GRAPPLING WITH GROKSTER

A more detailed analysis by the IPKat of the majority judgment in today’s Supreme Court Grokster decision.

Grokster is a file-sharing network that allows users to share electronic files (including music files) through peer-to-peer networks without having to go through central servers. Such P2P networks can be used to share any type of digital file, but they have been used in particular for sharing copyright-protected music and video files without the authorisation of the copyright holder.

The action

MGM and a number of other copyright holders brought an action for secondary copyright infringement against Grokster. The Court of Appeals of the Ninth Circuit granted summary judgment in Grokster’s favour, finding no arguable case of secondary infringement. While there was no doubt that users of the network were infringing, it was found that Grokster did not infringe, based on the Sony v Universal Studios case. In Sony the makers of Betamax video recorders were found not to have secondarily infringed because their machines could be used for non-infringing purposes and so did not lead to secondary infringement unless its maker knew of specific instances of infringement and failed to act on that knowledge.

Making a balance

The Supreme Court began by acknowledging that there was a balance to be made – according to the court “The more artistic protection is favoured, the more technological innovation may be discouraged; the administration of copyright law is an exercise in managing the trade-off.” There were strong arguments in favour of imposing indirect liability here, based on the vast number of infringing downloads and the impossibility of direct enforcement against the individual direct infringers.

Contributory infringement (a common law wrong) was said to consist of intentionally inducing or encouraging direct infringement. The Sony case was described as a reflection of patent law’s “staple article of commerce” doctrine. This doctrine holds that an article will not infringe a patent if it is suitable for use in other ways. Thus, Sony’s video recorders did not infringe copyright because they could be used for time-shifting (recording programmes to be watched later at the owner’s convenience) which was legal and therefore constituted a commercially significant non-infringing use. The purpose of the “staple article of commerce” doctrine is that there is a legitimate public interest in allowing products that can be used in a lawful way to be available.

Reading Sony too widely

The Ninth Circuit had read Sony too widely. Sony did not say that secondary infringement was an impossibility where a product is capable of a substantial lawful use. However, according to the Supreme Court, Sony only laid down this rule where liability was being placed on the maker of the means of infringement by imputing an intention to enable infringement based solely on the design of the means of infringement. Others forms of secondary infringement were unaffected by Sony.

The relevance of the defendant's intention

One example of another form of secondary infringement is where there is direct evidence of an intent to induce or encourage direct infringement. There must be a purposeful, culpable expression of intent to induce infringement and this must be accompanied by conduct. Such an unlawful purpose prevents a defendant from claiming the protection of the “staple article” rule. What is crucial is that (i) it is shown that active steps were taking with the purpose of bringing about the infringing acts and (ii) it is shown that infringing acts took place using the method for infringement distributed. It is not crucial to show that the message to infringe was sent out to the direct infringers, but such a showing will be helpful.

Here three main things demonstrated Grokster’s unlawful purpose:

* By promoting itself as a successor to Napster (the P2P system ruled to be infringing in a previous case), the company showed itself to be aiming a satisfying a known source of demand for copyright infringement. This could be seen both from internal business-plan documents and the way in which the site presented itself.

* Grokster didn’t develop filtering tools or other mechanisms to limit infringement through their software.

* Commercially, Grokster’s scheme only made sense if it could make money through advertising. The more the software was used, the greater the advertising income was. The software was used the most for top-40 hits, which could only be disseminated through Grokster in an infringing fashion. This though was said to be a weaker factor.

As well as intent to bring about infringement, actual direct infringement had to be shown. There was no shortage of evidence that this had taken place.

What next?

The case has now been remanded to the lower court for a ruling based on the principles set out by the Supreme Court.

According to the IPKat

The IPKat isn’t used to all this economic-style analysis dictating the direction of cases and he’s not sure how good it is for the predictability of the law (although in this case he wonders if the Supreme Court’s 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. In particular, the court has avoided answering the question of what percentage of the use has to be legitimate in order for a product to avoid being seen as a tool of secondary infringement.

The IPKat also points out that this is an example of how procedure and "hard law" come together to influence the outcome of a case. Without strong discovery, MGM would have been in a far weaker position when it came to proving that Grokster's intention was to induce infringement.