In MGM v. Grokster, the Supreme Court ruled unanimously that when a distributor of a product capable of both lawful and unlawful uses distributes such 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, is liable for the resulting acts of infringement by third parties.
The opinion of the Court, delivered by Justice Souter, adopts an active inducement standard for secondary copyright liability. Active inducement can be ascertained by looking to the express promotion, marketing, and intent to promote illicit uses of the technology and a lack of evidence that a developer made an effort to filter copyrighted material from the service. The inducement rule "premises liability on purposeful, culpable expression and conduct, and thus does nothing to compromise legitimate commerce or discourage innovation having a lawful promise."
The Court finds that Sony is not controlling here, because neither of these P2P services are neutral products merely capable of infringing use, but developed and marketed for the purposes of encouraging infringing use.
In sum, where an article is “good for nothing else” but infringement, Canda v. Michigan Malleable Iron Co., supra, at 489, there is no legitimate public interest in its unlicensed availability, and there is no injustice in presuming or imputing an intent to infringe, see Henry v. A. B. Dick Co., 224 U.S. 1, 48 (1912), overruled on other grounds, Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502 (1917). Conversely, the doctrine absolves the equivocal conduct of selling an item with substantial lawful as well as unlawful uses, and limits liability to instances of more acute fault than the mere understanding that some of one’s products will be misused. It leaves breathing room for innovation and a vigorous commerce. See Sony Corp. v. Universal City Studios, supra, at 442; Dawson Chemical Co. v. Rohm & Haas Co., 448 U.S. 176, 221 (1980); Henry v. A. B. Dick Co., supra, at 48.
For the same reasons that Sony took the staple-article doctrine of patent law as a model for its copyright safe-harbor rule, the inducement rule, too, is a sensible one for copyright. We adopt it here, holding that 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, is liable for the resulting acts of infringement by third parties. We are, of course, mindful of the need to keep from trenching on regular commerce or discouraging the development of technologies with lawful and unlawful potential. Accordingly, just as Sony did not find intentional inducement despite the knowledge of the VCR manufacturer that its device could be used to infringe, 464 U.S., at 439, n. 19, mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability. Nor would ordinary acts incident to product distribution, such as offering customers technical support or product updates, support liability in themselves. The inducement rule, instead, premises liability on purposeful, culpable expression and conduct, and thus does nothing to compromise legitimate commerce or discourage innovation having a lawful promise.
In sum, this case is significantly different from Sony and reliance on that case to rule in favor of StreamCast and Grokster was error. Sony dealt with a claim of liability based solely on distributing a product with alternative lawful and unlawful uses, with knowledge that some users would follow the unlawful course. The case struck a balance between the interests of protection and innovation by holding that the product’s capability of substantial lawful employment should bar the imputation of fault and consequent secondary liability for the unlawful acts of others.
In a concurring opinion, Justice Ginsburg (joined by the Chief Justice and Justice Kennedy) writes that, even though the Court bases its ruling on the active inducement standard, Grokster and Streamcast may still be liable under the Sony Betamax standard. Ginsburg supports adopting the "percentage of use" interpretation of the Sony test advanced by the copyright owners, that supports a finding of liability for technology developer where the potential non-infringing uses of that technology are so far outnumbered by the potential infringing uses.
Even if the absolute number of noninfringing files copied using the Grokster and StreamCast software is large, it does not follow that the products are therefore put to substantial noninfringing uses and are thus immune from liability. The number of noninfringing copies may be reflective of, and dwarfed by, the huge total volume of files shared. Further, the District Court and the Court of Appeals did not sharply distinguish between uses of Grokster’s and StreamCast’s software products (which this case is about) and uses of peer-to-peer technology generally (which this case is not about).
In sum, when the record in this case was developed, there was evidence that Grokster’s and StreamCast’s products were, and had been for some time, overwhelmingly used to infringe, ante, at 4—6; App. 434—439, 476—481, and that this infringement was the overwhelming source of revenue from the products, ante, at 8—9; 259 F. Supp. 2d, at 1043—1044. Fairly appraised, the evidence was insufficient to demonstrate, beyond genuine debate, a reasonable prospect that substantial or commercially significant noninfringing uses were likely to develop over time. On this record, the District Court should not have ruled dispositively on the contributory infringement charge by granting summary judgment to Grokster and StreamCast.
In another concurring opinion, Justice Breyer (joined by Justices Stevens and O'Connor) supports the interpretation of the Sony substantial non-infringing use test proffered by the technology developers-- that the non-infringing uses must be substantial on their own without considering the specific percentage of infringing and non-infringing uses. Justice Breyeer agrees with the Ninth Circuit's ruling under the Sony standard-- that approximately 10% non-infringing use is more than sufficient to constitute substantial or commercially significant non-infringing use.
Here the record reveals a significant future market for noninfringing uses of Grokster-type peer-to-peer software. Such software permits the exchange of any sort of digital file–whether that file does, or does not, contain copyrighted material. As more and more uncopyrighted information is stored in swappable form, it seems a likely inference that lawful peer-to-peer sharing will become increasingly prevalent.
And that is just what is happening. Such legitimate noninfringing uses are coming to include the swapping of: research information (the initial purpose of many peer-to-peer networks); public domain films (e.g., those owned by the Prelinger Archive); historical recordings and digital educational materials (e.g., those stored on the Internet Archive); digital photos (OurPictures, for example, is starting a P2P photo-swapping service); “shareware” and “freeware” (e.g., Linux and certain Windows software); secure licensed music and movie files (Intent MediaWorks, for example, protects licensed content sent across P2P networks); news broadcasts past and present (the BBC Creative Archive lets users “rip, mix and share the BBC”); user-created audio and video files (including “podcasts” that may be distributed through P2P software); and all manner of free “open content” works collected by Creative Commons (one can search for Creative Commons material on StreamCast).
There may be other now-unforeseen noninfringing uses that develop for peer-to-peer software, just as the home-video rental industry (unmentioned in Sony) developed for the VCR. But the foreseeable development of such uses, when taken together with an estimated 10% noninfringing material, is sufficient to meet Sony’s standard. And while Sony considered the record following a trial, there are no facts asserted by MGM in its summary judgment filings that lead me to believe the outcome after a trial here could be any different. The lower courts reached the same conclusion.
Justice Breyer goes on to discuss whether the Sony standard should be modified, and looks to three factors:
- Has Sony (as I interpret it) worked to protect new technology?
- If so, would modification or strict interpretation significantly weaken that protection?
- If so, would new or necessary copyright-related benefits outweigh any such weakening?
To answer his first question, Breyer finds that the Sony rule has "provided entrepreneurs with needed assurance that they will be shielded from copyright liability as they bring valuable new technologies to market." The Sony rule is beneficial because it is "strongly technology protecting," "forward looking," and "mindful of the limitations facing judges where matters of technology are concerned."
To develop a stricter interpretation of the Sony standard would make it substantially more difficult for companies to bring innovative new technologies to market if those technologies have the potential to be used for copyright infringement.
The second, more difficult, question is whether a modified Sony rule (or a strict interpretation) would significantly weaken the law’s ability to protect new technology. Justice Ginsburg’s approach would require defendants to produce considerably more concrete evidence–more than was presented here–to earn Sony’s shelter. That heavier evidentiary demand, and especially the more dramatic (case-by-case balancing) modifications that MGM and the Government seek, would, I believe, undercut the protection that Sony now offers.
To require defendants to provide, for example, detailed evidence–say business plans, profitability estimates, projected technological modifications, and so forth–would doubtless make life easier for copyrightholder plaintiffs. But it would simultaneously increase the legal uncertainty that surrounds the creation or development of a new technology capable of being put to infringing uses. Inventors and entrepreneurs (in the garage, the dorm room, the corporate lab, or the boardroom) would have to fear (and in many cases endure) costly and extensive trials when they create, produce, or distribute the sort of information technology that can be used for copyright infringement.
Finally, Justice Breyer does "not doubt that a more intrusive Sony test would generally provide greater revenue security for copyright holders," but when balanced against the gains produced by encouraging innovative new technology, it is difficult to conclude that the benefits to copyright owners would "exceed the losses on the technology roundabouts."
For one thing, the law disfavors equating the two different kinds of gain and loss; rather, it leans in favor of protecting technology. As Sony itself makes clear, the producer of a technology which permits unlawful copying does not himself engage in unlawful copying–a fact that makes the attachment of copyright liability to the creation, production, or distribution of the technology an exceptional thing.… In any event, the evidence now available does not, in my view, make out a sufficiently strong case for change.
Links, Commentary, Crticism, Etc.
William Patry: The Court Punts: " I don't know about others, but I view the Court as having punted: they decided mainly an issue that wasn't in front of them (inducement) and didn't decide the one that was, the effect of Sony in the Internet era. I think this happened because neither the Ginsburg camp nor the Breyer camp could get two others to join. There were three for the picking, Souter, Scalia and Thomas. The two concurring camps have diametrically opposed views of the case, totalling six Justices. What does this do to the influence that the 'unanimous' Souter opinion has? I think it greatly undermines it, resulting, as predicted in a muddied, murky future."
SCOTUSblog Grokster discussion with Ian Gershengorn, Ed Felten, Charles Petit, Susan Crawford, Douglas Lichtman, and more.
The Wall St. Journal Grokster Roundtable with James M. Burger , Michael Geist, Denise Howell, Ernest Miller, Thedore Olson, John Palfrey and Cristopher Ruhland.
The Picker MobBlog with Randy Picker, Doug Lichtman, Jessica Litman, Jim Speta, Julie Cohen, Larry Solum, Lior Strahilevitz, Phil Weiser, Ray Ku, Stuart Benjamin, Tim Wu, Tom Hazlett, and Wendy Gordon
Via über-blogger Ernest Miller, Notes on Pro-Grokster Press Conference and Notes on RIAA and MPAA Press Conference.
Eric Goldman: Grokster Supreme Court Ruling: "I think the Supreme Court reached the only logical result. It had to find for the plaintiffs. I say this because there was simply no way for the Court to ignore that Grokster and Streamcast were facilitating massive copyright infringement. As the court says, 'the probable scope of copyright infringement is staggering' and 'there is evidence of infringement on a gigantic scale.' If it ignored these facts, it was simply going to force Congress to act."
Michael Madison: Grokster Redux: "So, innocent design + “culpable intent” = liability for indirect infringement. Is this such a bad thing? In the short term, I don’t think that it makes much difference in the dynamics of litigation. In the longer term, I think that courts can handle this, which makes me a little more sanguine than those who think that intent-based standards merely provide a road map for the bad guys."
Cathy Kirkman: Grokster ruling and the tech industry: "The outcome seems fairly close to the amicus brief filed by the Business Software Alliance, out of the fifty-five amicus briefs that were submitted. The BSA’s amicus brief advocated upholding the Sony doctrine with a reversal based on additional acts of encouraging the use of the technology for infringing purposes. The BSA also asked the Supreme Court to confirm that customary contact with customers, such as advertising, product support and upgrades, is covered by the Betamax exemption."
Rebecca Tushnet: More questions than answers: "That said, I am concerned that not every court is as careful as Justice Souter – this was a problem with his opinion in Campbell v. Acuff-Rose, which quite clearly says that satire can be fair use (though it has comparatively less advantage in the fair use analysis than parody does) but which has widely been overread to say that parodies win fair use defenses, but satires don’t. I fear that similar uncertainties will follow the Grokster ruling. In fairness, though, I can’t imagine a plausible majority opinion that wouldn’t leave many thorny questions."
Ernest Miller: Some Notes on Grokster :"The opinion emphasizes three main factors as "clear" evidence of intent. However, the first makes little sense and the next two are otherwise legal actions that only become evidence of intent if there is already evidence of intent."
Lorne Manley, New York Times: Court Rules File-Sharing Networks Can Be Held Liable for Illegal Use: "The case, which pitted the entertainment industry against technology companies in the continuing battle over the proper balance between protecting copyrights and fostering innovation, overturns lower court decisions that found the file-sharing networks were not liable because their services allowed for substantial legitimate uses. The justices said there was enough evidence that the Web sites were seeking to profit from their customers' use of the illegally shared files for the case to go back to lower court for trial."
Roger Parloff, Fortune: The File Sharing Fight's Not Over: "The U.S. Supreme Court ruled unanimously today in favor of an alliance of movie studios and record producers that brought a landmark copyright infringement suit against two providers of popular peer-to-peer, file-sharing software. Although the opinion, written by Justice David Souter, represents a clear victory for the entertainment industry, the ruling is narrow and does not necessarily spell doom for other providers of peer-to-peer file-sharing software."
Lyle Denniston, SCOTUSblog: New challenge to file-sharing designers: "The Supreme Court’s unanimous (but in some ways divided) ruling on the use of copyright laws to try to stop the massive sharing over the Internet of music and movie files posts a significant legal warning to software designers, but does not turn them into complete copyright outlaws."
IPKat: Grappling with Grokster: "The IPKat isn't used to all this economic-style analysis dictating the direction of cases and hes not sure how good it is for the predictability of the law (although in this case he wonders if the Supreme Courts legal framework that it put in place here might well have stood up without it). By focusing on secondary infringement based on an intent to induce infringement, the Supreme Court has neatly side-stepped the issue of the limits of the rule that there is no secondary infringement where the method for infringement also has a legitimate use."
Chris Riley at Lawmeme: "My (only partially joking) reaction to this is that my job security as a future cyberlawyer is assured."
And, from Wonkette: The Supremes Are Trying to Break Your Heart: "Bachelor, close to his mom, brings his own lunch to work -- we always suspected David Souter was the 'emo justice.' Now we know for sure."