August 19, 2004  ·  Tim Wu

Grokster has won MGM v. Grokster. (By Grokster I mean “Streamcast & Grokster,” hereinafter)

Analysis

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.

  • http://www.eff.org Fred von Lohmann

    Er, that would be StreamCast and Grokster win the MGM v. Grokster appeal. :-) Ah, the tyranny of having your client’s name not be first in the caption…

  • Alexander Wehr

    the comment about this win meaning that innovators dont have to beg hollywood and recording studios….. it’s not true.

    If they develop anything with “content protection” technology (and they are doing this to all of their next generation and most of their current generation media) then the DMCA says that innovators DO have to beg hollywood and recording studios before they are “blessed” with the almighty permission to bring new technology to market.

  • Robert Young

    It’s a very logical, and fair, ruling IMO. As Atty Lohmann argued so very convincingly, technology providers should not be subject to secondary liability.

    But I’m confused about something and, Prof. Wu, perhaps you can shed some light on this… while clearly releasing p2p vendors from liability, it seems this court affirmed that it was the end users who were infringing on copyright. Moreover, as Rep. Boucher stated here (in this blog), lawmakers feel they have a responsibility to address the fact that tens of millions of citizens are actually being unlawful. So my question is this… doesn’t today’s court decision actually *arm* the rightsholders with the best ammunition they could have hoped for vis a vis the Induce Act? To my naive eyes, it seems to me, that short of unraveling all existing copyright law, today’s development can prove to be the worst thing could have happened. No?

  • Tim Wu

    Robert,

    Essentially, everyone already concedes that swapping copyrighted MP3s without permission is a violation of copyright law for the people who do it. Speaking legally, Grokster doesn’t hold that any one person has broken the law, but it does assume that copyright law is being constantly violated. Hope that makes sense.

  • http://sethf.com/ Seth Finkelstein

    I think Robert Young is asking about what’s likely to be The Revenge Of Hollywood – The INDUCE Act. This decision is sure to be used as a talking-point in the upcoming lobbying.

    But we can worry about in another thread.

    Congratulations to Fred von Lohmann and EFF in general for a great victory.

  • Alexander Wehr

    “Essentially, everyone already concedes that swapping copyrighted MP3s without permission is a violation of copyright law for the people who do it.”

    This is a problem, it completely ignores the intent of the AHRA, and also works on the assumption that either A. individual behavior of sharing a few copies causes significant harm to the greater market, or B. that each individual should be held liable because of the effects of a collective body.

    If A is the case, i challenge anyone to show positively how even 1000 random copies noncommercially shared puts a dent in revenues.

    If B is the case, then i say the terrorists are right and each and every one of us should be murdered in cold blood for the collective military irresponsibility which our nation engages in.

  • Andrew Leifer

    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. – Professor Wu

    The 9th Circuit explicitly agrees that in this case the “blind eye” approach is inherently advantages:

    “…the peer-to-peer file-sharing technology at issue is not simply
    a tool engineered to get around the holdings of Napster I and
    Napster II. The [P2P] technology has numerous other uses, significantly
    reducing the distribution costs of public domain and
    permissively shared art and speech, as well as reducing the
    centralized control of that distribution.” [Emphasis added]

  • http://oknarb.web-log.nl Branko Collin

    Congrats to the good guys!

  • http://interactionlaw.com John Mitchell

    I see three potential outcomes: (1) appeal to the Supreme Court, (2) appeal to Congress, or (3) appeal to common sense.

    I make the latter appeal in a short piece I just posted, Riding P2P. More business analysis than legal.

    Opening paragraph: �The p2p horse is out of the barn,” to paraphrase the ruling of the U.S. Court of Appeals for the Ninth Circuit. It’s no use trying to close the barn door now, much less burn down the barn. It’s time to let everybody ride!

    John

  • Raoul

    The word �piracy� is not in the opinion, nor is �stealing.� Hmmmmmmmmmmmmmm?

  • raoul

    “Essentially, everyone already concedes that swapping copyrighted MP3s without permission is a violation of copyright law for the people who do it.”

    That is a fundamentally disturbing comment. There are numerous factual situations in which the sharing of copyrighted works, via P2P networks, without the permission of the rights holders, have not been tested in any legal precedent, including the Napster case. It is arrogant for us to presume, rather flippantly, what the Supreme Court justices are going to do when they are forced to pull the trigger and find someone liable for copying a song they have already paid for five times.

    Making 600 people pay $3500 each to settle infringement claims, for an activity that 60 million other people do on a regular basis, is ludicrous. If all 600 people would have litigated those cases, this whole mess would be over.

    The safest road to hell is the gradual one�the gentle slope, soft underfoot, without sudden turnings, without milestones, without signposts. C S Lewis

  • three blind mice

    The opinion turns on facts rather than law.

    the court’s conclusion seems to us consistent with such facts as cigarettes not causing cancer and alcohol not impairing driving.

    this court appears to have completely ignored the single most significant fact: the volume of copyright infringement enabled by and conducted via grokster.

    so now that grokster is held harmless, copyright owners must again go after individuals instead of the corporate interests that aid and enable them.

    american handgun manufacturers must be breathing a sigh of relief.

  • http://www.law.northwestern.edu/faculty/visiting/Sag/Sag.html Matthew Sag

    This should be known as the �Reverse Spiderman Principle� for copyright infringement.

    In the words of Spiderman, �with power comes responsibility.� The latest generation of internet file-sharing services, Grokster Inc. and StreamCast Networks, have proved that the opposite is also true. Decentralized peer-to-peer networks cede a significant degree of control to their users, but in doing so avoid liability for how those networks are used. Spiderman may not approve, but it beats the alternative.

  • mike

    this just in:

    knives do not commit murder. people can use them to commit murder, or they can slice Thanksgiving turkey with them. I think the case is quite clear, personally.

    I agree with Matthew, above, in that it beats the alternative.
    There’s a difference here with the handgun analogy, and that is if you were to go the other way, and make handguns illegal, then will you be chilling research into ballistic technology that can have other applications that are not at all like shooting a bullett ?

    Probably, but I can’t think how it could map the same with P2P technology, which can be seen by anyone to have future potential as powering applications that can be away from “enabling” copyright infringement. Some that come to mind are: educational applications, large-scale design collaborations, and a distributed, wide-area creative pooling of music and art efforts.

  • three blind mice

    mike, focusing on the potential positive benefits of P2P technology while ignorning the real, present, and significant harm that this technology is causing to copyright owners seems to be a fundamentally unfair way of judging the legality of its use.

    americans tolerate the murder of tens of thousands of their fellow citizens every year because they believe arms manufacturers should be able to sell handguns – but these same americans do not allow these same manufacturers to sell rocket propelled grenades.

    there is a balance in everything. presently the balance of P2P technology is overwhelmingly negative towards copyright owners and only marginally beneficial to supreme courts aides who use the technology to schedule basketball games.

    a ruling in favor of the marginal benefits – that does nothing to ameloriate the negative effects being cause – does not seem fair and balanced to us. it hardly seems in touch with reality.

    the US supreme court should review this judgement for no other reason than the enormous financial implications it has for a major contributor to america’s economy and one of her most important exporters.

  • http://www2.bc.edu/~liujr Joe Liu

    three blind mice,
    how confident are you that we currently know the net total costs and benefits of P2P filesharing? you say that “presently” the costs outweigh the benefits, and I’m inclined to agree. but to ban the technology, you need to make the stronger argument that this is the case over the long run. i don’t think we have enough information to make that argument, as the ultimate uses of technology are notoriously difficult to predict (see, e.g., radio, vcr, etc.). the betamax rule, whatever its faults, at least recognizes this.

  • http://www.digital-copyright.ca/petition Chris Brand

    The music industry has yet to prove a net loss of sales due to p2p.
    Unfortunately, they *have* managed to convine many people (including a lot of Congress) that they’ve proved it.

    Looking at the actual evidence, I’d say that it weighs slightly in favour of the theory that p2p helps CD sales, but not enough to be persuasive.

    “Three Blind Mice” reminds me of another children’s tale – Chicken Licken.

    It’s also inportant to remember that *even if* p2p does destroy todays recording industry, that may not be a bad thing in the long term. Are we still mourning the death of the piano roll industry that they helped kill ?

  • http://oknarb.web-log.nl Branko Collin

    Three Blind Mice is a well-known troll on this forum. Don’t hold your breath waiting for any proof of a net loss of sales from him/her.

  • http://web.ics.purdue.edu/~smith60 Chuck Smith

    I wanted to key this in ASAP with regards to the reaction; I’ll check the comments later.

    As far as the “blind eye” deal, willful or not, our side should have a pretty rich base to argue from. Larry’s own book, “The Future of Ideas” (great book, thanks Larry!) cites the inherent blind eye TCP/IP has turned towards its packets is very much an essential part of its beauty.

    The fact that we don’t necessarily strangle every packet and sniff every port, so to speak, is what’s been a huge driving force behind the innovation of the internet. And while P2P may have infringing uses, it does have the “substantial noninfringing” uses as well. While P2P may have turned a “blind eye” as to what’s going through its ad-hoc network, it’s only following a widely condoned model as in TCP/IP, where information goes to and fro with blatant disregard for what the information says or means.

    Has anyone threatened to sack TCP/IP because it can be used to transmit pornography or aid and abet terrorism? It would seem both of those would generate a far more damning case than what RIAA has come up with thus far.

    I wish my argument was more coherent… but there’s at least one and a half of my two cents :)

  • Jonathan in MA

    My question is, what is the status of the RIAA suing 12 year old file-sharers?

    Do the motion picture association and RIAA have the ability/right to sneak a peek at who is sharing files and record their IP addresses for lawsuit?

    Will they be able to continue to flood P2P systems with false files?

  • raoul

    “Do the motion picture association and RIAA have the ability/right to sneak a peek at who is sharing files and record their IP addresses for lawsuit?

    Will they be able to continue to flood P2P systems with false files?”

    Yes and Yes. There is no expectation of privacy in files that you openly share with the world. The same applies to the corresponding IP addresses. There is nothing wrong with the bogus file flooding, a perfectly legitimate tactic and much more effective than the suits.

  • raoul

    �The opinion turns on facts rather than law.� Yes and no. Both supposed factual findings were arguably capable of being judicially noticed as they were never seriously in doubt. There is a reason why the record indicates that there were no genuine issues of material fact. There are none. Facts that are in line with the indisputable laws of nature could be viewed as law.

    (1) P2P networks will always be capable of substantial non-infringing uses. You could set your clock or plot the orbits of celestial objects by it. �In this case, the district court found it undisputed that the software distributed by each defendant was capable of substantial noninfringing uses.� METRO-GOLDWYN-MAYER v. GROKSTER

    (2) �The second factual matter is whether Grokster �contributed� to infringement by its users.� Again the answer is beyond factual dispute. No. It�s really very simple. If the corporate offices of StreamCast and Grokster where shut down tomorrow, P2p applications would continue on their merry way.

    �Peer-to-peer file-sharing software upgrades can be coded in a way that prevents those who do not accept the upgrade from communicating with those who do, but those users who do not accept an upgrade may still be able to communicate with each other. The record indicates this has already occurred, with a number of nonupgraded users still being able to communicate and share files with each other.� METRO-GOLDWYN-MAYER v. GROKSTER

    StreamCast and Grokster don�t really contribute anything to P2P applications. All they do is leech off its existence like a bunch of smaller fish swimming along the underbelly of the great P2P fish. If anything, they only add value because of the RIAA�s campaign of doom. There haven�t been any major advances to P2P software in years other than new technologies to protect identity. P2P is fully evolved. There is nothing to contribute with future development other than encryption technologies. At least nothing that your average Swedish teenager couldn�t solve for us for free. However, StreamCast and Grokster should be lauded for doing battle with that rather sizable armada of multinational media conglomerates.

    �The �blind eye� or �willful blindness� issue� is a dead horse as well. If StreamCast and Grokster incorporated some sort of copy prevention technology, they would die and be immediately replaced by hacked versions. The great P2P fish has rows and rows of teeth like a shark.

    �The sale and design of P2P filesharing technology has just been legalized in California.� Nobody sells P2P software. Do they? Who would buy it?

  • Jonathan in MA

    Raoul,

    Thank you for your answers (yes and yes). I’m interested in more feedback from other folks on this issue too.

    I guess I have to wonder *why* Grokster, Morpheus, Kazaa, etc. would allow the RIAA to monitor their networks and record IP addresses, in light of this latest decision?

    As an unrepentant filesharer myself, that sword of daimocles is forever above my head…

  • three blind mice

    three blind mice, how confident are you that we currently know the net total costs and benefits of P2P filesharing?

    The music industry has yet to prove a net loss of sales due to p2p.
    Unfortunately, they *have* managed to convince many people (including a lot of Congress) that they�ve proved it.

    yeah, and cigarrettes don’t cause cancer.

    the mindset of this blog is astonishing.

    do either of you deny that P2P technology is currently being used to “share” copyrighted material?

    is this reasonably a loss of revenue to the copyright owner? we think it is.

    look, no one can prove precisely the amount of revenue lost by the RIAA due to file sharing. anyone who tried would have to resort to the same questionable assumptions you would have to use to estimate the economic benefits of file sharing.

    what we are saying is the “other substantial non-infringing uses” argument appears on its face a far weaker argument that that proffered by the digitial media content owners.

    our point is that – presently – the benefits of P2P do not outweigh the harm this technology causes to copyright owners.

    the historical fact is that P2P technology was created to facilitate copyright infringement. c’mon, we’re all friends here. let’s be honest about it. grokster was a direct response to the problems napster encountered.

    the fact that the architecture of P2P is fundamentally different that that of Napster is touted by it’s advocates as a reason that grokster should not be responsible for the illegal file sharing that it enables and encourages.

    it’s a tool for educators! (nudge, nudge, wink, wink)

    no one on your side seems to accept that copyrighted material is being “shared” illegally over P2P networks, that this is a problem, and that something reasonably should be done to hinder it.

    and this is where we have a problem. your side ignores the harm, downplays it, and says it’s meaningless compared to the potential educations benefits of P2P. this is an argument based either on irrational exhuberance, or pure, adulterated spin.

    it seems that P2P is important to the “everything is free” culture precisely because it is a tool for copyright infringement.

    Three Blind Mice is a well-known troll on this forum. Don�t hold your breath waiting for any proof of a net loss of sales from him/her.

    the three blind mice support the rights of artists, authors, engineers, developers, and other creative individuals against those who would take from them the fruits of their creative labors. we are against the collective ownership of creative works believing, perhaps naively, that society is best served when the property rights of individuals are respected.

    sorry if this makes us trolls to some people.

  • Chapin Cimino Cody

    Traditional media are accountable for “misuse” of print and broadcast forums, yet Grokster is not accountable for the misues of its technology. I think this is odd. For example, it is not a defense for a newspaper that has willfully turned a blind eye to the truth to say, “I didn’t realize those facts were false, and look, we publish so much that is true that we shouldn’t be held responsible for the false facts anyway.” As a matter of law, whether Grokster is capable of non-infringing uses should not be controlling. Grokster facilitates innumerable infringing uses. That Grokster uses computer technology, as opposed to paper or airwaves, should not insulate it from liablity for misuses of which it is aware. (Similarly, courts who have interpreted the CDA as providing immunity for ISPs who knowingly allow publication of defamation just because the defamation is distributed via technology are most likely wrong as well – there is at least one court and one good law review article out here making this point in various ways.) As for policy, what is the answer to the comment that granting Grokster a free pass will pass along the costs of infringement to the end users, those who are least able to bear them (and too diffuse to really regulate, anyway)?

  • http://resare.com/ Noa Resare

    three blind mice writes:
    yeah, and cigarrettes don�t cause cancer.
    the mindset of this blog is astonishing.
    do either of you deny that P2P technology is currently being used to �share� copyrighted material?
    is this reasonably a loss of revenue to the copyright owner? we think it is.

    No, I don’t deny that and yes, perhaps it is a loss of revenue to the copyright owner. However, the purpose of the copyrigt system is not to ensure that every copyright holder maximizes her revenue but instad “to promote progress”. I would argue that the increased availability of music via p2p promotes progress in itself. That value is often not recognized at all in the rhetoric of the RIAA who seems to think that promoting it’s current business model is equal to “promoted progress of science and useful arts”.

    I would love to be able to pay for the children’s song recorded in 1973 that I discussed with a friend yesterday and then downloaded. Why doesn’t the RIAA companies let me do that? (it’s out of print)

  • Mike

    Three blind:

    “no one on your side seems to accept that copyrighted material is being �shared� illegally over P2P networks”

    that’s bull, and you’ve been a commentor on this blog long enough to know that. come on now. :)

    no one here (or Mr. Lessig, anyway) is arguing that the illegal infringing of copyright does not happen with P2P file sharing mechanisms. no one here that I can tell (including Lessig) condones such illegal infringement. I also don’t think that anyone (on this blog or elsewhere) honestly thinks that the creators of content should not be compensated or have full control of their content within the limits of the law granting that control.

    Additionally, I don’t think anyone here is drunk with the naive belief that the ideals of P2P are restricted to the noble, and all-powerful “educational tool”, either.

    I think that the point that is being missed is the balance of technology with the potential copyright infringement that such technology can enable, and the leaning on that balance, one way or another.

    Analogies get thrown around willy nilly in these sorts of complex cases: guns, knives, cigarettes…most of them are pretty awful analogies, because guns kill people. Infringing copyright, while illegal, doesn’t really kill anyone. I really don’t think that there can be a 100% accurate analogy of the ‘blind eye’ issue, except for the Sony case.

    “we are against the collective ownership of creative works believing, perhaps naively, that society is best served when the property rights of individuals are respected.”

    having property rights being respected — no one argues that here, but most folks here also believe that those property rights should have a reasonable limit with regards to its value in being available, at some point, to society.

    collective ownership of creative works — can happen in many different ways, including being the choice of a content creator to hand over, to a collective, the ownership of his/her content, and that is their individual right.

    p.s.
    I will say that three blind mice has brought up excellent points here in the past, and while they have strong opinions, I would not call them a troll. Put it this way — I will take three blind mice over Richard Bennett any day of the week.

  • Three Blind Mice II

    To Three Blind Mice:

    Do you really practice what you preach?
    Did you once in a while infringe the
    rights of authors and artists? Come on.
    We are all friends. Let’s be honest about
    it.

    I am curious to know what you did to
    correct the “sin” of infringement. Write
    an apology letter to authors and artists?

    Three Blind Mice II
    (Joseph Pietro Riolo)
    <riolo@voicenet.com>

    Public domain notice: I put all of my expressions
    in this comment in the public domain.

  • Anonymous

    You said:

    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.

    Not really. All Grokster is is a distributed search engine. The Internet does the transfers once the search engine provides the endpoint information. Considering whether they have control over file transfers is really irrelevant in that case.