Copyright

The concerns surrounding the protection of the copyrights of electronic data extend to computer software. In 1997, Congress approved the No Electronic Theft (NET) Act, Pub. L. No. 105-147, 111 Stat. 2678, which substantially enhanced existing federal copyright law. Aimed primarily at the rampant theft of computer software, it allows the prosecution of anyone who violates the copyright of materials worth more than $1,000 in a six-month period by copying, distributing, or receiving software.

Congress passed the law in November 1997 after the software and entertainment industries strongly lobbied for it, claiming losses amounting to $2 billion in 1996 in the United States alone. In particular, the law closed a narrow loophole in existing federal law, which made criminal prosecution for copyright violation only possible if the violation resulted in financial gain. Under the NET Act, individuals face fines and jail sentences even if they do not profit financially from the violation. The law was enacted over protests by scientists who feared that it would hinder their research.

Lobbyists pointed to what became known as the "LaMaccia loophole." This term refers to an unforeseen weakness in federal law that was exposed by the failed federal prosecution of computer hacker David LaMacchia in 1994 (United States v. LaMacchia, 871 F. Supp. 535 [D. Mass. 1994]). LaMacchia, then a 21-year-old student at the Massachusetts Institute of Technology, had used an electronic bulletin board to freely distribute countless commercial software programs. Although he was indicted for wire FRAUD under 18 U.S.C.A. § 1343 for allegedly causing software companies losses of more than $1 million, the case was dismissed. U.S. District Court Judge Richard Stearns ruled that criminal sanctions did not apply because LaMacchia had not profited from his actions.

According to the software industry, the decision paved the way for piracy of material through web pages and other commonly used Internet sites. Software manufacturers were not only concerned about deliberate piracy by computer hackers; they also wanted to stop the casual lending and copying of computer software between consumers and within offices as well. Joining them in this effort were the music and film industries, which have increasingly become partners of software companies in the production of multimedia CD-ROMs. Additionally, the music industry viewed with alarm the widespread distribution of commercial recordings by fans, which became popular over the Internet in 1997 with the development of new software technology for digitally copying songs.

The NET Act was designed to close the LaMacchia loophole. Swiftly passed by the House and subsequently approved by the Senate, the act accomplished this by amending two key parts of federal copyright law: Titles 17 and 18 of the United States Code. These laws previously defined copyright violation strictly in terms of financial gain. The NET Act broadened them to include the reproduction or distribution of one or more copies of copyrighted works and considers financial gain simply to be the possession of copyrighted work. It defines a misdemeanor violation as occurring when the value of the copied material exceeds $1,000 over a 180-day period; a felony occurs if the value exceeds $2,500. Penalties range from a one-year jail sentence and up to $100,000 in fines for first-time offenders, to five years' imprisonment, and up to $250,000 in fines for repeat offenders.