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Scrivener's Error: Warped Weft |
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MGM v. Grokster originally posted June–July 2005
First Thoughts: The Ninth Circuit Rules [Expletive Deleted] Headline Writers! The Ninth Circuit's decision in Grokster came down today. It's a rather extreme exercise in hair-splitting, which basically comes down to this: There is no contributory or vicarious liability for copyright infringement as the law now stands for merely providing the tools that enable others to violate copyrights. Anything more than merely providing the tools, though, leans toward the Napster/Ellison analysis. Judge Thomas — who wrote the majority opinion in Ellison and cites it with approval, slip op. at 11734 — limits his opinion to the facts: Under the circumstances presented by this case, we conclude that the defendants are not liable for contributory and vicarious copyright infringement and affirm the district court’s partial grant of summary judgment. Slip op. at 11730 (emphasis added). Judge Thomas dealt with both contributory and vicarious copyright infringement. While distinguishing the Seventh Circuit's recent decision in Aimster, he noted that creating a tool that has significant noninfringing uses is not a "material contribution," and thus is not contributory infringement, under the law as it stands. While material contribution can be established through provision of site and facilities for infringement, followed by a failure to stop specific instances of infringement once knowledge of those infringements is acquired, the Software Distributors have not provided the site and facilities for infringement in the first place. If the Software Distributors were true access providers, failure to disable that access after acquiring specific knowledge of a user’s infringement might be material contribution. Or, if the Software Distributors stored files or indices, failure to delete the offending files or offending index listings might be material contribution. However, the Software Distributors here are not access providers, and they do not provide file storage and index maintenance. Rather, it is the users of the software who, by connecting to each other over the internet, create the network and provide the access. “Failure” to alter software located on another’s computer is simply not akin to the failure to delete a filename from one’s own computer, to the failure to cancel the registration name and password of a particular user from one’s user list, or to the failure to make modifications to software on one’s own computer. Slip op. at 11740–41 (citations omitted). In other words, it's not the manufacturer of the semiautomatic handgun optimized for "cop-killer" bullets who makes a material contribution to infringement; it's the gun shop that, knowing this, provides the weapons to known (or perhaps just suspected) members of Crack Dealer's Union Local 409. Whether the distributor who gets the gun from the manufacturer to the shop also makes a material contribution is a much harder, and thankfully evaded, question. The theory of vicarious infringement also failed, because the Software Distributors did not have sufficient control over their users' activity. It does not appear from any of the evidence in the record that either of the defendants has the ability to block access to individual users. Grokster nominally reserves the right to terminate access, while StreamCast does not maintain a licensing agreement with persons who download Morpheus. However, given the lack of a registration and log-in process, even Grokster has no ability to actually terminate access to filesharing functions, absent a mandatory software upgrade to all users that the particular user refuses, or IP addressblocking attempts. It is also clear that none of the communication between defendants and users provides a point of access for filtering or searching for infringing files, since infringing material and index information do not pass through defendants’ computers. Slip op. at 11743–44 (footnote omitted). In the end, it all comes down to the inadequacy of the legal system in regulating new technologies. [W]e live in a quicksilver technological environment with courts ill-suited to fix the flow of internet innovation. The introduction of new technology is always disruptive to old markets, and particularly to those copyright owners whose works are sold through well-established distribution mechanisms. Yet, history has shown that time and market forces often provide equilibrium in balancing interests, whether the new technology be a player piano, a copier, a tape recorder, a video recorder, a personal computer, a karaoke machine, or an MP3 player. Thus, it is prudent for courts to exercise caution before restructuring liability theories for the purpose of addressing specific market abuses, despite their apparent present magnitude. Slip op. at 11746–47 (citation omitted, emphasis added). So, then, where does this leave us? It does not, contrary to headlines that I have already seen, mean that "file-sharing software is legal." It means that the plaintiff record companies didn't (not necessarily couldn't — just didn't) establish intent in the same way as was done in Napster. It also creates an extremely fine line between providing a tool used to infringe, which is subject to apparently more-searching analysis, and providing a forum used to infringe, as the record indicates Napster and AOL did, or at least did enough to require a jury to make a definitive determination. Of course, a tool may well be meaningless without the forum. That, however, is for another time; as Judge Thomas emphasized, the tool alone is not unlawful unless the tool itself constitutes an infringement. Think of this as Internet "gun control": a handgun is not per se unlawful to possess, unless it is actually used in a crime or is a weapon specifically prohibited (such as a fully automatic weapon). What this really points out is that Congress has done a piss-poor job of drafting the Copyright Act so that it is not held hostage by changing technology. (Some of my current scholarly work revolves around this axis.) But then, that's been a problem since the 1850s; so, absent a zero-based rewrite and rethink of the Act, it's a problem that we're stuck with. Judge Thomas's emphasis on "market forces" at the end of his opinion points out the real solution to piracy: Making piracy economically unattractive by providing high-quality, easily accessible intangibles at a price that makes the perceived cost and inconvenience associated with downloading, storing, proofing, etc. "too much" for the potential audience. In other words, don't repeat the mistakes of Prohibition and the "War on Drugs": go after the demand side, not the supply. I'm not even going to try to keep up with all of the bullshit flying in the blogosphere about the Grokster opinion, which has already been spun so far by advocates of various extreme positions that a reasonably sophisticated nonlawyer might think that at least three different and incompatible opinions were issued yesterday. For example, one individual (whose analysis is generally much better than this) simply quotes part of the Ninth Circuit's concession that it believes it is creating a circuit split with the Seventh over Aimster without noting three critical contextual issues that would completely change one's interpretation of both opinions:
The irony that everyone thus far seems to be missing — and it is not even cited in Grokster — is that the DMCA has a specific safe-harbor for certain kinds of indexing activities, 17 U.S.C. § 512(d). This is probably because the Software Distributors, even if they had invoked this safe harbor, could not have sailed into it: They fail to meet two conditions (no financial benefit when aware of infringement, and removal of links to infringing material when notified). Nonetheless, it is somewhat curious that Judge Thomas did not cite to the general scope and structure of this particular safe harbor, because its reasoning pretty closely parallels his analysis of the contributory infringement theory. Over at Copyfight, Derek Slater disagrees with some of my analysis of the distinctions between Aimster and Grokster: I don't quite understand Petit's distinguishing Napster and Aimster based on intent. In Napster, there was evidence that the system operators intended the system for infringement, but the court's ruling didn't rest on that at all. In the contributory section, the court focused on Napster actual knowledge of specific infringements; the vicarious section focused on the right and ability to control in a similar fashion. As was the case in Napster and was further clarified in Grokster, actual knowledge of specific infringement must be received at a time when the receiver is capable of acting on that knowledge, and the right and ability to control is fully cabined within existing architecture. I'm not sure how you can read either of those cases to rest on an intent-based standard. In Aimster, intent took on greater importance, but I'm not sure it was as critical as Petit makes it out to be. Judge Posner notes that Aimster willfully blinded itself to infringements and that Aimster's docs were focused on infringing content (like Napster's). However, he speaks of that in the context of noting that there was sufficient evidence for infringing uses and essentially no evidence of non-infringing uses. Indeed, basically that encompasses the holding of the case, and everything else is dicta. If you accept the rest of Posner's standard as more than dicta, intent still isn't the determining factor. He explains that infringing and non-infringing uses should be balanced, taking into account their probability and the ability for system operators to redesign to prevent infringement. Intent can be factored in particularly when considering the redesign, but it hardly seems to be determinative. Grokster, Intent, and Cert (22 Aug 04) This is what I get for being a civil procedure geek: I assumed that my shorthand references to the underlying opinions at issue would be clear enough. They apparently weren't.
If you put this together, you'll see why the courts of appeals did not directly refer to evidence of intent. The weight of intent was subsumed within the procedural posture of the case. One must instead refer back to the trial court's opinion, and the public portion of the record, in both cases. That is where one finds the "intent" issues made explicit. The Seventh Circuit in Aimster was not allowed to touch the judge's credibility determinations on a preliminary injunction; when those credibility determinations are clearly "wrong," the court must find a misinterpretation of law that overrides them. The Ninth Circuit in Grokster, on the other hand, was not allowed to even consider credibility, because "all evidence is created equal" in summary judgment. I thus stand by my emphasis on the "intent" evidence. Had the record companies in Grokster presented sufficient evidence of intent to make the factual record parallel to Aimster and Napster, the record companies may well have succeeded in a motion for a preliminary injunction. In any event, that evidence of intent would probably have been sufficient to deny all motions for summary judgment, because it would have changed the applicability of other evidence in the record. In turn, that means that absent extraordinary circumstances, there wouldn't have been this appeal in Grokster, because with rare exceptions (that are not implicated in this case) one can't appeal from a denial of summary judgment — only from an adverse summary judgment. Thus, the matter would have needed to go to trial before a jury to reach this stage; and, in those circumstances, we're back to deferring to the jury (that "no rational jury" standard) on the findings of fact, including the credibility of the witnesses and evidence. So, then, tactics and civil procedure are at least as responsible for the differences in result between Aimster and Napster as any difference in substance. That makes this an inappropriate "circuit split" to justify certiorari. There may be substantive justifications for certiorari, but that's a much harder kind of review to get than is a circuit split. As I remarked in discussing Cheney, civil procedure can determine the outcome of important cases independent of their "objective" merits. Over at Cyber Divide, Jim Lai has a long, thoughtful piece on the "proper" scope of vicarious and contributory copyright infringement. It's a well-considered piece, but… I have had some unique opportunities to discuss the issue with attorneys from both sides from the issue and I think I've come up with the beginning of a test that I could support.
"BitTorrent and Secondary Copyright Infringement" (20 Dec 04) (reformatted for clarity). I think he's partway there, but I think he's fallen into a couple of traps that are not so obvious until one considers the actual creator's (not the patron's) viewpoint. The critical failure of this test — and it's amazing that it doesn't occur until the last clause — is "derives most, if not all, of its present value from acts of infringement." This short phrase has two fatal conceptual flaws. The first, and most obvious, is how one measures "present value." The major stumbling block in all of vicarious and contributory infringement theory is the point of view. Almost everyone pays attention to the "benefit to the infringer" prong as the proper measurement. This is entirely understandable, as it at least has some numbers attached to it. (Arguing over accounting standards, though, leads only to the distinction between Ellison and Fonovisa on "direct financial benefit".) That makes it attractive to a court or other decisionmaker. The problem is that copyright infringement actions are supposed to rectify a harm to the holder. Certainly, "seizing unjust profits" is one measure of such a harm — but it is not the only one, and certainly not the most important one. The difficulty for most actual creators is the ability to sell or resell one's material in the first place; and the potential income from such a practice has no discernable relationship to the unjust profits of a secondary infringer. Let's remove this from the copyright context for a moment and consider it as a matter of "more traditional" law, ignoring for the moment the whole "con-tort" issue. While the amount that an interloper profits by interfering with a contractual relationship is a valid measure of the harm party's loss, it is not the only one. "Settled expectations," "face value," and "consequential" theories are equally important. Mr Lai's test explicitly rejects them. Returning to the copyright creator's perspective, this means that the loss of the creator's ability to profit from authorized use(s) of his/her material is, under Mr Lai's test, completely irrelevant. If the resale value of, say, a short story drops from $500 to $300 as a result of secondary infringements, isn't that $200 a proper measure of damages? Not under Mr Lai's test. That, however, is an admittedly theoretical and rather amorphous objection. I think it points out more than adequately that it may well be impossible to develop a bright-line test of any kind for secondary infringement. I think this is actually the correct result; the whole point of secondary infringement theories is to prevent infringement by those who would weasel their way through loopholes that were not considered at the time whatever version of the Copyright Act is in force was passed. I think this is an argument for a far greater role for the Copyright Office in establishing substantive copyright law, pursuant to the Administrative Procedures Act; but that is for another time. I also have a fundamental objection not to just how "activity" is measured, but to the threshold at which "infringement" was set: "most, if not all, of its present value." I think this an inappropriate measurement. It enables too much gaming of the system to evade responsibility through sham or "Japanese real estate" transactions involving a few big-ticket items that never really change hands. However, there is a relatively seasoned — if not entirely objective — analogy available that provides a better yardstick. Keep in mind the distinction between the technology itself and the fora that use that technology. A key-cutter, for example, certainly has the legitimate use of making duplicate keys for rightful owners (and I need to go make a duplicate of a car key this afternoon anyway!). However, some key-cutters exist in dubious fora; and those fora have other problems. I refer, of course, to pawnshops. My alternate test is that if the relative volumes of transactions in a virtual pawnshop would reasonably be expected to result in prosecution for trafficking in stolen property if they occurred in a physical pawnshop, then the pawnshop is a secondary infringer. In other words, if you're a fence, you can't save yourself by having some legitimate business on the side; and if you're a legitimate reseller, you don't have to face jail time for the occasional hot stereo. It's not just about the business model; it's about the business attitude. And, in the end, that's why I think Mr Lai's test does put some necessary considerations out for discussion, but ultimately doesn't provide much, if any, real assistance in distinguishing between "infringing" and "noninfringing" uses of copying technology, despite its quantitative attractiveness. Tangent: No, You Weren't the First Over at the Conspiracy, David Post proclaims that: …I think the Court will send the case back to the Ninth Circuit and say: you were right that, under Sony, the non-infringing uses here are substantial enough so that, standing alone, providers of these p2p technologies can't be held liable for the copyright infringements of network users. But — and here's the critical part — on these facts, it doesn't stand alone; there's evidence in this record that Grokster and the other defendants actively encouraged and induced its customers to infringe copyrights, and that inducement of this kind is not protected by the Sony safe harbor. The Court will then instruct the Ninth Circuit to re-open the case and evaluate whether or not this evidence is enough to hold the defendants liable on an inducement, or "aiding and abetting," theory of liability. and that we've "heard it [from Post] first." Hmm. I wonder if I can remember anyone else pointing to this kind of thing? In Aimster, there was substantial evidence in the record — as in Napster — of the principal's intent to facilitate widespread infringement. This evidence was apparently absent in Grokster. By itself, I think this distinction is enough to vitiate any purported circuit split. It's not that I think the Software Distributors in Grokster were saints who just wanted to play with a kewl technology; it's that sufficient evidence of intent to facilitate not just file transfer, but infringing file transfer, was not entered against them in the trial court. (emphasis in original) (20 Aug 2004). I said it before, and I'll say it again: Grokster is about civil procedure at least as much as it is about copyright. There are important copyright issues, true; but the real problem is the application of the record to the law, not the law itself. From what I've seen, the Seventh Circuit got it right in Aimster and the Ninth Circuit may have made a mistake in Grokster. Not that this gives me warm and fuzzy feelings about Big Media, though; I almost exclusively represent the other victims of media consolidation: performers and writers. There is more than a trivial probability that Grokster will be decided tomorrow (13 June). It is virtually certain that the case will be decided before the end of this month — it has been quite some time since the Court held over a matter for reargument. Going out slightly on a limb, I predict a partial reversal of the Ninth Circuit. The Sony standard will get at least slightly recast, and almost certainly limited to terms parallel to the Home Audio Recording Act: personal use analogous to "time-shifting" (so long, of course, as the evil DRM provisions of chapter 12 remain inviolate) can qualify as fair use or as a permitted backup copy, regardless of medium. Distribution, however, will be out of bounds. The hard part of the question is this: Are the software manufacturers and/or network providers actually in the business of distribution, or only in the business of making tools that can be misused? This is why I think the matter needs to return to the Ninth Circuit: I don't think the factual record is sufficiently developed. Although it seems strange to be talking about intent as an issue concerning copyright — which is, under US law, a strict liability system — I think intent does (or at least should) matter when dealing with indirect liability. In any event, there's going to be plenty for lots of people to hate no matter how the decision comes down. Nobody with a stake in the litigation appears ready to reach any kind of compromise, or even look at the actual purpose of the IP Clause ("to promote progress"). On the one hand, one doesn't necessarily promote progress by allowing someone to lock up massive parts of the "record" and restrict its use. On the other hand, one doesn't necessarily promote progress by copying only the old stuff, or by copying so much that "starving artist" becomes the default condition. So go ahead, ladies and gentlemen. Make my predictions look foolish. A Short Reminder About Grokster No matter what way the decision in Grokster comes down, the blawgosphere and less-legally oriented blogosphere are going to be full of comments — some good, most bad, just like any other media event — on Monday (27 June). One of the myths that some people who should know better have put forth is that the Supreme Court granted certiorari to resolve a conflict between the Seventh and Ninth Circuits. Perhaps at some conceptual level the cases are in conflict; but not in the sense of a true "circuit conflict" on copyright doctrine.The Seventh Circuit's opinion in Aimster, formally known as RIAA v. Deep, is the one attacked on the "techie end" of the Internet, as it found a basis for liability by the "software provider." I'm not entirely certain that there is a conflict, primarily due to radically different procedural postures. In Grokster, the trial court granted summary judgment of nonliability to the software providers; that means that the Ninth Circuit reviewed the evidence in the record de novo, and had the freedom to interpret it as it wished. Based at least on the Ninth Circuit and trial court descriptions of the facts, there was little (if any) evidence (in the record, anyway) of intent to facilitate widespread copyright infringement. Aimster, however, came to the Seventh Circuit as an appeal by the software provider (Deep) against a preliminary injunction entered against him by the trial court. The Court of Appeals did not, and could not, review the record de novo; the factual record on a preliminary injunction is reviewed for abuse of discretion — a much more deferential standard. Further, unlike Grokster, the trial court's decision, and summary in the Court of Appeals decision, reflect significant evidence in the record of specific intent — or at least willful blindness — to facilitate widespread copyright infringement. Willful blindness is knowledge, in copyright law (where indeed it may be enough that the defendant should have known of the direct infringement) as it is in the law generally. One who, knowing or strongly suspecting that he is involved in shady dealings, takes steps to make sure that he does not acquire full or exact knowledge of the nature and extent of those dealings is held to have a criminal intent, because a deliberate effort to avoid guilty knowledge is all that the law requires to establish a guilty state of mind. In United States v. Diaz, the defendant, a drug trafficker, sought "to insulate himself from the actual drug transaction so that he could deny knowledge of it," which he did sometimes by absenting himself from the scene of the actual delivery and sometimes by pretending to be fussing under the hood of his car. He did not escape liability by this maneuver; no more can Deep by using encryption software to prevent himself from learning what surely he strongly suspects to be the case: that the users of his service — maybe all the users of his service — are copyright infringers. Aimster, slip op. at 11–12 (citations and parentheticals omitted). What is most important is that the law of "willful blindness" simply is not so clear in the Ninth Circuit, and that is not restricted to the context of copyright. So, if there is a conflict, perhaps it's a conflict in procedure and rules of evidence as much as it is in copyright doctrine… or, perhaps, it's just that the facts are different. The point of having a judicial system is to allow for differing factual patterns. Or, perhaps, there's a conflict in methods of statutory interpretation (like this Court is going to be able to resolve that cleanly, especially after Thursday's opinion in the diversity-jurisdiction cases). That, however, is for another time. Another Advance Note on Grokster One of the major problems with the entire Grokster debate is that it turns on some theories of copyright infringement that are not explicitly provided for in the Copyright Act. Unfortunately, the rhetoric turns on absolutism, too; but that isn't exactly a surprise by this time, is it?When most people think of "copyright infringement," they think of the actual copying — what those of us who practice in the area call "direct infringment." That, however, is not the only theory of copyright infringement upon which a case may rest, although a direct infringement by someone is a prerequisite to an indirect infringement. A second, broader type of infringement is generally (and probably misleadingly) called "contributory infringement." A contributory infringer isn't the person who does the direct infringement, but is instead the person who knowingly provides essential facilities to enable the direct infringement. At one extreme, one can imagine a photographer walking into OneHourPhoto with a roll of film, saying "I just duplicated this month's Playboy. Would you please process this roll of film optimized for further reproduction?" A vicarious infringer isn't the person who does the direct infringement, either, but is instead the person who provides essential facilities to enable the direct infringement but does not have specific knowledge of the infringement. The classic example of this is the music store that contracts its stockage to a company that includes pirated sheet music in its standard stock list, or the fleamarket/auction host that allows pirating companies to use its facilities. Note the change in rhetoric there? I think it's an important one. Direct infringement can be casual, as in walking into the library and making a photocopy of this month's issue of Wine Spectator (leaving aside that there's a special provision for library photocopiers). I don't ordinarily refer to that as "piracy." Copyright piracy, instead, involves systematic copying and redistribution. Extending the word "piracy" beyond a conscious, systematic effort involving redistribution seems a mistake to me. Another change in rhetoric that I'd prefer to see is eliminating the purported distinction between contributory and vicarious copyright infringement; instead, I prefer the term "indirect", which is less inflammatory, more accurate. and a better description of the general class of behavior without getting bogged down into questions of "fault." Copyright is, after all, a strict liability statute; importing fault into it should concern only the remedy (or perhaps highly limited defenses), not liability. However, that would require a wholesale rewriting of the law of indirect infringement by Congress, which Congress explicitly refused to do when adopting the DMCA. So, where is this going? Some commentators (like, but not only, this one in "main event #2") have erroneously claimed that the Supreme Court has never dealt with vicarious copyright infringement and/or its limits. Admittedly, it has not used the term, nor has it done so implicitly in a very coherent fashion. However, indirect copyright infringement was a necessary consideration in Feltner, Tasini, and Quality King, and forms the (shaky) foundation of the inelegantly analyzed majority opinion in Sony. Further, the doctrine has been around since the 1920s, and explicitly delineated since the 1940s.1 Grokster provides the Court an opportunity to step into this morass. In the best of all possible worlds, it will explicitly abrobate the terms "contributory" and "vicarious" and substitute "indirect", establish boundaries and a multifactored test parallel to that in § 107 for fair use, and let the lower courts apply the law to the particular circumstances. Since that's not what either side asked for, I don't see it happening; and, in any event, this is not the best of all possible worlds. I've found it most useful over the years, particularly when evaluating the strength of a case, to think of distribution channels as pawnshops (which, given the first-sale doctrine, should be an obvious analogy). Pawnshops, as a general comment, don't have that great a reputation. However, their business model is neither inherently lawful nor inherently unlawful. Instead, some pawnshops police themselves for legitimate merchandise and offer fair terms to customers; others… do not; and still others are nothing more (nor less) than fencing operations. However, the very nature of the business creates a nonzero risk that pawnshop X will have, during the course of a year, at least one piece of stolen property in its inventory. That does not mean that a pawnshop in the first class should be shut down.2 The fencing operation owned by Don Corleone is also an easy case; with no way to get rid of stolen merchandise, the incentive to steal becomes lower, etc. The middle case is the hard one — or, rather, distinguishing between the middle case and the outright fencing operation. This is where Judge Posner's comments on "willful blindness" become most relevant. Whether the record shows it or not, my belief is that the software providers and network providers in Grokster are far close to the third class of "pawnshops" than to the first class of pawnshops. However, I have not seen the evidence; I infer this from the public behavior and statements, and not a particularly comprehensive examination of them, either. In turn, this makes Grokster a civil procedure case. Again. Confused Thoughts: The Supreme Court Rules… Sort of First, a couple of general comments (copied from SCOTUSBlog with some minor expansions):
Unfortunately, Justice Souter's opinion never engages with the rhetorical problem of "what do we call something other than direct infringement?" I wish that he had; it's a shame he did not. His opinion usually uses the term "secondary infringement," although that's not parallel to "direct infringement." On the other hand, this is such a highly charged area that the argument that the Court need not decide that controversy today has some merit. It's Civil Procedure, Not Copyright (Copied from SCOTUSBlog with some fairly substantial expansions) I already jumped the gun a bit on one critical aspect of the decision, because I'm coming at it from an "impure" viewpoint. I don't think Grokster is purely a copyright matter: It's at least as much a question of civil procedure as it is of copyright — as was Ellison. We need to keep in mind that this is a decision on summary judgment, which means that the courts are not supposed to be making any credibility determinations or weighing any evidence. Although I haven't seen the actual record, my experience in Ellison leads me to believe that there is probably a lot of relevant information that is not reflected in the opinions. Nonetheless, I think that even what appears in the opinions makes summary judgment somewhat questionable: A reasonable jury could (not necessarily would) decide that the "software providers," the "network providers," or both are either vicariously or contributorily liable (or both). Of course, that just points toward the question of what "vicarious" and "contributory" copyright infringement are. I think those unfortunate (and potentially misleading) terms, but nonetheless they're what we have to work with. Apparently, Justice Stevens (for the Court) and Justice Ginsburg (for herself, Chief Justice Rehnquist, and Justice Kennedy) agreed with me. Justice Stevens said: There is substantial evidence in MGM's favor on all elements of inducement, and summary judgment in favor of Grokster and StreamCast was error. (slip op. at 24) "Substantial evidence in [a party]'s favor" is ordinarily supposed to be enough to deny summary judgment against that party, at least if the evidence relates to the legal theory at hand.3 Justice Ginsburg was even more pointed, beginning her opinion: I concur in the Court's decision, which vacates in full the judgment of the Court of Appeals for the Ninth Circuit, and write separately to clarify why I conclude that the Court of Appeals misperceived, and hence misapplied, our holding in Sony. There is here at least a "genuine issue as to [a] material fact" on the liability of Grokster or StreamCast, not only for actively inducing copyright infringement, but also or alternatively, based on the distribution of their software products, for contributory copyright infringement. On neither score was summary judgment for Grokster and StreamCast warranted. (slip op. at 25, citations omitted) But this is not the only "civil procedure" aspect of the case. Some commentators are already claiming that footnote 12 might turn out to be as notorious a source of further litigation as the evil, vengeful, badly conceived and written footnote 4 of Carolene Products. Footnote 12 of Justice Stevens's majority opinion reads: Of course, in the absence of other evidence of intent, a court would be unable to find contributory infringement liability merely based on a failure to take affirmative steps to prevent infringement, if the device otherwise was capable of substantial noninfringing uses. Such a holding would tread too close to the Sony safe harbor. (slip op. at 22) However, the two footnotes are not even close in scope. The note in Carolene Products concerns methods of statutory and constitutional interpretation, and essentially says "We don't have to lay out a method of interpretation for all time, because different pieces of legislation must be judged on their own terms (and methods of interpretation and precedent will change over time, even though we're not going to admit that here)." The note in Grokster, however, is far, far narrower: It points out that absence of one type of evidence would fail to support one particular theory of copyright infringement if all that was at issue was the technology ("progress") itself. Yes, footnote 12 is going to provide a lot of grist for law reviews and outraged statements. It is not, however, going to have a whole helluva lot to do with the behavior of various parties, or the conduct of lawsuits, or the further development of copyright law itself. By making this essentially a civil procedure case, the Court has taken it away from some of the most-emotional "innovation is the only goal worth striving for, and all means toward greater dissemination of innovations are necessarily good" assertions that some of the more-extreme IWTBF crowd4 espouses. What footnote 12 really does is make a court look at the entire context, not just individual pieces of evidence. This is disturbingly parallel to the multifactored "fair use" test in 17 U.S.C. § 107; it should surprise no one that Justice Souter wrote the last major opinion on fair use… The other "civil procedure" issue to consider is, rather, one that the Court did not: Nowhere is there an attempt to "deconflict" Aimster. It is cited once, in a throw-away fashion, in Justice Stevens's opinion for the Court; it is cited once more, in Justice Ginsburg's concurring opinion, in a footnote merely comparing Aimster with Napster; it is cited twice in Justice Breyer's concurring opinion (once at the beginning of a string citation, once as a useful contrast that is virtually thrown away). Thus, any continued assertion that certiorari was based on a "circuit split" needs to somehow face up to the lack of an apparent acknowledgement of such a split in all three opinions. All three opinions treat Aimster is if it is a somewhat related, but distinctly different, matter (both theoretically and contextually). I can't resist this note on a rhetorical irony from the reactions to the decision in Grokster. Right now, the absolutistic rhetoric — doom and gloom, no possibility of organic change or innovation — is coming from the purported advocates of change. Conversely, the rhetoric most accepting of individual circumstances and exceptions is coming from the "big bad entertainment industry." It won't last, of course. And maybe it's more amusing to me because I've had to put up with absolutists on both sides who refuse to deal with the actual rights and wishes of the actual creators of copyrighted works (after all, when's the last time that the chairman of Fox actually did anything creative, other than accounting?). Or, more likely, it's just the amusement at the grotesque reflections in the funhouse mirrors: Amusing for a moment, but back to "normal" before long. In any event, I do want to respond to one thing that certain individuals have been proclaiming. Loudly. And wrongly. "Inducement" is not new in copyright law; it has been a theory of liability in Anglo-American copyright law since not later than 1768, and using slightly different terminology was a critical underpinning to the piano-roll cases in the early 20th century. Only the vocabulary is "new," and really isn't that new at all unless all one reads is appellate decisions. "Incitement to copy" fell out of favor as the doctrines of contributory and vicarious infringement developed during the first half of the twentieth century, particularly in the line of cases leading up to Shapiro. It has always been a consideration, though; it's not an import from patent law, although some of the expression of it is. (I'm not making this comment over at SCOTUSBlog because it's out of place there.) More tomorrow; I'm bushed. Tangent: Internet Radio Discussion Internet radio is one of the cool and legal uses of audio-compression technology. We'll just sort of evade the irony of listening to a radio panel interview on Grokster as an MP3 file, won't we? In any event, for your listening pleasure — or pain, I suppose, if you're into that sort of thing — you can hear an hour-long program on Grokster at IT Conversations, hosted by Ernest Miller (of The Importance of Being) and including the lovely and talented Denise Howell (of Bag & Baggage) and the humble (snort!) C.E. Petit (of this fine blawg) as panelists. In some ways, this is a bit of a followup to our show last fall on the Ninth Circuit's decision. Unfortunately, this time around Professor Wu and the people from EFF were not available, so it's only half the panelists for twice the legal skullduggery.This is the core question for most people. The sarcastic (and always correct) answer is "the lawyers won." Of course, the real problem is that neither of the represented sides got what it asked for/wanted, and the other interested parties got only lip service. Grokster and Streamcast — I'll call them the "service providers" for simplicity from here on, as the question of providing software is largely a sideshow as the opinion was actually written — didn't get a continued liability shield. Instead, they get the dubious privilege of going back to court against a mass of evidence that the Supreme Court has already indicated convinces it of their ultimate liability. On the other hand, the RIAA, MPAA, etc. — I'll call them the "content owners" for simplicity, although that also raises a lot of other issues — didn't get much clarification or evisceration of Sony. What the content owners got instead was a way to evade Sony's reach against a distribution channel (as opposed to a technology), not a change in the rule. Professor Solum contends that The Grokster decision may have been a minor tactical victory for content providers, but it is a stupendous strategic loss. I can't agree with this characterization, although it does correctly emphasize that we can't call the content owners "big victors." Professor Solum correctly notes that the genie is out of the bottle. What that really does, though, is make Grokster not a strategic loss, but irrelevant. If the lawsuit had no chance of putting the genie back in the bottle, it can't be a strategic loss. And, in any event, I think that the result in Grokster did have some long-term strategic advantages for the content providers (if not what they were seeking): It makes commercial exploitation of P2P an at-best dicey proposition. Eventually, the "system" is going to stabilize to the point that various aspects of public trust in noncommercial sources will keep it viable (or, as the case may be, prevent it from being viable). Then, too, there will remain the whole question of "locking doors": There's no such thing as an impervious lock. Locks work best against the casual thief and small-time criminal; perhaps they slow down the determined crook. They do their work by attacking convenience more than anything else. And, in turn, this shows why the facial win in the Grokster matter is not a "strategic loss" for the content owners: It is ultimately irrelevant to whether they continue to suffer damage from P2P networks.5 It does, however, provide the cold comfort of knowing that it's going to be hard for someone else to profit from that damage. In the long run, two major nonparties are the "strategic victors" in Grokster. On the one hand, the "garage-mechanic-for-the-love-of-it" technologist can breathe a huge sigh of relief. As long as it remains a hobby, that is. Given that so many advances in both film/music and information technology have come from "outside" of the Big Industry components, this is a good thing. On the other hand, the holes left in the decision for bands like Wilco to continue to choose to provide content for no charge are good both for those bands and for the public at large. Since those channels are now (in practice) essentially unassailable, as long as unprofitable, the "free downloads as marketing" theory has pretty substantial permission to move forward.6 The ultimate strategic losers are, as usual, the actual content creators. You can bet that the content owners are going to start contractually taking away the right/ability of content creators to engage in these self-promotion efforts. You'll see contracts that require that all "free distribution" be done by the content owners only; that content creators must provide only content that has never appeared in a "free distribution" channel, upon pain of lawsuit; and worse provisions. (I don't want to give anybody any ideas, although I'm sure their lawyers are evil enough to come up with them all by themselves.) But then, this was going to happen regardless of the result in Grokster; so, again, perhaps it's improper to characterize it as a "strategic loss." Preliminary Conclusion: Everything Old Is New Again(?) Where does Grokster point us? Not in the direction that either of the posturing sides would have us believe. What Grokster does is revive an 18th-century way of looking at indirect copyright infringement.7 That is all too appropriate, as neither side seems to be looking at the two halves of the 18th-century Constitutional foundation of copyright: The Intellectual Property Clause. Although I've quoted it repeatedly in this blawg over the last couple of years, it bears quoting again: Congress shall have the power… To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries[.] U.S. Const. Art. I, § 8, cl. 8. We've got two critical concepts here: promoting "Progress", and "exclusive Right" "for limited Times." This, in turn, leads to a few observations (lettered for later reference):
In one sense, we're going back to the future; or, more aptly, must realize that everything old is new again.
The Grokster case reminds me very much of a remark that Professor Wayne LaFave made during the first session of Criminal Procedure (which, in turn, was my very first class in law school — and probably the most difficult final exam): roughly that almost all of the cases we'd be covering — search and seizure, self-incrimination, right to counsel — involved substantively guilty defendants. The Gideons of this world — the substantively innocent (at the appropriate standard of proof) defendants — are extremely rare. At least based on the various courts' descriptions of the evidence in the record, that is precisely what we have here: both Grokster and Streamcast (or, rather, the business entities hiding behind those labels and their respective principals) are in any objective sense guilty of purposefully facilitating widespread piracy of copyrighted materials to which they have no right or license. This, in turn, calls into question the litigation strategy of putting forth these particular defendants as paragons of the way the technology advocates want the technology portion of the law to develop. Frankly, they got what they deserved: A decision that didn't grapple with what they wanted it to, but instead fell back upon tried-and-true theories of unjust enrichment and interference with contractual advantage. "Unjust enrichment"? Where did that sneak in? It's not anywhere in any of the opinions! So why are we considering first-year contract law? Well, the most rigorous answer is "we're not: we're considering the relationship of potential remedy to liability, and that relationship is behind virtually all of the common law." For, in the end, that is what the evidence in Grokster points toward: Use of copyright law to prevent unjust enrichment achieved through violation of an exclusive right. Absent the economic factor, it's a lot harder (not impossible, merely harder) to say that mere technology violates a conception of copyright that reads the Intellectual Property Clause as a whole. Response to Other Commentators There is no way I can possibly respond to every commentator who has weighed in on the Grokster decision. However, a couple of comments do call for some direct response. Over at the Becker-Posner blawg, Judge Posner and Professor Becker make some strictly economic arguments in favor of sending the Grokster matter back for trial. (Remember that Judge Posner wrote the opinion in Aimster, although he was bound by factual determinations made by the trial court in its grant of a preliminary injunction.) Judge Posner notes: But again, the mere possibility that infringement may confer benefits on copyright owners can't suffice to defeat a suit for contributory infringement any more than it could defeat a suit for direct infringement, as it is always possible to conjure up such possibilities. If the Grokster case is tried, the trial will provide an opportunity to compare the revenue loss to the copyright owners against the possible gains that I have listed. Unfortunately, subjecting providers of file-sharing software to the threat of trial places them at substantial risk, which may drive many of them from the market. His real conclusion is that "any diminished innovation due to contributory-infringement liability must be traded off against the enhanced innovation that can be expected if intellectual-property rights are strongly protected by the law." Similarly, Professor Becker notes: I do believe the case deserves a trial, and primarily for this reason I signed (without any compensation) an Amici Curiae brief submitted by several economists to the Supreme Court against Grokster. The arguments about infringement are set out in that brief and in Posner's discussion. This software has few other uses so far other than to copy files from one computer to another, which often is a violation of copyright protection on the files copied. Although Grokster is not per se violating any copyright by producing this software, its software unquestionably facilitates these violations. It is also much more efficient to litigate against the contributory infringement of Grokster than to litigate against every college student and other individuals who are actually engaged in transferring files illegally. On the other hand, Professor Becker also expresses skepticism that judges are the right people to determine the economic balance; he would rather strictly use markets. Although I certainly think that economic analysis is a critical element of any realistic appraisal of intellectual property, I think Professor Becker goes a bit too far in his advocacy of markets as a check on contributory infringement. P2P technology is a classic instance of a market failure: the cost and value of an original is vastly greater than that of an indistinguishable copy, and the convenience of making that copy via a P2P network is far greater than going to the local music store, waiting in line, then paying sales tax on top of one's purchase. (Not to mention the cost of gas these days… whining that "it's more expensive in Europe" will be met with comparisons of public transportation, so there.) Ironically, it is only when the volume of such copies is small that the market has any real balancing effect — because the direct infringers who are enabled by the contributory infringers have explicitly opted out of the market established by the Intellectual Property Clause. In other words, it is a secondary market when the enabling provision explicitly provides for a restricted market ("exclusive Right"). Mr von Lohman's inadequately researched opinion piece comes from a perspective for which I have some sympathy: those who wish to open the Internet as a communications medium for as many uses as possible. However, the article builds its little castle on sand — and not very well-packed sand at that. As previously noted the day after the opinion issued on this blawg, encouragement of others to infringe is not "a new doctrine for copyright." The Second Circuit explicitly included "inducement" within the scope of contributory infringement over thirty years ago (Gershwin Publ. Corp. v. Columbia Artists Mgmt., 443 F.2d 1159, 1162 (2d Cir. 1971)), and the discussion in the seminal case on vicarious infringement (Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304 (2d Cir. 1963)) did much the same even earlier. Justice Day considered the problem of inducing others to infringe — admittedly in different and inelegant language — in the piano roll case (White-Smith Music Publ. Co. v. Apollo Co., 209 U.S. 1, 7 (1908) ("The primary use and adaptation of the thing determines its copyrightability or infringement of copyright. Intention as to use is material and may be controlling.") (argument of appellee as cited in syllabus, consistent with brief)). And "incitement" to induce goes back to the 18th century, in cases concerning the measure of damages against a plagiarist (and the derivative liability of the printer who printed the plagiarist's "work"). Calling "inducement" a "new" theory of liability is historically inaccurate. It is also logically unsound; the "right and ability to control" prong of vicarious liability clearly could be satisfied through inducing others to act. This is even within the ordinary dictionary definition of "vicarious", see Merriam-Webster Collegiate Dictionary (10th ed.) (def. 2). Then, too, there's the irony that in support of "progress" an advocate for high tech and "progress" via the Internet would be attacking "progress" in copyright doctrine if the assertion that this is a "new" doctrine is correct. This is another logical problem with the whole argument. The argument presumes that all progress in technology and its applications is necessarily good, but would refuse that judgment to progress in law. Cf. Edison v. Lubin, 122 F. 240, 242 (3rd Cir. 1903) (motion pictures can be copyrighted, although the then-effective copyright statute explicitly stated only "photographs"). The bulk of the screed, however, concerns opposition to statutory damages in copyright actions. Mr von Lohman says: Why is legal uncertainty in this context particularly chilling to innovators? First, and most important, is copyright's statutory damages regime. Unlike nearly every other area of law, copyright allows plaintiffs to skip proving actual damages and instead collect statutory damages, which a court may set between $750 and $30,000 per work infringed. So when secondary copyright claims are made against mass market products like the iPod, CD burners or file-sharing software, all of which are regularly used by customers to make copies of millions of works, statutory damages become a corporate death penalty. Insurance is unavailable for risks of this size and a claim against one product can sink an entire company. In contrast, patent law has no similar provision, nor do most other countries around the world. (emphasis in original) Ah, now we see the objective. The real problem isn't with the doctrine of liability, but with what can be done to remedy it.10 The contrast with patent law, however, is rather troubling — because it does not consider one aspect of patent damages that is not part of copyright law: implied license fees. Copyright "actual damages" seldom consider what a "reasonable license" would have cost, and virtually never establish an ongoing license rate for further use. Then, too, one is left with the troubling question of what statutory damages are intended to do. They are not just a means of compensation — but of deterrence. That is true for all varieties of statutory damages, both inside intellectual property and elsewhere. See, e.g., US v. Ursery, 518 U.S. 267, 292 (1996) (Kennedy, J., concurring) ("we long have held that this purpose [deterrence] may serve civil as well as criminal goals"); Tull v. US, 481 U.S. 412, 422–25 (1987) (Clean Water Act). In other words, statutory damages are justified precisely because they might "sink an entire company." A deterrent purpose for statutory damages is unusually well aligned with the means/ends dichotomy enshrined in the Intellectual Property Clause itself. Unlike virtually all of Congress's other powers, the Founders believed it necessary to state not just the power itself, but its rationale.11 The Commerce Clause does not require Congress to have any particular rationale in "regulat[ing] Commerce with foreign Nations, and among the several States, and with the Indian Tribes;" any rationale at all will do, so long as it is consistent with the grant of power — which is unrestricted. However, the IP Clause provides a rather extraordinary right — an exclusive right. A monopoly. Given that the damages caused by an improper monopoly are at best speculative — we can try to infer what the price for a given article might have been but for the monopolization, but it's never better than an argument among purported experts — the converse case (determining damages to the rightholder for violation of a proper monopoly) is equally compelling.12 Then, too, there's the question of "excessiveness" of statutory damages. The critical language that Mr von Lohman's piece fails to acknowledge is "up to." When justified by the evidence, the judge may choose to impose huge statutory damages — but is not obligated to do so. The judge has considerable discretion to tailor the damages to the facts, even within the realm of statutory damages.13 Mr von Lohman's article emphasizes the twice-struck-by-lightning extreme case and uses it as justification to eliminate that variety (not level) of remedy for all cases. This is disingenuous, to say the least; and that is aside from the poor logic underlying it. Avoiding reductio ad absurdem is supposed to be part of basic logic, and surely there is enough time spent in law school on the value of "slippery slope" arguments (or, usually, absence of it). Unfortunately, I've come to expect this kind of reasoning from EFF on copyright issues. The organization and its spokespeople would do well to remember that the Internet is not the only source of "Progress of Science and useful Arts."
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Law
and reality in publishing (seldom the same thing!) from the author's
side of the slush pile, with occasional forays into military affairs,
censorship and the First Amendment, legal theory, and anything else
that strikes me as interesting. Ritual disclaimer: This blog contains legal commentary, but it is only general commentary. It does not constitute legal advice for your situation. It does not create an attorney-client relationship or any other expectation of confidentiality, nor is it an offer of representation. All material © 2003–11 except where otherwise indicated. All rights reserved. N.B. This blawg does not use the Creative Commons License, although I'm usually pretty good-natured about permissions for attributed reuse. Warped Weft Essays in Warped Weft are consolidated from Scrivener's Error with only formatting corrections (and the occasional typographical correction). |
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