Grokster commentary

I'm sure there's an absolute blizzard of reaction to the Grokster decision but I haven't had the time to read any of it this afternoon. I did manage to skate through Justice Souter's opinion, which makes very interesting reading.

Right up front on page one, paragraph is the summary

"We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by the clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties."

A clear win for MGM and the studios and a clear loss for the P2P companies. No doubt there is significant gnashing of teeth about this amongst the anti-copyright expansion lobby, suggesting it undermines or kills the Sony v Universal "substantial non infringing use" test but it is not as bad for them as it might at first appear.

First of all, the court was ruling on whether the Court of Appeal for the 9th circuit were right to give a summary judgement against MGM, saying they couldn't sue the P2P companies for damages. ON that they decided the 9th circuit was wrong to stop MGM from getting a substantive hearing. So the case now goes back down the chain to look at MGM claims for damages in detail.

Secondly, the Supreme Court focussed heavily on the intentions of the Grokster and Streamcast in relation to the "staggering" scope of copyright infringement on their networks. They concluded that there was a lot of evidence to demonstrate that these two particular P2P companies not only distributed technologies "capable of substantial non infringing uses" (which I thought would have been ok under the Sony test but there is a disagreement amongst concurring justices on this 3v3 with 3 not commenting on the issue), but that they also acted to heavily promote copyright infringing activity amongst the users of their software. The CTO of Streamcast, for example, is on record with the statement "[t]he goal is to get in trouble with the law and get sued. It's the best way to get in the new[s]."

And this becomes the key to the Court crafting a new inducement rule, based on a similar rule in patent law, which will probably become known as the rule in MGM v Grokster. On page 19 of the decision, Justice Souter says the patent law inducement rule (emphasis mine):

"is a sensible one for copyright. We adopt it here, holding that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression of other affirmative steps taken to foster infringement, is liable for the resulting act of infringement by third parties...
mere knowledge of infringing potential or of actual infringing uses would not be enough her 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 purpose."

There are a lot talking points in the decision but that's the key one. It adds up to a really bad decision for Grokster and Streamcast (moreso for the latter because Grokster at least sent emails to users warning them about infringing content) but not necessarily bad for other P2P companies.

The court clearly want to avoid scaring potential technology innovators and more or less strike that balance (of course they have no control over how the decision will be presented which wil be crucial). There are a number of points in the decision where they may well undermine that intent, though.

At page 12 (top para) Justice Souter says the argument for indirect liability is powerful because there are too many individual infringers for the music companies to pursue. That will be picked over justifiably, especially since the RIAA have issued lawsuits against over 10000 individuals already.

At page 13 he says they are resolving the case on the new inducement theory not vicarious liability theory as hoped by MGM. Again this is important but I can't go into the detailed questions here. I had a problem with his depiction of Sony on page 14 as a totally innocent distributor of VCRs and that the famous 1984 case provided no evidence that Sony aimed to infringe copyright or that they took active steps to encourage infringement. (Isn't that exactly what this ad did?). This attempt to distinguish the case in this way does hold water if crafted carefully enough but at this point he was trying too hard to make Sony look innocent so he he could make Grokster et al look guilty. The argument distinguishing the Sony case on page 16 is slightly tigher, where he concludes the court of appeal for the 9th circuit interpreted Sony too widely in offering the protection of the "substantial non infringing uses" defense to Grokster and Streamcast. (Even though I still have my doubts).

HE refuses at page 17 to declare the proportion of infringing use that would lead to a technology being completely outlawed, as MGM wished.

In relation to this case, starting on page 21, he says there are 3 features demonstrating evidence of intent to induce copyright infringement on the part of Grokster and Streamcast.
1. "Each company showed itself to be satisfying a known demand for infringement"
2. Neither company tried to develop filters or other mechanisms to stop copyright infringement on their networks. (Note that seems a fairly clearcut commercial decision to me, so perhaps unfair. He does pose this as part of an overall pattern of behaviour - though this won't stop future lawyers trying to make it into a defintive rule.)
3. The companies business models depended on advertising revenues, so they had a commercial incentive to get as many users as possible. (Again it seems to me that this is a business decision and the Supreme Court's decision here leaves scope for misinterpretation.)

He sums up by saying the case is significantly different to the 1984 Sony v Universal decision (I certainly agree with that) and closes by referring it back to the District Court for a substantive hearing of MGM'c damages complaint.

I'm a little surprised at the outcome, as I didn't think it would be quite so clear cut. And now I'll have to re-write the part of my Open University internet law course that covers Grokster.

Look to the usual suspects for more in depth commentary. I have to agree with the commentators that say the keys to future P2P cases is what evidence specifically will be enough to prove "inducement" and how the disagreeing justices will resolve their differences on who can claim the Sony "substantial non-infringing uses" safe harbour.