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Grokster Ruling Perspective: NARAS vs CEA

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In the Grokster case, the Supreme Court unanimously decided that “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, going beyond mere distribution with knowledge of third-party action, is liable for the resulting acts of infringement by third parties using the device, regardless of the device’s lawful uses.”

And they remanded the case (see Michael D. Bryan’s analysis) “saying that there is room to find imputed liability for copyright infringement by Groksters users despite the Betamax case because Grokster solicited users to use their product specifically to violate copyrights.”

The Court did not say which actions short of marketing/advertising your service for the purpose of violating copyright would confer liability, so the essence of file-sharing — providing the technology to enable it — was left an open question.

Perspective on the decision seems directly related to economic stake in the case. Here is Neil Portnow, president of the NARAS on the ruling:

The National Academy of Recording Arts & Sciences represents 17,000 musicians, composers, artists, engineers, producers and songwriters and is dedicated to improving the quality of life and cultural condition for music and its makers.

Today is a good day for music fans and the 17,000 musicians, composers, artists, engineers, producers and songwriters that are the members of the Recording Academy. By unanimously upholding the rights of creators, the Supreme Court has defended an environment for legal online music services to thrive.

As the National Academy of Recording Arts AND Sciences, our membership embraces new technologies that deliver their music to fans in innovative ways. The court is forging the way for the legal digital services – those that compensate the creative professionals – to enable music fans to hear their favorite artists wherever, whenever and however they want.

The opinion also sends a strong message in defense of copyright protection, defending artists’ rights to create and to profit from their works within a safe and supportive system, while also making sure those rights are taken into consideration as technology continues to evolve.

Previously The Recording Academy submitted an amicus brief on behalf of the creative community, which depends on sales of its works to earn a living. We thank the Court for its insight into this important case and for the protection of music makers. The Academy will continue to defend its members’ rights wherever and whenever necessary.

Consumer Electronics Association President and CEO Gary Shapiro has a different perspective.

The immediate impact of today’s ruling is twofold: massive uncertainty and the likelihood of massive legal bills. The Court has done little to provide a clear path for legitimate innovators and manufacturers to avoid lawsuits related to copyright infringement over legitimate products and services.

With this ruling the Supreme Court has handed a powerful new tool to litigious content creators to stop innovation. Innovators must now consider new murky legal rules and potentially overwhelming legal costs before bringing their product to market – or even moving forward with an innovative idea. It is essentially a ‘full employment act’ for plaintiff’s attorneys and a guarantee for further lawsuits.

While the Court appears to have sought to narrowly tailor this decision to protect technological development and provide some guidance to promote innovation, the intent test established under this ruling stands as a heavy burden. Content creators may potentially find any act as an ‘infringement to induce’ and shut down a new product or service with the threat of a lawsuit. Who knows how many innovative products and services now face a premature death as the result of this ruling?

At the same time, the Court appears to have upheld the critical principles it established in its Betamax ruling, underscoring that products that have substantial non-infringing uses are legal even if they can be used for copyright infringement. The open question, again however, is the lack of clarity in determining intent to encourage infringement.

As we continue to examine the full impact of this ruling we will determine the next steps in our continuing efforts to protect innovation, consumer choice and fair use rights.

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About Eric Olsen

Career media professional and serial entrepreneur Eric Olsen flung himself into the paranormal world in 2012, creating the America's Most Haunted brand and co-authoring the award-winning America's Most Haunted book, published by Berkley/Penguin in Sept, 2014. Olsen is co-host of the nationally syndicated broadcast and Internet radio talk show After Hours AM; his entertaining and informative America's Most Haunted website and social media outlets are must-reads: Twitter@amhaunted, Facebook.com/amhaunted, Pinterest America's Most Haunted. Olsen is also guitarist/singer for popular and wildly eclectic Cleveland cover band The Props.
  • I’m not a legal expert by any means, but I have been following this case very closely, and I’m writing a research paper on it. At the end of the day, I think the ruling is essentially fair, although what it will mean for technology manufacturers is still somewhat unclear.

    A brief overview of the Grokster decision

    In my view, the Justices did what they had to do: they had to attempt to draw some kind of line in the sand between Grokster/Morpheus-type software companies, which are organized around profiting from massive copyright infringement, and the wide range of other companies whose products could conceivably make them contributorily liable for infringement under a broad ruling (such as iPods, cd burners, etc.).

    The Court’s problem? How to draw this line without throwing out the Betamax standard (from the 1984 Sony v. Universal, or Betamax, case). The Betamax standard can be restated as follows: a company not liable for creating a technology that some customers may use for copyright infringing purposes, so long as the technology is capable of substantial non-infringing uses (paraphrased from EFF.org’s Betamax page).

    However, “substantial non-infringing uses” were not as . . . substantial a factor as in the Grokster decision as many observers thought they would be. The Supreme Court held that the Ninth Circuit Court of Appeals misread the Sony v. Universal (or Betamax) doctrine (and I’m quoting the Grokster decision’s syllabus here) “to mean that when a product is capable of substantial lawful use, the producer cannot be held contributorily liable for third parties’ infringing use of it, even when an actual purpose to cause infringing use is shown, unless the distributors had specific knowledge of infringement at a time when they contributed to the infringement and failed to act upon that information. Sony did not displace other secondary liability theories.”

    In other words, the Supreme Court held that the mere existence of substantial non-infringing uses of a technology does not act as a prophylactic against all contributory liability claims against the manufacturer. The Court emphasized the intent of Grokster and Streamcast (the company that runs the Morpheus P2P network) – to make money by inducing copyright infringement – and much of the opinion is dedicated to underscoring 1) the companies’ advertising of their products as avenues for infringement, and 2) their business models, which rely on selling advertising space to profit off of massive infringement. Thus, while Grokster, LTD. has shown the kind of intent necessary to facilitate a contributory liability claim under the holding, someone like Bram Cohen, the computer genius who created the BitTorrent network (which is far-technologically-superior, and much more popular) and distributed it for free, probably has not.

    The Washington Post held a live chat Monday with Gigi Sohn, an attorney from Public Knowledge, a consumer-oriented technology think tank. The following is the question I submitted, with Sohn’s response:

    * * * * *

    Queens, N.Y.: The Court seemed to put a lot of emphasis on Grokster’s intent, such as their use of advertising promoting themselves as the next Napster, and their knowledge of the kind of infringement that was going on, shown in emails from executives to users. If intent is that important, would BitTorrent, which was created by a computer geek/genius, and distributed free, be viewed in a completely different light?

    Gigi Sohn: I would think so. BitTorrent does not appear to engage in any of the same conduct that concerned the Court in this case. I also think the fact that Grokster and Morpheus sell advertising is another important distinction. Obviously, this distinction has not stopped Hollywood from going after BitTorrent tracker sites, but I think that Bram Cohen (BitTorrent’s creator) is probably safe.

    * * * * *

    As Sohn says, a BitTorrent would probably be in the clear with regards to advertising the software as an avenue for infringement, as well as the business model element of the Court’s intent discussion. But there is a third prong of the Court’s intent test that is worrisome. The Court held that the fact that “neither company attempted to develop filtering tools or other mechanisms to diminish the infringing activity using their software” was evidence of “unlawful objective” on the part of Grokster and Streamcast.

    Would BitTorrent’s lack of “filtering tools or other mechanisms,” combined with massive evidence of infringement carried out using BitTorrent, be enough for contributory liability to be extended to BitTorrent? I doubt it, because the Court puts so much emphasis on the “advertising/promotion” and “business model” elements. Princeton Computer Science professor Ed Felton takes on this issue in his post, “BitTorrent: The Next Main Event” at freedom-to-tinker.com.

    Moreover, many tech experts are concerned about the unclear nature of the ruling, and the potential for strike suits by Hollywood against manufacturers of new technology – which could chill innovation by forcing manufacturers to fight in court or settle out of court. Cory Doctorow (from BoingBoing) surveys the slippery slope in his editorial for Popular Science, “Supreme Court Strikes a Blow against P2P Sharing.”

    While the potential chill on technology companies is a serious issue, I thought it was unrealistic to think that the Supreme Court was going to rule in favor of Grokster and Morpheus. I don’t think that the outcome of the Grokster decision is a doomsday scenario for P2P and similar technologies, and depending on how the Ninth Circuit Court of Appeals and other courts interpret the decision, Grokster‘s holding could be a lot narrower than some people are fearing.

    So what happened to the Betamax standard?

    Although the Court’s opinion downplays substantial non-infringing uses of P2P, it doesn’t throw out the Betamax standard – rather, the Court says that Betamax isn’t completely bulletproof, if there is a lot of evidence that your software has an unlawful objective.

    The concurrences which follow the Opinion of the Court battle over the future of the Betamax standard. Justice Breyer’s concurrence, which was joined by Justices Stevens and O’Connor, stresses the significance of the Betamax standard, and lists several good examples of non-infringing uses of P2P, including Project Gutenburg (which puts electronic books online), and Wilco’s use of P2P to promote their successful album “Yankee Hotel Foxtrot.”

    I hope that Breyer’s concurrence (which is attached to the end of the decision) will be looked to for clarification as courts interpret the Grokster decision, rather than Ginsburg’s, which downplays substantial uses of P2P the same way Souter’s opinion does. Perhaps the most astute part of Breyer’s concurrence is his discussion of the “flow” of new technologies towards non-infringing uses, which recognizes the fact that the initial use of a technology is often only one of a range of uses, which are increasingly developed by consumers themselves.

  • Eric Olsen

    thanks Thad, great stuff, you should post it!