MGM v. Grokster, No. 04-480

Although the Court ruled 9-0 that Grokster and Streamcast could be sued for inducing copyright infringement, the guts of the Grokster decision appear to me as a huge loss for copyright holders. Essentially, it is only because Grokster and Streamcast screwed up by affirmatively flaunting the infringing uses of their programs that they can now be sued. In the words of the Court:

one who distributes a device with the object of promoting its use to infringe, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.

Slip. Op. at 1 (emphasis added). On its face, that language seems pretty good for the industry, but consider the Court's broader language near the end of its discussion of the legal principle:

[M]ere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor [of a Grokster-like product] to liability. Nor would ordinary acts incident to product distribution, such as offering customers technical support or product updates, support liability in themselves. The inducement rule, instead, premises liability on purposeful, culpable expression and conduct, and thus does nothing to compromise legitimate commerce or discourage innovation having a lawful purpose.

Slip Op. at 19-20 (emphasis added). Earlier in its opinion, the Court draws attention to MGM's request that the Court:

add a more quantified description of the point of balance between protection [of copyright] and commerce when liability rests solely on distribution with knowledge that unlawful use will occur.

In other words, MGM wanted rules for the future -- a future in which Grokster-like software is distributed by an intelligent corporation that neither says nor does anything to advertise the potential infringing uses of its product or suggest that infringement is the intended use of the product. The court ostensibly refused to hang flesh on Sony's bones:

It is enough to note that the Ninth Circuit's judgment [in favor of Grokster] rested on an erroneous understanding of Sony and to leave further consideration of the Sony rule for a day when that may be required.

Slip Op. at 17. The Court's decision in this respect is hardly surprising; the court doesn't decide issues it does not necessarily need to decide. What is interesting, though, is that the Court did exactly what it said it would not -- it fleshed out Sony. Indeed, as the second block quote above makes abundantly clear, the Court has, for all practical purposes, made the rule of Sony into a per se rule that no liability for infringing use can attach to the marketing of a product capable of infringing use so long as (1) the product has non-infringing uses and (2) there is no direct evidence that the distributor intends infringing uses of the product. The Court can not be more clear than it is when it says "mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability."

That Sony is now bedrock -- a complete defense to infringement charges against the smart distributor of a product with infringing uses -- is further emphasized in note 12:

Of course, in the absence of other evidence of intent [that the product be used to infringe], a court would be unable to find contributory infringement based on a failure to take affirmative steps to prevent infringement, if the devide was otherwise capable of substantial non-infringing uses. Such a rule would tread too close to the Sony safe harbor.

Slip Op. at 22, n.12. Of course, this is the same safe harbor the contours of which the Court earlier suggested it would leave for another day.

Well, that's my take on Grokster -- a loss for Grokster and Streamcast, and a bigger, potentially devestating, loss for the copyright industry. There will be another Grokster-like product distributed soon (for all I know, it is already on the market in the form of e-mule) with regard to which there is no similar evidence of infringing intent on the part of the distributor. With the language of Grokster setting the Sony rule in stone, and admitting of virtually no exceptions, file-sharing will become a permanent fixture of the copyright landscape and will force tremendous long-term changes in the copyright industry, particularly in the music industry. I'd call this victory Pyrrhic, but it is hard to say the industry lost more by bringing this case than it would have without bringing the case. Either way, file-sharing appears to be here to stay.

Update: Douglas Lichtman agrees it's a hollow victory. To me, hollow doesn't begin to describe the disaster this is for the copyright industry (by which I mean businesses whose chief product is copyrighted work, e.g., movie studios, record labels, etc).