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ARTICLE
METRO-GOLDWIN-MAYER v. GROKSTER
Par Yannick-Eléonore Scaramozzino

Appeal from the United States District Court for the Central District of
California
, Stephen V. Wilson, District Judge, Presiding

 

Opinion by Judge THOMAS, Circuit Judge - August 19, 2004.

Extract

 

This appeal presents the question of whether distributors of peer-to-peer file-sharing computer networking software may be held contributory or vicariously liable for copyright infringements by users. Under the circumstances presented by this case, the Court concludes that the defendants are not liable for contributory and vicarious copyright infringement and affirm the district court’s partial grant of summary judgment.

 

The Copyright Owners allege that over 90% of the files exchanged through use of the “peer-to-peer” file-sharing software offered by the Software Distributors involves copyrighted material, 70% of which is owned by the Copyright Owners. Thus, the Copyright Owners argue, the Software Distributors are liable for vicarious and contributory copyright infringement pursuant to 17 U.S.C. §§ 501-13 (2000), for which the Copyright Owners are entitled to monetary and injunctive relief. The district court granted the Soft-ware Distributors partial summary judgment as to liability arising from present activities and certified the resolved questions for appeal pursuant to Fed. R. Civ P. 54(b). Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. 259 F. Supp. 2d 1029 (C.D. Cal. 2003) (“Grokster I”).

 

 

Because the information is decentralized in a peer-to-peer network[1]



, the software must provide some method of cataloguing the available information so that users may access it. The software operates by connecting, via the internet, to other users of the same or similar software. At any given moment, the network consists of other users of similar or the same software online at that time. Thus, an index of files available for sharing is a critical component of peer-to-peer file-sharing networks.

 

 

Both Grokster and StreamCast initially used the FastTrack technology[2]



. However, StreamCast had a licensing dispute with KaZaa, and now uses its own branded “Morpheus” version of the open-source Gnutella code. StreamCast users connect to other users of Gnutella-based peer-to-peer file-sharing software[3]



. Both Grokster and StreamCast distribute their separate softwares free of charge. Once downloaded onto a user’s computer, the software enables the user to participate in the respective peer-to-peer file-sharing networks over the internet.

 

Users of the software share digital audio, video, picture, and text files. Some of the files are copyrighted and shared without authorization, others are not copyrighted (such as public domain works), and still others are copyrighted, but the copyright owners have authorized software users in peer-to-peer file-sharing networks to distribute their work. The Copyright Owners assert, without serious contest by the Software Distributors, that the vast majority of the files are exchanged illegally in violation of copyright law.

 

 

II Analysis

 

The question of direct copyright infringement is not at issue in this case. Rather, the Copyright Owners contend that the Software Distributors are liable for the copyright infringement of the Software users. The Copyright Owners rely on the two recognized theories of secondary copyright liability: contributory copyright infringement and vicarious copyright infringement. The Court agrees with the district court’s well reasoned analysis that the Software Distributors’ current activities do not give rise to liability under either theory.

 

 

A- Contributory Copyright Infringement

 

The three elements required to prove a defendant liable under the theory of contributory copyright infringement are: (1) direct infringement by a primary infringer, (2) knowledge of the infringement, and (3) material contribution to the infringement. The element of direct infringement is undisputed in this case.

 

1- Knowledge :

 

Any examination of contributory copyright infringement must be guided by the seminial case of Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984) (“Sony-Betamax”). In Sony-Betamax, the Supreme Court held that the sale of video tape recorders could not give rise to contributory copyright infringement liability even though the defendant knew the machines were being used to commit infringement. In analyzing the contours of contributory copyright infringement, the Supreme Court drew on the “staple article of commerce
” doctrine from patent law.
Id
.
At 440-42. Under that doctrine, it would be sufficient to defeat a claim of contributory copyright infringement if the defendant showed that the product was “capable of substantial
” or “commercially significant noninfringing uses.
” In applying this doctrine, the Court, found that because Sony’s Betamax video tape recorder was capable of commercially significant noninfringing uses, constructive knowledge of the infringing activity could not be imputed from the fact that Sony knew the recorders, as a general matter, could be used for infringement.
Id
.
At 442.

 

In Napster I, it is construed Sony-Betamax to apply to the knowledge element of contributory copyright infringement. Napster I held that if a defendant could show that its product was capable of substantial or commercially significant noninfringing uses, then constructive knowledge of the infringement could not be imputed. Rather, if substantial non-infringing use was shown, the copyright owner would be required to show that the defendant had reasonable knowledge of specific infringing files. Napster I, 239 F . 3d at 1027; see also A&M Records v. Napster, 239 F.3d 1091, 1095-96 (9th Cir. 2002) (“Napster II”).

 

In the context of this case, the software design is of great import. The software at issue in Napster I and Napster II employed a centralized set of servers that maintained an index of available files. In contrast, under both StreamCast’ decentralized, Gnutella-type network and Grokster’s quasi-decentralized, supermode, KaZaa-type network, no central index is maintained. Indeed, at present, neither StreamCast nor Grokster maintains control over index files. As the district court observed, even if the Software Distributors “closed their doors, and deactived all computers within their control, users of their products could continue sharing files with little or no interruption”. Grokster I, 259 F. Supp. Ad at 1041.

 

Therefore, the Court agrees with the district court that the Software Distributors, the Court entitled to partial summary judgment on the element of knowledge.

 

 

2- Material Contribution

 

The Court also agrees with the district court that with respect to their current software distribution and related activities, defendants do not materially contribute to copyright infringement.

While Grokster and StreamCast in particular may seek to be the next Napster, Grokster I, 259 F. Supp.2d at 1036, 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 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. Especially in light of the fact that liability for contributory copyright infringement does not require proof of any direct financial gain from the infringement, the Court declines to expand contributory copyright liability in the manner that the Copyright Owners request.

 

 

B- Vicarious Copyright Infringement

 

Three elements are required to prove a defendant vicariously liable for copyright infringement : (1) direct infringement by a primary party
, (2) a direct financial benefit to the defendant
, and (3) the right and ability to supervise the infringers
. Napster I, 239 F.3d at 1022.

The element of direct infringement and a direct financial benefit, via advertising revenue, are undisputed in this case.

 

Concerning the “ right and ability to supervise”, according to the Court, the district court correctly characterized the Copyright Owners’evidence of the right and ability to supervise as little more than a contention that “ the software itself could be altered to prevent users from sharing copyrighted files.” Grokster I, 259 F. Supp. 2d at 1045. In arguing that this ability constitutes evidence of the right and ability to supervise, the Copyright Owners confuse the right and ability to supervise with the strong duty imposed on entities that have already been determined to be liable for vicarious copyright infringement; such entities have an obligation to exercise their policing powers to the fullest extent, which in Napster’s case included implementation of new filtering mechanisms. Moreover, a duty to alter software and files located on one’s own computer system is quite different in kind from a duty to alter software located on another person’s computer. The Court agrees with the district court that possibilities for upgrading software located on another person’s computer are irrelevant to determining whether vicarious liability exists. Grokster I, 259 F. Supp. 2d at 1045 ; see also Napster I, 239 F.3d at 1024 (“Napster’s reserved “right and ability” to police is cabined by the system’s current architecture.”).

 

 

C- Turning a “Blind Eye” to Infringement

 

The Copyright Owners finally argue that Grokster and StreamCast should not be able to escape vicarious liability by turning a “blind eye” to the infringement of their users, and that “turning a blind eye to detectable acts of infringement for the sake of profit gives rise to liability.” Napster I, 239 F.3d at 1023. If the Software Distributors had a right and ability to control and supervise that they proactively refused to exercise, such refusal would not absolve them of liability. However, although that rhetoric has occasionally been employed in describing vicarious copyright infringement, there is no separate “blind eye” theory or element of vicarious liability that exists independently of the traditional elements of liability. Thus, this theory is subsumed into the Copyright Owners’ claim for vicarious copyright infringement and necessarily fails the same reasons.

 

 

III- Re-examination of the law

 

As to the question at the hand, the district court’s grant of partial summary judgment to the Software Distributors is clearly dictated by applicable precedent. The Copyright Owners urge a re-examination of the law in the light of what they believe to be proper public policy, expanding exponentially the reach of the doctrines of contributory and vicarious copyright infringement. Not only would such a renovation conflict with binding precedent, it would be unwise. Doubtless, taking that step would satisfy the Copyright Owners’ immediate economic aims. However, it would also alter general copyright law in profound ways with unknown ultimate consequences outside the present context.

 

Yet, 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 karaoke machine, or an MP3 player. Thus, it is prudent for courts to exercise caution before restructuring liability theories for the purpose of addressing specific market abuses, despite their apparent present magnitude.

 

In Sony-Betamax, the Court spoke quite clearly about the role of Congress in applying copyright law to new technologies. As the Supreme Court stated in that case, “The direction of Art.I is that Congress shall have the power to promote the progress of science and the useful arts. When, as here, the Constitution is permissive, the sign of how far the Congress has chosen to go can come only from Congress.”[4]




 

In this case, the district court correctly applied applicable law and properly declined the invitation to alter it. The Court affirms the district court, and remands for resolution of the remaining issues.

 

AFFIRMED.

 

Article mis en ligne le 3 septembre 2004



[1]




In a peer-to-peer distribution network, the information available for access does not reside on a central server. No one computer contains all of the information that is available to all of the users. Rather, each computer makes information available to every other computer in the peer-to-peer network. In other words, in a peer-to-peer network, each computer is both a server and a client.

[2]




Since the litigation in this case began, control of the FastTrack software passed from KaZaa to Sharman Networks. KaZaa was named as a defendant in this action, but eventually ceased defending and default judgment was entered against it.

 

[3]




The owners of the FastTrack Software successfully prevented users of the StreamCast version of FastTrack from being able to connect to Grokster and KaZaa users of FastTrack by using a software upgrade that was not

sent to StreamCast users. 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 non-upgraded users still being able to communicate and share files with each other.

[4]




464
U.S.
at 456 quoting Deepsouth Packing Co.v. Laitram Corp., 406
U.S.
518, 530 (1972).


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