The World Wide What-If: How E.T. And Mickey Mouse Nearly Changed The Internet (And World) As We Know It – Part 1


By: Brian J. Meli

This is Part 1 of a two-part article appearing in the May/June 2012 edition of IP Litigator. You can read Part 2 here.

The Universal Studios logo is a computer-generated rendering of a rotating planet Earth, partially circumscribed by the company’s name in giant block letters. It’s an iconic image that instantly invokes the might and magic of Hollywood. It’s also unintentionally allegorical, because had things turned out a little differently for Universal 30 years ago, today’s world—particularly the parts that relate to commerce and technology—might be very different.

The date was January 17, 1984—a year many associate with Apple Computer’s famous “1984” Macintosh commercial, and the George Orwell book that inspired it. But a lesser-known, and even more significant event in the history of the human race’s relationship with technology occurred that same year, and it had nothing to do with Apple. That event was the U.S. Supreme Court’s decision in Sony v. Universal City Studios, better known in legal circles as the “Sony Betamax” case.

Just about every area of law has a seminal Supreme Court decision that serves as its jurisprudential foundation. In the area of civil rights that decision is Brown v. Board of Ed. For criminal defense it’s Gideon v. Wainwright. And of course everyone knows Roe v. Wade for the role it played in defining reproductive rights. While Sony v. Universal certainly has less popular recall than those landmark decisions, and for good reason, it may bear just as much responsibility for shaping the world we inhabit today. While Sony didn’t involve the divisive social and ethical dilemmas inherent to Wade, mandate the sweeping constitutional expansion of Gideon, or affirm the long overdue moral imperatives of Brown, its outcome did arguably have just as much an effect on our modern way of life as any of those historic cases; though not as directly.

The Case Against Sony

The main issue of Sony was straightforward as Supreme Court cases go. Hollywood heavyweights Universal Studios and Walt Disney Productions sued consumer electronics giant Sony Corporation over its new Betamax videocassette recorder (the predecessor of the VHS VCR), claiming the device infringed their copyrighted material by allowing users to unlawfully reproduce the material in violation of the Copyright Act of 1976.

The key point of the claim was that Universal was not accusing Sony of direct infringement; presumably the consumer, who actually recorded the broadcasts, would be doing that. (For obvious reasons, filing suits against thousands of Betamax users would’ve been impractical and ineffective). But by providing the direct means for their customers to do so, the charge against Sony was for secondary infringement. Cut the technology off at the source, the thinking was, and you stop the illegal copying in one fell swoop.

Sony ended up winning the day, but only by the slightest of margins (it was a 5-4 vote that very nearly went the other way). The defendants prevailed primarily on the theory that the Betamax had a substantial non-infringing use; namely to allow TV watchers to “time-shift” broadcasts by recording them when they weren’t home so they could watch them later, after which time they would ostensibly delete them. Time-shifting, the court reasoned, constituted a fair-use, and was therefore not infringement. It distinguished this from the hypothetical practice of creating personal home movie libraries out of recordable programming, which it suggested was infringement (and which most children of the 1980s, myself included, happily did anyway).

Therefore, because it had a permissible legal use, the VCR was allowed to live on to become the central entertainment device of the 1980s and 90s American household. In an ironic twist of fate, it also became the catalyst for a massive new revenue stream for movie studios in the form of the home video, and later the DVD market; which by some estimates accounts for roughly half of all film industry revenue today. But what made Sony such a remarkable case is that it was all but decided the opposite way. Late in the deliberations court records show that it was a 6-3 vote in favor of Universal, begging the question of what might have happened had it stayed that way.

And so with that as background, we endeavor—as Marty McFly famously did in one of the very movies Universal was trying to prevent Betamax owners from copying—to go back in time and alter the recent past by convincing the two justices who switched their vote at the last minute, to keep it with the plaintiffs.

Welcome to an alternate 2013; a world very different from the one we all inhabit:

A Different Kind of Internet

The Internet is a lot different here. The traffic on this superhighway flows mostly one-way. The wwd (or world-wide databank) serves as a massive depository of information that people can upload to for widespread information dissemination, making it a world-class public research and education tool. However, downloading information from the wwd is strictly limited to pre-authorized users (primarily corporations and government agencies) and those with special permissions.

Uploading to the wwd, while not subject to the same degree of restriction, is still dominated by big business and government. Uploading among individuals is much less common, and individuals uploading content, especially content of an artistic nature, is especially rare due to the time and effort involved. File-sharing is something that happens almost exclusively between private networks, often on a one-to-one basis. Little is ever transferred over a public network because service providers, hosting services and the database sites themselves that control the access are too concerned about users hijacking their technology to infringe third-party intellectual property rights.137922679_8

e-Commerce and File-Sharing

The prime example of the threat underpinning providers’ concerns was the eBay case. eBay, a small database site founded in the Internet’s early days, began experimenting with public online auctions and was swiftly driven out of business when hit with a wave of lawsuits from retailers whose counterfeited products began showing up on its site. As a direct result of eBay’s fate, online shopping today is limited almost entirely to official sites owned either by the manufacturers themselves or their authorized retailers. Despite claims from consumer rights groups that relaxing restrictions would be a boon to the economy, online shopping still accounts for a healthy 5% of retail revenue nationwide.

eBay serves as one of the most prominent cautionary tales for database sites with loose file-sharing standards, but it is certainly not the only one. Starting in the late 1990s several companies began experimenting with larger scale file-sharing services for different purposes, but most were quickly enjoined from continuing operations. Some of the more high-profile defendants who were shut down were Napster, BitTorrent, YouTube, Flickr, Facebook and Twitter. The latter two subsequently took advantage of more provider-friendly Internet laws in Asia, and now operate in several select overseas markets, however they cannot be accessed by U.S. IP addresses.

Before the file-sharers came along there were the ISP wars of the mid 90s; a time when just about every major Internet service provider was embroiled in litigation of some kind. It all began when America Online began providing an email client to its customers that gave them the ability to attach files to messages and send them out over its network on a mass scale. Many of these “attachments” contained copyrighted and trademarked material, and when a rights-holder eventually sued AOL for secondary infringement, the floodgates opened, leading to a slew of new self-imposed ISP software regulations, including things like recipient quantity limits on outbound emails containing attachments.

Nowadays most private individuals who have a strong incentive to upload content to the Internet (primarily artists and those working in creative industries) use specifically designated not-for-profit and NGO databank sites that enjoy special fair-use exemptions (hosted by the likes of PBS, NPR, the Smithsonian etc.) to promote their work. These database sites tend to have limited resources available to them though, so the verification of authorship process, which ensures an artist or author’s true identity and involves interfacing with the Copyright Office, can be time-consuming. It’s common for it to take weeks, if not months before a request for a public post is granted. Even so, the increasing popularity of these sites has created a veritable online museum of modern amateur artwork, and caused the .org top-level domain to become virtually synonymous with the arts and humanities.

Search Dysfunction

No matter where it’s located, finding copies of artwork and visual files on the wwd can be challenging, because search engines like Google and Yahoo are limited in what their results can display. Some search engines will only return thumbnails of images, while other more risk-averse ones won’t show copyrighted images at all; only written descriptions of them. So search engines usually aren’t the best tools for locating visual works that aren’t in the public domain. The key for someone searching for an image is knowing who the rights-holder is. Once you know that you can go directly to the owner’s official database site. Most rights-holders provide links to their proprietary imagery with terms and conditions governing its download and use. For example, if you were looking for pictures of James Bond, you would go directly to the Columbia Pictures database site, where their online content library contains all their archived imagery. Many companies allow their properties to be downloaded at restricted sizes free-of-charge for fair-use purposes such as news articles, commentary and parodies. But every industry is a little different regarding what it’s willing to make available, so a successful image search strategy for one may not work for another.


Search engine restrictions, limits on file-sharing and delays in upload approval can be frustrating at times, but it’s a small price to pay for the more open and equal Internet access that recent legislation has made possible. Part of that equality is having access to personal computers capable of both upstream and downstream functionality. Nobody today is in favor of going back to the old days when computers were split into two classes: consumer and business, and when only the latter could actually download files directly from the Internet. In those days the only way to get your hands on a “two-way”, as they were known, was on the black market. Among other things, these illegal devices spawned a massive online shadow market for unauthorized downloadable content, where bootlegged music and pirated software (not to mention terabytes of pornography) proliferated. Most of these sites, which originated overseas, were only up for a few days before being blocked or shut down, but that was long enough for millions in illegal profits to be made, much of it financing criminal and terrorist organizations.

Regulating the Online World

The eventual deregulation of the computer hardware industry was a major compromise of The Digital Millennium Copyright Act (DMCA). That legislation, passed in 1998, represented Congress’ most comprehensive attempt yet to reform Internet regulations that had become hopelessly unmanageable, and to harmonize a muddled patchwork of overlapping state and federal laws. The DMCA eliminated the market for illegal computer hardware virtually overnight, while significantly stepping up enforcement of illegal sites, and placing stringent requirements on software and file-developers like Microsoft, IBM and Adobe to create file formats that couldn’t be opened if they were illegally downloaded from the Internet. It also streamlined IP registration processes, and made accessing government copyright and trademark records much easier for the general public.


The biggest thing the DMCA did though was to consolidate and simplify a splintered bureaucratic structure by creating the Combined Federal Internet Communications Agency (CFICA) which, among other things, united divisions of the FTC, FCC and the Internet Corporation for Assigned Names and Numbers International (ICANN) under a single regulatory body that oversees all Internet practices in the United States. A major mandate of the new agency was to filter inbound Internet traffic from countries whose intellectual property laws were more lax than ours. Soon after its creation other countries with robust IP laws began following our lead and establishing their own Internet agencies. Eventually this led to a joint World Trade Organization (WTO), World Intellectual Property Organization (WIPO) treaty among like-minded IPR-friendly countries, resulting in a list of mostly developed nations that now accept unfettered reciprocal Internet traffic between their virtual borders. While some argue that this unfairly limits the growth potential of developing nations left out of the treaty, most agree that it has the beneficial effect of encouraging strong IP laws as a prerequisite to entry into the world’s online community.

The DMCA wasn’t perfect. Many constituents wanted the US Copyright Office and USPTO to also be included in the new super-agency, since both offices also had to be beefed up to deal with the new formality requirements that database sites successfully lobbied into the final draft of the bill. But it is still widely considered an effective solution to a commercial environment that demanded more oversight. The only alternative would have been a full repeal of the Copyright Act, or at least sweeping reforms to it, which would have left copyright ownership—a constitutional guarantee—with a very uncertain future.

Some civil rights groups have initiated test cases challenging many of the new regulations of the DMCA on the basis that they impermissibly restrict free speech, arguing that everyone—not just big business and government—should have equally unfettered access to the Internet as a means of free and open communication. So far though these groups are running up against stiff resistance from content distributors who argue persuasively that the Internet is subject to the same time, place and manner restrictions as the offline world.

On the subject of the offline world—

To be concluded… 

The content of this blog is intended for informational purposes only. The information provided in this blog is not intended to and does not constitute legal advice, and your use of this blog does not create an attorney-client relationship between you and The Law Firm of Brian J. Meli. Under the rules of certain jurisdictions, the material included in this blog may constitute attorney advertising. Prior results do not guarantee a similar outcome. Every case is different and the results obtained in your case may be different.

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