Government regulation

INTRODUCTION

The Internet is a new world which is based on the foundations of man's imagination. It rests on protocols with names like http and TCP/IP. It uses foreign languages like html, Java and ActiveX. We "surf" the Internet and "visit sites", using browsers with names like Navigator and Explorer. It is not by chance that the Internet is called Cyberspace; it really is somewhere else, another world.

Nevertheless, people are people, both in this world and in Cyberspace. Consequently  the same types of legal problem as arise in this world also arise in Cyberspace. However, since a new environment is involved, the statutes and legal precedents, which are appropriate to this world, do not provide a proper answer beyond it.

In many countries awareness of the legal issues which are specific to the Internet environment is growing. As regards liability for illegal content on the Internet, this awareness is expressed in several leading judgments in the USA and in European case law and legislation. In Israel, the matter has not yet been considered by the courts and it is difficult to infer from existing legislation how they should adjudicate when called upon to do so.

I shall below illustrate the issue of liability for illegal content on the Internet by describing an actual case that occurred in the USA. I shall then discuss the legal developments in the USA and Europe and inally I shall present the legal position in Israel.

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THE USA

The law on service providers' liability for the acts of others in the USA distinguishes between copyright infringement and defamation. It is based on only a few judgments, none of which is from the US Supreme Court. Moreover, the matter has not yet been legislated. As a result, the situation is still in the development stages and what I say here today, can change tomorrow. As regards copyright infringement, prominent is a September 1995 decision of a Federal Court in California in Religious Technology Center v. Netcom et al. RTC sued three entities for copyright infringement. The first was a person by the name of Ehrlich, who distributed, without permission, over the Internet, works by the founder of the Church of Scientology, L. Ron Hubbard, the copyright in which works belonged to the plaintiff. The second defendant was Ehrlich's Internet service provider, through which the content was transferred to another provider.

The third defendant was the other provider, Netcom, which hosted the infringing content and the content was distributed worldwide over the Internet through it. RTC asserted that each of the defendants was directly liable for the infringement of its copyright in the works. As regards Ehrlich, the plea is clear. But what about the service providers? According to RTC, Ehrlich had made an infringing copy of each of the works and delivered them to his service provider. His service provider made digital copies of the works on its own computer and sent them to Netcom's computer. The infringing copies were kept on Netcom's computer and distributed to the whole world, further infringing copies being made. By making and distributing infringing copies of the works without the copyright owner's permission, all the defendants had, according to RTC, infringed its copyright in the works.

Netcom sought to dismiss the claim for want of cause, pleading that it should not be held directly liable for the infringement of the plaintiff's copyright. It contended that it was not possible on the Internet to know what content was being transferred, who was transferring it, whether copyright was being infringed etc. It asserted that if the plaintiff's position were accepted, it would lead to the closure of the Internet. The Court dismissed the plaintiff's position and held:

"The court is not persuaded by plaintiffs' argument that Netcom is directly liable for the copies that are made and stored on its computer. Where the infringing subscriber is clearly directly liable for the same act, it does not make sense to adopt a rule that could lead to the liability of countless parties whose role in the infringement is nothing more than setting up and operating a system that is necessary for the functioning of the Internet. ... The court does not find workable a theory of infringement that would hold the entire Internet liable for activities that cannot reasonably be deterred."

Nevertheless, the Court was not prepared to dismiss the possibility that Netcom should bear contributory liability for the infringement of the plaintiff's copyright in accordance with the principles laid down in US case law. Relying on case law, the Court stated that the defendant could be held contributorily liable for a third party's copyright infringement, if the defendant, knowing of the third party's infringing act, induces, causes or materially contributes to the third party's infringing conduct. Such liability is termed "liability on notice". As the Court said:

"Liability for participation in the infringement will be established where the defendant, 'with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another'."

The Court decided that it was inappropriate to dismiss the claim, since the existence of a factual infrastructure had been established which might in the course of trial lead to Netcom being held liable for contributory infringement of copyright. The case did not actually come to trial and a settlement was reached, whose terms have not been published.

As regards defamation, in 1991 the Federal Court, in Cubby, Inc. v. Compuserve, distinguished between the liability of a publisher and that of a distributor with regard to a third party's defamatory act. With respect to a publisher, the law prescribes that it is liable for whatever is published by it, whether or not it knew of the content.

So far as the distributor is concerned, it is not liable for what it distributes, unless it knew or should have known that it was distributing illegal content and did not take action to stop further distribution. Against this distinction, the Court asked whether a service provider should be treated as a publisher or distributor. In the specific circumstances, it was established to the Court's satisfaction that the provider, Compuserve, did not control or edit the content published through its service. The Court therefore held that the provider merely acted as a distributor and should not bear liability for defamation by another, unless it knew or should have known that it was distributing defamatory content and did not take steps to stop it.

In another judgment, Stratton Oakmont, Inc. v. Prodigy Services Co., the New York Supreme Court held in 1995 that the defendant, an on-line service provider, controlled and supervised content that was presented through its service and therefore acted as a publisher, which bears strict liability for what it publishes.

In November 1997, the Federal Appeals Court ruled on Zeran's case. In that case it was clear that AOL knew of the defamation published through its service and it was also clear that it did not stop its continued publication when it was made aware of it. According to existing law, AOL should have borne liability to Zeran and been required to compensate him for his damage.

However, the Court dismissed the claim, relying on a 1996 legislative amendment. The amendment, which is now section 230(c)(1) of The Communications Decency Act, provides:

"No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider."

The stated intention of the said section was to enable service providers to control the content transmitted through them and to prevent the distribution of content which, in their opinion, ought not to be distributed through their infrastructures, whether the content is lawful or illegal. Section 230 is designed to neutralise the results of the Compuserve and Prodigy judgments, so that a service provider which exercises control will not be deemed a publisher and bear strict liability for the publication of illegal content deriving from a third party. According to simple logic, section 230 was not such as to change the legal principle that, if the service provider is made aware of the publication of illegal content by a third party through its service, the provider should act to stop it, failing which it should be liable to the injured party.

Zeran relied on such an argument but the Court did not accept it. It dismissed the claim and held that service providers could not be expected to remove content from their services whenever someone complained that the content had an illegal element and was, for example, defamatory. As regards the principle of "liability on notice", the Court held that section 230 had altered the legal position in the USA and therefore the liability of a service provider for the publication of a third party's defamation should no longer be recognised, even if it actually knew of the illegal publication.

The Court accepted AOL's position that it did not have the ability to judge people's complaints of defamation. If it was to bear liability for the publication of defamation every time it did not act as requested by a complainant, the result would be that it would have to accede to every request from the public to remove content which was allegedly illegal, failing which it would be exposed to civil actions, defending which would lead to the closure of the business and even to the closure of the Internet. This result would be a grave infringement of the freedom of speech. Adopting this argument, the Court held:

"Strict liability upon notice has a chilling effect on the freedom of Internet speech..... Because the probable effects of distributor liability on the vigor of Internet speech and on service provider self regulation are directly contrary to §230's statutory purposes, we will not assume that Congress intended to leave liability upon notice intact."

In conclusion, the law laid down in Netcom, according to which a service provider will be liable for a third party's copyright infringement, if it knew thereof and did not act to stop it, is still valid. On the other hand, the judgment in Zeran has set a different standard in respect of defamation, whereby a service provider will be relieved of any liability for the publication of a third party's defamation by means of its service. The question is whether the existence of this double standard is justified. Moreover, according to the result in Zeran, what can someone do if he is damaged by the publication of defamation on the Internet?  

Section 5 of the German Act on the Utilisation of Teleservices, which was enacted in August 1997, regulates the liability of service providers for the publication of a third party's illegal content. Unlike the law in the USA, the German Act does not distinguish between different types of illegal content. It does distinguish between different types of providers: providers who serve as the host for a third party's content; and providers who merely serve as a pipeline for the transmission of such content from place to place. As regards the first type, section 5(2) of the Act prescribes that a provider will not bear liability for a third party's illegal content which is distributed through it, unless the following three conditions are fulfilled:

"Providers shall not be responsible for any third-party content which they make available for uunless they have knowledge of such content and are technically able and can reasonably be expected to block the use of such content."

As regards a provider which merely serves as a pipeline for the transmission of content, the Act provides that it will not be liable for a third party's illegal content, in the following terms:

"Providers shall not be responsible for any third-party content to which they only provide access. The automatic and temporary storage of third-party content due to user request shall be considered as providing access."

Nevertheless, according to section 5(3) of the German Act, if the "pipeline provider" becomes aware that illegal content is being transmitted through it, it must stop publication of the content in accordance with the general laws governing it, if it has the technical means to stop the content's distribution and can be reasonably expected to stop it.

"The obligations in accordance with general laws to block the use of illegal content shall remain unaffected if the provider obtains knowledge of such content while complying with the telecommunications secrecy under §85 of the Telecommunications Act and if blocking is technically feasible and can be reasonably be expected."

Consequently, the German act adopts the "liability on notice" approach, subject nevertheless to the provisos that the provider must have the technical ability to stop distribution of the illegal content and that it can be reasonably expected to do so. The German legislature is in this way trying to achieve a balance between the interests of persons who can potentially be damaged and those of service providers.

In Scientology v. Providers and Karin Spaink, the President of the District Court of The Hague in March 1996 held in a claim, which was essentially the same as that in Netcom, that service providers should not be held liable for illegal content transmitted through them unless they knew of the infringing activity and did not take steps to stop it. The Court stated:

"A responsibility might be assumed in a situation where it is unequivocally clear that a publication of a user is wrongful and where it can be assumed with reason that such is known to the access provider, for instance because someone has notified the provider of this. In such cases, Internet access providers might be requested to take steps against the user in question."

THE EUROPEAN COMMUNITY

A paper submitted to the European Parliament in April 1997, entitled Illegal and Harmful Content on the Internet, adopted the approach whereby a service provider, which hosts third party content, should act to remove illegal third party content if it is made aware, at least prima facie, that such content is being hosted by it. It makes no distinction between different types of illegal content, either on the civil or criminal level. In the words of the document:

"Once a host service provider becomes aware of the prima facie illegality of content hosted on his server, in principle the legislation in the Member States foresee that he must clearly take steps to remove the content in question."

As regards other suppliers, which merely act as pipelines, the paper indicates the technological inability to stop the transmission of specific illegal content deriving from a particular computer without also impairing the transmission of lawful content on the same computer.
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