Technology evolves by leaps and bounds while the evolution of law occurs at much slower pace. The year 1999 heralded a new revolutionary service on the internet – Napster- brainchild of an 18 year old college dropout Shawn Fanning. Napster was essentially a service used to find and download music on the net. Napster was based on the “peer to peer” file sharing technology. The technology proved to be so popular that 5.8 million people visited the site within a week of its launch. Though the main aim of service was music download, the users of this service found illegal uses for napster which included illegal transferring and copying of copyrighted material. The ease with which such illegal activity could be conducted attracted more and more users to napster leading to the copyright infringement on a massive scale. This led to a revenue slump for many major recording companies. The ensuing litigation in napster and subsequent cases resulted in the development of U.S copyright law.
This article is an attempt to trace the evolution of secondary liability in the field of copyright infringement by the u.s supreme court in the case of
”Sony corporation of America inc. v/s Universal City Studios Inc.’’ to ‘’Metro Goldwyn Mayer Studios inc. v. Grokster Ltd.’’ where the inducement standard was imported from patent law to copyright law in the light of evolving peer to peer technology.
What is peer to peer technology (P2P)?
Traditional methods of distributing files over the internet involved a model popularly known as the client server model.In this model the files to be distributed are held on a few servers and could be accessed by users (clients) who downloaded the data as per their wish. This method was not an efficient technique of transferring data as the data flow was one way (server to client), the running costs were prohibited and there was a risk of the whole system crashing if the server failed.
Programmers in 1990s began toying with the idea of creating networks to mass distribute copyrighted material. But these applications were basically client server models which were deemed illegal by the courts. But the idea of online file sharing had already taken root in programmer minds. Enterprising programmers sought to overcome the technical and legal difficulties encountered by early file sharing applications. The fruit of their efforts were the P2P file sharing networks which proved to be a cheap, reliable and efficient mode of sharing and distributing data.
The concept of P2P networks is that the data to be shared will exist on many computers (peers) many of which can supply the existing data on request. Structured on this general principle are three types of P2P platforms:-
1) Centralized indexing system
2) Super node indexing system
3) Local indexing system.
All of these systems integrate three basic components:-
1) client
2) server
3) Index
A client is a web browser like application allowing users to perform searches and get the required data. A server is a computer which interprets the requests from the clients for resources on other computers in the network
The index maintains a list of resources available on a p2p network.
Though the 3 types of p2p platforms accomplish same task they differ substantially in their mode of functioning. In the central indexing system, a server is maintained to process all the requests for data and to index all the files available on the network at any given time. This platform requires more administrative management but is comparatively more secure and better regulated.
In a local indexing platform (pure peer type) the working is completely decentralized and all users are on an equal footing . Each user’s computer is called a”node”. Each computer maintains an index of all the files available on it. Because of its structure this platform suffers from inconsistent performance, instability and has difficulties in expanding its user base as finding reliable source of data is hard.
The last platform and arguably the most popular is the super node model where a few nodes are selected to act as indexing servers or super nodes while the data exists on user computers. This hybrid platform tries to make the best use of stability offered by centralized indexing systems and the decentralized pattern of local indexing systems. .
The Menace – The Economic impact of Peer 2 Peer technology
The P2P platforms unquestionably made the downloading and sharing of media files so simple that even the less net savvy have learned to adapt. But despite these benefits the fact remains that corporate holders did not grant legal permission for the media to be shared and distributed on p2p networks.
Musicunited.org estimates that 2.6 billion files are illegally downloaded each month. As of august 2005 compared to legal online music stores, P2P services attract up to 60 million more users in the USA.
Recording Industry Association of America (RIAA) claims that retail value of shipments of recorded music in the USA has dropped from about $13.5 billion in 1999 to $11.5 billion in 2005.
In 2004 “Big champagne”, an internet measurement service estimated 13 billion songs were available for illegal download and sharing on P2P networks. The Year 2005 saw a further fall in the sales of music albums in the USA by 7%. World wide the recording industry estimates about $ 4.5 billion is lost to piracy. At any given time 7.6 million people are logged on to p2p networks .
Several p2p network designers are now involved in the creation of “Small – World networks” to go around the legal and technical complexities that have risen. A new development in p2p networks is the use of military grade encryption and randomization to prevent the loss of user anonymity when agencies hired by major copyright holders are trawling these networks for copyright abuses.
The American copyright act invests in copyright holder a bundle of rights which include rights of reproduction of the work , creation of derivative work , public performance , distribution and digital performance. Though a small minority of users who put up media files for distribution have legitimately purchased the media they are sharing. The rights they hold in the media is limited putting up media files on P2P networks is in excess of the rights granted under the license agreement to which the user subjects himself when he is buying the product .
An attempt to reach a solution:-
P2P networks have increasingly become a significant part of our information sharing process. The problem with P2P networks is that most of the material shared is copyrighted and such sharing violates the exclusive right of the copyright holder to make and distribute copies. The question invariably arises: Who should be liable for such copyright violations? Is it the people who share copyrighted information or is it the P2P networks facilitating such direct user infringement?
Courts have attempted to answer these difficult and policy ridden questions by using pre existing legal principles. The American Copyright Act of 1909 and 1976 mainly deal with primary liability that is the liability can be imputed only on those who directly infringe copyrights. But courts have long imposed liability for actions taken by third parties. This sort of liability is called Secondary liability. Secondary liability is of two types- Contributory liability and Vicarious liability. These primarily exist to inculpate parties who do not infringe copy right of the owner.But both vicarious and contributory liability impinge upon infringement by a direct infringer.
Vicarious liability is an extension of the tort concept of “Respondent Superior” which imputes liability to employers for the acts of their employees who are acting within the scope of employment. Vicarious liability if it is to be applied has to satisfy two conditions:-
1) The ability and right to supervise the infringing conduct and,
2) The direct and obvious financial interest in the infringing activity.
The concept of contributory liability grew out of a separate tort concept of Enterprise Liability which allows an injured party who cannot identify which industry manufacturer is responsible for the injury to hold all members of the industry liable in participating in manufacture of that harmful and injurious product.
Despite the long standing common law origin of Contributory Infringement case laws were scarce till the early 80s. The Supreme Court in the
Case of, Kalem co. v.Harper Bros., Kalem commissioned a man to turn the book “Ben Hur” into the now famous movie with the same name.
Without first securing permission from the copyright holder in the book. Justice Homes in his now famous judgment found that Kalem was liable for contributory infringement because of its act of contribution to advertising in the films.
In the famous 1963 case of Shapero Bernstein and co. v.H.L.Green Co. and in the 1971 case of Gershwin publishing co.v. Columbia Artist Management Inc the second circuit court of appeals defined the contributory infringer as one who, with the knowledge of the infringing activity, induces, causes, materially contributes to the infringing conduct of another. This definition had two necessary ingredients:-
1) The alleged infringer possesses knowledge of the infringement
2) Has the reason to know of the direct infringement.
The Sony doctrine
In the 1984 US Supreme Court case of Sony Corp. of America .v. Universal city studios Inc. Disney and universal studios copyright holders of innumerable TV programmes sued Sony, the manufacturer of then – new
Betamax video tape recorders for the alleged infringement of the copyright act by customers of Betamax in recording copyrighted TV programmes.
The court in this historic case acknowledged the brotherhood of patent and copyright law the patent law principle of contributory infringement was added to supplement contributory copyright infringement jurisprudence. the express exception to contributory infringement in patent law that is anyone who “ offers to sell or sells… a staple article or commodity of commerce suitable for substantial non infringing use “ was invoked. The court invoked the Staple Article of Commerce Doctrine to resolve the complex problem before it, emphasizing the need to balance the propriety interest of copyright holders against “The right of others to freely engage in substantially unrelated areas of commerce”, applying this doctrine the court held that Sony was not liable for contributory infringement because the Betamax was capable of substantially non infringing uses. The court deemed time – shifting an activity where users used VTR’s to record a programme for later viewing because of the following reasons:-
1) some copyright holders authorized consumer time shifting and
2) Unauthorized time shifting constituted fair use because it did not significantly affect the market value or the interests of copyright holders.
A significant feature of this judgment was that the court did not focus on the traditional contributory infringement requirement that the contributory
infringer possesses knowledge of the infringing activity. The court further said that the defendants Sony would only be liable if they possess actual or constructive knowledge.
Application of Sony doctrine in P2P litigation
CASES:-
(1) Napster
In A & M records inc. v/s Napster, Inc. the case which went from the 9th circuit court of appeal to the Supreme Court was the first major case which was filed against P2P networks by the recording industry. In this case the approach of the ninth circuit differed substantially from the Supreme Court. The ninth circuit was asked to look into whether the user of napster could be declared as fair users under the copyright act. .Napster argued that users were using the content for three fair uses:-
1) Sampling – downloading a song to decide whether to purchase it.
2) Space shifting – copying a song from a cd one has legally purchased
3) Permissible distribution
With respect to sampling, the court decided that consumers are less likely to purchase from legal sources when they have already downloaded music and that such downloading creates a barrier to launch retail downloading by the industry. With respect to space shifting the court said space shifting in Napster could be clearly distinguished from time shifting in Sony because the content in this case could be broadcast to the general public. Once a user puts a song he owns onto the Napster network while such activity could not be done in Sony. The court found Napster users were not fair users. It added the use was merely copying and infringing use was commercial.
The circuit looked into Napster’s secondary liability in the form of contributory liability by looking at Napster’s knowledge of infringing activities. Napster tried to use “The Staple Article of Commerce Doctrine from Sony as a defense”. But the court rejected this approach because the doctrine was a mere “gloss on the knowledge element”. The court rather decided that “in an online context, evidence of actual knowledge of specific acts of infringement is required” to establish contributory liability. So even if Napster was capable of substantial non infringing uses it would still be a contributory infringer if it had knowledge of specific acts of infringing. The evidence that RIAA notified Napster of thousands of infringing files on its network and the failure of napster to remove those files made Napster liable. Further the court found the very purpose and architecture of the service aided users infringing conduct.
Evaluating vicarious liability aspect of Secondary liability for providing the file sharing software, the court declined that the Sony doctrine did not apply to vicarious liability and is limited to contributory infringement because the vicarious liability aspect was not before the Supreme Court. Napster met the first element of vicarious liability as it had a direct financial interest in the infringement, because the pre downloading induced the users to register with the service. The court also found napster satisfied the 2nd element of vicarious liability and supervise infringement as the service had the ability to locate infringing material listed on its search indices and the right to terminate user access to the system because Napster did nothing to remove infringing files. The court held that Napster’s ability to block user access was sufficient evidence of supervisory capacity. Thus Napster was held liable for copyright infringement and had an out of court settlement for a token sum of 50 million U.S. dollars with the RIAA.
(2) Aimster
In 2003 the seventh circuit court of appeal had before it the litigation of In Re Aimster where the music industry sued the programmers of a P2P programme for contributory and vicarious liability. The Aimster service utilized American Online Instant Messaging services to enable copyright material distribution because the files were not kept on Aimster servers; it escaped liability for direct infringement.
The court in its approach took a novel path to access the potentially non infringing uses of a product. The court did not take the Sony approach to determine non infringing uses of the technology. Instead the court wanted to examine the array of potential users to determine just how infringing the product was. The court thought “magnitude of these users is necessary for finding of contributory infringement.” The court determined to establish actual use as a threshold and thus evidence proved aimster was pre-dominantly used to infringe copyrighted material.
In examining Aimster’s liability for the contributory infringing aspect of secondary liability the circuit court departed from Napster’s knowledge requirement by holding actual knowledge of specific infringing unnecessary. Instead if Aimster’s developers believed its users would utilize the programme to infringe, the programmers should not have created the programme or adequate steps should have been taken to ensure against infringing activities . In discussing whether encrypted data transfer on part of aimster to engage in “Willful blindness would amount to knowledge in copyright law”. The court decided willful blindness is taking affirmative action to shield oneself from learning about the unlawful acts. Thus it was held aimster could not avoid the knowledge element of contributory infringement. on the question whether aimster materially contributed to infringement the court said aimster is like “An aide and an abettor” of criminal activity examining Aimster’s culpability under vicarious infringement was not answered satisfactorily regarding ability and control because the court explained that if a the Sony decision had mandated that the Betamax undergo design changes the issue would be clearer. The court further said where the copyright owner proves infringement; he is not required to show a financial loss occurred to get an injunction .
(3) Grokster II
The Ninth circuit was called to look into the case of Metro Goldwyn Mayor v/s Grokster Inc. the year 2005. This case was landmark as the district court and the circuit court of appeals held that Grokster was not liable by quoting the precedents in earlier cases which talked of secondary liability in Copyright infringement like Sony, Napster, Aimster and on the fact that the architecture of Grokster did not allow the developers of the software to control user activity in any way.
The court held that Grokster was not secondary liable for direct copyright infringement rights users even though 90% of the content exchanged over Grokster was protected by copyright and 70% of the copyright in that content was held by the plaintiff. Because of the fact that unlike Napster which used a centralized server to store the indices of thee files available on its network, Grokster did not have a centralized server, the program was wholly decentralized, and it depended on its users to create their own network to distribute files.
Analyzing the Secondary liability aspect the court used the ‘Staple Article of Commerce’ doctrine from Sony. The court further held that all the defendants needed to show was that the program had substantial non infringing uses. The defendants proved the program had substantial non infringing uses in that unpublished works of new artists , literature available on Project Gutenberg and movies released on Pre – Linger archives were distributed through this network.
Discussing whether Grokster substantially contributed to Material Infringement the court said because Grokster did not host actual files or a list of files on an index , the distributors could not control access of the users the court decided that grokster did not contribute to the infringement.
In determining the vicarious liability the court decided that by virtue of the soft wares the architectural design, there was no right or ability to block individual users. Moreover there was no way to trace users because registration was not requisite. Thus the court determined the defendant did not have the right or the ability to supervise the user. The 2nd element, financial interest in the infringing activity did not hold water as grokster model had no advertising revenues. Thus the 9th circuit held grokster was not liable for secondary infringement.
(4) Grokster III – the new doctrine of “Inducement Standard” evolved by the Supreme Court:-
On July 27, 2005 the Supreme Court made its decision on Grokster III where the question in front of the court was “under what circumstances the distributor of a product capable of both lawful and unlawful use is liable for acts of copyright infringement by 3rd parties using the product?”
The essence of the supreme court judgment was that “ Whoever distributes a device with the object of promoting its use to infringe copyright , as shown by a clear expression or other affirmative steps taken to faster infringement , is liable…” for third party infringement .
The Supreme Court in its judgment declared that the Ninth circuit misapplied Sony doctrine and its stand that Grokster’s capability for non infringing uses precluded liability for contributory copyright infringement was a wrong interpretation.
The court distinguished between the knowledge aspect in Sony and Grokster by saying that in Sony there was knowledge that only some user would infringe while grokster promoted infringing uses of its product. The court held the Ninth circuit holding of just looking into the capacity of non infringing uses and not examining the defendants intent was an error. The court looked into the evidence of the defendant’s intent to determine the liability in this case.
The Inducement Standard now applicable to Copyright law
The Supreme Court held Grokster was liable for contributory infringement as it intentionally induced and encouraged direct infringement. Rather than applying the Sony standard the court adopted the patent law theory of “Intentional inducement of infringement”. This theory of liability requires the plaintiff to prove that the defendant knowingly aided and abetted another’s direct infringement. The court further said specific intent to encourage infringement – something more than mere knowledge was reqd. to hold the plaintiff liable. The evidence that internal communication and advertisement showed Grokster’s intent to retain previous napster users and their business model of selling advertising space on the software proved the malicious intent. Moreover as held in the case of Oak industries v/s Zenith electronics the court held that advertisement indicates an affirmative intent of the product to infringe.
Conclusion
Because of the Court’s decision to remand the matter, lower courts now must apply the inducement test, which is really an intent-based test that focuses on the object of a defendant’s enterprise in future litigation. Unfortunately, the standard does not give much guidance to innovators and distributors. If there are communications, either internal or shared with the public, that encourage infringement, then those software distributors are likely to be liable based on an intent to induce infringing activities. Because of the new test, discovery disputes will likely arise, with plaintiffs desiring every communication voiced, written, emailed, or conveyed by the defendants.
Regardless of what any court holds, P2P software will continue to function on users computers. Additionally, companies might be rewarded by offering software in countries with no fully-formed Copyright or patent laws. Some believe that the case is wholly irrelevant because without re-designing how the Internet works, illegal file sharing will continue. Files can be transferred in e-mail attachments.and they can be transferred through Instant Messaging. They can be transferred via MMS. File transfers are basic to networking – the future of the Internet without the ability to transfer files we’re down to typing.
Andrew J. Lee, MGM Studios, Inc. v. Grokster, Ltd. & In re Aimster Litigation: A Study of Secondary Copyright Liability in the Peer-to-Peer Context
The cost of operating a web site, for example, includes the cost of the server and the network bandwidth it uses. The cost of bandwidth increases directly with how much data is sent, and as sites become more popular they also require larger and more expensive servers. See, e.g., Peer-to-Peer Systems and Applications 29 (Steinmetz & Wehrle eds., 2005).
Commentators have likened this method, utilized by the Napster platform, to Internet search engines. Craig A. Grossman, From Sony to Grokster, the Failure of the Copyright Doctrines of Contributory Infringement and Vicarious Liability to Resolve the War between Content and Destructive Technologies, 53 Buff. L. Rev. 141, 193-94 (2005). When users perform a search, the files themselves are never stored or routed through the central server. Instead, the central server simply maintains an indexed list of the file names. Id. Once a user selects a file from that index, the network directly connects the two users, allowing a direct download from one computer to the other
Jesse M. Feder, Is Betamax Obsolete? Sony Corp. of America v. Universal City Studios, Inc. in the Age of Napster, 37 Creighton L. Rev. 859, 865 (2004).
An early platform known as “Gnutella” operated in this manner. Gnutella was first introduced in 2000 and has existed in several incarnations since that time. While the Gnutella system has not been plagued with the same type of legal problems as other P2P networks, some thought that the early Gnutella client design had traded resistance to litigation for system instability.”
RIAA, Yearend Statistics (2005), available at http://www.riaa.com/news/newsletter/pdf/2005yearEndStats.pdf
See generally Kristina Groennings, An Analysis of the Recording Industry’s Litigation Strategy Against Direct Infringers,, 7 Vand. J. Ent. L. & Prac. 389 (2005)
See generally Kristina Groennings, An Analysis of the Recording Industry’s Litigation Strategy against Direct Infringers, 7 Vand. J. Ent. L. & Prac. 389 (2005).
. See Peter Biddle et al., Microsoft Corp., The Dark net and the Future of Content Distribution
William Sloan Coats et al., Blows Against the Empire: Napster, Aimster, Grokster and the War Against P2P File Sharing, 765 Practicing L. Inst. 445, 457 (2003). See 17 U.S.C. §106.
31 In re Aimster C. r. Litig,344 F 3d 643,645[7th Cir 2003]. It should be noted that the elements of contributory and vicarious liability were assessed, but not under their correctly-named theories. For example, the element of control, usually assessed under vicarious liability, was assessed under contributory liability. Also, the element of a financial benefit was analyzed under a theory of contributory liability. Perhaps this is because this court thought the Court in Sony used the theories interchangeably.
See generally Fonovisa v. Cherry Auction, Inc., 76 F.3d 259 (holding vicariously liable defendants who have a financial interest in the infringing activity and who control the direct infringers); Religious Tech. Ctr. v. Netcom On-Line Comm’n Servs., 907 F. Supp. 1361 (finding substantial participation because defendant failed to stop the distribution of infringing material).
