Ober|Kaler - Article: On Intellectual Property - Grokster: Burning Down the Copyright House, or Rearranging the Furniture? 3/30/05

03/30/2005

On Intellectual Property - Grokster: Burning Down the Copyright House, or Rearranging the Furniture?

Jonathan M. Holda
410-347-7380
jmholda@ober.com

Appeared in The Daily Record
March 30, 2005

Yesterday, the Supreme Court heard arguments in MGM v. Grokster, a case that pits Silicon Valley against Hollywood and highlights the convergence of technology and entertainment.

The question is whether respondents Grokster and StreamCast, two Internet peer-to-peer file sharing services, should be held contributorily liable for the activities of their users in infringing the copyrights of petitioners MGM and some of the world's largest content providers. The answer may dictate the future of technology development.

An impressive array of amicus filers have weighed in.

Siding with petitioners are over two dozen Hollywood studios and music companies, the attorneys general of most states, all three major U.S. sports leagues, Business Software Alliance, Recording Industry Association of America, Motion Picture Association of America and the Songwriters Guild of America, to name a few.

Respondents' equally impressive amici include the American Civil Liberties Union, Consumer Electronics Association (CEA), National Venture Capital Association, technology companies such as Intel, and consumer groups.

Supporters on both sides were outside the court in force both before the hearing and afterwards. On respondents' behalf were two dozen employees from the CEA, waving signs such as "Save Betamax" and "Fight for your right to innovate."

Jeff Joseph, Vice President of Communications at the CEA, stated that while the CEA believes that copyrighted works should be protected, the Grokster case was an example of the content providers attacking the technology rather than the parties responsible for the infringement.

On petitioners' behalf were an equal number of members of the Songwriters Guild (SGA), some holding placards reading "Feed a musician — download legally" and "Thou shalt not steal," while others played guitars and mandolins.

Rick Carnes, president of the SGA, noted that while file sharing is the future, the way that it is currently used is hurting the songwriters.

Glancing over at the CEA employees, most of whom appeared in their early 20s, he explained that while "this [illegal downloading] is a hobby for those people," for the songwriters, "this is our life."

As anticipated, much of the questioning focused on the court's 20-year-old decision in Sony v. Universal Studios, dubbed the Betamax case.

In Betamax, the issue was whether Sony should be held contributorily liable for the actions of video recorder consumers. The Supreme Court found that since the recorders were capable of "substantial" or "commercially significant" non-infringing use, Sony was not contributorily liable through its knowledge of such infringement.

Relying on Betamax, the 9^th U.S. Circuit Court of Appeals in Grokster found that since respondents' file sharing software was capable of "substantial" or "commercially significant noninfringing use," respondent had no constructive knowledge of infringement.

Questions for both
During the hearing, the court asked pointed questions of both sides. Justices Stephen G. Breyer and Antonin Scalia seemed concerned that under petitioner's reading of Betamax, companies going into business with a new technology would have no real way of knowing beforehand whether they might be liable for massive infringement.

Breyer pointedly asked petitioners whether, if they had been counsel for the creators of the photocopier, VCR, iPod, or even the Gutenberg printing press, they would be comfortable under petitioners' copyright standard.

As for respondents, Justice Anthony Kennedy noted that under the 9^th Circuit's ruling, a business would seem to be allowed to use the intellectual property of another as "start-up capital" — a conclusion that seemed wrong to him.

Justices Sandra Day O'Connor and David H. Souter both asked why the respondents should not be held liable for active inducement based on their past actions, and why respondents' actions in avoiding knowledge of their users' infringing activities should not be viewed as "willful ignorance."

Somewhere in the middle?
Throughout the hearing, the court seemed unconvinced that it should either affirm the 9^th Circuit in Grokster or overrule it. Consequently, it seems most likely that the Court will strike a position somewhere in the middle, upholding Betamax but providing guidance in its interpretation.

Regardless of the outcome, and regardless of whether this case serves as the warm-up for a battle on Capital Hill, it seems that the hearing has already borne positive fruit: afterwards, representatives from both sides could be seen debating the issue with one another on the steps of the court in a meaningful manner.