I want my MP3: secondary copyright liability in a hidden peer-to-peer network.

• Author: Carroll, Wayne
• Position: Essay

"[Y]ou can run but you can't hide."--Cary Sherman, President RIAA (2)

1. INTRODUCTION

   A worldwide technology arms race is underway between artists and their fans. (3) The fight is over copyrights, and the arms are the technologies that control, or destroy control, over the copyrighted works. (4) The artists have developed "Digital Rights Management" (DRM) technology to lock down their works, while their fans are using anonymity-protecting Peer-to-Peer networks to hide from copyright enforcement. (5) This Note focuses on the copyright liability for the developers and users of Freenet, an anonymity-protecting Peer-to-Peer network. (6)

   This Note first gives an overview of secondary copyright liability, discussing contributory and vicarious infringement. (7) Peer-to-Peer (P2P) technology is then discussed, along with cases addressing this technology. (8) Freenet is finally discussed, with the legal implications for those who develop and those who use Freenet. (9) This Note proposes that users of Freenet, but not the developers, may be liable for secondary copyright infringement. (10)

2. SECONDARY COPYRIGHT LIABILITY

   Title 17 of the United States Code gives the owner of a copyright the exclusive control of the reproduction, distribution, display, performance, and derivative works of their copyrighted work. (11) Under the statute, the owner of the copyright has standing to sue those who violate any of these rights directly. (12) Under the judicially-created doctrines of contributory and vicarious liability, copyright holders may sue those who are liable for the infringement of a third party. (13)

   1. Contributory Copyright Infringement

      "[O]ne who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a 'contributory' infringer." (14) A court will find contributory infringement if the copyright owner has established first, direct infringement of the copyright, second, knowledge of the infringement, and third, material contribution to the infringement. (15)

      1. Occurrence of Direct Infringement

         The copyright holder is given an exclusive right for a limited time to control the copying of the copyrighted work. (16) When the work is copied, the person who illegally copies the work is a direct infringer of the copyright. (17) In the context of Peer-to-Peer (P2P) networks, this usually means violating the right of control over reproduction and distribution when a copyrighted music CD is copied into MP3 format and distributed over the P2P networks. (18) To establish copyright infringement the copyright owner must establish both ownership of the copyright and the occurrence of an infringing act. (19) The alleged infringer may then rebut the charge of infringement. (20)

         The judicial doctrine of fair use in copyright law is codified; the governing statute provides that some copying, which would ordinarily constitute infringement, is not infringement. (21) If no direct infringement occurred, then there can be no secondary copyright liability. (22) In Sony Corp. of America v. Universal Studios, Inc., (23) the issue presented on appeal to the Supreme Court was whether Sony was liable for contributory infringement, but the Court resolved the issue on the basis of whether or not Sony's customers were actually infringing the copyrights. (24) The Supreme Court concluded that the majority of Sony's customers were only copying the material so that they could view it at a different time, and that this practice, called time-shifting, falls within the fair use provision of the copyright act, and is therefore not infringement. (25) Sony could not be held liable for contributory copyright infringement where the act of direct infringement did not occur. (26)

         Sony was selling a recording device called the Betamax, which was capable of recording copyrighted television broadcasts. (27) The Court borrowed a standard for contributory infringement from patent law, requiring more participation in the copyright infringement than just selling a "staple article of commerce" for material contribution. (28) In patent law, when an item is sold in parts and then assembled, the person selling the parts may be liable for contributory infringement of the patent. (29) This does not apply, however, if the part sold is a staple article which is commonly sold for many different purposes, or is capable of substantial non-infringing applications. (30) The Supreme Court in Sony held that the Betamax was a staple article of commerce under the copyright fair use laws because it was commonly used in a non-infringing manner. (31) Under this staple article of commerce theory, the analysis for determining infringement focuses on the non-infringing uses of third parties instead of the direct infringement of third parties. (32)

      2. Knowledge of Copyright Infringement

         When a person either knows or should know of copyright infringement, the element of knowledge required to show contributory copyright infringement is satisfied. (33) Actual knowledge can come from notice of infringement by the copyright holder. (34) In Sony, the Court concluded that Sony did not have actual knowledge of the copyright infringement of its customers because the contact with the customers did not give them actual knowledge, and they were not informed of specific infringing acts in some other way. (35) Constructive knowledge can also satisfy the knowledge requirement. (36) When a person has reason to know of copyright infringement, the court may hold the person to have knowledge of the infringement. (37)

      3. Material Contribution

         The element of material contribution is satisfied when the accused provides the means for copyright infringement, or in any way knowingly furthers a third party's copyright infringement. (38) One example of material contribution is where the owner of a swap meet provides the site and facilities for copyright infringement. (39) Another example is where the operator of an Internet bulletin board fails to remove infringing material when the operator has actual knowledge of the copyright infringement. (40)

   2. Vicarious Copyright Infringement

      Vicarious infringement in copyright law is based on the doctrine of respondeat superior. (41) The elements for vicarious copyright infringement are less strict than the usual agency relationship of employer and employee. (42) In agency law, the reasoning behind respondeat superior is that the employer is reaping the financial benefit from the good work of the employee, and should also bear the risk for the torts committed by the employee within the scope of the business. (43) Respondeat superior is also based on the theory that the employer has control over the employee and is in the best position to prevent the harmful conduct. In this way the incentive to prevent the harmful conduct is given to the employer who is in a position to pay if the harm occurs. (44)

      The judicially-created copyright doctrine requires some ability to control the infringing activity, and some direct financial benefit from the infringing activity. (45) As with contributory copyright infringement, vicarious copyright infringement requires a finding of direct infringement by a third party. (46) Unlike the doctrine of contributory copyright infringement, however, the doctrine of vicarious copyright infringement does not require any knowledge of the infringing activity. (47) The liability is instead based on the relationship between the infringing party and the vicarious infringer. (48)

      1. Control of Infringement

         The element of control can be understood by contrasting the relationship of an employer who must answer for the torts of the employee, with that of a landlord who is not responsible for the torts of the tenant. (49) The courts have drawn a distinction between an employer/employee relationship and a landlord/tenant relationship. (50) The key difference is the right and ability that an employer has to control and supervise the conduct of the employee. (51) No such right is traditionally given to a landlord. (52) When courts have determined that a case is closer to the employer model, then vicarious liability is imposed for the copyright infringement. (53) Some courts have ruled that in order to escape liability the relationship must be a strict landlord tenant relationship, without any right by the landlord to control or supervise the activities of the tenant. (54) When considering the issue of vicarious copyright infringement for the creators of technology, control has been at the center of the courts' analysis. (55) If the supplier of the technology retains the possibility of control over copyright infringement, then the courts may find the supplier liable for the copyright infringement of its customers. (56) For example, in Sony where the relationship ended at the sale of the Betamax recording device, there was not sufficient control to impose vicarious copyright liability for the customer's infringement using a Betamax (or VCR) recorder. (57)

      2. Financial Interest

         The courts have taken a broad view of the financial interest element under a vicarious liability analysis. (58) A clear example of financial interest is presented when a person receives a percentage of sales from infringing activities. (59) The courts, however, have accepted more tenuous connections between the infringing activities and financial benefit, such as attracting customers. (60) Another example where a court found a direct financial interest was when a band was commissioned which did not pay for a license to perform copyrighted music and therefore can charge less for performing copyrighted music. (61) In a landlord and tenant situation where the tenant is infringing copyrights, the rent paid by the tenant does not constitute a direct financial interest in copyright infringement unless the landlord knew of the tenant's intentions before signing the lease, and received a direct benefit from the...