Dispatches From the Moderate Left

Tuesday, July 05, 2005

Indecision (US)

The Supreme Court handed down its decision in the Grokster Case last week. Having read the case, it's interesting to note that much of the reporting on the case missed the point and vastly overstated the importance of the decision. True, the court found 9-0 against the P2P software makers in the case (Grokster and StreamCast who operated Morpheus), but the decision contains, ultimately, no guidance for the application of the Sony Betamax principle to P2P software in the future. To those unfamiliar with this principle, it basically says that the makers of a particular technology cannot be held liable for the breach of copyright by users so long as the technology has 'substantial' non-infringing uses. This is the theory of imputed inducement - if your product can, in effect, only be used to infringe copyright you will be presumed to be intentionally inducing copyright infringment, which is against the law.

Souter J (a somewhat liberal judge) delivered the primary judgement of the court, joined by the two ultra-conservatives, Scalia and Thomas JJ. Right off the bat he dismissed the relevance of Sony, saying that the key question here was not imputed inducement but intentional inducement. He analysed the actions of Grokster and Streamcast in detail and found that thy had taken active steps to promote copyright infringement by their users, such as answering user's questions about what to do with downloaded files, marketing heavily to the user base of Napster, providing a "top 40 chart songs" search tool, trying to increase the amount of copyrighted material available on the network and advertising this fact. From this analysis arises the oft-reported quote:
[O]ne 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, going beyond mere distribution with knowledge of third-party action, is liable for the resulting act of infringement by third parties

The entire court agreed with this analysis, but they all said it had nothing to do with the Betamax principle. Thus all agreed that the summary judgement in favour of Grokster/Streamcast which had been made by the 9th Circuit Court should be overturned and a full trial on the merits conducted.

Ginsburg J, joined by Renquist CJ and Kennedy J (generally conservative judges) went further and said that Grokster and StreamCast could be found liable under the Betamax principle of imputed inducement. They took a wider definition of this principle and said that, bascially, if almost everyone is using the product to infringe copyright then possible future, non-infringing, uses are irrelevant. They basically lowered the Betamax 'substantial' non-infringing uses standard, which would have made it easier to prosecute P2P distributors in the future.

Breyer J, joined by O'Connor and Stevens JJ (moderates/moderate liberals) disagreed with Ginsburg J. They said that Grokster and StreamCast were fine under the Betamax standard. The percentage of non-infringing files on the networks (about 10%) was similar to the number of people who, in the early 80s, were using Betamax recorders for legitimate purposes (about 9%). They also took a much more open view of the future potential of the technology, drawing the link with the development of the lucrative home video industry in the 80s - strongly reaffirming the technology innovation-promotion policy behind the Betamax rule.

In the end the court split 3-3 on how to apply Betamax in the future with the other 3 judges not deciding. Thus, the way courts will approach other P2P distributors like Kazaa, Limewire and Bitorrent, who in their public statements and marketing express a desire to promote legitimate use of the technology, is unknown. These companies do not seem to 'actively induce' copyright infringement under Souter J's standard (see, especially, his footnote 12) and lower courts, thanks to the indecision of the Supreme Court, have no real guidance on how to apply Betamax in subsequent cases.

As an aside, the hearings for the Kazaa case in the Australian Federal Court closed on the 22 March. There was a rumour floating around that Wilcox J was waiting for the Grokster case to finish before handing down his decision there, it'll be interesting to see if his opinion is released soon. It's certainly been a while.


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