The Promise of Internet Intermediary Liability

Article excerpt

    A. The End-to-End Structure of the Internet
    B. Internet Actors
       1. Primary Malfeasors
       2. Internet Intermediaries
          a. ISPs
          b. Payment Intermediaries
          c. Auction Intermediaries
    C. Existing (Fault-Based) Liability Schemes
    A. The Basic Premise
       1. The Nature of Gatekeeper Liability
       2. Gatekeeper Liability and the Internet
    B. Variations on the Theme
    C. A Framework for Analysis
     A. Dissemination of Content
        1. Trafficking in Contraband and
           Counterfeit Products
           a. Targeting Auction Intermediaries
           b. Targeting Payment Intermediaries
        2. Internet Gambling
           a. Targeting ISPs
           b. Targeting Payment Intermediaries
        3. Child Pornography
           a. Targeting ISPs
           b. Targeting Payment Intermediaries
        4. Internet Piracy
     B. Breaches of Security
        1. Lack of Strong Intermediaries
        2. Market Incentives Already Exist


The Internet has transformed the economics of communication, creating a spirited debate about the proper role of federal, state, and international governments in regulating conduct related to the Internet. Many argue that Internet communications should be entirely self-regulated because such communications cannot or should not be the subject of government regulation. The advocates of that approach would prefer a no-regulation zone around Internet communications, based largely on the unexamined view that Internet activity is fundamentally different in a way that justifies broad regulatory exemption. At the same time, some kinds of activity that the Internet facilitates undisputedly violate widely shared norms and legal rules. State legislatures motivated by that concern have begun to respond with Internet-specific laws directed at particular contexts, giving little or no credence to the claims that the Internet needs special treatment.

This Article starts from the realist assumption that government regulation of the Internet is inevitable. Thus, instead of focusing on the naive question of whether the Internet should be regulated, this Article discusses how to regulate Internet-related activity in a way that is consistent with approaches to analogous offline conduct. The Article also assumes that the Internet's most salient characteristic is that it inserts intermediaries into relationships that could be, and previously would have been, conducted directly in an offline environment. Existing liability schemes generally join traditional fault-based liability rules with broad Internet-specific liability exemptions. Those exemptions are supported by the premise that in many cases the conduct of the intermediaries is so wholly passive as to make liability inappropriate. Over time, this has produced a great volume of litigation, mostly in the context of the piracy of copyrighted works, in which the responsibility of the intermediary generally turns on fault, as measured by the intermediary's level of involvement in the challenged conduct.

This Article argues that the pervasive role of intermediaries calls not for a broad scheme of exoneration, premised on passivity, but rather for a more thoughtful development of principles for determining when and how it makes economic sense to allocate responsibility for wrongful conduct to the least cost avoider. The Internet's rise has brought about three changes that make intermediaries more likely to be least cost avoiders in the Internet context than they previously have been in offline contexts: (1) an increase in the likelihood that it will be easy to identify specific intermediaries for large classes of transactions, (2) a reduction in information costs, which makes it easier for the intermediaries to monitor the conduct of end users, and (3) increased anonymity, which makes remedies against end users generally less effective. …


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