Metro Goldwyn Mayer Studios v. Grokster, Ltd. 545 U.S. 913 (2005) (Cyber Law Series)

A PDF file should load here. If you do not see its contents the file may be temporarily unavailable at the journal website or you do not have a PDF plug-in installed and enabled in your browser. This is a preview of a remote PDF: Grokster Battle Inducement and Grokster: Alternatively, you can download the file locally and open with any standalone PDF reader: Secondary Liability Perspectives Robert I.

Reis Please take a moment to share how this work helps you through this survey. Your feedback will be important as we plan further development of our repository. Follow this and additional works at: Traditional remedies against individual infringers served their purpose of compensation and deterrence. These forms of action have been weakened where the jurisdictional, monetary and administrative underpinnings of legal administration are compromised. This complex of factors is further exacerbated by the clash between conflicting ends of protecting intellectual property rights while at the same time ensuring appropriate public beneficial use.

Most enabling technologies have the potential for fundamental public benefit. The very power of these technologies facilitates unlawful activity. The traditional function of law has been to compensate those who have been injured by imposing liability on the wrongdoer who, by intention or through a failure of duty or negligence, occasions the harm. The unprecedented growth in value of intellectual property rights have shifted the primary focus of "promot[ing] the progress of science and [the] useful arts" to the protection of exclusive rights for limited times as an end unto themselves.

Secondary liability, however, is compromised where it is used to reduce the level of care required of the right holder, or permits the right holder to externalize costs and risks of doing business.

Recent secondary liability cases have raised questions as to whether the judicial process is being used as a means of enhancing market returns otherwise unjustifiable. It diverted utilization and development of common law tort doctrine and obscured the need for transparent means of technology readiness, utility and risk assessment in the determination of present and potential uses of technology.

Recent cases have not bound themselves to the limitations of this doctrine and have adopted transparent rules regarding intentional behavior and reasonable standards of care recognizing the obligation of the right holder to remain vigilant as well the technology provider to minimize infringement and maximize the public good. The issue was framed by the fact that the very technology that threatened control over the content right provided an enhancement of beneficial access and use consistent with the purpose of intellectual property.

Despite these advances and attempts to revisit the premises and function of intellectual property, 13 a number of issues in the balance between private rights and public interests in emerging technologies remain unresolved. Sony left us with doctrine and dicta that obscured the need for rigorous methods of evaluation and assessment of new technologies that ensure reasonable standards and transparency.

This paper once started with a focus on "fear" of losing intellectual property values based on the postulation that intellectual property played a role in recovery of the nation from the 20th Century depression. Whether this is correct or not, "fear of the unknown" does play a role in policy and decision making.

It is difficult for those whose lives began well after the Depression to realize the lasting anguish and the hope for a better future. It was once said in this context that "the only thing we have to fear is fear itself. The full quotation was: The United States had been reduced to a nation whose industrial production diminished to approximately ten percent of the world's industrial output.

It was a time of reduced liquidity, reduced credit, and limited capital growth. The investment cost of a revitalized industrial infrastructure was prohibitive. FDR's vision was that the most significant asset of the American people was ingenuity, creativity, and resourcefulness. FDR's plan simply focused on maximizing the potential of growth and value of intellectual property rights.

The plan required relatively minimal capital investment to achieve the goals of employment and opportunity in the revitalization of the nation's economic recovery. Universal City Studios, Inc. That balance must be tempered by restraint when evaluating technologies that enhance public beneficial use and diminish the protective measures necessary for intellectual property rights.

There are subtle distinctions applicable to direct and secondary liability, and differences within secondary liability constructs of actual or vicarious based on behavior, coupled with intent and inferences of intent to be presumed from third party use of technology. The issues before the courts in the 2 1st century present even further changing perspectives and mature paradigms.

The changes have been incremental, yet fundamental, and through their constant reference to 18 Sony, are best understood in that context. Nagging, and likely of little relevance, is the question why, when there was a finding of non-infringement, the court continued their analysis of secondary liability, particularly since when almost every decision says there can be no secondary liability without infringement.

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Sony understood the value of the underlying technology of video recording devices. They used their experience to transfer the technology of their professional recorders to serve as consumer recording devices. They include market and manufacturing readiness assessments and consider risk assessment involving potential legal issues, including infringement.

Whether Sony assessed these issues systematically, or not, it is clear that Sony understood copyright rules and the potential liability users of the Betamax might have if they record protected materials. This was evidenced by both their behavior and the included warning to this effect in their advertising and user manual.

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Litman, supra note 19, at UniversalCity Studios, F. On page 17 of the instruction booklet, the following language appears: Unauthorized recording of such material may be contrary to the provisions of the United States copyright laws. The public perspective applied to intellectual property rights cases focuses on the public benefit from copyright and the quid pro quo of privatization. The wisdom of balance is required to keep both property rights and public benefit in proper perspective.

The issues are not only between the parties, but the beneficiary without standing before the court. Defendants contend that home copying for home use is not an infringement and, even if it were, defendants could not be held responsible under any theory of infringement or vicarious liability. The resolution of these issues first requires a determination of whether Congress gave authors monopoly power over this use and, if so, whether the corporate defendants are in any way liable.

As will be discussed, these determinations are not easily made. Protection of the public interest requires balancing the need for wide availability of audiovisual works against the need for monetary reward to authors to assure production of these works. Does secondary liability play a role in this since the impact on the market can be altered by the business model selection of the content right holder. In the Sony case could this have been restructured in their charges to the broadcaster to take into account loses, if any, that would have been occasioned by copying.

See an early article presenting this thought in the context of News Broadcasts. This may raise a question of market failure as the market seems to work through compensation for the initial broadcast. Compare to other licensing arrangements and the new DRM issues with iTunes. Apple's new business model takes into account the potential for file sharing and prices their product accordingly for DRM-protected and files with DRM removed. They also price new and older releases on a sliding scale. In addition to Sony, Universal sued one individual and several retail establishments that sold and demonstrated the Betamax.

See also Perfect 10, Inc. See Napster, F. Plaintiffs have waived any claim for damages or costs against Griffiths for his activities alleged in the complaint. Plaintiffs never expected Griffiths to be represented by counsel and he has not been. Instead, they sought money damages and an equitable accounting of profits from petitioners, as well as an injunction against the manufacture and marketing of Betamax VTR's.

Or, why would they object if they were compensated for broadcast rights by the television stations? In current contexts, this question may be applied to a resolution of the respective duties of the content holder and those sought to be held secondarily liable in balancing the respective duties of the parties. In either instance, why is this pursued as an infringement issue rather than a failure of the right holder resulting in a market malfunction based on incorrectly setting broadcast pricing with the station?

If the content right holder correctly prices the broadcast license, it would account for copying undertaken for personal use. If so, is this really a "fair use" or "permitted use" issue, or an issue affecting the duty of the right holder under secondary liability constructs, or does it matter? The legal system acts in diverse ways to increase the probability that these and other conditions for perfect competition will be present.

When the market does not work perfectly, a decision will often have to be made on whether market transactions or collective fiat is most likely to bring us closer to the.. Is this out of context with the tradition of the Court not to engage in rule making beyond the case before it? Is this indicative of the reconciliation of differences among the Justices with all sides receiving something to peg their positions on? Why did the court continue with what appears to be a Staple Articles of Commerce commentary and note that: Sony's sale of such equipment to the general public does not constitute contributory infringement of respondent's copyrights?

The Many Faces of Secondary Liability Secondary liability has been subdivided to include both contributory liability and vicarious liability. First, liability is premised on intentional behavior inducing and facilitating infringement. Intentional Inducement The Sony Court noted a series of factors indicating what they believed would constitute intentional behavior, such as the business model, advertising, and refusal to utilize protections against infringement, performing, or enabling essential elements in the link to infringement.

As a separate basis of its decision, the District Court also indicated that Sony was not liable as a contributory infringer even if they found that the use of the Betamax constituted an infringing use, thus establishing the proposition that mere use of the technology would not render Sony liable without direct involvement or inducement of the infringement. Active Inducement As Justice Stevens noted at the outset of the majority opinion: The Copyright Act does not expressly render anyone liable for infringement committed by another. In contrast, the Patent Act expressly brands anyone who 'actively induces infringement of a patent' as an infringer, 35 U.

The absence of such express language in the copyright statute does not preclude the imposition of liability for copyright infringements on certain parties who have not themselves engaged in the infringing activity. For vicarious liability is imposed in virtually all areas of the law, and the concept of contributory infringement is merely a species of the broader It is interesting to see good faith cited as an express factor. See generally, Perfect 10, Inc. See Sony, U. Section c addresses the use of: In fact, Google argued in Perfect 10 v. Google, that its search engine was a Staple Article of Commerce, despite the implications of search use as a means to identify the location of infringing full size images.

The examples used in Sony are as follows: If these were applied by the court to copyright, the result as thus inapposite, would be imperfect when it comes to treating the technology or enabling product itself as constituting the element in "Staple Articles of Commerce. What is a Staple Article ofCommerce?

Objective Standards and Technology Assessment There are few standards set forth for determination of what constitutes a Staple Article of Commerce. What constitutes non-infringing use? Is there a qualitative evaluation or a quantitative measure? What time frame is necessary for the measurement of function? And, can the determination change over time depending on the uses being made when reviewed? These are but a few of the questions left open.

Technology transfer assessments measure user demand, as well as market, manufacturing, and risk assessments. This may explain in part why Justice Blackmun verbalized the need for inferences from the ordinary consequences of one's actions under general tort law. See generally supranote See generally, Phyllis L. This creates fears of uncertain futures for innovators of new technologies. Consider the P2P cases and think of what might have happened to Google, the search engine, and eBay if the more recent cases were brought before the relevant technologies matured and the use was heavily imbued with the public interest.

See Fred von Lohmann, Remedying Grokster, http: Don't you hate it when you ask someone a question and, rather than answering it, they choose to answer a different one? Then you understand the frustration that technology lawyers feel in the wake of the Supreme Court's opinion in Metro-Goldwyn-Mayer,Inc.

The question asked by the parties and dozens of amici was direct and critically important: Asked to clarify the reach of copyright law's existing secondary liability doctrines, however, the Court instead announced a new doctrine for copyright: The Court's ruling leaves technology companies and their attorneys to pick their way through a dangerous minefield of legal uncertainties. The trouble is not principally with the new doctrine of inducement announced by the Court: In other words, it's not so much what the Court said, as what it didn't say, that ought to worry innovators and their attorneys.

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The potential negative inference based on actual infringing usage still casts a large shadow over technology development. The lack of transparency has not helped ameliorate the problem. The resolution of inference-based issues of this nature requires a commitment to fact finding proceedings in the court based on mature technology analysis.

These should be conducted with due respect for limitations that inhere in the adversarial process. Recent cases in addressing technologies essential to the information structures of intellectual and commercial function reflect the benefit of maturing paradigms of assessment in weighting private and public values of technology and allocating duties and risks of management and loss to effectuate balanced and sustainable public policies.

Napster and Aimster built their distribution model on a direct pipeline of peer to peer P2P file ] sharing involving a central server they operated and controlled. Grokster used adaptive technology that removed the central server from the process. The traditional way of finding a file or other information on the web you go to a search engine - type in the criteria and click search.

Your computer sends off that information to the search engine. The search engine has a huge data base of web pages.

The server then sends the search results back to your computer telling it which sites on the internet have the data you are searching for. The server with the index plays an integral or central role in the process. In contrast, when you use the search capabilities of a P2P network when you enter the criteria, the computer asks ten other computers if they have it, these ten then ask ten more computers, and each of these continue to ask ten more computers each if they have it, and so on.

If any given computer has the file it sends back a yes answer. You then download the file directly from the computer that has indicated it has the file. No server is involved or comes between the users and the network. Since one peer directly accesses the data from the other peer, this is called peer to peer - or P2P. This is the Grokster model removing Grokster from dir5e6ct control represented by server content and access.

That which we call a rose by any other name would smell as sweet. Likewise "if it walks like a duck and looks like a duck then it must be a duck. See Posting of Video to http: Despite references to Sony as protecting future development, Grokster leaves the burden of proof of non-infringing uses on the manufacturer or developer and neither provides a vehicle to take into account or inform of future uses by characterizing much of the amicus claim of non-infringing use as anecdotal. An Exercise in ComprehensiveLitigation After remand to the district court for retrial, there was an anxious time waiting to see whether there would be any defendants left to go to trial to further understand the ruling of the court.

The settlement covered Grokster Ltd. Rung, and Michael Rung as defendants. See Grokster, F. Post-Grokster cases have dealt with enabling technologies that have matured to serve clear public functions. They introduce issues of liability by reflecting on the broader purpose and usage of technologies that have both infringing and noninfringing applications. They also have had to deal with issues of attempts to maximize returns by resorting to litigation for infringement as compensatory and enriching by statutory damages using injunctive remedies or threats of injunc7t2ion to secure settlement or licensing fees in excess of fair market value.

See Perfect 10 v. Visa Int'l Service Ass'n, F. See generally Gordon, supra note 45, at ; eBay, U. Google Amazon Perfect 10 brought a series of actions against multiple parties for infringement of their copyrights. How would this have been weighted against an unknown future? The plaintiff, Perfect 10 ". See Perfect 10, Inc. Judge Matz structures the comparison by introducing the case with this "flavor: Instead of communicating a copy of the image, Google provides HTML instructions that direct a user's browser to a website publisher's computer that stores the full-size photographic image.

Providing these HTML instructions is not equivalent to showing a copy. First, the HTML instructions are lines of text, not a photographic image. Second, HTML instructions do not themselves cause infringing images to appear on the user's computer screen. The HTML merely gives the address of the image to the user's browser. The browser then interacts with the computer that stores the infringing image. It is this interaction that causes 20an1 infringing image to appear on the user's computer screen. There are innumerable instances in law where the distinction between "form and substance" is important.

The question this analysis raises is why in this case form prevails over what may otherwise constitute substance? The substance of the right to display lies in the viewing of the image, which this technology in fact accomplishes. Should it make any difference in a determination of whether a display right is infringed where the image is located? The substance of the right is control over display, which is, in fact, what the HTML instructions accomplish regardless of whether the image is on the Google server or a third party infringer server. These distinctions raise questions regarding implications that may bear on further analysis of secondary liability issues.

The court's analysis of secondary liability issues continues in this awareness of the "dazzling" function of Google's search engine.

The Sony Legacy: Secondary Liability Perspectives

While they have knowledge that their search engine will include infringing images among the millions of noninfringing images, they will have no details of the specifics of which images are copyrighted and which images are infringements. Perfect 10, F. What obligation does Google have to identify images which are copyrighted and improperly posted on the internet? We can assume it is not strict liability since that would be devastating to the function of the internet and search engine technologies.

It is also one thing to premise liability on wrongful intent and actions, but this is distinctly based on the failure to act to protect another's lawful interests and sounds as a duty, an obligation not to harm, much the same as negligence in tort law. It poses an intellectual property "slip and fall," awareness of the potential for slippery conditions versus actual knowledge of a specific condition in need of attention.

Filters have become somewhat common with some file structures to prevent infringement, but in the context of digital imaging it becomes particularly problematic and burdensome. The filter must have specific images claimed to be copyrighted and the capacity to store them on a server in order to make a match. The case is frequently characterized as a re-examination of the issues in Sony Corp. MGM wants makers of file sharing technology held liable for their users' copyright infringements. In Sony, the court held that technology could not be barred if it was "capable of substantial noninfringing uses.

Grokster came before the Supreme Court having already won in two previous courts. Computer and Internet technology companies such as Intel , and trade associations including firms such as Yahoo! Napster filed a brief in support of the petitioner copyright holders. During oral argument , the Supreme Court justices appeared divided between the need to protect new technologies and the need to provide remedies against copyright infringement. Justice Antonin Scalia expressed concern that inventors would be chilled from entering the market by the threat of immediate lawsuits.

Justice David Souter questioned how the interpretation of the law the plaintiffs argued for would affect devices like copy machines or the iPod. The music industry suggested that iPods have a substantial and legitimate commercial use in contrast to Grokster, to which Souter replied, "I know perfectly well that I can buy a CD and put it on my iPod. But I also know if I can get music without buying it, I'm going to do so. Grokster argued that affirming the Ninth Circuit would only prevent an injunction against future use of the P2P software, while the plaintiffs would still be free to pursue damages in the district court for alleged past wrongful acts.

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Much of the Court, however, expressed skepticism that Grokster's continuing enterprise could be severable from the consequences of those prior acts. The opinion was authored by Justice Souter , who wrote:. We hold 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, is liable for the resulting acts of infringement by third parties.

While the Court unanimously concurred that Grokster could be liable for inducing copyright infringement, there was considerable disagreement over whether the case is substantially different from the Sony case, and whether the precedent established by Sony should be modified.

On the one hand, Justice Ginsburg, joined by Kennedy and Rehnquist, claim that "[t]his case differs markedly from Sony" as there was insufficient evidence of uses which were non-infringing. On the other hand, Justice Breyer, joined by Stevens and O'Connor, claims "a strong demonstrated need for modifying Sony or for interpreting Sony's standard more strictly has not yet been shown," primarily because "the nature of Roughly speaking, the Ginsburg concurrence suggests that Grokster would be liable unprotected by Sony even absent evidence of inducement.

The Breyer concurrence, on the other hand, suggests that Grokster would be protected by Sony without evidence of inducement. The Souter opinion does not address whether or not Sony protects Grokster. Thus, neither the view that Grokster is protected nor the view that Grokster is unprotected by Sony commanded a plurality of the Court.

MGM Studios, Inc. v. Grokster, Ltd. - Wikipedia

The majority of the Justices would have either expanded or contracted the Sony Betamax doctrine ; however, the Court as a whole has not chosen to reexamine the Betamax precedent in the decision, being split into three equal groups. Thus the Betamax ruling was reviewed only as necessary to properly detail the issues involved in this case. Instead, a new and—as several critics have contended—ambiguous test has been developed to determine whether the software in question is not protected by the Sony ruling.

For example, MGM et al. In Footnote 12, however, Justice Souter notes that. Such a holding would tread too close to the Sony safe harbor. The decision has been hailed by several SCOTUS correspondents as striking a fair balance between the need to respect the copyrights of artists, and the benefits of allowing and promoting technological innovation. Indeed, the decision does seem to leave sufficient leeway for developers in creating new products, as it establishes guidelines to compliance with existing copyright law, and holds liable the distributors rather than developers for copyright infringement.

Conversely, others have criticized the new test for its apparent vagueness, contending that it permits financially powerful organizations such as the RIAA and MPAA to effectively hinder development of new technology by active pursuit of litigation against the developers and distributors.

On November 7, Grokster announced that it would no longer offer its peer-to-peer file sharing service. The notice on their website said, "The United States Supreme Court unanimously confirmed that using this service to trade copyrighted material is illegal. Copying copyrighted motion picture and music files using unauthorized peer-to-peer services is illegal and is prosecuted by copyright owners.