The Grokster ruling

June 29, 2005

This article was contributed by Joe 'Zonker' Brockmeier.

The long-awaited Metro-Goldwyn-Mayer v. Grokster decision was handed down by the Supreme Court on Monday, with disappointing if not surprising results. The court unanimously decided against Grokster, overturning the summary judgment in favor of Grokster issued by the United States District Court and upheld by the 9th Circuit Court of Appeals. The case has been remanded to the District Court for reconsideration, which seems likely to go against Grokster and Streamcast. Groklaw has the full decision as text, and it is also available as a PDF.

What was at question was whether Grokster, et al, can be held liable for use of P2P software when the software had substantial non-infringing uses, and when the parties were not aware of infringement. The Supreme Court has held that a party can be held liable for distributing software if the party is seen to be "inducing or encouraging direct infringement, and infringes vicariously by profiting from direct infringement while declining to exercise the right to stop or limit it".

The decision was eagerly awaited by both sides, and has been viewed as having widespread implications for the future of P2P technologies. If the court had upheld the decision of the District Court, it would have been largely viewed as an affirmation of the assumption that producers of technology are not liable for its uses, if it has substantial non-infringing uses. In the Sony Corp. of America v. Universal City Studios case, widely known as the Betamax case, the court decided that Sony was not liable because the VCR was "capable of commercially significant noninfringing uses".

Instead, the court's decision focuses on whether or not the company intends to promote infringement, or benefit from infringement. The decision points out that Grokster and StreamCast "each took active steps to encourage infringement". So, merely having substantial non-infringing uses is not enough. According to the Supreme Court's decision, companies can be found liable if they actively promote the technology or take "other affirmative steps to foster infringement". What comprises an "affirmative step" is open to debate, and will no doubt be seen quite differently by the entertainment industry and the technology industry.

The court also complained that neither company "made an effort to filter copyrighted material from users' downloads or otherwise impede the sharing of copyrighted files". This may set a difficult standard for P2P technologies, having to try to "impede the sharing of copyrighted files." While BitTorrent, for example, may not be encouraging users to commit copyright infringement, it's doing little to dissuade copyright infringement. How much will companies, or open source projects, be expected to police their users?

As Ed Felten writes, how the courts rule on the next generation of technologies is more important than whether Grokster and StreamCast continue doing business:

Here the Court did not offer the clarity we might have hoped for, opting instead for what Tim Wu has described as the Miss Manners rule, under which vendors must avoid showing an unseemly interest in infringing uses of their products. This would appear to protect vendors who are honestly uninterested in forstering infringement, as well as those who are very interested but manage to hide it.

Lower courts will be left to apply the Grokster Court's inducement rule to the facts of other file distribution technologies. How far will lower courts go? Will they go too far?

The litmus test is BitTorrent. Here is a technology that is widely used for both infringing and non-infringing purposes, with infringement probably predominating today. And yet: It was originally created to support noninfringing sharing (of concert recordings, with permission). Its creator, Bram Cohen, seems interested only in noninfringing uses, and has said all the right things about infringement - so consistently that one can only conclude he is sincere. BitTorrent is nicely engineered, offering novel benefits to infringing and noninfringing users alike. It is available for free, so there is no infringement-based business model. In short, BitTorrent looks like a clear example of the kind of dual-use technology that ought to pass the Court's active inducement test.

The decision isn't quite as bad as it could have been -- except for Grokster and StreamCast, of course. The court could have revisited the Sony decision, though it declined to do so at this time. However, it seems likely that this decision will encourage the entertainment industry to continue suing companies to force them to prove the "fair use question," as Fred von Lohmann puts it:

A variety of new digital technologies are advertised and promoted for uses that the technology vendors believe to be fair uses. For example, Time Trax promotes its technology for recording satellite radio, Mercora for recording music from webcasts, and Sling Media for transmitting your TiVo'd TV shows to yourself over the Internet. All maintain that these personal, noncommercial, nontranformative uses of copyrighted works fall within the scope of fair use. No court, however, has ever weighed in on these (or virtually any other) personal digital fair uses.

If these innovators are wrong on the fair use score, however, are they all liable for inducement? To put it another way, the Supreme Court's ruling may put "fair use technology companies" in the position of having to litigate, and win, the fair use question on behalf of their customers in order to resist an inducement charge. That's an expensive burden to foist on these companies.

Expensive indeed. In the final analysis, the Grokster ruling means many more years of litigation and continued attempts by the entertainment industry to litigate technology they find threatening out of existence. It may very well have a chilling effect on companies and projects who wish to provide P2P technologies or other "time-shifting" and "space-shifting" technologies.

Index entries for this article
GuestArticles	Brockmeier, Joe

The Grokster ruling -- good for open source

Posted Jun 30, 2005 3:47 UTC (Thu) by ssavitzky (guest, #2855) [Link] (2 responses)

What the ruling means is that the promotion of file sharing as a business model is dead. As several other publications have pointed out, that leaves the field to the open-source software developers (I believe the WSJ said "geeks", but we know who we are), who don't need a business model.

BitTorrent and Freenet are perhaps the best examples, but there are plenty of others. Let's not forget that NFS is a file-sharing technology, as is WebDAV. And before that there were FTP and UUCP. Make no mistake, file-sharing will flourish, and nobody will be making any money off it until some kind of flat-fee compulsory licensing model (like the one ASCAP figured out 95 years ago for radio and piano rolls) takes off.

The Grokster ruling -- good for open source

Posted Jun 30, 2005 6:44 UTC (Thu) by yokem_55 (guest, #10498) [Link]

This ruling will also effect the architecture of P2P software. I think we
will see a lot more of the bittorrent style divergence between search
tools and services that find sources of files (legit and less-than-so) and
tools that carry out the actual transfer mechanism. Thus, a torrent
search tool/service, that does not implement even a basic filtering system
could be liable, while the actual bittorent protocol client software would
be much, much harder to go after.

The Grokster ruling -- good for open source

Posted Jun 30, 2005 17:06 UTC (Thu) by fdesloges (guest, #291) [Link]

The file sharing business model is dead _in_the_USA_. Money for such
businesses will just flow out of the US, and the US will loose the edge in
yet another market.

The Grokster ruling

Posted Jun 30, 2005 5:30 UTC (Thu) by melevittfl (guest, #5409) [Link] (2 responses)

Remember, file sharing software doesn't commit copyight infringement, people commit copyright
infringement.

But I guess the courts only wants to apply that standard to guns, not songs.

The Grokster ruling

Posted Jul 1, 2005 1:32 UTC (Fri) by njhurst (guest, #6022) [Link] (1 responses)

Are guns promoted as 'for killing people'?

The Grokster ruling

Posted Jul 2, 2005 14:17 UTC (Sat) by tseaver (guest, #1544) [Link]

Are guns promoted as "for killing people"?

For handguns, certainly: they have no other (primary) purpose except to kill people. Secondary purposed involve the *threat* of killing people, or *practice* for that act.

As Lynyrd Skynyrd notes:

[They] ain't good for nothin
But put a man six feet in a hole

The Grokster ruling

Posted Jun 30, 2005 13:43 UTC (Thu) by alex (subscriber, #1355) [Link] (2 responses)

As someone who hacks on P2P software I have an interest in what the
next step of the media companies will be. If "they" submit well crafted license compatible patches that do effective filtering/warning of infringing use I'd be happy to push for inclusion of the code. However if their
response is to threaten law suits if developers don't implement features they want, or try to break the license ("its open source but you can't remove X") then I guess we will see the courts start making rulings more directly relevant to open source code.

My sympathy for Grokster is limited. Its certainly seems to me they based their model on saying "hey kids, you can get free copyrighted music with our
tools". They are not champions of FOSS.

Stealth may be an issue

Posted Jul 1, 2005 0:23 UTC (Fri) by JoeBuck (subscriber, #2330) [Link] (1 responses)

One thing the ruling may mean is that it could be dangerous to release any P2P software that tries to be stealthy. If what is being uploaded/downloaded is not legal, the users will want to hide their activity, but if the use is legal (for example, using BitTorrent to download a Fedora distribution), hiding is counterproductive. Courts might conclude that any feature that has no use to legal, open users implies that you're a bad guy (even if there are valid and legal uses for such features).

We shall see

Posted Jul 1, 2005 15:52 UTC (Fri) by alex (subscriber, #1355) [Link]

Maybe. IANAL but I suspect it will take a test case or two. One would hope that something like Freenet would be ok as it is designed to be ananoymised publishing network for use in oppressive legislatures. The distributed trackers of Bittorrent should also be excempt as there are good non-piracy related reasons to have such an architecture.

I suspect trying to anonymise Gnutella could well be seen as trying to aid piracy, where I would argue current black listing measures are only trying to prevent damage to the network regardless of the bad nodes operator's status.

It depends on what the next move of RIAA/MPAA et all will be. Unfortunatly I suspect wielding the legal stick has become a habit for them :-(

The Grokster ruling

Posted Jun 30, 2005 15:30 UTC (Thu) by pimlott (guest, #1535) [Link] (1 responses)

When I read the ruling (only the court opinion), after seeing the headlines but before hearing any commentary, I found it on the whole a relief. The court ruled on the grounds of clear intent to induce copyright infringement, evidenced by the unequivocal statements and actions of the defendants. It carefully avoided lending support to any other grounds; indeed, while it pointed out that "neither company attempted to develop filtering tools", this was considered significant only in the context of their demonstrated (by other evidence) "unlawful objective". "Substantial non-infringing uses" never came up, except to say that it's not a get out of jail free card (and the Circuit Court was misguided to interpret it as such).

While this does likely mean more lawsuits by the recording industry hoping to extend the ruling, I don't think it gives us anything to worry about. The ruling was based primarily on the egregious behavior of the defendants, not on the technology and not even so much on the uses of the technology:

If liability for inducing infringement is ultimately found, it will not be on the basis of presuming or imputing fault, but from inferring a patently illegal objective from statements and actions showing what that objective was.

Bittorrent, to pick an example, does not seem to meet these grounds. And by not touching the Betamax case, it left that part of the Circuit Court's decision intact. In other words, the good news from the Circuit Court is still good. Couple that with the Court's harping on the "balance between the interests of protection and innovation" (as PJ on Groklaw wrote, they "get it"), and we should be feeling pretty good.

The Grokster ruling

Posted Jun 30, 2005 19:32 UTC (Thu) by AJWM (guest, #15888) [Link]

I think that makes sense. There are "substantial non-infringing uses" for hammers, crowbars and jimmies, but somebody skulking around a neighborhood at night with those in one hand and a bag in the other is likely to get nicked for possession of burglary tools.

Not Like Betamax

Posted Jul 4, 2005 0:00 UTC (Mon) by miallen (guest, #10195) [Link] (1 responses)

I grew up in the 80's at the hight of VCR and audio cassette usage and I don't recall any widescale bootlegging. Maybe a little with audio cassettes but VCRs and dual cassette decks were used 99% for legitimate purposes. Grokster OTOH is 99.999% illegitimate. Bittorrent is used significantly for legitimate purposes and no one's directly profiting from it.

So I'm not terribly surprised by this ruling but this is NOT like the Betamax issue. If bittorrent has legitimate uses it will be much more difficult for copyright groups to litigate (assuming they can even find someone worth litigating against).

Not Like Betamax

Posted Jul 7, 2005 20:15 UTC (Thu) by rqosa (subscriber, #24136) [Link]

> no one's directly profiting from it

Red Hat and other distro makers profit from it, because it reduces their bandwidth usage.

Furthermore, why should whether or not someone profits from it have any effect on whether it is legal or not?