The Supreme Court's Sony opinion may be one of the worst of a very sad lot from that Court, its ill-effects seemingly endless, a poster child of why that Court should not hear new technology cases. The story of its flip-flopping majorities, failure to grasp essential attributes of the 1976 Act (such as the structure of Section 106 granting broad rights followed by limitations in Sections 107 ff; the express liability for third-party liability via the term "to authorize") is old hat, as is the devastation wrought by its rabbit hat creation of fair use presumptions, jettisoned 10 years later in the 2 Live Crew opinion, but still living on in some opinions like a cancer that can never be completely remitted.
And then there is Sony's adoption of the patent law staple article of commerce doctrine, grafted on to the very different copyright doctrine of contributory infringement. And now we have Groskter's "inducement" theory of liability which fits somehow with contributory infringement and vicarious liability, but which was resorted to only as a last ditch PR effort when the Court couldn't come to agreement on the actual issues it set out to answer.
I read last night a case that has made me even more despondent about an already depressing area. The case is Marvel Enterprises, Inc. v. NCSoft Corp., 74 USPQ2d 1303 (C.D. Cal. 2005). Plaintiff is the well-known owner of comic book characters, including Captain America and the Incredible Hulk. Defendant NCR Soft hosts online games, like the City of Heroes, where members of the public can create their own games and characters. Plaintiff alleged that some of these characters infringed its characters and that defendant should be held liable.
Defendant filed a motion to dismiss under FRCP 12(b)(6). Here is the part of the court's opinion that concerns me:
It is uncontested that Defendants' game has a substantial non-infringing use. Generally, the sale of products with substantial non-infringing uses does not evoke liability for contributory copyright infringement. Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 442(1984). However, where a computer system operator is aware of specific infringing material on the computer system, and fails to remove it, the system operator contributes to infringement. A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1021 (9th Cir.2001). Plaintiffs have alleged that “Defendants knew or should have known” that many users were committing direct infringement of Plaintiffs copyrighted characters. (Second Am. Compl. ¶ 42). Thus, Plaintiffs have alleged that Defendants, as operators of their online computer server system were aware of infringing material on their system and failed to remove it. Therefore, Plaintiffs have stated a claim for contributory copyright infringement.
This passage disabused me of the one thing I thought I knew about the area. I had thought that if a court found there is a substantial noninfringing use, there was no liability for any infringing uses. What else could it mean? You are never liable for noninfringing uses, so the staple article commerce of doctrine would seem to only have relevance for excusing a certain amount of infringing uses.
Among the unanswered questions from Sony is what does "substantial" mean? Does it mean dominant or something over 50%? Or, does it mean less than dominant, maybe even a relatively small amount but an important use? Can there, in other words, be both substantial non-infringing uses and substantial infringing uses at the same time, and if so, what happens? Is there liability for the infringing uses, and if so, under what circumstances? Does it matter if defendant can prevent noninfringing uses, and if so at what cost?
A photocopy machine is one example. One can't construct such a machine not to copy copyrighted material (at least as a general matter), so either you enjoin it all or not. (This is a problem that DRMs attempt to solve of course). In Sony, though, the Betamax could have been made without the record feature, but the Court thought that unnecessary, even though with the record feature there was a substantial amount of infringing uses that resulted. That's why I thought there is no liability for the infringing uses once a substantial noninfringing use was found.
What if defendant can separate out the infringing sheep from the noninfringing goats? Does it matter if defendant has knowledge of the infringing acts? Does it depend on the relative burdens? (See the Grokster amicus brief by the "Chicago 10," Doug Lichtman, Randy Picker et al). If so, where does this come from, and doesn't such an approach merely mean that there can be no infringing uses, rendering the staple article of commerce defense irrelevant? Such a notice and take down approach to staple article of commerce, moreover, sounds to me like an importation of the DMCA into the body politic of copyright, an importation likely to be fatal to the host.