[Reader-list] MGM vs Grokster decision - MGM won by unanimous court

[Monica Narula]

(Also hear on 
http://www.morpheus.com/mp3/20050608113189.mp3 
the hour-long MP3 of Grokster press-conference, 
held jointly by EFF, StreamCast/Morpheus, 
Grokster, Public Knowledge, Compter and 
Communications Industry Association, and the 
Consumer Electronics Association)

(From www.boingboing.net:  Here's a link to a 
BitTorrent distribution of the decisions in 
Grokster, today's Supreme Court decision that 
established a new copyright thoughtcrime: 
"inducing" your users to infringe by failing to 
employ restrictions that you believe will reduce 
copyright infringement. BitTorrent is a P2P 
software application that was not designed to 
reduce infringement. Many BitTorrent users use it 
to pass around infringing copies of movies and 
music. Many also use it to distribute Supreme 
Court decisions)

Below is the full text of the main opinion. The 
other two concurring opinions can be found here:
http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&navby=case&vol=000&invol=04-480

=========================
METRO-GOLDWYN-MAYER STUDIOS INC. et al. v. GROKSTER, LTD., et al.

certiorari to the united states court of appeals for the ninth circuit

No. 04-480.Argued March 29, 2005--Decided June 27, 2005

Respondent companies distribute free software that allows computer
users to share electronic files through peer-to-peer networks, so
called because the computers communicate directly with each other, not
through central servers. Although such networks can be used to share
any type of digital file, recipients of respondents' software have
mostly used them to share copyrighted music and video files without
authorization. Seeking damages and an injunction, a group of movie
studios and other copyright holders (hereinafter MGM) sued respondents
for their users' copyright infringements, alleging that respondents
knowingly and intentionally distributed their software to enable users
to infringe copyrighted works in violation of the Copyright Act.

           Discovery revealed that billions of files are shared across
peer-to-peer networks each month. Respondents are aware that users
employ their software primarily to download copyrighted files,
although the decentralized networks do not reveal which files are
copied, and when. Respondents have sometimes learned about the
infringement directly when users have e-mailed questions regarding
copyrighted works, and respondents have replied with guidance.
Respondents are not merely passive recipients of information about
infringement. The record is replete with evidence that when they began
to distribute their free software, each of them clearly voiced the
objective that recipients use the software to download copyrighted
works and took active steps to encourage infringement. After the
notorious file-sharing service, Napster, was sued by copyright holders
for facilitating copyright infringement, both respondents promoted and
marketed themselves as Napster alternatives. They receive no revenue
from users, but, instead, generate income by selling advertising
space, then streaming the advertising to their users. As the number of
users increases, advertising opportunities are worth more. There is no
evidence that either respondent made an effort to filter copyrighted
material from users' downloads or otherwise to impede the sharing of
copyrighted files.

           While acknowledging that respondents' users had directly
infringed MGM's copyrights, the District Court nonetheless granted
respondents summary judgment as to liability arising from distribution
of their software. The Ninth Circuit affirmed. It read Sony Corp. of
America v. Universal City Studios, Inc., 464 U. S. 417, as holding
that the distribution of a commercial product capable of substantial
noninfringing uses could not give rise to contributory liability for
infringement unless the distributor had actual knowledge of specific
instances of infringement and failed to act on that knowledge. Because
the appeals court found respondents' software to be capable of
substantial noninfringing uses and because respondents had no actual
knowledge of infringement owing to the software's decentralized
architecture, the court held that they were not liable. It also held
that they did not materially contribute to their users' infringement
because the users themselves searched for, retrieved, and stored the
infringing files, with no involvement by respondents beyond providing
the software in the first place. Finally, the court held that
respondents could not be held liable under a vicarious infringement
theory because they did not monitor or control the software's use, had
no agreed-upon right or current ability to supervise its use, and had
no independent duty to police infringement.

Held: One who distributes a device with the object of promoting its
use to infringe copyright, as shown by clear expression or other
affirmative steps taken to foster infringement, going beyond mere
distribution with knowledge of third-party action, is liable for the
resulting acts of infringement by third parties using the device,
regardless of the device's lawful uses. Pp. 10-24.

      (a) The tension between the competing values of supporting
creativity through copyright protection and promoting technological
innovation by limiting infringement liability is the subject of this
case. Despite offsetting considerations, the argument for imposing
indirect liability here is powerful, given the number of infringing
downloads that occur daily using respondents' software. When a widely
shared product is used to commit infringement, it may be impossible to
enforce rights in the protected work effectively against all direct
infringers, so that the only practical alternative is to go against
the device's distributor for secondary liability on a theory of
contributory or vicarious infringement. One infringes contributorily
by intentionally inducing or encouraging direct infringement, and
infringes vicariously by profiting from direct infringement while
declining to exercise the right to stop or limit it. Although "[t]he
Copyright Act does not expressly render anyone liable for [another's]
infringement," Sony, 464 U. S., at 434, these secondary liability
doctrines emerged from common law principles and are well established
in the law, e.g., id., at 486. Pp. 10-13.

      (b) Sony addressed a claim that secondary liability for
infringement can arise from the very distribution of a commercial
product. There, copyright holders sued Sony, the manufacturer of
videocassette recorders, claiming that it was contributorily liable
for the infringement that occurred when VCR owners taped copyrighted
programs. The evidence showed that the VCR's principal use was
"time-shifting," i.e., taping a program for later viewing at a more
convenient time, which the Court found to be a fair, noninfringing
use. 464 U. S., at 423-424. Moreover, there was no evidence that Sony
had desired to bring about taping in violation of copyright or taken
active steps to increase its profits from unlawful taping. Id., at
438. On those facts, the only conceivable basis for liability was on a
theory of contributory infringement through distribution of a product.
Id., at 439. Because the VCR was "capable of commercially significant
noninfringing uses," the Court held that Sony was not liable. Id., at
442. This theory reflected patent law's traditional staple article of
commerce doctrine that distribution of a component of a patented
device will not violate the patent if it is suitable for use in other
ways. 35 U. S. C §271(c). The doctrine absolves the equivocal conduct
of selling an item with lawful and unlawful uses and limits liability
to instances of more acute fault. In this case, the Ninth Circuit
misread Sony to mean that when a product is capable of substantial
lawful use, the producer cannot be held contributorily liable for
third parties' infringing use of it, even when an actual purpose to
cause infringing use is shown, unless the distributors had specific
knowledge of infringement at a time when they contributed to the
infringement and failed to act upon that information. Sony did not
displace other secondary liability theories. Pp. 13-17.

      (c) Nothing in Sony requires courts to ignore evidence of intent
to promote infringement if such evidence exists. It was never meant to
foreclose rules of fault-based liability derived from the common law.
464 U. S., at 439. Where evidence goes beyond a product's
characteristics or the knowledge that it may be put to infringing
uses, and shows statements or actions directed to promoting
infringement, Sony's staple-article rule will not preclude liability.
At common law a copyright or patent defendant who "not only expected
but invoked [infringing use] by advertisement" was liable for
infringement. Kalem Co. v. Harper Brothers, 222 U. S. 55, 62-63. The
rule on inducement of infringement as developed in the early cases is
no different today. Evidence of active steps taken to encourage direct
infringement, such as advertising an infringing use or instructing how
to engage in an infringing use, shows an affirmative intent that the
product be used to infringe, and overcomes the law's reluctance to
find liability when a defendant merely sells a commercial product
suitable for some lawful use. A rule that premises liability on
purposeful, culpable expression and conduct does nothing to compromise
legitimate commerce or discourage innovation having a lawful promise.
Pp. 17-20.

      (d) On the record presented, respondents' unlawful objective is
unmistakable. The classic instance of inducement is by advertisement
or solicitation that broadcasts a message designed to stimulate others
to commit violations. MGM argues persuasively that such a message is
shown here. Three features of the evidence of intent are particularly
notable. First, each of the respondents showed itself to be aiming to
satisfy a known source of demand for copyright infringement, the
market comprising former Napster users. Respondents' efforts to supply
services to former Napster users indicate a principal, if not
exclusive, intent to bring about infringement. Second, neither
respondent attempted to develop filtering tools or other mechanisms to
diminish the infringing activity using their software. While the Ninth
Circuit treated that failure as irrelevant because respondents lacked
an independent duty to monitor their users' activity, this evidence
underscores their intentional facilitation of their users'
infringement. Third, respondents make money by selling advertising
space, then by directing ads to the screens of computers employing
their software. The more their software is used, the more ads are sent
out and the greater the advertising revenue. Since the extent of the
software's use determines the gain to the distributors, the commercial
sense of their enterprise turns on high-volume use, which the record
shows is infringing. This evidence alone would not justify an
inference of unlawful intent, but its import is clear in the entire
record's context. Pp. 20-23.

      (e) In addition to intent to bring about infringement and
distribution of a device suitable for infringing use, the inducement
theory requires evidence of actual infringement by recipients of the
device, the software in this case. There is evidence of such
infringement on a gigantic scale. Because substantial evidence
supports MGM on all elements, summary judgment for respondents was
error. On remand, reconsideration of MGM's summary judgment motion
will be in order. Pp. 23-24.

380 F. 3d 1154, vacated and remanded.

      Souter, J., delivered the opinion for a unanimous Court.
Ginsburg, J., filed a concurring opinion, in which Rehnquist, C. J.,
and Kennedy, J., joined. Breyer, J., filed a concurring opinion, in
which Stevens and O'Connor, JJ., joined.
--
Monica Narula [Raqs Media Collective]
Sarai-CSDS
29 Rajpur Road, Delhi 110 054
www.raqsmediacollective.net
www.sarai.net