Metro-Goldwyn-Mayer v. Grokster
decision was handed down by the Supreme Court on Monday, with disappointing if not surprising results. The court unanimously decided against Grokster, overturning the summary judgment in favor of Grokster issued by the United States District Court and upheld by the 9th Circuit Court of Appeals. The case has been remanded to the District Court for reconsideration, which seems likely to go against Grokster and Streamcast. Groklaw has the full decision as text
, and it is also available as a PDF
What was at question was whether Grokster, et al, can be held liable for use of P2P software when the software had substantial non-infringing uses, and when the parties were not aware of infringement. The Supreme Court has held that a party can be held liable for distributing software if the party is seen to be "inducing or encouraging direct infringement, and infringes vicariously by profiting from direct infringement while declining to exercise the right to stop or limit it."
The decision was eagerly awaited by both sides, and has been viewed as having widespread implications for the future of P2P technologies. If the court had upheld the decision of the District Court, it would have been largely viewed as an affirmation of the assumption that producers of technology are not liable for its uses, if it has substantial non-infringing uses. In the Sony Corp. of America v. Universal City Studios case, widely known as the Betamax case, the court decided that Sony was not liable because the VCR was "capable of commercially significant noninfringing uses."
Instead, the court's decision focuses on whether or not the company intends to promote infringement, or benefit from infringement. The decision points out that Grokster and StreamCast "each took active steps to encourage infringement." So, merely having substantial non-infringing uses is not enough. According to the Supreme Court's decision, companies can be found liable if they actively promote the technology or take "other affirmative steps to foster infringement." What comprises an "affirmative step" is open to debate, and will no doubt be seen quite differently by the entertainment industry and the technology industry.
The court also complained that neither company "made an effort to filter copyrighted material from users' downloads or otherwise impede the sharing of copyrighted files." This may set a difficult standard for P2P technologies, having to try to "impede the sharing of copyrighted files." While BitTorrent, for example, may not be encouraging users to commit copyright infringement, it's doing little to dissuade copyright infringement. How much will companies, or open source projects, be expected to police their users?
As Ed Felten writes, how the courts rule on the next generation of technologies is more important than whether Grokster and StreamCast continue doing business:
Here the Court did not offer the clarity we might have hoped for, opting instead for what Tim Wu has described as the Miss Manners rule, under which vendors must avoid showing an unseemly interest in infringing uses of their products. This would appear to protect vendors who are honestly uninterested in forstering infringement, as well as those who are very interested but manage to hide it.
Lower courts will be left to apply the Grokster Court's inducement rule to the facts of other file distribution technologies. How far will lower courts go? Will they go too far?
The litmus test is BitTorrent. Here is a technology that is widely used for both infringing and non-infringing purposes, with infringement probably predominating today. And yet: It was originally created to support noninfringing sharing (of concert recordings, with permission). Its creator, Bram Cohen, seems interested only in noninfringing uses, and has said all the right things about infringement - so consistently that one can only conclude he is sincere. BitTorrent is nicely engineered, offering novel benefits to infringing and noninfringing users alike. It is available for free, so there is no infringement-based business model. In short, BitTorrent looks like a clear example of the kind of dual-use technology that ought to pass the Court's active inducement test.
The decision isn't quite as bad as it could have been -- except for Grokster and StreamCast, of course. The court could have revisited the Sony decision, though it declined to do so at this time. However, it seems likely that this decision will encourage the entertainment industry to continue suing companies to force them to prove the "fair use question," as Fred von Lohmann puts it:
A variety of new digital technologies are advertised and promoted for uses that the technology vendors believe to be fair uses. For example, Time Trax promotes its technology for recording satellite radio, Mercora for recording music from webcasts, and Sling Media for transmitting your TiVo'd TV shows to yourself over the Internet. All maintain that these personal, noncommercial, nontranformative uses of copyrighted works fall within the scope of fair use. No court, however, has ever weighed in on these (or virtually any other) personal digital fair uses.
If these innovators are wrong on the fair use score, however, are they all liable for inducement? To put it another way, the Supreme Court's ruling may put "fair use technology companies" in the position of having to litigate, and win, the fair use question on behalf of their customers in order to resist an inducement charge. That's an expensive burden to foist on these companies.
Expensive indeed. In the final analysis, the Grokster ruling means many more years of litigation and continued attempts by the entertainment industry to litigate technology they find threatening out of existence. It may very well have a chilling effect on companies and projects who wish to provide P2P technologies or other "time-shifting" and "space-shifting" technologies.
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