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Grokster may be liable for users' copyright infringement

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NEWS MEDIA UPDATE   ·   U.S. SUPREME COURT   ·   Copyright/Intellectual Property   ·   June 27, 2005

Grokster may be liable for users’ copyright infringement

  • Manufacturers of peer-to-peer software may be held liable for users who illegally download copyrighted files, the U.S. Supreme Court ruled unanimously Monday, creating a new standard for third-party copyright infringement liability.

June 27, 2005  ·   Peer-to-peer software distributors who encourage their users to infringe copyrights may face liability in lawsuits initiated by movie and record producers, the U.S. Supreme Court ruled Monday. In a unanimous decision overturning the trial and appeals courts, the high court ruled that the proper test is whether the actions of the software distributors show they tried to induce illegal downloading.

“We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by the clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties,” Justice David H. Souter wrote for the court.

The court examined the marketing strategies and business models for Grokster and StreamCast, finding that the companies were trying to capture the market of former Napster users by advertising their software’s ability to easily download copyrighted files. The court also noted that neither company made any effort to filter copyrighted material to prevent illegal downloads. Those findings are evidence that the companies were inducing copyright infringement, the court said.

The decision upset advocates for peer-to-peer technology because the new “inducement” standard for infringement expands third-party contributory copyright infringement to include the intent of the distributor — a difficult and expensive element to prove in court.

“The court seems to have recognized that active inducement is part of contributory infringement,” Michael Page, an attorney for Grokster, said in a conference call with reporters. “But then the court’s discussion of what it means to induce leaves us with a whole bunch of conflicting signals.”

Some technology sector leaders are concerned the decision will limit the kinds of inventions and technology available in the future.

“We’re obviously quite concerned that a new liability theory based on inducement will freeze the introduction of new technology in the marketplace,” Michael Petricone, vice president of technology policy for the Consumer Electronics Association, said in the conference call. “The risk of litigation has increased. From a competitive standpoint, that is not a good thing.”

The case was brought initially in 2001 by 28 entertainment companies against the distributors of file-sharing software products. The entertainment companies hoped for a legal precedent that would hold all technology makers responsible for the infringements committed by the users of their products.

The Supreme Court remanded the case for a lower court to factually determine if Grokster or StreamCast “induced” its users to illegally download copyrighted files.

(Metro-Goldwyn-Mayer Studios v. Grokster; MGM’s Counsel: Donald B. Verrilli Jr., Jenner & Block LLP, Washington, D.C.; Grokster’s Counsel: Cindy Cohn, Electronic Frontier Foundation, San Francisco, Calif.)AG

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