No. ___
WILSON-EPES PRINTING CO., INC. – (202) 789-0096 –WASHINGTON, D. C. 20001
IN THE
Supreme Court of the United States
————
METRO-GOLDWYN-MAYER STUDIOS INC., ET AL.,
Petitioners,
v.
GROKSTER, LTD., ET AL.,
Respondents.
————
Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Ninth Circuit
————
PETITION FOR AWRIT OF CERTIORARI
————
KENNETHW. STARR
STEVEN A. ENGEL
SUSAN ENGEL
KIRKLAND & ELLIS LLP
655 Fifteenth Street, N.W.
Washington, DC 20005
(202) 879-5090
DONALD B. VERRILLI, JR.*
IAN HEATH GERSHENGORN
WILLIAMM. HOHENGARTEN
KATHLEEN R. HARTNETT
BRIAN HAUCK
JENNER & BLOCK LLP
601 Thirteenth Street, N.W.
Washington, DC 20005
(202) 639-6000
RUSSELL J. FRACKMAN
GEORGEM. BORKOWSKI
MITCHELL SILBERBERG&
KNUPP LLP
11377 West Olympic Blvd.
Los Angeles, CA 90064
(310) 312-2000
DAVID E. KENDALL
THOMAS G. HENTOFF
WILLIAMS & CONNOLLY LLP
725 Twelfth Street, N.W.
Washington, DC 20005
(202) 434-5000
October 8, 2004 * Counsel of Record
Additional Counsel Listed on Inside Cover
GREGORY P. GOECKNER
DEAN C. GARFIELD
MOTION PICTURE ASSOCIATION
OF AMERICA, INC.
15503 Ventura Boulevard
Encino, CA 91436
(818) 995-6600
STANLEY PIERRE-LOUIS
RECORDING INDUSTRY
ASSOCIATION OF AMERICA, INC.
1330 Connecticut Avenue, N.W.
Suite 300
Washington, DC 20036
(202) 775-0101
Counsel for Motion Picture Studio
and Recording Company Petitioners
ROBERTM. SCHWARTZ
DREW E. BREUDER
O’MELVENY &MYERS LLP
1999 Avenue of the Stars
Los Angeles, California 90067
(310) 553-6700
Counsel for Petitioners
Warner Bros. Entertainment
Inc. and New Line Cinema
Corporation
CAREY R. RAMOS
AIDAN SYNNOTT
THEODORE K. CHENG
BRIAN L. URBANO
PAUL,WEISS, RIFKIND,
WHARTON & GARRISON LLP
1285 Avenue of the Americas
New York, NY 10019
(212) 373-3000
KELLI L. SAGER
ANDREW J. THOMAS
JEFFREY H. BLUM
DAVISWRIGHT TREMAINE LLP
865 South Figueroa Street
Los Angeles, CA 90017
(213) 633-6800
Counsel for Music Publisher and Songwriter Petitioners
QUESTION PRESENTED
Whether the Ninth Circuit erred in concluding, contrary
to long-established principles of secondary liability in
copyright law (and in acknowledged conflict with the
Seventh Circuit), that the Internet-based “file sharing”
services Grokster and StreamCast should be immunized from
copyright liability for the millions of daily acts of copyright
infringement that occur on their services and that constitute
at least 90% of the total use of the services.
ii
PARTIES TO THE PROCEEDING
Pursuant to Rule 14.1(b), the following list identifies all
of the parties appearing here and before the United States
Court of Appeals for the Ninth Circuit.
The petitioners here and appellants below are Metro-
Goldwyn-Mayer Studios Inc.; Columbia Pictures Industries,
Inc.; Disney Enterprises, Inc.; Warner Bros. Entertainment
Inc. (as successor-in-interest to the Filmed Entertainment
Division of Time Warner Entertainment Company, L.P.);
New Line Cinema Corporation; Paramount Pictures
Corporation; Twentieth Century Fox Film Corporation;
Universal City Studios LLLP (f/k/a Universal City Studios,
Inc.); Arista Records, Inc.; Atlantic Recording Corporation;
Rhino Entertainment Company; Bad Boy Records; Capitol
Records, Inc.; Elektra Entertainment Group Inc.; Hollywood
Records, Inc.; Interscope Records; LaFace Records, Inc.;
London-Sire Records Inc.; Motown Record Company, L.P.;
The 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; Warner Bros. Records Inc.; WEA International
Inc.; Warner Music Latina Inc.; Zomba Recording
Corporation; Jerry Leiber, individually and d/b/a Jerry
Leiber Music; Mike Stoller, individually and d/b/a Mike
Stoller Music; Peer International Corporation; Songs of Peer,
Limited; Peermusic, Limited; Criterion Music Corporation;
Famous Music Corporation; Bruin Music Company; Ensign
Music Corporation; Let’s Talk Shop, Inc. d/b/a Beau-Di-ODo
Music.
The appellees below and respondents here are Grokster,
Ltd. and StreamCast Networks, Inc.
iii
CORPORATE DISCLOSURE STATEMENT
Pursuant to Rule 29.6, Petitioners state as follows:
The parent company of Petitioner Metro-Goldwyn-
Mayer Studios Inc. is Metro-Goldwyn-Mayer Inc., a publicly
traded corporation.
The parent company of Petitioner Columbia Pictures
Industries, Inc. is Sony Corporation, a publicly traded
corporation.
The parent company of Petitioner Disney Enterprises,
Inc. is The Walt Disney Company, a publicly traded
corporation.
The indirect parent company of Petitioner Paramount
Pictures Corporation is Viacom Inc., a publicly traded
corporation.
The parent of Petitioner Warner Bros. Entertainment Inc.
(as successor-in-interest to the Filmed Entertainment
Division of Time Warner Entertainment Company, L.P.) is
Time Warner Inc., a publicly traded company.
The parent of Petitioner New Line Cinema Corporation
is Time Warner Inc., a publicly traded company.
The parent companies of Petitioner Twentieth Century
Fox Film Corporation are Fox Entertainment Group, Inc. and
The News Corporation Limited, both of which are publicly
traded corporations.
The parent companies of Petitioner Universal Studios
LLLP (f/k/a Universal City Studios, Inc.) are General
Electric Company and Vivendi Universal S.A., both of
which are publicly traded corporations.
iv
The parent companies of Petitioner Arista Records, LLC
(f/k/a Arista Records, Inc.) are Sony Corporation, a publicly
traded corporation, and Bertelsmann AG, which is not
publicly traded.
The parent company of Petitioner Atlantic Recording
Corporation is WMG Parent Corp., which is not a publicly
traded corporation.
The parent company of Petitioner Rhino Entertainment
Company is WMG Parent Corp., which is not a publicly
traded corporation.
The parent company of Petitioner Capitol Records, Inc.
is EMI Group PLC, which is publicly traded in the U.K.
The parent company of Petitioner Elektra Entertainment
Group Inc. is WMG Parent Corp., which is not a publicly
traded corporation.
The parent company of Petitioner Hollywood Records is
The Walt Disney Company, a publicly traded corporation.
The parent company of Petitioner Interscope Records is
Vivendi Universal S.A., a publicly held French company.
The parent companies of Petitioner LaFace Records,
LLC (f/k/a LaFace Records, Inc.) are Sony Corporation, a
publicly traded corporation, and Bertelsmann AG, which is
not publicly traded.
The parent company of Petitioner London-Sire Records
Inc. is WMG Parent Corp., which is not a publicly traded
corporation.
The parent company of Petitioner Motown Record
Company, L.P. is Vivendi Universal S.A., a publicly held
French company.
v
The parent companies of Petitioner The RCA Records
Label are Sony Corporation, a publicly traded corporation,
and Bertelsmann AG, which is not publicly traded.
The parent companies of Sony BMG Music
Entertainment (successor-in-interest to Sony Music
Entertainment Inc.) are Sony Corporation, a publicly traded
corporation, and Bertelsman AG, which is not publicly
traded.
The parent company of Petitioner UMG Recordings, Inc.
is Vivendi Universal S.A., a publicly held French company.
The parent company of Petitioner Virgin Records
America, Inc. is EMI Group PLC, which is publicly traded in
the U.K.
The parent company of Petitioner Walt Disney Records
is The Walt Disney Company, a publicly traded corporation.
The parent company of Petitioner Warner Bros. Records
Inc. is WMG Parent Corp., which is not a publicly traded
corporation.
The parent company of Petitioner WEA International
Inc. is WMG Parent Corp., which is not a publicly traded
corporation.
The parent company of Petitioner Warner Music Latina
Inc. is WMG Parent Corp., which is not a publicly traded
corporation.
The parent companies of Petitioner Zomba Recording,
LLC (f/k/a Zomba Recording Corporation) are Sony
Corporation, a publicly traded corporation, and Bertelsmann
AG, which is not publicly traded.
vi
Petitioner Bruin Music Company is a wholly-owned
subsidiary of Petitioner Ensign Music Corporation, which is
a wholly-owned subsidiary of Petitioner Famous Music
Corporation, the indirect parent company of which is
Viacom Inc., a publicly traded corporation.
vii
TABLE OF CONTENTS
QUESTIONS PRESENTED................................................... i
PARTIES TO THE PROCEEDING...................................... ii
CORPORATE DISCLOSURE STATEMENT .................... iii
TABLE OF AUTHORITIES ................................................. x
OPINIONS BELOW.............................................................. 1
JURISDICTION.....................................................................
1
STATUTES INVOLVED...................................................... 1
STATEMENT OF THE CASE.............................................. 1
A. Factual Background ............................................. 3
B. Proceedings Below............................................... 8
REASONS FOR GRANTING THE PETITION................. 12
I. THIS CASE RAISES THE CRITICALLY
IMPORTANT QUESTION OF HOW
SECONDARY COPYRIGHT LIABILITY
APPLIES TO THE NATIONWIDE
DISTRIBUTION OF PROTECTED WORKS
OVER THE INTERNET............................................. 15
A. Liability For Secondary Copyright
Infringement Has Long Been Imposed
Under Established Doctrines That Sony-
Betamax Reaffirmed........................................... 15
B. Sony-Betamax Adapted Established
Secondary Liability Law To The
Distinctive Situation Presented By That
Case. ................................................................... 17
viii
C. Misreading Sony-Betamax, The Ninth
Circuit’s Decision Turns Secondary
Liability Principles On Their Head. ................... 20
II. THE DECISION BELOW CREATES A
DIRECT AND ACKNOWLEDGED
CONFLICT WITH THE SEVENTH
CIRCUIT’S DECISION IN AIMSTER. ...................... 24
A. There Is A Conflict Regarding What Is
Necessary To Show Commercially
Significant Noninfringing Uses.......................... 25
B. There Is A Conflict On The
Consequences Of A Showing Of
Substantial Noninfringing Uses. ........................ 27
III. IMMEDIATE REVIEW IS URGENTLY
NEEDED..................................................................... 29
CONCLUSION....................................................................
30
Appendix A
Metro-Goldwyn-Mayor Studios, Inc. v. Grokster
Ltd., 380 F.3d 1154 (9th Cir. 2004) ...................................1a
Appendix B
Metro-Goldwyn-Mayor Studios, Inc. v. Grokster
Ltd., 259 F. Supp. 2d 1029 (C.D. Cal. 2003) ...................23a
Appendix C
Statutory Provisions Involved..........................................57a
ix
Appendix D
Statement of The Honorable Marybeth Peters,
Register of Copyrights, Before the Senate Comm.
on the Judiciary, 108th Cong. (Sept. 9, 2003),
http://www.copyright.gov/docs/regstat090903.html .......61a
Appendix E
Morpheus’™ Legitimacy Confirmed! Appellate
Court Rules in Favor of Peer-To-Peer Giant
Streamcast Networks, Inc.™, at http://www.
streamcastnetworks.com/08_19_04_9th_CircuitFin
al.html
..............................................................................75a
Appendix F
Grokster Wins!, at http://www.grokster.com/
(visited Sept. 13, 2004)
....................................................80a
Appendix G
Latest News: US courts affirm Kazaa 100% legal!,
at http://www.kazaa.com/us/index.htm (visited
Sept. 13, 2004)
.................................................................83a
x
TABLE OF AUTHORITIES
CASES
A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004
(9th Cir.
2001).................................................................. 5
In re Aimster Copyright Litigation, 334 F.3d 643
(7th Cir. 2003), cert. denied, 124 S. Ct. 1069
(2004)..................................... 2, 13, 14, 16, 25, 26, 27, 28
Carbice Corp. of America v. American Patents
Development Corp., 283 U.S. 27 (1931),
supplemented, 283 U.S. 420 (1931)............................... 18
Fortnightly Corp. v. United Artists Television, Inc.,
392 U.S. 390 (1968)....................................................... 24
Gershwin Publishing Corp. v. Columbia Artists
Management, Inc., 443 F.2d 1159 (2d Cir. 1971).......... 16
Kalem Co. v. Harper Brothers, 222 U.S. 55 (1911) ......... 15
Shapiro, Bernstein & Co. v. H.L. Green Co., 316
F.2d 304 (2d Cir. 1963) ................................................. 16
Sony Corp. of America v. Universal City Studios,
Inc., 464 U.S. 417 (1984)........................................ passim
Teleprompter Corp. v. Columbia Broadcasting
System, Inc., 415 U.S. 394 (1974) ................................. 24
Universal City Studios, Inc. v. Sony Corp. of
America, 480 F. Supp. 429 (C.D. Cal. 1979)................. 18
xi
LEGISLATIVE MATERIAL
Privacy & Piracy: The Paradox of Illegal File
Sharing on Peer-to-Peer Networks and the
Impact of Technology on the Entertainment
Industry: Hearing Before the Senate Comm. on
Governmental Affairs, 108th Cong. (Sept. 30,
2003) (statement by Mitch Bainwol, CEO,
RIAA)
..............................................................................
8
Statement of The Honorable Marybeth Peters,
Register of Copyrights, Before the Senate
Comm. on the Judiciary, 108th Cong. (Sept. 9,
2003), http://www.copyright.gov/docs/regstat
090903.html ...............................................................
1, 13
MISCELLANEOUS
Frank Ahrens, States Warn File-Sharing Networks,
Wash. Post, Aug. 5, 2004, at E2 .................................... 29
Simon Dyson, Informa Media Group Report,
Music on the Internet (4th ed. 2003)................................ 8
Jesse M. Feder, Is Betamax Obsolete?: Sony Corp.
of America v. Universal City Studios, Inc. in the
Age of Napster, 37 Creighton L. Rev. 859 (2004) ......... 29
Jane C. Ginsburg, Copyright Use and Excuse on
the Internet, 24 Colum.-VLA J.L. & Arts 1
(2001).............................................................................
22
Jane C. Ginsburg, Putting Cars on the
“Information Superhighway,” 95 Colum. L. Rev.
1466
(1995).................................................................... 16
Grokster Wins!, at http://www.grokster.com/
(visited Sept. 13, 2004) .................................................. 30
xii
Lev Grossman, It’s All Free, Time, May 5, 2003............... 8
W. Page Keeton, et al., Prosser & Keeton on the
Law of Torts (5th ed. 1984) ........................................... 28
Latest News: US courts affirm Kazaa 100% legal!,
at http://www.kazaa.com/us/index.htm (visited
Sept. 13, 2004)
............................................................... 30
Morpheus’™ Legitimacy Confirmed! Appellate
Court Rules in Favor of Peer-To-Peer Giant
StreamCast Networks, Inc.™, at
http://www.streamcastnetworks.com/08_19_04_
9th_CircuitFinal.html..................................................... 30
Press Release, MPAA, MPAA Launches New
Phase of Aggressive Education Campaign
Against Movie Piracy (June 15, 2004), at
http://mpaa. org/MPAAPress/.......................................... 8
Restatement (Third) of Torts: Products Liability
(1998).............................................................................
28
Darrell Smith, The File-Sharing Dilemma, C-Net
News (Feb. 3, 2004), at http://news.com.com/
The+file-sharing+dilemma/2010-1027_3-515226
5.html
...............................................................................
7
Tim Wu, When Code Isn’t Law, 89 Va. L. Rev. 679
(2003).............................................................................
16
OPINIONS BELOW
The opinion of the Court of Appeals is reported at 380
F.3d 1154, and is reprinted in the Appendix to the Petition
(“Pet. App.”) at 1a-22a. The District Court’s opinion is
reported at 259 F. Supp. 2d 1029, and is reprinted at Pet.
App. 23a-56a.
JURISDICTION
The Court of Appeals entered its judgment on August 19,
2004. This Court has jurisdiction under 28 U.S.C. § 1254(1).
STATUTES INVOLVED
This case involves provisions of the Copyright Act, 17
U.S.C. § 101, et seq. The pertinent provisions are
reproduced in the Appendix at Pet. App. 57a-60a.
STATEMENT OF THE CASE
This is one of the most important copyright cases ever to
reach this Court. Resolution of the question presented here
will largely determine the value, indeed the very significance,
of copyright in the digital era.
Respondents Grokster and StreamCast facilitate
copyright infringement on a scale the Register of Copyrights
has called “mind-boggling.”1 Like their notorious
predecessor Napster, respondents created and maintain
Internet-based services that enable millions of people every
day to copy and distribute copyrighted sound recordings and
motion pictures without permission – and without paying for
them. It is undisputed that those who use Grokster and
StreamCast in this way are committing copyright
infringement, and that this infringement constitutes at least
90% of the activity on the services. It is equally clear that
1 Statement of The Honorable Marybeth Peters, Register of Copyrights,
Before the Senate Comm. on the Judiciary, 108th Cong. (Sept. 9, 2003),
http://www.copyright.gov/docs/regstat090903.html (Pet. App. 65a-66a).
2
Grokster and StreamCast have built their businesses to
capitalize on this infringement, that they profit handsomely
from it, and that they designed their services to disable
mechanisms that would prevent the very infringement that
sustains their businesses.
The Ninth Circuit’s refusal to hold Grokster and
StreamCast accountable under these circumstances is a
radical departure from principles of secondary liability
recognized “in virtually all areas of the law,” including
copyright. Sony Corp. of Am. v. Universal City Studios, Inc.,
464 U.S. 417, 435 (1984) (Sony-Betamax). The Ninth
Circuit read Sony-Betamax not as endorsing but as rejecting
those established principles, and as instead imposing
“limitations” and “higher standards” for contributory
infringement that foreclose liability here. Pet. App.12a, 13a.
But Sony-Betamax did not purport to decide how principles
of secondary liability apply in circumstances like those
present here (indeed, it left such questions open), and it
manifestly did not dictate the result the Ninth Circuit
reached. Not surprisingly, the Seventh Circuit has reached
diametrically opposed conclusions on these same issues in a
case involving an Internet-based service that does exactly
what Grokster and StreamCast do. In re Aimster Copyright
Litig., 334 F.3d 643 (7th Cir. 2003) (Posner, J.), cert. denied,
124 S. Ct. 1069 (2004).
Review is urgently needed not only to resolve the conflict
between the Ninth and Seventh Circuits, but more
importantly to clarify the standards for secondary liability
applicable to Internet-based services that facilitate copyright
infringement. The infringement Grokster and StreamCast
foster is inflicting catastrophic, multibillion-dollar harm on
petitioners that cannot be redressed through lawsuits against
the millions of direct infringers using those services. Left
undisturbed, the Ninth Circuit’s decision will effectively
3
insulate Grokster and StreamCast from suit nationwide,
leaving these harms unremedied.
Indeed, the Ninth Circuit’s decision threatens the very
foundations of our copyright system in the digital era. The
ease with which copyrighted works in digital form can be
unlawfully copied and distributed millions of times over on
the Internet makes it especially important that traditional
principles of secondary copyright liability apply to
enterprises that, like respondents, brazenly encourage and
profit from infringement. Unless respondents and those like
them can be held accountable, copyright will soon mean
nothing on the Internet, and the incentives on which our
copyright system rests will be imperiled.
A. Factual Background
1. Grokster and StreamCast run infringement-driven
businesses. Exploiting widely available “peer-to-peer”
technology, these companies created, maintain, and profit
from Internet-based services that offer users the ability to
obtain a vast array of copyrighted sound recordings and
motion pictures without permission and for free. By
connecting to the Grokster or StreamCast services,
individuals can search the computer files of all other users
connected to the service and, with a few simple clicks, can
copy any desired file directly from the available files of other
users (hence the name peer-to-peer).2 Although peer-to-peer
2 The software contains a search function that allows users to search for
digital files of sound recordings, motion pictures, or other content stored
on the computers of any other user logged onto the service. For example,
a user seeking recordings by Bruce Springsteen or the motion picture
Spider-Man simply types the artist’s name or the film title in a search
window on the user’s computer and clicks a search button. Within
seconds a list is provided showing copies of the desired works available
from other users on the service. With another click, the user downloads a
digital copy of the desired work from another user’s computer, and within
a short time can listen to the song or view the film.
4
technology can be used lawfully for authorized exchanges of
digital files, Grokster and StreamCast use it to profit from
copyright infringement. Indeed, there is no dispute that
infringement is at least 90% of the activity on the Grokster
and StreamCast services and that this infringement occurs
millions of times each day. Pet. App. 4a. Grokster and
StreamCast have thus created on-line havens for copyright
infringement of unprecedented magnitude.
Grokster and StreamCast “depend upon this
infringement” to make money. Pet. App. 50a (district court
opinion). They do not earn revenue by distributing software,
and are thus not “software distributors” in any meaningful
sense. Indeed, they do not sell their software at all. They
give it away on the Internet, encouraging users to download
it onto home and office computers. The software enables
Internet users to connect to a vast network of like-minded
infringers seeking copyrighted works and offering their own
copies of such works to others. It also creates an enduring
link between the service and its users whenever they are
logged on. Grokster and StreamCast make their money by
capitalizing on these ongoing relationships to sell
advertising. That is their business. Every time a user
activates Grokster or StreamCast software, the user’s
computer automatically connects to a computer server that
pumps advertising to the user’s computer screen. Grokster
and StreamCast “derive substantial revenue” – millions of
dollars annually – from advertisers seeking to reach the users
of these services. Id. Grokster and StreamCast, therefore,
have every incentive to attract as many users as possible.3 As
they know full well, and as the district court recognized, the
infringing content is what lures users by the millions,
3 As StreamCast has explained, “the core value of a peer-to-peer network
[is] the network itself and not necessarily the technology.” Joint Excerpts
of Record 3864. All citations to record evidence are to material in the
Joint Excerpts of Record (“JER”) that was before the Ninth Circuit.
5
allowing these companies to reap hefty advertising revenues.
Id. (“Individuals are attracted . . . because of the ability to
acquire copyrighted material free of charge.”).
By design, the Grokster and StreamCast services function
as an unauthorized 24-hour-a-day worldwide distribution
system for copyrighted sound recordings and motion
pictures, cutting deeply into the legitimate markets for those
works. Each time a Grokster or StreamCast user makes an
unauthorized copy of a sound recording or motion picture,
that copy is available on the user’s computer (as well as the
computer of the user from whom the copy was made) to be
copied and distributed by other users of the services –
resulting in an exponentially multiplying redistribution of
perfect digital copies. Indeed, whenever a user is logged on,
all the files in the directory created by the Grokster or
StreamCast software on the user’s computer are
automatically available for copying by other users. Because
millions of people use Grokster and StreamCast, virtually all
of the most popular sound recordings and motion pictures –
including many not yet released to the public – are available
for free. Users need never again buy a CD, rent a DVD, or
log on to legitimate on-line services such as Apple’s iTunes
or Movielink to purchase authorized digital copies of desired
works.
2. It is no accident that the Grokster and StreamCast
business models depend on copyright infringement. These
companies built directly upon the experience of Napster, the
first infringement-driven service that used peer-to-peer
technology. Soon after Napster began operations, record
companies, songwriters, and music publishers sued to stop
the massive infringement occurring on Napster’s service, and
they obtained a preliminary injunction compelling Napster to
block infringing material. See A&M Records, Inc. v.
Napster, Inc., 239 F.3d 1004 (9th Cir. 2001). The millions of
6
Napster users then fled in search of other services that could
provide what Napster no longer could.
Seizing the moment, Grokster and StreamCast launched
alternative peer-to-peer services “so that when Napster pulls
the plug on their free service (or if the Court orders them shut
down prior to that), we will be positioned to capture the flood
of their 32 million users that will be actively looking for an
alternative.” JER 3537. Grokster even inserted the word
“Napster” into the “metatags” for its website, so that Internet
users looking for “Napster” on Google or other search
engines would be directed to Grokster. JER 6234. From a
user’s perspective, Grokster and StreamCast differ from
Napster only in the greater variety of their offerings, which
include motion pictures, video games, and other digital
copyrighted works, as well as the sound recordings that
fueled Napster.
3. Although Grokster and StreamCast offer the same
service Napster did, they differ from Napster in one
technological detail, which is immaterial to their business
model but which the Ninth Circuit found dispositive as a
matter of copyright law. Napster maintained multiple central
servers (i.e., computers operated by Napster itself) with
indices of the files available on its users’ computers. Napster
users searched those indices to find the recordings they
wanted – although the files themselves were distributed
directly from one user to another (as on Grokster or
StreamCast). In imposing liability, the Napster court relied
in part on the fact that Napster contributed to infringement by
providing these indices. Responding to that ruling, and
seeking to evade responsibility for infringement while still
encouraging and profiting from it, Grokster and StreamCast
decentralized the search function on their services. They did
so by commandeering the computers of some users as
surrogate servers to store the indices of available material.
When a Grokster or StreamCast user searches for desired
7
content, the search is conducted on indices maintained on
these user computers (called “supernodes” by Grokster and
“ultrapeers” by StreamCast).
4. Just as Grokster and StreamCast engineered the search
function to make it more difficult for them to block
infringing files, they dismantled other aspects of their
services that could have been used to control infringement.
When this lawsuit began, for example, a user activating
Grokster or StreamCast logged on to the service through a
central server requiring a unique user name and a password,
and both companies reserved the right to deny access to
infringers. After petitioners sued, respondents eliminated the
log-in feature. Pet. App. 43a n.7.
At the same time, Grokster and StreamCast refused to
implement available filtering technologies that would block
the infringing materials on their services. As StreamCast’s
former Chief Technology Officer has explained, “there are
no technical limitations to the ability to filter” (and thereby
block) infringing content on the Grokster and StreamCast
services, and “the question is not whether file-sharing
companies can filter, but whether they will.”4 In stark
contrast, to promote their business interests, Grokster and
StreamCast have implemented filters to eliminate
4 Darrell Smith, The File-Sharing Dilemma, C-Net News (Feb. 3, 2004),
at http://news.com.com/The+file-sharing+dilemma/2010-1027_3-5152
265.html. Respondents disputed their ability to block infringing files, and
Grokster in particular claimed that it lacked the power because it was a
mere licensee without access to the underlying “source code” for the
peer-to-peer software that is the backbone of its system. However,
petitioners’ evidence showed that “there are methods presently available
to prevent unauthorized recordings from being distributed on peer-to-peer
systems like those operated by defendants,” Ikezoye Decl. ¶ 1, JER 760;
Breslin Decl. ¶ 5, JER 722; Kleinrock Decl. ¶ 82, JER 816-17, that
blocking could be accomplished “without any significant degradation in
the [peer-to-peer] system,” Breslin Decl. ¶ 21, JER 727-28; and that
blocking was feasible for services such as Grokster’s even without access
to the “source code,” Kleinrock Dep. at 152-59, 184-85; JER 1872-81.
8
pornographic files, files with “viruses,” and “bogus” files
(i.e., files that appear to be, but are not, actual media files).
5. Respondents’ services (and others like them) inflict
massive and irreparable harm. More than 2.6 billion
infringing music files are downloaded each month, see Lev
Grossman, It’s All Free, Time, May 5, 2003, and between
400,000 and 600,000 copies of motion pictures are
unlawfully downloaded each day.5 Record sales over the
past three years are down 31%, and sales of the top 10 selling
albums have dropped nearly 50%.6 Conservative estimates
of lost sales of music alone range from $700 million to
several billion dollars annually. See, e.g., Simon Dyson,
Informa Media Group Report, Music on the Internet 25 (4th
ed. 2003). Moreover, petitioners stand to lose billions more
as computers become faster, as user “bandwidth” grows, and
as more consumers become aware of, or emboldened to use,
the infringing services Grokster and StreamCast maintain.
B. Proceedings Below
Petitioners – the major motion picture studios and record
companies in this country, as well as a certified class of
27,000 music publishers and songwriters – sued seeking an
injunction against continuing infringement on the Grokster
and StreamCast services. The district court denied relief and
granted summary judgment for respondents. Pet. App. 24a-
25a.
On appeal, the Ninth Circuit recognized that the Grokster
and StreamCast software “enables the user to participate in
5 See Press Release, MPAA, MPAA Launches New Phase of Aggressive
Education Campaign Against Movie Piracy (June 15, 2004), at
http://mpaa.org/MPAAPress/.
6 Privacy & Piracy: The Paradox of Illegal File Sharing on Peer-to-Peer
Networks and the Impact of Technology on the Entertainment Industry:
Hearing Before the Senate Comm. on Governmental Affairs, 108th Cong.
(Sept. 30, 2003) (statement by Mitch Bainwol, CEO, RIAA).
9
the respective peer-to-peer file-sharing networks,” Pet. App.
7a; that “the vast majority of the files are exchanged illegally
in violation of the copyright law,” id. at 8a; that Grokster and
StreamCast know their systems are being used for
infringement; and that they profit handsomely from, and in
direct proportion to, the level of infringement. Despite these
undisputed facts, the court concluded that Grokster and
StreamCast could not be held liable under either a
contributory infringement or vicarious liability theory.
The court believed that Sony-Betamax (as the Ninth
Circuit had previously interpreted it in Napster) imposed
“limitations” on well-established principles of contributory
infringement, and required a “higher standard” when a
defendant’s contribution to infringement involves a product
or service that has noninfringing uses. Pet. App. 12a, 13a.
For those purported “limitations” to apply, the court held, “a
product need only be capable of substantial noninfringing
uses.” Id. at 11a (emphasis in original).
Applying that test, the Ninth Circuit held that it could not
consider the undisputed fact that at least 90% of the activity
on Grokster and StreamCast was copyright infringement.
Pet. App. 11a (stating that considering such evidence
“misapprehends the Sony standard”). Ignoring the empirical
evidence documenting massive infringing use, and relying
instead on anecdotal evidence that some noninfringing
material was distributed on the services, the Ninth Circuit
held that respondents satisfied the Sony-Betamax test.7 In so
7 The Ninth Circuit stated that it was “undisputed” that respondents’
services were “capable of substantial noninfringing uses.” See Pet. App.
10a (citing Pet App. 33a). In reality, petitioners presented evidence
contesting the extent of actual noninfringing uses of respondents’
networks; for example, petitioners demonstrated that the public domain
works claimed by respondents’ affiants to be available on respondents’
networks were not, in fact, generally available. See, e.g., JER 0747
(Creighton Decl. ¶ 25). Petitioners also produced evidence that “over
90%” of the material on respondents’ services was infringing. Pet. App.
10
doing, the court stated without analysis or citation that these
noninfringing uses have “commercial viability.” Id. at 12a.
The court never explained how it reached that conclusion or
what “commercial viability” even meant. What is clear,
however, is that the court did not find or even suggest that
there was a “substantial market for a non-infringing use” of
respondents’ services, Sony-Betamax, 464 U.S. at 446 n.28 –
i.e., that Grokster and StreamCast could have sustained their
business based on noninfringing uses.
The Ninth Circuit then went on to apply the “higher
standard” it thought Sony-Betamax dictated. Specifically, the
court required a showing that Grokster and StreamCast “had
specific knowledge of infringement at a time at which they
contribute[d] to the infringement and fail[ed] to act upon that
information” – a standard that appears nowhere in Sony-
Betamax itself or in the law of secondary liability. See Pet.
App. 13a (quotation marks omitted; alteration in original).
Applying that standard, the Ninth Circuit deemed
“irrelevant” the notices of hundreds of thousands of specific
infringements provided to Grokster and StreamCast. The
court believed that Grokster and StreamCast could not have
“acted upon this information” when they received the notices
because by then they had already completed the actions that
facilitated the infringement (i.e., setting up the infringing
services). Id.
The Ninth Circuit’s conclusion in that regard depended
upon the unprecedented assumption that, no matter what the
nature of their conduct or the surrounding circumstances,
Grokster and StreamCast were under no legal duty either to
have designed their services differently in the first place to
prevent infringing uses, or to take reasonable steps going
forward to do so. The court declared that “the software
4a. The Ninth Circuit stated that petitioners “contended” that the
remaining 10% was noninfringing, id. at 12a n.10, but that was wrong –
petitioners stated only that 10% could not be categorized with confidence.
11
design is of great import,” Pet. App. 13a; indeed, it was
outcome determinative. For the Ninth Circuit, it was
irrelevant that the software design reflected deliberate,
affirmative choices on the part of respondents to disable legal
and practical mechanisms for controlling infringement by
(among other things) disabling log-in and registration
features and eliminating user licensing agreements (which
purported to prohibit the infringing use of their systems). Id.
at 13a; 43a n.7. It was likewise irrelevant to the Ninth
Circuit that respondents chose not to upgrade their software
to filter out infringing files, even though they filter out other
undesirable files. Id. at 13a, 18a, 47a.
The same analysis led the Ninth Circuit to conclude that
Grokster and StreamCast were not liable on the separate
vicarious liability theory. Although the court found that “the
elements of direct infringement and a direct financial benefit,
via advertising revenue are undisputed in this case,” Pet.
App. 16a., it absolved Grokster and StreamCast because they
allegedly could not control the infringement on their services.
As it did in rejecting contributory infringement, the court
found irrelevant that Grokster and StreamCast had divested
themselves of the ability to control infringement, id. at 18a
(“given the lack of a registration and log-in process, . . .
Grokster has no ability to actually terminate access to
filesharing functions”), and that, with the use of software
upgrades, they could easily filter out infringing files, id. at
70a (“possibilities for upgrading software located on another
person’s computer are irrelevant to determining whether
vicarious liability exists”) (emphasis added).
Thus, the Ninth Circuit has immunized Grokster and
StreamCast from copyright liability for the millions of acts of
copyright infringement that occur on their services every day,
and that could not occur but for the existence of their
services.
12
REASONS FOR GRANTING THE PETITION
This case presents an exceptionally important question of
federal law that has not been but should be settled by this
Court, and on which the circuits are in conflict: How do
principles of secondary liability apply to the unprecedented
phenomenon of Internet services such as Grokster and
StreamCast, whose overwhelming use is for the unauthorized
distribution of copyrighted works to millions of users for
free? The answer to that question is of paramount
importance to the future of copyright in the digital age.
The Ninth Circuit concluded that Grokster and
StreamCast could not be held responsible for the millions of
acts of infringement occurring daily on their services. It did
so even though infringement is the primary use for their
services, their business model depends on this volume of
infringing use, and, indeed, their advertising revenues are
directly tied to the amount of infringement taking place.
Remarkably, despite these facts, the Ninth Circuit found it
dispositive in respondents’ favor that they had tied their own
hands by disabling mechanisms for blocking infringement on
their services – a fact that should establish liability, not
preclude it. Pet. App. 13a.
The Ninth Circuit purported to derive its counterintuitive
approach from the Court’s Sony-Betamax decision. Sony-
Betamax did not, however, resolve the question presented
here, much less mandate the radical surgery the Ninth Circuit
performed on traditional principles of secondary liability.
Under well-established law (which Sony-Betamax endorsed),
it is both just and economically rational to impose liability on
a defendant who knowingly furthers and profits from
copyright infringement, especially when the defendant is in a
position “to police carefully the conduct” of the direct
infringer and chooses not to do so. 464 U.S. at 438 & n.18
(quotation marks omitted). Yet the Ninth Circuit repudiated
those standards and adopted a test that, in the words of the
13
Register of Copyrights, “departed from long-established
precedent” and would “eviscerate the doctrine of
contributory infringement.” Pet. App. 65a-66a. Most
fundamentally, the Ninth Circuit’s lopsided test ignored
Sony-Betamax’s core premise that secondary liability rules
must “strike a balance” between the copyright owners’
“legitimate demand for effective – and not merely symbolic –
protection” and the rights of others to engage in
“substantially unrelated areas of commerce.” 464 U.S. at
442.
In view of the Ninth Circuit’s extreme conclusions, it is
hardly surprising that the decision below diverges markedly
from Seventh Circuit law on the core question this case
presents. See In re Aimster, 334 F.3d 643 (7th Cir. 2003). In
a case involving a peer-to-peer service that was facilitating
massive copyright infringement just as Grokster and
StreamCast do, the Seventh Circuit read Sony-Betamax far
differently than did the Ninth Circuit. That court of appeals
prescribed a context-specific evaluation of how the
defendant’s service operates in the real world to determine
how best to accommodate both the interests of copyright
holders in preventing infringement and the public’s access to
the noninfringing uses of the service. In so doing, the
Seventh Circuit deemed critical some of the very factors the
Ninth Circuit deemed irrelevant: the relative proportions of
infringing and noninfringing uses and the defendant’s ability
to separate infringing from noninfringing material.
The undoubted legal and practical importance of the
question presented in this case, and the conflict between the
Ninth and Seventh Circuits, provide ample grounds for this
Court to grant review. It is, moreover, imperative that review
occur now. The Ninth Circuit’s ruling denies petitioners
their principal remedy against the staggering harms they are
suffering, and it effectively does so on a nationwide basis
because, as a practical matter, petitioners are the only ones in
14
a position to challenge respondents. Thus, if the Ninth
Circuit’s decision stands, Grokster and StreamCast will be
home free, and petitioners will be left with only the
“impractical[]” and manifestly inadequate option of suing “a
multitude of individual infringers.” Aimster, 334 F.3d at 645.
Even worse, new infringement-driven enterprises can set up
shop in the Ninth Circuit, emboldened by the notion that they
will evade legal responsibility if they follow the roadmap set
forth in the decision below and engineer their systems to
disable mechanisms for preventing infringement. The Ninth
Circuit’s decision will also encourage even more people to
use Grokster and StreamCast (and the new services the
court’s decision will spawn) to infringe copyrights with
impunity – further eroding respect for copyright on the
Internet.
Holding Grokster and StreamCast responsible for the
consequences of their conduct would pose no threat to the
development and legitimate deployment of peer-to-peer
technology. Petitioners seek only to bring an end to the
infringement respondents’ businesses have made possible –
and petitioners have demonstrated that this can be done while
preserving the technology’s noninfringing uses. Indeed, the
Ninth Circuit’s legal rule will actually impede technological
progress. As long as infringement-driven services such as
Grokster and StreamCast continue to flourish, it will be
exceedingly difficult for innovative on-line ventures that
legitimately distribute recordings and motion pictures in
digital format (such as Apple’s iTunes, Movielink and the
other new services now being launched) to compete on
anything approaching an equal footing.
Sheltering Grokster and StreamCast (and others like
them) thus poses a grave threat to the very foundations of the
copyright law’s incentive system for promoting the progress
of science and the arts, and will profoundly reshape our
nation’s system of copyright in the digital era.
15
I. THIS CASE RAISES THE CRITICALLY
IMPORTANT QUESTION OF HOW SECONDARY
COPYRIGHT LIABILITY APPLIES TO THE
NATIONWIDE DISTRIBUTION OF PROTECTED
WORKS OVER THE INTERNET.
There is a pressing need for this Court to clarify the
principles of secondary copyright liability applicable to peerto-
peer services that facilitate copyright infringement. By
ignoring the fundamental principles of secondary liability,
which Sony-Betamax reaffirmed, and the crucial differences
between that case and this one, the Ninth Circuit converted
the Court’s carefully circumscribed decision of twenty years
ago into a license for companies to contribute to and profit
from infringement with impunity.
A. Liability For Secondary Copyright Infringement Has
Long Been Imposed Under Established Doctrines
That Sony-Betamax Reaffirmed.
This case arises against the backdrop of a well-developed
body of law governing secondary copyright liability. See,
e.g., Sony-Betamax, 464 U.S. at 434-39 & n.18; Kalem Co. v.
Harper Bros., 222 U.S. 55 (1911). As the Court explained in
Sony-Betamax, secondary 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.” 464 U.S.
at 435. Specifically, “contributory infringement doctrine is
grounded on the recognition that adequate protection of a
monopoly may require the courts to look beyond the actual
duplication of a . . . publication to the products or activities
that make such duplication possible.” Id. at 442. Secondary
liability thereby furthers the “basic purposes” of the
copyright laws to “stimulate artistic creativity for the general
public good.” Id. at 432 (quotation marks omitted).
16
Federal courts have long recognized two general theories
for determining when secondary copyright liability is
appropriate. The first, “contributory infringement,” applies
when “one who, with knowledge of the infringing activity,
induces, causes or materially contributes to the infringing
conduct of another.” Gershwin Publ’g Corp. v. Columbia
Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971)
(footnote omitted). The second, “vicarious liability,” applies
when “the right and ability to supervise coalesce with an
obvious and direct financial interest in the exploitation of
copyrighted materials [by another].” Shapiro, Bernstein &
Co. v. H.L. Green Co., 316 F.2d 304, 307 (2d Cir. 1963).
Both theories reflect the traditional tort principle of placing
liability on “gatekeepers” who can most efficiently stop
tortious activity. See, e.g., In re Aimster, 334 F.3d at 644-45;
see also Jane C. Ginsburg, Putting Cars on the “Information
Superhighway,” 95 Colum. L. Rev. 1466, 1488 (1995)
(describing copyright’s historical reliance on gatekeeper
liability, rather than enforcement against individual
infringers); Tim Wu, When Code Isn’t Law, 89 Va. L. Rev.
679, 711, 717 (2003).
Sony-Betamax endorsed both types of secondary liability.
See 464 U.S. at 435 n.17, 437-39. The Court recognized that
liability for contributory infringement should sometimes be
imposed on defendants whose products or activities make
direct infringement possible, id. at 442, and rejected as too
narrow a standard imposing liability only when a defendant
“suppl[ies] its products to identified individuals known by it
to be engaging in continuing infringement,” id. at 439 n.19
(emphasis added). Similarly, when a defendant profits from
infringement and “‘has the power to police carefully the
conduct of’” the direct infringer, the Court stated that
vicarious liability “is manifestly just” and “‘plac[es]
responsibility where it can and should be effectively
exercised.’” Id. at 438 & n.18 (quoting Shapiro, 316 F.2d at
308).
17
B. Sony-Betamax Adapted Established Secondary
Liability Law To The Distinctive Situation Presented
By That Case.
Sony-Betamax adapted secondary liability principles to a
novel context: the potential liability of a manufacturer of
equipment – the Betamax video tape recorder – that was
principally used for lawful noninfringing purposes, but that
was also used incidentally for infringement. 464 U.S. at 421.
The Court recognized that principles of secondary liability
have to “strike a balance between a copyright holder’s
legitimate demand for effective – not merely symbolic –
protection of the statutory monopoly, and the rights of others
freely to engage in substantially unrelated areas of
commerce.” Id. at 442. To do so in that context, which
involved the mere sale of a product, the Court drew on the
“staple article of commerce” doctrine from patent law and
held that the predominantly noninfringing uses of the
Betamax precluded secondary liability.
One striking feature of Sony-Betamax is that the main
bone of contention was not the standard for secondary
copyright infringement, but whether the primary use of the
Betamax machine constituted direct infringement. The
Betamax was used principally for “time-shifting,” i.e.,
recording a free telecast for later one-time viewing in the
home. Id. at 423. The case did not involve the distribution
of copyrighted works – the “transfer of tapes to other
persons” – nor did it involve the copying of cable or other
programs for which copyright owners charged a fee. Id. at
425. The Court held that time-shifting is fair use and
therefore noninfringing, because it “merely enables a viewer
to see . . . a work which he had been invited to witness in its
entirety free of charge.” Id. at 449. Any harm from timeshifting
was “speculative and, at best, minimal.’” Id. at 454
(quoting trial court finding).
18
That holding drove the conclusion that Sony was not
secondarily liable. See id. at 442; see also id. at 493
(Blackmun, J., dissenting) (agreeing that if primary use was
fair use, then manufacturer would not be contributory
infringer). The Court was concerned that if secondary
liability were imposed, the plaintiffs would extend their
copyright monopolies over a handful of particular works to
an unrelated area of commerce – the sale of Betamax
machines for noninfringing timeshifting – by obtaining an
injunction against distribution of the Betamax or demanding
a royalty for all such distribution. Id. at 440-41 & n.21. The
district court had found that no practical means existed
through which the manufacturer of the Betamax could
separate infringing from noninfringing uses; hence, an
injunction could not be crafted to stop one while allowing the
other. See Universal City Studios, Inc. v. Sony Corp., 480 F.
Supp. 429, 461-62 (C.D. Cal. 1979); see also 464 U.S. at
437-38 (observing that manufacturer had no ongoing
relationship after sale). Sony-Betamax thus presented an allor-
nothing choice. Under those circumstances, the Court
analogized to the “staple article of commerce” doctrine from
patent law to bar a copyright holder from obtaining control
over copying equipment that had “commercially significant
noninfringing uses,” 464 U.S. at 440-442, just as a patent
holder may not leverage a monopoly over a patented device
to gain a monopoly over an unpatented staple item used in
the patented device. See, e.g., Carbice Corp. of Am. v. Am.
Patents Dev. Corp., 283 U.S. 27 (1931) (owner of patent on
refrigeration unit cannot use it to gain monopoly over dry
ice), supplemented, 283 U.S. 420 (1931).
Sony-Betamax determined that the Betamax’s
predominant use – noninfringing time-shifting of free, overthe-
air broadcast television programs – was “commercially
significant.” 464 U.S. at 442. There was a substantial
commercial market for the Betamax based solely on its use
for time-shifting, not to mention its use for noninfringing
19
authorized copying. See id. at 446 n.28, 456. As that was
plainly enough to meet the “commercially significant”
standard, the Court declined to opine whether a lesser
showing would also suffice. Id.
The Court in Sony-Betamax did not hold or even suggest
that the existence of commercially significant noninfringing
uses is an absolute shield from secondary liability no matter
what other factors are present. It did not bar liability where,
as here, the predominant, fully intended use of a product or
service is infringing. It also did not rule out liability where,
as here, the creator of the service has an ongoing relationship
with the infringers, and its profits depend directly on the
volume of ongoing infringing activity on its service. Nor did
Sony-Betamax suggest that an enterprise is immune where, as
here, it can exercise control to prevent infringement but
chooses not to do so because its business model depends on
voluminous infringing use. None of these issues was
presented in Sony-Betamax, given the district court’s
findings, which were made after a full trial: infringement of
the two plaintiff’s copyrights was minimal and any resulting
harm was speculative at most; there was no way to separate
infringing from noninfringing uses; and the manufacturer had
not in any way induced infringement. See id. at 434, 454,
439 n.19; supra 17.
Similarly, Sony-Betamax did not suggest that the
existence of commercially significant noninfringing uses
would shield from vicarious liability a defendant who profits
from direct infringement and can prevent it in an ongoing
relationship. To the contrary, the Court recognized that
secondary liability in those situations would be “manifestly
just.” Id. at 438. Sony itself, however, could not be subject
to vicarious liability because it neither profited from
infringement nor had an ongoing relationship with purchasers
allowing it to block infringement. Id. at 437-38.
20
C. Misreading Sony-Betamax, The Ninth Circuit’s
Decision Turns Secondary Liability Principles On
Their Head.
Ignoring the carefully circumscribed nature of the Court’s
analysis in Sony-Betamax, the Ninth Circuit misread that
decision as virtually dictating that Grokster and StreamCast
be shielded from contributory liability. In reality, the factual
context here differs from Sony-Betamax in critical ways,
raising important issues that were either expressly reserved or
simply not presented by that case. At the same time, the
Ninth Circuit ignored the well-established underlying
principles of secondary liability, which Sony-Betamax
reaffirmed, including the need to give meaningful protection
to copyrights even while fostering new technologies. By
forcing the square peg of this case into the round hole of
Sony-Betamax, the Ninth Circuit created a completely novel
test for secondary liability, unmoored from law or logic, that
poses a grave threat to the very existence of intellectual
property in the digital era.
First, the Ninth Circuit emptied all meaning from Sony-
Betamax’s concept of “commercially significant”
noninfringing uses. The Ninth Circuit simply pronounced
the noninfringing uses “commercially viab[le]” without
setting forth any standard for making that determination.
Specifically, the court did not attempt to ascertain whether
there is “a substantial market for a non-infringing use of”
Grokster’s or StreamCast’s services that could commercially
support their advertisement-dependent businesses, 464 U.S.
at 442, 447 n.28, or whether (as the district court found) their
businesses depend on attracting millions of infringing users.
Instead, the Ninth Circuit let respondents establish
“substantial noninfringing uses” with anecdotes of how their
services were or might be used without infringing. If this
constitutes commercially significant noninfringing use, then
every service or product meets that standard. This case thus
21
presents the issue, expressly left open in Sony-Betamax, id. at
442, of whether noninfringing uses can be “commercially
significant” when the defendant’s business depends on
infringing uses and is not sustainable without them.
Second, the Ninth Circuit read Sony-Betamax – refracted
through the circuit’s Napster decision – as absolving a
defendant of liability for contributory infringement once
substantial noninfringing uses are established, except in one
narrow circumstance: when the defendant fails to act on
specific knowledge of specific infringement using the current
features of the service as designed by the defendant. Pet.
App. 10a-11a. Not only is that almost exactly the standard
rejected as too narrow by Sony-Betamax, see 464 U.S. at 439
n.19 (refusing to import the standard for contributory
infringement that governs trademark law), but it renders
legally irrelevant critical factors that are present here but
were absent in Sony-Betamax.
For example, the Ninth Circuit found it irrelevant that
“the vast majority of the . . . use [of respondents’ services] is
for copyright infringement.” Pet. App. 11a. Indeed, the
Ninth Circuit believed that even to consider the extent of
infringement “misapprehend[ed] the Sony standard.” Id.
Focusing solely on alleged noninfringing uses, the Ninth
Circuit’s secondary liability rules ignore the other side of the
balance: the “copyright holder’s legitimate demand for
effective – not merely symbolic – protection of the statutory
monopoly.” 464 U.S. at 442.
The situation in Sony-Betamax was the polar opposite.
The predominant use of the Betamax machine – one-time
later viewing of free programs without any distribution to
others – was fair use. The predominant use of the Grokster
and StreamCast services is undisputed infringement. Those
services are overwhelmingly used to distribute free digital
copies of petitioners’ works. That use directly supplants
existing and future markets for the sale and authorized
22
distribution of those works, inflicting direct and obvious
harm upon the recording, music publishing, and motion
picture industries. Not even respondents have tried to justify
the massive infringement on Grokster and StreamCast as fair
use. Thus, even if the minimal noninfringing uses of
Grokster and StreamCast could be deemed “commercially
significant” within the meaning of Sony-Betamax, this case
still presents the important question whether the “staple
article of commerce” doctrine should be extended to
situations where the overwhelming use is for devastating
infringement.
Similarly, under the Ninth Circuit’s test a defendant’s
ability to block infringement is rendered irrelevant except in
the narrowest circumstances. The entire rationale for
importing the “staple article of commerce” doctrine in Sony-
Betamax was to prevent monopoly leveraging into unrelated
areas of commerce. See 464 U.S. at 440-42. That concern is
not implicated where infringing and noninfringing uses can
be separated, so that enforcement of the copyright monopoly
to enjoin infringing uses leaves noninfringing uses
untouched. Here, Grokster and StreamCast could easily
implement technological measures to separate infringing
from noninfringing uses but made affirmative choices not to
do so and, indeed, disabled aspects of their systems that
could be used to that end. The Ninth Circuit, however, held
that it must accept as given the way respondents’ systems are
currently engineered. Pet. App. 13a (“software design is of
great import”).
With that unprecedented leap, the Ninth Circuit has
encouraged infringement-driven services to shield
themselves from liability by designing their services to
disable their ability to block infringement. See Jane C.
Ginsburg, Copyright Use and Excuse on the Internet, 24
Colum.-VLA J.L. & Arts 1, 37 (2000) (criticizing “rule that
one who deliberately builds an online system in a way that
23
confounds the distinction [between infringing and
noninfringing uses] should escape liability”). The Ninth
Circuit’s rule thus fosters a peculiar kind of “innovation” – it
incents enterprises to “innovate” by disabling a system’s
capacity to prevent infringing uses, irrespective of whether
such innovation otherwise makes sense from a business or
technical perspective. Sony-Betamax cannot possibly have
intended that result, and copyright law cannot withstand it.
The Ninth Circuit imported the same misconception into
its analysis of vicarious liability. Although the court
acknowledged that the issue of vicarious liability was not
presented in Sony-Betamax and therefore “held that Sony-
Betamax has no application . . . to vicarious copyright
infringement,” Pet. App. 16a (quotation marks omitted), it
created the same gaping exception to that well-established
basis for liability whenever a defendant has engineered its
service to disable mechanisms for preventing infringement.
Thus, even though Grokster and StreamCast concededly
profit directly from infringement and are gatekeepers that
could implement measures to block infringing uses or users,
they are not liable under the Ninth Circuit’s standard
precisely because they have chosen not to implement those
measures. That turns the law of vicarious liability on its
head. Far from “placing responsibility where it can and
should be effectively exercised” in order to encourage
gatekeepers who profit from the infringement of others “to
police carefully,” Sony-Betamax, 464 U.S. at 437 n.18
(quoting Shapiro, 316 F.2d at 308), the Ninth Circuit’s new
defense to vicarious liability gives gatekeepers a perverse
incentive to avoid technological measures for controlling
infringement by their users.
Finally, the Ninth Circuit’s test enables those who (like
Grokster and StreamCast) set out deliberately to induce or
aid infringement on an unprecedented scale while willfully
blinding themselves to specific acts of infringement to escape
24
liability. The only state of mind that matters in the Ninth
Circuit is specific knowledge of specific infringement at the
precise time the infringement can be stopped using the
service as defendants designed it. Nothing in Sony-Betamax
dictates, or even remotely supports, such a result.
The Court has often granted certiorari to resolve such
issues involving the fundamental direction of copyright law –
even absent a circuit conflict (which is present here, see Point
II infra). Indeed, the Court did so in Sony-Betamax itself.
See also Teleprompter Corp. v. Columbia Broad. Sys., Inc.,
415 U.S. 394, 399 (1974); Fortnightly Corp. v. United Artists
Television, Inc., 392 U.S. 390, 393 (1968). The need for
immediate review is more pressing in this case than it was in
Sony-Betamax. The Ninth Circuit’s secondary liability rules
shield every enterprise that intentionally sets out to make
money by facilitating copyright infringement on the Internet.
That ruling threatens not only petitioners’ businesses, but
also the very foundations of our copyright system in the
digital era. Immediate review is manifestly appropriate.
II. THE DECISION BELOW CREATES A DIRECT
AND ACKNOWLEDGED CONFLICT WITH THE
SEVENTH CIRCUIT’S DECISION IN AIMSTER.
The Ninth Circuit’s decision creates a direct and
acknowledged conflict with the Seventh Circuit’s Aimster
decision, in which Judge Posner affirmed a district court’s
conclusion that Aimster, a peer-to-peer file-sharing service
that operated like the services at issue here, was likely to be
found liable as a contributory infringer. Under Aimster, a
court must assess a system’s actual and probable potential
infringing and noninfringing uses, and then must balance the
costs and benefits to accommodate the interests of copyright
holders in preventing infringement while protecting the right
of the public to use products for noninfringing uses. The
Ninth Circuit expressly rejected that approach, examining
only whether the system is theoretically capable of
25
noninfringing uses, no matter how improbable, and then
permitting liability only when the alleged contributory
infringer has specific knowledge of actual infringement and
has engineered its system to allow for the prevention of the
infringement when the defendant learns it is occurring. This
conflict demonstrates that Sony-Betamax did not dictate the
Ninth Circuit’s tortured approach, and it reinforces the need
for this Court’s review.
A. There Is A Conflict Regarding What Is Necessary To
Show Commercially Significant Noninfringing Uses.
The Ninth Circuit and the Seventh Circuit are in direct
conflict over what a defendant must show under Sony-
Betamax to establish that defendant’s system is capable of
commercially significant noninfringing uses.
The Ninth Circuit requires only a showing that
substantial noninfringing uses are possible. See Pet. App.
11a (holding that “in order for limitations imposed by Sony-
Betamax to apply, a product need only be capable of
substantial noninfringing uses.”) (emphasis in original). A
service thus may have substantial noninfringing uses even if
the current uses are overwhelmingly infringing, and even if
the current noninfringing uses would not support the product
as a stand-alone business. The Seventh Circuit, in contrast,
evaluates not just whether noninfringing uses are possible,
see 334 F.3d at 651 (holding

Wow that's alot too read. Guess why I'm an engineer and not a lawyer?

What a surprise, the MPAA wants to overturn another court case that didn't go as they planned.

There are so many flaws I am having trouble deciding where to start....

The biggest of all is the view from which they are looking at the amount of infringing use. The percentages don't matter. Its the content of the portion that is non-infringing that really matters.

Think about it. Constitutionally, copyright is a claim of ownership for a limited time. The infringement does not attempt to deny that claim. This lessens the constitutional value of the case.

On the other side, we have literally millions (if we want to apply the inflated assumtions from the industry) of files that are not infringing. If memory serves, they were given the opportunity to account for what content was in those files. They could not.

No to get to the point....If only one of those files contains an opinion - such as one's point of view on the upcoming election - and it gets filtered, or better yet, P2P gets ruled as illegal in the blacket view being requested, the we have a clear First Ammendment violation.

Given that they cannot gaurantee that any action will not take us to this end, the courts cannot simply base a decision on quantity.

The part I find most irritating is that they have been told that quatity is not a deciding factor in virtually every one of these things they try. After a while, you want to just "send them to their rooms without their dinner and not let them out until they learn how to play nice with the other children"...

"Now to get to the point....If only one of those files contains an opinion - such as one's point of view on the upcoming election - and it gets filtered, or better yet, P2P gets ruled as illegal in the blanket view being requested, the we have a clear First Ammendment violation"

Darn typos....

It seems the issue as to whether P2P Networks get closed down, hinges on the ability to prove that while there may be some copyright infringement on these sites that they are also used for significant non-infringing purposes. that the issue is not one of the existence of the networks but rather the actions of the users.

It seems to be that even to the most biased of viewpoints that is a self evident truth.

In this context I see no way that the Courts could in all honestly and fairness rule in anyway but un favour of the P2P Networks.

What is also apparent, by the continued appeals of the Entertainment industry to successive losses on this issue is that they are engaged in a form of ecconomic terroism. They are using their deep pockets to weardown the opposition, by making this fight as expensive as possible, hoping to win by the shear financial attrition of the opposition.

To my mind the term Ecconomic Terrorism could also be applied to the efforts being employed by their cohorts the RIAA. In suing Children, Seniors, Single Parents etc., persons they know are not in a financial position to legally oppose their specious arguments.

What they don't seem to realize, or are unwilling to consider is that most of these downloads don't represent lost sales, if these people couldn't download the Music they would do without it. Its more a matter of conveniennnce, or the chance to have something that you couldn't otherwise afford, or in the case of many of the Kids, just something to do on the Internet, rather than premeditated theft as the Entertainment Industry would like to portray it.

All they are doing by their ill advised legal actions is alienating potential customers, it should be abundantly clear even to the seemingly limited intelligence of the persons directing these compaigns that that is no way to treat potential customers. The Public is appalled at the personal sufering being caused by these suits and I can't help but think that the entertainment industry will pay the ultimate price of declining revenue as a result of a Public backlash once their actions gain wide public exposure. all that is needed is one Public defense which clearly shows the victimization of some Child or Family etc. for the sake of a few minimally valuable songs in the form of electronic data bits.

Theres no question that in the case of downloading Music, for those persons unfortunate enough to be ensnared in this legal aggression, the severity of the ecconomic punishment far outweighs any perceived crime. Clearly in the context of making the Punishment fit the supposed crime, there is a clear inbalance favouring the aggressor.

I apologize for the length of this post, but this topic has annoyed me for sometime. I find the actions of the Entertainment Industry in suing these individuals totally repulsive.

One final point why have I seen no effort to have the entertainment Industry show that they legitimately own the copyright to these songs, and why have they not been required to prove that they have made every reasonable effort to ensure that those people who are downloading from the P2P sites can clearly identify each and every copyrighted song before downloading. I'm sure if the copyright was clearly indicated most people would avoid these songs, as there not worth the hassle.

"...and why have they not been required to prove that they have made every reasonable effort to ensure that those people who are downloading from the P2P sites can clearly identify each and every copyrighted song before downloading."

This is one of those peeves I have ranted about before. If their songs are so precious as to be protected in such an aggressive way; it follows to reason that those same songs should be put up by name. Listed as property of the majors and put in some site where they can be identified as being protected property. To date I have seen one netsite that does this and it isn't with the majors' blessings.

I suspect that if this was done that some of the statements made about how much music is actually controlled by the majors might fall by a good few percentage points. Because of unclear data it has been laid out that the majors control 70, 80, and 90% at different times by different articles at this site.

The obscurity of just what music is owned by the majors allows them to be in the bully boy position of claiming far more than they own or in otherwords, misrepresenting the facts when carrying a court case forward. The misrepresenting done by omission rather than statement, a less obvious tact. Because of this lack of data they can claim whatever number they care to pull out of the hat and no one can prove otherwise.

This is the most hilarious thing I have read in months. I wonder who writes their material.

There is very little reality in this. No matter how many different ways they frame the question, the simple fact is that there is no law against what the p2p companies are doing, despite the RIAA's recurring pirate hallucinations to the contrary.

And the Time story they quoted is loaded with factual errors.