MGM Studios, Inc. v. Grokster, Ltd.

MGM Studios, Inc. v. Grokster, Ltd.

Argued March 29, 2005
Decided June 27, 2005
Full case name Metro-Goldwyn-Mayer Studios, Inc., et al. v. Grokster, Ltd., et al.
Docket nos. 04-480
Citations

545 U.S. 913 (more)

125 S. Ct. 2764; 162 L. Ed. 2d 781; 2005 U.S. LEXIS 5212; 75 U.S.P.Q.2D (BNA) 1001; 33 Media L. Rep. 1865; 18 Fla. L. Weekly Fed. S 547
Prior history Motion to dismiss denied, 243 F. Supp. 2d 1073 (C.D. Cal. 2003); summary judgment granted in part to defendants, 259 F. Supp. 2d 1029 (C.D. Cal. 2003); plaintiffs' motion to dismiss counterclaims granted in part, 269 F.Supp.2d 1213 (C.D. Cal. 2003); affirmed, 380 F.3d 1154 (9th Cir. 2004); cert. granted, 125 S. Ct. 686 (2004)
Subsequent history Remanded by MGM Studios, Inc. v. Grokster Ltd., 2005 U.S. App. LEXIS 17145 (9th Cir., August 15, 2005)
Holding
Producers of technology who promote the ease of infringing on copyrights can be sued for inducing copyright infringement committed by their users. Ninth Circuit Court of Appeals vacated and remanded.
Court membership
Chief Justice
William Rehnquist
Associate Justices
John P. Stevens · Sandra Day O'Connor
Antonin Scalia · Anthony Kennedy
David Souter · Clarence Thomas
Ruth Bader Ginsburg · Stephen Breyer
Case opinions
Majority Souter, joined by unanimous
Concurrence Ginsburg, joined by Rehnquist, Kennedy
Concurrence Breyer, joined by Stevens, O'Connor
Laws applied
Copyright Act of 1976

MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005), is a United States Supreme Court decision in which the Court unanimously held that defendant peer-to-peer file sharing companies Grokster and Streamcast (maker of Morpheus) could be sued for inducing copyright infringement for acts taken in the course of marketing file sharing software. The plaintiffs were a consortium of 28 of the largest entertainment companies (led by Metro-Goldwyn-Mayer studios).

Background

The case is frequently characterized as a re-examination of the issues in Sony Corp. v. Universal City Studios, 464 U.S. 417 (1984)[1] — AKA the "Betamax case", a decision that protected VCR manufacturers from liability for contributory infringement. MGM wants makers of file sharing technology held liable for their users' copyright infringements. In Sony, the court held that technology could not be barred if it was "capable of substantial noninfringing uses."

Grokster came before the Supreme Court having already won in two previous courts. The United States District Court for the Central District of California originally dismissed the case in 2003, citing the Betamax decision. Then a higher court, the Ninth Circuit Court of Appeals, upheld the lower court's decision after acknowledging that peer-to-peer ("P2P") software has legitimate and legal uses. Sharman Networks' Kazaa file sharing program was originally amongst the defendants, but was dropped because the company is based in Vanuatu.[2]

Computer and Internet technology companies such as Intel, and trade associations including firms such as Yahoo! and Microsoft, filed amicus curiae briefs in support of the file sharing companies, while the RIAA and MPAA both sided with MGM. Interestingly, Napster filed a brief in support of the petitioner copyright holders.[3] Billionaire Mark Cuban partially financed Grokster's fight before the Supreme Court.[4]

Oral arguments

During oral argument, the Supreme Court justices appeared divided between the need to protect new technologies and the need to provide remedies against copyright infringement. Justice Antonin Scalia expressed concern that inventors would be chilled from entering the market by the threat of immediate lawsuits. Justice David Souter questioned how the interpretation of the law the plaintiffs argued for would affect devices like copy machines or the iPod.

The music industry suggested that iPods have a substantial and legitimate commercial use in contrast to Grokster, to which Souter replied, "I know perfectly well that I can buy a CD and put it on my iPod. But I also know if I can get music without buying it, I'm going to do so."[5] On the other hand, the justices seemed troubled at the prospect of ruling that Grokster's alleged business model of actively inducing infringement and then reaping the commercial benefits was shielded from liability. Grokster argued that affirming the Ninth Circuit would only prevent an injunction against future use of the P2P software, while the plaintiffs would still be free to pursue damages in the district court for alleged past wrongful acts. Much of the Court, however, expressed skepticism that Grokster's continuing enterprise could be severable from the consequences of those prior acts.

Opinion of the Court

The opinion was authored by Justice Souter, who wrote:

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

Concurring opinions were written by Justice Ginsburg, who was joined by Chief Justice Rehnquist and Justice Kennedy; and by Justice Breyer, joined by Justice Stevens and Justice O'Connor.

While the Court unanimously concurred that Grokster could be liable for inducing copyright infringement, there was considerable disagreement over whether the case is substantially different from the Sony case, and whether the precedent established by Sony should be modified. On the one hand, Justice Ginsburg, joined by Kennedy and Rehnquist, claim that "[t]his case differs markedly from Sony" as there was insufficient evidence of uses which were non-infringing. On the other hand, Justice Breyer, joined by Stevens and O'Connor, claims "a strong demonstrated need for modifying Sony (or for interpreting Sony's standard more strictly) has not yet been shown," primarily because "the nature of [...] lawfully swapped files is such that it is reasonable to infer quantities of current lawful use roughly approximate to those at issue in Sony." These justices concur in the judgment on the narrow ground of Grokster's alleged inducement of its customers to use the product illegally.

Roughly speaking, the Ginsburg concurrence suggests that Grokster would be liable (unprotected by Sony) even absent evidence of inducement. The Breyer concurrence, on the other hand, suggests that Grokster would be protected by Sony without evidence of inducement. The Souter opinion does not address whether or not Sony protects Grokster. Thus, neither the view that Grokster is protected nor the view that Grokster is unprotected by Sony commanded a plurality of the Court.

The majority of the Justices would have either expanded or contracted the Sony Betamax doctrine, however the Court as a whole has not chosen to reexamine the Betamax precedent in the decision, being split into three equal groups. Thus the Betamax ruling was reviewed only as necessary to properly detail the issues involved in this case. Instead, a new and—as several critics have contended—ambiguous test has been developed to determine whether the software in question is not protected by the Sony ruling. Briefly stated, it has to be shown that the distributors of the program have advertised and/or otherwise induced its use for copyright infringement; if this intent can be shown, additional contributory aspects may be relevant. For example, MGM et al. had asserted that the defendants' refusal to incorporate protocols that would filter copyrighted materials from the file-sharing network constitutes an intent to promote copyright infringement. In Footnote 12, however, Justice Souter notes that

"...in the absence of other evidence of intent, a court would be unable to find contributory infringement liability merely based on a failure to take affirmative steps to prevent infringement, if the device otherwise was capable of substantial noninfringing uses. Such a holding would tread too close to the Sony safe harbor."

The decision has been hailed by several SCOTUS correspondents as striking a fair balance between the need to respect the copyrights of artists, and the benefits of allowing and promoting technological innovation. Indeed, the decision does seem to leave sufficient leeway for developers in creating new products, as it establishes guidelines to compliance with existing copyright law, and holds liable the distributors rather than developers for copyright infringement. Conversely, others have criticized the new test for its apparent vagueness, contending that it permits financially powerful organizations such as the RIAA and MPAA to effectively hinder development of new technology by active pursuit of litigation against the developers and distributors.[6]

Subsequent developments

On November 7, 2005 Grokster announced that it would no longer offer its peer-to-peer file sharing service. The notice on their website said, "The United States Supreme Court unanimously confirmed that using this service to trade copyrighted material is illegal. Copying copyrighted motion picture and music files using unauthorized peer-to-peer services is illegal and is prosecuted by copyright owners."[7] As part of a lawsuit permitted by the MGM Studios v. Grokster Supreme Court decision, Grokster was forced to pay $50 million to the music and recording industries.[8] As of December 1, 2016, visiting the Grokster website displays this message: "Your IP address is (your ip) and has been logged. Don't think you can't get caught. You are not anonymous."[9]

Streamcast, however, continued to fight the suit on remand. On September 27, 2006, the U.S. District Court for the Central District of California granted summary judgment in favor of the plaintiffs on Streamcast's liability for infringement,[10] though Streamcast promised to appeal the decision.[11]

Fearing lawsuits similar to MGM v. Grokster, Mark Gorton, the chief executive officer of the firm that produces LimeWire, has said that he plans to stop distributing his file sharing program. He explained this by saying

"Some people are saying that as long as I don't actively induce infringement, I'm O.K. I don't think it will work out that way...[the Court] has handed a tool to judges that they can declare inducement whenever they want to."[6]

A lawsuit was brought against LimeWire in Arista Records LLC v. Lime Group LLC, which held that Lime Group LLC induced copyright infringement with its P2P file sharing software LimeWire and issued a permanent injunction.

Downloads of the free LimeWire client have now been barred from its official website, with a notice claiming that this is a result of the Arista Records LLC v. Lime Group LLC legal battle, which resulted in the official download of LimeWire now being unavailable, but as of July 21, 2013, the site remains open.

References

  1. ↑ Towers, Sandi (2008-05-05). Media and Entertainment Law. Cengage Learning. ISBN 1111798648.
  2. ↑ Sachs, Marcus; Piccard, Paul (2005-12-12). Securing IM and P2P Applications for the Enterprise. Syngress. ISBN 9780080489698.
  3. ↑ A list of briefs filed in the case is available at copyright.gov and eff.org.
  4. ↑ Musil, Steven (2005-03-27). "Mark Cuban to finance Grokster defense". CNET. Archived from the original on 2012-07-15. Retrieved 2006-07-20.
  5. ↑ Linda Greenhouse, "Lively Debate as Justices Address Filesharing", New York Times, March 30, 2005.
  6. 1 2 Zeller, Tom, Jr.; Roben Farzad; Saul Hansell (2005-06-28). "Sharing Culture Likely to Pause but Not Wither". The New York Times. Retrieved 2006-07-20.
  7. ↑ "Grokster". Grokster. Retrieved 2006-07-20.
  8. ↑ Borland, John (2005-11-07). "Last waltz for Grokster". CNET. Archived from the original on 2012-07-11. Retrieved 2006-07-20.
  9. ↑ "Grokster website". Grokster. Retrieved 2008-10-24.
  10. ↑ "September 27, 2006, Decision"
  11. ↑ "StreamCast Up Streaming Creek". InternetNews.com. Retrieved 2006-09-28.
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