Secondary liability for third parties' copyright infringement upheld by the Supreme Court: MGM Studios, Inc. v. Grokster, Ltd.

• Author: Mota, Sue Ann

1. INTRODUCTION

   The legal system frequently lags behind technological innovation. This requires Congress to amend existing acts or create statutes to attempt to keep pace with technological innovations as it did with the Computer Software Act of 1980 which amended the Copyright Act by adding a definition of computer programs, (1) or when it enacted the Digital Millennium Copyright Act. (2) The Supreme Court similarly has had to apply existing law to new technology, as it did in 1984 in Sony Corp. of America v. Universal City Studios, Inc. concerning the videotape recorder, (3) and again in 2005 in Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd. concerning Internet peer-to-peer file sharing software. (4)

   This article will examine how the Court has applied secondary liability for copyright infringement to emerging technologies, first in Sony in 1984, (5) and most recently, at the time of the publication, in Grokster twenty-one years later in 2005. (6) This article will first discuss direct and secondary copyright infringement, (7) and will briefly examine the A&M Records, Inc. v. Napster Inc. (8) and the In re Aimster (9) circuit court of appeals decisions involving secondary liability for peer-to-peer Internet sharing of copyrighted files. Finally, this article will conclude with implications of the landmark 2005 Grokster decision.

2. DIRECT AND SECONDARY COPYRIGHT INFRINGEMENT

   The U.S. Constitution states that "Congress shall have power to promote the Progress of Science and useful Arts by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." (10) Pursuant to this power, Congress has passed numerous copyright acts, starting in 1790, (11) and most recently, the Copyright Act of 1976. (12) Under this most recent enactment, copyright protection subsists in original works of authorship fixed in any tangible form, now or later developed, including but not limited to: " (1) literary works; (2) musical works including any accompanying words; (3) dramatic works including any accompanying music; (4) pantomimes and choreographic works; (5) pictorial, graphic, and sculptural works; (6) motion pictures and other audiovisual works; (7) sound recordings; and (8) architectural works." (13)

   The owner of the copyright has the exclusive right to: "(1) reproduce the copyrighted work; (2) to prepare derivative works; (3) to distribute copies of the work; ... [and] (6) in the case of sound recordings, to perform or display the copyrighted work." (14) The copyright term in the United States is now the author's life plus seventy years, (15) or in the case of anonymous, pseudonymous, or works made for hire, the copyright lasts for the shorter of ninety-five years from publication, or one hundred twenty years from creation, (16) under the Sonny Bono Copyright Term Extension Act of 1998. (17)

   Anyone who violates any of these exclusive rights is an infringer, according to the Copyright Act. (18) To establish direct copyright infringement, the plaintiff must establish ownership of a copyright and unauthorized copying of that original work of authorship. (19) Under common law, secondary copyright infringement may occur under the theories of contribution or vicarious infringement for the direct infringement by another. Contributory copyright infringement occurs when one "induces, causes, or materially contributes to the infringing conduct of another," by one who knows or has reason to know of the direct infringement. (20) Vicarious copyright infringement is an outgrowth of the doctrine of respondeat superior, and occurs when one "has the right and ability to supervise the infringing activity, and has a direct interest in the infringing activity." (21) Civil damages available for copyright infringement include actual damages and profits, (22) or statutory damages, (23) and an injunction against the infringing activity. (24)

   Sony Corp. v. Universal City Studios, Inc.

   The first recent Supreme Court case in secondary copyright infringement, (25) Sony Corp of America v. Universal City Studios, Inc., occurred in 1984. (26) In this case, Universal City Studios, Inc. and Walt Disney Productions held copyrights on numerous motion pictures and audiovisual works. These plaintiffs sued Sony, who manufactured, Doyle Dave Bernbach, Inc., who marketed, and retailers, who sold, Betamax videotape records, then a newer technology, for, among other things, copyright infringement. (27) This district court ruled in the defendants' favor; (28) the Court of Appeals for the Ninth Circuit, however, reversed, holding the defendants liable for contributory copyright infringement. (29) The U.S. Supreme Court in a five-to-four reversed again. (30)

   The Court, in an opinion written by Justice Stevens, considered the two competing purposes of copyright legislation: the benefit to the public from the stimulation by the producer, versus the detriment to the public by the limited monopoly. (31) While the Copyright Act does not expressly create secondary liability for copyright infringement, the Patent Act does, creating liability for anyone who actively induces patent infringement, (32) and other contributory infringers. (33) Because of the historically close relationship between patent and copyright law, (34) vicarious liability for copyright infringement could be imposed if Sony "sold equipment with constructive knowledge ... that its customers may ... make unauthorized copies." (35)

   Contributory infringement, according to the Court, is not found if the product is "capable of substantial non-infringing uses." (36) The Court concluded that there is a sufficient record to support the district court's conclusion that "time-shifting is a fair use." (37) The majority concluded that Congress might take a fresh look at the then-new technology, but the Court was not going to apply laws not yet written, thus reversing the Ninth Circuit. (38)

   A&M Records, Inc. v. Napster, Inc.

   The first case involving secondary copyright infringement involving peer-to-peer Internet file sharing was A&M Records, Inc. v. Napster, Inc. (39) The Napster web-site freely distributed proprietary software which allowed Napster users to share MP3 music files peer-to-peer, through the Napster web-site, which indexed the files. (40) In 1999, seventeen copyright holders, including A&M Records and Sony, sued Napster for vicarious and contributory copyright infringement, among other things, requesting damages and profits or statutory damages for each work infringed, and an injunction. (41) In 2000, the district court preliminarily enjoined Napster from "engaging in, or facilitating others in copying, downloading, uploading, transmitting, or distributing plaintiffs' copyrighted" music. (42)

   The Court of Appeals for the Ninth Circuit stayed the injunction. (43) In 2001, the appeals court determined that the district court was correct in issuing the preliminary injunction. (44) The appeals court ruled that the district court was correct, that Napster users were not protected by fair use, (45) and that Napster plaintiffs demonstrated a likelihood of success on the merits of both the contributory (46) and vicarious copyright infringement. (47) However, the scope of the preliminary injunction needed to be modified. (48)

   In 2001, a modified injunction was issued by the district court. (49) When Napster received reasonable knowledge of infringing files, it had three days to prevent access to those files. (50) When Napster concluded it could not comply with the order, it ceased doing business under that model in 2001. (51) Napster is currently operating as a fee-based site, (52) with extensive content agreements with the five major record labels. (53)

   The Recording Industry of America (RIAA), the trade group that represents the recording industry, has taken an active role against direct copyright infringers; after suing file-sharers allegedly violating copyright law in 2003 and 2004, the group sued an additional 725 illegal file sharers in 2005, (54) and expanded the scope of illegal file-sharing lawsuits against student-observers of the Internet 2. (55) In addition, fourteen members of the RIAA have sued other defendants including Flea World, Inc. and Columbus Farmers Market, claiming vicarious and contributory copyright infringement for allowing the sale of pirated and counterfeit compact discs and cassette tapes at the Farmer's Market. (56)

   In Re Aimster

   RIAA and owners of copyrighted music filed suits for contributory and vicarious copyright infringement against John Deep and his corporations over Deep's Internet file sharing service Aimster. (57) The cases were combined into In re Aimster. (58) The Aimster system included downloadable free proprietary software which allowed users to share peer-to-peer music files. (59) "Club Aimster" allowed users, for $4.95 a month, easier downloading than the free service. (60) A tutorial that included all copyright infringing examples was also displayed on the site. (61)

   The district court issued a preliminary injunction, which shut down Aimster, because the recording industry demonstrated a likelihood of prevailing on the merits on both contributory and vicarious copyright infringement. (62)

   On appeal, the Court of Appeals for the Seventh Circuit, citing Sony, upheld the preliminary injunction on the issue of contributory infringement. (63) "Aimster [had] failed to produce any evidence that its service has ever been used for a non-infringing use, let alone evidence concerning the frequency of such uses." (64)

   While the appellate court upheld the preliminary injunction, (65) it was less confident than the district court that the recording industry would prevail at trial on the issue of vicarious liability due to the appellate court's uncertainty on...