Page 1 of 3
Random Musings
Vol. 1, No. 4: Supreme Court Holds Providers of P2P Software May Be Held Liable for Copyright Infringement

Random Musings is a collection of opinions, commentary, humor, satire, information and other thoughts escaping from the cluttered mind of the not necessarily well-informed Gerald "grsamf" Smith concerning news and events in the world of computers and their use.

Introduction

On June 27, 2005, the Supreme Court issued a decision in Metro-Goldwyn-Mayer Studios, Inc., et al. v. Grokster, LTD, et al., in which it held that one who distributes devices or software with the intent or object of promoting its use to illegally download copyright material is liable for the resulting acts of copyright infringement by people using the device or software, regardless of the potential lawful uses it may have. Specifically, the case involved producers and distributors of P2P file-sharing software and the Court's decision will allow copyright holders to sue the producers for damages from the downloading of copyrighted material if it is shown the producers intended the software be used for such copyright infringement.

In this article, I will summarize briefly the legal background of this case that brought it to the Supreme Court and then discuss the more important points of the Supreme Court's decision. The final section of the article considers what the opinion means in terms of where the case will go from here and the practical impact of the decision.

Background of the Case

In a previous article I discussed this case and its background shortly after the oral argument in the Supreme Court. Briefly, MGM and other members of the RIAA and MPAA sued Grokster and Streamcast, two of the "Big Seven" of P2P software and services. The plaintiffs alleged the defendants' software and services were used to download copyrighted material. They sued for injunctive relief and damages on a theory of secondary liability. Two types of secondary liability are contributory liability, in which a defendant significantly contributes to another person's infringement, and vicarious liability, in which a defendant profits from another person's infringement. In both types of secondary liability, a defendant must have knowledge that its products are being used for infringement.

Relying on Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984) (Sony Betamax), the Ninth Circuit Court of Appeals affirmed the summary judgment that had been granted by the District Court. A summary judgment dismisses a case prior to trial on the grounds that even if the allegations made by the losing party are true, the claim is not one recognized by the law.

Sony Betamax involved the sale of VCR equipment and in that case the Supreme Court held that Sony could not be held liable for copyright infringement of the users of the equipment. The Court noted that the equipment was marketed primarily as a "time-shifting" device, allowing users to view television programming at a time convenient to them. Because the equipment had legitimate non-infringing uses, Sony could not be held liable in the absence of knowledge of specific instances of copyright infringement by the users.

The Ninth Circuit concluded that Sony Betamax was controlling in this case because P2P programs do have legitimate uses and the defendants could not be shown to have knowledge of specific instances of copyright infringement. The Court found that this case was differed from its holdings in cases involving Napster, in which the Court found liability. Napster maintained the copyrighted material on its servers and made them available to members. P2P programs, on the other hand, do not have a central server maintaining files, nor is there a central indexing system maintained by the providers.

The Seventh Circuit Court of Appeals had reached a different conclusion in another case, holding that a defendant could not avoid knowledge of infringement by "willful blindness." In re Aimster Copyright Litig., 334 F.3d 643 (7th Cir. 2003). Unlike the Ninth Circuit, the Seventh Circuit concluded that knowledge of specific instances of copyright infringement was not necessary to hold a defendant liable.