The Chronicle of Higher Education
February 6, 1998

The Hidden Legal Traps in Distance-Learning Programs
By Sheldon Elliot Steinback and Anthony V. Lupo

College and university administrators who are thinking about creating or expanding distance-learning programs need to consider several potential legal issues that many are overlooking.

One significant issue is whether the institution has obtained whatever approvals it needs from the states in which it plans to offer its program. Another is whether the institution has obtained all of the rights to use the intellectual property involved, and has protected that material from misuse.

Administrators must first determine whether their college or university needs to obtain approval from accrediting agencies or higher-education boards in the states where they plan to offer distance-learning programs. Generally, they will need approval unless their institution is not awarding academic credit for the classes, or unless it does not have a "physical presence" in the state. However, some states, such as Georgia and Tennessee, require approval for some types of classes whether they are for credit or not. Others, such as Indiana and Wisconsin, do not require approval even if the classes are offered for credit -- if the classes are for continuing education or professional development.

State definitions of "physical presence" also vary and thus demand scrutiny from planners. If an institution merely provides distance-learning programs electronically to individual students, without providing a location for students to meet, a number of states hold that the institution does not have a physical presence in the state. In such a situation, they do not require approval of the courses, even if the classes are offered for credit.

However, if a college or university provides distance-learning programs to students at a conference center or in another more-formal class setting, the majority of states hold that the institution has a physical presence in the state, and require approval of the program. Beyond the issue of a formal class setting, states are not uniform in what they consider to constitute a physical presence in the state.

Not surprisingly, the procedures for obtaining approval to offer a distance-learning program also vary greatly from state to state. Some, such as Colorado, offer immediate approval to educational institutions that are accredited in their home states and by regional accrediting agencies. But states such as New York have extremely protracted procedures for approving offerings by institutions in other states, which may delay approval for years.

In response to pressure from in-state educational institutions, several states probably will tighten their regulation of distance-learning programs to try to limit competition. Indeed, if states' regulation of other areas of electronic commerce are an indication, some states will try to enact stiff barriers to deter out-of-state institutions from competing within their borders.

For example, in telemedicine (the practice of medicine from remote locations, such as providing medical advice over the Internet), a number of states originally held that institutions in other states that provided medical services electronically within their borders were not considered to be practicing medicine. Thus they were not subject to regulation. Doctors, however, concerned about their financial interests, successfully lobbied various state legislatures and convinced lawmakers that such out-of-state medical providers should be considered to be practicing medicine in the state. Consequently, such providers were forced to obtain full medical licensure within the state if they wanted to continue offering their electronic services.

Nevertheless, it should be noted that states are not completely free to enact laws that discriminate against out-of-state colleges and universities. The Commerce Clause of the Constitution, which applies to public institutions, bars states from erecting barriers that would make it more difficult for an out-of-state institution to conduct business in the state than it would be for an in-state entity to conduct the same business. As the Supreme Court held in 1986 in Maine v. Taylor, the Commerce Clause has long been recognized to limit the power of the state to erect barriers against interstate trade. On the other hand, states do have broad latitude to establish laws that protect the welfare of their citizens. Courts will ultimately have to balance these competing interests in assessing whether a state's restrictions on distance learning are acceptable.

In addition to complying with state regulations covering distance-learning programs, institutions must comply with all intellectual-property laws relevant to such programs. Thus, an institution must make sure that it has all the necessary rights to the materials and lectures that it plans to transmit electronically. Administrators need to understand that copyright includes five independent rights: to reproduce the work, to distribute or transmit the work, to perform the work in public, to display the work in public, and to create another work derived or adapted from the first work.

An educational institution may have obtained only the rights to reproduce and distribute certain materials that it has used in its traditional classes, because before the advent of the Internet, it may have had little reason to obtain the right to "publicly display" the materials. However, before it transmits the materials over the Internet in a distance-learning program, a college or university needs the right to display the material publicly and also may need the right to create a derivative work or to display that work publicly. For materials created specifically for the distance program, the institution should have the creators of the materials assign all rights in the materials to the institution.

In addition, the institution should make sure that users of the materials agree to employ them only in connection with the particular program offered. The college or university needs to do its utmost to protect the materials from being misused or misappropriated, by competitors or by students. Institutions must also realize that, if the material being used is not owned by the educational institutions transmitting it, they may be held liable for copyright infringement for the acts of their students or faculty members.

To help protect themselves from legal liability, colleges and universities should establish policies that specifically address the following issues: who owns the materials produced by faculty and staff members in the distance-learning programs; how the materials should be used in accordance with the "fair use" provisions in the U.S. Copyright Act and with any existing licenses or restrictions on the use of the materials; and how to insure that whoever receives or intercepts the distance-learning programs or materials understands and acknowledges that they may not be used without authorization of the educational institution.

All such policies should be distributed to students and to faculty and staff members, who then should be required, in writing, to accept the terms of the policies. These policies may not fully insulate an educational institution from liability, but they should significantly reduce the amount of liability.

Distance learning will certainly become widespread in the near future. But before they offer such programs, colleges and universities must make sure that they are acting in full compliance with the relevant laws and regulations. This may not be easy, particularly because some states have not decided how they will treat distance learning, and others will probably try to adopt more-restrictive regulations than now exist. Nonetheless, the task of compliance is crucial for all institutions eager to take full advantage of an important educational and financial opportunity.

Reproduced by Permission of the Authors. Sheldon Elliot Steinbach is general counsel of the American Council on Education. Anthony V. Lupo is an attorney at Arent, Fox, Kintner, Plotkin & Kahn.

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