We hold 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.
and from the end:
There is substantial evidence in MGM’s favor on all elements of inducement, and summary judgment in favor of Grokster and StreamCast was error. On remand, re-consideration of MGMís motion for summary judgment will be in order.
This outcome is no surprise. It seemed obvious that the Court was going to take a middle position that would take some kind of bite out of Sony; the real question was how big a bite.
So how big is this bite? The Court established an inducement standard, setting out the facts implicating Grokster et al’s knowledge and intent to have copyrighted files copied. The battle for the next few years or decades will be to expand or constrict this standard to the facts of Grokster.
The inducement standard is treated as part of the contributory infringement standard in one place, (p.12), but elsewhere as a third test parallel to contributory and vicarious.
The new inducement standard on the one hand might not be horrible, if it is limited to the facts at hand: It was certainly clear that Grokster et al intended to follow in the footsteps of Napster. Modeling your entity after another entity that was successfully characterized as a “bad actor” now looks like not so good an idea.
But on the other hand, the evidence cited in some instances is pretty patchy/sparse:
The majority opinion cites, for instance, that “Grokster’s name is an apparent derivative of Napster.” p.7, and again at p.21 (“Grokster’s name is apparently derived from Napster…”) If that kind of naming can constitute evidence then every e-business and i-product may someday be in trouble.
The majority also cites attempts to capture / buy relevant search engine keywords. (p.7 & p.22)
The Court also felt that “the defendants’ failure to develop … filtering tools or other mechanisms to diminish the infringing activity … underscores Grokster’s and StreamCast’s intentional facilitation of their users’ infringement.” I really dislike this and any other pro-network-policing implications.
More generally, though, I am still concerned with the dotted line this opinion implicitly draws around design decisions. It should be permissible to design your product around precedents, to avoid clearly unlawful behavior. It can and should be permissible to push that boundary in new directions — new innovation proceeds by pushing old boundaries. In the case of copyright infringement, pushing a boundary too far carries its own risk: that you might fall afoul of that boundary and be found liable for copyright infringement. But here, acknowledging the design decisions is evidence in and of itself of “inducement”. That’s troubling, because it requires that designers adopt a willful blindness attitude very similar to that which Judge Posner decried in Aimster. And it could make it difficult to defend and describe innovations in court.
I’m also concerned with the very notion of including an intent-based standard in copyright. Copyright is a strict liability regime. Liability is thus quite broad: any actual infringement creates liability, regardless of intent. Adding an intent-based liability to the further-afield secondary liability broadens copyright even further. The Court did attempt to address this, at p.19:
We are, of course, mindful of the need to keep from trenching on regular commerce or discouraging the development of technology 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.
Yeah, we’ll see. Here’s hoping the Court is right in its optimistic assertion that its new inducement “does nothing to compromise legitimate commerce or discourage innovtaion having a lawful promise”.
The Court also played dangerously with the numbers game, citing “the number of infringing downloads that occur every day using StreamCast’s and Grokster’s software” as a “powerful… argument for imposing liability”. At 12. And again at 23: “As the account of the facts indicates, there is evidence of infringement on a gigantic scale, and there is no serious issue of the adequacy of MGM’s showing on this point…. ”
These lines will certainly appear in content-owners’ briefs and attempts to get courts to consider the quantity and volume of infringement — the very standard rejected in Sony.
The Court states that neither of the Sony uses (recording TV off-air, and librarying programs) was “necessarily infringing”. (p.14). So presumably new uses are not “necessarily infringing”. But wouldn’t this have applied to Napster? Personal file sharing, of degraded-quality MP3s, without commercial exchanges — that was a new use, and not a “necessarily infringing” use. Ah, this is going to beef up the market prong of the fair use test, I bet. Like it needs any more beefing.
The Court restricts Sony to contributory infringement not vicarious liability. Some courts assumed so anyway, but Posner in Aimster pointed out that it was really unclear. Grokster resolves that unclarity by describing Sony as merely about contributory infringement, not about vicarious liability.
On those facts, with no evidence of stated or indicated intent to promote infringing uses, the only conceivable basis for imposing liability was on a theory of contributory infringement arising from its sale of VCRs to consumers with knowledge that some would use them to infringe. Id., at 439.
at 14. And later at 16-17:
[The Ninth Circuit’s] view of Sony, however, was error, converting the case from one about liability resting on imputed intent to one about liability on any theory. Because Sony did not displace other theories of secondary liability …
On the other hand, the Court seems to want to leave Sony otherwise untouched:
Because Sony did not displace other theories of secondary liability, and because we find below that it was error to grant summary judgment to the companies on MGMís inducement claim, we do not revisit Sony further, as MGM requests, to add a more quantified description of the point of balance between protection and commerce when liability rests solely on distribution with knowledge that unlawful use will occur. It is enough to note that the Ninth Circuitís judgment rested on an erroneous understanding of Sony and to leave further consideration of the Sony rule for a day when that may be required.
Added commentary (6/28):
The real problem is that while the Court leaving Sony untouched in name only, the Court manipulated the entire environment in which Sony lived. Sony, as it played out in the real world, stood for the generic proposition that secondary liability for developing & distributing a technology accrued only where there were no “substantial noninfringing uses” to the technology. The fact that Sony was vague on the vicarious / contributory distinction was fine — it created a grander position for the Sony standard vis-a-vis secondary liability generally. Technological development ought not be held hostage either to existing business models or to those who seek to get around the existing business models.
Despite the Court’s intentions, Grokster chips away at Sony in two ways: First, the Court hones down the vagueness and wiggle room in Sony by construing it as a contributory case. Second, the Court opens up an entirely new avenue for secondary liability, one with (as yet) no pro-technology out. So, now technology developers, instead of being able to rely on a general, broad principle of protection for multiple-use technologies, have to watch out for both vicarious liability and the new (to copyright) inducement standard.
The protection for technological development is gone. So what if Grokster developed its technology intending to foster copyright infringement? Once the technology is out there, it started being used to, yes, share noninfringing materials. And those uses will continue to grow and evolve. On some level, Grokster the company is merely an agent for technological evolution. But this decision is not aimed at the agent; it’s aimed at technological evolution itself. If they had wanted to aim at the agent, then they could have restricted their theory to the inducing acts and words — not to the development and distribution of the technology. How much did Grokster’s ad campaigns actually induce infringement? And how much did the mere capability of the technology “induce” infringement? Unfortunately this decision doesn’t (at first reading anyway) lend itself to focusing on the acts. It looks at the acts, but it targets the technology.
< / end of added commentary >
I don’t like footnote 13:
It is not only that encouraging a particular consumer to infringe a copyright can give rise to secondary liability for the infringement that results. Inducement liability goes beyond that, and the distribution of a product can itself give rise to liability where evidence shows that the distributor intended and encouraged the product to be used to infringe. In such a case, the culpable act is not merely the encouragement of infringement but also the distribution of the tool intended for infringing use.
Breyer/Souter/O’Connor concur with the majority but disagree with Ginsburg’s concurrence (Ginsburg/Rehnquist/Kennedy) evaluating Grokster’s potential liability for “contributory infringement”. Breyer agrees with the inducement carve-out, but separately finds that Grokster meets the Sony test for contributory infringement.
On the other hand, Breyer regularly cites the quantity in Sony — which suggests that even though he is supporting Grokster in this discussion, he has bought into the quantitative analysis anyway. However Breyer does clearly point out that 10% may not be enough, should not be fixed, and that Aimster was a stricter interpretation of Sony than he would have put forth.
Breyer’s opinion is ultimately the most thoughtful and most directly engages the policy balances at stake. And, demonstrates the most familiarity with the record.
Ginsburg: I really take issue with this concurrence. How can J. Ginsburg say
Here, there has been no finding of fair use and little beyond anecdotal evidence of noninfringing uses. … These declarations (some of them hearsay) include assertions that number of copyright owners authorize distribution of their works on the Internet and that some public domain material is available through peer-to-peer networks.
(at 5) The fact that Rick Prelinger and Brewster Kahle have not personally used the P2P networks is used against them! Merely providing content which they authorized for distribution over P2P networks was not enough. Contrast Sony: If Ginsburg had been writing it, apparently Mr. Rogers’ statements that he was happy to have his content copied would not have been sufficient. No, Mr. Rogers would have been required to have actually used VCRs to tape his materials off air.
Apparently all public domain and permissive filesharing constitutes “anecdotal evidence of noninfringing uses”. But shouldn’t distribution of teachers’ guides, satires, etc., count as fair uses? Oh — someone needs to make the compelling case for fair use filesharing! But I suspect nothing would persuade J. Ginsburg. Even blind orphans from Tanzania who get copies of works not otherwise available in Tanzania may not merit a tear if weighed against the all-important interests of large copyright-holding movie companies and cartels.
Ginsburg is pushing for a reconsideration of quantitative factors, which apparently will look at the state of infringement at the moment the litigation is filed. Needless to say this would stifle and kill all sorts of technological developments.