MGM v Grokster
Technology Producers Can Be Liable for Intentionally Inducing Copyright Infringement
When are technology producers liable for the infringing activities of people who use their products? In the case against Grokster and Streamcast Networks, distributors of “peer-to-peer” or “P2P” software, the Supreme Court offered a new answer: technologists are liable when they intentionally “induce” that infringement, even if their products are capable of both legal and illegal uses.
This is not the first time copyright owners have challenged new technologies. When VCRs first came out, the movie studios claimed that they would undermine the industry–as one of their representatives put it, “[t]he VCR is to the motion picture industry . . . what the Boston strangler is to the woman alone.” The studios sued Sony, who then sold Betamax recorders, and the Supreme Court found that Sony was not liable for infringing activities of VCR users because VCRs were “capable of substantial non-infringing uses,” including taping shows at home to watch them later. This “loss” turned out to be a blessing for the movie studios, who now make more than 50% of their revenues from video rentals. Similarly, previous technologies that enabled copying — player pianos, phonographs, and juke-boxes, among others–have all enjoyed a legislative or judicial shelter that allowed them to develop and ultimately benefit both consumers and the entertainment industries.
In the Grokster case, however, the Court found that even though the P2P software in question was, like the VCR, capable of non-infringing uses (such as swapping research information, public domain material, educational materials, secure licensed files, and more), P2P distributors could still be liable under an “inducement” theory. This is the first time this inducement rule has been imported into copyright law.
The Grokster decision is good news and bad news for technology producers. The good news is that it seeks to punish bad actors, not technology itself. P2P software is not illegal, only P2P software from distributors who induce infringement. The bad news is that innovators now have to worry about whether they are inducing infringement, and the decision offers them with little clarity as to what inducement means.
This is how the Court described the inducement standard: “[O]ne 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 . . . [but] 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 . . . .”
But what amounts to “clear expression” or “other affirmative steps”? What kind of evidence suggests “purposeful, culpable expression and conduct”? The Court found that three features in the Grokster case were “particularly notable” in showing an “unmistakable” unlawful objective. First, company emails, advertisements and other details showed that Grokster and Streamcast conceived and marketed themselves as “the next Napster” in an effort to supply services to former Napster users. Among this evidence was the fact that “Grokster’s name is apparently derived from Napster.” Second, the companies did not attempt to develop mechanisms that would limit infringing uses of their software. Third, the companies’ business models relied on infringement because their advertising-based revenue increased as more infringing material became available. But the Court noted that neither the second nor third feature alone would be enough to show inducement, and it is not clear how many or what combination of factors must be present to conclusively indicate inducement.
As many have pointed out, the kind of evidence highlighted by the Court could conceivably condemn popular devices such as the iPod. Consider this argument (borrowed from previous work by the Electronic Frontier Foundation) applying the Court’s three salient features to the iPod. iPods are illegal because of 1) tainted marketing: Apple’s “Rip, Mix, and Burn” advertising campaign directly encourages copyright infringement; 2) lack of infringement-curbing mechanisms: instead of using a file format with strong content protection, iPods play MP3 files, which have inadequate protection and are the favorite format for illegal filesharing; and 3) an infringement-based business model: the iPod’s enormous 40gb capacity, which exceeds almost any CD or iTunes collection, can only be meant for storing illegally downloaded music.
Of course, an iPod lawsuit is unlikely as the iPod has already been sanctioned by the recording industry. But what about the next generation of technologies? After the Sony decision, innovators whose products were capable of substantial non-infringing uses could presume that their work was legal. Now these innovators have to worry about their advertisements, marketing plans, business models, whether they have done enough to prevent infringing uses, even the name of their product.
Unfortunately, the Grokster decision leaves innovators in a state of legal uncertainty, and this could limit the development of future technologies that would benefit both consumers and entertainment industries. Perhaps the biggest winners will be the lawyers who will log countless hours divining the contours of the new inducement rule, advising technology companies on potential liability, and bringing discovery-intensive lawsuits. But this is hardly cause for celebration.
The author, Jennifer Jenkins is the director of the Center for the Study of the Public Domain at Duke University School of Law.
