Stanford law forum on Grokster
Mark Lemley, law professor and counsel to Grokster, and Ian Ballon, of Manatt Phelps and counsel to copyright owners, debated the merits of the Grokster ruling before a packed house at Stanford Law School yesterday on a panel moderated by law professor and copyright treatise author Paul Goldstein.
Opening remarks
Ballon commented that he hadn’t held out high hopes for the Court to get it right, so he was astonished to see a 9-0 decision that in his view makes a lot of sense. He said that if you look at the Rehnquist Court’s past treatment of technology cases, there’s a theme of lack of specificity -- Lotus v. Borland had no outcome, and in the Tasini case the court used concepts like the feel of the morning newspaper.
Professor Lemley made clear that he was speaking as a law professor and not on behalf of Grokster. He commented that if you saw the oral argument it was predictable that the Court was going to go the inducement route. He predicted that the Grokster rule will only be as clear as an intent standard can ever possibly be. Lemley said there are two ways to read this analysis of the evidence: (i) it’s an amorphous multi-factor test that will be hard to apply; or (ii) it’s really a unique set of circumstances and all must be present. If it’s the latter, then the holding may not be of great significance, which Professor Goldstein suggested.
Professor Goldstein said that in general intent-based tests are a disaster. He noted the historical basis in copyright for inducement, based on the Kalem Bros. case, and recalled that one of the counts in the Sony Betamax case, which he worked on, was for inducement, based on advertising. Reading assignment -- see chapter six of his treatise.
According to Professor Lemley, the impact of this case will be that the other theories of indirect liability will fade into relative insignificance, because as a plaintiff you don’t have to worry about Sony and the DMCA safe harbors if you can prove intent. In other words, you can plead around these defenses by pleading intent.
A win for copyright owners
Ballon said that for copyright owners this is a big win because it encourages companies to be compliance oriented. He also opined that Grokster is a good decision for technology companies, because of limitations on vicarious liability and by making the Sony Betamax doctrine a safe harbor defense. Lemley countered that the case is only pro-technology in the sense that now they can assert three causes of action and only win one against you, but one is all you need to prevail. Goldstein agreed that the case is a pro-rights-holder decision. He argued that the discursive writing style of Judge Souter lends itself to open-ended interpretations of how to apply the inducement factors.
Limitations on vicarious liability
Both Ballon and Lemley agreed that the Court’s brief discussion of vicarious liability may cause this doctrine to be tightened up. The Court stated the standard more narrowly than the 9th Circuit has done – which loosened the requirement of direct financial benefit to include more indirect benefits such as derived by swap meet proprietors (Fonoviso) and to say that even if there’s no money involved there can be a financial benefit (Napster). Lemley also referred to another Supreme Court case that may result in a cutting back of vicarious liability -- Meyer vs. Holley – which applied a narrow vicarious liability standard in the employment context.
Corporate responsibility
Ballon opined that the case reflects a broader trend in the law, in terms of corporate responsibility, and the need for companies to be compliance-oriented. If you are compliance-oriented, you’re not going to have a problem, he said. Lemley agreed that that’s what the Court was trying to do. They are trying to differentiate the bad guys from the good guys. However the problem is not in this ambition, but in how this will end up being worked out in more litigation. As a result, he said that there’s now a premium on being a big company with lawyers involved. If you’re a small company, God help you.
Ballon emphasized that in discovery you’re going to see a focus on internal documents. Ballon emphasized that you want lawyers involved in the R&D; stage and in review of the business model. You will have a paper trail, so you want lawyers involved, and get a memo. He said that in practice there’s enough uncertainty in pursuing inducement claims that there shouldn’t be an incentive to sue over baseless claims.
Copyright versus patent intent
Professor Lemley addressed a question about why inducement is bad for copyright if it’s fine for patent and trademark law. He said he’s not opposed in concept – the problem is the way it has been applied here. If the court had simply said you encouraged infringement, that would be acceptable as inducement, but the sale of a product with bad intent as inducement is troubling. He said that the decision expands the doctrine beyond the limits of patent law, which could detrimentally affect patent doctrine. In fact, he reported that the patent bar wants a resolution that Grokster is not their inducement standard, and they don’t want it imported back into patent law.
Intent for collaborative projects
Another question was how will the intent standard apply to collaborative software development projects, such as through Sourceforge? Professor Lemley responded that this illustrates how an intent standard is hard to apply. It is difficult enough to figure out a corporation’s intent – the problem gets worse outside of a corporate environment. Ballon noted that in Grokster the Court pointed to marketing materials that had been prepared but not released. He emphasized the need for legal review -- if you have that bad evidence, you need to filter or do whatever you can to show compliance.
Chilling effect
Another questions was what will the chilling effect be on the technology marketplace, and what technologies are most vulnerable? Professor Lemley opined that the copyright owners have been casting about for the magic bullet -- sue somebody and make the problem go away. They’ve sued a succession of "somebodies" to create a choke point, but it hasn’t gone away. One good thing is that it has prompted the industry to see that it’s not going away and they need to participate in the market. He suggested there could be a deliberate strategy by copyright owners to discourage investment. And Grokster gives another tool to copyright owners who want to overreach. Both panelists suggested that Bittorrent may get sued, and Ballon predicted that if you type “free plus eminem” on Google, the companies in the search results are the likely candidates to be sued.
Legislation
Another question was whether legislation would shift power back to consumers. Lemley noted that the history of copyright is one of continual expansion, with exceptions granted for those with lobbying capabilities. However the technology industry woke up when the inducement bill was introduced last year, and Congress got the message that there are two sides to this debate. We might see legislative initiatives that are more sensitive to needs of technology companies. However the problem with exceptions like the DMCA safe harbor, was that those exceptions don’t necessarily carry forward to cover new technologies -- it’s great if your technology was considered important in 1998 when the DMCA was enacted, but the next technology won’t benefit, unless it can wedge itself into one of those exceptions.
Professor Goldstein commented that in the past century, Congress has expanded copyright, while the courts have generally withdrawn copyright protection. He also pointed out that there is an international setting to this – there are limits on how much the US can reduce rights under Berne and TRIPS – for example, certain forms of compulsory licenses can’t be adopted.
Closing
Professor Goldstein concluded: I get the sense that p2p is here to stay. It is a technology that has huge attractions to consumer. It has virtues over one-to-one relationships. I will be interested in licensed alternatives.
TrackBack URL for this entry:
Listed below are links to weblogs that reference 'Stanford law forum on Grokster' from Silicon Valley Media Law Blog.
