IMPACT OF NETCOM RULING IS UNCERTAIN

San Jose Mercury News
Wednesday, November 29, 1995
Section: Business
Page: 1C

By ELIZABETH WASSERMAN, Mercury News Staff Writer

Free speech proponents on the Internet had warned of a ''big chill''
in the burgeoning on-line service industry if a federal judge found
that Netcom On-line Communications Inc. could be liable for the
copyright infringements committed by a subscriber.

But a recent ruling on the issue in San Jose has gotten a more
lukewarm response.

The reason is that while U.S. District Court Judge Ronald Whyte found
that Netcom may be liable for ''contributory'' copyright infringement,
he also set conditions: Any liability hinges on the company's
knowledge that copyrighted material was being illegally posted, and
failure to remove it.

''The ruling was not as drastic as it could have been for this
evolving on-line Internet medium,'' said Bill Burrington, a lawyer and
director of public policy for America Online in Vienna, Va. ''The
industry collectively needs to take a close look at it and decide what
to do.''

Netcom - one of the largest Internet access providers in the nation -
won on two important points. The judge found Netcom was not liable for
the more serious direct copyright infringement. Whyte also said that
the plaintiff - the publishing and copyright arms of the Church of
Scientology - is unlikely to ultimately win the case when it goes to
trial next year.

The company issued a press release late Tuesday that said it remains
confident that it will win.

''I thought the opinion was great,'' said Shari Steele, attorney for
the Electronic Frontier Foundation, a non-profit group dedicated to
promoting free speech in cyber space. While the question of liability
is still open, she said, the court also made it clear that ''if it's a
case where the system operator doesn't know and hasn't been given
adequate notice of a copyright infringement, they're not going to be
held responsible.''

The ruling took some Internet watchers by surprise because access
providers see themselves as ''conduits,'' akin to a telephone company,
rather than as traditional publishers. They have argued they should
have no liability for the actions of subscribers, any more so than a
telephone company is liable for the content of telephone calls.

''The difficulty in this area is that judges need to find a legal
model for describing an on-line service,'' said Alex Alben, director
of business affairs and general counsel of Starwave Corp., of
Belleview, Wash., which runs ESPNET Sportszone. ''A decision like this
indicates that judges tend to start out viewing an online service as a
traditional publication, which has editors who are responsible for
reviewing the content it contains. . . . The resources required for an
on-line service to monitor every message posted or transmitted would
severely retard these services.''

Representatives of on-line services big and small said that the San
Jose ruling was unlikely to prompt additional policing of postings
immediately. However, they did say the complaints about any cases of
possible copyright infringement would be readily investigated.

''I'm unclear what kind of impact it's going to have,'' said Margaret
Jane Radin, a Stanford University law professor who is an expert on
intellectual property. ''Everyone says, 'Oh my God. Now they're going
to edit everything.' But the alternative is for these providers to buy
insurance like a newspaper does.''

Eugene Volokh, a law professor at the University of California, Los
Angeles, said that the decision leaves many questions unanswered,
particularly about what constitutes ''knowledge'' about a copyright
infringement - whether it can be a mere allegation or documentation -
and what a provider should do.

The case was filed by the Scientologists earlier this year after a
bulletin board subscriber, for whom Netcom merely provided a pathway
to the Internet, posted writings by the religion's founder, L. Ron
Hubbard, involving material that his followers consider sacred.
Lawyers for the Scientologists contacted Netcom and asked that the
activities of the subscriber be stopped.

The company, according to court papers, admitted that ''it did not
even look at the postings once given notice and that had it looked at
the copyright notice and statements regarding authorship, it would
have triggered an investigation into whether there was infringement.''