Legal Bytes: File Sharing - Liability Issues Revisited by the 9th Circuit
By John Brewer September 2004
In mid-August, the Ninth Circuit Court of Appeals revisited the issue of copyright liability and peer-to-peer file sharing. The 9th Circuit is the same court that previously shut down Napster for violations of the Copyright Act. Napster maintained servers with directories of content that could be downloaded via peer-to-peer file sharing from Napster registrants.
Grokster and StreamCast Networks modified the technology and avoided the use of central file servers. The entertainment industry sued both companies alleging contributory and vicarious copyright infringement. A federal district court in California denied the claims of the entertainment industry and ruled in favor of the defendants. The plaintiffs appealed to the 9th Circuit in San Francisco.
The opinion states that “this appeal presents the question of whether distributors of peer-to-peer file-sharing, computer networking software may be held contributorily or vicariously liable for copyright infringements by users. Under the circumstances presented by this case, we conclude that the defendants are not liable for contributory and vicarious copyright infringement and affirm the district court’s partial grant of summary judgment.”
Why did the court reach a different conclusion in this case from the Napster decisions?
The court reached back to the Sony Corporation case from 1984 regarding video tape recorders, a U.S. Supreme Court opinion. “Any examination of contributory copyright infringement must be guided by the seminal case of Sony Corp. of America v. Universal City Studios (Sony-Betamax). In Sony-Betamax, the Supreme Court held that the sale of video tape recorders could not give rise to contributory copyright infringement liability even though the defendant knew the machines were being used to commit infringement. In analyzing the contours of contributory copyright infringement, the Supreme Court drew on the “staple article of commerce” doctrine from patent law. Under that doctrine, it would be sufficient to defeat a claim of contributory copyright infringement if the defendant showed that the product was “capable of substantial” or “commercially significant, noninfringing uses.” In applying this doctrine, the Court found that because Sony’s Betamax video tape recorder was capable of commercially significant noninfringing uses, constructive knowledge of the infringing activity could not be imputed from the fact that Sony knew the recorders, as a general matter, could be used for infringement.”
In the Grokster/StreamCast case, the district court found it undisputed that the software distributed by each defendant was capable of substantial noninfringing uses.
“In the context of this case, the software design is of great import. As we have discussed, the software at issue in Napster I and Napster II employed a centralized set of servers that maintained an index of available files. In contrast, under both StreamCast’s decentralized, Gnutella-type network and Grokster’s quasi-decentralized, supernode, KaZaa-type network, no central index is maintained. Indeed, at present, neither StreamCast nor Grokster maintains control over index files. As the district court observed, even if the Software Distributors “closed their doors and deactivated all computers within their control, users of their products could continue sharing files with little or no interruption.”
The court concluded its opinion regarding the challenges posed by technology. “We live in a quicksilver technological environment with courts ill-suited to fix the flow of Internet innovation. The introduction of new technology is always disruptive to old markets, and particularly to those copyright owners whose works are sold through well-established distribution mechanisms. Yet, history has shown that time and market forces often provide equilibrium in balancing interests, whether the new technology be a player piano, a copier, a tape recorder, a video recorder, a personal computer, a karaoke machine, or an MP3 player. Thus, it is prudent for courts to exercise caution before restructuring liability theories for the purpose of addressing specific market abuses, despite their apparent present magnitude. Indeed, the Supreme Court has admonished us to leave such matters to Congress. In Sony-Betamax, the Court spoke quite clearly about the role of Congress in applying copyright law to new technologies. As the Supreme Court stated in that case, “the direction of Article I is that Congress shall have the power to promote the progress of science and the useful arts. When, as here, the Constitution is permissive, the sign of how far Congress has chosen to go can come only from Congress.”
Jack Valenti, president of the Motion Picture Association of America, responded to the decision with a statement, “we are carefully reviewing our next steps.” Valenti pledged “to pursue all avenues in our power to fight those who illicitly profit from our members’ valuable property.”
A reasonable prediction for the entertainment industry is that it will intensify its pursuit of individual infringers who participate in peer-to-peer file swapping. The industry will also increase its efforts to modify federal law to tighten this perceived loophole. In addition, there are current news reports that the Department of Justice is intensifying its efforts to prosecute companies that enable peer-to-peer file sharing for criminal violations of the Copyright Act.
Recently, the attorneys general in 45 states sent letters to Grokster, StreamCast and other file-sharing services. These letters hinted at possible legal action unless the networks improve their efforts to inform users of potential copyright violations from sharing files.
A lawyer for StreamCast opined that the ruling follows “the same principle that people who make crowbars are not responsible for the robberies that may be committed with those crowbars.”
This battle is far from over. There is one certainty; this battle will continue to generate enormous fees for the law firms and political lobbyists that represent the entertainment industry … and there will be computer users who continue to use peer-to-peer technology to swap files. This battle has become a war between cultures.
John Brewer practices law in Oklahoma City, is a member of the Governor’s and Legislative Task Force for E-Commerce, and enjoys issues relating to eBusiness and cyberspace. Comments and questions are welcome and can be emailed to
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