Tech Law Journal Daily E-Mail Alert
August 26, 2002, 9:00 AM ET, Alert No. 498.
TLJ Home Page | Calendar | Subscribe | Back Issues
Publication Schedule
The Tech Law Journal Daily E-Mail Alert will not be published on Wednesday, August 28, Thursday, August 29, Friday, August 30, or Monday, September 2.
Court Holds There is Presumptive Entitlement to Attorneys' Fees in Small Copyright Infringement Cases
8/23. The U.S. Court of Appeals (7thCir) issued its opinion [4 pages in PDF] in Gonzales v. Transfer Technologies, a case regarding the award of statutory damages and attorneys' fees for copyright infringement. The Court held that "the prevailing party in a copyright case in which the monetary stakes are small should have a presumptive entitlement to an award of attorneys' fees".
Background. Gonzales owns copyrights on designs. Transfer Technologies sold temporary tattoos that copied four of Gonzales' designs, without license or permission.
District Court. Gonzales filed a complaint in U.S. District Court (NDIll) against Transfer Technologies alleging copyright infringement. He sought statutory damages and attorneys' fees. The District Court awarded Gonzales the minimum statutory damages of $750 per incident (pursuant to 17 U.S.C. § 504), and no attorneys' fees (pursuant to 17 U.S.C. § 505). The District Court explained that "Transfer's actions, though willful, are not the kind of flagrant behavior that would justify an award of attorneys' fees", but otherwise did not explain its ruling. Gonzales appealed the denial of attorneys fess.
Statute. Section 505 provides that "In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney's fee to the prevailing party as part of the costs."
Appeals Court. The Court of Appeals vacated and remanded. First, Judge Richard Posner, who wrote the opinion of the three judge panel, stated that the reversal was warranted because of the lack of an adequate explanation by the District Court. He wrote that "we do have to insist that the judge explain the grounds for his decision in sufficient depth to enable their reasonableness to be determined; otherwise there would be no appellate control at all over such decisions. And so we have not hesitated in the past to remand section 505 determinations when the district judge had not supplied us with sufficient indication of his reasoning process to enable us to decide whether the determination was reasonable. ... This is such a case." (Citations omitted.)
Second, and more importantly, the Appeals Court held that "we go so far as to suggest, by way of refinement of the Fogerty standard, that the prevailing party in a copyright case in which the monetary stakes are small should have a presumptive entitlement to an award of attorneys' fees." See, opinion of the Supreme Court in Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994).
The Appeals Court offered the following rationale. "The infringement was willful; and willful infringements involving small amounts of money cannot be adequately deterred (and remember ``the need in particular circumstances to advance consideration of . . . deterrence´´) without an award of attorneys' fees. No one can prosecute a copyright suit for $3,000. The effect of the district court's decision if universalized would be to allow minor infringements, though willful, to be committed with impunity, to be in effect privileged, immune from legal address. The smaller the damages, provided there is a real, and especially a willful, infringement, the stronger the case for an award of attorneys' fees."
The only issue before the Appeals Court was the award of attorneys' fees. However, the same rationale might be applied to support the award of statutory damages greater than the statutory minimum. The Court did not address this.
More News
8/22. Federal Communications Commission (FCC) Chairman Michael Powell stated in a release [PDF] that "I am deeply disturbed about the reports of an incident involving WNEW-FM and a radio contest involving sex in public places, and I have directed the FCC's Enforcement Bureau to proceed immediately with a thorough investigation of the matter." See also, FCC written interrogatories [PDF] to Infinity Broadcasting, licensee of station WNEW-FM.
9th Circuit Rules on Application of Wiretap Act and Stored Communications Act to Secure Web Sites
8/23. The U.S. Court of Appeals (9thCir) issued its opinion [39 pages in PDF] in Konop v. Hawaiian Airlines, a case involving application of the Wiretap Act and the Stored Communications Act (SCA) to password protected discussion web sites. This is the Appeals Courts' second opinion in this case.
The Appeals Court held in this second opinion that the unauthorized accessing of messages posted to a password protected web site does not violate the Wiretap Act because the Wiretap Act only covers messages intercepted during transmission, not those intercepted in storage. And hence, the Appeals Court affirmed the District Court's summary judgment on this issue in favor of a defendant who accessed the web site under false pretences. The Appeals Court reversed the District Court's summary judgment for the defendant on the Stored Communications Act (SCA) issue, but only on narrow grounds peculiar to this case.
Background. Robert Konop, a pilot for Hawaiian Airlines (HA), operated a bulletin board web site for discussion of HA union representation issues. Konop, who opposed labor concessions sought by HA, made statements in the web site that were critical of both his employer and the pilots' union. The web site was password protected, and required registration and consent not to disclose the contents of the web site. An HA VP named Davis repeatedly accessed the web site under false pretenses: logging in as pilots who had authority to access the web site. The two other pilots, named Wong and Gardner, had authority to use the website, and gave Davis permission and information to access the web site.
Previous Proceedings. Konop filed a complaint in U.S. District Court (DHawaii) against HA alleging that HA (1) intercepted an electronic communication in violation of the Wiretap Act, as amended by the Electronic Communications Privacy Act (ECPA), (2) accessed an electronic communications facility in violation of the SCA, (3) violated the Railway Labor Act in several respects, and (4) committed various torts under Hawaii state law.
The trial court dismissed all of Konop's claims on summary judgment, except for retaliatory suspension under the Railway Labor Act. Konop appealed all issues except the state tort claims. The District Court did not find, or base its judgment upon a finding, that the other HA pilots, Wong and Gardner, ever used the web site.
The Appeals Court, in its first opinion [PDF], issued on January 8, 2001, reversed the District Court's judgment on both the Wiretap Act and SCA claims on the grounds that there were triable issues of fact. The Appeals Court held that "The contents of secure websites are ``electronic communications´´ in intermediate storage that are protected from unauthorized interception under the Wiretap Act." It further held that "the Wiretap Act protects electronic communications from interception when stored to the same extent as when in transit." See, 236 F.3d 1035. However, the Appeals Court vacated this opinion. See, 262 F.3d 972.
Appeals Court. In this second opinion, the Appeals Court affirmed the judgment of the District Court with respect to the Wiretap Act claim and the retaliation claim under the Railway Labor Act. It reversed with respect to the claims under the SCA and the remaining claims under the Railway Labor Act.
The same three judge panel -- Judges Robert Boochever, Richard Paez and Stephen Reinhardt -- participated in both opinions. Reinhardt wrote a partial dissent to this second opinion.
The Statutes. The prohibition of the Wiretap Act is codified at 18 U.S.C. 2511. It applies to anyone who "intentionally intercepts, endeavors to intercept, or procures any other person to intercept or endeavor to intercept, any wire, oral, or electronic communication". The relevant definitions are codified at 18 U.S.C. § 2510.
The key terms for this case are "intercept" and "electronic communication". § 2510(c)(4) provides that intercept "means the aural or other acquisition of the contents of any wire, electronic, or oral communication through the use of any electronic, mechanical, or other device." § 2510(c)(12) provides, in part, that electronic communication "means any transfer of signs, signals, writing, images, sounds, data, or intelligence of any nature transmitted in whole or in part by a wire, radio, electromagnetic, photoelectronic or photooptical system ..."
The Stored Communications Act prohibition is codified at 28 U.S.C. § 2701.
The Appeals Court first commented on the legislative history of the ECPA, which was passed by the Congress in 1986. The Court wrote that "Title I of the ECPA amended the federal Wiretap Act, which previously addressed only wire and oral communications, to ``address[ ] the interception of ... electronic communications.´´ ... Title II of the ECPA created the Stored Communications Act (SCA), which was designed to ``address[ ] access to stored wire and electronic communications and transactional records.´´ ... As we have previously observed, the intersection of these two statutes ``is a complex, often convoluted, area of the law.´´ ... In the present case, the difficulty is compounded by the fact that the ECPA was written prior to the advent of the Internet and the World Wide Web. As a result, the existing statutory framework is ill-suited to address modern forms of communication like Konop's secure website." (Citations omitted.)
The Court also noted that "The legislative history of the ECPA suggests that Congress wanted to protect electronic communications that are configured to be private, such as email and private electronic bulletin boards." It added that "The nature of the Internet, however, is such that if a user enters the appropriate information (password, social security number, etc.), it is nearly impossible to verify the true identity of that user. ... We are confronted with such a situation here."
Wiretap Act. The Appeals Court affirmed summary judgment for HA on this issue. The Court first concluded that Konop's website fits the definition of "electronic communication." However, the Court held that HA did not "intercept" an electronic communication.
After a lengthy analysis of precedent, the Court concluded that "for a website such as Konop's to be ``intercepted´´ in violation of the Wiretap Act, it must be acquired during transmission, not while it is in electronic storage." And since the Appeals Court found no "interception", it affirmed the District Court's summary judgment against Konop on his Wiretap Act claims.
Stored Communications Act. The Appeals Court wrote that "The SCA makes it an offense to ``intentionally access[ ] without authorization a facility through which an electronic communication service is provided ... and thereby obtain[ ] ... access to a wire or electronic communication while it is in electronic storage in such system.´´ 18 U.S.C. § 2701(a)(1). The SCA excepts from liability, however, ``conduct authorized ... by a user of that service with respect to a communication of or intended for that user.´´ 18 U.S.C. § 2701(c)(2). The district court found that the exception in § 2701(c)(2) applied because Wong and Gardner consented to Davis' use of Konop's website. It therefore granted summary judgment to Hawaiian on the SCA claim."
However, the Appeals Court, focusing on the term "user", reversed the District Court. The Appeals Court reasoned that because (1) Section 2701 provides that only a "user" can authorize access by a third party, (2) Section 2701 defines "user" as someone who "uses the service", and (3) the District Court did not make a finding that Wong and Gardner had used the service, that therefore there is not sufficient evidence in the record to sustain the application of authorization exception, and the summary judgment for HA must be vacated.
Of course, on remand, it is hypothetically possible that the District Court would make the requisite finding of use by the authorizer, and enter summary judgment for HA once again. Moreover, the Appeals Court's holding is not likely to have wide reach, because most persons who have a password to a protected web site, and know their password, have also used that web site.
Railway Labor Act. The Court also addressed the Railway Labor Act claims at length. However, those are not addressed in this article.
Dissent. Judge Reinhardt dissented from the majority's opinion with respect to the Wiretap Act. He wrote that "I dissent, however, from Part B of Section I, which holds that the term ``intercept´´ in the Wiretap Act, as applied to electronic communications, refers solely to contemporaneous acquisition. I conclude instead that ``stored electronic communications´´ are subject to the statute's intercept prohibition as well."
Advice for Congress. The Court also wrote that "We observe that until Congress brings the laws in line with modern technology, protection of the Internet and websites such as Konop's will remain a confusing and uncertain area of the law." However, it is very difficult to move wiretap or ECPA related bills through the Congress because the issues involved are so contentious. Moreover, many members of the Congress are currently not disposed to following the advice of the Ninth Circuit, as a result of its recent opinion regarding the constitutionality of the Pledge of Allegiance.
Monday, August 26
8:00 - 11:00 AM. Equity International will host a conference titled "Homeland Security Financing Briefing". Speakers will address supplemental homeland security spending for 2002, priorities for 2003 homeland security spending, critical infrastructure protection, counter terrorism programs of the FBI, and how to win homeland security contracts. Ron Dick, Director of the FBI's National Infrastructure Protection Center, will speak from 9:15 to 9:30 AM. Other speakers include Dale Watson (Executive Assistant Director for Counterterrorism at the FBI), William Hoagland (Staff Director of the Senate Budget Committee), Scott Lilly (Minority Staff Director of the House Appropriations Committee), Paul Bergeron (Office of the Deputy Assistant to the Secretary of Defense for Chemical & Biological Defense), and Donald Vincent (VP for Homeland Security at Booz Allen). Location: Holeman Lounge, National Press Club, 529 14th St., NW.
1:00 PM. FTC Chairman Timothy Muris, Postmaster General John Potter, and other government officials will hold a press conference regarding telemarketing fraud. See, release. Location: USPS Headquarters, 475 L'Enfant Plaza SW, Ben Franklin Room (11th Floor).
Tuesday, August 27
10:00 AM - 12:00 NOON. The State Department's International Telecommunication Advisory Committee (ITAC) will meet. See, notice in Federal Register, July 23, 2002, Vol. 67, No. 141, at Page 48241. Location: Room 1105, State Department.
8:00 AM - 3:30 PM. The National Academy of Sciences (NAS) will host partially open, and partially closed, seminar titled "Review of the Patent Office's 21st Century Strategic Plan". See, agenda. Location: NAS, Lecture Room, 500 Fifth Street, NW.
Deadline to submit comments to the National Telecommunications and Information Administration (NTIA) in response to its request for comments on the effectiveness of Internet blocking and filtering technologies. § 1703 of the Children's Internet Protection Act (CIPA) [PDF] directs NTIA to initiate a notice and comment proceeding to evaluate whether currently available Internet blocking or filtering technology protection measures and Internet safety policies adequately address the needs of educational institutions. It also directs NTIA to make recommendations to Congress on how to foster the development of technology protection measures that meet these needs. See, notice in the Federal Register.
Wednesday, August 28
Day one of a two day public hearing before the Federal Election Commission (FEC) on its second Notice of Proposed Rulemaking (NPRM) [67 pages in MS Word] regarding the Bipartisan Campaign Reform Act of 2002 (BCRA), the recently enacted campaign finance reform legislation. This NPRM pertains to "electioneering communications". The proposed rules would exempt webcasts. See also, FEC release.
Thursday, August 29
8:30 AM - 12:35 PM. The President's Homeland Security Advisory Council (PHSAC) will hold a meeting to receive briefings and to discuss best practices in the areas of mergers and acquisitions, information technology, personnel management and related issues that may concern the creation of the proposed Department of Homeland Security. Public access is limited. See, notice in Federal Register. Location: Indian Treaty Room, Eisenhower Executive Office Building, 725 Seventeenth St., NW.
Day two of a two day public hearing before the Federal Election Commission (FEC) on its second Notice of Proposed Rulemaking (NPRM) [67 pages in MS Word] regarding the Bipartisan Campaign Reform Act of 2002 (BCRA), the recently enacted campaign finance reform legislation. This NPRM pertains to "electioneering communications". The proposed rules would exempt webcasts. See also, FEC release.
Deadline to submit comments to the FEC regarding its NPRM regarding "electioneering communications".
Friday, August 30
Deadline to submit reply comments to the FCC's regarding its Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming. See, notice in Federal Register.
About Tech Law Journal
Tech Law Journal publishes a free access web site and subscription e-mail alert. The basic rate for a subscription to the TLJ Daily E-Mail Alert is $250 per year. However, there are discounts for entities with multiple subscribers. Free one month trial subscriptions are available. Also, free subscriptions are available for law students, journalists, elected officials, and employees of the Congress, courts, and executive branch, and state officials. The TLJ web site is free access. However, copies of the TLJ Daily E-Mail Alert and news items are not published in the web site until one month after writing. See, subscription information page.

Contact: 202-364-8882; E-mail.
P.O. Box 4851, Washington DC, 20008.
Privacy Policy
Notices & Disclaimers
Copyright 1998 - 2002 David Carney, dba Tech Law Journal. All rights reserved.