Part of a public library containing court papers related to lawsuits involving Scientology in some way. Collected to help lawyers and critics of Scientology in future lawsuits from or against this cult. Please report back if this has been of help, or send new contributions to the collection. Thanks. Andreas Heldal-Lund (heldal@online.no)

  RELIGIOUS TECHNOLOGY CENTER, a California non-profit corporation;  and Bridge
      Publications, Inc., a California non-profit corporation, Plaintiffs,
  NETCOM ON-LINE COMMUNICATION SERVICES, INC., a Delaware corporation;  Dennis
  Erlich, an individual;  and Tom Klemesrud, an individual, dba Clearwood Data
                              Services, Defendants.
                               No. C-95-20091 RMW.
                          United States District Court,
                                N.D. California.
                                 Nov. 21, 1995.
  Copyright holders brought infringement action against operator of computer
 bulletin board service (BBS) and Internet access provider, seeking to hold
 defendants liable for copyright infringement committed by BBS subscriber.
 Access provider filed motion for summary judgment, operator filed motion for
 judgment on the pleadings, and holders filed motion for preliminary
 injunction.  The District Court, Whyte, J., held that:  (1) access provider was
 not directly liable for copies that were made and stored on its computer;  (2)
 fact issue as to whether access provider had knowledge of infringing activity
 precluded summary judgment on contributory infringement claim;  (3) access
 provider did not receive direct financial benefit from infringing
 activity necessary to hold it vicariously liable;  (4) fact issues precluded
 summary judgment on access provider's fair use defense;  (5) bulletin board
 operator could not be held liable on theories of direct infringement or
 vicarious liability;  (6) holders' allegations were sufficient to raise issue
 of contributory infringement on part of operator;  and (7) holders were not
 entitled to preliminary injunction.
  Motions denied.

 To establish claim of copyright infringement, plaintiff must demonstrate
 ownership of valid copyright and copying of protectable expression by
 defendant.  17 U.S.C.A. s 501(a).

 Act of sending message to Usenet newsgroup which caused reproduction of
 portions of copyrighted works on computer bulletin board service (BBS)
 operator's and Internet access provider's storage devices created "copies" for
 purposes of Copyright Act;  even though messages remained on operator's and
 access provider's systems for at most 11 days, they were sufficiently "fixed"
 to constitute recognizable copies under the Act.  17 U.S.C.A. s 101.

 Internet access provider was not directly liable for unauthorized copies of
 copyrighted work that were made and stored on its computer while transmitting
 computer bulletin board service's (BBS) Usenet postings to and from the
 Internet;  access provider did not take any affirmative action that directly
 resulted in copying other than installing and maintaining system whereby
 software automatically forwarded messages received from subscribers onto Usenet
 and temporarily stored copies on its system, and its actions were necessary to
 having working system for transmitting Usenet postings to and from the
 Internet.  17 U.S.C.A. s 101.

 Storage on defendant's system of infringing copies and retransmission to other
 servers is not direct infringement by computer bulletin board service (BBS)
 operator of exclusive right to reproduce work where such copies are uploaded by
 infringing user.  17 U.S.C.A. ss 101, 501.

 Internet access provider did not violate copyright holders' exclusive rights to
 publicly display copies of their works by maintaining copies of infringing
 computer bulletin board messages on its server for 11 days for access by its
 subscribers and Usenet neighbors, where provider did not create or control
 content of information available to its subscribers, and merely provided access
 to Internet, whose content was controlled by no single entity.  17
 U.S.C.A. ss 101, 501.

 Liability for participation in copyright infringement will be established where
 defendant, with knowledge of infringing activity, induces, causes or materially
 contributes to infringing conduct of another.  17 U.S.C.A. s 501.

 Evidence that Internet access provider, after receiving notice from copyright
 holders' counsel indicating that alleged infringer had posted copies of their
 works on Usenet newsgroup through the provider's system, continued to allow
 alleged infringer to post messages to newsgroup and left allegedly infringing
 messages on its system so that its subscribers and other Usenet servers could
 access them, raised genuine issue of material fact as to whether provider knew
 or should have known that copyrights had been infringed, precluding summary
 judgment on claim of contributory infringement.  17 U.S.C.A. s 501(a).

 Internet access provider could not be held liable for contributory copyright
 infringement based on infringing messages posted on Usenet newsgroup before it
 received notice of infringement from copyright holders.  17 U.S.C.A. s 501.

 Where computer bulletin board service (BBS) operator cannot reasonably verify
 claim of copyright infringement, either because of possible fair use defense,
 lack of copyright notice on copies, or copyright holder's failure to provide
 necessary documentation to show that there is likely infringement, operator's
 lack of knowledge will be found reasonable and there will be no liability for
 contributory infringement for allowing continued distribution of works on its
 system.  17 U.S.C.A. s 501.

 Where defendant has knowledge of primary copyright infringer's infringing
 activities, it will be liable if it induces, causes or materially contributes
 to infringing conduct of primary infringer;  such participation must be
 substantial.  17 U.S.C.A. s 501.

 Assuming Internet access provider was able to take simple measures to prevent
 future damages to copyrighted work posted on Usenet newsgroup, provider could
 be liable for contributory copyright infringement where it had knowledge of
 infringing postings yet continued to aid in accomplishment of infringer's
 purpose of publicly distributing postings.  17 U.S.C.A. s 501.

 Defendant is liable for vicarious liability for actions of primary copyright
 infringer where defendant has right and ability to control infringer's acts and
 receives direct financial benefit from the infringement.  17 U.S.C.A. s 501.

 Unlike contributory copyright infringement, knowledge is not element of
 vicarious liability.  17 U.S.C.A. s 501.

 Evidence raised genuine issue of material fact as to whether Internet access
 provider had right and ability to exercise control over activities of its
 subscribers, precluding summary judgment on vicarious liability claim in
 copyright infringement case arising when computer bulletin board service (BBS)
 subscriber posted infringing works on Usenet newsgroup;  evidence indicated
 that under informal rules and customs developed in the Internet, access
 providers had duty to prevent copyright violations, and provider prohibited
 copyright infringement, required its subscribers to indemnify it for damage to
 third parties, and had ability to delete specific postings.  17 U.S.C.A. s

 Internet access provider that charged fixed fees did not receive direct
 financial benefit from computer bulletin board service (BBS) subscriber's
 unauthorized posting of copyrighted works on Usenet newsgroup, and could not be
 held vicariously liable for copyright infringement;  there was no evidence that
 infringement by subscriber in any way enhanced value of provider's services or
 attracted new subscribers.  17 U.S.C.A. s 501.

 Holding Internet access provider contributorily liable under Copyright Act for
 posting of infringing messages on Usenet newsgroup would not violate provider's
 First Amendment free speech rights.  U.S.C.A. Const.Amend. 1;  17
 U.S.C.A. s 501.

 Evidence raised genuine issue of material fact as to whether Internet access
 provider's distribution of infringing works that computer bulletin board
 service (BBS) subscriber had posted on Usenet newsgroup was fair use,
 precluding summary judgment in copyright infringement case;  although provider
 received no direct financial benefit from acts of infringement, it knew that
 subscriber's use was infringing and had ability to prevent further
 distribution, but failed to do so.  17 U.S.C.A. s 107.

 Mere fact that all of work is copied is not determinative of fair use question,
 where such total copying is essential given purpose of copying.  17
 U.S.C.A. s 107.

 Operator of computer bulletin board system (BBS) could not be held liable for
 direct copyright infringement when subscriber posted infringing works on system
 without authorization, absent allegations that operator took any affirmative
 steps to cause copies to be made.  17 U.S.C.A. s 501.

 Allegations that operator of computer bulletin board system (BBS) refused to
 assist copyright holders in compelling subscriber to stop infringing postings
 and refused to stop receiving, transmitting and publishing the postings after
 being informed by copyright holders that such actions constituted infringement
 were sufficient to state contributory infringement claim against operator.
 17 U.S.C.A. s 501.

 Operator of computer bulletin board system (BBS) could not be held vicariously
 liable for subscriber's copyright infringement, absent claim that operator
 financially benefitted from infringing postings.  17 U.S.C.A. s 501.

 Party seeking preliminary injunction may establish its entitlement to equitable
 relief by showing either combination of probable success on the merits and
 possibility of irreparable injury, or serious questions as to those matters and
 balance of hardships tipping sharply in movant's favor;  these two tests are
 not separate, but represent continuum of equitable discretion whereby the
 greater the relative hardship to moving party, less probability of success need
 be shown.

 Primary purpose of preliminary injunction is to preserve status quo pending
 trial on the merits.

 Copyright holders failed to show they were likely to succeed on merits of their
 copyright infringement claims against Internet access provider and operator of
 computer bulletin board system (BBS), based on subscriber's alleged infringing
 postings on Usenet newsgroup;  only viable theory of infringement was
 contributory infringement, and there was little evidence that defendants knew
 or should have known that subscriber was engaged in copyright infringement of
 holders' works and were not entitled to fair use defense, as they did not
 receive notice of alleged infringement until after all but one of postings were

 There is strong presumption against any injunction that could act as prior
 restraint on free speech.  U.S.C.A. Const.Amend. 1.

 First Amendment concerns precluded grant of preliminary injunction requiring
 Internet access provider and computer bulletin board system (BBS) operator to
 prescreen postings for possible copyright infringement;  defendants played
 vital role in speech of their users, and requiring them to prescreen postings
 would chill their users' speech.  U.S.C.A. Const.Amend. 1.
  *1364 Helena K. Kobrin, North Hollywood, CA, Andrew H. Wilson, Wilson,
 Ryan & Campilongo, San Francisco, CA, Thomas M. Small, Janet A. Kobrin, Small,
 Larkin & Kidde, Los Angeles, CA, Elliot J. Abelson, Los Angeles, CA, for
  *1365 Randolf J. Rice, Pillsbury, Madison & Sutro, San Jose, CA, for
 Defendant Netcom On-Line Communication Services.
  Harold J. McElhinny, Carla Oakley, Morrison & Foerster, San Francisco, CA, for
 Defendant Dennis Erlich.
  Daniel Leipold, Hagenbaugh & Murphy, Orange, CA, for Defendant Tom Klemesrud.

  WHYTE, District Judge.
  This case concerns an issue of first impression regarding intellectual
 property rights in cyberspace. [FN1]  Specifically, this order addresses
 whether the operator of a computer bulletin board service ("BBS"), and the
 large Internet [FN2] access provider that allows that BBS to reach the
 Internet, should be liable for copyright infringement committed by a subscriber
 of the BBS.

      FN1. Cyberspace is a popular term for the world of electronic
     communications over computer networks.  See Trotter Hardy, The Proper
     Legal Regime for "Cyberspace," 55 U.PITT.L.REV. 993, 994 (1994).

      FN2. "The Internet today is a worldwide entity whose nature cannot be
     easily or simply defined.  From a technical definition, the Internet is
     the 'set of all interconnected IP networks'--the collection of several
     thousand local, regional, and global computer networks interconnected in
     real time via the TCP/IP Internetworking Protocol suite...."  Daniel P.
     One article described the Internet as
     a collection of thousands of local, regional, and global Internet Protocol
     networks.  What it means in practical terms is that millions of computers
     in schools, universities, corporations, and other organizations are tied
     together via telephone lines.  The Internet enables users to share files,
     search for information, send electronic mail, and log onto remote
     computers.  But it isn't a program or even a particular computer resource.
     It remains only a means to link computer users together.
     Unlike on-line computer services such as CompuServe and America On Line, no
     one runs the Internet....
     No one pays for the Internet because the network itself doesn't exist as a
     separate entity.  Instead various universities and organizations pay for
     the dedicated lines linking their computers.  Individual users may pay an
     Internet provider for access to the Internet via its server.
     David Bruning, Along the InfoBahn, ASTRONOMY, Vol. 23, No. 6, p. 76
     (June 1995).

  Plaintiffs Religious Technology Center ("RTC") and Bridge Publications, Inc.
 ("BPI") hold copyrights in the unpublished and published works of L. Ron
 Hubbard, the late founder of the Church of Scientology ("the Church").
 Defendant Dennis Erlich ("Erlich") [FN3] is a former minister of Scientology
 turned vocal critic of the Church, whose pulpit is now the Usenet newsgroup
 [FN4] alt.religion.scientology ("a.r.s."), an on-line forum for discussion and
 criticism of Scientology.  Plaintiffs maintain that Erlich infringed their
 copyrights when he posted portions of their *1366 works on a.r.s.  Erlich
 gained his access to the Internet through defendant Thomas Klemesrud's
 ("Klemesrud's") BBS "support.com."  Klemesrud is the operator of the BBS, which
 is run out of his home and has approximately 500 paying users.  Klemesrud's BBS
 is not directly linked to the Internet, but gains its connection through the
 facilities of defendant Netcom On-Line Communications, Inc. ("Netcom"), one of
 the largest providers of Internet access in the United States.

      FN3. Issues of Erlich's liability were addressed in this court's order of
     September 22, 1995.  That order concludes in part that a preliminary
     injunction against Erlich is warranted because plaintiffs have shown a
     likelihood of success on their copyright infringement claims against him.
     Plaintiffs likely own valid copyrights in Hubbard's published and
     unpublished works and Erlich's near-verbatim copying of substantial
     portions of plaintiffs' works was not likely a fair use.  To the extent
     that Netcom and Klemesrud argue that plaintiffs' copyrights are invalid and
     that Netcom and Klemesrud are not liable because Erlich had a valid fair
     use defense, the court previously rejected these arguments and will not
     reconsider them here.

      FN4. The Usenet has been described as
     a worldwide community of electronic BBSs that is closely associated with
     the Internet and with the Internet community.  P The messages in Usenet are
     organized into thousands of topical groups, or "Newsgroups"....  P As a
     Usenet user, you read and contribute ("post") to your local Usenet site.
     Each Usenet site distributes its users' postings to other Usenet sites
     based on various implicit and explicit configuration settings, and in turn
     receives postings from other sites.  Usenet traffic typically consists of
     as much as 30 to 50 Mbytes of messages per day.  P Usenet is read and
     contributed to on a daily basis by a total population of millions of
     people....  P There is no specific network that is the Usenet.  Usenet
     traffic flows over a wide range of networks, including the Internet and
     dial-up phone links.
     Dern, supra, at 196-97.

  After failing to convince Erlich to stop his postings, plaintiffs contacted
 defendants Klemesrud and Netcom.  Klemesrud responded to plaintiffs' demands
 that Erlich be kept off his system by asking plaintiffs to prove that they
 owned the copyrights to the works posted by Erlich.  However, plaintiffs
 refused Klemesrud's request as unreasonable.  Netcom similarly refused
 plaintiffs' request that Erlich not be allowed to gain access to the Internet
 through its system.  Netcom contended that it would be impossible to prescreen
 Erlich's postings and that to kick Erlich off the Internet meant kicking off
 the hundreds of users of Klemesrud's BBS.  Consequently, plaintiffs named
 Klemesrud and Netcom in their suit against Erlich, although only on the
 copyright infringement claims. [FN5]

      FN5. The First Amended Complaint ("FAC") contains three claims:  (1)
     copyright infringement of BPI's published literary works against all
     defendants;  (2) copyright infringement of RTC's unpublished confidential
     works against all defendants;  and (3) misappropriation of RTC's trade
     secrets against defendant Erlich only.

  On June 23, 1995, this court heard the parties' arguments on eight motions,
 three of which relate to Netcom and Klemesrud and are discussed in this
 order:  (1) Netcom's motion for summary judgment;  (2) Klemesrud's motion for
 judgment on the pleadings; [FN6]  and (3) plaintiffs' motion for a preliminary
 injunction against Netcom and Klemesrud.  For the reasons set forth below, the
 court grants in part and denies in part Netcom's motion for summary judgment
 and Klemesrud's motion for judgment on the pleadings and denies plaintiffs'
 motion for a preliminary injunction.

      FN6. Klemesrud alternatively filed a motion for summary judgment, which
     will not be considered at this time because Klemesrud was unavailable to be
     deposed in time for plaintiffs' opposition.  In a previous order, the court
     struck those portions of the motion that referred to matters outside of the

  A. Summary Judgment Standards
  Because the court is looking beyond the pleadings in examining this motion, it
 will be treated as a motion for summary judgment rather than a motion to
 dismiss.  Grove v. Mead School District, 753 F.2d 1528, 1532 (9th
 Cir.1985).  Summary judgment is proper when "the pleadings, depositions,
 answers to interrogatories, and admissions on file, together with the
 affidavits, if any, show that there is no genuine issue as to any material fact
 and that the moving party is entitled to judgment as a matter of law."
 Fed.R.Civ.P. 56(c).  There is a "genuine" issue of material fact only when
 there is sufficient evidence such that a reasonable juror could find for the
 party opposing the motion.  Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
 251-52, 106 S.Ct. 2505, 2511-12, 91 L.Ed.2d 202 (1986).  Entry of summary
 judgment is mandated against a party if, after adequate time for discovery and
 upon motion, the party fails to make a showing sufficient to establish the
 existence of an element essential to that party's case, and on which that party
 will bear the burden of proof at trial.  Celotex Corp. v. Catrett, 477 U.S.
 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).  The court, however,
 must draw all justifiable inferences in favor of the nonmoving parties,
 including questions of credibility and of the weight to be accorded particular
 evidence.  Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 520, 111 S.Ct.
 2419, 2434-35, 115 L.Ed.2d 447 (1991).
  B. Copyright Infringement
  [1] To establish a claim of copyright infringement, a plaintiff must
 demonstrate (1) ownership of a valid copyright and (2) "copying" *1367 [FN7]
 of protectable expression by the defendant.  Baxter v. MCA, Inc., 812 F.2d
 421, 423 (9th Cir.), cert. denied, 484 U.S. 954, 108 S.Ct. 346, 98 L.Ed.2d
 372 (1987).  Infringement occurs when a defendant violates one of the exclusive
 rights of the copyright holder.  17 U.S.C. s 501(a).  These rights include
 the right to reproduce the copyrighted work, the right to prepare derivative
 works, the right to distribute copies to the public, and the right to publicly
 display the work.  17 U.S.C. ss 106(1)-(3) & (5).  The court has already
 determined that plaintiffs have established that they own the copyrights to all
 of the Exhibit A and B works, except item 4 of Exhibit A. [FN8]  The court also
 found plaintiffs likely to succeed on their claim that defendant Erlich copied
 the Exhibit A and B works and was not entitled to a fair use defense.
 Plaintiffs argue that, although Netcom was not itself the source of any of the
 infringing materials on its system, it nonetheless should be liable for
 infringement, either directly, contributorily, or vicariously. [FN9]  Netcom
 disputes these theories of infringement and further argues that it is entitled
 to its own fair use defense.

      FN7. In this context, "copying" is "shorthand for the infringing of any of
     the copyright owner's five exclusive rights."  S.O.S., Inc. v. Payday,
     Inc., 886 F.2d 1081, 1085 n. 3 (9th Cir.1989).

      FN8. The court has under submission plaintiffs' request to expand the
     preliminary injunction against Erlich.

      FN9. Plaintiffs have argued at times during this litigation that Netcom
     should only be required to respond after being given notice, which is only
     relevant to contributory infringement.  Nevertheless, the court will
     address all three theories of infringement liability.

  1. Direct Infringement
  Infringement consists of the unauthorized exercise of one of the exclusive
 rights of the copyright holder delineated in section 106.  17 U.S.C. s
 501.  Direct infringement does not require intent or any particular state of
 mind, [FN10] although willfulness is relevant to the award of statutory
 damages.  17 U.S.C. s 504(c).

      FN10. The strict liability for copyright infringement is in contrast to
     another area of liability affecting online service providers:  defamation.
     Recent decisions have held that where a BBS exercised little control over
     the content of the material on its service, it was more like a
     "distributor" than a "republisher" and was thus only liable for defamation
     on its system where it knew or should have known of the defamatory
     statements.  Cubby, Inc. v. CompuServe, Inc., 776 F.Supp. 135
     (S.D.N.Y.1991).  By contrast, a New York state court judge found that
     Prodigy was a publisher because it held itself out to be controlling the
     content of its services and because it used software to automatically
     prescreen messages that were offensive or in bad taste.  Stratton
     Oakmont, Inc. v. Prodigy Services Co., 1995 WL 323710, THE RECORDER, June
     1, 1995, at 7 (excerpting May 24, 1995 Order Granting Partial Summary
     Judgment to Plaintiffs).

  Many of the facts pertaining to this motion are undisputed.  The court will
 address the relevant facts to determine whether a theory of direct infringement
 can be supported based on Netcom's alleged reproduction of plaintiffs' works.
 The court will look at one controlling Ninth Circuit decision addressing
 copying in the context of computers and two district court opinions addressing
 the liability of BBS operators for the infringing activities of subscribers.
 The court will additionally examine whether Netcom is liable for infringing
 plaintiffs' exclusive rights to publicly distribute and display their works.
                               a. Undisputed Facts
  The parties do not dispute the basic processes that occur when Erlich posts
 his allegedly infringing messages to a.r.s.  Erlich connects to Klemesrud's BBS
 using a telephone and a modem.  Erlich then transmits his messages to
 Klemesrud's computer, where they are automatically briefly stored.  According
 to a prearranged pattern established by Netcom's software, Erlich's initial act
 of posting a message to the Usenet results in the automatic copying of Erlich's
 message from Klemesrud's computer onto Netcom's computer and onto other
 computers on the Usenet.  In order to ease transmission and for the convenience
 of Usenet users, Usenet servers maintain postings from newsgroups for a short
 period of time--eleven days for Netcom's system and three days for Klemesrud's
 system.  Once on Netcom's computers, messages are available to Netcom's
 customers and Usenet neighbors, who may then download the messages to their
 *1368 own computers.  Netcom's local server makes available its postings to
 a group of Usenet servers, which do the same for other servers until all Usenet
 sites worldwide have obtained access to the postings, which takes a matter of
 hours.  Francis Decl. P 5.
  Unlike some other large on-line service providers, such as CompuServe,
 America Online, and Prodigy, Netcom does not create or control the content of
 the information available to its subscribers.  It also does not monitor
 messages as they are posted.  It has, however, suspended the accounts of
 subscribers who violated its terms and conditions, such as where they had
 commercial software in their posted files.  Netcom admits that, although not
 currently configured to do this, it may be possible to reprogram its system to
 screen postings containing particular words or coming from particular
 individuals.  Netcom, however, took no action after it was told by plaintiffs
 that Erlich had posted messages through Netcom's system that violated
 plaintiffs' copyrights, instead claiming that it could not shut out Erlich
 without shutting out all of the users of Klemesrud's BBS.
                           b. Creation of Fixed Copies
  The Ninth Circuit addressed the question of what constitutes infringement in
 the context of storage of digital information in a computer's random access
 memory ("RAM").  MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511,
 518 (9th Cir.1993).  In MAI, the Ninth Circuit upheld a finding of copyright
 infringement where a repair person, who was not authorized to use the computer
 owner's licensed operating system software, turned on the computer, thus
 loading the operating system into RAM for long enough to check an "error
 log."  Id. at 518-19.  Copyright protection subsists in original works of
 authorship "fixed in any tangible medium of expression, now known or later
 developed, from which they can be perceived, reproduced, or otherwise
 communicated, either directly or with the aid of a machine or device."  17
 U.S.C. s 102 (emphasis added).  A work is "fixed" when its "embodiment in a
 copy ... is sufficiently permanent or stable to permit it to be perceived,
 reproduced, or otherwise communicated for a period of more than transitory
 duration."  Id. s 101.  MAI established that the loading of data from
 a storage device into RAM constitutes copying because that data stays in RAM
 long enough for it to be perceived.  MAI Systems, 991 F.2d at 518.
  [2] In the present case, there is no question after MAI that "copies"
 were created, as Erlich's act of sending a message to a.r.s. caused
 reproductions of portions of plaintiffs' works on both Klemesrud's and Netcom's
 storage devices.  Even though the messages remained on their systems for at
 most eleven days, they were sufficiently "fixed" to constitute recognizable
 copies under the Copyright Act.  See Information Infrastructure Task Force,
 Intellectual Property and the National Information Infrastructure:  The Report
 of the Working Group on Intellectual Property Rights 66 (1995) ("IITF Report").
               c. Is Netcom Directly Liable for Making the Copies?
  [3] Accepting that copies were made, Netcom argues that Erlich, and not
 Netcom, is directly liable for the copying.  MAI did not address the
 question raised in this case:  whether possessors of computers are liable for
 incidental copies automatically made on their computers using their software as
 part of a process initiated by a third party.  Netcom correctly distinguishes
 MAI on the ground that Netcom did not take any affirmative action that
 directly resulted in copying plaintiffs' works other than by installing and
 maintaining a system whereby software automatically forwards messages received
 from subscribers onto the Usenet, and temporarily stores copies on its system.
 Netcom's actions, to the extent that they created a copy of plaintiffs' works,
 were necessary to having a working system for transmitting Usenet postings to
 and from the Internet.  Unlike the defendants in MAI, neither Netcom nor
 Klemesrud initiated the copying.  The defendants in MAI turned on their
 customers' computers thereby creating temporary copies of the operating system,
 whereas Netcom's and Klemesrud's systems can operate without any human
 intervention.  Thus, unlike MAI, the mere fact that Netcom's system
 incidentally makes temporary copies *1369 of plaintiffs' works does not mean
 Netcom has caused the copying. [FN11]  The court believes that Netcom's act of
 designing or implementing a system that automatically and uniformly creates
 temporary copies of all data sent through it is not unlike that of the owner of
 a copying machine who lets the public make copies with it. [FN12]  Although
 some of the people using the machine may directly infringe copyrights, courts
 analyze the machine owner's liability under the rubric of contributory
 infringement, not direct infringement.  See, e.g., RCA Records v. All-Fast
 Systems, Inc., 594 F.Supp. 335 (S.D.N.Y.1984);  3 Melville B. Nimmer & David
 Nimmer, NIMMER ON COPYRIGHT s 12.04[A][2][b], at 12-78 to -79 (1995) ("NIMMER
 ON COPYRIGHT");  Elkin-Koren, supra, at 363 (arguing that "contributory
 infringement is more appropriate for dealing with BBS liability, first, because
 it focuses attention on the BBS-users relationship and the way imposing
 liability on BBS operators may shape this relationship, and second because it
 better addresses the complexity of the relationship between BBS operators and
 subscribers").  Plaintiffs' theory would create many separate acts of
 infringement and, carried to its natural extreme, would lead to unreasonable
 liability.  It is not difficult to conclude that Erlich infringes by copying a
 protected work onto his computer and by posting a message to a newsgroup.
 However, plaintiffs' theory further implicates a Usenet server that carries
 Erlich's message to other servers regardless of whether that server acts
 without any human intervention beyond the initial setting up of the system.  It
 would also result in liability for every single Usenet server in the worldwide
 link of computers transmitting Erlich's message to every other computer.  These
 parties, who are liable under plaintiffs' theory, do no more *1370 than
 operate or implement a system that is essential if Usenet messages are to be
 widely distributed.  There is no need to construe the Act to make all of these
 parties infringers.  Although copyright is a strict liability statute, there
 should still be some element of volition or causation which is lacking where a
 defendant's system is merely used to create a copy by a third party.

      FN11. One commentator addressed the difficulty in translating copyright
     concepts, including the public/private dichotomy, to the digitized
     environment.  See Niva Elkin-Koren, Copyright Law and Social Dialogue on
     the Information Superhighway:  The Case Against Copyright Liability of
     Bulletin Board Operators, 13 CARDOZO ARTS & ENT.L.J. 345, 390 (1995).
     This commentator noted that one way to characterize a BBS operation is that
     it "provides subscribers with access and services.  As such, BBS operators
     do not create copies, and do not transfer them in any way.  Users post the
     copies on the BBS, which other users can then read or download."  Id. at

      FN12. Netcom compares itself to a common carrier that merely acts as a
     passive conduit for information.  In a sense, a Usenet server that forwards
     all messages acts like a common carrier, passively retransmitting every
     message that gets sent through it.  Netcom would seem no more liable than
     the phone company for carrying an infringing facsimile transmission or
     storing an infringing audio recording on its voice mail.  As Netcom's
     counsel argued, holding such a server liable would be like holding the
     owner of the highway, or at least the operator of a toll booth, liable for
     the criminal activities that occur on its roads.  Since other similar
     carriers of information are not liable for infringement, there is some
     basis for exempting Internet access providers from liability for
     infringement by their users.  The IITF Report concluded that "[i]f an
     entity provided only the wires and conduits--such as the telephone company,
     it would have a good argument for an exemption if it was truly in the same
     position as a common carrier and could not control who or what was on its
     system."  IITF Report at 122.  Here, perhaps, the analogy is not completely
     appropriate as Netcom does more than just "provide the wire and conduits."
     Further, Internet providers are not natural monopolies that are bound to
     carry all the traffic that one wishes to pass through them, as with the
     usual common carrier.  See id. at 122 n. 392 (citing Federal
     Communications Commission v. Midwest Video Corp., 440 U.S. 689, 701, 99
     S.Ct. 1435, 1442, 59 L.Ed.2d 692 (1979)).  Section 111 of the Copyright Act
     codifies the exemption for passive carriers who are otherwise liable for a
     secondary transmission.  3 Melville B. Nimmer & David Nimmer, NIMMER ON
     COPYRIGHT s 12.04[B][3], at 12-99 (1995).  However, the carrier must not
     have any direct or indirect control over the content or selection of the
     primary transmission.  Id.;  17 U.S.C. s 111(a)(3).  Cf. infra part
     I.B.3.a.  In any event, common carriers are granted statutory exemptions
     for liability that might otherwise exist.  Here, Netcom does not fall under
     this statutory exemption, and thus faces the usual strict liability scheme
     that exists for copyright.  Whether a new exemption should be carved out
     for online service providers is to be resolved by Congress, not the
     courts.  Compare Comment, "Online Service Providers and Copyright Law:  The
     Need for Change," 1 SYRACUSE J.LEGIS. & POL'Y 197, 202 (1995) (citing
     recommendations of online service providers for amending the Copyright Act
     to create liability only where a "provider has 'actual knowledge that a
     work that is being or has been transmitted onto, or stored on, its system
     is infringing,' and has the 'ability and authority' to stop the
     transmission, and has, after a reasonable amount of time, allowed the
     infringing activity to continue' ") with IITF Report at 122 (recommending
     that Congress not exempt service providers from strict liability for direct

  Plaintiffs point out that the infringing copies resided for eleven days
 on Netcom's computer and were sent out from it onto the "Information
 Superhighway."  However, under plaintiffs' theory, any storage of a copy that
 occurs in the process of sending a message to the Usenet is an infringement.
 While it is possible that less "damage" would have been done if Netcom had
 heeded plaintiffs' warnings and acted to prevent Erlich's message from being
 forwarded, [FN13] this is not relevant to its direct liability for copying.
 The same argument is true of Klemesrud and any Usenet server.  Whether a
 defendant makes a direct copy that constitutes infringement cannot depend on
 whether it received a warning to delete the message.  See D.C. Comics, Inc.
 v. Mini Gift, 912 F.2d 29, 35 (2d Cir.1990).  This distinction may be relevant
 to contributory infringement, however, where knowledge is an element.  See
 infra part I.B.2.a.

      FN13. The court notes, however, that stopping the distribution of
     information once it is on the Internet is not easy.  The decentralized
     network was designed so that if one link in the chain be closed off, the
     information will be dynamically rerouted through another link.  This was
     meant to allow the system to be used for communication after a catastrophic
     event that shuts down part of it.  Francis Decl. P 4.

  The court will now consider two district court opinions that have addressed
 the liability of BBS operators for infringing files uploaded by subscribers.
                                 d. Playboy Case
  Playboy Enterprises, Inc. v. Frena involved a suit against the operator of
 a small BBS whose system contained files of erotic pictures.  839 F.Supp.
 1552, 1554 (M.D.Fla.1993).  A subscriber of the defendant's BBS had uploaded
 files containing digitized pictures copied from the plaintiff's copyrighted
 magazine, which files remained on the BBS for other subscribers to download.
 Id.  The court did not conclude, as plaintiffs suggest in this case, that
 the BBS is itself liable for the unauthorized reproduction of plaintiffs'
 work;  instead, the court concluded that the BBS operator was liable for
 violating the plaintiff's right to publicly distribute and display copies of
 its work.  Id. at 1556-57.
  [4] In support of their argument that Netcom is directly liable for copying
 plaintiffs' works, plaintiffs cite to the court's conclusion that "[t]here is
 no dispute that [the BBS operator] supplied a product containing unauthorized
 copies of a copyrighted work.  It does not matter that [the BBS operator]
 claims he did not make the copies [him]self."  Id. at 1556.  It is clear
 from the context of this discussion [FN14] that the Playboy court was
 looking only at the exclusive right to distribute copies to the public, where
 liability exists regardless of whether the defendant makes copies.  Here,
 however, plaintiffs do not argue that Netcom is liable for its public
 distribution of copies.  Instead, they claim that Netcom is liable because its
 computers in fact made copies.  Therefore, the above-quoted language has no
 bearing on the issue of direct liability for unauthorized reproductions.
 Notwithstanding Playboy's holding that a BBS operator may be directly liable
 for distributing or displaying to the public copies of protected works, [FN15]
 this court holds *1371 that the storage on a defendant's system of
 infringing copies and retransmission to other servers is not a direct
 infringement by the BBS operator of the exclusive right to reproduce the work
 where such copies are uploaded by an infringing user.  Playboy does not hold
 otherwise. [FN16]

      FN14. The paragraph in Playboy containing the quotation begins with a
     description of the right of public distribution.  Id.  Further, the
     above quoted language is followed by a citation to a discussion of the
     right of public distribution in Jay Dratler, Jr., INTELLECTUAL PROPERTY
     (1991).  This treatise states that "the distribution right may be decisive,
     if, for example, a distributor supplies products containing unauthorized
     copies of a copyrighted work but has not made the copies itself."  Id.
     (citing to Williams Electronics, Inc. v. Artic International, Inc., 685
     F.2d 870, 876 (3d Cir.1982)).  In any event, the Williams holding
     regarding public distribution was dicta, as the court found that the
     defendant had also made copies.  Id.

      FN15. Given the ambiguity in plaintiffs' reference to a violation of the
     right to "publish" and to Playboy, it is possible that plaintiffs are
     also claiming that Netcom infringed their exclusive right to publicly
     distribute their works.  The court will address this argument infra.

      FN16. The court further notes that Playboy has been much criticized.
     See, e.g., L. Rose, NETLAW 91-92 (1995).  The finding of direct
     infringement was perhaps influenced by the fact that there was some
     evidence that defendants in fact knew of the infringing nature of the
     works, which were digitized photographs labeled "Playboy" and "Playmate."

                                    e. Sega Case
  A court in this district addressed the issue of whether a BBS operator
 is liable for copyright infringement where it solicited subscribers to upload
 files containing copyrighted materials to the BBS that were available for
 others to download.  Sega Enterprises Ltd. v. MAPHIA, 857 F.Supp. 679, 683
 (N.D.Cal.1994).  The defendant's "MAPHIA" BBS contained copies of plaintiff
 Sega's video game programs that were uploaded by users.  Id. at 683.  The
 defendant solicited the uploading of such programs and received consideration
 for the right to download files.  Id.  Access was given for a fee or to
 those purchasing the defendant's hardware device that allowed Sega video game
 cartridges to be copied.  Id. at 683-84.  The court granted a preliminary
 injunction against the defendant, finding that plaintiffs had shown a prima
 facie case of direct and contributory infringement.  Id. at 687.  The court
 found that copies were made by unknown users of the BBS when files were
 uploaded and downloaded.  Id.  Further, the court found that the defendant's
 knowledge of the infringing activities, encouragement, direction and provision
 of the facilities through his operation of the BBS constituted contributory
 infringement, even though the defendant did not know exactly when files were
 uploaded or downloaded.  Id. at 686-87.
  This court is not convinced that Sega provides support for a finding of
 direct infringement where copies are made on a defendant's BBS by users who
 upload files.  Although there is some language in Sega regarding direct
 infringement, it is entirely conclusory:
   Sega has established a prima facie case of direct copyright infringement
 under 17 U.S.C. s 501.  Sega has established that unauthorized copies of its
 games are made when such games are uploaded to the MAPHIA bulletin board, here
 with the knowledge of Defendant Scherman.  These games are thereby placed on
 the storage media of the electronic bulletin board by unknown users.
  Id. at 686 (emphasis added).  The court's reference to the "knowledge of
 Defendant" indicates that the court was focusing on contributory infringement,
 as knowledge is not an element of direct infringement.  Perhaps, Sega's
 references to direct infringement and that "copies ... are made" are to the
 direct liability of the "unknown users," as there can be no contributory
 infringement by a defendant without direct infringement by another.  See 3
 NIMMER ON COPYRIGHT s 12.04[A][3][a], at 12-89.  Thus, the court finds that
 neither Playboy nor Sega requires finding Netcom liable for direct
 infringement of plaintiffs' exclusive right to reproduce their works. [FN17]

      FN17. To the extent that Sega holds that BBS operators are directly
     liable for copyright infringement when users upload infringing works to
     their systems, this court respectfully disagrees with the court's holding
     for the reasons discussed above.  Further, such a holding was dicta, as
     there was evidence that the defendant knew of the infringing uploads by
     users and, in fact, actively encouraged such activity, thus supporting the
     contributory infringement theory.  Id. at 683.

                         f. Public Distribution and Display?
  [5] Plaintiffs allege that Netcom is directly liable for making copies of
 their works.  See FAC P 25.  They also allege that Netcom violated their
 exclusive rights to publicly display copies of their works.  FAC PP 44, 51.
 There are no allegations that Netcom violated plaintiffs' exclusive right to
 publicly distribute their works.  However, in their discussion of direct
 infringement, plaintiffs insist that Netcom is liable for "maintain[ing] copies
 of [Erlich's] messages on its server for eleven days for access by its
 subscribers and 'USENET neighbors' " and they compare this case to the
 Playboy case, which discussed *1372 the right of public distribution.
 Opp'n at 7.  Plaintiffs also argued this theory of infringement at oral
 argument.  Tr. [FN18] 5:22.  Because this could be an attempt to argue that
 Netcom has infringed plaintiffs' rights of public distribution and display, the
 court will address these arguments.

      FN18. References to "Tr." are to the reporter's transcript of the June 23,
     1995 hearing on these motions.

  Playboy concluded that the defendant infringed the plaintiff's
 exclusive rights to publicly distribute and display copies of its works.
 839 F.Supp. at 1556-57.  The court is not entirely convinced that the mere
 possession of a digital copy on a BBS that is accessible to some members of the
 public constitutes direct infringement by the BBS operator.  Such a holding
 suffers from the same problem of causation as the reproduction argument.  Only
 the subscriber should be liable for causing the distribution of plaintiffs'
 work, as the contributing actions of the BBS provider are automatic and
 indiscriminate.  Erlich could have posted his messages through countless access
 providers and the outcome would be the same:  anyone with access to Usenet
 newsgroups would be able to read his messages.  There is no logical reason to
 draw a line around Netcom and Klemesrud and say that they are uniquely
 responsible for distributing Erlich's messages.  Netcom is not even the first
 link in the chain of distribution--Erlich had no direct relationship with
 Netcom but dealt solely with Klemesrud's BBS, which used Netcom to gain its
 Internet access.  Every Usenet server has a role in the distribution, so
 plaintiffs' argument would create unreasonable liability.  Where the BBS merely
 stores and passes along all messages sent by its subscribers and others, the
 BBS should not be seen as causing these works to be publicly distributed or
  Even accepting the Playboy court's holding, the case is factually
 distinguishable.  Unlike the BBS in that case, Netcom does not maintain an
 archive of files for its users.  Thus, it cannot be said to be "suppl[ying] a
 product."  In contrast to some of its larger competitors, Netcom does not
 create or control the content of the information available to its subscribers;
 it merely provides access to the Internet, whose content is controlled by no
 single entity.  Although the Internet consists of many different computers
 networked together, some of which may contain infringing files, it does not
 make sense to hold the operator of each computer liable as an infringer merely
 because his or her computer is linked to a computer with an infringing file.
 It would be especially inappropriate to hold liable a service that acts more
 like a conduit, in other words, one that does not itself keep an archive of
 files for more than a short duration.  Finding such a service liable would
 involve an unreasonably broad construction of public distribution and display
 rights.  No purpose would be served by holding liable those who have no ability
 to control the information to which their subscribers have access, even though
 they might be in some sense helping to achieve the Internet's automatic "public
 distribution" and the users' "public" display of files.
                                  g. Conclusion
  The court is not persuaded by plaintiffs' argument that Netcom is directly
 liable for the copies that are made and stored on its computer.  Where the
 infringing subscriber is clearly directly liable for the same act, it does not
 make sense to adopt a rule that could lead to the liability of countless
 parties whose role in the infringement is nothing more than setting up and
 operating a system that is necessary for the functioning of the Internet.  Such
 a result is unnecessary as there is already a party directly liable for causing
 the copies to be made.  Plaintiffs occasionally claim that they only seek to
 hold liable a party that refuses to delete infringing files after they have
 been warned.  However, such liability cannot be based on a theory of direct
 infringement, where knowledge is irrelevant.  The court does not find workable
 a theory of infringement that would hold the entire Internet liable for
 activities that cannot reasonably be deterred.  Billions of bits of data flow
 through the Internet and are necessarily stored on servers throughout the
 network and it is thus practically impossible *1373 to screen out infringing
 bits from noninfringing bits.  Because the court cannot see any meaningful
 distinction (without regard to knowledge) between what Netcom did and what
 every other Usenet server does, the court finds that Netcom cannot be held
 liable for direct infringement.  Cf. IITF Report at 69 (noting uncertainty
 regarding whether BBS operator should be directly liable for reproduction or
 distribution of files uploaded by a subscriber). [FN19]

      FN19. Despite that uncertainty, the IITF Report recommends a strict
     liability paradigm for BBS operators.  See IITF Report at 122-24.  It
     recommends that Congress not exempt on-line service providers from strict
     liability because this would prematurely deprive the system of an incentive
     to get providers to reduce the damage to copyright holders by reducing the
     chances that users will infringe by educating them, requiring
     indemnification, purchasing insurance, and, where efficient, developing
     technological solutions to screening out infringement.  Denying strict
     liability in many cases would leave copyright owners without an adequate
     remedy since direct infringers may act anonymously or pseudonymously or may
     not have the resources to pay a judgment.  Id.;  see also Hardy, supra.

  2. Contributory Infringement
  [6] Netcom is not free from liability just because it did not directly
 infringe plaintiffs' works;  it may still be liable as a contributory
 infringer.  Although there is no statutory rule of liability for infringement
 committed by others,
   [t]he absence of such express language in the copyright statute does not
 preclude the imposition of liability for copyright infringement on certain
 parties who have not themselves engaged in the infringing activity.  For
 vicarious liability is imposed in virtually all areas of the law, and the
 concept of contributory infringement is merely a species of the broader problem
 of identifying the circumstances in which it is just to hold one individual
 accountable for the actions of another.
  Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 435, 104 S.Ct.
 774, 785, 78 L.Ed.2d 574 (1984) (footnote omitted).  Liability for
 participation in the infringement will be established where the defendant,
 "with knowledge of the infringing activity, induces, causes or materially
 contributes to the infringing conduct of another."  Gershwin Publishing
 Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir.1971).
                       a. Knowledge of Infringing Activity
  [7] Plaintiffs insist that Netcom knew that Erlich was infringing their
 copyrights at least after receiving notice from plaintiffs' counsel indicating
 that Erlich had posted copies of their works onto a.r.s. through Netcom's
 system.  Despite this knowledge, Netcom continued to allow Erlich to post
 messages to a.r.s. and left the allegedly infringing messages on its system so
 that Netcom's subscribers and other Usenet servers could access them.  Netcom
 argues that it did not possess the necessary type of knowledge because (1) it
 did not know of Erlich's planned infringing activities when it agreed to lease
 its facilities to Klemesrud, (2) it did not know that Erlich would infringe
 prior to any of his postings, (3) it is unable to screen out infringing
 postings before they are made, and (4) its knowledge of the infringing nature
 of Erlich's postings was too equivocal given the difficulty in assessing
 whether the registrations were valid and whether Erlich's use was fair.  The
 court will address these arguments in turn.
  [8] Netcom cites cases holding that there is no contributory infringement by
 the lessors of premises that are later used for infringement unless the lessor
 had knowledge of the intended use at the time of the signing of the lease.
 See, e.g. Deutsch v. Arnold, 98 F.2d 686, 688 (2d Cir.1938). [FN20]  The
 contribution to the infringement by the defendant in Deutsch was merely to
 lease use of the premises to the infringer.  Here, Netcom not only leases space
 but also serves as an access provider, which includes the storage and
 transmission of information necessary to facilitate *1374 Erlich's postings
 to a.r.s.  Unlike a landlord, Netcom retains some control over the use of its
 system.  See infra part I.B.3.a.  Thus, the relevant time frame for knowledge
 is not when Netcom entered into an agreement with Klemesrud.  It should be when
 Netcom provided its services to allow Erlich to infringe plaintiffs'
 copyrights.  Cf. Screen Gems-Columbia Music, Inc. v. Mark-Fi Records, Inc.,
 256 F.Supp. 399, 403 (S.D.N.Y.1966) (analyzing knowledge at time that defendant
 rendered its particular service).  It is undisputed that Netcom did not know
 that Erlich was infringing before it received notice from plaintiffs.  Netcom
 points out that the alleged instances of infringement occurring on Netcom's
 system all happened prior to December 29, 1994, the date on which Netcom first
 received notice of plaintiffs' infringement claim against Erlich.  See Pisani
 Feb. 8, 1995 Decl., P 6 & Exs. (showing latest posting made on December 29,
 1994);  McShane Feb. 8, 1995 Decl.;  FAC PP 36-38 & Ex. I.  Thus, there is no
 question of fact as to whether Netcom knew or should have known of Erlich's
 infringing activities that occurred more than 11 days before receipt of the
 December 28, 1994 letter.

      FN20. Adopting such a rule would relieve a BBS of liability for failing to
     take steps to remove infringing works from its system even after being
     handed a court's order finding infringement.  This would be undesirable and
     is inconsistent with Netcom's counsel's admission that Netcom would have an
     obligation to act in such circumstances.  Tr. 35:25;  see also Tr. 42:18-

  However, the evidence reveals a question of fact as to whether Netcom
 knew or should have known that Erlich had infringed plaintiffs' copyrights
 following receipt of plaintiffs' letter.  Because Netcom was arguably
 participating in Erlich's public distribution of plaintiffs' works, there is a
 genuine issue as to whether Netcom knew of any infringement by Erlich before it
 was too late to do anything about it.  If plaintiffs can prove the knowledge
 element, Netcom will be liable for contributory infringement since its failure
 to simply cancel Erlich's infringing message and thereby stop an infringing
 copy from being distributed worldwide constitutes substantial participation in
 Erlich's public distribution of the message.  Cf. R.T. Nimmer, THE LAW OF
 COMPUTER TECHNOLOGY P 15.11B, at S15-42 (2d ed. 1994) (opining that "where
 information service is less directly involved in the enterprise of creating
 unauthorized copies, a finding of contributory infringement is not likely").
  [9] Netcom argues that its knowledge after receiving notice of Erlich's
 alleged infringing activities was too equivocal given the difficulty in
 assessing whether registrations are valid and whether use is fair.  Although a
 mere unsupported allegation of infringement by a copyright owner may not
 automatically put a defendant on notice of infringing activity, Netcom's
 position that liability must be unequivocal is unsupportable.  While perhaps
 the typical infringing activities of BBSs will involve copying software, where
 BBS operators are better equipped to judge infringement, the fact that this
 involves written works should not distinguish it.  Where works contain
 copyright notices within them, as here, it is difficult to argue that a
 defendant did not know that the works were copyrighted.  To require proof of
 valid registrations would be impractical and would perhaps take too long to
 verify, making it impossible for a copyright holder to protect his or her works
 in some cases, as works are automatically deleted less than two weeks after
 they are posted.  The court is more persuaded by the argument that it is beyond
 the ability of a BBS operator to quickly and fairly determine when a use is not
 infringement where there is at least a colorable claim of fair use.  Where a
 BBS operator cannot reasonably verify a claim of infringement, either because
 of a possible fair use defense, the lack of copyright notices on the copies, or
 the copyright holder's failure to provide the necessary documentation to show
 that there is a likely infringement, the operator's lack of knowledge will be
 found reasonable and there will be no liability for contributory infringement
 for allowing the continued distribution of the works on its system.
  Since Netcom was given notice of an infringement claim before Erlich had
 completed his infringing activity, there may be a question of fact as to
 whether Netcom knew or should have known that such activities were infringing.
 Given the context of a dispute between a former minister and a church he is
 criticizing, Netcom may be able to show that its lack of knowledge that Erlich
 was infringing was reasonable.  However, Netcom admits that it did not even
 look at the postings once given notice and that had it looked at the copyright
 notice and statements *1375 regarding authorship, it would have triggered an
 investigation into whether there was infringement.  Kobrin June 7, 1995 Decl.,
 Ex. H, Hoffman Depo. At 125-128.  These facts are sufficient to raise a
 question as to Netcom's knowledge once it received a letter from plaintiffs on
 December 29, 1994. [FN21]

      FN21. The court does not see the relevance of plaintiffs' argument that
     Netcom's failure to investigate their claims of infringement or take
     actions against Erlich was a departure from Netcom's normal procedure.  A
     policy and practice of acting to stop postings where there is inadequate
     knowledge of infringement in no way creates a higher standard of care under
     the Copyright Act as to subsequent claims of user infringement.

                            b. Substantial Participation
  [10] Where a defendant has knowledge of the primary infringer's
 infringing activities, it will be liable if it "induces, causes or materially
 contributes to the infringing conduct of" the primary infringer.  Gershwin
 Publishing, 443 F.2d at 1162.  Such participation must be substantial.
 Apple Computer, Inc. v. Microsoft Corp., 821 F.Supp. 616, 625
 (N.D.Cal.1993), aff'd, 35 F.3d 1435 (9th Cir.1994);  Demetriades v.
 Kaufmann, 690 F.Supp. 289, 294 (S.D.N.Y.1988).
  [11] Providing a service that allows for the automatic distribution of all
 Usenet postings, infringing and noninfringing, goes well beyond renting a
 premises to an infringer.  See Fonovisa, Inc. v. Cherry Auction, Inc., 847
 F.Supp. 1492, 1496 (E.D.Cal.1994) (finding that renting space at swap meet to
 known bootleggers not "substantial participation" in the infringers'
 activities).  It is more akin to the radio stations that were found liable for
 rebroadcasting an infringing broadcast.  See, e.g., Select Theatres Corp. v.
 Ronzoni Macaroni Corp., 59 U.S.P.Q. 288, 291 (S.D.N.Y.1943).  Netcom allows
 Erlich's infringing messages to remain on its system and be further distributed
 to other Usenet servers worldwide.  It does not completely relinquish control
 over how its system is used, unlike a landlord.  Thus, it is fair, assuming
 Netcom is able to take simple measures to prevent further damage to plaintiffs'
 copyrighted works, to hold Netcom liable for contributory infringement where
 Netcom has knowledge of Erlich's infringing postings yet continues to aid in
 the accomplishment of Erlich's purpose of publicly distributing the postings.
 Accordingly, plaintiffs do raise a genuine issue of material fact as to their
 theory of contributory infringement as to the postings made after Netcom was on
 notice of plaintiffs' infringement claim.
  3. Vicarious Liability
  [12][13] Even if plaintiffs cannot prove that Netcom is contributorily
 liable for its participation in the infringing activity, it may still seek to
 prove vicarious infringement based on Netcom's relationship to Erlich.  A
 defendant is liable for vicarious liability for the actions of a primary
 infringer where the defendant (1) has the right and ability to control the
 infringer's acts and (2) receives a direct financial benefit from the
 infringement.  See Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304,
 306 (2d Cir.1963).  Unlike contributory infringement, knowledge is not an
 element of vicarious liability.  3 NIMMER ON COPYRIGHT s 12.04[A][1], at 12-
                         a. Right and Ability To Control
  [14] The first element of vicarious liability will be met if plaintiffs can
 show that Netcom has the right and ability to supervise the conduct of its
 subscribers.  Netcom argues that it does not have the right to control its
 users' postings before they occur.  Plaintiffs dispute this and argue that
 Netcom's terms and conditions, to which its subscribers [FN22] must agree,
 specify that Netcom reserves the right to take remedial action against
 subscribers.  See, e.g., Francis Depo. at 124-126.  Plaintiffs argue that
 under "netiquette," the informal rules and customs that have developed on the
 Internet, violation of copyrights by a user is unacceptable and the access
 provider has a duty take measures to prevent this;  where the immediate service
 *1376 provider fails, the next service provider up the transmission stream
 must act.  See Castleman Decl. PP 32-43.  Further evidence of Netcom's right to
 restrict infringing activity is its prohibition of copyright infringement and
 its requirement that its subscribers indemnify it for any damage to third
 parties.  See Kobrin May 5, 1995 Decl., Ex. G.  Plaintiffs have thus raised a
 question of fact as to Netcom's right to control Erlich's use of its services.

      FN22. In this case, Netcom is even further removed from Erlich's
     activities.  Erlich was in a contractual relationship only with Klemesrud.
     Netcom thus dealt directly only with Klemesrud.  However, it is not crucial
     that Erlich does not obtain access directly through Netcom.  The issue is
     Netcom's right and ability to control the use of its system, which it can
     do indirectly by controlling Klemesrud's use.

  Netcom argues that it could not possibly screen messages before they
 are posted given the speed and volume of the data that goes through its
 system.  Netcom further argues that it has never exercised control over the
 content of its users' postings.  Plaintiffs' expert opines otherwise, stating
 that with an easy software modification Netcom could identify postings that
 contain particular words or come from particular individuals.  Castleman
 Decl. PP 39-43;  see also Francis Depo. at 262-63;  Hoffman Depo. at 173-74,
 178. [FN23]  Plaintiffs further dispute Netcom's claim that it could not limit
 Erlich's access to Usenet without kicking off all 500 subscribers of
 Klemesrud's BBS.  As evidence that Netcom has in fact exercised its ability to
 police its users' conduct, plaintiffs cite evidence that Netcom has acted to
 suspend subscribers' accounts on over one thousand occasions.  See Ex. J
 (listing suspensions of subscribers by Netcom for commercial advertising,
 posting obscene materials, and off-topic postings).  Further evidence shows
 that Netcom can delete specific postings.  See Tr. 9:16.  Whether such
 sanctions occurred before or after the abusive conduct is not material to
 whether Netcom can exercise control.  The court thus finds that plaintiffs have
 raised a genuine issue of fact as to whether Netcom has the right and ability
 to exercise control over the activities of its subscribers, and of Erlich in

      FN23. However, plaintiffs submit no evidence indicating Netcom, or anyone,
     could design software that could determine whether a posting is infringing.

                             b. Direct Financial Benefit
  [15] Plaintiffs must further prove that Netcom receives a direct financial
 benefit from the infringing activities of its users.  For example, a landlord
 who has the right and ability to supervise the tenant's activities is
 vicariously liable for the infringements of the tenant where the rental amount
 is proportional to the proceeds of the tenant's sales.  Shapiro, Bernstein,
 316 F.2d at 306.  However, where a defendant rents space or services on a fixed
 rental fee that does not depend on the nature of the activity of the lessee,
 courts usually find no vicarious liability because there is no direct financial
 benefit from the infringement.  See, e.g., Roy Export Co. v. Trustees of
 Columbia University, 344 F.Supp. 1350, 1353 (S.D.N.Y.1972) (finding no
 vicarious liability of university because no financial benefit from allowing
 screening of bootlegged films);  Fonovisa, 847 F.Supp. at 1496 (finding swap
 meet operators did not financially benefit from fixed fee);  see also Kelly
 Tickle, Comment, The Vicarious Liability of Electronic Bulletin Board Operators
 for the Copyright Infringement Occurring on Their Bulletin Boards, 80 IOWA
 L.REV. 391, 415 (1995) (arguing that BBS operators "lease cyberspace" and
 should thus be treated like landlords, who are not liable for infringement that
 occurs on their premises).
  Plaintiffs argue that courts will find a financial benefit despite fixed
 fees.  In Polygram International Publishing, Inc. v. Nevada/TIG, Inc., 855
 F.Supp. 1314, 1330-33 (D.Mass.1994), the court found a trade show organizer
 vicariously liable for the infringing performance of an exhibitor because,
 although the infringement did not affect the fixed rental fee received by the
 organizers, the organizers benefitted from the performances, which helped make
 the show a financial success.  But see Artists Music, Inc. v. Reed
 Publishing, Inc., 31 U.S.P.Q.2d 1623, 1994 WL 191643, at *6
 (S.D.N.Y.1994) (finding no vicarious liability for trade show organizers where
 revenues not increased because of infringing music performed by exhibitors).
 Plaintiffs cite two other cases where, despite fixed fees, defendants received
 financial benefits from allowing groups to perform infringing works over the
 radio without having to get an ASCAP license, which minimized the defendants'
 expenses.  See Boz Scaggs Music v. KND Corp, 491 F.Supp. 908, 913
 (D.Conn.1980);  Realsongs v. Gulf Broadcasting *1377 Corp., 824 F.Supp.
 89, 92 (M.D.La.1993).  Plaintiffs' cases are factually distinguishable.
 Plaintiffs cannot provide any evidence of a direct financial benefit received
 by Netcom from Erlich's infringing postings.  Unlike Shapiro, Bernstein, and
 like Fonovisa, Netcom receives a fixed fee.  There is no evidence that
 infringement by Erlich, or any other user of Netcom's services, in any way
 enhances the value of Netcom's services to subscribers or attracts new
 subscribers.  Plaintiffs argue, however, that Netcom somehow derives a benefit
 from its purported "policy of refusing to take enforcement actions against its
 subscribers and others who transmit infringing messages over its computer
 networks."  Opp'n at 18.  Plaintiffs point to Netcom's advertisements that,
 compared to competitors like CompuServe and America Online, Netcom provides
 easy, regulation-free Internet access.  Plaintiffs assert that Netcom's policy
 attracts copyright infringers to its system, resulting in a direct financial
 benefit.  The court is not convinced that such an argument, if true, would
 constitute a direct financial benefit to Netcom from Erlich's infringing
 activities.  See Fonovisa, 847 F.Supp. at 1496 (finding no direct financial
 benefit despite argument that lessees included many vendors selling counterfeit
 goods and that clientele sought "bargain basement prices").  Further,
 plaintiffs' argument is not supported by probative evidence.  The only
 "evidence" plaintiffs cite for their supposition is the declaration of their
 counsel, Elliot Abelson, who states that
   [o]n April 7, 1995, in a conversation regarding Netcom's position
 related to this case, Randolf Rice, attorney for Netcom, informed me that
 Netcom's executives are happy about the publicity it is receiving in the press
 as a result of this case.  Mr. Rice also told me that Netcom was concerned that
 it would lose business if it took action against Erlich or Klemesrud in
 connection with Erlich's infringements.
  Abelson Decl. P 2.  Netcom objects to this declaration as hearsay and as
 inadmissible evidence of statements made in compromise negotiations.
 Fed.R.Ev. 801, 408.  Whether or not this declaration is admissible, it
 does not support plaintiffs' argument that Netcom either has a policy of not
 enforcing violations of copyright laws by its subscribers or, assuming such a
 policy exists, that Netcom's policy directly financially benefits Netcom, such
 as by attracting new subscribers.  Because plaintiffs have failed to raise a
 question of fact on this vital element, their claim of vicarious liability
 fails.  See Roy Export, 344 F.Supp. at 1353.
  4. First Amendment Argument
  [16] Netcom argues that plaintiffs' theory of liability contravenes the
 first amendment, as it would chill the use of the Internet because every access
 provider or user would be subject to liability when a user posts an infringing
 work to a Usenet newsgroup.  While the court agrees that an overbroad
 injunction might implicate the First Amendment, see In re Capital
 Cities/ABC, Inc., 918 F.2d 140, 144 (11th Cir.1990), [FN24] imposing liability
 for infringement where it is otherwise appropriate does not necessarily raise a
 First Amendment issue.  The copyright concepts of the idea/expression dichotomy
 and the fair use defense balance the important First Amendment rights with the
 constitutional authority for "promot[ing] the progress of science and useful
 arts," U.S. CONST. art. I, s 8, cl. 8;  1 NIMMER ON COPYRIGHT s 1.10[B], at
 1-71 to -83.  Netcom argues that liability here would force Usenet servers
 to perform the impossible--screening all the information that comes through
 their systems.  However, the court is not convinced that Usenet servers are
 directly liable for causing a copy to be made, and absent evidence of knowledge
 and participation or control and direct profit, they will not be contributorily
 or vicariously liable.  If Usenet servers were responsible for screening all
 messages coming through their systems, this could have a serious chilling
 effect on what some say may turn out to be the best public forum for free
 speech yet *1378 devised.  See Jerry Berman & Daniel J. Weitzner, Abundance
 and User Control:  Renewing the Democratic Heart of the First Amendment in the
 Age of Interactive Media, 104 YALE L.J. 1619, 1624 (1995) (praising
 decentralized networks for opening access to all with no entity stifling
 independent sources of speech);  Rose, supra, at 4. [FN25]  Finally, Netcom
 admits that its First Amendment argument is merely a consideration in the fair
 use argument, which the court will now address.  See Reply at 24.

      FN24. For example, plaintiffs' demand that the court order Netcom to
     terminate Klemesrud's BBS's access to the Internet, thus depriving all 500
     of his subscribers, would be overbroad, as it would unnecessarily keep
     hundreds of users, against whom there are no allegations of copyright
     infringement, from accessing a means of speech.  The overbroadness is even
     more evident if, as plaintiffs contend, there is a way to restrict only
     Erlich's access to a.r.s.

      FN25. Netcom additionally argues that plaintiffs' theory of liability
     would have a chilling effect on users, who would be liable for merely
     browsing infringing works.  Browsing technically causes an infringing copy
     of the digital information to be made in the screen memory.  MAI holds
     that such a copy is fixed even when information is temporarily placed in
     RAM, such as the screen RAM.  The temporary copying involved in browsing is
     only necessary because humans cannot otherwise perceive digital
     information.  It is the functional equivalent of reading, which does not
     implicate the copyright laws and may be done by anyone in a library without
     the permission of the copyright owner.  However, it can be argued that the
     effects of digital browsing are different because millions can browse a
     single copy of a work in cyberspace, while only one can read a library's
     copy at a time.
     Absent a commercial or profit-depriving use, digital browsing is probably a
     fair use;  there could hardly be a market for licensing the temporary
     copying of digital works onto computer screens to allow browsing.  Unless
     such a use is commercial, such as where someone reads a copyrighted work
     online and therefore decides not to purchase a copy from the copyright
     owner, fair use is likely.  Until reading a work online becomes as easy and
     convenient as reading a paperback, copyright owners do not have much to
     fear from digital browsing and there will not likely be much market effect.
     Additionally, unless a user has reason to know, such as from the title of a
     message, that the message contains copyrighted materials, the browser will
     be protected by the innocent infringer doctrine, which allows the court to
     award no damages in appropriate circumstances.  In any event, users should
     hardly worry about a finding of direct infringement;  it seems highly
     unlikely from a practical matter that a copyright owner could prove such
     infringement or would want to sue such an individual.

  5. Fair Use Defense
  [17] Assuming plaintiffs can prove a violation of one of the
 exclusive rights guaranteed in section 106, there is no infringement if the
 defendant's use is fair under section 108.  The proper focus here is on whether
 Netcom's actions qualify as fair use, not on whether Erlich himself engaged in
 fair use;  the court has already found that Erlich was not likely entitled to
 his own fair use defense, as his postings contained large portions of
 plaintiffs' published and unpublished works quoted verbatim with little added
  Although the author has the exclusive rights to reproduce, publicly
 distribute, and publicly display a copyrighted work under section 106, these
 rights are limited by the defense of "fair use."  17 U.S.C. s 107.  The
 defense "permits and requires courts to avoid rigid application of the
 copyright statute when, on occasion, it would stifle the very creativity which
 that law is designed to foster."  Campbell v. Acuff-Rose Music, Inc., ---
 U.S. ----, ----, 114 S.Ct. 1164, 1170, 127 L.Ed.2d 500 (1994) (citation
 omitted).  Congress has set out four nonexclusive factors to be considered in
 determining the availability of the fair use defense:
   (1) the purpose and character of the use, including whether such use is of a
 commercial nature or is for nonprofit educational purposes;
   (2) the nature of the copyrighted work;
   (3) the amount and substantiality of the portion used in relation to the
 copyrighted work as a whole;  and
   (4) the effect of the use upon the potential market for or value of the
 copyrighted work.
  17 U.S.C. s 107.  The fair use doctrine calls for a case-by-case
 analysis.  Campbell, 510 U.S. at ----, 114 S.Ct. at 1170.  All of the
 factors "are to be explored, and the results weighed together, in light of the
 purposes of copyright."  Id. at ---- - ----, 114 S.Ct. at 1170-71.
               a. First Factor:  Purpose and Character of the Use
  The first statutory factor looks to the purpose and character of the
 defendant's use.  Netcom's use of plaintiffs' works is to carry out its
 commercial function as an Internet access provider.  Such a use, regardless of
 *1379 the underlying uses made by Netcom's subscribers, is clearly
 commercial.  Netcom's use, though commercial, also benefits the public in
 allowing for the functioning of the Internet and the dissemination of other
 creative works, a goal of the Copyright Act.  See Sega v. Accolade, 977 F.2d
 1510, 1523 (9th Cir.1992) (holding that intermediate copying to accomplish
 reverse engineering of software fair use despite commercial nature of
 activity;  considering public benefit of use).  The Campbell Court
 emphasized that a commercial use does not dictate against a finding of fair
 use, as most of the uses listed in the statute are "generally conducted for
 profit in this country."  510 U.S. at ----, 114 S.Ct. at 1174.  Although
 Netcom gains financially from its distribution of messages to the Internet, its
 financial incentive is unrelated to the infringing activity and the defendant
 receives no direct financial benefit from the acts of infringement.  Therefore,
 the commercial nature of the defendant's activity should not be dispositive.
 Moreover, there is no easy way for a defendant like Netcom to secure a license
 for carrying every possible type of copyrighted work onto the Internet.  Thus,
 it should not be seen as "profit[ing] from the exploitation of the copyrighted
 work without paying the customary prices."  Harper & Row, Publishers, Inc.
 v. Nation Enterprises, 471 U.S. 539, 562, 105 S.Ct. 2218, 2231, 85 L.Ed.2d 588
 (1985).  It is undisputed that, unlike the defendants in Playboy and
 Sega, Netcom does not directly gain anything from the content of the
 information available to its subscribers on the Internet.  See supra part
 I.B.3.b.  Because it does not itself provide the files or solicit infringing
 works, its purpose is different from that of the defendants in Playboy and
 Sega.  Because Netcom's use of copyrighted materials served a completely
 different function than that of the plaintiffs, this factor weighs in Netcom's
 favor, see Hustler Magazine, Inc. v. Moral Majority, Inc., 606 F.Supp. 1526,
 1535 (C.D.Cal.1985), aff'd, 796 F.2d 1148 (9th Cir.1986), notwithstanding
 the otherwise commercial nature of Netcom's use.
                b. Second Factor:  Nature of the Copyrighted Work
  The second factor focuses on two different aspects of the copyrighted
 work:  whether it is published or unpublished and whether it is informational
 or creative. [FN26]  Plaintiffs rely on the fact that some of the works
 transmitted by Netcom were unpublished and some were arguably highly creative
 and original.  However, because Netcom's use of the works was merely to
 facilitate their posting to the Usenet, which is an entirely different purpose
 than plaintiffs' use (or, for that matter, Erlich's use), the precise nature of
 those works is not important to the fair use determination.  See Campbell,
 510 U.S. at ----, 114 S.Ct. at 1175 (finding creative nature of work copied
 irrelevant where copying for purposes of parody);  Hustler Magazine, 606
 F.Supp. at 1537;  3 NIMMER ON COPYRIGHT s 13.05[A][2][a], at 13-177 ("It is
 sometimes necessary, in calibrating the fair use defense, to advert to the
 defendant's usage simultaneously with the nature of the plaintiff's work.").

      FN26. A recent report noted that a third aspect of the nature of the work
     may be relevant:  whether it is in digital or analog form.  IITF Report at
     78.  Although the copyright laws were developed before digital works
     existed, they have certainly evolved to include such works, and this court
     can see no reason why works should deserve less protection because they are
     in digital form, especially where, as here, they were not put in such form
     by plaintiffs.

           c. Third Factor:  Amount and Substantiality of the Portion Used
  The third factor concerns both the percentage of the original work that was
 copied and whether that portion constitutes the "heart" of the copyrighted
 work.  Harper & Row, 471 U.S. at 564-65, 105 S.Ct. at 2232-33.  Generally,
 no more of a work may be copied than is necessary for the particular use.  See
 Supermarket of Homes v. San Fernando Valley Board of Realtors, 786 F.2d
 1400, 1409 (9th Cir.1986).  The copying of an entire work will ordinarily
 militate against a finding of fair use, although this is not a per se rule.
 Sony, 464 U.S. at 449-450, 104 S.Ct. at 792-793.
  [18] Plaintiffs have shown that Erlich's postings copied substantial amounts
 of the originals or, in some cases, the entire works.  Netcom, of course, made
 available to the *1380 Usenet exactly what was posted by Erlich.  As the
 court found in Sony, the mere fact that all of a work is copied is not
 determinative of the fair use question, where such total copying is essential
 given the purpose of the copying.  Id. (allowing total copying in context of
 time-shifting copyrighted television shows by home viewers).  For example,
 where total copying was necessary to carry out the defendants' beneficial
 purpose of reverse engineering software to get at the ideas found in the source
 code, the court found fair use.  Sega v. Accolade, 977 F.2d at 1526-27.
 Here, Netcom copied no more of plaintiffs' works than necessary to function as
 a Usenet server.  Like the defendant in Sega v. Accolade, Netcom had no
 practical alternative way to carry out its socially useful purpose;  a Usenet
 server must copy all files, since the prescreening of postings for potential
 copyright infringement is not feasible.  977 F.2d at 1526.  Accordingly,
 this factor should not defeat an otherwise valid defense.
   d. Fourth Factor:  Effect of the Use upon the Potential Market for the Work
  The fourth and final statutory factor concerns "the extent of market harm
 caused by the particular actions of the alleged infringer" and " 'whether
 unrestricted and widespread conduct of the sort engaged in by the defendant ...
 would result in a substantially adverse impact on the potential market' for the
 original."  Campbell, 510 U.S. at ----, 114 S.Ct. at 1177 (quoting 3 NIMMER
 ON COPYRIGHT s 13.05[A][4] ) (remanding for consideration of this factor).
 Although the results of all four factors must be weighed together, id.
 at ----, 114 S.Ct. at 1171, the fourth factor is the most important
 consideration, 3 NIMMER ON COPYRIGHT s 13.05[A][4], at 13-188 to -189
 (citing Harper & Row, 471 U.S. at 566, 105 S.Ct. at 2233), 13-207 (observing
 that fourth factor explains results in recent Supreme Court cases).
  Netcom argues that there is no evidence that making accessible
 plaintiffs' works, which consist of religious scriptures and policy letters,
 will harm the market for these works by preventing someone from participating
 in the Scientology religion because they can view the works on the Internet
 instead.  Further, Netcom notes that the relevant question is whether the
 postings fulfill the demand of an individual who seeks to follow the religion's
 teachings, and not whether they suppress the desire of an individual who is
 affected by the criticism posted by Erlich.  Netcom argues that the court must
 focus on the "normal market" for the copyrighted work, which in this case is
 through a Scientology-based organization.  Plaintiffs respond that the
 Internet's extremely widespread distribution--where more than 25 million people
 worldwide have access--multiplies the effects of market substitution.  In
 support of its motion for a preliminary injunction against Erlich, plaintiffs
 submitted declarations regarding the potential effect of making the Church's
 secret scriptures available over the Internet.  Plaintiffs point out that,
 although the Church currently faces no competition, groups in the past have
 used stolen copies of the Church's scriptures in charging for Scientology-like
 religious training.  See, e.g., Bridge Publications, Inc. v. Vien, 827
 F.Supp. 629, 633-34 (S.D.Cal.1993);  Religious Technology Center v.
 Wollersheim, 796 F.2d 1076, 1078-79 (9th Cir.1986), cert. denied, 479 U.S.
 1103, 107 S.Ct. 1336, 94 L.Ed.2d 187 (1987).  This evidence raises a genuine
 issue as to the possibility that Erlich's postings, made available over the
 Internet by Netcom, could hurt the market for plaintiffs' works.
                             e. Equitable Balancing
  In balancing the various factors, the court finds that there is a question of
 fact as to whether there is a valid fair use defense.  Netcom has not justified
 its copying plaintiffs' works to the extent necessary to establish entitlement
 to summary judgment in light of evidence that it knew that Erlich's use was
 infringing and had the ability to prevent its further distribution.  While
 copying all or most of a work will often preclude fair use, courts have
 recognized the fair use defense where the purpose of the use is beneficial to
 society, complete copying is necessary given the type of use, the purpose of
 the use is completely different than the purpose of the original, and there is
 no evidence that the use will significantly harm the market for the original.
 This case is distinguishable from those cases recognizing fair use
 *1381 despite total copying.  In Sony, the home viewers' use was not
 commercial and the viewers were allowed to watch the entire shows for free.
 In Sega v. Accolade, the complete copying was necessitated to access the
 unprotectable idea in the original.  Here, plaintiffs never gave either Erlich
 or Netcom permission to view or copy their works.  Netcom's use has some
 commercial aspects.  Further, Netcom's copying is not for the purpose of
 getting to the unprotected idea behind plaintiffs' works.  Although plaintiffs
 may ultimately lose on their infringement claims if, among other things, they
 cannot prove that posting their copyrighted works will harm the market for
 these works, see Religious Technology Center v. Lerma, 897 F.Supp. 260, 263
 (E.D.Va.1995) (finding fair use defense exists where no separate market for
 works because Scientologists cannot effectively use them without the Church's
 supervision);  Religious Technology Center v. F.A.C.T.NET, Inc., 901 F.Supp.
 1519, 1522-26 (D.Colo. September 15, 1995) (finding no showing of a potential
 effect on the market for plaintiffs' works), fair use presents a factual
 question on which plaintiffs have at least raised a genuine issue of fact.
 Accordingly, the court does not find that Netcom's use was fair as a matter of
  C. Conclusion
  The court finds that plaintiffs have raised a genuine issue of fact
 regarding whether Netcom should have known that Erlich was infringing their
 copyrights after receiving a letter from plaintiffs, whether Netcom
 substantially participated in the infringement, and whether Netcom has a valid
 fair use defense.  Accordingly, Netcom is not entitled to summary judgment on
 plaintiffs' claim of contributory copyright infringement.  However, plaintiffs'
 claims of direct and vicarious infringement fail.
  A. Standards for Judgment on the Pleadings
  A motion for judgment on the pleadings pursuant to Federal Rule of Civil
 Procedure 12(c) is directed at the legal sufficiency of a party's allegations.
 A judgment on the pleadings is proper when there are no issues of material
 fact, and the moving party is entitled to judgment as a matter of law.
 General Conference Corp. v. Seventh Day Adventist Church, 887 F.2d 228, 230
 (9th Cir.1989), cert. denied, 493 U.S. 1079, 110 S.Ct. 1134, 107 L.Ed.2d
 1039 (1990);  Hal Roach Studios v. Richard Feiner & Co., 896 F.2d 1542,
 1550 (9th Cir.1989).  In ruling on a motion for judgment on the pleadings,
 district courts must accept all material allegations of fact alleged in the
 complaint as true, and resolve all doubts in favor of the nonmoving party.
 Id.  The court need not accept as true conclusory allegations or legal
 characterizations.  Western Mining Council v. Watt, 643 F.2d 618, 624 (9th
 Cir.1981).  Materials submitted with the complaint may be considered.  Hal
 Roach Studios, 896 F.2d at 1555.  All affirmative defenses must clearly appear
 on the face of the complaint.  McCalden v. California Library Ass'n, 955
 F.2d 1214, 1219 (9th Cir.1990).
  B. Copyright Infringement
  1. Direct Infringement
  [19] First, plaintiffs allege that Klemesrud directly infringed their
 copyrights by "reproduc[ing] and publish[ing] plaintiffs' works."  FAC P 35.
 The complaint alleges that "Erlich ... caused copies of [plaintiffs' works] to
 be published, without authorization, on the BBS computer maintained by
 Klemesrud" and that "Klemesrud's BBS computer, after receiving and storing for
 some period of time the copies of the Works sent to it from Erlich, created
 additional copies of the works and sent these copies to Netcom's computer."
 FAC P 34.  The allegations against Klemesrud fail for the same reason the court
 found that Netcom was entitled to judgment as a matter of law on the direct
 infringement claim.  There are no allegations that Klemesrud took any
 affirmative steps to cause the copies to be made.  The allegations, in fact,
 merely say that "Erlich ... caused" the copies to be made and that Klemesrud's
 computer, not Klemesrud himself, created additional copies.  There are
 *1382 no allegations in the complaint to overcome the missing volitional or
 causal elements necessary to hold a BBS operator directly liable for copying
 that is automatic and caused by a subscriber.  See supra part I.B.1.
  2. Contributory Infringement
  [20] Second, the complaint alleges that Klemesrud is contributorily
 liable.  FAC P 35.  It further alleges that plaintiffs repeatedly objected to
 Klemesrud's actions and informed him that Erlich's (and his) actions
 constituted infringement.  FAC P 36.  A letter attached to the complaint
 indicates that such notice was first sent to Klemesrud on December 30, 1994.
 FAC, Ex. I.  Despite the warnings, Klemesrud allegedly refused to assist
 plaintiffs in compelling Erlich to stop his postings and refused to stop
 receiving, copying, transmitting and publishing the postings.  FAC P 38.  To
 state a claim for contributory infringement, plaintiffs must allege that
 Klemesrud knew or should have known of Erlich's infringing actions at the time
 they occurred and yet substantially participated by "induc[ing], caus[ing] or
 materially contribut[ing] to the infringing conduct" of Erlich.  Gershwin,
 443 F.2d at 1162.  For the reasons discussed in connection with Netcom's
 motion, the court finds plaintiffs' pleadings sufficient to raise an issue of
 contributory infringement.
  3. Vicarious Liability
  [21] The third theory of liability argued by plaintiffs, vicarious
 liability, is not specifically mentioned in the complaint.  Nonetheless, this
 theory fails as a matter of law because there are insufficient factual
 allegations to support it.  Plaintiffs must show that Klemesrud had the right
 and ability to control Erlich's activities and that Klemesrud had a direct
 financial interest in Erlich's infringement.  Shapiro, Bernstein, 316 F.2d
 at 306.  A letter from Klemesrud to plaintiffs' counsel states that Klemesrud
 would comply with plaintiffs' request to take actions against Erlich by
 deleting the infringing postings from his BBS if plaintiffs mailed him the
 original copyrighted work and he found that they matched the allegedly
 infringing posting.  FAC, Ex. J.  Plaintiffs argue that this letter indicates
 Klemesrud's ability and right to control Erlich's activities on his BBS.  The
 court finds that this letter, construed in the light most favorable to
 plaintiffs, raises a question as to whether plaintiffs can show that Klemesrud,
 in the operation of his BBS, could control Erlich's activities, such as by
 deleting infringing postings.  However, plaintiffs' failure to allege a
 financial benefit is fatal to their claim for vicarious liability.
  The complaint alleges that Klemesrud is in the business of operating a BBS for
 subscribers for a fee.  The complaint does not say how the fee is collected,
 but there are no allegations that Klemesrud's fee, or any other direct
 financial benefit received by Klemesrud, varies in any way with the content of
 Erlich's postings.  Nothing in or attached to the complaint states that
 Klemesrud in any way profits from allowing Erlich to infringe copyrights.
 Plaintiffs are given 30 days leave in which to amend to cure this pleadings
 deficiency if they can do so in good faith.
  A. Legal Standards for a Preliminary Injunction
  [22][23] A party seeking a preliminary injunction may establish its
 entitlement to equitable relief by showing either (1) a combination of probable
 success on the merits and the possibility of irreparable injury, or (2) serious
 questions as to these matters and the balance of hardships tipping sharply in
 the movant's favor.  First Brands Corp. v. Fred Meyer, Inc., 809 F.2d 1378,
 1381 (9th Cir.1987).  These two tests are not separate, but represent a
 "continuum" of equitable discretion whereby the greater the relative hardship
 to the moving party, the less probability of success need be shown.  Regents
 of University of California v. American Broadcasting Cos., 747 F.2d 511, 515
 (9th Cir.1984).  The primary purpose of a preliminary injunction is to preserve
 the status quo pending a trial on the merits.  Los Angeles Memorial Coliseum
 Commission v. National Football League, 634 F.2d 1197, 1200 (9th Cir.1980).
  *1383 B. Likelihood of Success
  [24] The court finds that plaintiffs have not met their burden of showing a
 likelihood of success on the merits as to either Netcom or Klemesrud.  The only
 viable theory of infringement is contributory infringement, and there is little
 evidence that Netcom or Klemesrud knew or should have known that Erlich was
 engaged in copyright infringement of plaintiffs' works and was not entitled to
 a fair use defense, especially as they did not receive notice of the alleged
 infringement until after all but one of the postings were completed.  Further,
 their participation in the infringement was not substantial.  Accordingly,
 plaintiffs will not likely prevail on their claims.
  C. Irreparable Injury
  The court will presume irreparable harm for the copyright claim where
 plaintiffs have shown a likelihood of success on their claims of
 infringement.  Johnson Controls, Inc. v. Phoenix Control Systems, Inc., 886
 F.2d 1173, 1174 (9th Cir.1989).  Here, however, plaintiffs have not made an
 adequate showing of likelihood of success.  More importantly, plaintiffs have
 not shown that the current preliminary injunction prohibiting Erlich from
 infringing plaintiffs' copyrights will not be sufficient to avoid any harm to
 plaintiffs' intellectual property rights.
  D. First Amendment Concerns
  [25][26] There is a strong presumption against any injunction that could act
 as a "prior restraint" on free speech, citing CBS, Inc. v. Davis, 510 U.S.
 1315, ---- - ----, 114 S.Ct. 912, 913-14, 127 L.Ed.2d 358 (1994) (Justice
 Blackmun, as Circuit Justice, staying a preliminary injunction prohibiting CBS
 from airing footage of inside of meat packing plant).  Because plaintiffs seek
 injunctive relief that is broader than necessary to prevent Erlich from
 committing copyright infringement, there is a valid First Amendment question
 raised here.  Netcom and Klemesrud play a vital role in the speech of their
 users.  Requiring them to prescreen postings for possible infringement would
 chill their users' speech.  Cf. In re Capital Cities/ABC, Inc, 918 F.2d at
  E. Conclusion
  Plaintiffs have not shown a likelihood of success on the merits of
 their copyright claims nor irreparable harm absent an injunction against
 defendants Netcom and Klemesrud.  Accordingly, plaintiffs are not entitled to a
 preliminary injunction.
                                    IV. ORDER
  The court denies Netcom's motion for summary judgment and Klemesrud's motion
 for judgment on the pleadings, as a triable issue of fact exists on the claim
 of contributory infringement.  The court also gives plaintiffs 30 days leave in
 which to amend to state a claim for vicarious liability against defendant
 Klemesrud, if they can do so in good faith.  Plaintiffs' application for a
 preliminary injunction against defendants Netcom and Klemesrud is denied.
  The parties shall appear for a case management conference at 10:30 a.m. on
 Friday, January 19, 1996.  The deadline for completing required disclosures is
 January 5, 1996.  The joint case management conference statement must be filed
 by January 12, 1996.

End of file...