Digital Millennium Copyright Act and Damages for the Least Cost Avoider

The proliferation of the Internet has led to widespread globalization and commercial growth, as people are now able to share content on a much greater scale. Yet as with most things, the Internet’s exponential growth has led to a fair share of growing pains. Digitalization and sharing of online content oftentimes come with the unwanted side effect of increased costs to the many content owners whose copyrights are now easily infringed. As a result, the Digital Millennium Copyright Act (DMCA) was created as an effort to balance the interests of content owners, content sharers, and Online Service Providers (OSPs) that sometimes facilitate the content sharing process.

Despite the 17-year existence of the DMCA, the government is still ironing out certain operational details pertaining to the notice and takedown provisions. One such detail relates to the allocation of risk and liability for providers that host infringing content online. As it stands, OSPs such as YouTube currently bear the burden of taking down user-contributed infringing content from their servers, lest they risk secondary infringement liability. So far, the government has been unable to determine an appropriate measure for statutory damages in the context of large-scale secondary infringement liability. In order to address this and other issues related to the provision, the U.S. Department of Commerce is conducting a series of roundtable discussions to seek out other solutions.

A recent proposal by federal appeals court judge Richard Posner suggests that the solution is a matter of economics—one that has already been addressed by common law tort theory. Judge Posner thinks that liability should be based on an efficient risk-bearing standard that shifts the legal burden to those who are in a position to most cost-efficiently minimize the harm—the least cost avoider. Other experts and scholars agree that by employing a standard based on efficient harm avoidance, parties that are uniquely positioned to avoid or minimize harm would be sufficiently incentivized to do so. At the same time, the least cost avoider would not be expected to take precautions in cases where the costs of harm avoidance outweigh the value of the harm. Posner and supporters believe that, by adopting the efficiency-based liability standard, the DMCA would better balance the need to protect the rights of content owners with the interests of content sharers and OSPs.

Despite the judicial precedents and academic support that lend credence to Judge Posner’s proposal, technology company supporters do not think that the determination of secondary infringement liability should be colored by the nuances of economic analysis. Their solution is more black-and-white—as long as service providers block or remove material for which they have exact or specific knowledge of infringement, they should be completely immune to copyright liability.

But least cost avoider advocates shun the idea of an absolute bar to secondary infringement, stating that it flies in the face of well-established legal responsibility principles and leaves OSPs with zero incentive to avoid harm. Only time will tell if and how this issue will be resolved.

Sources: The Brookings Institution; United States Patent and Trademark Office