Below are just a few my observations about the decision, in no particular order.
Vicarious infringement is a rather messy little and unclear doctrine. It could seriously use some clarity. The question was before the Court, but they refused to address it (footnote 9):
In the present case MGM has argued a vicarious liability theory, which allows imposition of liability when the defendant profits directly from the infringement and has a right and ability to supervise the direct infringer, even if the defendant initially lacks knowledge of the infringement. Because we resolve the case based on an inducement theory, there is no need to analyze separately MGM's vicarious liability theory. [citations omitted]
Well, if they had analyzed the vicarious infringement liability and found that the lower courts had erred, they wouldn't have had to reach the question of inducement. It isn't as if questions about vicarious liability will be going away. Interestingly, neither concurrence even mentions vicarious liablity.
Evidence of Intent?
The evidence for Grokster/StreamCast's intent is pretty darn weak:
[p. 20] Grokster distributed an electronic newsletter containing links to articles promoting its software's ability to access popular copyrighted music.
What does this mean? If the New York Times
profiles your product and mentions its infringing uses you can't cite that article?
The same could be said about this "evidence" of intent:
And anyone whose Napster or free file-sharing searches turned up a link to Grokster would have understood Grokster to be offering the same file-sharing ability as Napster, and to the same people who probably used Napster for infringing downloads...
Huh? Grokster was available on the original Napster and this makes Grokster liable? What free software wasn't and isn't available on P2P filesharing networks whether legal or illegal?
Three Main Indicators of Intent: The First is Bogus and the Next Two Bootstrap Off the First
The opinion emphasizes three main factors as "clear" evidence of intent. However, the first makes little sense and the next two are otherwise legal actions that only become evidence of intent if there is already evidence of intent.
The first is advertising aimed at Napster users.
First, each company showed itself to be aiming to satisfy a known source of demand for copyright infringement, the market comprising former Napster users. StreamCast's internal documents made constant reference to Napster, it initially distributed its Morpheus software through an OpenNap program compatible with Napster, it advertised its OpenNap program to Napster users, and its Morpheus software functions as Napster did except that it could be used to distribute more kinds of files, including copyrighted movies and software programs. Grokster's name is apparently derived from Napster, it too initially offered an OpenNap program, its software's function is likewise comparable to Napster's, and it attempted to divert queries for Napster onto its own Web site. Grokster and StreamCast's efforts to supply services to former Napster users, deprived of a mechanism to copy and distribute what were overwhelmingly infringing files, indicate a principal, if not exclusive, intent on the part of each to bring about infringement.
Of course, this is limited by the fact that future creators will avoid such a thing, but why should it be considered "evidence" in the first place. After all, there is one company that is uneqivocally going after former Napster users, Napster
itself. Why is it that Grokster cannot go after former Napster users, but Napster 2.0 can? Is it the technology? But I thought inducement was about intent, and not the tools.
This brings up the point I raised on the Wall Street Journal's Grokster Roundtable:
Imagine that Sony had been a nefarious group of active inducers when they brought out their Betamax. Suppose that there was ample evidence that Sony fully intended and explicitly encouraged Betamax users to infringe copyright with their videotape recorder (ads, internal emails, business plans). Consequently, under this standard, sales of the Betamax were shut down. What happens when VHS comes along? What will the makers of VHS have to do in order to avoid liability thanks to the bad actions of Sony?
Should VHS be punished for going after the Betamax market? It would have been hard for VHS not
to go after the Betamax market, that's where the buyers of VCRs are. As I asked in the roundtable, "What would StreamCast and Grokster have to have done in order to avoid liability for following in the footsteps of bad actor Napster? What will the next developer of P2P have to do if Grokster and StreamCast are found liable in the lower court?" This decision leaves the issue fairly uncertain.
Next, the infamous, footnote 12 and questions of design. First the paragraph it is attached to:
Second, this evidence of unlawful objective is given added significance by MGM?s showing that neither company attempted to develop filtering tools or other mechanisms to diminish the infringing activity using their software. While the Ninth Circuit treated the defendants'failure to develop such tools as irrelevant because they lacked an independent duty to monitor their users' activity, we think this evidence underscores Grokster's and StreamCast's intentional facilitation of their users? infringement.
And, footnote 12, itself:
Of course, in the absence of other evidence of intent, a court would be unable to find contributory infringement liability merely based on a failure to take affirmative steps to prevent infringement, if the device otherwise was capable of substantial noninfringing uses. Such a holding would tread too close to the Sony safe harbor.
What the heck does this mean? No one seems to know. Rather contradictory, actually.
Honestly, this doesn't make a lot of sense. Imagine the VCR scenario again. Imagine that Sony was a bunch of infringement inducing scum with the Betamax. Now, the VHS standard comes along and they seem to be going after the Betamax market (sort of hard to avoid, actually). Suddenly, it is evidence of illicit intent that the VHS was built without broadcast flag technology?
I suppose it will end up turning on how big one thinks the Sony safe harbor actually is. The Court really punted this one.
The bootstrapping continues:
Third, there is a further complement to the direct evidence of unlawful objective. It is useful to recall that StreamCast and Grokster make money by selling advertising space, by directing ads to the screens of computers employing their software. As the record shows, the more the software is used, the more ads are sent out and the greater the advertising revenue becomes. Since the extent of the software's use determines the gain to the distributors, the commercial sense of their enterprise turns on high-volume use, which the record shows is infringing. This evidence alone would not justify an inference of unlawful intent, but viewed in the context of the entire record its import is clear.
"[I]ts import is clear?" Clear? I think not.
The Supreme Court points to three main reasons by Grokster and Streamcast intend infringement. The first is that they went after Napster's users. That's pretty darn weak evidence by itself. Everyone wanted to capture Napster's market, legitimate and illegitimate services alike. Why do you think Napster 2.0 is still around? The Court then boostraps this weak evidence into turning what the Court admits would be otherwise lawful conduct, into evidence of illicit intent.
So, bascally, the Court has said that you don't have to design your software to avoid infringement. Feel free to earn advertising revenues (gee, thanks), but once you pass some unknown threshold of intent (what? an internal email, an ambiguous advertisement, what?), these two otherwise lawful acts will be held against you. Apparently, the Court wants a balancing test of some sort. How this is balanced is going to be key. I almost want some terribly incriminating statements from Grokster and StreamCast to be entered into evidence in the district court, as they're doomed at its best that we don't get a narrow reading of Sony in the context of this threshold for intent argument.
The conclusion of the opinion is a bit defensive of this argument, I think:
If liability for inducing infringement is ultimately found, it will not be on the basis of presuming or imputing fault, but from inferring a patently illegal objective from statements and actions showing what that objective was.
One man's imputing is another man's inferring, presumably.
The less said about the Ginsburg concurrence the better. I think, though, that the concurrence is fairly limited to the facts developed in this particular case and to a record that wasn't fully developed through trial. Furthermore, there is very little explanation of what "capable" means in Sony. The concurrence seems firmly rooted in a fixed timeframe and reflects Justice Kennedy's questions about free riding on copyrighted works to get a technology off the ground.
Ah, sweet reason, three Justices who get it. Here, there is a discussion of what capable means, revealing a view of technology that develops over time.
Here the record reveals a significant future market for noninfringing uses of Grokster-type peer-to-peer software. Such software permits the exchange of any sort of digital file -- whether that file does, or does not, contain copyrighted material. As more and more uncopyrighted information is stored in swappable form, it seems a likely inference that lawful peer-to-peer sharing will become increasingly prevalent. [citations omitted]
And that is just what is happening. Such legitimate noninfringing uses are coming to include the swapping of: research information (the initial purpose of many peer-to-peer networks); public domain films (e.g., those owned by the Prelinger Archive); historical recordings and digital educational materials (e.g., those stored on the Internet Archive); digital photos (OurPictures, for example, is starting a P2P photo-swapping service); "shareware" and "freeware" (e.g., Linux and certain Windows software); secure licensed music and movie files (Intent MediaWorks, for example, protects licensed content sent across P2P networks); news broadcasts past and present (the BBC Creative Archive lets users "rip, mix and share the BBC"); user-created audio and video files (including "podcasts" that may be distributed through P2P software); and all manner of free "open content" works collected by Creative Commons (one can search for Creative Commons material on StreamCast). [citations omitted] I can find nothing in the record that suggests that this course of events will not continue to flow naturally as a consequence of the character of the software taken together with the foreseeable development of the Internet and of information technology.
That's what I'm talking about!
I would continue to cite from it, but I would end up copying the whole thing. I imagine that it will become one of the most popular concurrences written, cited for its wisdom and insight into issues of innovation and the promises of communications technology. Its a great foundation, anyway.
Welcome Instapundit readers! If you've made it this far, you obviously are very interested in the Grokster decision. Here are some more links:
I live-blogged the two main, opposing press conferences on the decision today:
Notes on the RIAA / MPAA Press Conference
Notes on the Pro-Grokster Press Conference
Lots of links and analysis here:
Grokster Loses - Unanimously - Inducement Test?
I participated in the Wall Street Journal's Grokster Roundtable.
Darknet author JD Lasica is guest-blogging here today and has these posts:
Grokster: Theory and Practice
Grokster Open Thread: Your Views