A Briefing On Public Policy Issues Affecting Civil Liberties Online from The Center For Democracy and Technology
1. High Court Hears Grokster File-Sharing Case
2. Justices Grapple With Major Implications for the Internet, Copyright, and Innovation
3. Possible "Inducement" Liability Considered by Court
4. CDT FTC Complaint Demonstrates Better Enforcement Approach
The Supreme Court heard oral arguments on Tuesday in MGM v. Grokster, arguably the most important copyright case before the Court in over two decades. The case, which seeks to hold peer-to-peer software developers liable for products widely used for illegal copying, is likely to have major implications for developers of new digital technologies and for free expression online.
CDT strongly believes that if the Internet is to flourish, the creators of music, movies, and other valuable content must have ways of protecting their content online. At the same time, legal protections for copyright must not jeopardize the openness and innovation that have made the Internet an engine of free expression and commerce.
The Grokster case is important because of the impact it will have beyond the two file-sharing companies at issue. If the Court goes too far in undoing the protections it created 20 years ago for the makers of VCRs and other valuable products, it risks chilling the development of important new technologies that have substantial lawful uses. If the Court errs in the other direction, and forecloses all enforcement actions against bad actors, it could further chill digital distribution of movies and music online in digital form.
At oral arguments this week the Court grappled with these very issues. Questions from the Justices demonstrated a good understanding of the potential impact on innovators, as well as concern about the widespread use of file-sharing for illegal copying.
These issues were also the focus of a friend-of-the-court brief that CDT filed in the case along with leading technology groups. That brief expressed a common consumer and industry interest in preserving the current legal protections for technologies that have "substantial non-infringing uses." CDT's brief urged the Court to uphold those protections while sending the case back to a lower court to explore whether the parties had engaged in other bad acts - beyond merely developing a technology. During yesterday's oral arguments, the Court seemed interested in such an approach.
The Supreme Court is expected to rule in MGM v. Grokster by the end of its term, this June.
In arguments this week, the Court clearly grappled with the broad impact of the case. Several Justices sharply questioned whether new liability rules could sweep in the makers of VCRs, Xerox machines, or iPods - and how a technology developer "sitting in his garage" could anticipate how his or her product would be used.
The Justices pressed lawyers for content companies on the landmark 1984 Sony Betamax standard, which protected developers of technologies "capable of substantial noninfringing use." Both the content industry lawyers and the government argued that companies should be liable based on their business models. Justices Breyer, Souter, and Scalia questioned, however, whether innovators could know how their product would be used early on. Scalia suggested that it might take significant time to build a viable business for a new technology.
At the same time, some members of the Court expressed distress about companies using misappropriated works as the basis for their businesses. Justice Kennedy said it "seems wrong" that "expropriated property can be used as part of the start-up capital" for peer-to-peer software businesses.
Some Justices seemed to favor an alternative approach that might create liability for "inducement" of illegal copying, while protecting innovation. Lawyers for the content companies, the government, and the peer-to-peer services were each asked about such an approach.
Both the government and content companies argued that Grokster should be found liable under an inducement approach, but that such a result did not go far enough. They said future companies might build business similar to Grokster's without actively encouraging infringement.
The lawyer for the peer-to-peer companies argued that the services were not guilty of inducing infringement-but that, in any case, the issue was still to be addressed by lower courts, and therefore not something the Supreme Court should address at this time.
CDT's amicus brief suggested that active encouragement of copyright violation could be a basis of liability for peer-to-peer companies under copyright law. CDT has stressed, however, that any such theory should be narrowly tailored, and should not subject companies to liability merely for the design of their products.
In a complaint filed earlier this month before the Federal Trade Commission, CDT sought to give a clear example of the behavior-based approach we believe should be used to balance the needs for protecting intellectual property and safeguarding innovation online.
CDT brought the complaint against websites deceptively claiming to offer "100% Legal" music and video downloads. The sites claim to offer legal downloads of music and videos in exchange for a subscription fee. In fact, they merely point users to free file-sharing software and provide instructions on its use to download unlicensed popular works. CDT's complaint states that these offers are clearly deceptive and therefore a violation of federal law.
In the Grokster case and in other debates about copyright liability, CDT has called for a clear line between behavior and technology. CDT has argued that companies and individuals should be punished for clearly wrongful behavior-such as deceptive claims about downloading or actively encouraging illegal uses of their products-but that underlying technologies, which can have both legal and illegal uses, should be safeguarded.
CDT will continue to support this approach as debates over copyright liability are likely to continue in Congress, however the court decides Grokster.