Timothy K Armstrong (blogger):
Along with what seemed like about two-thirds
all the lawyers in Washington, I attended
today’s Supreme Court argument in MGM v.
Grokster, the case on the legality of
decentralized peer-to-peer file sharing. It
was the most crowded argument I’ve ever
attended—I arrived before 6:30 a.m. and
still ended up in the overflow seating,
listening to the audio in the attorney
lounge, which was standing room only.
Mostly industry and government lawyers in
attendance, it seemed to me, which is surely
no surprise given the dollar amounts on the
line. I don’t really like the attorney
lounge because it’s sometimes hard to hear
the Justices (they don’t all speak directly
into their microphones) and because it’s not
always clear who is speaking (Kennedy and
Souter, in particular, sound basically the
same to my ears). Just based on the audio
feed, it sure sounded like the Chief had no
business being out of a hospital.
I would say the argument went a little
better for Grokster than I would have
expected it to. Not to the point where I’d
actually predict victory for them, but to my
mind at least, the questions Grokster got
were not as difficult as those MGM got.
The big issue that the Justices were
wrestling with, it seemed to me, is what the
standard ought to be for deciding whether
services like Grokster can be secondarily
liable for their users’ copyright
infringement. The Justices did not sound
especially satisfied with either MGM’s or
the government’s answers to this question.
MGM’s view was and is a little odd; their
argument to the Court was that the legality
of a technology should turn upon the type of
business model the developer of that
technology adopts to distribute it. On this
view, Sony is off the hook because Sony is
not a company that is primarily in the
business of copyright infringement. But
Grokster should be held accountable because
they intentionally founded a business based
expressly on encouraging infringement of
copyright. It does not matter, in MGM’s
view, whether the infringing use of
Grokster’s system constitutes 90% or 10% of
the total: because its whole business plan
is geared around using the promise of
infringing content to lure customers, it
should be liable.
At least some of the Justices, Scalia in
particular, seemed troubled by how an
inventor would know, at the time of
inventing, how its invention might be
marketed in the future. How, some of the
Justices asked MGM, could the inventors of
the iPod (or the VCR, or the photocopier, or
even the printing press) know whether they
could go ahead with developing their
invention? It surely would not be difficult
for them to imagine that somebody might hit
upon the idea of marketing their device as a
tool for infringement.
MGM’s answer to this was pretty
unsatisfying. They said that at the time
the iPod was invented, it was clear that
there were many perfectly lawful uses for
it, such as ripping one’s own CD and storing
it in the iPod. This was a very interesting
point for them to make, not least because I
would wager that there are a substantial
number of people on MGM’s side of the case
who don’t think that example is one bit
legal. But they’ve now conceded the
contrary in open court, so if they actually
win this case they’ll be barred from
challenging “ripping” in the future under
the doctrine of judicial estoppel. In any
event, though, MGM’s iPod example did
exactly what their proposed standard
expressly doesn’t do: it evaluated the
legality of the invention based on the
knowledge available to the inventor at the
time, not from a post hoc perspective that
asks how the invention is subsequently
marketed or what business models later grow
up around it.
Justice Scalia’s questions kept the focus on
what an inventor would know at the time of
making an invention: how would they know
which uses of their product would later come
to predominate; and should an inventor maybe
have some fixed period of time (say, ten
years) to develop noninfringing uses of its
product before its legality is tested.
MGM’s answer was that an inventor could
never be secondarily liable because they
could not be found to have acted with the
requisite knowledge that they were
facilitating infringement, but Grokster can
be liable because its knowledge of that fact
forms the very basis for its business plan.
Justice Ginsburg asked whether an inducement
theory based on whether a defendant built a
business around encouraging infringement of
copyright could ever be amenable to
resolution on summary judgment, and MGM
seemed to say that a trial would be required
in every case. This is an extraordinarily
low threshold they are asking the Court to
establish for getting to a jury, and this is
still a Court that generally likes summary
judgment, so I wonder whether MGM’s proposed
standard will get much traction.
If the Solicitor General’s proposed standard
was actually different from MGM’s, I’m
afraid the subtlety was lost on me; their
argument to the Court parroted MGM’s in most
pertinent respects. The SG argued that a
defendant should be held liable if their
business model is not substantially
unrelated to copyright infringement. Minor
noninfringing uses (such as authorized
downloads) should not immunize a defendant
from liability, and in suggesting the
contrary, the courts below misread the Sony
decision. The Court (Justice Kennedy, I
think) questioned the government about
whether there could ever be a safe harbor
for defendants (maybe trying to see whether
the SG shared MGM’s view that a plaintiff
should get to trial in every case, or
whether in some cases nonliability was so
clear as to be decided summarily). The SG’s
answer was that if a minority of the uses
were infringing (that is, 50% minus one),
the defendant should be off the hook, but
anything beyond that and the court would
have to look closely at their business
model. The SG, in other words, called for a
safe harbor that no extant, or reasonably
foreseeable, service would ever be able to
avail itself of. The SG also rejected the
suggestions (by Justices Scalia and, I
think, Souter) that perhaps
infringing-versus-noninfringing business
models shouldn’t be evaluated at the moment
the company launches its product, but maybe
after a market has had a certain opportunity
to mature.
The questioning of Grokster’s lawyer was
very odd. The Court spent what I thought
was an inordinate amount of time trying to
nail down exactly what issues had been
certified for interlocutory review and what
issues were still “live” in the trial court.
The dividing line seemed to fall between
the question whether Grokster’s software
design was lawful going forward, and whether
Grokster could nevertheless face liability
for its past efforts to market that software
as a vehicle for infringement. The
discussion on this point was not especially
illuminating and consumed an awful lot of
Grokster’s clock time.
As expected, Grokster argued that the Sony
rule was necessary to protect innovation,
and noted the large industries that had
grown up expressly relying on the “capable
of substantial noninfringing uses” test.
Justice Ginsburg made a couple of comments
about how there is more to the Sony opinion
than just the “capable of substantial
noninfringing uses” phrase, but Grokster
seemed to have the better of the argument
that, say what you will about that phrase,
it is in fact the standard that Sony
establishes, for better or worse. Justice
Breyer wondered whether Sony wouldn’t work
just as well if the Court struck out the
words “capable of” and just focused on the
actual uses, but Grokster answered that
basically all of the alternative standards
that had been proposed in the case were
worse for innovation than the as-is Sony
test. There was a little sparring with
Justices Souter and Ginsburg about whether
the Court should be making the decisions in
this area rather than Congress. I don’t
think anybody expects the Court (especially
this Court) to punt to Congress, however, on
this or any other issue that is colorably
subject to judicial resolution.
Some of the Justices seemed pretty troubled
by the idea that Grokster had engineered its
system for “willful blindness” to the
infringing conduct of its users. Grokster’s
lawyer conceded, as he had to, that one of
the reasons Grokster designed its software
as it did was to avoid the Ninth Circuit’s
decision in the original Napster case (which
held Napster liable because its centralized
file database gave it actual knowledge of
what its users were doing). Grokster argued
that designing around Napster wasn’t its
sole purpose, but it remains to be seen
whether the Justices think this is
persuasive. I think they made a little, but
not a lot, of headway on the “willful
blindness” issue.
MGM’s rebuttal opened with a real howler,
and I am a little surprised that none of the
Justices interrupted their lawyer to
challenge it, but he was speaking pretty
quickly and forcefully, so I guess they were
inclined to let him sum up. Addressing the
relief MGM was seeking, their lawyer said:
Grokster is a machine built upon inducing
infringement and we are entitled to an
injunction shutting it down. The obvious
rejoinder, based on the lower courts’
express findings in the case, is that an
injunction can’t shut down Grokster, the
network, because it exists completely apart
from Grokster, the company. If this was an
attempt at some sleight of hand with the
technologically unsophisticated judges, I
don’t see it going anywhere, because the
questioning of both sides seemed to reflect
that the Justices have a hearteningly clear
grasp of what the software does and doesn’t
do. MGM also argued that the Ninth
Circuit’s decision was itself chilling
technological innovation, although they
defined “innovation” as innovation
authorized by copyright holders. MGM closed
with its pity-the-starving-artists line,
complaining about the lost revenues from
hypothesized sales it says would have
occurred absent file-sharing.
On balance, not quite as bad a day for
Grokster as I think a lot of people were
expecting. Not a sure (or even a probable)
victory for them by any means, but the Court
did seem quite attuned to the effects on
innovation of whatever liability rule it
ultimately adopts. None of the Justices was
talking as if the case could be disposed of
on Sony alone, but there will be at least a
few votes against abandoning that standard
altogether. Whether the Court can craft a
marginal tweak of Sony that does as little
harm as possible is a question nobody can
answer now, but we will know in a couple of
months.
leflaw
tomsong
gdZiemann
CodeWarrior
Capt-n-Jack
carla60626
surfside6
