“Grokster” Case Follow Up:

January 1, 2006

BY:

Richard A. Beyman

Supreme Court Issues Grokster Decision

(Originally published in Franklin, Weinrib, Rudell & Vassallo’s Newsletter, The Report, Winter 2005-2006)

In our last newsletter, the article “Peer to Peer Distribution: Grokster and the Balance of Interests” discussed the issues of secondary liability for copyright infringement before the United States Supreme Court in the case of Metro Goldwyn Mayer et al. v. Grokster, Ltd. Since then, the Supreme Court has issued its ruling, holding that where a party 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, the distributor may be held liable for the third party’s illegal acts.

Grokster involved peer to peer file sharing and was the latest high profile litigation brought by copyright holders to stanch the flow of unlicensed copyrighted files on the Internet. The defendants relied heavily on the doctrine established in the Sony Betamax case (Sony v. Universal City Studios, 464 U.S. 417 (1984)) that where a device (e.g., video tape recorders) has both infringing and substantial non-infringing uses, distributors should not be held liable for the infringement of third parties unless they had some level of knowledge concerning the infringement. The Grokster software was decentralized; no central index of users or available files was maintained. As such, it was different than the software in the Napster and other cases which preceded it, where the distributors had central indexing and therefore knowledge of actual infringement. The Grokster software distributors argued that as a result of their software architecture, they had no specific knowledge of third party infringement and should not be liable for it. Moreover, the Grokster software had non-infringing capability (e.g., for sharing public domain works).

The Supreme Court held that nothing in the Sony decision requires courts to ignore evidence of an intent to promote infringement, which was not present in Sony. In Grokster, the Court was confronted with overwhelming evidence that defendants had knowingly and intentionally engineered and distributed the software without any monitoring, specifically to avoid having knowledge. The evidence also established that they had promoted infringement by consumers as a means of inducing use of their software and thereby building their business. Under these facts, the Sony decision was distinguished and the defendants could be held accountable.

While the decision arguably gives copyright holders a new weapon against rogue file sharing on the Internet, it clearly will not end the tension between innovators and copyright owners. The Court did not go as far as to make software distributors responsible for monitoring each available file; nor did it accept the mere existence of non-infringing uses as a safe harbor against liability in every situation. The search for a suitable balance between these conflicting interests will continue.