Grokster, the Little Engine that Could, Chugs Up One Last Hill

By Pamela Jones, Editor of Groklaw

LWN.net

February 2, 2005

Grokster is the Little Engine That Could. So far, against overwhelming odds, it has successfully dodged every legal bullet a massive horde of entertainment companies - some 28 of them, representing the interests of the music recording and movie industry - have thrown at it. Now, there is one more hill, and it's the steepest of them all, a hearing before the US Supreme Court in March.

There is a lot more at stake than just the fate of a couple of peer-to-peer file sharing services. What's at stake, to quote from one of the many amici briefs filed in this high-profile case (this one [ http://www.eff.org/IP/P2P/MGM_v_Grokster/?f=20030926_ccia_amicus.txt ] by the Computer & Communications Industry Association and NetCoalition) is nothing less than this: it's a push to overturn the court's ruling in Sony Corp. of America v. Universal City Studios, 464 U.S. 417 (1984) (the "Betamax case") and replace it "with new standards that would as a practical matter give the entertainment industry a veto power over the development of innovative products and services."

The appearance of amici briefs from such technology groups and associations in Grokster marks the first time we've seen them join the P2P fray, a recognition that technological innovation is at odds with some of the desires of the entertainment industry.

Of course, Hollywood doesn't tell it that way. To them, what is at stake is expressed in their brief to the Supreme Court. Here [ http://www.eff.org/IP/P2P/MGM_v_Grokster/04-480_Petitioners_brief.pdf ] [PDF] is how the recording and movie studio petitioners' brief phrases the question they think is before the Court:

Whether the Ninth Circuit erred in concluding, contrary to long-established principles of secondary liability in copyright law (and in acknowledged conflict with the Seventh Circuit), that the Internet-based "file sharing" services Grokster and StreamCast should be immunized from copyright liability for the millions of daily acts of copyright infringement that occur on their services and that constitute at least 90% of the total use of the services.

There is abundant hyperbole on display in their brief as well. Life will, in their eyes, more or less not be worth living if they don't prevail. On page 29, for example, they write: "Respondents thus erode not only the public perception of the value of sound recordings, musical compositions, and motion pictures, but respect for the very foundations of copyright law in the digital age."

The Songwriters [ http://www.eff.org/IP/P2P/MGM_v_Grokster/Songwriters_brief.pdf ] brief [PDF], representing, they say, 27,000 songwriters and music publishers "who own the copyrights in more than 2.5 million songs," waxes poetic about creativity and money. They have united, they say, to "confront 'the monster that is now devouring their intellectual property rights.'" Their world view is simple and clear. They want their money, and they want it now. And both groups want it from Grokster and StreamCast, without the hassle and poor returns one might expect from individual lawsuits against the services' customers. They want Grokster and StreamCast held liable for the infringing acts of their customers, nothing less, despite the lower court's ruling that they had no control over their users. "Poppycock," responds the entertainment industry. If they just wanted to, they could.

Take note of the reference to the 90% figure, although the accuracy of the figure itself is disputed by EFF. [1] It's a key part of the plaintiffs' strategy to get the court to reinterpret the Sony Betamax ruling, which held that a distributor cannot held liable for users' infringement so long as the product is "capable of substantial noninfringing use." It is on that sentence that Grokster and StreamCast have survived so far.

But now the argument is being made that the noninfringing use of these services is a tiny fraction in comparison to the infringing use, and it isn't conceivably commercial use, so in their eyes, it doesn't count. The word they use is "incidental". You can't sustain a business on distribution of free public domain copies of the Bible or the Gettysburg Address. Anyway, they argue, you can get those things and copyrighted works that are authorized for free digital distribution in other ways. They have no comprehension that some might prefer the P2P method of distribution over any other, or that it is worth entertaining seriously.

Peer to peer is faster and easier and simpler [ http://www.firstmonday.org/issues/issue7_8/bowrey/index.html ] than previous distribution methods. Instead of a funnel, with a media outlet distributing through its narrow end, everyone on the internet could just share whatever they had with anyone, even if only one other individual in the world wanted it.

The district court's technically clueful decision, which I wrote about as the subject of Groklaw's very first article, said this about noninfringing use:

Here, it is undisputed that there are substantial noninfringing uses for Defendants' software, e.g., distributing movie trailers, free songs or other non-copyrighted works; using the software in countries where it is legal; or sharing the works of Shakespeare. . . . For instance, StreamCast has adduced evidence that the Morpheus program is regularly used to facilitate and search for public domain materials, government documents, media content for which distribution is authorized, media content as to which the rights owners do not object to distribution, and computer software for which distribution is permitted.

What is happening now is an attempt to assert that "substantial" noninfringing use isn't enough. It must be dominant. When you consider the way new technology is often adopted, that could represent a significant bar to innovation. EFF for StreamCast:

[T]he Betamax principle has the salutary effect of encouraging the incumbent entertainment industry giants to adjust their business models to see whether there is money to be made using new technologies. The 'primary use' test, in contrast, gives them an incentive to let slip the dogs of litigation as early as possible, before a new technology starts proving its noninfringing potential.

Companies are not likely to innovate when the risks are so unpredictable and the law is stacked against heavily them, as the Digital Media et al amici brief [ http://www.eff.org/IP/P2P/MGM_v_Grokster/050124_DiMA+Netcoal+ITAA+CDT_Grokster_Friend_of_Court_Brief.pdf ] [PDF] explains:

Amici do not condone -- indeed, they strongly condemn -- the use of peer-to-peer technologies to violate copyright law. Neither, however, do amici support the substantial broadening of the standards for secondary liability that petitioners urge this Court to adopt. Amici submit this brief to apprise the Court of the dangers to technological innovation, free expression, and democratic values online that are posed by petitioners' position. . . .

Without the crucial protections for technology innovators recognized in Sony, courts would be put in the untenable position of deciding when a provider of novel technology has 'done enough' to prevent intentional misuse by others. Worse yet, courts would be called upon to balance the theoretical cost-efficiency of potentially unproven design changes that a technology provider might make to reduce the risk that technology users might violate copyright laws. Under such a regi with great trepidation, training one eye toward the potential liability their new technologies could incur if abused by purchasers, licensees, or sub-licensees. Inevitably, technological progress would be impeded, as the potential for technologies and product features that would benefit legitimate users. In the long run, innovation -- and therefore society as a whole -- would suffer."

Of course, Hollywood hated the Sony Betamax ruling from its birth, and now they are seeking a subtle way to make it walk the plank or at least pull out all its teeth. On March 29, the Supreme Court of the United States will hear arguments on the Grokster case. That's not the official title, of course. It's cited as Metro-Goldwyn-Mayer Studios Inc., et al, v. Grokster, Ltd, et al. You could just call it the Entire World v. P2P, though. The case was begun in October 2001, brought by the largest entertainment companies in the world, supported now by all their friends.

And I do mean all. There are now 19 separate amici briefs in support of the music and movie industry's position, including one from Napster [ http://www.eff.org/IP/P2P/MGM_v_Grokster/050124_napster_etc.pdf ], of all things, as well as:

Even Senators Patrick Leahy and Orrin Hatch have filed a brief [ http://www.eff.org/IP/P2P/MGM_v_Grokster/050124_Leahy-Hatch_Amicus_Brief.pdf ] [PDF], contradicting the defendants' statement, accepted by the judges, that it is up to Congress to change Sony Betamax, not the courts. Not so, claim the Senators. "The Court cannot refuse to fulfill its constitutional responsibility simply because Congress may be working through possible legislation, that, even if passed and signed into law by the President, may or may not address the issue at hand," their brief contends. Of course, they already tried to change the law, by introducing the INDUCE Act [ http://www.corante.com/importance/archives/004563.html ], but they couldn't get it passed so far, so now they tell the judge it's up to the Court to do what they failed to accomplish.

Why is this case so vital in the eyes of so many? Obviously, it's about money and control. It's a lot easier for entertainment companies to sue a gateway than to sue individual infringers who, they point out, are likely judgment-proof anyway. "Judgment-proof" is legalese for "this potential defendant isn't worth suing because he has no money, and it would cost more in legal fees to win a judgment than we could possibly collect, so let's find someone with deep pockets we can sue instead." The RIAA tried kind of the same thing in the Verizon case [ http://www.groklaw.net/article.php?story=20041028172616656 ], but the court there told them they had to file against infringers one by one instead of going after Verizon.

It's also a debate between those who understand technology and those who don't, as Edward Felten has pointed out in his analysis [ http://www.freedom-to-tinker.com/archives/000755.html ] of the brief filed by the Solicitor General [ http://www.eff.org/IP/P2P/MGM_v_Grokster/050124_US_Amicus_Br_04-480.pdf  ] [PDF]. The Internet is, after all, when you think about it, a file sharing system itself. And the entertainment industry doesn't like it one bit. It would like the world to stop in its tracks and cling to the old, funneled way of distributing information, whereas the world has found a system that is easier, quicker and cheaper, and they want the better mousetrap.

And then, in the middle, is the more subtle and complex issue of how to define and protect valid copyright rights in a digital age without destroying fair use, innovation, and Constitutional rights of free expression at the same time.

There are a block of amici briefs that take neither side's position and want the Court to remand the case to the district court and look at the matter with fresh eyes. "Grokster's conduct in this case may well give rise to liability," says Digital Media et al's amici brief [ http://www.eff.org/IP/P2P/MGM_v_Grokster/050124_DiMA+Netcoal+ITAA+CDT_Grokster_Friend_of_Court_Brief.pdf ] [PDF], but they add that while design and manufacture is protected by Sony, conduct that actively encourages users to infringe is not. Their hope is to leave Sony Betamax intact, but look at whether the respondents crossed other lines that could lead to them being found guilty of infringement on a basis that won't topple Sony. EFF has all of the briefs [ http://www.eff.org/IP/P2P/MGM_v_Grokster/ ] on its website.

Does Grokster stand a chance? Obviously, it would have been better from the defendants' standpoint if the Supreme Court had not accepted the case and had let the Ninth Circuit decision stand. On the other hand, this case has resulted in some surprises before. Back in April of 2003, when the district court in Los Angeles granted partial summary judgment in favor of StreamCast and Grokster, the entertainment industry was stunned. After knocking over Napster and Aimster and all their cousins like so many lined-up dominoes, the industry wasn't used to losing. And yet, here was a judge who said that P2P software is capable of noninfringing uses, and so, relying on Sony Betamax, the accused were not liable for users' copyright violations.

Plaintiffs appealed to the Ninth Circuit Court of Appeals. The oral arguments [ http://www.groklaw.net/article.php?story=20040823002045984 ] were riveting. At the conclusion, even one of the three judges, the Hon. Sidney R. Thomas, who wrote the final opinion, at the conclusion of the hearing told them, "Excellent arguments, and the briefing has been superb." Judge Thomas hit the nail on the head. The lawyering in this case has been admirable, and whatever happens, it won't be because one side or the other dropped the ball.

The Ninth Circuit's decision [ http://www.eff.org/IP/P2P/MGM_v_Grokster/20040819_mgm_v_grokster_decision.pdf ] [PDF] upheld the lower court. Remember, this court is the very one that upheld the Napster decision. Plaintiffs appealed again, and in December 2004 the Supreme Court granted certiorari. You don't just get to argue your case before the Supreme Court at will. You must persuade them to let you.

And what about the respondents? Everyone else has had its say, but their Supreme Court briefs will not be filed until March 1, 2005, along with amicus briefs in support. But we are not left in the dark about their position, as we can read EFF's Brief in Opposition to the Petition for Certiorari [ http://www.eff.org/IP/P2P/MGM_v_Grokster/20041108_Final_Brief.pdf ] [PDF], the transcript [ http://www.groklaw.net/article.php?story=20040823002045984 ] of the oral arguments before the Ninth Circuit, StreamCast's [ http://www.eff.org/IP/P2P/MGM_v_Grokster/20030917_morpheus_appeal_brief.pdf ] and Grokster's [ http://www.eff.org/IP/P2P/MGM_v_Grokster/20030917_grokster_appeal_brief.pdf ] briefs [PDFs] to the Ninth Circuit, EFF attorney Fred von Lohmann's Law.com article [ http://www.law.com/jsp/article.jsp?id=1090180416759 ], as well as my favorite, the Amicus Brief of 40 law professors [ http://www.eff.org/IP/P2P/MGM_v_Grokster/20030930_lawyers_amicus.pdf ] [PDF].

For the time-challenged, EFF's Fred von Lohmann, who represents StreamCast, calls the lawsuit "nothing less than a frontal attack on the Betamax ruling":

The Betamax principle is simple: so long as your product is capable of substantial noninfringing uses, selling it will not put you on the hook for every infringement a customer may commit with it. If copyright owners want a different rule for any particular technology, they can go to Congress and ask . . . According the entertainment industries, the Betamax defense "should not apply when the primary or principal use of a product or service is infringing" . . . They specifically reject the "mere capability" test . . . that the majority of the Supreme Court endorsed in 1984.

Why does this distinction matter to innovators, he asks? Because if "primary use" becomes the test, and it's "measured from the point of view of Hollywood lawyers", innovators will have to "stare down the lawyers before they ever reach the market." And it's only if P2P file-sharing technology is allowed to continue to flourish and mature, EFF argues, that will we ever find out what its ultimate "primary use" may turn out to be.

The Sony Betamax decision, then, is the rock on which Grokster's defense stands, and it is really the prospect that the rock might crumble that will have multitudes flocking to the Supreme Court in March, either salivating at the prospect or in real dismay. 2

When should the distributor of a multi-purpose tool be held liable for the infringements that may be committed by end-users of the tool? That is the question before the Supreme Court. Edward Felten puts it [ http://www.freedom-to-tinker.com/archives/000756.html ] succinctly:

The biggest issue in the Grokster case is whether the Supreme Court adjusts or clarifies its precedent from the Sony Betamax case. The fate of Grokster itself is much less important than what ground rules the Court imposes on future innovators.

The Supreme Court's visitors' guide opens with these words:

A case selected for argument usually involves interpretations of the U. S. Constitution or federal law. At least four Justices have selected the case as being of such importance that the Supreme Court must resolve the legal issues.

In the case of Grokster, that is not hyperbole.

1 Fred von Lohmann explains that the sole expert, upon whom plaintiffs' rely, found that 15% of P2P contented sampled on one occasion by the expert "consist of commercially released sound recordings..., compositions, videos, and the like" not owned or controlled by Plaintiff companies. -10% were either unidentifiable, or "snippets of software, a picture of Bob Marley playing soccer and a document concerning someone's divorce."

"The declarant then **assumed** that the 15% was 'very likely infringing.' No basis was given for this, and there is no evidence that they bothered to track down and ask any of these rightsholders if they minded P2P sharing among fans. Included among the 15% are live concert recordings from Phish, the Grateful Dead, DJ Logic, and Bela Fleck, all of whom have authorized noncommercial sharing of live recordings (DJ Logic and Bela Fleck, in fact, are part of the Internet Archive's Live Music Archive). Also included are independent artists who (assuming they still control their own rights) may not object to noncommercial sharing among fans, including Wilco, Tenacious D (who authorizes sharing of live recordings), Ani Difranco, White Stripes, Kid Koala and Moby.

"There's no evidence that any of the rightsholders in the 15% were ever asked. Instead, Petitioners simply presumed to speak for all rightsholders, asserting that all copyright owners view noncommercial sharing by fans the same way they do. "So I think 75% is where the **real** numbers begin on this record (with the renewed note that it should have been even lower, but for flaws in building the sample)."

2 It is possible [ http://www.supremecourtus.gov/visiting/visiting.html ] to attend the Supreme Court hearings, by the way, if you get on line early enough. It's first-come, first-serve, with the line forming in the Front Plaza, and seating is limited. Here's [ http://www.supremecourtus.gov/visiting/visitorsguidetooralargument.pdf ] a visitors' guide [PDF] that explains what you will see and what is expected of visitors. In this case, I doubt you will get in, given the intense interest in the case, but who knows? But be aware, if you try to attend, that there are two lines: one for those wishing to listen to everything, and one for a 3-minute walk-through, so look for the signs. Seating for the morning session begins at 9:30, with arguments to begin at 10 AM, but plan to get there a lot earlier than that. There is, of course, a security checkpoint. But the hearings will be transcribed and probably there will eventually be video available as well in time. You can find audio files of Supreme Court hearings on the Oyez Project's US Supreme Court Multimedia Database. When the transcript is done, you'll find it on this Supreme Court web page [ http://www.supremecourtus.gov/oral_arguments/argument_transcripts.html ]. A ruling in the Grokster case won't issue until July. Here's [ http://www.llrx.com/features/supremectwebguide.htm#Oral%20Arguments ] a guide to Supreme Court research, in case you've gotten hooked.

Copyright 2005