RETURN TO
ALEXTHORN.COM WRITINGS SECTION
Peer-to-Peer File Sharing
and Secondary Liability
Alex Thorn
The Judicial Process / PSCI
262
TABLE OF AUTHORITIES
A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001)
AMPAT/Midwest, Inc. v. Illinois Tool Works Inc., 896 F.2d 1035, 1042 (7th Cir.1990)
Fonovisa, Inc. v. Cherry
Auction, Inc. 76 F.3d 254 (9th Cir. 1996)
In re: Aimster Copyright
Litigation
No 02-4125 (7th Cir. 2003)
Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 259 F.Supp. 2d 1029 (2001)
Metro-Goldwyn-Mayer Studios, Inc. et. al. v. Grokster,
Ltd. et. al. 239 F.3d 1004 (9th Cir.
2001)
Metro-Goldwyn-Mayer Studios, Inc. et. al. v. Grokster,
Ltd. et. al. No. 03-56236 (9th Cir.
2004).
Sony Corporation of
Shapiro, Bernstein & Co.
v. H.L. Green Co., 316 F.2d 304 (2d Cir. 1963)
So.
BIBLIOGRAPHY
(books, articles,
non-opinion court documents)
Brief Amici
Curiae of the American Federation of Musicians of the
MGM
initial brief for the
Peters, Marybeth. Senate Judiciary Committee
Hearing on S. 2560, the Intentional Inducement of Copyright Infringements Act
of 2004: Statement of the Honorable Marybeth Peters.
Petitioner’s Brief for Motion
Picture Studio and Recording Company Petitioners in Metro-Goldwyn-Mayer Studios Inc., et. al. v. Grokster, Ltd., et. al.
No. 03-56236 (9th Cir., filed
McGuire, David. “Lawmakers Push Prison For Online Pirates.”
Oberholzer, Felix & Strumpf, Koleman. The
Effect of File Sharing on Record Sales: An Empirical Analysis. March, 2004.
Accessed
On March 29, the Supreme
Court of the
The decision in the Grokster case will set legal precedent and end file-sharing legal battles that have been raging for the last five years. On Oct. 2, 2001 as millions of people logged on to the peer-to-peer networks Kazaa and Grokster, 28 of the entertainment industry’s elite[3] sued the programs’ operators for allowing their users to illegally download copyrighted material. While this may have been the official start of the case, the stage for the legal battle over file-sharing started year’s earlier when file-sharing giant and innovator Napster lost its case in the 9th Circuit Court of Appeals in early 2001 and was dismantled. It was only a matter of time before the music and movie companies came knocking on the doors of other makers of file-sharing software. These newer peer-to-peer programs, such as Grokster, allow user computers to connect with other computers to share and copy each other’s files. The reason this new generation of software is different from Napster lies in the technology.[4]
The question before the Supreme Court is
whether the 9th Circuit erred in concluding, contrary to
long-established principles of secondary liability[5]
(and in acknowledged conflict with the 7th and 9th
Circuits)[6]
that internet-based file-sharing services Grokster and StreamCast, Inc. (whose
Kazaa program uses the same technology as Grokster) should be immunized from
copyright liability for the millions of daily acts of copyright infringement
that occur on through their services and that constitute of at least 88% of the
total use of the services.[7]
The petitioners have alleged that the respondents should be held liable for
contributory and vicarious liability.[8]
Perhaps the most significant development in secondary liability was the Supreme Court's first attempt to interpret the 1976 Copyright Act, Sony Corporation of America v. Universal City Studios, Inc., 464 US 417 (1984) (hereinafter referred to as “Sony”) Often referred to as the “Betamax” case, Sony involved the question of whether a manufacturer of a VCR (such as the Sony Betamax) could be held liable under the doctrines of secondary liability for the infringing actions of the customers who buy the VCR. The Court recognized that secondary liability was established in copyright law: [V]icarious liability is imposed in virtually all areas of the law, and the concept of contributory infringement is merely a species of the broader problem of identifying the circumstances in which it is just to hold one individual accountable for the actions of another.[9] But, the Court concluded that these doctrines had not been applied to a situation presented by the VCR, where the manufacturer did not have actual knowledge of the infringing activity for which customers used the device, only “constructive knowledge of the fact that its customers may use that equipment to make unauthorized copies of copyrighted material.”[10]
The
evolution and use of this cases precedent has varied. The 9th and 7th
In Napster, the 9th
Circuit found that Napster had “both actual and constructive knowledge that its
users exchanged copyrighted music…”[11]
and therefore was liable for contributory infringement. The court argued that
in Sony, the Sony Corporation merely
knew that its product was being used to illegally duplicate copyrighted
materials, whereas Napster possessed evidence, data, and the “right and ability
to supervise its users’ conduct.”[12] The
ability to supervise, the Circuit Court ruled, makes Napster vicariously liable
because it fails to “use its ability to patrol its system and preclude access
to potentially infringing files listed in its search index.”[13] In In re:
Aimster Copyright Litigation No 02-4125 (7th Cir. 2003)
(hereinafter referred to as “Aimster”),
Circuit Judge Posner wrote on behalf of the Court that “actual knowledge of
specific infringing uses is a sufficient condition for deeming a facilitator a
contributory infringer.”[14]
The court rejected Aimster’s argument “that to prevail, the recording
industry must prove it has actually lost money as a result of the copying
[Aimster’s] service facilitates.”[15]
The court also rejected Aimster’s argument that because of its encrypted search
functions[16] it had successfully removed itself from the
transaction, stating that “one who, knowing or strongly suspecting that he is
involved in shady dealings and takes steps to make sure that he does not
acquire full or exact knowledge of the nature and extent of those dealings is
held to have criminal intent.”[17]
The precedential value
of Sony has also been upheld. The 9th
Circuit held in the Grokster case the exact opposite, ruling that the
file-sharing companies’ knowledge of the infringements doesn’t make them
liable, there is no “issue of material fact as to whether defendants have the
right and ability to supervise direct infringers”[18]
or block individual users, and that the copyright owners’ claim that Grokster
“[turns] a ‘blind eye’ to the infringement of their users”[19]
lacked validity because “there is no separate ‘blind eye’ theory or element of
vicarious liability that exists independently of the traditional elements of
liability.”[20]
However, the court’s response to the “blind eye” argument is nearly as
unfounded as the argument itself, as is the court’s dismissal of the question
over Grokster’s “right and ability to supervise direct infringers.”
In ruling on the appeal
from petitioners MGM et. al., one of the most important and distinguishing
issues in Sony is the notion that
many users of the Betamax VCR used the device for “time-shifting.” Justice
Stevens describes time-shifting in Sony’s
majority opinion:
The
respondents and Sony both conducted surveys of the way the Betamax machine was
used by several hundred owners during a sample period in 1978. Although there
were some differences in the surveys, they both showed that the primary use of
the machine for most owners was "time-shifting" -- the practice of
recording a program to view it once at a later time, and thereafter erasing it.
Time-shifting enables viewers to see programs they otherwise would miss because
they are not at home, are occupied with other tasks, or are viewing a program
on another station at the time of a broadcast that they desire to watch. Both
surveys also showed, however, that a substantial number of interviewees had
accumulated libraries of tapes. Sony's survey indicated that over 80% of the
interviewees watched at least as much regular television as they had before
owning a Betamax. Respondents offered no evidence of decreased television
viewing by Betamax owners.[21]
A major justification for the court’s ruling in Sony was the fact that most, four out of five users of the Betamax
VCR, only used the device to tape shows for a later viewing, at which time they
would be replaced. Justice Stevens found weight in this argument because, in
fact, of the total programs viewed by Betamax users in the month before trial 70.4%
had been viewed only that one time and for 57.9%, there were no plans for
further viewing.[22]
Not only were non-infringing uses possible, but according to the relevant data,
most users of the Betamax VCR had not engaged in the illegal, “library
building” style of television duplication.
This type of “time
shifting” has been discussed but has proved largely inapplicable in
file-sharing history. It has been accepted that the downloading of songs to
which the user already has paid for is not illegal, just as the making of
copies for personal use is not a copyright infringement. This type of
downloading or duplicating is the closest equivalent to the time-shifting
discussed in Sony. The petitioners in
the Grokster case argue that 88% of the material transferred through the respondents’
networks is done illegally with no intent to “time-shift” or back up/duplicate
previously purchased copies.[23]
Even if the actual percentage of illegally transferred materials is not exactly
88%, it is at least telling of the shear magnitude of illegal duplication and
sharing that exists via the internet. This key difference between Sony’s
Betamax VCR and the services provided by Grokster and StreamCast illustrates
the major disparity between the two cases and why the precedential impact of Sony will be limited.
It is important to note,
also, that Grokster consciously chose not to use filters to terminate illegal
downloading of copyrighted materials. Rather than actually filter the content
and stop all illegal activity, Grokster instead took steps to remove itself
from the search process and, subsequently, from liability. In Aimster, the 7th
Circuit has found that, “one who, knowing or strongly suspecting that he is
involved in shady dealings and takes steps to make sure that he does not
acquire full or exact knowledge of the nature and extent of those dealings is
held to have criminal intent.”[24]
By consciously not filtering the content out of its system, Grokster became
liable for secondary infringement.
The technical questions
regarding liability is compounded by a moral sense that Grokster tried to find
a legal loophole in order to escape the same fate as its predecessor, Napster,
and thus it clearly operated with both the intent and knowledge that it was
facilitating illegal activity. It has been clearly established by the 7th
Circuit that “one who, knowing or strongly suspecting that he is involved in
shady dealings and takes steps to make sure that he does not acquire full or
exact knowledge of the nature and extent of those dealings is held to have
criminal intent, because a deliberate effort to avoid guilty knowledge
is all that the law requires to establish a guilty state of mind.”[25]
This criminal intent qualifies both as knowledge of the infringements occurring
and the knowing facilitation of future infringements due to a lack of
filtering. This principle of finding guilt in a party who knowingly taking
steps against receiving liability has been developed rationally by the 7th
Circuit.[26]
In
The Justices will likely
also take into account the alleged impact these peer-to-peer networks have had
on copyright owners, as they did in Sony.
In that case, Just Stevens affirmed that “even when an entire
copyrighted work was recorded, the District Court regarded the copying as fair
use ‘because there is no accompanying reduction in the market for `plaintiff's
original work.’”[31] Later, Justice Stevens concludes that, in regards to the importance of
establishing injury, “a challenge to a noncommercial use of a copyrighted work
requires proof either that the particular use is harmful, or that if it should
become widespread, it would adversely affect the potential market for the
copyrighted work.”[32]
However, while the Betamax VCR had no negative impact in the sales of the
copied materials, the Recording Industry Association of America (RIAA)
estimates a $2 billion drop in record sales between 2001 and 2003, “a period
that matches the growth of online music piracy services.”[33]
Though some claim the peer-to-peer monetary impact on the recording industry is
exaggerated,[34]
there was no evidence at all in Sony
to even suggest such damages as have been alleged in the Grokster case. In
addition, the “loss of the ability to control the proliferation of ones
intellectual property has had substantial impact on welfare of copyright
owners.”[35]
The amount of copyrighted material currently available on Kazaa’s networks is
so unbelievably massive, nearly 60 million gigabytes (90% of which is illegally
shared copyrighted material, the equivalent of 13,500,000,000 songs in digital
format[36]),
will be very persuasive for the Supreme Court Justices.
The facts in the case are well established: 1)
the respondents possessed relevant knowledge of the existence and incredible
magnitude of said infringements occurring on their networks; 2) they acted
deliberately in an attempt to both remove themselves from liability and allow
unfiltered downloading; 3) and they knowingly made profits off of said
allowance and knowledge of said infringements. Secondary liability precedents are
well defined in opposition to the respondents and will allow the Supreme Court
the ability to create a doctrine for applying the ideals in prior precedents to
an updated file-sharing rule. Said Marybeth Peters, the US Register of
Copyrights, of secondary liability doctrines, “they allow copyright owners to
focus their enforcement (and licensing) efforts on those entities that foster
infringing activity and have the resources and wherewithal to either pay
licensing fees or satisfy an infringement judgment, without bringing costly,
time-consuming and usually futile actions against multiple, mostly judgment-proof
individual defendants.”[37]
These secondary liability doctrines, as Ms. Peters describes, carry more weight
than the out-dated precedents from Sony
that are still unclear.
In June of this year, the Supreme Court will likely reject the precedents in Sony as being distinguishable and find that those who create and run deliberately de-centralized peer-to-peer file-sharing services like Grokster, Ltd. and StreamCast Networks, Inc. are liable for secondary copyright infringements.
[1] That case was Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. 259 F. Supp. 2d 1029
[2] A&M
Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001)
[3] The petitioners include the following companies: MGM; Colombia Pictures Industries, Inc.; Disney Enterprises, Inc.; Paramount Pictures Corporation; Twentieth Century Fox Film Corporation; Universal City Studios LLP, f/k/a Universal City Studios, Inc.; New Line Cinema Corporation; Time Warner Entertainment Company, LP; Atlantic Recording Corporation; Atlantic Rhino Ventures, Inc.; d/b/a Rhino Entertainment, Inc.; Elektra Entertainment Group, Inc.; London-Sire Records, Inc., LP; Warner Brothers Records, Inc.; WEA International Inc.; Warner Music Latina, Inc., f/k/a WEA Latina, Inc.; Arista Records, Inc.; Bad Boy Records; Capitol Records, Inc.; Hollywood Records, Inc.; Interscope Records; LaFace Records; Motown Record Company; RCA Records Label, a unit of BMG Music d/b/a BMG Entertainment; Sony Music Entertainment, Inc.; UMG Recordings, Inc.; Virgin Records America, Inc.; Walt Disney Records, a division of ABC, Inc.; Zomba Recording Corp.
[4] Napster
ran everything off a central server, meaning that search queries went through a
centralized Napster server and the best possible matches were displayed.
Napster was found liable for the infringements taking place over their networks
because “without the support services [Napster] provides, Napster users could
not find and download the music they want with the ease of which [Napster]
boasts,” said James DeLong of the Progress & Freedom Foundation. Grokster,
on the other hand was “deliberately designed to be decentralized,” to the
extent that users never actually interact with a Grokster server, but merely
with each other. It is because of this removed relationship that Grokster has
with its users that has kept the software company from being found liable for
the infringements committed by its users.
[5] Said
Marybeth Peters, the US Register of Copyrights, of secondary liability
doctrines, “they allow copyright owners to focus their enforcement (and
licensing) efforts on those entities that foster infringing activity and have
the resources and wherewithal to either pay licensing fees or satisfy an
infringement judgment, without bringing costly, time-consuming and usually
futile actions against multiple, mostly judgment-proof individual defendants.”
(Senate Judiciary Committee Hearing,
[6] The 2nd
Circuit ruled in A&M Records, Inc. v.
Napster, Inc., 239 F.3d 1004 (9th Cir. 2001) that Napster, Inc. was liable
for secondary copyright infringement because it encourages, facilitates and
benefits from the infringements committed over its networks. The 7th
Circuit ruled similarly in In re: Aimster
Copyright Litigation No. 02-4125 (7th Cir. 2003) against
Aimster, a peer-to-peer file-sharing network.
[7] MGM
initial brief for the
[8] Contributory
infringement requires that the alleged infringer have knowledge of the
infringement of the third party and that it aid, induce or actively contribute
to the infringement. Vicarious infringement can be sustained when (1) the
alleged infringer can exercise control over the direct infringer or infringing
activity and (2) the alleged infringer had a direct financial interest in the
infringement. These infringements are forms of secondary liability. See Southern
[9] Sony at 435.
[10]
[11] Napster at 1032.
[12] Napster at 1035.
[13] Napster at 1051.
[14] Aimster at 649.
[15] Sony at 450-54, 456.
[16] Aimster was designed to encrypt users’ search queries so that the company may not monitor the material being transferred.
[17] Aimster at 650.
[18] MGM v. Grokster 239 F.3d 1004 (9th Cir. 2001) at 11742.
[19]
[20]
[21] Sony at 423-4.
[22]
[23] MGM
initial brief for the
[24] Aimster at 650.
[25] Aimster at 650.
[26] See
[27] Aimster at 650.
[28]
[29] MGM v. Grokster 239 F.3d 1004 (9th Cir. 2001) at 11755.
[30] Petitioner’s Brief in the Grokster Case
[31] Sony at 417, 426.
[32] Sony at 451.
[33]
McGuire, David. “Lawmakers Push Prison For Online Pirates.”
[34] See
Oberholzer, Felix & Strumpf, Koleman. The Effect of File Sharing on
Record Sales: An Empirical Analysis. March, 2004. Accessed
[35] Brief Amici Curiae of the American Federation
of Musicians of the
[36]
Calculations provided by the Kazaa program upon running it on my local
computer,
[37] Peters,
Marybeth. Senate Judiciary Committee Hearing on S. 2560, the Intentional
Inducement of Copyright Infringements Act of 2004: Statement of the Honorable
Marybeth Peters.