As a technologist I find the most interesting, and scariest, part of the Grokster opinion to be the discussion of product design decisions. The Court seems to say that Sony bars liability based solely on product design (p. 16):

Sony barred secondary liability based on presuming or imputing intent to cause infringement solely from the design of distribution of a product capable of substantial lawful use, which the distributor knows is in fact used for infringement.

And again (on p. 17),

Sony‘s rule limits imputing culpable intent as a matter of law from the characteristics or uses of a distributed product.

But when it comes time to lay out the evidence of intent to foster infringement, we get this (p. 22):

Second, this evidence of unlawful objective is given added significance of MGM’s showing that neither company attempted to develop filtering tools or other mechanisms to diminish the infringing activity using their software. While the Ninth Circuit treated the defendants’ failure to develop such tools as irrelevant because they lacked an independent duty to monitor their users’ activity, we think this evidence underscores Grokster’s and StreamCast’s intentional facilitation of their users’ infringement.

It’s hard to square this with the previous statements that intent is not to be inferred from the characteristics of the product. Perhaps the answer is in -footnote 12, which the court hangs off the last word in the previous quote:

Of course, in the absence of other evidence of intent, a court would be unable to find contributory infringement liability merely based on a failure to take affirmative steps to prevent infringement, if the device otherwise was capable of substantial noninfringing uses. Such a holding would tread too close to the Sony safe harbor.

So it seems that product design decisions are not to be questioned, unless there is some other evidence of bad intent to open the door.

To make things worse, the Court here criticizes Grokster and StreamCast for making a very reasonable engineering decision. There is every reason to believe that filtering technology would add to the cost and complexity of the companies’ software, without substantially reducing infringement. (We discussed this issue in the computer science professors’ brief.) In short, the Court here engages in exactly the kind of design second-guessing that technologists fear.

Legitimate technologists will still worry that a well-funded plaintiff can cook up a stew of product design second-guessing, business model second-guessing, and occasional failures of copyright compliance by low-level employees, into an active inducement case. This risk existed before, and the Court today hasn’t done much to reduce it.