Alerts and Updates
Software Distributors Potentially Liable for Inducing Copyright Infringement
June 30, 2005
Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., No. 04-480
In a landmark decision with far-reaching implications for copyright owners, the U.S. Supreme Court overturned a ruling by the Ninth Circuit that exempted distributors of peer-to-peer file sharing ("PTP") software from liability arising from copyright infringement committed by users of the PTP software.
Grokster, Ltd. and StreamCast Networks distribute free PTP software products that allow computer users to directly share and copy electronic files of music, movies and other materials. Some of the materials shared and copied using the PTP software products are subject to the copyrights owned by plaintiff MGM Studios and other plaintiffs, including the Recording Industry Association of America, the Motion Picture Association of America and a class of 27,000 music publishers and songwriters. The copyright owners sued Grokster and StreamCast, the developer of the Morpheus file-swapping system, alleging that the PTP software distributors were liable for copyright infringement committed by users of the PTP software. In their defense, Grokster and StreamCast cited the Supreme Court's 1984 decision in Sony Corp. of America v. Universal City Studios, Inc.
The 1984 Sony decision also centered around a product capable of being used for copying material subject to copyright protection - Sony's Betamax® videocassette recorder product. In that case, analogizing to the doctrine of contributory infringement in patent law, the Supreme Court held that mere distribution of such a product would not subject its distributor to secondary liability for copyright infringement if the product was a staple article of commerce "capable of substantial non-infringing uses." It was widely expected that the decision in the MGM v. Grokster case would turn on an interpretation or revision of the Sony standard.
The trial and appellate courts held that the PTP software products distributed by Grokster and StreamCast satisfied the Sony standard of being capable of substantial non-infringing uses and granted summary judgment for the distributors. In concurring opinions, the Supreme Court was split on the question of whether the evidence satisfied the Sony standard. Three Justices held that the accused PTP software was capable of sufficiently substantial non-infringing uses; three held that it was not; and three expressed no opinion. Thus, the MGM v. Grokster decision did not turn on the characteristics of the PTP software products alone.
Instead, the Supreme Court unanimously held that the trial and appellate courts had erred by applying Sony's product-centered standard to the exclusion of considering evidence of common law fault-based liability, stating:
where evidence goes beyond a product's characteristics or the knowledge that it may be put to infringing uses, and shows statements or actions directed to promoting infringement, Sony's staple-article rule will not preclude liability.
In its opinion, the Supreme Court highlighted evidence that Grokster and StreamCast each intended its PTP software product to be used for infringing purposes and took active steps to encourage such infringement by users. Again analogizing to patent law, the Court for the first time held that one can be held liable for inducing copyright infringement by another:
For the same reasons that Sony took the staple-article doctrine of patent law as a model for its copyright safe-harbor rule, the inducement rule, too, 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 or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.Citing evidence of advertising, business planning and internal communications of Grokster and StreamCast, the Supreme Court held that there was substantial evidence of inducement and that the trial and appellate courts had erred in their summary judgment determinations.
For the full slip opinion, see:
http://www.supremecourtus.gov/opinions/04pdf/04-480.pdf
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