August 19, 2004 · Tim Wu
Grokster has won MGM v. Grokster. (By Grokster I mean “Streamcast & Grokster,” hereinafter)
The Ninth Circuit has decided that, on the facts developed, Grokster-style P2P technology is an easy case under Sony. For those unfamiliar with Sony, that decision held VCR manufacturers are not liable for copyright infringement practiced by owners of VCRs. The Court ruling recognized, in other words, that the P2P filesharing technology in programs like KaZaA falls into the same category as typewriters, photocopiers, VCRs, and pencils. All are tools that whose usage is not supervised by the manufacturer, that can be used for both legitimate and illegitimate purposes. All are tools that do not attract copyright liability for the manufacturer.
The opinion turns on facts rather than law. Two crucial factual findings accepted by the Court are basically the case. First, the court concludes that P2P is �capable of substantial non-infringing use�:
“A careful examination of the record indicates that there is no genuine issue of material fact as to noninfringing use. Indeed, the Software Distributors submitted numerous declarations by persons who permit their work to be distributed via the software, or use the software to distribute public domain works. [Example of popular band Wilco, who became successful via the P2P music distribution] … In short, from the evidence presented, the district court quite correctly concluded that the software was capable of substantial non-infringing uses and, therefore, that the Sony-Betamax doctrine applied.”
The second factual matter is whether Grokster “contributed” to infringement by its users. The Court found that Grokster does not provide the “site and facilities” for infringement:
“[Grokster et al.] are not access providers, and they do not provide file storage and index maintenance. Rather, it is the users of the software who … create the network and provide the access.” This, of course, is the major factual distinction from the Napster case, as Napster did provide an index and servers that were the “site and facilities” for infringement.
With these two factual findings in place, victory under Sony follows directly. The design of KaZaA with Napster in mind, and the successful development of these facts by Grokster�s lawyers at the EFF (Fred von Lohmann among them), is why Grokster won.
The court writes with a self-consciousness of the effects of copyright for innovation policy. It, in other words, writes in Silicon Valley language rather than Hollywood. The word �piracy� is not in the opinion, nor is �stealing.� Instead, words that could have been penned by Schumpeter: “the introduction of new technology is always disruptive to old markets, and particularly to those copyright owners whose works are sold through established distribution mechanisms.� Does it matter in the long run if the recording industry is hurt? Not really, suggests the court: �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 karoke machine, or an MP3 player.�
The opinion is not without its weaknesses, particularly with a view to Supreme Court review. The most obvious weakness relates to the �blind eye� or �willful blindness� issue. On one account, Grokster escaped liability because it deliberately created a P2P network over which it had no control over specific file transfers. If it is trivially easy to create a network that makes it easy to stop copyright infringement, cannot Grokster be accused of trying to make an �end run� around the law, or making itself �willfully blind� to the infringements it is contributing to? This is the more important of two crucial differences with the Aimster decision penned by Judge Posner. Posner said in dicta that �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 [knowledge sufficient for copyright infringement.� Arguably � constructing a system that deliberately left Grokster uninformed and incapable of stopping infringement � is what Grokster did here.
It�s a weakness because the Ninth�s circuit treatment of this issue is cursory: �There is no separate �blind eye� theory or element of vicarious liability�� If this case makes it to the Supreme Court, I would expect everything to turn on this issue. Grokster, of course, can argue that making itself �willfully blind� is actually a better P2P design, and not just a ruse to get around copyright infringement.
But let�s return to the end result. The sale and design of P2P filesharing technology has just been legalized in California. Whether legalizations spreads depends on Supreme Court cert. policy (more on this latter), and that place called Congress and its Act called Induce.