July 12, 2014

avatar

Grokster: The Case is Submitted

Greetings Freedom to Tinker readers! I’m Alex Halderman, one of Ed Felten’s grad students at Princeton. I’d like to thank Ed for the opportunity to be a regular contributor to this site.

On Tuesday I had the privilege of attending the MGM v. Grokster oral arguments along with several students from Ed’s Information Technology and the Law seminar. The class spent weeks discussing the Grokster case, and our field trip to Washington afforded a rare opportunity to witness the legal process in person instead of just on paper. We camped overnight outside the court to secure seats for what proved to be a fascinating argument. Some of the students have posted commentaries [1, 2, 3] and photographs [1,2,3,4], of which this is my favorite.

It was difficult to tell what the Justices were thinking, since their questions deeply probed the arguments from both sides of the case, but I was left with the impression that they are leaning towards a revision or reinterpretation of secondary liability law. None of their questions directly addressed Grokster’s argument that the matter should be deferred to Congress, and Justice Scalia emphasized that the case certainly wouldn’t hinge on stare decisis. In contrast, what a new liability test might look like was a recurring theme.

MGM argued that businesses centered on infringement should not be seen as engaged in “substantially unrelated areas of commerce” as required by the Betamax test. Several Justices questioned whether this reading would make it too easy for copyright holders to intimidate creators of new technologies. Justice Breyer wondered whether the creators of the iPod, the VCR, or the Guttenberg press would have feared liability under such a test, Justice Scalia asked whether new technologies would need to be given a decade or more to prove their non-infringing uses before such a standard could be applied, and Justice Souter worried about the fate of lone innovators without access to expensive legal guidance (the “guy in his garage”). Clearly, Grokster’s council and amici have done a commendable job explaining these issues to the Court, and I’m relived to say that the worst-case outcomes, such as a complete replacement of the bright line protections for innovation afforded by the Betamax test, no longer seem likely.

On the other hand, some of the Justices were no more receptive to Grokster’s interpretation of the Betamax defense, under which products “merely capable of substantial non-infringing use” would not be subject to liability. Justice Ginsberg called this an overly simplistic reading of Sony and pointed out that the decision continues for 13 pages of nuanced discussion after the phrase cited by Grokster. She also emphasized differences between Grokster’s product and the Betamax: the primary use of the Betamax was found to be non-infringing, but the district court in the present case established that at least 90% of Grokster’s traffic infringed.

What most surprised me was that several Justices repeatedly asked about a standard barely mentioned in the main briefs from either side: a so-called “active inducement” test. Inducement is a concept borrowed from patent law under which parties can be held liable for encouraging others to misappropriate protected intellectual property. Tests based on active inducement were discussed in the U.S. Government’s amicus brief (filed in support of MGM) and in the IEEE’s amicus brief (filed in support of neither party). The Induce Act, debated in Congress last summer, would have created a test based on an inducement theory, but it was widely criticized for giving copyright holders too much control over new technologies and making it too easy for them to bring frivolous lawsuits. IEEE, which opposed the Induce Act, says its model of an inducement test would require a much higher standard of proof involving evidence that parites committed overt acts of encouragement, not merely that they failed to do all they could to prevent illegal copying.

Several questions about inducement came from Justice O’Connor, who cast the deciding vote in the Betamax case. She asked MGM’s lawyer whether inducement was a way to resolve the case. Along with Justice Scalia, she seemed skeptical of Grokster’s attempt to separate out its past actions that could be seen as inducing infringement. Those acts do apply to the current case, Scalia insisted, because they were what developed Grokster’s current clientele. Scalia also wondered whether an active inducement standard would go far enough. Couldn’t a successor build a product identical to Grokster, he asked, but escape liability by being careful not to induce? Both MGM’s counsel, Donald Verrilli, and Paul Clement, speaking for the Government, responded that inducement would not be a sufficient remedy. Creators of future file sharing products would be careful not to leave a paper trail documenting their inducement, Verrilli warned.

Despite these objections, I think it is plausible that the Court will craft a narrow active inducement test resembling the IEEE proposal. This is likely for several reasons. Such a test would be neutral with respect to technology, thus creating a precedent applicable to much more than peer-to-peer file sharing. It would be responsive to the worries of technologists by clearly defining how innovators would need to act to avoid liability, yet it would also allow the courts to hold Grokster accountable because of its past encouragement of infringement. Inducement would function as a parallel category of liability complementing Sony, so the Court could leave the celebrated Betamax test intact. With both rules in place, defendants would need to demonstrate substantial non-infringing uses of their products and refrain from overtly encouraging infringement. Perhaps the most attractive feature of an inducement test is that both the Government, which sided with the content industry, and the pro-technology IEEE support it in some form. This is the closest thing to a compromise that we have seen in the case. Neither Grokster nor MGM would be wholly satisfied with a narrow inducement test, but it could potentially cure the most imminent harms cited by the copyright owners while causing minimal collateral damage to innovation.

Now the waiting begins. We’ll find out what the Justices were really thinking in a few months when the Court issues its decision.

Comments

  1. joe says:

    some in the law community thought that the active inducement remand was very likely to happen… for example, see this post by David Post (Temple Law):

    http://volokh.com/posts/1107794379.shtml

  2. Neo says:

    “stare decisis” — we aren’t all lawyers here, or scholars specializing in Latin. In plain English, if you please?

    Also, an inconsistency — at one point the article says the government filed a brief on behalf of Grokster and IEEE files a neutral brief; later it says the government brief was on behalf of the content industry and the IEEE’s on behalf of Grokster. The latter sounds more likely — can an “amicus” brief even *be* neutral, given that that word means “friend”? (I do know *some* Latin. :)) Which is it?

  3. Alex Halderman says:

    Hi Neo,

    No, we aren’t all lawyers or Latinists–some of us are merely grad students! Thanks for the suggestion and correction. I added a link to an article about stare decisis and fixed the post to say the Government’s brief was in support of MGM.

  4. Ulrich Hobelmann says:

    I still wonder what the number of infringing uses of Grokster has to do with this, but I’m not a lawyer. So if large numbers of people bought kitchen knives and started stabbing people all over the country, would knives be outlawed?

    In my opinion *any* tool can *not* be held liable for any of its uses. If software tools like Grokster are used 90% for illegal uses, while knives are mostly not used to stab people, this doesn’t tell me that Grokster should be outlawed. It tells me instead that a stabber is usually sued pretty quickly, while file sharing might be seen as low-risk for most people. Why not start there, instead of sueing toolmakers?

    MGM — Wimps!

  5. Jeff Keltner says:

    Though I can understand how concept of a “active inducement” test would seem to the court like a reasonable compromise between the points of view of the two sides, wouldn’t that enter the realm of creating new law and not enforcing existing law? Wasn’t one of the major points of the Betamax decision that when it came time to re-balance the interests of innovators and content creators that the proper forum for such a decision was Congress? Not that I like the idea of Congress making those calls, but wouldn’t that be the appropriate place to create a new form of liability for “actively inducing” copyright?

  6. Cypherpunk says:

    Welcome, Alex. This is the best commentary I have seen on this issue: objective, analytical, and by identifying the importance of the active inducement standard it gives us a much clearer picture of the court’s thinking.

    Your reasoning and evidence is persuasive that this is the direction the court will pursue. The IEEE brief shows that active inducement has a long history in case law, legislative action and supreme court decisions. It even played a major if often unrecognized role in the Sony decision that everyone claims to understand so well.

    According to the IEEE brief, active inducement requires showing that “the defendant engaged in overt, knowing, and intentional conduct inducing infringement. Liability is not triggered by the defendant’s inaction coupled with other persons’ action”.

    If the court does pursue this direction, it’s likely that we will see further legislative action to fine-tune the inducement standard. This will be an opportunity for interested parties get involved in the political process.

    Again, welcome and thanks for shedding some much needed light on this issue.

  7. Stephen Cochran says:

    I find it odd that file sharing networks are facing an active inducement test, while gun manufacturers are free to make, advertise and sell weapons with fingerprint resistant finishes. aren’t armed robbery, assault and murder a much more severe threat to our society than file sharing?

    It’s sad how far out of whack our priorities have become.

  8. Ulrich Hobelmann says:

    That’s right. *People* abuse weapons, and *people* abuse software. Less people abuse weapons, because weapon-owners are more afraid of the law. Whose fault is that?

    Do we need to prohibit all tools on this world that people shouldn’t abuse but whose misuses are not actively prosecuted (or not enough)?

    As far as I understand, induce means something like actively encourage. BitTorrent was expressly created for legal content (and is used *a lot* for that). Still there’s a lot of abuse happening. Grokster is also marketed as a tool for “content developers” (see http://www.grokster.com); I don’t know it’s use statistics. I wouldn’t call that inducing.

  9. Neo says:

    I’m disturbed by the possible effect an “active inducement” standard will have on file sharing systems that contain anonymity features and the like. Will these be likened to fingerprint-resistant guns and sued as having features “obviously” intended to please infringers? Even if the makers of such software would win any such suits on the grounds of obvious legitimate uses for the anonymity features, such as getting news out of repressive regimes under censors’ noses and so forth (and likewise encryption features have legitimate uses in the sharing of secure documents) the lawsuits’ costs could be ruinous, and the mere threat of them might have chilling effects.

    The future of the freenet project, for example, could be at stake. There’s both anonymity and encryption in freenet — it’s designed to be difficult to find out what documents are hosted on a node, who introduced a document into the network and who now hosts copies, and so forth. Freedom of speech is their concern, but they could be painted as “active inducers” on the theory that “if they didn’t intend their users to be able to hide illicit activity they wouldn’t have gone to such lengths to encrypt and anonymize”.