Personal Jurisdiction Online
On April 25, 2003, in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Judge Wilson of the United States District Court for the Central District of California granted Grokster's motion for summary judgment for non-infringement of copyright. By granting summary judgment, the judge held that there were no facts in dispute, no need to proceed to a trial, and that as a matter of law, Grokster did not infringe.
The court reached this decision despite the fact that thousands if not millions of people were using Grokster, and similar programs Kaaza and Morpheus, to locate and download copies of copyrighted songs without authorization. The end users were infringing copyright. Why then was Grokster, as the party that distributed the software that enabled the infringement, not liable for contributory infringement when Napster was?
The Napster Case and Contributory Infringement
In 2001, in A & M Records v. Napster, the Court of Appeals for the Ninth Circuit affirmed the lower court's holding that Napster was liable for contributory infringement of the copyrights of thousands of musical compositions and sound recordings. As a preliminary matter, the court agreed that the end users -- the uploaders and downloaders -- did not engage in "fair use" and themselves infringed.
In determining whether Napster the company committed copyright infringement, the court concentrated on the degree of participation and knowledge. The court found that Napster "facilitated transmission and retention of digital audio files by its users" and "had actual knowledge that specific infringing material was available using its system, that it could block access to system by suppliers of infringing material, that it failed to remove infringing material, and that service materially contributed to infringing activity by providing site and facilities for direct infringement." In short, the uploading and downloading that violated the rights of reproduction and distribution were done through and with the knowledge and participation of the Napster service. That is a classic example of contributory infringement. (For a more detailed discussion of the Napster case, see "Questions & Answers About the Napster Case.")
The Grokster case was also was really a case of contributory infringement. Grokster itself was not violating any of the exclusive rights of the copyright holder, such as the right to reproduce, the right to perform, the right to distribute, etc. Any violation of the exclusive rights was done by the end-users who uploaded, downloaded and traded files. The real issue before the court was whether Grokster the company participated with sufficient knowledge in the infringement, and whether the Grokster software was, as the Supreme Court stated in the famous 1984 Betamax case, Sony Corp. v Universal City Studios, "capable of substantial noninfringing uses."
If an item is used at times to facilitate or enable a party to commit copyright infringement, but is also "capable of substantial noninfringing uses," the manufacturer and distributor of that item will not be found to be a contributory infringer. For example, photocopy machines are used to reproduce copyrighted material with and without authorization. If some of the uses infringe, but many of the uses do not, it would not be proper to enjoin the sale of the photocopiers completely. Such an injunction would deprive the public of the benefits of a useful invention.
However, the parties who use photocopiers for infringing purposes can themselves be liable, as was illustrated in the 1991 case Basic Books v. Kinko's Graphics, and the 1996 case Princeton University Press v. Michigan Document Services. In both of those cases, the commercial copyshops that made unauthorized course-packets were found to infringe.
The same "capable of noninfringing uses" argument could be advanced about computers; some uses infringe and some do not. It would be absurd to find Dell, Compaq or Apple liable for contributory infringement because many computers are used in the uploading and downloading of music files without authorization. To take the analysis to its extreme, the same could be said about the telephone companies, cable companies or satellite companies. Many of the illegal uploads and downloads of music files are done via their services. It would be utterly ridiculous to shut down the telephone companies, cable companies and satellite companies because some people use the lines and satellites for infringing purposes.
According to the Court of Appeals for the Ninth Circuit (the court that decided the Napster case and the court whose precedent is binding in the Grokster case), the standard for a defendant to be found liable for contributory infringement is as follows: (1) knowledge of and (2) material contribution to the direct infringement. As was held by the Ninth Circuit in the Napster case, there must be "evidence of knowledge of specific acts of infringement" to be liable for contributory infringement. It is not sufficient to know that users might at some time be using your software for infringing purposes. As the court said in Napster, "[A] computer system operator cannot be liable for contributory infringement merely because the structure of the system allows for the exchange of copyrighted material."
Differences Between Grokster and Napster
The lawyers for the defendants in the Grokster case produced a much better record for non-infringement than Napster's lawyers did. Evidence was produced that the Morpheus software "is regularly used to facilitate and search for public domain materials, government documents, media content for which distribution is authorized, media content as to which the rights owners do not object to distribution, and computer software for which distribution is permitted." In other words, in accord with the Supreme Court's Sony decision, not only was the software "capable of substantial noninfringing uses," it, indeed, was being used for non-infringing purposes.
In addition, a defendant's participation must be substantial for it to be found liable for contributory infringement. In Napster, court found that Napster was a participant, and was contributorily liable because of the participation. Napster provided the system through which the infringement was accomplished. Napster knew that its users were using the system to upload and download copyrighted music files without authorization. Napster was also given notice by the record companies of which titles were being infringed.
While there certainly was unauthorized uploading and downloading of music files with Grokster, Morpheus and Kaaza, it is much more difficult to keep track of the specific infringements as required by the Ninth Circuit. In addition, as shown by the defendants, there are legitimate uses of file-locating and file-transfer software.
Where Do We Go From Here?
Because of the myriad of uses of file-sharing software, it is unlikely that a higher court will ultimately find that Grokster and the other software defendants infringe. So long as the Supreme Court does not overrule its "capable of substantial noninfringing uses" language, products and software that can be used for both legal and illegal purposes should be found to not infringe. After Grokster, one can only assume that other file-searching and file-sharing programs will proliferate like crazy.
The Grokster decision makes the anticircumvention provisions of the Digital Millennium Copyright Act ("DMCA") more important. If the courts will not stop the distribution of software that makes copying of non-encrypted material easy, then the content providers, such as the record companies and the software companies, will make access and copying of files more difficult through technological measures that prevent or limit access. Under the DMCA, the making or trafficking in software or devices whose primary purpose is defeating technological measures that control access is illegal. As was shown in the Universal City Studios v. Corley case, even the posting of anti-encryption software is a violation of the DMCA, although this controversial law will certainly face more legal challenges.
The Grokster decision has also given the recording industry new motivation to actually go after the end users -- the downloaders -- for direct copyright infringement. Subpoenas have been served on Internet service providers for information about subscribers suspected of infringing copyrights in musical compositions and sound recordings. Because actual damages are difficult to assess, and because the infringement is willful, and possibly egregiously so, the music industry will ask for statutory damages, which are within the judge's discretion, but which could go as high as $150,000 per song.
Both the content providers and the downloaders will become more innovative and creative. Content providers will attempt to make files "uncrackable" and will probably do anything short of disabling the computer of the party that attempts to access content without authorization. Parties who wish to upload and download will be more creative with respect to decryption. I am hopeful that in time the law will coalesce.
In the meanwhile, content providers should make available authorized online downloadable content for reasonable prices. A file by itself does not include the cost of the jewel box, the art, the physical CD, the profit for the record or mega-store, etc. If prices were more reasonable, perhaps there would be less incentive to engage in unauthorized copying. The success of Apple's iMusic, a service that allows users to legitimately pick and choose their favorite tunes for 99 cents each from a menu of thousands and thousands of songs is evidence that if music is made available in an easy way at a reasonable price, users will, indeed, pay the price to obtain content legally.
One may initially say that 99 cents per song is no cheaper than the prices on a CD. After all, CDs have approximately 15 songs on them. The reason that parties are willing to pay 99 cents per song is that often CDs only have one or two or three songs that are really good. Many of the others are just filler. If people can obtain only those songs that they want, without having to take the songs that they do not want, then the price is certainly reasonable.