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07/2005 |
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Jonathan M. Holda Appeared in The Daily Record On Monday the Supreme Court unanimously held that peer-to-peer file sharing services can be held liable for the copyright infringement of their customers. The Court ruled that the determining factor in setting such liability will be the manner in which the peer-to-peer entity promotes its services. The court essentially left Sony v. Universal Studios, dubbed the Betamax case, untouched. Relying in part on the inducement theory under patent law and mindful of the balance between fostering creativity and protecting copyrights, the Court held that under Betamax, “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.” The Court reaffirmed the core Betamax principle that “mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability.” However, the Court indicated that in this particular case, there was “substantial evidence” that Respondents Grokster and StreamCast had induced infringement. In particular, the court cited three features of Respondents’ actions that indicated culpability for inducement. First, each Respondent “showed itself to be aiming to satisfy a known source of demand for copyright infringement, the market comprising former Napster users.” Second, neither Respondent so much as “attempted to develop filtering tools or other mechanisms to diminish the infringing activity using their software.” Third, the Respondents’ business models were based upon “high-volume use, which the record shows is infringing.” As for the evidence of actual infringement by Respondents’ customers, the Court found there to be “evidence of infringement on a gigantic scale.” Reactions to the ruling could be classified in three groups: those who saw it as having a chilling effect on the development of new technology (Respondents and their supporters), those who thought it was a fair response (many established technology companies and organizations), and those who saw it as putting a fair and powerful new tool in the hands of the entertainment industry (the entertainment industry). Gary Shapiro, President and CEO of the Consumer Electronics Association (CEA), criticized the ruling for its “lack of clarity in determining intent to encourage infringement,” and predicted that the ruling would result in “massive uncertainty and the likelihood of massive legal bills.” Fred von Lohmann of the Electronic Frontier Foundation echoed this position, believing that “[t]he newly announced inducement theory of copyright liability will fuel a new generation of entertainment industry lawsuits against technology companies.” The Institute of Electrical and Electronics Engineers (IEEE), an entity that had written an amicus opinion in support of neither party, agreed with the ruling, noting that the Court had adopted the same active inducement standard proposed by the IEEE in its amicus brief. Harris Miller, President of the Information Technology Association of America, voiced similar pleasure with the ruling, stating that “this issue must be decided by the conduct and behavior of individuals, not the capabilities of various technology devices.” Rick Carnes, President of the Songwriters Guild of America and Chair of the Music United Coalition Communications Committee, feels that the Court “has laid down some simple guidelines about what is fair and what isn’t.” The Recording Industry Association of America went further, describing the Court as having “addressed a significant threat to the U.S. economy and moved to protect the livelihoods of the more than 11 million Americans employed by the copyright industries.” A “fuzzy” decision? As the statements of Shapiro and von Lohmann indicate, much of the criticism of the ruling seems to center around the apparent imprecision in the Court’s Grokster liability test, which requires weighing the actions (and inactions) of a defendant to determine whether inducement occurred. In the case of Grokster, the Court found that Respondents’ “unlawful objective was unmistakable.” But as the CEA and others have noted, this begs the question of how will the lower courts interpret and weigh the various factors laid out by the Supreme Court in establishing active inducement where a defendant’s conduct is less than “unmistakable”? Given the likelihood that different courts will weigh these factors differently and thereby create some confusion as to what is and is not permissible behavior, it is possible that in the short-term, Grokster will have a somewhat chilling effect on technology developers who would otherwise push the limits. But in a sense, is the uncertainty in Grokster all that different from the uncertainty in the interpretation of other copyright law principles? Copyright jurisprudence is full of such balancing tests. The fair use doctrine in copyright law permits an author to copy a portion of another’s work without infringing. How much use will still constitute fair use? The analysis is not simple; in addition to the amount of material used, “fair use” depends on the purpose and character of the use, the nature of the copyrighted work, the substantiality of the portion taken, and the effect of such use on the potential market. The same percentage of use that in one situation would be deemed a “fair use” may be deemed infringing where it constitutes the “heart” of the underlying work, or where it negatively impacts the market of the underlying work. Another example is the substantial similarity test, which is used to determine whether infringement occurred by comparing a copyrighted work with an allegedly infringing work. The analysis centers around whether an “ordinary observer” would perceive substantial similarities between the two works. However, any similarities between the ideas behind the two works are not considered, as ideas are not protectable under copyright law. The bar for establishing substantial similarity is that the similarity present in the allegedly infringing work must be more than merely “stirring one’s memory” of the copyrighted work, as one court has so clearly put it. If such tests sound “fuzzy,” it is because they are, and purposefully so — Courts have repeatedly stated that tests such as the fair use and substantial similarity tests are intended to allow the courts flexibility. Upon closer examination, the Grokster decision is not as fuzzy as it first appears — it is plainly grounded in patent and common law copyright law. The Court states that the same principles applicable in common law copyright and patent inducement cases are applicable in Grokster. Further, the Court was consistent in again tapping patent law for the Grokster inducement rule, as it did in Betamax where the Court referenced the staple-article doctrine of patent law to develop the principle that mere knowledge of infringement is not enough. Summing it all up Rather than adding uncertainty, the Grokster decision provides a natural extension to copyright law in response to new technologies. This extension is consistent both with the spirit of copyright law flexibility as well as with the long history of inducement infringement jurisprudence in patent and common law copyright cases. Jonathan M. Holda is an attorney practicing in the Intellectual Property Group of the national law firm Ober|Kaler. He attended the arguments in the Grokster case at the Supreme Court and described them for The Daily Record (March 30, 2005). He is based in the firm's Baltimore office and can be reached at 410-347-7380 or jmholda@ober.com.
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