Infringement of Software Copyrights:
Copyright can protect both literal lines of computer code and the overall
"look and feel" of the program itself and the user interface. However,
copyright only protects certain aspects of a program. Elements that are unprotected
-- including underlying ideas or unoriginal lines of code -- may be freely
copied by other programmers without infringing copyright. Courts have struggled
to determine which elements of computer programs should be covered by copyright
- particularly in cases where the defendant did not copy literal lines of
code, but rather organizational or structural aspects of the program.
A basic problem is that programs are functional, but that copyright may not
give copyright holders exclusive rights to any "idea, procedure, process,
system, method of operation, concept, principle, or discovery, regardless
of the form in which it is described, explained, illustrated, or embodied
a work."  Copyright only covers particular,
original expressions. If there is only one way to effectively express an idea
- or to carry out a procedure - then that expression cannot be copyrighted,
because the copyright holder would as a practical matter have exclusive rights
over the underlying idea. Software copyright cases can get complicated when
the defendant copied elements other than literal lines of code, and the court
must decide whether the thing copied was protected "expression"
or an unprotected element such as an idea or procedure.
Courts usually start by trying to determine which elements of the copyrighted
work are really protected by copyright, before they can determine whether
infringement occurred. Many courts follow the test developed in Computer
Associates v. Altai, which requires the court to abstract a program into
its structural elements, filter out those elements that are not protected
by copyright, then compare the remaining, protected elements against the defendant's
program to see if they are similar enough to find copyright infringement.
 According to one widely followed legal
treatise, the following elements should be filtered out (in other words, copying
these elements does not necessarily infringe copyright). 
- Elements that constitute only abstract ideas, such as the general outline of what the program should do.
- Elements dictated by logic and efficiency, such as particularly efficient searching or sorting methods.
- Elements dictated by external considerations, such as hardware standards, software standards, computer manufacturers' design standards, the particular needs of the business for which the software is designed, and traditional or standard programming practices.
- Elements taken from the public domain, which existed and were freely accessible to all before the copyright owner incorporated them in his or her work.
Another important case is Lotus v. Borland. 
In that case, Borland's Quattro and Quattro Pro spreadsheet programs offered
a Lotus emulation interface, which allowed users to run Quattro using the
Lotus menu command hierarchy, as well as any Lotus macros they had made. The
court had to decide whether the menus (as distinct from code or other program
elements, which were not at issue in the case) could be protected by Lotus'
copyright. The trial court held that the menu command hierarchy was copyrightable
expression, because the designers made expressive choices among many possible
arrangements of menu commands. But the appeals court held that expressiveness
did not matter in this case, because the menu command hierarchy was a "method
of operation" for the program, much like the buttons on a VCR. Methods
of operation are barred from copyright protection under federal copyright
statute and, the Court said, under Supreme Court precedent.
In a concurring opinion, one judge pointed out that users may be "locked
in" to the Lotus interface because they already know how to use it, not
because of any superiority of Lotus' software. If a better spreadsheet comes
along, he said, users should not be "captives" of Lotus simply because
of their own investment in learning the menu hierarchy.
The Lotus decision was quite controversial, and was followed closely by software companies, professional associations, and others with an interest in its outcome. It was appealed to the Supreme Court. In an unusual turn of events, eight justices heard the case and split four to four over the outcome. Therefore, the appeals court decision was affirmed without comment from the Supreme Court.
Direct Infringement, Contributory Infringement, and Vicarious Infringement:
Individuals who infringe copyright are liable for direct infringement. But
other people who do not themselves commit infringement may still be liable
for contributory or vicarious infringement if they helped someone else to
infringe copyright. For example, in some cases the operators of flea markets
where pirated recordings are sold have been held legally responsible for copyright
infringement. This is the basic legal claim against operators of file-sharing
systems like Napster - not that they themselves infringed the copyright in
songs, but that they should be liable for helping their users to infringe.
In general, a party may be liable for contributory infringement if she "with
knowledge of the infringing activity, induces, causes or materially contributes
to the infringing conduct of another."
 And she may be liable for vicarious infringement if she controlled
the direct infringer's actions and received a financial benefit from the direct
infringement.  These legal standards
will sometimes apply to activities online. But there is also special statutory
protection for some providers of online services, as discussed below.
Time-Shifting, Space-Shifting, and the Online Material Liability Limitations
As part of the Digital Millennium Copyright Act, Congress enacted 17 U.S.C. §512 ("Section 512").  Section 512 protects "service providers" - generally including ISPs and search engines -- from liability for direct, vicarious, or contributory copyright infringement under certain circumstances. The Section is extremely complicated; the summary below necessarily leaves out important details. (For example, Section 512 has such torturous definitions of "service providers," it can be hard even to tell who is covered under the statute.)
In order to qualify for protection from liability under Section 512, a defendant must meet the definition of a "service provider"; and it must have a policy and process for terminating the accounts of users who are repeat copyright infringers; and it must accommodate "standard technical measures" used by copyright owners to protect and identify copyrighted works.
Once these threshold requirements are met, a service provider may be safe
from liability for copying which takes place in the course of four specific
activities. Generally, the service provider can only take advantage of these
"safe harbors" if its role in the alleged infringement was very
passive, such as providing an automated system to transmit material selected
by users to destinations selected by users. The four "safe harbor"
- transmission of material
- temporary caching of material
- storage of material
- providing "information location tools" such as directories
If a service provider does not meet the stringent requirements for protection from liability under Section 512, it may still be safe from liability under other legal doctrines. The most important source of protection comes from Sony Corp. of America v. Universal City Studios, Inc., was the case that upheld as legal the sale of Video Tape Recorders (VTR's - now known as VCRs).  The Motion Picture Industry argued that since people could use the VCRs to copy and distribute their programs in violation of copyright regulations, Sony, as a manufacturer of VCRs, was contributorily liable for copyright infringement. The Supreme Court decided, however, that the fact that people could use the devices in an infringing manner was not important, if they also could use the devices for substantial, non-infringing purposes. In coming to this conclusion, the Court necessarily determined that time-shifting, recording a program at one time to watch at a different time, was "fair use" and not copyright infringement.
Some lawyers argue that the Sony case means that "space-shifting," such as that carried out by Napster, is also permitted fair use. If one were to record a program onto a videocassette, then that program could be played on any compatible VCR; thus, Sony might be interpreted to authorize some, if not all, space-shifting.