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For San Jose, Calif.-based eBay Inc., it seems like a no-win proposition. The Internet auction can avoid monitoring for pirated music, movies and software on its site and face the legal wrath of copyright holders. Or it can police for infringement and wade into a morass of liability by effectively waiving qualified immunity from copyright suits granted by federal law. For most of its history, eBay has chosen to forgo monitoring, only removing items when notified by copyright holders or site users. But in a shift of legal strategy, the company in January began to search its site for copyrighted material. That change, the company’s lawyers say, was driven by a pair of California trial court decisions that seem to give eBay some protection when it comes to self-monitoring. But the move — which comes as music-swapping site Napster Inc. struggles in court with many of the same issues — could still prove problematic for the company. Federal rules governing Internet copyrights are murky, and the Napster case could confuse matters further. EBay’s struggle to define its legal strategy underscores a dilemma facing Internet service providers caught between murky federal laws and volatile Internet case law. “We were worried it will be used against us. We are dealing with a very unsettled area of law,” said Jay Monahan, eBay’s associate general counsel for intellectual property. “We are trying to do the right thing in our business, but we don’t want to expose ourselves to liability.” MUDDY LAWS EBay’s change of policy was bolstered by wins in superior court in San Francisco and San Diego that relied on a novel interpretation of the federal Communications Decency Act. Under the act, the provider of an interactive computer service cannot be held liable as the publisher of information provided by another content provider in state claims. That provision played a key role in the company’s victory in Randall Stoner v. eBay, 305666, in San Francisco Superior Court. Attorney Randall Stoner sued eBay in September 1999 claiming bootleg recordings sold on the online auction constituted an unfair business practice. In November, San Francisco Superior Court Judge Stuart Pollak granted summary judgment based on the Communications Decency Act defense. EBay notched a similar win in Gentry v. eBay, 746980 — a class action filed in San Diego County in April 2000. EBay shoppers sued, claiming the company was responsible for forged signatures on sports memorabilia sold online. The judge dismissed the case under the Communications Decency Act defense. Monahan concedes that wins in state trial courts hardly guarantee a similar interpretation by federal judges, but says now is the time to roll the dice on the policy even if it opens eBay up for a legal challenge. “Technically the [California State cases] did not give us immunity to copyright claims. It gave us somewhat more comfort to go forward with voluntary monitoring. It’s the right time,” Monahan said. The potential problem for eBay lies in another federal law — the Digital Millennium Copyright Act. Passed in 1998, the act limits copyright infringement liability for Internet service providers for simply transmitting information over the Internet. But it includes a long list of qualifications for immunity, including a clause that removes liability from service providers if the provider “does not have actual knowledge that the material or an activity using the material on the system or network is infringing.” EBay has lobbied Congress to close the loophole, but said legislators have been leery of creating such ironclad immunity, Monahan said. He expects a future lawsuit could still challenge eBay’s immunity under this law. “We believe the things we do qualify eBay for immunity, but the law says if the company has the right and ability to control content, it loses protection. That was a concern and remains a concern. It always held us back,” Monahan said. “As for the issue of a lawsuit challenging immunity under the DMCA, we anticipate this will be raised somewhere someday.” Add to the mix the current case involving Napster and the recording industry, and companies are facing a minefield if they want to be conscientious about self-policing, said Curtis Karnow, an intellectual property partner at the San Francisco office of Chicago’s Sonnenschein Nath & Rosenthal. “It’s correct to say that monitoring which generates knowledge of infringement could get the site in trouble under the Digital Millennium Copyright Act. You blow out that immunity,” Karnow said. The Napster case, he said, seems to ignore the DCMA “to impose vicarious liability.” “What Napster does is say even if you don’t know about it, you can be vicariously liable. … The practical effect of ignoring the DMCA is making people far more nervous that they can use that act.” So far, however, eBay’s move has met with praise from groups that might be inclined to take on the company for infringement, including the Business Software Alliance. The Washington, D.C., nonprofit’s members — including Microsoft Corp. and Adobe Systems Inc. — have taken a keen interest in infringement on auction sites. “Our members have identified this area as a high priority for this organization. They are devoting a lot of resources and attention to monitoring what is happening on auction sites,” said Robert Kruger, BSA vice president for enforcement. Kruger, formerly with the U.S. attorney’s office, said efforts to promote self-policing are not adversarial, but rather work to protect software makers and online auction consumers to prevent copyright infringement. Monahan said eBay is also attempting to take a positive approach, and self-policing shows the company’s desire to work with copyright holders. A former vice president of worldwide antipiracy for the Walt Disney Co., Monahan said he and Robert Chesnut, a former federal prosecutor, were brought on board at eBay a few years ago to help provide a different perspective on the copyright debate. “I came from the copyright community,” Monahan said. “The company recognized it was important and it’s time to get the right people to address this.”
Copyright Law in the New Millennium. March 20-April 2.

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