Exam No.____________

UNIVERSITY OF SAN FRANCISCO

SCHOOL OF LAW

Final Examination Eric Schlachter

Cyberspace Law May 14, 1996

Spring 1996 6:30 to 9:00

________________________________________________________________________________

Instructions-- PLEASE READ CAREFULLY

1. This is an open book exam. All written and printed materials are permitted.

2. This is a multiple part exam with a total time limit of 2 1/2 hours. There are a total of three questions, with the following approximate weighting for each question:

Question 1: 40% (approximately 1 hour)

Question 2: 40% (approximately 1 hour)

Question 3: 20% (approximately 1/2 hour)

3. Enter your exam number in the space provided above.

4. Please write your exam in blue books or type your exam on paper provided.

5. I have the following exam tips and strategies for you:

a. Please outline your answers carefully and deliberately. I recommend that you spend approximately 1/3 of your allocated time reading the question and outlining a response.

b. Follow the call of the question. Target your response to your audience.

c. While generally your questions should be based on legal principles, it is always appropriate to address business issues.

d. You are likely to find that additional information would be useful in your analysis.

Please indicate what additional information would be helpful, and then make assumptions to proceed with your analysis.

6. ALL EXAM QUESTIONS MUST BE TURNED IN AT THE END OF THE EXAMINATION.

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Question 1 (1 hour)

Susan James runs a 12 phone line BBS called “The Black Hole.” The Black Hole is a general interest BBS, providing such functionality to users as Internet access, message boards, online games, and a software file exchange area.

Susan has decided to retain you as the attorney for the Black Hole. At your initial consultation with her, the following exchange takes place:

You: “Tell me how you run your software file exchange.”

SJ: “We have divided the software file exchange into 4 main areas: Windows, Mac, DOS and GIFs [GIFs are graphics files, such as computer art or digitized photos]. Within each area, the file exchanges are divided into categories, such as games, utilities, error corrections and patch releases, communications, word processing, spreadsheet programs, and so on. The GIFs are classified by subject matter of the file. Users who want to download software or files are free to do so with no limits.”

You: “Tell me about the upload process.”

SJ: “Users upload files or software to a separate server where the computer automatically runs a program to check if there are any viruses contained in the software. [A virus is deleterious code embedded in a software program.] If the virus checker does not find any viruses in the software, it is automatically uploaded to our public space within 2-4 hours after initial posting.

If viruses are found in the software, the software is rejected.”

You: “Do you ever get pirated commercial software posted?”

SJ: “Occasionally, and when I see it, I remove it as quickly as possible.”

You: “How does software get categorized, so that (for example) a Mac word processing program gets put into the right area?”

SJ: “In the uploading process, the users identify where the software should go. Most of the time, the software is properly categorized. However, sometimes we get some bozos who deliberately misclassify their stuff, in which case we usually move it to the proper category.”

Later in the conversation, Susan indicates that she has been receiving complaints about a GIF file that has been uploaded to the GIF area. The GIF contains an image that, in its caption, asserts that the person who is the subject matter of the cartoon has a sexually transmitted disease. Apparently, the subject person called Susan to complain about the file. Susan is thinking about removing the file but is unsure what to do. What do you tell her to do?

END OF QUESTION 1

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Question 2 (1 hour)

Soundtouch, Ltd. is a new client of yours. Soundtouch has developed a unique database of “Soundbytes.” Over the years, Soundtouch has received promotional CDs from record producers and studios. Soundtouch has selected the “best” (in Soundtouch’ s judgment) 30-45 seconds of each song on the CDs and digitized that portion into a computer-readable file. All these “bites” of songs have been indexed and put into a database that now numbers 50,000 bites. Soundtouch has never entered into any license agreement with record companies or artists regarding the creation or use of Soundbytes. Soundtouch also has developed some database management software to search for and retrieve Soundbytes.

A licensee named Javelin has approached Soundtouch requesting a 1 year license to the Soundbytes database and database management software. Javelin desires to set up a storefront to sell music CDs on the Web and will use the Soundbytes database to provide potential customers with the real time ability to play “samples” of the songs on CDs prior to purchase. Javelin wants a complete copy of the Soundbytes database to run on Javelin’s Web server. In addition to license rights which properly allow Javelin to use the Soundbytes database on the Web, the license agreement will permit Javelin to make modifications to and derivative works of the Soundbytes database, and Javelin will own all such modifications and derivative works. [Remember the general rule that the owner of a derivative work requires a license to the underlying copyrighted work in order to exercise copyright rights in the derivative work.]

1. Soundtouch has indicated that it believes its use of the Soundbytes is “fair use. “ Do you have any problems with Soundtouch using “fair use” to build its Soundbytes database?

2. What do you think about the Javelin license? Are there any problems with it as currently structured? Some issues to think about include: exactly what rights are being licensed by Soundtouch and what happens to the database and its derivative works after termination? Are there alternative ways (technological or contractual) to accomplish the parties’ intent and protect Soundtouch better?

[Do not discuss any copyrights in music that we did not discuss in class (i.e., synchronization, mechanical, master recording)].

END OF QUESTION 2

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Question 3 (1/2 hour)

George Yee, a software licensing partner in your firm, calls you about his client Online Motion. Online Motion has executed a letter of intent with High Rollers LLC with the following terms:

· Online Motion will develop slot machine software. The software will allow web browsers to play the slot machine software over the Web. Online Motion will develop the software to High Roller’s specifications and High Roller will run the software on its server as part of High Roller’s cybercasino.

· Online Motion will assign all right, title and interest in and to the software to High Rollers.

· High Rollers will pay $200,000 to Online Motion for development costs, plus 3% of all net revenues generated from players’ use of the software for a period of 10 years.

· High Rollers will indemnify and hold Online Motion harmless from all claims by players for any actual or alleged gaming losses and for any governmenta1 legal action, which may be filed against High Rollers or Online Motion as a result of the software.

Because George does not have much experience with the Internet, he calls to get your general thoughts about the transaction. Do you have any questions for George? What do you tell George?

[Do not discuss any copyright issues]

END OF QUESTION 3

END OF EXAMINATION

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