability to the accessing of the stored communication without authorization.20 The court
granted the moving defendants' motion to dismiss the SCA claims, as well as state privacy law
intrusion upon seclusion claims. Similar to the reasoning behind the dismissal of the SCA claim, the
court found the plaintiff did not automatically have a cause of action against those who subsequently
viewed his previously private emails. The court stated that once the emails were obtained from the
plaintiff’s personal email, the intrusion upon seclusion was complete and that any cause of action that
the plaintiff had for invasion of privacy would be against the person who initially invaded the privacy
and subsequently disseminated the information.
Zheng v. Yahoo! Inc. held there is no language in the ECPA itself, nor to any statement in the
legislative history indicating Congress intended the statute to apply to activities occurring outside the
United States.21 The court dismissed the plaintiff's federal electronic privacy-related claims
stemming from an alleged disclosure of user information to Chinese authorities. The court also
rejected the plaintiffs’ argument that because the defendant email provider had servers located
around the globe, email communications may have traveled through the defendant's networks in the
United States. The court stated that because the alleged interceptions and disclosures occurred
“locally” within China, the ECPA did not apply, even if the communications, prior to their
interception and disclosure, traveled electronically through a network located in the United States.
According to the District of Connecticut in McLoughlin v. People's United Bank, Inc., theft of
personal consumer data that resulted in a risk of future injury, but no actual misuse of information,
does not represent an ascertainable loss under Connecticut state law.22 While the district court found
that the plaintiff alleged an adequate injury-in-fact for standing purposes, it ultimately granted the
20
Markert v. Becker Technical Staffing, Inc., 2010 WL 1856057 (E.D. Pa. May 7, 2010). See also Van Alstyne v. Elec.
Scriptorium Ltd., 560 F.3d 199 (4th Cir. 2009) (finding that proof of actual damages is a prerequisite to recovering statutory
damages under the Stored Communications Act, though not for an award of either punitive damages or attorney’s fees under the
statute); Worix v. MedAssets Inc., 2012 WL 787210 (N.D. Ill. Mar. 8, 2012) (finding that alleged failure to take steps to protect
database from theft and security breach did not constitute “knowingly divulging” information under the SCA); Thompson v.
Ross, 2010 WL 3896533 (W.D. Pa. Sept. 30, 2010) (unauthorized access of previously received email messages that had been
downloaded by the recipient and saved to the hard drive of a personal laptop computer does not violate the Stored
Communications Act because SCA protection does not extend to emails and messages stored only on a personal computer and
not with an ISP or other electronic communications service); Chasten v. Franklin, 2010 WL 4065606 (N.D. Cal. Oct. 14, 2010)
(Stored Communications Act bars the enforcement of a subpoena directed to an email service provider to obtain the contents of
an account holder's emails, absent the consent of the account holder); In re Beluga Shipping GMBH v. Suzlon Energy, Ltd., 2010
U.S. Dist. LEXIS 104705 (N.D. Cal. Sept. 23, 2010) (SCA prohibits email service from divulging the stored messages of a nonparty witness pursuant to a civil subpoena, absent application of certain statutory exceptions or the account holder's consent);
Fontenot v. Brouillette, No. 10-01053 (S.D. Tex. Feb. 9, 2012) (because email messages were still maintained on the system and
not downloaded or removed from electronic storage, subpoena to service provider seeking plaintiff's personal emails was
quashed); Bower v. Bower, 808 F.Supp.2d 348 (D. Mass. 2011) (court cannot imply an intent to consent to the disclosure of
electronic information from email providers under the SCA based upon the party's default or status as a fugitive). But see Pure
Power Boot Camp, Inc. v. Warrior Fitness Boot Camp, LLC, 759 F.Supp.2d 417 (S.D.N.Y. 2010) (small award of SCA damages
for employer's unauthorized access to ex-employee's private email accounts).
21
Zheng v. Yahoo! Inc., 2009 WL 4430297 (N.D. Cal. Dec. 2, 2009). But see Suzlon Energy Ltd. v. Microsoft Corp., 671 F.3d
726 (9th Cir. 2011) (the protections of the ECPA extend to the contents of communications of foreign citizens; however, “the
Court does not address here whether the ECPA applies to documents stored or acts occurring outside of the United States”).
22
McLoughlin v. People's United Bank, Inc., 2009 WL 2843269 (D. Conn. Aug. 31, 2009). See also FAA v. Cooper, 132 S.Ct.
1441 (2012) (the federal Privacy Act does not unequivocally authorize damages for mental or emotional distress; because
Congress did not speak unequivocally, the Court adopted an interpretation of “actual damages” limited to proven pecuniary
harm).
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defendant's motion to dismiss the plaintiff's negligence, unfair trade practice and other state law
claims. The court concluded that the plaintiff's alleged injuries were solely the result of a perceived
and speculative risk of future injury that might never occur, unsupported by any allegation of
malfeasance, and as such, could not form a cognizable claim.
In Quon v. Arch Wireless Operating Co., Inc., the Ninth Circuit held that under the SCA, a text
message service is prohibited from disclosing contents of text messages, absent the consent of the
addressee or intended recipient of such communications.23 The appeals court reversed the lower
court's ruling that the text message service permissibly released transcripts of the plaintiff-police
officer's text messages sent and received from his work-issued pager for the purpose of an audit by
his employer. The court also ruled that the government employer had violated the employer's
reasonable expectation of privacy under the Fourth Amendment. The court found that, under the
SCA, the text message service was an “electronic communication service” (i.e., any service which
provides users the ability to send or receive wire or electronic communications). Accordingly, the
text message service was prohibited from releasing the contents of a communication without the
lawful consent of the addressee or intended recipient.
In further proceedings, the Supreme Court granted certiorari on the sole issue of ruling on the
Ninth Circuit's holding that the city employer violated the Fourth Amendment.24 The Court was
reticent to fashion a general principle about electronic privacy around text messages sent or received
by government employees and decided the case on narrower grounds. The Court stated that even
assuming the city employee had a reasonable expectation of privacy in his text messages, the city did
not necessarily violate the Fourth Amendment by obtaining and reviewing the transcripts of the
messages because (1) there were reasonable grounds for suspecting that the search was necessary for
a non-investigatory work-related purpose; (2) the review of the transcripts was an efficient and
expedient way to determine whether the employee's excess usage was due to personal use; and (3)
even if the SCA forbade the cellular phone carrier from turning over the transcripts, it did not follow
that the city's actions were unreasonable under the Fourth Amendment.
In United States v. Weaver, the Central District of Illinois held that under the federal SCA, a
court can compel an ISP to comply with a trial subpoena and produce the contents of a subscriber’s
previously-opened Web-based emails that had not been downloaded onto the subscriber's computer
but remained in online storage and were less than 181 days old.25 The court commented that under §
2703 of the Act, governmental entities must use a warrant to obtain certain types of electronic
communications, but they can access others using only a trial subpoena such as emails less than 181
23
Quon v. Arch Wireless Operating Co., 529 F. 3d 892 (9th Cir. 2008).
24
City of Ontario v. Quon, 130 S.Ct. 2619 (2010).
25
United States v. Weaver, 636 F.Supp.2d 769 (C.D. Ill. 2009). But see United States v. Warshak, 631 F.3d 266 (6th Cir. 2010)
(a subscriber enjoys a reasonable expectation of privacy in the contents of emails that are stored with, or sent or received through,
a commercial ISP and the government may not compel a commercial ISP to turn over the contents of a subscriber’s emails
without first obtaining a warrant based on probable cause); Matter of Historical Cell-Website Information, 809 F.Supp.2d 113
(E.D.N.Y. 2011) (request for 113 days of cumulative cell-website location records for the cell phone of an individual who was
the target of a criminal investigation constitutes a search under the Fourth Amendment); United States v. Jones, 132 S.Ct. 945
(U.S. Jan. 23, 2012) (attachment of a GPS tracking device to an individual’s vehicle, and subsequent use of that device to monitor
the vehicle’s movements on public streets for an extended period, constituted a search within the meaning of the Fourth
Amendment); In re Applications for Search Warrants for Info. Associated with Target Email Address, 2012 WL 4383917 (D.
Kan. Sept. 21, 2012) (Fourth Amendment protects emails stored with, sent to or received from an email service provider;
Government's warrant seeking all emails and online faxes linked to the account deemed overly broad and not particularized).
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days old, under certain circumstances. The court found that the ISP's Web-based email service held
or maintained subscribers' emails solely to provide customer storage or computer processing
services, and not for the purpose of backup protection (which would have triggered the warrant
requirement), and thus the ISP was required to comply with the government’s subpoena.
The warrantless search of data within a cell phone seized incident to an arrest is prohibited by
the Fourth Amendment when the search is unnecessary for the safety of police officers and there are
no exigent circumstances, according to State v. Smith.26 The Ohio Supreme Court there reversed and
remanded to the trial court for a new trial based upon the trial court's improper admission of the call
records and phone numbers from the defendant's phone. In an issue of first impression, the court
rejected the state's argument that a cell phone is akin to a closed container and subject to search for
the preservation of evidence, concluding that even the more basic models of modern cell phones are
capable of storing a wealth of digitized information wholly unlike any physical object found within a
closed container, giving the individual a privacy interest in the contents that goes beyond the privacy
interest in a simple address book or pager.
In Merritt, Flebotte, Wilson, Webb & Caruso, PLLC v. Hemmings, an employer that removed
all biographical information and links pertaining to departing employees from its website, but did not
take steps to remove the photo files that were stored on an outside server such that an Internet search
engine might return links to some of the deleted biographical pages, was not liable for
misappropriation for a commercial purpose of the employees' image or biographies.27
According to Boring v. Google, Inc., residents’ state privacy claims against a search engine
that offered online “street view” mapping images from their private driveway, including images of
the outside of the plaintiffs' residence, are not cognizable because such conduct would not be highly
offensive to a person of ordinary sensibilities.28 The appeals court affirmed the dismissal of privacy
and negligence claims against the search engine, but reversed the lower court's dismissal of the
plaintiffs’ trespass claim. The court allowed the trespass claim to go forward, because the plaintiffs
alleged that the defendant entered their property without permission, which, if proven, would
constitute a trespass. The court commented that there was no requirement under Pennsylvania law
that damages be pled, either nominal or consequential, in trespass cases, even though “it may well be
26
State v. Smith, 920 N.E.2d 949 (2009). See also United States v. Kirschner, 823 F.Supp.2d 665 (E.D. Mich. 2010) (subpoena
requesting that defendant reveal password to encrypted contents of his computer was deemed testimony and violated the
defendant's right against self-incrimination under the Fifth Amendment). But see United States v. Fricosu, 841 F.Supp.2d 1232
(D. Colo. 2012) (Fifth Amendment is not implicated by requiring production of the unencrypted contents of a criminal
defendant's laptop that had previously been authenticated as the defendant's personal home computer); United States v. Skinner,
690 F.3d 772 (6th Cir. 2012) (criminal suspect did not have a reasonable expectation of privacy in the data emanating from his
pay-as-you-go cell “burner” mobile phone that emanated GPS data revealing its location to police); United States v. FloresLopez, 670 F.3d 803 (7th Cir. 2012) (warrantless search of individual's cell phone as an incident to arrest to ascertain its assigned
telephone number did not violate Fourth Amendment); People v. Diaz, 51 Cal.4th 84 (Cal. 2011) (a warrantless search of the text
message folders of an arrestee's cell phone 90 minutes after being taken into custody was valid as being “incident to a lawful
custodial arrest”); Sitton v. Print Direction, Inc., 718 S.E.2d 532 (Ga. App. 2011) (employer's viewing and printing of
incriminating emails viewable from plaintiff's laptop open on office desk showed plaintiff was impermissibly conducting a
competing business did not constitute computer theft or trespass since it was not done “without authority” and pursuant to the
company's computer usage policy that stated that “[Employer] will ... inspect the contents of computers, voice mail or electronic
mail in the course of an investigation triggered by indications of unacceptable behavior”).
27
Merritt, Flebotte, Wilson, Webb & Caruso, PLLC v. Hemmings, 676 S.E.2d 79 (N.C. Ct. App. 2009).
28
Boring v. Google Inc., 362 Fed.Appx. 273 (3rd Cir. 2010).
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that, when it comes to proving damages from the alleged trespass, the [plaintiffs] are left to collect
one dollar and whatever sense of vindication that may bring.”
The court in Burnett v. County of Bergen held that a request by a commercial entity for the
bulk release of land title records that contain citizens’ social security numbers must be redacted
before release to protect citizen privacy, with the requestor ordered to pay the redaction and
duplication costs.29 The court found that the twin aims of public access and the protection of personal
information weighed in favor of redacting social security numbers from the requested records before
releasing them. The court limited its holding to the facts of this case, which involved a bulk request
for millions of realty records, spanning decades, containing a substantial number of social security
numbers the requestor did not need, whose dissemination via a centralized computer database would
pose an increased risk of identity theft to countless individuals with no possibility of advance notice
to those individuals and where the request does not further the state Open Public Records Act’s core
aim of transparency in government.
In Pinero v. Jackson Hewitt Tax Service Inc., mere violations of a firm’s written privacy policy
following the alleged mishandling of the disposal of confidential documents cannot form the basis of
a fraudulent inducement action, absent showing of actual damages and heightened factual pleading.30
After the plaintiff filed an amended complaint, the defendants again moved to dismiss, arguing that
the plaintiff failed to plead fraud with the requisite particularity. The court denied the defendant’s
motion, concluding that the plaintiff’s new allegations that delineated nine specific ways the
defendants failed to maintain policies and procedures to protect customer privacy satisfied the
heightened pleading requirements and could form the basis of a claim that the defendant’s alleged
misrepresentation as to its written privacy policy induced the plaintiff to transact business with the
defendant.31
A. Privacy-Related Enforcement Actions
The FTC has taken an active role with respect to protecting privacy rights in connection with
the collection and use of personal information for commercial purposes. Most notably, the FTC has
undertaken enforcement actions against entities that sold information to third parties for commercial
purposes contrary to a website privacy policy, failed to keep consumer information secure, installed
malicious spyware or adware onto unknowing consumers' computers, or violated the federal do-notcall list with an unlawful telemarketing campaign. In addition, federal civil rights laws and the
Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule, together protect
individuals' rights of nondiscrimination and health information privacy, with enforcement falling
upon the Department of Health and Human Services (HHS) Office for Civil Rights (OCR). In In re
29
Burnett v. County of Bergen, 968 A.2d 1151 (N.J. 2009).
30
Pinero v. Jackson Hewitt Tax Service Inc., 594 F.Supp.2d 710 (E.D. La. 2009). See also Cornelius v. Deluca, No. 10-27 (D.
Idaho Mar. 15, 2011) (non-party, volunteer website moderator's First Amendment right to post anonymously outweighs
plaintiffs’ need for relevant discovery; moderator had an expectation of privacy based on the website's Terms of Service and
Privacy Policy). See generally Lee v. The Picture People Inc., No. 10C-07-002 (Del. Super. Ct. Mar. 19, 2012) (breach of
warranty claims related to sale of photographs cannot be based on company's unrelated website privacy policy).
31
See Pinero, 594 F.Supp.2d at 710. See also Smith v. Trusted Univ. Standards in Electronics Transactions, Inc., 2010 WL
1799456 (D. N.J. May 04, 2010) (plaintiff's alleged reliance on certain online privacy policy provisions allegedly violated by his
ISP could form the basis of a contract action, but the claim failed because the plaintiff did not plead any loss stemming from the
alleged breach).
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ScanScout, Inc., the court held that an online advertiser agreed to settle FTC charges that it
deceptively claimed that consumers could opt out of receiving targeted ads by changing their browser
settings to block cookies, when in fact, the advertiser used flash cookies that could not be blocked by
browser settings.32 The proposed settlement, among other things, bars misrepresentations about the
company’s data-collection practices, and requires that the advertiser provide a user-friendly
mechanism to allow consumers to opt out of being tracked, including the use of a hyperlinked,
embedded within or immediately next to its targeted display ads, to take consumers to a choice
mechanism where consumers can opt out of receiving targeted ads.
A healthcare insurer agreed to pay a civil fine of $1,500,000 to settle certain HIPAA violations
stemming from the theft of 57 unencrypted computer hard drives that contained the protected health
information of over a million individuals in In re Blue Cross Blue Shield of Tennessee.33 According
to the HHS allegations, the insurer failed to implement appropriate administrative safeguards to
adequately protect data servers remaining at an unused, leased facility by not performing the required
security evaluations and implementing appropriate physical protections as required by the HIPAA
Security Rule. Notably, this was the first enforcement action under the data breach rules mandated
by the Health Information Technology for Economic and Clinical Health Act (“HITECH Act”).
In FTC v. Frostwire LLC, a peer-to-peer file-sharing application developer settled FTC charges
that its software likely would cause consumers to unwittingly expose sensitive personal files stored
on their mobile devices.34 According to the FTC complaint, the mobile file-sharing application was
likely to cause consumers to unwittingly disclose personal files stored on their smartphones and
tablet computers because the application’s default settings were configured such that immediately
upon installation and set-up, it would publicly share users’ files stored on those devices. Among
other things, the settlement bars the developer from using default settings that share consumers’ files
and requires clear and prominent disclosures about file sharing and how to disable it.
A retailer agreed to settle FTC charges that it failed to disclose adequately the scope of
consumers’ personal information it collected via a downloadable software application in In Re Sears
Holdings Mgmt. Co.35 According to the FTC’s administrative complaint, the retailer represented to
consumers that the marketing software, which consumers agreed to download in exchange for a
monetary payment, would track their “online browsing.” The FTC charged that the software
monitored consumers’ online sessions to a greater degree than disclosed by the retailer and that the
extent of the tracking was only recited in a lengthy user license agreement available to consumers at
the end of the multi-step registration process. Under the final consent order, the retailer would stop
collecting data from the consumers who downloaded the software and destroy all data previously
32
ScanScout, Inc., 76 Fed. Reg. 71566 (proposed Nov. 18, 2011). See also United States v. Rental Research Services, Inc., No.
09-00524 (D. Minn. settlement announced Mar. 5, 2009) (consumer reporting agency that failed to properly screen prospective
customers and, as a result, sold multiple credit reports to identity thieves, settled FTC charges that it violated the Fair Credit
Reporting Act); In re Genica Corp., FTC File No. 082 3113 (settlement announcement Feb. 5, 2009) (online computer seller that
collected sensitive information from consumers and allegedly failed to take basic security measures settled FTC charges); United
States v. Central Florida Investments, Inc., No. 09-104 (M.D. Fla. Jan. 20, 2009) (company that called consumers whose phone
numbers were on the Do Not Call Registry without consent or an “established business relationship” settled FTC charges that it
violated the Do Not Call Registry provisions).
33
In re Blue Cross Blue Shield of Tennessee (HHS Settlement announced Mar. 13, 2012).
34
FTC v. Frostwire LLC, No. 11-23643 (S.D. Fla. Stipulated Final Order Oct. 12, 2011).
35
In Re Sears Holdings Mgmt. Co., No. C-4264 (Decision and Order Aug. 31, 2009).
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collected, as well as prominently disclose the types of data the software will monitor, record, or
transmit in the future prior to installation and separate from any user license agreement.
In In re CVS Caremark Corp., a national pharmacy agreed to settle FTC charges that it failed
to take appropriate security measures to protect the sensitive financial and medical information when
it disposed of pill bottles containing labels bearing sensitive personal information of its customers.36
In a coordinated action by the HHS OCR, the pharmacy agreed to pay $2.25 million and to
implement a robust correction action plan for safeguarding patient information during disposal.
B. Computer Fraud and Abuse Act
Among other things, the CFAA37 prohibits accessing a computer and obtaining information
“without authorization” or by “exceeding authorized access.” The statute lists many different types of
criminal “hacking” conduct punishable by fines or imprisonment. In relevant part, §1030(a)(2)(C)
provides: “[Whoever] intentionally accesses a computer without authorization or exceeds authorized
access and thereby obtains…information from any protected computer if the conduct involved an
interstate or foreign communication…shall be punished,” and in related statutory language,
§1030(a)(4) prohibits similar behavior with an intent to defraud.
The court held in United States v. Nosal that under the criminal provisions of the CFAA, a
departing employee who accessed his employer's databases to help start a competing business did not
“exceed authorized access” of the computer system even if such use of the proprietary materials
violated the employer’s computer use policy.38 The Ninth Circuit, sitting en banc, affirmed the lower
court's dismissal of the criminal CFAA claim and rejected the Government's broad interpretation of
the CFAA that would have “transform[ed] the CFAA from an anti-hacking statute into an expansive
misappropriation statute.” The court held that the language “exceeds authorized access” in the
CFAA is limited to violations of restrictions on “access” to information, and not restrictions on its
“use,” that the statute targets “the unauthorized procurement or alteration of information, not its
misuse or misappropriation.” Clarifying the two-prongs of the CFAA's prohibitions, the court stated:
“‘[W]ithout authorization” would apply to outside hackers (individuals who have no authorized
access to the computer at all) and ‘exceeds authorized access’ would apply to inside hackers
(individuals whose initial access to a computer is authorized but who access unauthorized
information or files).” Construing the criminal statutory language narrowly, the appeals court found
that a broad interpretation of the CFAA would turn minor online dalliances by employees using
company computers into federal crimes and that significant notice problems would arise if criminal
liability turned on the vagaries of corporate computer use polices that are lengthy, opaque, subject to
change and seldom read.
36
In re CVS Caremark Corp., FTC File No. 072 3119 (settlement announced Feb. 18, 2009).
37
18 U.S.C. §1030 (2008).
38
United States v. Nosal, 676 F.3d 854 (9th Cir. 2012). See also WEC Carolina Energy Solutions LLC v. Miller, 687 F.3d 199
(4th Cir. 2012) (CFAA fails to provide a remedy for misappropriation of trade secrets or violation of a use policy where
authorization has not been rescinded (citing Nosal); based on the ordinary meaning of “authorization,” an employee is authorized
to access a computer when his employer approves or sanctions his admission to that computer and acts "without authorization"
when he gains admission to a computer without approval; similarly, an employee "exceeds authorized access" when he has
approval to access a computer, but uses his access to obtain or alter information that falls outside the bounds of his approved
access; neither of these definitions extends to the improper use of information validly accessed).
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A misdemeanor violation under the 18 U.S.C. §§ 1030(a)(2)(C) and 1030(c)(2)(A) of the
CFAA upon the conscious violation of a website’s terms of service runs afoul of the void-forvagueness doctrine, because of the absence of minimal guidelines to govern law enforcement and
actual notice deficiencies, according to the decision reached in United States v. Drew.39 The court
granted the defendant's motion for a post-verdict acquittal and vacated her CFAA misdemeanor
conviction. The court commented that the concept of accessing a computer “without authorization”
usually involved a computer hacker, a disloyal employee accessing proprietary files, or an entity in
breach of a contract. Within the breach of contract approach, the court determined that most judges,
in the civil law context, have held that a conscious violation of a website’s terms of service will
render the access unauthorized and/or cause it to exceed authorization. It cannot be considered “a
stretch of the law to hold that the owner of an Internet website has the right to establish the extent to
(and the conditions under) which members of the public will be allowed access,” according to the
court. However, the court stated that individuals of “common intelligence” are arguably not on
notice that a breach of a terms of service contract can become a crime under the CFAA. Notably, the
court reasoned that if a website’s terms of service controls what is “authorized” and what is
“exceeding authorization” – which in turn governs whether an individual’s conduct is criminal or not
– the statute would be unacceptably vague because "it is unclear whether any or all violations of
terms of service will render the access unauthorized, or whether only certain ones will."
Although principally a criminal statute, the CFAA also provides for a private civil right of
action, allowing for awards of damages and injunctive relief in favor of any person who suffers a loss
due to a violation of the act. Although the CFAA was enacted almost 25 years ago, courts continue
to decide how the statute applies to new factual scenarios in a rapidly and ever-changing
computerized world.
According to the Northern District of Illinois in Cassetica Software, Inc. v. Computer Sciences
Corp., the unauthorized downloading of software from a computer system after a licensing
agreement had expired does not satisfy the “damage” element under the CFAA, because the statute
only recognizes damage when the violation causes a diminution in the completeness or usability of
the data on a computer system.40 The court found that the plaintiff failed to allege that the
defendant’s downloads resulted in lost data, the inability to offer downloads to its customers, or that
the downloads affected the availability of the software. The court also found that the plaintiff’s
allegations of “loss” were not cognizable because they were costs that were not related to the
impairment or damage to a computer or computer system.
39
United States v. Drew, 259 F.R.D. 449 (C.D. Cal. 2009). See also United States v. Aleynikov, 737 F.Supp.2d 173 (S.D.N.Y.
2010) (government's argument that defendant, who was authorized to access his employer's trading system source code, violated
the criminal provisions of the CFAA by misappropriating the source code was rejected), reversed by, United Stated v. Aleynikov
676 F.3d 71 (2nd Cir. 2012) (conviction under federal EEA overturned because, among other things, the wrongful uploading of
his employer's proprietary source code did not implicate a system that was “produced for” or “placed in” interstate or foreign
commerce). See generally United States v. Zhang, 2012 WL 1932843 (N.D. Cal. May 29, 2012) (applying the Ninth Circuit's
holding in Nosal, departing employee who misappropriated confidential information in violation of nondisclosure agreement did
not exceed authorized access and was not guilty of CFAA charges; defendant convicted for theft of trade secrets under federal
law); Lee v. PMSI, Inc., 2011 WL 1742028 (M.D. Fla. May 6, 2011) (court rejects employer's CFAA claim against employee
that allegedly engaged in excessive Internet usage and visited social network websites and personal webmail accounts, because,
among other things, the employer failed to allege damage to its computer system; “both the letter and the spirit of the CFAA
convey that the statute is not intended to cover an employee who uses the internet instead of working”).
40
Cassetica Software, Inc. v. Computer Sciences Corp., 2009 WL 1703015 (N.D. Ill. June 18, 2009).
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In State Analysis Inc. v. American Financial Services Assoc., the Eastern District of Virginia
held that a company that accessed a password-protected proprietary database using the “shared”
password of another entity could be liable for common law trespass and unauthorized access under
the CFAA, while the entity that allowed the company to use its old password may be liable for
trafficking in passwords under the CFAA, but not unauthorized access.41
The Sixth Circuit in Pulte Homes Inc. v. Laborers International Union of North America held
that a company that suffered impairment to its systems and networks due to a union's intentional
campaign to bombard the company with emails and voicemails may proceed with CFAA
transmission claims, which, in part, concern knowingly causing the transmission of information that
causes damage without authorization to a computer.42 The appeals court reversed the lower court's
dismissal of the plaintiff's CFAA transmission claim, finding that the email campaign prevented the
plaintiff's employees from accessing or sending some emails and voicemails, which could be deemed
"damage" under the statute. The court, however, affirmed the dismissal of the plaintiff's CFAA
unauthorized access claims because the union's calls and emails did not enter the plaintiff's networks
"without authorization" since the company used unprotected public communications systems.
Most notably, the CFAA has been used increasingly in civil suits by employers to sue former
employees and their new companies for misappropriation of information from the employer’s
computer system, beyond the standard state causes of action for trade secret misappropriation and
breach of contract. A civil cause of action under the CFAA frequently is pleaded in cases where an
employer is suing a former employee for misappropriation of trade secrets or proprietary
information, where the misappropriation involved some kind of access to or use of the employer's
computer network. However, federal courts disagree in interpreting the term “unauthorized access.”
Under an expansive view, courts have found that an employee’s access was unauthorized after she
engaged in conduct, which could constitute a breach of her duty of loyalty to the company. Taking a
narrower reading of the statute, many courts have found that a departing employee, who copied
proprietary files while still having full access to his employer’s protected computer databases, did not
access information “without authorization” or otherwise “exceed authorized access” under the
CFAA.43
A departing employee who emailed certain company documents to his own personal computer
before departure did not access the computers “without authorization” or in excess of “authorized
access” as required under the CFAA to establish a violation, according to the decision in LVRC
Holdings, LLC v. Brekka.44 The Ninth Circuit affirmed the dismissal of the CFAA claims against the
41
State Analysis Inc. v. American Financial Services Assoc., 621 F. Supp. 2d 309 (E.D. Va. 2009). See also AtPac Inc. v.
Aptitude Solutions Inc., 2010, 730 F.Supp.2d 1174 (E.D.Cal. 2010) (third parties are not always liable under the CFAA for
exploiting a licensee’s violation of its license agreement; rather, such liability is perhaps best applied in situations where the
third-party defendant uses subterfuge-–like using user names and passwords that do not belong to it—to gain access to a
licensor's protected materials on the licensor's own website, computers, or servers).
42
Pulte Homes Inc. v. Laborers Int'l Union of North America, 648 F.3d 295 (6th Cir. 2011).
43
See also Flynn v. Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP, 2011 WL 2847712 (D. Nev. July 15,
2011) (no aiding and abetting civil liability does not exist under §1030).
44
LVRC Holdings, LLC v Brekka, 581 F.3d 1127 (9th Cir. 2009). See also ReMedPar Inc. v. AllParts Medical LLC, 683 F.
Supp. 2d 605 (M.D. Tenn. 2010) (CFAA does not extend to situations where the employee's access was technically authorized
but the particular use of the information was not; also, the employer's “loss” at issue (i.e., the misappropriation of trade secret
information) as well as the costs incurred by the employer in its efforts to seek redress for those acts and retain new employees
are not the type of losses covered by the statute because they are unrelated to any interruption in computer service); Lewis-Burke
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ex-employee. The court found that a person uses a computer “without authorization” when the
person has not received permission to use the computer for any purpose (e.g., a hacker) or when the
employer has rescinded permission to access the computer and the employee thereafter accesses the
company network. In this case, the court concluded that the employee's use of the company
computers to email documents did not violate the CFAA, because he was authorized to access the
company computers during his employment. The court reasoned that there was no language in the
CFAA that supported the proposition that authorization to use a computer ceases when an employee
resolves to use the computer contrary to the employer’s interest. The court declined to follow the
Seventh Circuit decision, International Airport Centers, LLC v. Citrin,45 which held that an employee
acts without authorization under the CFAA when he obtains company information for an improper
purpose.
In TelQuest Int'l Corp. v. Dedicated Business Systems, Inc., the District of New Jersey held
that departing employees who allegedly violated a non-competition employment agreement and used
private customer information to initiate their own business did not violate the CFAA because the
employer failed to allege facts that the damage or loss it incurred was related to investigating or
remedying damage to its computer system.46 The court dismissed the employer's CFAA claims. The
court found that the employer allegations regarding losses related to hiring a computer expert failed
to provide the type of investigation or description of how its computer system was interrupted,
Assocs. LLC v. Widder, 2010 WL 2926161 (D.D.C. July 28, 2010) (following Brekka, an employer's decision to allow or
terminate an employee's authorization is the determining factor as to whether the employee acted with or without authorization;
whether defendant had permission to copy documents onto a thumb drive or to subsequently use the data after he had left the
plaintiff's employ, is not a question that relates to his liability under the CFAA); Orbit One Communications, Inc. v. Numerex
Corp., 692 F. Supp. 2d 373 (S.D.N.Y. 2010) (departing employees had unfettered access to employer's computers prior to leaving
the company and thus plaintiff-employer failed to advance any evidence that the departing employees accessed the plaintiff's
computer system without authorization or exceeded their authorized access in violation of the CFAA); Oce North America Inc. v.
MCS Services Inc., 2010 WL 3703277 (D. Md. Sept. 16, 2010) (ex-employee who allegedly copied printer diagnostic software
from his ex-employer and used it during his work for a competitor did not access the software "without authorization" under the
CFAA; CFAA claims against the employee's new employer were also dismissed because the plaintiff did not allege that the
defendant accessed any “protected computer” without authorization or in excess of that authorization to obtain the plaintiff’s
software); Sebrite Agency, Inc. v. Platt, 884 F.Supp.2d 912 (D. Minn. 2012) (misuse or misappropriation of confidential
information stored on a employer's computer to which the defendant had authority to access does not give rise to liability).
45
Int’l Airport Centers, LLC v. Citrin, 440 F.3d 418 (7th Cir. 2006).
46
TelQuest Int'l Corp. v. Dedicated Business Systems, Inc., 2009 WL 3234226 (D. N.J. Sept. 30, 2009). See also Mintel Int'l
Group Ltd. v. Neergheen, 636 F.Supp.2d 677 (N.D.Ill. 2009) (departing employee's act of copying and emailing electronic files
from his employer's computer database is not enough to satisfy the damage requirement of the CFAA; fees paid to expert to
assess the ex-employee's improper actions are not “losses” under the CFAA because an alleged “loss” must relate to the
investigation or repair of a computer or computer system following a violation that caused impairment or unavailability of data or
interruption of service); Catapult Communications Corp. v. Foster, 165 F.3d 747 (9th Cir. 1999) (alleged losses in the form of
expenses incurred from conducting forensic analysis on defendant’s computer are not compensable losses under the CFAA,
without any evidence that plaintiffs' computers were damaged by defendant’s alleged unauthorized access); M-I LLC v. Stelly,
2010 WL 733 F.Supp.2d 759 (S.D.Tex. 2010) (employer allegations of damages “to its business in the form of lost profits, loss of
customers and loss of future business opportunities” caused by departing employees cannot form a cognizable CFAA claim; “[the
plaintiff] asserts no damages whatsoever relating to their investigation of computer damage, or costs incurred because any
computer service was interrupted”); General Scientific Corp. v. Sheervision, Inc., 2011 WL 3880489 (E.D. Mich. Sept. 2, 2011)
(losses under the CFAA are limited to costs incurred and profits lost as a direct result of interrupted computer service; the
CFAA’s damage requirement is not concerned with sales lost through the use of the information accessed); Schatzki v. Weiser
Capital Management LLC, 2012 WL 2568973 (S.D.N.Y. July 3, 2012) (plaintiffs’ claim inadequate to meet the definition of
damages and losses under the CFAA; the complaint does not allege that the defendant, a former business partner, destroyed or
impaired the plaintiff's proprietary data, nor does it make any specific allegation as to the cost of identifying, securing or
remedying the alleged damage caused by the defendant's access).
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damaged, or restored. The court also commented that gathering evidence from a computer to prove
state law employment claims does not turn employee conduct–even allegedly disloyal conduct in
breach of contract–into the kind of conduct that violates the CFAA.
As discussed in Vurv Technology LLC v. Kenexa Corp., departing employees who were
authorized to access the information they copied from a company laptop, but allegedly did so for a
wrongful purpose, did not access their employer's computers “without authorization” as required
under the CFAA to establish a violation, notwithstanding the existence of a employment
confidentiality agreement.47 However, the court found that the employer may proceed with CFAA
claims relating to the copying of proprietary information after the defendants left the employment of
the plaintiff.
The costs that would be incurred by examining other parties’ computers – computers onto
which the defendant allegedly copied material taken from the plaintiff's thumb drive – and
permanently deleting any such material found are not cognizable losses under the CFAA that can
satisfy the jurisdictional threshold, according to the decision reached in Doyle v. Taylor.48 The court
granted the defendant's motion for summary judgment on the CFAA claim and declined to exercise
supplemental jurisdiction on the related state claims. The court found that while the act of accessing
another's thumb drive without authorization may fall within the scope of the CFAA, there was no
basis in the record to find that the thumb drive was impaired or that the plaintiff will incur any costs
associated with restoring any interruption of service. The court noted that the CFAA's definitions of
47
Vurv Technology LLC v. Kenexa Corp., 2009 WL 2171042 (N.D. Ga. July 20, 2009). See also Mortgage Now Inc. v. Stone,
2009 WL 4262877 (M.D. Fla. Nov. 24, 2009) (departing employees who allegedly stole proprietary information from their
employer's computers and “scrubbed” their computers’ hard drives to conceal their activity did not violate the CFAA because a
party who is permitted to view proprietary information does not act “without authorization” when he accesses it); Clarity Services
Inc. v. Barney, 698 F.Supp.2d 1309 (M.D.Fla. 2010) (departing employee that checked email and reformatted laptop after
resigning neither accessed the employer's computers “without authorization” nor “exceeded his authorized access”); American
Family Mut. Ins. Co. v. Hollander, 2009 WL 535990 (N.D. Iowa Mar. 3, 2009) (departing employee that reviewed his
employer’s client lists before departure did not access the computers “without authorization” or in excess of “authorized access”
as required under the CFAA to establish a violation); Envtl. Safety Consultants, Inc. v. Allied Safety Consultants Inc., 95 Fed.Cl.
77 (2010) (company's allegations that it suffered damages as a result of an ex-employee's misappropriation of proprietary
information were insufficient to state a claim under the CFAA where the company failed to plead any interruption of computer
service; lost revenue was only recoverable if it was incurred because of an “interruption in service”). But see Musket Corp. v.
Star Fuel of Oklahoma LLC, 2012 WL 3595048 (W.D. Okla. Aug. 21, 2012) (departing employee that downloaded shareware
against company policy and then used it to copy proprietary files for use with his new position at a competitor contrary to a nondisclosure agreement may have exceeded authorized access" under the CFAA); see also Deloitte & Touche LLP v. Carlson, 2011
WL 2923865 (N.D. Ill. July 18, 2011) (CFAA claims may proceed against departing employee who destroyed and replaced hard
drive before returning company-issued laptop to allegedly cover his tracks in wrongfully soliciting a competitor in violation of
employee agreement); LKQ Corp. v. Thrasher, 785 F.Supp.2d 737 (N.D. Ill. 2011) (no allegation that the employer specifically
restricted its employees is necessary to state a CFAA claim against a departing employee who wiped his company laptop before
returning it; the employer's allegation of a breach of duty is enough to allege a lack of authorization); Lasco Foods Inc. v. Hall,
600 F.Supp.2d 1045 (E.D.Mo. 2009) (while a departing employee ordinarily may have been authorized to access the information
appropriated from his employer, that authorization was terminated when the defendant destroyed the agency relationship by
accessing and appropriating the protected information for his own personal gain and contrary to the interest of the employer).
48
Doyle v. Taylor, 2010 WL 2163521 (E.D. Wash. May 24, 2010). See also Intl. Chauffeured Services, Inc. v. Fast Operating
Corp., 2012 WL 1279825 (S.D.N.Y. Apr. 16, 2012) (expenses for monitoring network for future unauthorized activity not a
“loss” under the CFAA; “loss” only encompasses costs to repair and costs associated with investigating the damage). But see
Navistar, Inc. v. New Baltimore Garage, Inc., 2012 WL 4338816 (N.D. Ill. Sept. 20, 2012) (plaintiff can satisfy the requirements
of loss under the CFAA by alleging costs reasonably incurred to respond to an alleged CFAA offense, even if the offense turned
out not to have caused damage to the computer system; using a password to access a copyrighted work, even without
authorization, does not constitute circumvention under the DMCA because it does not involve descrambling, decrypting, or
otherwise bypassing a technological measure).
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“damages” and “loss” should be strictly construed and that the plaintiff must identify impairment of
or damage to the computer system that was accessed without authorization.
In Ervin & Smith Adver. & Public Relations, Inc. v. Ervin, the court held departing employees
who, against company policy, emailed themselves proprietary data may be liable under CFAA as per
the Seventh Circuit's decision in International Airport Centers LLC v. Citrin.49 The court stated that
while the defendants ordinarily may have been authorized to access the information they
appropriated from the plaintiff, such authorization was terminated when the defendants destroyed the
agency relationship by accessing and appropriating the protected information for their own personal
gain and against the interest of their employer.
Most CFAA claims were dismissed against ex-employees who had initial access to proprietary
information that was allegedly copied from employer’s computer system in US Bioservices Corp. v.
Lugo. However, the court allowed the plaintiff to proceed on those claims that were based upon
violations for exceeding authorized access when defendants allegedly accesses certain information to
which they were not entitled.50
Beyond federal law, a majority of states have enacted computer trespass and fraud statutes that
allow claims for various degrees of unauthorized access and copying, schemes to defraud, and the
unlawful destruction of proprietary data.
The District of Nebraska held in Joseph Oat Holdings Inc. v. RCM Digesters Inc. that an entity
who secretly accessed the servers of its former business partner, copied proprietary files and changed
administrative passwords following the dissolution of the parties’ joint venture violated California
and New Jersey state computer trespass laws.51 The court granted summary judgment on defendant's
computer trespass counterclaims, holding that at the time the plaintiff accessed the defendant's
computer server (which had formerly been used by the joint venture), the server had reverted back to
the property of the defendant because the joint venture had been officially defunct. The court
rejected the plaintiff’s argument that it copied the defendant's files to preserve evidence pursuant to a
litigation hold letter, finding that an adversary’s counsel’s letter regarding the duty to preserve
evidence does not “afford a party carte blanche authority” to secretively copy computer files located
on the adversary’s computer server, even if many of those files on the server had once been property
of that party, and even if that party still had access to those files.
C. Commercial Email and Spam
The CAN-SPAM Act,52 which imposes requirements on those who send commercial email
messages to consumers and establishes civil and criminal penalties for the transmission of unsolicited
commercial electronic mail, or spam, that does not comport with the Act’s requirements, continues to
garner the public’s attention as spam remains a stubborn problem. Essentially, the CAN-SPAM Act
protects consumers by offering them a legal right to “opt out” of future spam. In most situations, it is
not required that a business get permission from a potential recipient before sending commercial
49
Ervin & Smith Adver. & Public Relations, Inc. v. Ervin, 2009 WL 249998 (D. Neb. Feb. 3, 2009).
50
US Bioservices Corp. v. Lugo, 595 F.Supp.2d 1189 (D. Kan. Jan. 21, 2009).
51
Joseph Oat Holdings Inc. v. RCM Digesters, Inc., 665 F. Supp. 2d 448 (D.NJ 2009).
52
15 U.S.C. §7701.
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email. Still, businesses are not permitted to send commercial emails to those who request to be
removed from the businesses’ lists.
Notably, the Act expressly preempts all state laws to the extent that they address the
permissibility of unsolicited commercial email, except for those that apply “falsity or deception in
any portion of a commercial electronic mail message or information attached thereto.” Courts have
wrestled with the question of what constitutes falsity or deception under the statute, whether
cognizable state claims must be based on the traditional tort theory of common law fraud and deceit,
which usually requires a plaintiff to plead it with particularity, or whether state consumer or antispam laws may survive preemption for regulating something less than fraud. District courts to have
addressed the issue have reached differing results.
The CAN-SPAM Act applies to social networking communications—including internal
messages to users’ walls, “news feeds,” the “home” page of users’ friends, and the Facebook inbox
of users' friends—despite the fact that such electronic messages are not delivered to a traditional
email “inbox.”53 In Facebook, Inc. v. Maxbounty, Inc., the court refused to dismiss the plaintiff's
CAN-SPAM claims against an Internet marketer that had allegedly set up fraudulent fan pages
through its affiliates to draw traffic to outside websites and advertisers through a series of messages
and notifications to Facebook users. The court rejected the defendant's argument that an “electronic
mail message” under the CAN-SPAM Act must be capable of characterization as “email” or must be
directed to a traditional email inbox or address with a local part and domain part (i.e.,
[email protected]).
A provider of free email accounts for a small number of individuals who took no steps to stem
the flow of spam emails does not have standing to pursue claims under the CAN-SPAM Act as a
result of unsolicited commercial email sent to its users, according to Gordon v. Virtumundo, Inc..54
The Ninth Circuit affirmed the lower court's grant of summary judgment to the defendant and also
ruled that the plaintiff's state anti-spam claims were preempted by the CAN-SPAM Act. The court
held that the plaintiff was not a “provider of an Internet access service” who was adversely affected
by a statutory violation, and thus, did not have private standing to bring CAN-SPAM Act claims.
While the court recognized that statutory standing was not limited to traditional ISPs (and included
providers such as social network websites), the court rejected any overly broad interpretation of
“Internet access service” (IAS) that would include an entity that merely provided email accounts and
email access. The court commented that the plaintiff neither had physical control over nor access to
the hardware at issue, which was owned by another provider, and was “troubled” by the extent to
which the plaintiff failed to operate as a “bona fide email provider,” such that the plaintiff
purposefully avoided taking even minimal efforts to avoid or block spam messages and accumulated
53
Facebook, Inc. v. Maxbounty, Inc., 274 F.R.D. 279 (N.D. Cal. 2011).
54
Gordon v. Virtumundo, Inc., 575 F.3d 1040 (9th Cir. 2009). See also Asis Internet Servs. v. Azoogle.com, Inc., 357 Fed.Appx.
112 (9th Cir. 2009) (mere cost of ordinary filtering and carrying spam over plaintiff’s facilities does not constitute a harm as
required by the CAN-SPAM Act; plaintiff did not suffered a harm within the meaning of the statute and lacked standing.), further
proceedings at Asis Internet Servs. v. Optin Global, Inc., 2010 WL 2035327 (N.D. Cal. May 19, 2010) (defendant awarded
attorney's fees in the amount of $806,978.84); Asis Internet Services v. Active Response Group, 2010 WL 519830 (N.D. Cal.
Feb. 9, 2010) (following Virtumundo and Azoogle in dismissing the plaintiff's action for lack of standing because the mere cost of
carrying spam emails over plaintiff’s facilities does not constitute a harm under the CAN-SPAM Act); RJ Prod. Co. v. Nestle
USA, Inc., 2010 WL 1506914 (D.D.C. Apr. 15, 2010) (digital media outsourcing and consulting firm that made no allegations
that it was an Internet access service that suffered any network harms lacked standing under the CAN-SPAM Act); Melaleuca
Inc. v. Hansen, No 07-212 (D. Idaho Sept. 30, 2010) (marketing company that possessed a domain name and also offered email
services through a third party was not a bona fide ISP under the CAN-SPAM Act and lacked standing to pursue a claim).
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spam through a variety of means for the purpose of facilitating litigation. As to the “adversely
affected” standing requirement, the court stated that the fact that the plaintiff received a large volume
of commercial email was not enough to establish his statutory standing. Rather, the court found that
a plaintiff must plead those types of harms uniquely encountered by IAS providers, that is, network
crashes, higher bandwidth utilization, and increased costs for hardware and software upgrades,
network expansion and additional personnel, such that, in most cases, “evidence of some
combination of operational or technical impairments and related financial costs attributable to
unwanted commercial email would suffice.” Interestingly, the appeals court noted that trial courts
must take a closer look at services that may not be bona fide providers and “be careful to distinguish
the ordinary costs and burdens associated with operating an Internet access service from actual
harm,” and that courts should also expect a legitimate service provider to “secure adequate
bandwidth and storage capacity and take reasonable precautions, such as implementing spam filters,
as part of its normal operations.”
In Ferguson v. Active Response Group, the Ninth Circuit held that an Internet access service
provider that offers free email forwarding services lacks standing under the CAN-SPAM Act because
he was not “adversely affected” by incoming spam when he was forced to switch to a broadband
connection.55 The appeals court affirmed the district court's grant of summary judgment to the
defendant online marketing company because the plaintiff failed to prove more than negligible harm
due to the spam, such as increased costs for server maintenance, network harm, or for customer
service personnel to handle complaints.
Claims under California's deceptive email advertising law are not preempted by the CANSPAM Act.56 Regarding CAN-SPAM Act preemption of state laws, the Asis Internet Services v.
Consumerbargaingiveaways LLC court ruled that “falsity or deception” was not limited just to
common-law fraud and other similar torts such that anti-deception state actions not insisting on every
element of common-law fraud are not preempted.
55
Ferguson v. Active Response Group, 348 Fed. Appx. 255 (9th Cir. 2009). See also Haselton v. Quicken Loans Inc., 2010 WL
1180353 (W.D. Wash. Mar. 23, 2010) (website host that attempted to grow a spam business and did not use any e-mail filtering
programs was not bona fide IAS provider and accordingly lacked standing to pursue a claim under the CAN-SPAM Act; in
addition, the plaintiff did not show it was “adversely affected” by any alleged violation of the CAN-SPAM Act since it suffered
harm, if at all, by its own failure to implement spam reducing measures and its actions to actively seek out such
communications).
56
Asis Internet Services v. Consumerbargaingiveaways LLC, 622 F. Supp. 2d 935 (N.D. Cal. 2009). See also Hypertouch, Inc.
v. Valueclick, Inc., 191 Cal.App.4th 1209 (Cal. App. 2011) (CAN-SPAM Act’s savings clause applies to any state law that
prohibits material falsity or material deception in a commercial e-mail regardless of whether such laws require plaintiff to prove
and plead each and every element of common law fraud; moreover, the application of California's spam statute is not limited to
entities that “send” the offending e-mails nor does it require a plaintiff to establish that defendant had knowledge of such emails); Hoang v. Reunion.com, No. 08-03518 (N.D. Cal. Mar. 31, 2010); Asis Internet Services v. Subscriberbase Inc., 2009 WL
4723338 (N.D. Cal. Dec. 4, 2009); Asis Internet Services v. Member Source Media, LLC, No. 08-1321 (N.D. Cal. Apr. 20, 2010)
(state anti-spam law claims based upon header deficiencies preempted by CAN-SPAM Act; claims based upon deceptive subject
lines not preempted); Ferron v. SubscriberBase Holdings, Inc., 2009 WL 650731 (S.D. Ohio Mar. 11, 2009) (claims stemming
from allegedly deceptive commercial email solicitation brought under state consumer protection statute are not preempted by the
CAN-SPAM Act). But see Hypertouch, Inc. v. Azoogle.com, Inc., 2010 WL 2712217 (9th Cir. July 09, 2010) (unpublished)
(claims under California anti-spam law for commercial email advertisements that contained "falsified," "misrepresented,"
"forged," or misleading information must comply with the Federal Rules of Civil Procedure's heightened pleading standards for
fraud).
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It is not a violation of Section 17519.5(a)(2) of the California anti-spam law, which prohibits
“falsified or forged header information,” to send commercial email advertisements from multiple,
accurately-registered domain names for the purpose of bypassing spam filters.57
The disclosure of an email address that resulted in the receipt of spam, but no other misuse, is
not sufficient to constitute damage to the plaintiff or sustain breach of contract and fiduciary claims.58
D. Telephone Consumer Protection Act
The Telephone Consumer Protection Act (TCPA) was originally adopted in 1991 to, among
other things, protect the privacy of citizens by restricting the use of telephones for unsolicited
advertising and, more specifically, curb telemarketers from using autodialers to make millions of
unsolicited calls to residential and business telephone numbers, fax machines and cellular telephones.
The TCPA also prohibits the use of any fax machine, computer, or other device to send unsolicited
fax advertisements, absent certain consent requirements.
According to Satterfield v. Simon & Schuster, the transmission of an SMS text message to a
cellular telephone is a “call” within the meaning of the TCPA.59 The Ninth Circuit reversed the
district court's grant of summary judgment to the defendant and remanded the case to determine if the
text message at issue was sent using an “automatic telephone dialing system” as required under the
statute, that is, whether the equipment used for transmission had the “capacity” to both (1) store or
produce numbers to be called using a random or sequential number generator and (2) to dial such
numbers. The court found that the TCPA’s prohibition on certain automated calls to wireless
numbers encompasses both voice calls and SMS text messages, deferring to the FCC's regulations
and interpretation of the Act and the plain meaning of the term “call.” The court reasoned that the
purpose and history of the TCPA indicated that Congress was trying to prohibit the use of automatic
dialers to communicate with others by telephone in an invasive manner, and that a voice message or
a text message were not distinguishable in terms of being an invasion of privacy. The court further
held that while the TCPA exempts those calls “made with the prior express consent of the called
party,” no express consent was given in this case because the plaintiff's consent to receive
promotional material from a third-party marketer and its “affiliates and brands,” cannot be read as
consenting to the receipt of the commercial messages of the defendant, an unrelated entity.
The court in Abbas v. Selling Source, LLC held that an unsolicited, commercial SMS message
is a “call” within the meaning of the TCPA because Congress intended to restrict unsolicited,
automated advertisements and solicitations by telephonic means, which includes text messages.60
57
Kleffman v. Vonage Holdings Corp., 49 Cal.4th 334 (2010).
58
Cherny v. Emigrant Bank, 604 F.Supp.2d 605 (S.D.N.Y. 2009).
59
Satterfield v. Simon & Schuster, 569 F.3d 946 (9th Cir. 2009). See also In re Jiffy Lube Intl., 847 F.Supp.2d 1253 (N.D. Cal.
2012) (advertiser not permitted to avoid TCPA liability merely because it hired a different firm to send text message
advertisements to its customers). But see Thomas v. Taco Bell Corp., 879 F.Supp.2d 1079 (C.D. Cal. 2012) (a party can be held
liable under the TCPA directly if it personally “makes” a call in the method proscribed by the statute, or vicariously, such as, if it
was in an agency relationship with the party that sent the text message; plaintiff failed to present any evidence that defendant
directed or supervised the manner and means of the text message campaign conducted by an association of its franchisees).
60
Abbas v. Selling Source, LLC, 2009 WL 4884471 (N.D. Ill. Dec. 14, 2009). See also Lozano v. Twentieth Century Fox Film
Corp., 702 F. Supp.2d 999 (N.D. Ill. 2010) (promotional text message sent to plaintiff constitutes a “call” for the purposes of the
TCPA; the plain language of the TCPA does not require plaintiff to allege that he was charged for receipt of the text message that
forms the basis for his complaint). But see Ibey v. Taco Bell Corp., 2012 WL 2401972 (S.D. Cal. June 18, 2012) (advertiser's
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The court denied the defendant's motion to dismiss the defendant's TCPA claims. The court rejected
the defendant's argument that the TCPA was inapplicable because there was no evidence that the
plaintiff was “charged for the call,” concluding that beyond “cost-shifting” concerns, Congress was
just as concerned with consumers’ privacy rights and the nuisances of telemarketing such that a
cellular phone customer need not necessarily be charged for the call to make that call actionable.
The New York Court of Appeals held in Stern v. Bluestone that unsolicited, faxed
“commentaries containing short essays on legal topics in an attorney's field of practice that also list
the sending attorney's law firm name and contact information fit the FCC's framework for an
“informational message.” and are not unlawful "unsolicited advertisements" under the TCPA.61 The
Court of Appeals reversed the lower court's grant of summary judgment to the plaintiff on his TCPA
claims. The court found that the defendant's commentaries, which provided academic legal
information, did not promote a commercial product and to the extent that the defendant devised the
commentaries as a way to advertise his expertise to other attorneys and gain referrals, the faxes
contained at most, “[a]n incidental advertisement of his services, which [did] not convert the entire
communication into an advertisement.”
Certain regulatory violations of the TCPA fall outside the scope of private enforcement
actions.62 The New York court concluded that there was no private right of action for failure on the
part of an automated telemarketing call to identify itself or provide its phone number since the
enforcement of such identification requirements was within the province of state attorneys general
and the FCC, and could not form the basis of a private enforcement action.
E. First Amendment Issues in Digital Content
The First Amendment's freedom of speech and the press provide protection for certain uses of
content on the Internet or in a digital application and can limit rights of publicity in one's name or
likeness for newsworthy and other purposes. Moreover, in certain instances, students and public
employees can be subject to restrictions in the name of school discipline and the objectives of a
public employer.
single, confirmatory text message in response to an opt-out request from plaintiff, who voluntarily had provided his phone
number by sending the initial text message, does not violate the TCPA).
61
Stern v. Bluestone, 12 N.Y.2d 873 (2009). See also Holmes v. Back Doctors, Ltd, 2009 WL 3425961 (S.D. Ill. Oct. 21, 2009)
(faxed newsletter that contained bona fide medical information that changed each month and was sent to specific recipients on a
regular schedule does not constitute an “advertisement” under the TCPA; while the faxes contained some advertising material, “it
is worth noting that the TCPA actually requires the sender of a fax to include its contact information in the fax…and the Court
sees no reason why [defendant's] compliance with the statute should become…the linchpin for finding that [defendant's] faxes
constitute advertising”); Holtzman v. Turza, 2010 WL 3076258 (N.D. Ill. Aug. 3, 2010) (faxed newsletters that contained
editorial and promotional content that were ghostwritten and transmitted on attorney's behalf as part of a paid marketing
campaign were deemed unsolicited advertisements under the TCPA), further proceedings at Holtzman v. Turza, 2011 WL
3876943 (N.D. Ill. Aug. 29, 2011) (plaintiff granted summary judgment, with the court awarding $4,215,000 in damages, $500
in statutory damages for each of the 8,430 times faxes successfully sent to the class members).
62
Burdge v. Ass’n Health Care Mgmt., 2009 WL 414595 (S.D. Ohio Feb. 18, 2009). See also Dobbin v. Wells Fargo Auto
Finance, Inc., 10-268 (N.D. Ill. June 14, 2011) (recipients of cell phone calls failed to establish a genuine issue of fact regarding
whether manually dialed calls made from a bank call center desk phone were made "using" equipment with the capacity to
autodial within the meaning of the TCPA since such desk phones could be used independently of the predictive dialing
technology employed by the bank); CE Design, Ltd. v. Prism Bus. Media, Inc., 606 F.3d 443 (7th Cir. 2010)) (the “established
business relationship exception” to the TCPA's junk fax prohibitions applies to both business and residential customers).
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According to FreeLife Int'l Inc. v. American Educational Music Publications, Inc., a nondisparagement clause contained in an online adhesion contract between a direct sales company and a
prospective independent distributor is enforceable because it is neither procedurally nor substantively
unconscionable and does not violate the First Amendment.63 In ruling on the enforceability of the
online contract's non-disparagement clause, the court found that the defendant completed the
application and stated affirmatively that he accepted the terms and that the non-disparagement clause
was not objectively bizarre or oppressive such that the adhering party “would not have assented to
the particular term had he or she known of its presence.” The court commented that the defendant
accepted the contract with the non-disparagement clause, and after that he allegedly had breached it,
cannot be heard to claim it is unfair because of the possible consequences of his breach. The court
also rejected the defendant’s First Amendment argument, stating that the First Amendment protects
individuals from government infringement on speech, not private infringement.
The Northern District of California in Estavillo v. Sony Computer Entertainment held that a
user that was banned from the defendant's videogame network after multiple violations of its terms of
use cannot state a plausible First Amendment claim for relief, because the defendant was merely
providing a private commercial product and did not have a sufficient structural or functional nexus to
the government for the First Amendment to apply.64
In Richerson v. Beckon, the transfer of an education instructional coach to another position
after it was discovered that she wrote a publicly-available blog that included several highly personal
and vituperative comments about her employers and fellow teachers did not violate the instructional
coach's First Amendment rights.65 The court found that the legitimate administrative interests of the
school district outweighed the plaintiff’s First Amendment interests in not being transferred because
of her speech, despite the fact that it arguably touched on matters of public concern.
A state administrative hearing officer's termination due to her personal blog that addressed the
same special education topics that she heard in her judicial capacity called did not violate her First
Amendment or other civil rights in Stengle v. Office of Dispute Resolution.66 The court granted the
government agency’s motion for summary judgment on the plaintiff's constitutional and civil rights
claims, finding that her blog posed a legitimate threat to the efficient operation of the government
63
FreeLife Int'l Inc. v. Am. Educ. Music Publ’ns, Inc., 2009 WL 3241795 (D. Ariz. Oct. 1, 2009).
64
Estavillo v. Sony Computer Entm’t, 2009 WL 3072887 (N.D. Cal., Sept. 22, 2009). See also Stern v. Sony Corp., No. 09-7710
(C.D. Cal. Feb. 8, 2010) (“To the extent Plaintiff is suing Sony as a manufacturer of video games, and the provider of online
services, Sony is not a ‘place of public accommodation’ and is therefore not liable for violating Title III of the ADA”).
65
Richerson v. Beckon, 337 Fed.Appx. 637 (9th Cir. 2009). See also Yoder v. Univ. of Louisville, 2012 WL 1078819 (W.D. Ky.
Mar. 30, 2012) (nursing school that expelled student for making social media posting about a patient's birth did not violate her
First Amendment rights; the school had a legitimate pedagogical purpose in requiring students to sign a confidentiality policy and
the student "cannot now complain that she had a First Amendment right to publish on the internet the information she agreed not
to reveal").
66
Stengle v. Office of Dispute Resolution, 631 F.Supp.2d 564 (M.D. Pa. 2009). See also Zellner v. Herrick, 639 F.3d 371 (7th
Cir. 2011) (teacher dismissal for violating computer use policy against viewing adult materials was warranted and unrelated to
his outside union activities). But see Love v. Rehfus, 946 N.E.2d 1 (Ind. 2011) (firefighter was improperly terminated for
sending a private email supporting a local political candidate to a small group of citizens because the email was constitutionally
protected speech and there was little evidence suggesting the speech caused or had the potential to cause disruption or harm to the
Fire Department's operations); Rubino v. City of New York, 950 N.Y.S.2d (2012) (public school teacher's termination for
tasteless Facebook posting about her students was not warranted where the petitioner had a long and otherwise unblemished
employment history).
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agency such that the plaintiff’s free speech rights as a government officer could be constitutionally
abridged in these circumstances. A California state court stated that the plaintiff failed to show that
her blogging activities had no potential to disrupt the governmental operations, particularly since her
blog had the potential to induce recusal motions from those who came before her in her hearing
officer capacity and encourage losing parties to question her impartiality following an adverse
decision.
A school’s transfer and discipline of student who created a slide show that was later posted on
YouTube that depicted violence against a teacher was likely justified.67 The court reasoned that even
if the student’s posting was protected speech, it was reasonable, given the violent language and
unusual photos depicted in the video slide show, for school officials to forecast substantial disruption
of school activities.
IV. JURISDICTION AND PROCEDURE
As plaintiffs increasingly have urged courts to exercise jurisdiction over non-resident parties
based on their Web presence, two lines of analysis have arisen in the judicial opinions. One line of
reasoning developed from the opinion in Zippo Manufacturing Co. v. Zippo Dot Com Inc.,68 where
the Eastern District of Pennsylvania proposed that “the likelihood that personal jurisdiction can be
constitutionally exercised is directly proportional to the nature and quality of commercial activity that
an entity conducts over the Internet.” The Zippo court established a “sliding scale” of Internet
activity. On one end of the scale lie passive websites that only provide information and do not allow
any interaction between a user and the website, and thus, are unlikely to provide a basis for the
exercise of jurisdiction. On the other end of the scale are fully interactive websites where a
defendant conducts business over the Internet, a website much more likely to provide a basis for the
exercise of jurisdiction.
67
O.Z. v. Bd. of Trs. of Long Beach Unif. Sch. Dist., 2008 WL 4396895 (C.D. Cal. Sept. 9, 2008). See also Kowalski v.
Berkeley Cnty Schs., 652 F.3d 565 (4th Cir. 2011) (student suspension over creation of MySpace page dedicated to ridiculing a
fellow student did not violate the plaintiff's free speech rights because it was foreseeable that such conduct would reach the
school via computers and smartphones and create a foreseeable substantial disruption there); D.J.M. v. Hannibal Pub. Sch. Dist.,
647 F.3d 754 (8th Cir. 2011) (suspension upheld where student sent violent threats over instant messenger program from his
home); Harris v. Pontotoc Cnty. Sch. Dist., 635 F.3d 685 (5th Cir. 2011) (school did not violate student's due process rights in
suspending for causing a denial of service attack against the school network); Doninger v. Niehoff, 642 F.3d 334 (2d Cir. 2011)
(school officials acted reasonably and deserved qualified immunity for prohibiting a student from running for Senior Class
Secretary because of offensive off-campus blog posts that pertained to a school event); Tatro v. Univ. of Minn., 816 N.W.2d 509
(Minn. 2012) (university mortuary sciences program did not violate the free speech rights of graduate student by imposing
sanctions for her Facebook posts that violated academic program rules where the academic program rules were narrowly tailored
and directly related to established professional conduct standards); Bell v. Itawamba Cnty. Sch. Bd, 859 F.Supp.2d 834 (N.D.
Miss. 2012) (student's suspension over rap video posted on YouTube and Facebook containing allegations against a teacher was
upheld because lyrics caused a material and/or substantial disruption at school and it was reasonably foreseeable to school
officials the song would cause such a disruption). But see J.S. v. Blue Mountain Sch. Dist., 650 F.3d 915 (3d Cir. 2011) (en
banc) (school that suspended student for creating a lewd MySpace profile of the principal violated student's First Amendment
rights because the facts simply do not support the conclusion that the School District could have reasonably forecasted a
substantial disruption of or material interference with the school as a result of fake social media profile created off-campus);
Layshock v. Hermitage Sch. Dist., 650 F.3d 205 (3d Cir. 2011) (en banc) (student's suspension for creating fictitious, offensive
social media profile of school official not justified under exceptions that allow punishment for off-campus behaviors); R.S. v.
Minnewaska Area Sch. Dist., 2012 WL 3870868 (D.Minn. Sept. 6, 2012) (First Amendment and privacy claims against school
may proceed based upon search of student's Facebook account after a posting that was not truly threatening or disruptive to the
school environment).
68
952 F.Supp. 1119 (E.D. Pa. 1997).
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Another line of cases follow the reasoning of the Supreme Court's decision in Calder v.
Jones,69 a pre-Internet defamation case in which the Court held that jurisdiction could be premised on
the intentional conduct of defendants outside the forum state that is calculated to cause injury to the
plaintiffs within the forum state. Courts typically apply the Calder “effects test” in cases involving
defamation or some other intentional tort, including trademark infringement.
The Northern District of California held in Zynga Game Network Inc. v. Does that an online
videogame company that sought discovery from third-party web hosting companies and other
websites seeking the identity of domain name holders who are allegedly operating infringing
websites must narrow the scope of its subpoenas to information related to the identify and name the
John Doe defendants.70 The court granted the plaintiff’s motion to conduct limited discovery, but
narrowed the scope of the subpoenas, stating that the plaintiff's request for items such as server logs,
website content transaction histories and correspondence remotely linked to the defendants was
overbroad. The court ultimately limited the reach of the subpoena to “all documents necessary to
obtain the name, current and permanent addresses, telephone numbers, and valid email addresses of
the owner(s) of [the defendant's allegedly infringing website] or similar information suitable for
identification and location of defendants.”
In copyright infringement cases involving the uploading of a copyrighted printed literary work
onto the Internet, the situs of injury for purposes of determining long-arm is the location of the
principal place of business of the copyright holder, according to Penguin Group, Inc. v. Am.
Buddha.71 In answering a certified question from the Second Circuit, the New York Court of
Appeals rejected the defendant’s argument that a derivative economic injury felt in New York based
solely on the domicile of the plaintiff was insufficient to establish an in-state injury within the
meaning of the long-arm statute. The court commented that in the case of online infringement and
digital piracy, where the harm is dispersed throughout the country, the place of uploading is
inconsequential and it is difficult, if not impossible, to correlate lost sales to a particular geographic
area, such that the out-of-state location of the infringing conduct carries less weight in the
jurisdictional inquiry. Indeed, the court noted, “the absence of any evidence of the actual
downloading of Penguin's four works by users in New York is not fatal to a finding that the alleged
injury occurred in New York.”
According to the Florida Supreme Court in Internet Solutions Corp. v. Marshall, a nonresident
defendant commits the tortious act of defamation in Florida for purposes of Florida’s long-arm
statute when the nonresident makes allegedly defamatory statements about a Florida resident by
69
465 U.S. 783 (1984).
70
Zynga Game Network Inc. v. Does 1-5, 2010 WL 271426 (N.D. Cal., Jan. 21, 2010). See also Pacific Century Int'l Ltd. v.
Does, 2011 WL 2690142 (N.D. Cal. July 8, 2011) (mere allegation that multiple Doe defendants used the same BitTorrent
network to infringe a copyrighted work is insufficient to meet the standards for joinder set forth in Rule 20; court found no
evidence that users acted together to download the work, despite the collaborative nature of members of a BitTorrent “swarm”).
71
Penguin Group, Inc. v. Am. Buddha, 16 N.Y.3d 295 (2011). Following the ruling by the New York Court of Appeal on the
certified question, the Second Circuit vacated the lower court's order and remanded to determine whether the plaintiff established
the four remaining jurisdictional requistes under the New York long-arm statute, and the extent to which the assertion of personal
jurisdiction would be consistent with the requirements of Due Process. Penguin Group Inc. v. Am. Buddha, 640 F.3d 497 (2d Cir.
May 12, 2011). But see Troma Entm’t Inc. v. Centennial Pictures Inc., 853 F.Supp.2d 326 (E.D.N.Y. 2012) (mere claims of
infringement against New York copyright holder is insufficient to trigger Penguin rule; downloading of films over the Internet
and subsequent unauthorized licensing of the works is far different than the uploading of copyrighted works and online
distribution that occurred in Penguin).
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posting those statements on a website, provided that the website posts containing the statements are
accessible in the forum and accessed in the forum.72 In answering this certified question from the
Eleventh Circuit, the Florida Supreme Court did not address the second part of the long-arm
jurisdictional analysis, namely whether an exercise of jurisdiction over a non-resident defendant
under these circumstances violates the due process clause.
In CoStar Realty Information Inc. v. Field, unauthorized users’repeated exposure to website
terms of use a over several year period bound them to terms, subjecting them to jurisdiction in the
forum based upon their express and implied assent to the forum selection clause contained in the
terms of use.73
In Consulting Engineers Corp. v. Geometric Ltd., foreign software developers were not subject
to personal jurisdiction in a Virginia forum based upon email and telephone contacts concerning a
project in India, particularly since no agreement to perform work was ever reached.74
A social network website that allegedly used technology to embed advertisements into
infringing, user-uploaded videos is subject to long-arm jurisdiction in the forum based upon evidence
that the defendant sold advertisements to New York companies and sought to participate in
advertising campaigns specifically directed at New York users, according to the decision in Capitol
Records LLC v. VideoEgg Inc..75 The court found that such a showing was sufficient to establish that
the defendant used its website to “transact business” in the forum.
The court held in Chanel, Inc. v. Lin that service of process by alternative means through an
email address is not warranted where there is doubt that the defendant sends and receives emails
from the address.76 The court concluded that the plaintiff had not demonstrated that such alternative
service would reasonably notify the defendant that litigation was pending against him.
72
Internet Solutions Corp. v. Marshall, 2010 WL 2400390 (Fla. June 17, 2010). But see Penachio v. Benedict, 2012 WL 10971
(2d Cir. Jan. 4, 2012) (out-of-state witnesses in a family court proceeding who posted allegedly defamatory videos on YouTube,
but had no related commercial interest in the forum, are not amenable to long-arm jurisdiction in New York).
73
CoStar Realty Info. Inc. v. Field, 39 So.3d 1201 (Fla. 2010). In further proceedings, the court ruled that the plaintiffs’ claim of
loss based solely on the lost revenue from the license fees that plaintiffs would have recouped had some defendants entered into a
license agreement to use its services is insufficient to qualify as a loss under the CFAA. See CoStar Realty Info. Inc. v. Field, 737
F.Supp.2d 496 (D. Md. 2010. Subsequently, the court ruled that the defendants were liable for breach of contract and copyright
infringement for unauthorized uses that violated the database license agreement. See also CoStar Realty Information Inc. v.
Field, 2010 WL 5391463 (D. Md. Dec. 21, 2010).
74
Consulting Eng’rs Corp. v. Geometric Ltd., 561 F.3d 273 (4th Cir. 2009). But see Gallup, Inc. v. Bus. Research Bureau (PVT.)
Ltd., 2008 WL 4857027 (N.D. Cal. Nov. 10, 2008) (federal court had subject matter jurisdiction over foreign defendants to hear
the plaintiff’s Lanham Act claims based upon allegation that “Gallup” trademark had an adverse effect on U.S. commerce).
75
Capitol Records LLC v. VideoEgg Inc., 611 F. Supp. 2d 349 (S.D.N.Y. 2009).
76
Chanel, Inc. v. Lin, 2009 WL 1034627 (S.D. Fla. Apr. 16, 2009). See also Chanel Inc. v. Zhibing, 2010 WL 1009981 (W.D.
Tenn. Mar. 17, 2010) (email service of process on alleged online counterfeit product seller permitted where defendant's physical
address could not be determined and he conducted business electronically via email); Chanel Inc. v. Zhixan, 2010 WL 1740695
(S.D. Fla. Apr. 29, 2010) (service via email to apparently active email accounts permitted where defendant had falsified WHOIS
listing information and had no verifiable address in China); Gaffigan v. Does 1-10, 689 F.Supp.2d 1332, 1342 (S.D. Fla. 2010)
(“[I]n this case, email was the method of communication used by Defendants in confirming orders placed on its websites, and
thus, email should be calculated to provide Defendants with notice.”); McCluskey v. Belford High Sch., 2010 WL 2696599 (E.D.
Mich. June 24, 2010) (while the court disallowed alternate service via the defendant's web hosting company and posting on a
website related to the ongoing lawsuit, it granted the plaintiff's motion to serve process to a working fax number and email
address, as well as through the “live chat” feature on the defendants’ website); Fortunato v. Chase Bank USA, N.A., 2011 WL
5574884 (S.D.N.Y. June 7, 2012) (court disallows service of process on individual via Facebook or her listed email address as on
Facebook, but directed the defendant to serve third-party defendant via publication).
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Service of process via a functional email address and international mail was authorized against
an alleged foreign cybersquatter in an in rem action under the ACPA, captioned Jenkins v. Pooke.77
In Chang v. Virgin Mobile USA, LLC, an Australian company that downloaded a Flickr photo
of a Texas resident pursuant to a Creative Commons License was not subject to Texas long-arm
jurisdiction based upon tenuous contacts with the forum and the fact that the computer contracting
processing may have been routed through servers located in the forum.78
V. CONCLUSION
The development of the Internet and new electronic media has created a host of new issues in
almost all areas of the law – a not unsurprising form of new wine in old bottles. Digital media have
impacted on subjects ranging from intellectual property, to privacy, to the First Amendment, and
labor. As shown by the diversity of the above discussion, today’s lawyers have had to develop new
knowledge and skills. They seem to be off to a good, creative, and productive start.
77
Jenkins v. Pooke, 2009 WL 412987 (N.D. Cal. Feb. 17, 2009). See also Chanel, Inc. v. Song Xu, 2010 WL 396357 (W.D.
Tenn. Jan. 27, 2010) (effecting service of process on e-commerce merchants at their preferred email addresses permitted where
WHOIS mailing address was invalid and email provided the greatest likelihood of generating a response from the served parties);
Craigslist, Inc. v. Meyer, 2010 WL 2975938 (N.D. Cal. July 26, 2010) (service via email is appropriate since plaintiff
demonstrated that, despite best efforts, it was unable to obtain a physical address for the defendant and the defendant conducted
business solely through the Internet, and email service would not be prohibited by international agreement); Alfred E. Mann
Living Trust v. ETIRC Aviation S.A.R.L., 78 A.D.3d 137 (1st Dept. 2010) (guaranty's provision waiving personal service of
process and authorizing service of notices, demands, requests or other communications to a specific email address constitutes a
waiver of personal service and the requirements that would otherwise dictate the manner to serve the foreign defendant, namely,
CPLR 308 and the Hague Convention); U.S. Commodity Futures Trading Com’n v. Rubio, 2012 WL 3614360 (S.D. Fla. Aug.
21, 2012) (court allows service of process via defendant's still-active Yahoo email address that defendant previously swore under
oath was used by him because it is reasonably calculated to give defendant notice of the action and defendant's address is
unknown).
78
Chang v. Virgin Mobile USA, LLC, 2009 WL 111570 (N.D. Tex. Jan. 16, 2009).
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FCC ANCILLARY JURISDICTION OVER INTERNET AND BROADBAND
Michael Botein
I. INTRODUCTION
As new technologies develop, legal means of regulating their behavior become necessary—
whether wireless telegraphy or wireless video.1 Incompatible engineering formats, interconnection
problems, and offensive material are common examples of issues for which the public demands
regulation. These problems often can be resolved by custom, usage, and private self-regulation—
hence the large number of trade associations in the media-telecommunications field. For example, the
transition from analog to digital broadcast and cable television was a disaster waiting to happen, and
was averted largely by the efforts of broadcast, cable, film, and computer interests though a “Grand
Alliance”—guided by a former FCC chairman—in arriving at the current digital video compromise
format.2 Similarly, broadcasting was spared rigorous censorship of “indecent” material through
negotiations among groups with different views of propriety.
One of the longest-running examples of this phenomenon during the 20th century was the
development of cable television. As discussed below, cable managed to elude regulation by the
Federal Communications Commission (FCC) for more than three decades.3
Much the same situation now faces regulation of the Internet and broadband—referred to
collectively here as cybermedia.4 Although federal statutes selectively limit or prohibit some types of
content—mainly pornographic material5—neither the FCC nor any other federal body has national
*
Professor of Law and Director, Media Center, New York Law School. B.A., 1966, Wesleyan University; J.D., 1969, Cornell
University; J.S.D., 1979, Columbia University. The author wishes to thank his energetic research assistants, Tara C. Hewitson
and Joshua Druckerman for their rigorous and thorough help in researching, writing, and editing this piece.
1
For excellent storytelling about and a good history of the first wireless—i.e., telegraphy—see Erik Larson, THUNDERSTRUCK
(2007).
2
Joel Brinkley, DEFINING VISION: HOW BROADCASTERS LURED THE GOVERNMENT INTO INCITING A REVOLUTION IN TELEVISION
(1997).
3
Cable first developed in the late 1940s and early 1950s, literally as low-capacity stands of primitive coaxial cable strung from
telephone poles, or often from trees. On a good day, most cable systems could carry a maximum of a dozen video signals, and
had absolutely no voice, interactive, or data capability. In some respects, it thus resembled the Internet before development of the
World Wide Web.
At first, the Federal Communications Commission (FCC) eschewed jurisdiction over cable. Frontier Broadcasting Co.
v. Laramie Community TV Co., 24 F.C.C. 251, 253 (1958). The Commission reasoned that cable was neither a common carrier
under Title II nor a broadcaster under Title III of the Communications Act, as discussed infra note 12. During this interregnum,
states and municipalities as their delegates exercised substantial power over many consumer aspects of cable. These areas did not
include industry structure or operation, of course, because of geographic limitations. Their powers generally derived from broad
police power provisions in state constitutions of statutes, and they naturally did not have national scope.
4
There is disagreement as to what constitutes “broadband.” The FCC recently attempted to clarify this by redefining
“broadband” as any sort of “mass-market retail service by wire or radio that provides the capability to transmit data to and
receive data from . . . [the] Internet . . . but excluding dial-up Internet access service.” Preserving the Open Internet, 47 C.F.R. §
8.11(a) (2011).
5
E.g., the now largely eviscerated Communications Decency Act of 1996, 47 U.S.C. §223 (3d ed. 1998), which was largely
struck down in Reno v. ACLU, 521 U.S. 844 (1997).
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plenary jurisdiction over cybermedia. The development and economic structure of cybermedia thus
hava been largely piecemeal. At present, perhaps the most vexing problem is implementation of
“network neutrality,” the facially simple requirement that a broadband provider not block, slow down
or discriminate against lawful websites, network traffic, applications, services, or applications that
compete with services that they provide.6
II. THE FCC’S STATUTORY (PLENARY) CABLE JURISDICTION
A traditional legislative approach has been to pass statutes with new regulatory norms. This
worked reasonably well in the early days of U.S. electronic communications. Congress largely
dodged legal issues as to early telephony by passing very broad statutes and dumping their resolution
in the lap of administrative agencies—such as the Interstate Commerce Commission and later the
FCC.7
A hands-off strategy was less workable with radio frequency (RF) over-the-air spectrum uses,
most significantly broadcasting. Electrical interference between stations inevitably results in some
parts of the population receiving poor service and others none at all.8 National federal regulation thus
was necessary, and the answer was the Federal Radio Commission in 1927 and then the creation of
the FCC as a separate federally mandated regulatory body as part of the Communications Act of
1934 (Communications Act).9
Through the Communications Act, Congress had essentially and unknowingly adopted three
different types of regulatory regimes: (1) common carriage under Title II; (2) broadcasting under
Title III; and 35 years later; (3) ancillary jurisdiction under Title I and some combination of Title II
and/or Title III.
As most policy planners increasingly have discovered, very often the Communications Act’s
statutory icons are of little use in adapting to new technologies and their challenges. Although
vesting telecommunications jurisdiction in the Interstate Commerce Commission may have seemed
sensible in the early 20th century—after all, telephone and railroads were both carriers—the devil
was in the details, particularly since an older agency often had little or no expertise in a new
technology, such as telephony.
One result of this was the New Deal’s “headless fourth branch,”10 which gave broad enabling
powers to administrative agencies through hopelessly general phrases such as “public interest,
convenience, and necessity.”11 That approach created difficulties in designing detailed regulatory
responses to new economic and engineering issues, particularly for agencies from the New Deal era
that had been conceived to deal with particular industries and economic problems. By the 1950s,
agencies often were faced with the need of fabricating new grants of jurisdiction in order to deal with
6
Open Internet Report & Order, 25 FCC Rcd. 17905, 17906 (2010); see also In re Comcast Corp. for Secretly Degrading Peerto-Peer Applications, 233 FCC Rcd. 13028 (2008).
7
Michael Botein, FEDERAL REGULATION OF THE ELECTRONIC MASS MEDIA 22-30 (3d ed. 1998).
8
Id. at 22–24.
9
47 U.S.C. § 101 et seq. In the process, the FCC also acquired the FCC′s moribund common carrier jurisdiction.
10
Report of the President’s Committee on Administrative Management 7, 83 (1937).
11
See, e.g., 47 U.S.C. §§ 257(c), 309(a), § 311(c)(3)(A).
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the details. For example, production of oil and gas had changed from a policy of limitation—because
of excess capacity12—to one of promotion.
In some cases creative construction of enabling statutes was enough, simply because of broad
“public interest” language. In other situations, however, absolutely nothing in an agency’s enabling
legislation supported a body’s power to act. Many statutes were relatively narrow in their scope;
unlike many other nations, the United States was loathe to give agencies true plenary jurisdiction
over their areas of responsibility. This required a search for other sources of power. Not
unsurprisingly, these other sources often turned out to be implied—sometimes from the enabling
statute’s language, sometimes from the overall purpose of the legislation.
III. THE FCC AND REASONABLY ANCILLARY (NON-PLENARY) JURISDICTION: CABLE
TELEVISION
The FCC’s history exemplifies an agency’s ongoing need to expand its jurisdiction through
implied powers. Although the Commission’s basic powers were laid out in the Communications
Act,13 in the last 50 years, it has faced at least two major needs to expand its jurisdiction beyond the
plain language interpretation of its enabling act: first, with cable television in the 1960s and currently
with the internet in the new millennium. This discussion does not include Chevron deference to
agency interpretation14 for the purposes of brevity.
As in 1934, the Communications Act still is divided into three parts:
 Title I: Administrative Powers
 Title II: Common Carriers
 Title III: Radio Frequency (RF) Transmission15
Until the advent of cable, the coverage of each title was pretty self-evident. When the
Commission first had to deal with cable in the mid-1960s, however, it recognized that it was dealing
with an entity that was neither a common carrier (such as a telephone provider) nor a broadcaster
(such as a radio station).
Early cases treated cable as just an extension of broadcasting, and based the Commission’s
jurisdiction on its power over broadcasting under Title III.16 In effect, cable jurisdiction became part
of a broadcast station’s compliance with Title III, even though a cable operator was functionally and
financially totally separate from—and often at odds with—the television stations from which it
carried signals.
As was to be the case with the Internet, Congress was unwilling (at least initially) to amend the
Communications Act to add a section explicitly designed to regulate cable. In response, the
12
Panama Refining Co. v. Ryan, 293 U.S. 388 (1935).
13
47 U.S.C. § 101 et seq.
14
Chevron U.S.A., Inc. v. National Resource Defense Council, Inc., 467 U.S. 837 (1984).
15
In 1984 and 1992, Congress added statutory coverage of cable in what became Title VI of the Communications Act. Cable
Communications Act of 1984, 47 U.S.C. §§ 521–573 (2006); Cable Television Consumer Protection and Competition Act of
1992, Pub. L. No. 102–385, 89 Stat. 1503 (codified in scattered sections of 47 U.S.C.). This granted the agency plenary power
over a few areas—e.g., concentration of control, programming sales, pole attachments—and left most other areas such as
franchises, street usage fees, and access channels, to state and/or local governments.
16
Carter Mountain Transmission Corp. v. FCC, 321 F.2d 359 (D.C.Cir), cert. denied 375 U.S. 951 (1963).
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Commission expanded the “reasonably ancillary” jurisdictional approach into a completely new form
of regulatory power.17 This essentially was a combination of Title I administrative powers with
jurisdiction from Title II and/or Title III. The game thus became putting together elements from two
or more titles to construct a basis for jurisdiction.
The keystone was Title I, Section 1 of the Communications Act, which provides that the
statutory purpose of the Act is “to make available . . . a rapid, efficient, Nation-wide and world-wide
wire and radio communication service.”18 This language was supplemented by Title I, Section 2,
which states that this act “shall apply to all interstate and foreign communication by wire or radio and
all interstate and foreign transmission of energy by radio.”19
Assuming that a lynchpin existed in sections 1 and/or 2, the first part of the reasonably
ancillary equation was in place. Depending upon the source of the second factor, the Title II or Title
III substantive source of jurisdiction, the schematic would resemble the following:
Title I
Section 1 or 2
Title II and/or Title III
The obvious difficulty was establishing the connection between the two foundations of
ancillary jurisdiction.20
This quandary first arose in United States v. Southwestern Cable Co.21 The Supreme Court
in that case reviewed the Commission’s requirement that a San Diego cable system demonstrate
that its transmission of a “distant” Los Angeles broadcast station would not endanger the
financial health of local broadcast stations or advertisers on them.22 The Commission’s concern
was that additional signals would reduce local viewing—and hence advertising revenues—for
San Diego television stations.
Regulation of distant signal importation—one of the most controversial cable issues in the
1960s and 1970s—thus became a high priority for the FCC. But neither Title II nor Title III
conferred any jurisdictional basis over cable, as would be revisited in the 1979 Midwest Video II
case.23 Cable was not a telephone-style common carrier, and since it did not use RF transmission,
it was not subject to Title III.
17
Michael Botein, CATV Regulation: A Jumble of Jurisdictions, 45 N.Y.U. L. REV. 816 (1970).
18
47 U.S.C. §151.
19
47 U.S.C. § 152. Most cable systems did not fall within this, since they transmitted signals by wire, not radio. Where cable
operations used microwave transmission to receive broadcast television or other programming, they were deemed to be RF
carriers under Title III, and hence there was no need to find ancillary jurisdiction.
20
E.g., Echostar Satellite, L.L.C. v. F.C.C., 704 F.2d 992, 998 (2013) adopts a similar analysis.
21
392 U.S. 157 (1968).
22
Then 47 C.F.R. § 74.1107 put the burden on a cable system to show that importation of distant signals into any of the nation’s
100 largest television markets would be “consistent with the public interest, and specifically the establishment and healthy
maintenance of television broadcast service in the area.” Shortly after Southwestern, the Supreme Court refused to review a
decision upholding the validity of the provision. Bucks County Cable TV, Inc. v. United States, 427 F.2d 438 (3d Cir. 1970),
cert. denied, 400 U.S. 831 (1970).
23
See discussion infra pp. 278-279.
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In effect, the FCC’s argument was that if an unregulated industry impacted a regulated one,
an agency with jurisdiction over the latter could extend its reach to the former. Taken to its
extreme, this rationale would allow federal agencies to assert jurisdiction to an extent
coterminous with Congress’s legislative power under the Constitution. The Federal Aviation
Administration presumably would have jurisdiction over running shoes, since their performance
might affect an airline passenger’s speed in reaching a departing flight. The Court naturally was
interested not in federalizing the national’s economy, but merely in resolving a relatively minor
dispute of concern to the then-powerful broadcast lobby. After all, at this time the entire U.S.
cable industry had about 950,000 subscribers24—less than one percent of national households,
versus the two-thirds it serves today.
The Court neatly sidestepped these concerns in Southwestern in its first application of
reasonably ancillary jurisdiction to telecommunications. It simply held that cable impacted on
the economic viability of Title III television broadcast stations. As a result, the combination of
the general administrative language in Sections 1 and 2 gave the Commission power to protect
television broadcasting under Title III’s mandate.
The Court was quick to hedge its bets, however, as to the scope of ancillary jurisdiction. It
noted that “the authority which we recognize today . . . is restricted to that reasonably ancillary to
the effective performance of the Commission’s various responsibilities for the regulation of
television broadcasting.”25
There naturally were several difficulties with this approach. First, the information
regarding cable’s impact on broadcast television was limited at best, as indicated by the
industry’s small size. The cable industry studies purported to show that it increased broadcast
revenues by expanding the total audience; conversely, the broadcast white papers claimed that
cable importation of distant signals—and eventually of non-broadcast signals, such as CNN or
HBO—reduced viewers for broadcast television programs.
Second, the Commission’s and the Court’s analysis assumed that the goal of protecting
broadcast television was sufficient to justify regulating cable. The difficulty with this approach
was that it based regulation of non-broadcast media on the preservation of (perhaps even failing)
broadcast stations. The Court’s rationale analogizing the regulation of cable to the regulation of
radio or television broadcast stations to prevent interference and loss of listeners simply did not
work. The cable rules were not designed to prevent electrical interference or to provide universal
service to the public—major goals of broadcasting. Some observers viewed this as sacrificing
cable to pay for broadcasting’s sins.
The overall weakness of the Southwestern decision may have resulted from the Court’s
desire to slow cable growth without making new law. Since the Court seemed to go out of its
way to restrict the reasonably ancillary doctrine to cable’s impact on broadcast television, it very
well may have planned to settle the cable-broadcast dispute quickly through a doctrine which
never would be heard of again.
For better or worse, this was not the case, since the cable-broadcast wars continued
unabated through the enactment of Communications Act cable legislation in Title VI between
24
Will 1971 give CATV a green light?, BROADCASTING YEARBOOK at 14 (1971), available at
http://www.americanradiohistory.com/Archive-BC-YB/1971/Section-Intro-Broadcasting-Yearbook-1971-9.pdf.
25
Southwestern, 392 U.S. at 178.
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1984 and 1996.26 Until Congress finally acted, the industries tried any other available avenue—
including litigation. As lobbyists sometimes observe, all that any regulated industry wants is one
unfair advantage.
In 1972, the Court revisited the reasonably ancillary issue in United States v. Midwest
Video Corp (Midwest I).27 The Commission there had adopted a rule requiring cable systems
with more than 3,500 subscribers to engage in “mandatory origination”—producing primarily
local programs with news, public affairs, and programming by third parties. Unlike the signal
importation rules in Southwestern, these regulations did not purport to protect the economic
viability of broadcast television stations. In upholding the rules, the Court relied upon Section 1
and held that cable systems effectively owed these services to the public as a quid pro quo for
use of broadcast television signals. The Court viewed mandatory origination as a means of
achieving public service goals not already served by broadcast television stations.
The Court’s emphasis on promoting public service was a radical departure from
Southwestern’s view of the Commission’s jurisdiction over cable as conditional on its statutory
powers over broadcasting. Although not viewed as a substantial change in approach, the Court’s
rationale approached a grant of plenary jurisdiction over cable.
As in Southwestern, the Court’s emphasis on using cable regulation to reach traditional
broadcast goals ignored the fact that cable did not use RF transmissions like broadcasting. The
rationale amounted to insuring that cable viewers could be able to receive signals not supplied by
broadcast television providers because of economic limitations. This attempt to draw a
connection between cable carriage and improvements in broadcast service lacked the logical
nexus generally present in ancillary jurisdiction.28 Although not labeled as plenary jurisdiction,
the decision approached that result.
In addition, the Commission had estimated—and the Court agreed—that the cost of
mandatory origination to a cable operator would be steep but not economically infeasible. The
FCC’s projected capital costs were $21,000 for a black-and-white origination system and
$56,000 for color. By the standards of 1972, these figures were wildly conservative. Today’s
estimates would be 10-15 percent as much.29
It thus was less than surprising that Chief Justice Burger provided a concurring fifth vote to
uphold the rules only with difficulty. Although hardly a technologist, he found the nexus
between statutory goals and Commission jurisdiction to be tenuous at best. He saw a serious
disconnect in the fact that cable operators were not RF, while broadcasters were. Burger noted
that: “candor requires acknowledgment, for me at least, that the Commission’s position strains
the outer limits of even the open-ended and pervasive jurisdiction that has evolved by decisions
of the Commission and the courts.”30
26
47 U.S.C. § 601 et. seq.
27
406 U.S. 649 (1972).
28
406 U.S. at 664–65.
29
Cable quality cameras cost as little as $3,000, including lenses.
30
406 U.S. at 676 (Burger, J., dissenting).
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This too might have been the end of the ancillary jurisdiction doctrine, were it not for the
Commission’s continued tinkering with cable operators’ obligations to provide local
programming. These requirements eventually were invalidated by the Court in FCC v. Midwest
Video Corporation (Midwest Video II).31
In 1976 the Commission embarked upon a departure from what had been a relatively
unsatisfying experience with mandatory origination. The agency repealed the existing rule and
adopted instead a new “access” requirement. Under this rule, cable operators had to make
available four types of channels to unaffiliated third parties: public, educational, governmental
(PEG), and leased. Although the Court found a nexus between the Commission’s jurisdiction and
the rules’ requirements, it held that the FCC had pushed the regulatory envelope too far.
One of the goals of the new rules was to enable third parties to use an operator’s cable
access channels—particularly PEG—without any control by the cable system. Although the
Court found some public interest goals in the rules, it invalidated them on the ground that they
imposed common carrier obligations on cable carriers: requiring operators to hold out their
facilities to unaffiliated entities; barring them from content control; and limiting leased access
channel charges. The Court did not pass on the First Amendment status of the rules, however,
which effectively allowed Congress and state/local governments to implement access channels
later—as they did, beginning with the 1984 Cable Act just a few years later.32
In effect, the nexus existed between the agency’s overall administrative powers, but the
rules’ broadcast-style goals violated the Act. Section 153(10) provides that “a person engaged in
radio broadcasting shall not, insofar as such person is so engaged, be deemed a common
carrier.”33 Using its reasoning from prior decisions that a cable system was analogous to a
broadcaster and thus could be subject to broadcasting goals, the incorporation of carrier-style
obligations invalidated an otherwise valid connection between the Commission’s administrative
powers and broadcast-like goals. Although Congress ultimately preserved access rules on a local
level in the 1984 Cable Act, from Midwest Video II until recently, ancillary jurisdiction played
little role in telecommunications regulation.
IV. REASONABLY ANCILLARY JURISDICTION OVER THE INTERNET
After two decades of cable access channel regulation under Title VI of the Communications
Act, ancillary jurisdiction was virtually off the regulatory radar screen. Today, however, the history
of ancillary jurisdiction may be relevant again with the cable-style “explosive growth”34 of the
Internet and broadband (referred to collectively as cyber media). This development brought with it a
perceived need by some for a further expansion of the FCC’s jurisdiction.
As had been the case with cable, there is no statutory grant of Commission power over
cybermedia, and thus no clear regulatory niche for it under the Communications Act. Like cable, the
Internet and broadband are not carriers, since operators are subject only to general antitrust
constraints in dealing with third parties and setting rates. Increase use of mobile devices, wifi and the
31
440 U.S. 689 (1979).
32
This now is incorporated into Title VI of the Communications Act, as discussed supra note 19.
33
47 U.S.C. § 153(11).
34
Second Report and Order, 2 F.C.C.2d 725, 738 (1966).
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like naturally may move cyber media into the RF domain. Although many observers—somewhat
ironically, mainly cable operators—argued that the Internet should be treated as a form of cable
under Title VI, it clearly was not a one-way distribution system.
In occasional references, courts have suggested that cybermedia might be regulable under
ancillary jurisdiction. In a rather convoluted opinion, the Supreme Court in National Cable &
Telecommunications Association v. Brand X Internet Services, Inc.,35 held that the Commission could
regulate the Internet as an “information” rather than as a “telecommunications” service. After a
debate sometimes resembling a food fight between Justices Scalia and Thomas,36 the plurality hastily
noted that “the Commission remains free to impose special regulatory duties on facilities-based ISPs
under its Title I ancillary jurisdiction.”37
In the recent past, the most significant issue arose in Comcast Corporation v. FCC.38 At issue
there was the FCC’s prior version of its “network neutrality” restrictions, resulting from a complaint
against Comcast. At that point, the Commission’s policy was mainly to prevent Internet Service
Providers (“ISPs”) from blocking third parties from using all or part of their bandwidth, imposing
unreasonable discrimination, as to price or availability, engaging in paid prioritization of one user
over another, and allowing “reasonable network management.”
The Commission argued that it had ancillary jurisdiction to impose these policies. The FCC
relied on Section 1 as well as Section 230 of the Communications Act, which prohibits blocking of
transmissions. The agency was somewhat vague as to the nexus, however, between its administrative
power and Titles II, III, or VI. The court ultimately concluded, however, that the Commission had
“failed to tie its assertion of ancillary authority over Comcast’s Internet service to any ‘statutorily
mandated responsibility’”39—i.e., Title II, III, or VI. Three years later in 2013, the D.C. Circuit used
similar reasoning to hold that the FCC could not adopt rules to prohibit satellite broadcasters from
using encoding to exclude third parties.40
The D.C. Circuit’s decision in Comcast came just as the new (now former) Chairman of the
Commission, Julius Genachowski, was beginning negotiations with ISPs as to network neutrality
rules. The dealings eventually broke down, and the Commission adopted rules similar to what had
been on the table.41 The case appeared destined for a lengthy appellate process.42
And while the litigation proceeded, Congress moved towards a legislative ban on further
Commission action concerning network neutrality.
35
545 U.S. 967 (2005).
36
Id. at 1018.
37
Id . at 980-986.
38
600 F.3d 642 (D.C. Cir. 2010).
39
600 F.3d at 661.
40
Echostar, supra note 20, at 998-999.
41
In the Matter of Preserving the Open Internet, Broadband Industry Practices, Notice of Proposed Rulemaking, GN Docket No.
09-191, 07-52 (released October 22, 2009).
42
Brendan Sasso, FCC Urges Court to Uphold Net Neutrality Rules, THE HILL, Oct. 9, 2012, available at http://thehill.com/
blogs/ hillicon-valley/technology/248619-fcc-urges-court-to-uphold-net-neutrality.
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V. CONCLUSION
The courts and the Congress have been stalled in defining any type of plenary FCC jurisdiction
over the Internet and broadband.43 This naturally left the Commission with little ability to implement
a potentially wide variety of public policies—just as it initially was with cable.
Although the discussion of cable jurisdiction in Section II is largely historical now, it shows
that a willing Supreme Court can give an agency at least a temporary form of power to deal with
perceived public interest issues. Whether particular cable policies made sense at the time or today,
the mere fact that a responsible agency felt them to be necessary suggests that similar reasoning may
apply to the Internet and broadband.
This is not to suggest that the courts should exercise unbridled discretion in empowering
administrative agencies. After all, in purely regulatory situations such as cable or cybermedia,
Congress eventually will step in to modify—or perhaps even abolish—any powers implied from
sources such as ancillary jurisdiction. While a broader policy debate is pending, however, use of an
obvious artifice such as ancillary jurisdiction may be a sound way of plugging a policy lacuna. It thus
may be worth considering in the context of the Internet and broadband, just as with cable.
43
Ironically, the Administration carved out a part of its general stimulus program in the Broadband Stimulus Act of 2009.
American Recovery and Reinvestment Act of 2009, Pub, L. 111-5, 123 Stat. 115 (Feb. 17, 2009). This part of the general
stimulus act provided substantial grants for broadband projects under the Broadband Technology Opportunities Program, even
though federal agencies had no statutory powers to regulate the funded activities. See 47 U.S.C. §§ 1304, 1305. The FCC’s only
role was in producing a National Broadband Plan on March 18, 2010. FEDERAL COMMUNICATIONS COMMISSION, CONNECTING
AMERICA: THE NATIONAL BROADBAND PLAN (2010), available at http://download.broadband.gov/plan/national-broadbandplan.pdf.
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