The difference a Supreme Court opinion can make, even on how one views the facts, is seen in Judge Wilson's Wednesday opinion ( link here) in the Grokster case (now the StreamCast case given the settlement with Grokster). The facts sure felt a lot different in his 2003 opinion (259 F. Supp.2d 1029), not that they changed of course in the intervening three years. And it is the facts that are the driver in the new opinion. Of the opinion's 60 pages, 25 are devoted to evidentiary issues. Emails supplied the majority of the documents offered into evidence. The discovery process that leads to such evidence is very expensive, and while one may focus in the future on the court's legal analysis, overlooking the factual component would be a mistake: it was the email trail on which Judge Wilson hung liability under the new inducement theory. This is not to say the legal analysis is unimportant; it is, and it confirms my fear about Grokster's killing off of Sony, footnote 12 notwithstanding. There is also 10 pages of discussion on a misuse defense. In my opinion, the misuse defense in Grokster was frivolous, as sympathetic as I am to the double-dipping streaming argument.
On to the legal analysis. The most important thing to note is that the only basis for liability discussed is inducement: no contributory infringement, no staple article of commerce. I have had many discussions with friends about whether Grokster did create a new third theory of liability, separate from the inducement prong of classic copyright contributory infringement. I have taken the position it did and further that it did so deliberately to kill off Sony. Content owners have, I believe, seen it this way, and Wednesday's opinion shows I was right. Who would have thought even at the oral argument before the Supreme Court in Grokster that on remand (if there was one) that the staple article of commerce doctrine would have no role to play? Wasn't the whole point of the appeal to the Supreme Court to get the Court to set out rules for applying the doctrine for the Internet? Instead, the Court provided content owners with a way to avoid the staple article of commerce defense entirely. Here's why I say this.
The classic formulation of contributory liability in copyright cases, pre-dating Sony is: "[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," Gershwin Publishing Corp. v. Columbia Artists Mgt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971). By contrast, the new inducement theory, derived from Section 271(b) of the Patent Act focuses on defendant’s intent, and not on its knowledge of others’ direct infringement:
"Sony’s rule limits imputing culpable intent as a matter of law from the characteristic or uses of a distributed product. But nothing in Sony requires courts to ignore evidence of intent if there is such evidence, and the case was never meant to foreclose rules of fault-based liability derived from the common law.FN10 …Thus, where evidence goes beyond a product's characteristics or the knowledge that it may be put to infringing uses, and shows statements or actions directed to promoting infringement, Sony's staple-article rule will not preclude liability.
FN10. Nor does the Patent Act's exemption from liability for those who distribute a staple article of commerce, 35 U.S.C.A. § 271(c), extend to those who induce patent infringement, §271(b)."
Justice Ginsburg’s concurring opinion in Grokster discretely points what the majority did not state directly (although footnote 10 states the conclusion), namely that the purpose of the new inducement theory was to jettison Sony’s staple article of commerce doctrine:
"At bottom, however labeled, the question in this case is whether Grokster and StreamCast are liable for the direct infringing acts of others. Liability under our jurisprudence may be predicated on actively encouraging (or inducing) infringement through specific acts (as the Court's opinion develops) or on distributing a product distributees use to infringe copyrights, if the product is not capable of 'substantial' or 'commercially significant' noninfringing uses. Sony, 464 U.S., at 442 … While the two categories overlap, they capture different culpable behavior. Long coexisting, both are now codified in patent law. Compare 35 U.S.C.A. § 271(b) (active inducement liability), with § 271(c) (contributory liability for distribution of a product not "suitable for substantial noninfringing use").
What Justice Ginsburg is pointing out in her usual, quiet manner, is that Sony does not apply to the new inducement theory, footnote 12 notwithstanding. Inducement is based on 35 US.C. Section 271(b); the staple article of commerce defense only applies to contributory infringement claims under Section 271(c). Content owners are free to rely solely on inducement, in which case staple article of commerce is irrelevant, and that is exactly what happened in the remand opinion.
Inducement, though, is as it turns out a fairly watered down threshold. It is more like intent. This is seen in footnote 13 of the Supreme Court's opinion (notice how all the juicy parts of the opinion are the footnotes: 10, 12, 13):
"It is not only that encouraging a particular consumer to infringe a copyright can give rise to secondary liability for the infringement that results. Inducement liability goes beyond that, and the distribution of a product can itself give rise to liability where evidence shows that the distributor intended and encouraged the product to be used to infringe. In such a case, the culpable act is not merely the encouragement of infringement but also the distribution of the tool intended for infringing use."
And this is where the facts killed StreamCast, with Judge Wilson holding that "Plaintiffs need not prove that StreamCast undertook specific actions, beyond product distribution, that caused specific axcts of infringement. Instead, Plaintiffs need prove only that StreamCast distributed the product with the intent to encourage infringement."
The new theory of liability might, therefore, more properly be called intent to encourage infringement, and not inducement to infringe. I don't shed crocodile tears over StreamCast itself, and maybe all cases are nothing more than a decision on the facts, but there is, I believe, cause to worry about the killing off of Sony and its replacement with such a loose standard.
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About five years ago, I tried to help found a small role-playing game company (it's not uncommon among us "socially challenged" smartasses). That company never went anywhere.
One of our products was going to be an open source instant-messaging application tailored to role-playing games. But we needed a way to share maps, sound effects (that our company would sell in bundles), etc. among a small group of people in a chatroom. But we didn't want to be the ones running the chatroom; so we were looking at peer-to-peer networks.
This was 2001 and instant messaging was still pretty novel. P2P instant messaging was something that we hadn't seen offered. And, of course, we were worried that if our users started sharing copyrighted material without permission, we could get hauled into court as the next Napster.
Looking at the Grokster opinion, it looks like there is still enough space carved out by Sony that we could write this program. If there were a market for it, and if we still had our little game company.
I don't mean to oversell the Grokster killed Sony point; certainly plaintiffs need to have the facts to prove inducement, although if the threshold for such a case is low, that might not be so hard. But the availability of a way to avoid the staple article of commerce debate is not, I think, so healthy.
Dear Bill,
The news of my demise is greatly exaggerated.
1. Have you forgotten Justice Souter's careful opinion in Grokster explaining at length the need for the Sony safe harbor. Unless you think Souter and the 8 other justices were dissembling, then Sony is still live and well. (Note 12: "Of course, 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.")
2. True, Justice Ginsburg's concurring opinion tries to change the Sony standard, but her opinion only had 2 other justices sign on (one of whom has since passed away).
3. Subsequent courts have not applied Grokster broadly to kill Sony as you suggest. The sky has not fallen, nor have I.
Yours truly,
The Sony safe harbor
Judge Wilson found the evidence of intent so overwhelming that no reasonable jury could find otherwise.
Yet, on p.45, he notes some evidence that StreamCast blocked certain users. On p.40, he had noted a requirement to mitigate. But the evidence that he recognizes on p.45, he dismisses as evidence merely of an effort "half-hearted at best".
It seems that characterization belongs to the province of a jury.
To the extent that this finding of fact may have been material to Judge Wilson's decision, it looks to me like he made a clear mistake on summary judgement.
I actually think inducement will be difficult to prove in many cases (see, e.g., the inducement claim against XM for its "inno"). Trouble is, it will be very easy to plead, leading to extensive discovery, and very difficult to dispose of on summary judgment, meaning an expensive trial with extremely high stakes.
And that's all that is required to chill many (most?) mainstream technology innovators. Instead of pioneering disruptive innovations, the larger tech vendors will opt to collaborate with major copyright holders (DRM, design restrictions, forensic features, etc).
Once that occurs, the companies who have chosen to collaborate will have a strong incentive to police the market to exclude "noncompliant" competitors.
If inducement (and the uncertainties relating to the other secondary liability theories) leads to an alignment of incentives for Hollywood and Microsoft, Intel, and Apple, then innovation is going to be in serious trouble.
Just to be clear, I'm no longer planning on writing any peer-to-peer programs. I also recognize that if I ever did, I won't likely show up on anyone's lawsuit radar without being much more famous than I am now. And I'm not asking for any legal advice, because I know that doesn't come free on Internet discussion boards.
Even before Grokster, Sony didn't give clear enough guidance for many companies (how much use is "substantial"? does it need to be capable of commercially significant noninfringing uses, or must it actually used that way? if the noninfringing use is commercially significant, but still less in scope than the infringing use, does that matter? etc.) And Grokster complicates that landscape some by saying "here are a few more mines to worry about."
Some of those mines are simply "you are now more likely to be sued" even if you'll eventually win. Some are "if you do this, you are more likely to lose in court." So, yes, it's important news.
This would be an interesting exercise for an interesting law review article that I lack the energy and time to write and it would be a "proof" of the equation Prof. Patry suggests came out of the Supreme Court's Grokster opinion: Roll the facts of Sony through this opinion of Wilson's with the object of reaching an inducement finding without being protected by the Sony safe harbor. This exercise might also be a proof of Fred von Lohman's assertion that it would be difficult to prove inducement in many cases. If Sony on its facts would have been liable on inducement, then that's all the damage to the Sony safe harbor you would need.
Dear Sony Safe harbor:
I am very glad to hear that you and Mark Twain are still alive. I view footnote 12 as pretty much a political compromise necessary to keep a majority. And it was not just Ginsburg who noted the unavailability of the staple article of commerce doctrine for inducement claims, Souter noted it too just obliquely. But if Sony was untouched, why wasn't the case analyzed under Sony? It had certainly been argued that way. And there is also no denying that since copyright owners can choose their theory of liability, and judges can decide the ground for deciding a case (as Wilson did), Sony can be bypassed, which is a better description I think than the melodramatic "killed" I used before. But bypassing is still a form of rendering Sony inapplicable.
As Josh Wattles indicates, it would be an interesting exercise to run the Betamax facts through the Grokster standard. What are, for example, the types of cases where Sony will still apply? Is it just don't throw out the baby with the bathwater cases, that is, those where one can't separate the sheep from the goats?
I confess to having only questions, though and not answers. One would have wished the Court would have supplied answers and not raised more questions.
Dear Bill,
Twain is alive in his writings; I'm alive in Supreme Court precedent, heretofore not overruled. Indeed, reaffirmed and elevated to safe harbor status in Grokster.
Sony betamax most likely would have survived an active inducement claim -- Souter quite tellingly says that even library building may not have been infringing. That gratuituous statement was probably added to anticipate exactly that question you pose.
"Bypass" is still too strong a word. You make it sound like in every or the typical case, the Sony safe harbor can be bypassed. That's clearly not what Grokster envisions. Nor have the cases subsequent to Grokster borne out that supposition.
The reason that Grokster itself could "bypass" Sony was that the evidence of active inducement -- internal company documents and other admissions -- was considered to be overwhelming. Footnote 12, even if a compromise, is still a part of the case and still pretty clear in stating that designers have no affirmative duty to design their products to stop copyright infringement.
Warm regards,
The Sony safe harbor
Dear Sony Safe Harbor:
I am happy to be reassured. My reading of the Justice's papers in Sony indicates a majority thought librarying was not fair use, but then was then and now is now. May I ask a question? Let's say I design a DVR. I know and intende that the DVR be used for timeshifting of broadcast programs and librarying of Video on Demand programming. I am sued for inducement because I intended that it be used for librarying too. What happens if the claim is only for inducement. Does the staple article of commerce and Sony apply or not?
Dear Bill,
I agree that librarying in Sony was viewed with suspicion, if not out and out infringement. That's what makes Souter's throwaway line so noticeable in Grokster.
As to your hypo, please stick to your day job -- we need you as the wonderful copyright expert you are. But if you do design a DVR with the intention of librarying AND TAKE SOME ACTIVE STEPS to encourage the librarying, you could be liable (assuming personal librarying is infringing). If you don't take any active steps and it's merely the design of your DVR, then you can invoke Sony. And, realistically, it's hard to imagine that a tech designer would be so narrow minded in wanting users only to use for infringing purpose. The designer is probably interested in any use, including noninfringing ones, that help sell the product. For example, it would be hard to believe that you design your DVR only for the purpose of librarying, as opposed to time shift.
Very truly yours,
The Sony safe harbor
I like Sony, but I have to admit what I consider a big legal flaw, which could lead to its eventual demise: the opinion declares "time shifting" fair use partly because there is "a significant likelihood that substantial numbers of copyright holders who license their works for broadcast on free television would not object to having their broadcasts time-shifted by private viewers."
At the time Rehnquist made what I think was a better legal case, roughly "why not ask the copyright holders for permission instead of making assumptions on what they'd object to." Or, how it was suggested in the opinion "Sony may be able, for example, to build a VTR that enables broadcasters to scramble the signal of individual programs and 'jam' the unauthorized recording of them."
I believe (1) it is highly unlikely that the Court will declare a general activity (like "timeshifting") "fair use" ever again (Rehnquist again: "But neither the statute nor its legislative history suggests any intent to create a general exemption for a single copy made for personal or private use. ... Fair use may be found when a work is used 'for purposes such as criticism, comment, news reporting, teaching, ... scholarship, or research.'"); and (2) the electronic manufacturing industry will need to lobby at least as hard as the entertainment industry to get Congress to clear these rules up if there's any hope of getting something clear cut.
But if you do design a DVR with the intention of librarying AND TAKE SOME ACTIVE STEPS to encourage the librarying, you could be liable (assuming personal librarying is infringing). If you don't take any active steps and it's merely the design of your DVR, then you can invoke Sony.
I agree, at least insofar as that's what I think the rule should be. But I wonder what you make of the following from Judge Wilson's opinion:
Thus, Plaintiffs need not prove that StreamCast undertook specific actions, beyond product distribution, that caused specific acts of infringement. Instead, Plaintiffs need prove only that StreamCast distributed the product with the intent to encourage infringement.
I've said a bit more on what this might all mean for innovaotor in my post over in EFF's Deep Links.
Dear Sony Safe Harbor;
Thanks for your compliment and I promise not to give up my day job. There are a few things I can't figure out. In my DVR hypo, assume I intend the DVR to be used both for time-shifting and for librarying (say by having generous storage capacity) and that librarying is not fair use.
Case #1. Copyright owners sue for inducement.
Case #2. copyright owners sue for contributory infringement.
In #1, I think the staple article of commerce can't be raised under Grokster. In case # 2 it can be. I don;t understand why such a distinction, and my bypass remark was directed toward the ability of copyright owners to sue under the case #1 scenario, or judges to decide a case with multiple theories solely under #1, as Wilson just did.
And, as Fred pointed out even under inducement, as Wilson held:
"Plaintiffs need not prove that StreamCast undertook specific actions, beyond product distribution, that caused specific acts of infringement. Instead, Plaintiffs need prove only that StreamCast distributed the product with the intent to encourage infringement."
It would seem that under my DVR hypo that would be enough. And I think of course that my DVR hypo is little different from Sony.
This also gets back for me to my earlier confusion about whether the presence of substantial non-infringing uses renders immune infringing uses. Sony seems to say yes. Grokster seems to say even substantial noninfringing uses won't get you off the hook if you induce some infringing uses, e.g., in my hypo librarying (or any proxy for an infringing use).
Am I wrong?
Footnote 19 of Sony, respecting a hypothetical application of the standard for vicarious liability in trademark: "Sony certainly does not 'intentionally induce[ ]' its customers to make infringing uses of respondents' copyrights...." Does this answer the Betamax-via-Grokster exercise?
Dean:
I think it was a factually questionable statement that Sony corproation didn't induce infringing acts (at least if one considers that a majority of the Sony Court Court thought librarying to be infringing, and considering the rather loose meaning Grokster ascribes to inducement - something more like intent) but that aside, neither Sony nor Grokster were decided on the basis of vicarious liability.
My biggest problem with how things have shook out so far with secondary liability is this: the choice of a theory of secondary liability is plaintiff's; the staple article of commerce doctrine is not an affirmative defense like fair use, it is simply a way to negate one and only one theory of liability, contribututory infringent. The staple article of commerce doctrine is not a safe harbor in the sense of the DMCA provisions - something defendant can point to to get off the hook regardless of the theory plaintiff pleads. If the choice is made to sue under the new inducement theory, staple article of commerce doesn't matter. So calling Sony a safe harbor should be understood narrowly: only those cases where the theory of liability chosen by plaintiff is contributory infringement; its a narrow harbor and one where the copyright owner gets to decide who moors there. With the DMCA, by contrast the plaintiff does not get to decide whether the safe ahrbor may be utilized; if defendant fits within the provision and has taken the necessary steps, the harbor is available at defendant's choice. To me that's a big difference.
I think that the ability of copyright owners to prevent application of the staple article of commerce doctrine was quite purposeful on the part of the Grokster Supreme Court: both Souter's opinion and Ginsburg point out the differences with 35 USC 271(b) and (c) - the difference being no staple article of commerce for inducement claims. The proof is in the pudding in the remand opinion which analyzes the matter under inducement without staple article of commerce.
Dear Bill,
You and the kind gentleman from EFF raise some very subtle points.
Rereading Grokster, I will refine slightly my comments.
1. In your DVR hypo, if there is evidence of "clear expression or other affirmative steps" of your intent that the DVR be used to infringe, then under Grokster an inducement claim can be raised.
2. But that's different from (merely) knowing that your DVR will be used to infringe. Distribution with "knowledge that some users would follow the unlawful course" is not enough for inducement.
3. The tougher case is when you have some latent intent, but no clear expression. So, let's say in your hypo, there are no "words or deeds" -- to borrow Souter's language-- manifesting an intent to induce or encourage users to infringe. But secretly, deep down, you desired commercial success for your DVR, including whatever infringing and noninfringing uses became popular. As I read Grokster, these facts would not support an inducement claim. No words or deeds, or clear expression, of inducement.
4. The quoted language from Wilson's opinion is perhaps ambiguous. But if you read before and after Wilson's analysis, he does require "evidence of the defendant's expression or conduct" manifesting the intent to induce. And in this case, the words and deeds of Streamcast were many.
5. I agree with you that the Sony safe harbor does not apply to inducement claims, as Grokster held. But there's no basis to conclude that inducement claims will be easy to prove. It's not in patent law. Nor has it been in copyright law thus far.
Streamcast is an outlier because the company's internal emails and documents were smoking guns.
Keep hope alive.
The Sony safe harbor still lives.
Dear Sony safe harbor:
I agree that it is the outliers that get all the attention. Judge Leval was quite critical of Sony on that ground, especially in light if the armada that was arrayed to resolve a matter he thought could have been more simply decided. The same might be said about Grokster: if the Court had foregone its rather strained discussion of Sony and basically said "You're an evil inducer and we're not going to let you get away with it," some might have wanted a more sophisticated basis while still agreeing with the result. But instead, we got such a result with legal hoopla that doesn't always add up.
This discussion between the Sony Safe Harbour and William Patry is very interesting.
I have been following these issues closely because my doctoral research focuses on secondary liability for copyright infringement in the P2P context. I should take this opportunity to say thanks very much for your insightful and enlightening posts; they are very useful to me all the way over in Australia where fewer academics are working on this issue.
The way I see it is this. Despite the court’s stated intention of preserving the Sony protection, it risks becoming a mere historical curiosity. Imagine having a rickety old bridge marked all over with signs warning of danger. Cars that drive over it risk falling through. Then imagine that a glossy new concrete bridge is constructed right next to it. Motorists are at liberty to drive over either.
Copyright plaintiffs are in the position of the motorists in this analogy. They choose the route that their case will take. They are perfectly entitled to choose to plead their case under contributory liability, which is equivalent to the rickety bridge. However, if they do so there is a risk that the Sony protection will operate to defeat their case, causing them to fall right through. On the other hand, they can choose to simply turn onto the glossy and strong concrete structure (which of course represents the inducement theory). Admittedly the concrete bridge doesn’t have the same historical character as the other, but for plaintiffs the risk of falling is much reduced.
While the road-builders (or if you like, the Supreme Court) have theoretically "preserved" the historic bridge, in reality it's not a route that any sensible motorist is going to take.
Brava Rebecca. Australia has a number of great copyright scholars, such as Sam Ricketson Kathy Bowrey, and Kim Weatherall whose blog I regularly read.
There are indeed, and it is a rather daunting standard to follow!
I have been thinking about the way in which Wilson J framed his interpretation of the inducement standard - "Plaintiffs need not prove that StreamCast undertook specific actions, beyond product distribution, that caused specific acts of infringement. Instead, Plaintiffs need prove only that StreamCast distributed the product with the intent to encourage infringement." (p30)
An intention to induce standard is of course easier to satisfy than one that requires proof of actual inducement. It means that a defendant could potentially be liable for inducement if it intended to induce users to infringe, even if it did so in such a way that no person was in fact induced by its conduct.
Such an interpretation is particularly interesting when considered in the context of the inducement theory’s origin. The Supreme Court of course adopted it from a patent law provision in the United States Code that provides “whoever actively induces infringement of a patent shall be liable as an infringer.” The patent case law has interpreted the use of the adverb “actively” as meaning that “some affirmative act is necessary for a violation of § 271(b) to occur,” and the Supreme Court’s test itself requires there to be “affirmative steps.”
In light of this background, any interpretation that says that inducement is made out if you distribute a product with intent to encourage infringement seems to be overly broad.
What do others think?
Rebecca:
Among the many things I find disturbing about the inducement theory is that it is not an inducement theory but an intent to induce theory. This is shift is not inadvertent: actual inducement would be going out and cajoling people; intent to induce could be internal stuff, recited profusely bu Judge Wilson. But regardless of what a company may wish to accomplish, shouldn't be key be in an inducement theory whether one does induce and even accomplish by that inducement?
sony safe harbor wrote: So, let's say in your hypo, there are no "words or deeds" -- to borrow Souter's language-- manifesting an intent to induce or encourage users to infringe. But secretly, deep down, you desired commercial success for your DVR, including whatever infringing and noninfringing uses became popular. As I read Grokster, these facts would not support an inducement claim. No words or deeds, or clear expression, of inducement. . . . The quoted language from Wilson's opinion is perhaps ambiguous. But if you read before and after Wilson's analysis, he does require "evidence of the defendant's expression or conduct" manifesting the intent to induce. And in this case, the words and deeds of Streamcast were many.
There is a disconnect, as usual, between the real world of business, in which all of these matters become facts instead of theories, and the world of law in which theory frequently overcomes practical realities. I am confused by this: if an engineer designs an application or piece of hardware that within its design and with clear knowledge by the engineer has the capability of letting someone make copies and put them away for later use but that has a primary intended purpose to, let’s say, improve the quality of a transmission through a time delay and signal sharpening device, has the horse left barn forever? Under Grokster as applied by Judge Wilson must affirmative steps then be taken to block infringing applications of the device no matter how minor those potentially infringing uses might be when compared to the non-infringing uses of the device? Or this: if the marketing department says in an internal memo “hey, our feedback from the focus group says that there are a bunch of college kids that want to use this device to sharpen up low resolution DVD rips from email groups and the like obtained from darknet distribution of films” what would the company then have to do?
I know what the engineer should not do. I know what the company should not say in its pitch when selling the device. But Judge Wilson also seems to suggest that doing nothing under both of these circumstances (possibly when combined with finding some benefit from the doing of nothing) is an act indicative of intent to induce and enough to find liability. Since doing nothing ceases to be a practical option, the great unknown becomes how to un-ring that kind of bell to avoid liability?
How about this? I assume that actual infringements must occur to find liability for inducement although in theory it is no longer required that the alleged inducer have actual knowledge of those infringements. But maybe not. Could one obtain an injunction before the device is distributed at all on the basis that the device would induce infringements and that it was made even in part with that intention? I think the copyright content groups now hold this view.
As smart as those Justices are up there in the Supreme Court, I doubt much of this was thought through as they struggled to obtain compromises for ersatz unanimity. But on the ground, not in court but in the garages and factories and fancy design studios, the rules have changed and their bench tools will now require a copyright lawyer who has no idea what to do. And, you get the not so sneaking suspicion that the point was to kill the Sony safe harbor but that they lacked the guts to say so. If they had, this issue would go to Congress. By shying away, it will bounce around claim letters and courtrooms and the imaginations of hackers to the likely detriment of everyone concerned.
So, to "sony safe harbor", you may not be buried in the ground but in keeping with the Halloween season, you are horribly mangled and among the walking un-dead dead.
What of the argument that courts need not choose between the inducement and substantial noninfringing uses? In my research on the Grokster decision, I've seen at least one article that argues that the Grokster and Sony decisions are the Court's attempt to articulate the typical intent requiremed for tort liability in the copyright context.
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