An international-comparative perspective on peer-to-peer file-sharing and third party liability in copyright law: framing the past, present, and next generations' questions.

• Author: Pessach, Guy

ABSTRACT

In the last decade, the phenomenon of peer-to-peer file-sharing and its various legal aspects have been dealt with extensively by legal scholarship. The purpose of this Article is to take a closer inspection of several particular legal aspects that are related to peer-to-peer file-sharing as a comparative, social, economic, and cultural phenomenon. The Article begins by providing critical comparative analysis of distinct paradigms that different legal systems have offered regarding the question of third party liability for copyright infringements that occur through peer-to-peer file-sharing platforms. The Article then presents three focal policy considerations that should serve as copyright law's compass in the context of peer-to-peer file-sharing: (a) adopting a requirement of compliance between the legal liability of third parties and copyright law's exemptions and limitations regime; (b) striking a socially desired allocation of risk between positive and negative externalities that peer-to-peer file-sharing platforms tend to generate; (c) understanding the unique distributional concerns that are raised by legal regulation of peer-to-peer file-sharing platforms, especially when taking into account the nature of such platforms as a novel emerging speech resource that society has to decide upon its allocation. The last part of the Article focuses on some of the next generation legal questions that peer-to-peer networks are already beginning to give rise to, including the legal liability of internet service providers for managing peer-to-peer traffic through active caching and routing applications.

TABLE OF CONTENTS I. INTRODUCTION II. THE METRO-GOLDWYN-MAYER AND UNIVERSAL MUSIC AUSTRALIA DECISIONS III. THE PRIMARY LIABILITY OF END-USERS, STATUTORY LICENSEES, AND LEVY SCHEMES A. The Primary Liability of End-Users B. Statutory Compulsory Licenses and Levy Schemes--Lessons from the Canadian Experience IV. ADJUSTING A REQUIREMENT OF COMPLIANCE BETWEEN THIRD PARTY LIABILITY REGIMES AND COPYRIGHT LAW'S EXEMPTIONS AND LIMITATIONS V. PEER-TO-PEER FILE-SHARING: ALLOCATING THE RISK BETWEEN COMPETING INTERESTS AND POSITIVE AND NEGATIVE EXTERNALITIES VI. PEER-TO-PEER FILE-SHARING PLATFORMS AS A NEW EMERGING SPEECH RESOURCE: DISTRIBUTIVE CONCERNS VII. NEXT GENERATION QUESTIONS: ISPs' LIABILITY FOR MANAGING PEER-TO-PEER TRAFFIC VIII. SUMMARY I. INTRODUCTION

After a long wait, the phenomenon of peer-to-peer file-sharing has recently been addressed by a number of high courts around the globe: the U.S. Supreme Court decision in Metro-Goldwyn-Mayer Studios Inc v. Grokster Ltd.; (1) the federal court of Australia's decision in Universal Music Australia Pty Ltd. v. Sharman License Holdings Ltd.; (2) and two Canadian decisions, one of which is a decision of the Canadian Supreme Court that also includes several important statements with implications on the legality of file-sharing activities and the scope of third party liability in such circumstances. (3)

The purpose of this Article is twofold. The Article begins by providing a critical comparative analysis of these decisions and the distinct paradigms that different legal systems have offered regarding the question of third party liability for copyright infringements that occur through peer-to-peer file-sharing platforms. The Article then turns to develop several novel insights regarding the policy considerations that should serve as copyright law's compass in the context of peer-to-peer file-sharing and, more specifically, in the context of some of the next generation of legal questions that peer-to-peer platforms are already beginning to give rise to.

Parts II and III include an overall critical examination of recent judicial developments regarding third party liability for copyright infringements that take place through peer-to-peer file-sharing platforms. Part IV then presents and develops the Author's argument for a requirement of compliance between legal regimes of third party liability and copyright law's exemptions. The discussion begins by demonstrating the implications of different legal regimes of third party liability on the extent and degree that copyright law's exemptions and limitations could be effectively utilized. It continues by establishing a normative argument according to which any legal framework of third party liability must be shaped and adjusted in a manner that takes into account its implications on the vitality of copyright law's exemptions and limitations.

Parts V and VI offer two novel perspectives on peer-to-peer file-sharing platforms and the implications that different regimes of third party liability might have on society's communicative and technological environment. The first perspective highlights the potential influence that different regimes of third party liability might have on the allocation of risk between positive and negative externalities that peer-to-peer file-sharing platforms tend to generate. After focusing on positive spillovers that peer-to-peer platforms produce and the risks that broad third party liability imposes on such spillovers, the Article presents several considerations in support of a legal regime that places a higher degree of risk on the proprietary interests of copyright owners.

The second perspective develops the notion of peer-to-peer file-sharing platforms as a new evolving speech resource that society has to decide upon its allocation. It begins by developing the concept of speech resources and the unique distributional concerns that the allocation of legal entitlements in speech resources give rise to. The general observations regarding the allocation of entitlements in speech resources are then applied in the context of peer-to-peer file-sharing platforms, which are--it shall be argued--a prototype example for a new emerging speech resource.

As the Author will argue, both perspectives have direct implications on law's approach toward third party liability for copyright infringements that occur through peer-to-peer file-sharing platforms. The overall purpose in these two parts is twofold: first, to locate the question of third party liability for copyright infringement within a broader framework of policy considerations that are conjured up with the emergence of innovative technological devices and novel communication platforms. The second is to evaluate current legal approaches toward third party liability under this broader framework of policy considerations.

Part VII concludes by examining some of the next generation of questions of peer-to-peer platforms through the prism of the preceding discussion. The focus of examination will be the legal liability of internet service providers (ISPs) that use active caching and routing applications for managing efficiently peer-to-peer traffic--an issue that thus far has not been dealt with explicitly either by legislators or by courts. Based on policy considerations that were previously developed, this Article shall present an argument in support of limiting the liability of internet service providers that use active caching and routing applications, even if such applications involve reproduction and copying of files that are exchanged through peer-to-peer file-sharing platforms.

2. THE METRO-GOLDWYN-MAYER AND UNIVERSAL MUSIC AUSTRALIA DECISIONS

   Both the U.S. Supreme Court's decision in Metro-Goldwyn-Mayer and the Australian federal court's decision in Universal Music Australia have dealt with similar file-sharing software that allows computer users to share electronic files through peer-to-peer networks. In both decisions, the courts ruled that actions taken by the producers of the file-sharing software might justify the imposition of third party liability for copyright infringement. (4) Each decision, however, established its holding on a different argument, different factual merits, and a different standard of liability.

   In Metro-Goldwyn-Mayer, the U.S. Supreme Court developed a theory of inducement for imposing secondary liability on third parties that produce and distribute devices capable of both infringing and non-infringing uses. According to the Court's decision, if a third party distributes such devices with the object of promoting copyright infringements, or if one takes other affirmative steps to foster copyright infringements, then this third party would be liable for acts of infringements by primary users of the devices, regardless of the fact that the device is also capable of lawful uses. (5)

   The Court's inclination to consider the imposition of liability on third parties was, however, narrowly constructed as an additional layer on top of the already well-established components of secondary liability in U.S. copyright law (contributory liability and vicarious liability). (6) The Court specifically emphasized the fact that nothing in its ruling overturned the judgment of Sony Corp. of America v. Universal City Studios, Inc., (7) which held that when a product is capable of substantial, non-infringing use its mere production and distribution do not impose secondary liability for third parties' infringing uses of it. (8) Overall, Metro-Goldwyn-Mayer is a bounded precedent for imposing secondary liability on third parties that are involved in the production and distribution of devices and platforms for peer-to-peer file-sharing. The imposition of such liability would require direct evidence of actions promoting the use of the software for copyright infringement. Although such evidences did exist in Metro-Goldwyn-Mayer, one could speculate that in the future, producers and distributors of file-sharing software would be very cautious before taking any action or expression that relates the software with copyright infringement.

   In Universal Music Australia, the federal court of Australia took a different path regarding the imposition of secondary liability on producers of file-sharing software. (9) The court's ruling relied on...