I. A RENEWED REQUEST
The Church of Scientology is pursuing a vocal critic named Dennis Erlich over the Internet and into court, along with an Internet provider (Netcom On-Line Communication Services, Inc.) and the operator of an electronic bulletin board service (Tom Klemesrud) that links to the Internet through a connection provided by Netcom. The case is brought by Religious Technology Center and Bridge Publications Inc. (collectively, "Scientology"), owners of rights to published and unpublished works of L. Ron Hubbard, founder of the Scientology religion. At the heart of the complaint is the allegation that Erlich used Netcom's and Klemesrud's computer facilities to publish unauthorized copies of Hubbard's works in an Internet newsgroup named "alt.religion.scientology." Scientology claims Erlich has stolen trade secrets and that his postings constitute copyright infringement. It also alleges his access providers are guilty of the same offenses. At first, a federal court issued a restraining order against all defendants. The order was later dissolved against the access providers, but the Church has now renewed its efforts to obtain an injunction against them. At this point, one key issue is whether Netcom can again avoid liability for alleged copyright infringement arguing it is merely a passive conduit of Internet postings, particularly in the face of Scientology's allegation that Netcom has suspended and terminated customers' accounts for abuse of its Terms and Conditions and Netiquette, as well as for copyright infringement? Another issue is whether Netcom has a better defense based on fundamental rights of freedom of speech and expression, as exercised by Erlich in posting to an Internet newsgroup dedicated to discussion of the Scientology religion? Scientology's renewed request now awaits decision by a federal court in California.
II. ADDITIONAL FACTS & EVIDENCE
Scientology claims the exclusive right to reproduce and publish published and unpublished literary works of L. Ron Hubbard. It also claims that, in 1993, a federal court decided that certain of these works are trade secrets under California law, as Scientology proved there was economic advantage in keeping the materials secret, among other required factors.

Scientology alleges over 200 instances of copyright infringement by Erlich. 90 of those were allegedly through Klemesrud's and Netcom's systems, with materials stored in those systems for up to three days and several weeks respectively. Scientology claims that on February 26, 1995, Erlich violated the temporary restraining order (TRO) issued against him by making an eight-page posting through the defendants' systems

In its renewed application for a preliminary injunction, Scientology argues that additional facts and evidence now demonstrate that Scientology is entitled to such relief against Netcom and Klemesrud. Indeed, says Scientology, "their principal defense -- purported inability to deal with the subject infringements -- is simply not true."
III. REFUSAL TO ACT
Defendants' systems are not mere conduits for Erlich's postings, claims Scientology -- "defendants' equipment is itself generating and storing the unauthorized, infringing copies to service their paying customers...." Both Netcom and Klemesrud were able, continues Scientology, to warn of violations of usage conditions and to cancel service. But, says Scientology,

"They refused to take any action, being unwilling even to issue warnings not to engage in the infringing postings. By their refusal, coupled with their actual copying of Erlich's infringements onto their own disks to make them available for paying subscriber access over extended periods, they have embroiled themselves in this matter, and should be preliminarily enjoined from continuing their activities."

Erlich's February 26, 1995, eight-page posting in violation of the TRO demonstrates he did not give up all copies of Scientology's works. The question of exerting control over Erlich's postings "was not mooted by the seizure and TRO, as Netcom contended in its opposition to the original injunction application."

In posting to Usenet newsgroups such as alt.religion.scientology, Erlich used Klemesrud's system to transfer Erlich's posting to Netcom's computer. Klemesrud's action is so doing, claims Scientology, "is analogous to that of the bulletin board operator enjoined in __Sega Enterprises Ltd. v. MAPHIA__, 857 F.Supp. 679, 683-684 (N.D. Cal. 1994), who stored unauthorized copies of Sega games on his BBS, which were uploaded and downloaded to his users."

In response to the argument of Klemesrud and Netcom that the requested relief would cripple their ability to function, Scientology remarks that the injunction sought "is narrowly tailored and deals with the situation at hand and any other __known__ situations of which defendants are warned." Klemesrud, notes Scientology, is able to delete individuals form his system, has excluded hate groups and other objectionable groups from his system, has asked posters of 'offensive, distasteful, and inappropriate" remarks "to take their accounts elsewhere," and would delete Erlich's postings if they are "wholesale copying" of religious texts in order to deprive the Church of Scientology of income.

According to Scientology, Klemesrud could limit Erlich's access so that he could not access newsgroups -- "[a]s a matter of Internet 'Netiquette,' it is entirely appropriate for Klemesrud, as the systems operator ('sysop') of a BBS, to take action against a copyright infringer on his system." According to Scientology,

"Where a user engages in unlawful postings, his immediate service provider is obligated by Netiquette to deal with his violations, first by warnings and ultimately by denial of access, if nothing else works. Furthermore, where the immediate provider will not deal with the problem, then the next provider up the line takes on the obligation of doing so. Thus, if Klemesrud refuses, Netcom should take the action itself."

Netcom could do so, alleges Scientology, by running a program to check the messages passing through its system, blocking those from Erlich "altogether, as properly warranted by his threats to ignore any court orders, and his subsequent February 26 posting in clear violation of the original and amended TRO." In addition, Scientology observes that the rules of Klemesrud's system, the Los Angeles Valley College BBS, allow removal of Erlich for "violating the BBS' rules and causing it to violate the rules of its access providers, thereby jeopardizing Los Angeles Valley College BBS, Netcom and the entire BBS community."
IV. BALANCING HARM & INJURY
Netcom responds by first explaining that Erlich made the February 26, 1995, posting before receiving a copy of the Court's amended TRO and becoming aware that the fair use exception did not extend to the confidential materials identified in plaintiff's complaint. Upon receipt of the amended TROs, Erlich immediately wrote to the Court and apologized if he had erred. Erlich, now represented by counsel, has not made an objectionable posting since that time. Scientology cannot, therefore, demonstrate a threat of irreparable harm to support its request for injunctive relief.

The purpose of an injunction is to preserve the status quo pending a determination of the action on the merits. Netcom argues that here, "rather than preserving the status quo, the injunctive relief [Scientology] request[s] would fundamentally alter the functioning of the Internet."

If an injunction should issue, Netcom says it would have to disconnect Klemesrud and his approximately 500 subscribers "or undertake, at great expense and with no guarantee of success, to attempt to modify its operating software to permanently block Erlich's access to the Internet. Thus, the harm the injunction would cause NETCOM greatly outweighs [Scientology's] threatened injury...."

Netcom also claims,

"[I]t is inappropriate for [Scientology] to premise a request for injunctive relief against NETCOM on the alleged past and predicted future noncompliance of Mr. Erlich with the Court's amended TRO. The proper remedy for any violation of the TRO by Mr. Erlich is further action against Mr. Erlich, not NETCOM."
V. INFRINGEMENT LIABILITY
Regarding claimed copyright infringement, Netcom argues it is neither liable for direct or contributory infringement, nor is it vicariously liable for Erlich's actions. Netcom's role here was as a temporary host of messages posted to newsgroups to which it provides access. This role, urges Netcom,

"is qualitatively no different from the role of the thousands of other Usenet server sites who host the alt.religion.scientology newsgroup on their servers. ... [I]f NETCOM were considered to be a direct infringer because of the computer dissemination of Usenet messages on the Internet, such a theory of liability would apply to the over 10,000 Usenet sites, and, possibly, the millions of Usenet participants."

To be held liable for contributory infringement, Netcom must have knowledge of the infringing conduct and materially participate in it. Netcom argues it does not have the "certain, unequivocal and advance knowledge courts require before holding a party contributorily liable for the acts of another." Also, its role in Erlich's alleged infringement does not constitute the "pervasive participation" courts require:

"Rather than directing, authorizing or actively participating in Erlich's allegedly infringing activities, NETCOM simply serves as a passive transmitter of his and millions of other messages throughout the Internet. ... NETCOM leases use of its computer facilities to its subscribers. The fact that NETCOM is just one of dozens of access providers and just one of thousands of Usenet server sites throughout the country illustrates the immateriality of its contribution to Erlich's conduct."

Regarding vicarious liability, Netcom states such a claim depends upon a showing that a third party had "the right and ability to control the infringer and received a direct financial benefit from the infringement." Here, both elements are lacking. Netcom says it "does not and cannot supervise Erlich's messages before they are posted." It also is unable, as a passive access provider, to exercise editorial control over the content of individual messages given the speed and volume of the message traffic transmitted via the Usenet. Netcom has never pre-screened postings, does not have software to do so, and, contrary to the assertions of Scientology's "consultants," does not believe that a software change could block Erlich's postings until it could review them. "It would be necessary," argues Netcom, "to entirely change the functioning of the USENET system in order to monitor information that is posted to it."

Netcom acknowledges that is has the contractual right to take certain remedial actions once a violation of its terms and conditions of service has been established. But its terms and conditions, adds Netcom, "do not say, nor could they given the technological realities, that NETCOM will __screen__ for violations in advance of posting."

And Netcom's terms and conditions cannot be used by Scientology to establish that Netcom has the ability to control users within the meaning of the vicarious liability doctrine. A federal court has recently rejected the argument that the power to refuse to deal with an infringer is equivalent to the power to control him.

Netcom also argues that it does not benefit financially from content that passes through its system. The fixed-fee rentals Netcom receives from subscribers are not, it says, "deemed financially derivative of the alleged act of infringement because the fee remains the same regardless of the nature, extent, or lack thereof, or the use of the premises."

Netcom acknowledges and disputes Scientology's assertion that Netcom can be liable for copyright infringement because it hosts Erlich's postings on its Usenet server for several days. Assuming for the sake of argument that "its nonvolitional transmission of messages through a lease arrangement" could be construed as an act of copying, Netcom argues that it is protected by the "fair use doctrine which allows a person to use copyrighted material in a reasonable manner without the copyright holder's consent." Netcom also notes serious questions about whether Erlich has infringed Scientology's rights, including:

"(1) whether [Scientology] may properly maintain copyrights in the materials at issue; (2) if so, whether [Scientology's] copyrights in the material remain enforceable; and (3) whether Erlich's alleged use of his materials constitute 'fair use" and, consequently, is nonactionable given his apparent reliance on them to facilitate commentary on the Church of Scientology and its practices."
VI. SPEECH, RELIGION & FAIR USE
On the First Amendment, Netcom argues that Internet users and Netcom subscribers, in particular, are guaranteed by fundamental rights of freedom of speech and expression, association, and to engage in the distribution of information. Scientology's construction of copyright law, urges Netcom, would impair the First Amendment rights of millions of Internet users. It would also "curtail the exchange of information that is crucial to the development of art, science, industry, and indeed religion," contravening the Copyright Act and the First Amendment. Netcom adds that an injunction requiring Netcom permanently to bar Erlich from the Internet "would constitute an impermissible prior restraint."

If Scientology's position were accepted, Netcom claims it will be faced with "an insoluble dilemma." On the one hand, it will face debilitating infringement liability if it does not eliminate access. On the other hand, if it were to eliminate access without a prior judicial determination, it will face liability under California law to Klemesrud's approximately 500 non-infringing users for cutting off access to a public forum.

Netcom argues that it "is 'ill-equipped' to do the 'policing' [Scientology] demand[s], and requiring NETCOM would adversely affect the public's low-cost access to the information marketplace." If held accountable for the tortious acts of others, argues Netcom, it will face the type of problems that a federal court recently noted with respect to a local television network affiliate in holding that the affiliate had no editorial control over a network broadcast, serving only as a conduit not responsible for republishing defamatory content of a "60 Minutes" segment. In __Auvil v. CBS 60 Minutes__, 800 F.Supp. 928 (E.D. Wash. 1992), the court noted that liability

"would force the creation of full time editorial boards at local stations throughout the country which possess sufficient knowledge, legal acumen and access to experts to continually monitor incoming transmissions and exercise on-the-spot discretionary calls or face $75 million dollar lawsuits at every turn. That is not realistic."
VII. SCIENTOLOGY'S REPLY
In response, Scientology observes, among other things, that Netcom's claims are belied by the deposition testimony of its own witnesses:

"Per Netcom's admissions, Netcom is not the passive transmitter it has led the Court to believe. Netcom regularly exercises controls over its customers' postings. It has: (1) suspended over 1,180 customers' accounts for abuse of its Terms and Conditions and Netiquette; (2) suspended accounts of copyright infringers without court order or legal opinion; and (3) terminated a bulletin board account without regard to whether others would be affected by the termination."

Similarly, Scientology notes that where Netcom earlier stated that it was impossible to deal with Erlich's postings other than to terminate Klemesrud's account, Netcom now admits that it merely does not currently have the software to do so. Accordingly, says Scientology,

"Netcom can, and does, control abuses on its system, and preliminarily enjoining it from permitting abuse of plaintiff's rights will not require it to do anything it has not done as a routine part of its business many times before."

Scientology also alleges that Netcom does, in fact, receive a financial benefit from declining to take action against Erlich,

"As a commercial provider of Internet services, Netcom directly profits from the media and Internet exposure it receives as a result of its refusal to take enforcement action against Erlich and Klemesrud in this situation, and fears it will suffer adverse consequences if it acts on its own to prevent their infringements. Netcom advertises its services as providing easy, regulation-free access to the Internet, access which is not available from its more restrictive competitors such as Compuserve and America Online, Inc. Indeed, Netcom's 'NETCOM Info' boasts to its customers that 'there is no administration to the Internet' and that '[n]o one person can "lay down the law" to the rest of the community because there is no law ....' It is precisely this hands off approach that will attract to Netcom, rather than to its competitors, subscribers who seek to copy or distribute copyrighted materials. It is not a matter of free speech as Netcom urges, but of profits."

Regarding the First Amendment, Scientology urges that no harm to the public will accrue if an injunction is issued. According to Scientology, "courts have consistently rejected all claims of a First Amendment right to engage in copyright infringement and instead have fully protected the statutory rights granted to authors of creative works." Scientology further asserts that its proposed order takes fair use into account, adding that,

"Where a defendant's right to engage in fair use has been accommodated by a court, there is simply no place for a separate First Amendment analysis because 'the fair use doctrine encompasses all claims of first amendment in the copyright field.'" (Citation omitted.)

CyberLaw (tm) is published solely as an educational service. The author, a California attorney, is Executive Editor of LEXIS COUNSEL CONNECT CALIFORNIA. He may be contacted at cyberlaw.us@counsel.com or cyberlaw@cyberlaw.com. Questions and comments may be posted on America Online (go to keyword "CYBERLAW") or CyberLaw World Wide (http://www.portal.com/~cyberlaw/), made possible with support from Portal Communications Co. (ph. 408/973-9111). CyberLaw is a trademark of Jonathan Rosenoer. Copyright © 1995 Jonathan Rosenoer; All Rights Reserved.

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