Providing Wi-Fi as a perk has a price for businesses

The Internet helps drive business at Fabulous Freddy's.

The local car-wash and lube chain offers customers Wi-Fi Internet access while they wait for their cars, and the perk has become an important customer-service boost for the company's five Las Vegas stores, owner Freddy Smith said.

"It's huge for our business. It keeps them occupied. They can get some work done," Smith said. "It really adds to the experience they get at our place."

Legions of Las Vegas businesses, from coffee shops to hotels to mechanics' garages, offer Wi-Fi access as a convenience and as a way to get customers to hang out a little longer.

But that perk comes with serious potential liability: Businesses could owe huge fines if they enable illicit activity on the Web, and a new entertainment-industry crackdown on illegal downloads of music and movies could eventually ensnare them as well as consumers, one local attorney says. The National Federation of Independent Business has even noted the heightened anti-piracy efforts, and on Monday urged members to tighten Wi-Fi security.

"Some people don't want to pirate music from home, because they're afraid of getting caught, so they'll use the Wi-Fi connection of a neighbor or the coffee shop down the street," said Randi Thompson, the federation's Nevada director.

Consumers may actually be more likely to use a company's network for illegal downloading these days. On July 6, the Recording Industry Association of America and the Motion Picture Association of America announced a deal with big Internet service providers, including AT&T and Verizon, to enforce laws against copyright infringement.

Under the agreement, an Internet provider would send an alert letting a consumer know his computer was used to illegally download copyrighted content. After five alerts, an Internet provider could reduce Internet speeds or redirect traffic to a landing page until the consumer calls to discuss the matter. A sixth notice could result in service cutoff. Consumers could challenge piracy alerts, but it would cost $35 per incident to request an independent review.

The arrangement doesn't apply to businesses yet, but it probably will at some point, said Mark Tratos, a local intellectual-property attorney and managing shareholder of the Las Vegas office of law firm Greenberg Traurig.

"Creative plaintiffs' lawyers try to get as many people on the hook as they can," Tratos said.

But even if the policy doesn't expand to include businesses, companies should know they already face legal liability if customers conduct illegal activity on their Wi-Fi networks.

There are three types of copyright infringement: direct, vicarious and contributing. Direct infringement involves theft of content. Vicarious and contributing infringement happen when a business or Internet provider knows about illegal downloading and doesn't attempt to stop it.

It's the two latter forms of infringement that companies could be responsible for, Tratos said. Damages can run as high as $150,000 per occurrence, and losing businesses may also have to pony up plaintiffs' legal costs.

Businesses can protect themselves, though.

Tratos advises companies to write a formal policy prohibiting illegal downloads. Owners should also post signs noting that they comply with the law and reserve the right to 86 customers who don't. Finally, if they find out someone is using their Wi-Fi to steal content, they must act to stop it.

"A lot of copyright-infringement cases turn on evidence brought forth that defendants were doing everything they could to stop illegal infringement," Tratos said. "Once that evidence comes forward, the burden shifts back to the plaintiff."

Business owners should also use secured Wi-Fi with passwords given out by employees, said Jeff Grace, president and chief executive officer for local information-technology consulting firm NetEffect. They should also ensure their corporate networks and confidential data are segmented from guest networks.

Companies can also ask their Internet service provider to block access to websites that encourage or allow illegal activity, Grace said.

Fabulous Freddy's doesn't use passwords, but it does block some sites, Smith said. And if employees see a customer doing something they shouldn't, they tell the person to stop.

At Red Hookah Lounge and Blue Sky Hookah Lounge, both in Las Vegas, customers need the company's password to hop online. Owner Cottrell Dawson changes the password every week, and websites are filtered.

The barriers aren't perfect -- a customer can obtain the password and come back later in the week and surf from the parking lot, Dawson acknowledged.

"But at least it's some deterrent against those who really want to do wrong," Dawson said. "We're just protecting against the backlash of copyright liability. I'd rather be safe than sorry."

Dawson has an additional motive, though. He also owns independent film companies Planet Earth Filmworks International and Wings of Wonder Motion Pictures, and he makes music videos. That makes him a potential victim of copyright infringers.

"The public has to understand that if you want to continue having music and films, the bootlegging has to stop," he said. "Maybe I'm uncool for saying that, but if the industry doesn't make any money, they're not going to be able to present a quality product."

Contact reporter Jennifer Robison at
jrobison@reviewjournal.com or 702-380-4512.