Today in 2005: The Supreme Court decides peer-to-peer file sharing Grokster case

June 27, 2014

Today in Legal HistoryEarlier this week, I wrote about how the Supreme Court’s Riley v. California ruling demonstrated that the Court understood that new technology necessitates a new look at old jurisprudence.

The Court took that approach with another case, decided nine years ago today, but I’m not so certain that those same technology advocates are quite as enthusiastic about that case’s result.

The case to which I’m referring is MGM v. Grokster, decided June 27, 2005.  Grokster, as the name implies (at least, to those of you old enough to remember Grokster), is the ruling in which the Supreme Court found peer-to-peer file-sharing companies Grokster and Morpheus-creator Streamcast liable for copyright infringement.

The novel legal aspect of this case has to do with the way that Grokster and Morpheus operated: each distributed free software (paid for by built-in ads) that facilitated file-sharing over a “peer-to-peer network.”  Peer-to-peer is exactly what it sounds like: one user downloading a file from another without the use of a centralized server.

In short, Grokster’s and Morpheus’s respective software allowed users to share files with one another directly, with no intermediary acting to provide storage or a conduit.

Naturally, a great deal of these users were employing the software to download copyrighted music and movies without permission, so a large group of copyright holders, such as MGM Studios, Disney, Universal Studios, BMG music, got together and filed a massive lawsuit against Grokster and Streamcast for copyright infringement.

Despite the widespread reputation for Grokster and Streamcast being used for pirating copyrighted material, however, the software creators won at the district court and appeals court levels.  Both of these courts relied on the most pertinent Supreme Court precedent that they had available at the time: 1984’s Sony Corp  v. Universal City Studios – the so-called “Sony-Betamax” case.

Sony-Betamax, as discussed in more detail in this post, held that Sony was not liable for the infringing uses of its “video tape recorder” consumers in recording TV programs and movies off of broadcast TV.  The Court specifically held that manufacturers are not liable for contributory infringement if the device in question is “capable of substantial noninfringing use.”  The now-iconic use cited in Sony-Betamax by the Court is “time-shifting” – that is, recording a TV program to watch on one occasion at a later time because the viewer was unavailable to watch during the original airing.

The district and appeals courts believed that Sony-Betamax applied to Grokster, and that Grokster and Streamcast were not liable for the infringement of their users since their software was capable of “substantial noninfringing use.”

The Supreme Court didn’t agree, though, finding that the technologies at issue in the case warranted a different approach than that used in Sony-Betamax: ”inducement.”

A party, such as Grokster or Streamcast, is liable for “inducing” copyright infringement if:

(1) someone (not necessarily the party being sued) has committed “direct infringement” (which is exactly what it sounds like);

(2) the party has taken active steps directed at encouraging infringing uses (such as advertising a product for infringing uses or deliberately trying to attract infringers to your service); and

(3) the party has intended to encourage copyright infringement.

This was a different approach than what the Court used over 20 years earlier in Sony-Betamax, in which the “substantial noninfringing use” defense protected Sony from contributory infringement liability.  Under the “inducement” theory of liability, the defense does not apply.

Thus, the Supreme Court found that Grokster and Streamcast had both intended to and taken active steps to encourage infringing uses (advertising themselves as great alternatives to Napster was one particularly bad step on their part), and were consequently liable for the copyright infringement of their users.

Interestingly, it’s extremely unlikely that, had the Supreme Court employed the “inducement” theory in Sony-Betamax, Sony would have been found to be not liable for its consumers’ infringement.  After all, Sony’s Betamax marketing materials invited potential consumers to record “favorite shows” and “movies” and to “build a library.”  Quite the invitation to infringement, no?

In any case, in regards to both the Grokster and this week’s Riley rulings, it seems that the Court sometimes “gets it” and sometimes doesn’t when it comes to technology.