Monday, July 31, 2006

Substantially Confusing Uses

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.


Eric Goldman said...

In my mind, the real villian isn't the Sony opinion but the Ninth Circuit Napster bastardization. That opinion was so lawless and misguided that it taints all cases trying to wrestle with it as precedent (or, in the Marval v. NCSoft case, courts that are "bound" by it). Eric.

William Patry said...


I certainly agreement with your assessment of the 9th Circuit's Napster opinion, which probably led to Marvel, and I don't think that Napster properly understood Sony. It may be though that some of these ambiguities would have arisen even if Napster had never been issued.

Anonymous said...

I agree with Eric Goldman. To blame the software for an outside users' infringement is just rent seeking - not copyright enforcement. I think Napster has had more of a chilling effect on technology development than Sony.

Anonymous said...

Prof. Patry--
I had thought that if a court found there is a substantial noninfringing use, there was no liability for any infringing uses.

Not at all.

There are two elements for contributory infringement: contribution to infringement and knowledge of the infringement at the time of the contribution. Knowledge is one of the elements that distinguishes contributory infringement from vicarious infringement, which has no knowledge requirement.

In Sony, the Court said that Sony did not have constructive knowledge of infringement as a result of the capabilities of the Betamax to foster infringement. This leaves the door open for actual knowledge or constructive knowledge with some other basis.

While I have plenty of problems with the Napster decision, I'd say that the court there did properly understand Sony. They just found that there was other knowledge besides constructive knowledge based upon the capabilities of the product at hand.

In the Sony case, it wouldn't have mattered if Universal told Sony that John Doe at 123 Main St. was infringing, since by then Sony was no longer contributing. The Betamax had been sold, and there was no further contact between Sony and John Doe. It's the continuing relationship between service providers such as Napster or whomever and their users that tends to change things into a model similar to notice-and-takedown.

While I don't much care for most of the DMCA, and find 512 inadequate in protecting alleged infringers, 512 is the main method for continuing-contact contributory infringers with actual knowledge to protect themselves from liability.

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

Oh? I've always thought that Sony was a great opinion, and that it has been shown to be over the years with the plethora of copyright-benign and -beneficial technology that we never would've gotten without it. This is particularly true when you remember that the Court reversed the appellate opinion!

Besides, even where the courts don't do a great job, look at what they have to work with. Statutory copyright law would be a joke if it wasn't so depressing. Congress no longer cares about fulfilling its Constitutional duty vis-a-vis copyright, and instead caters to industry, authors (generally big name stars that can blind Congress with their fame) and foreign nations. The laws are totally misguided and everyone involved should be ashamed of themselves.

It'll be a pain to accomplish, but ultimately we're going to have to exit all of the bad copyright treaties (i.e. all of them), ignore the industries, authors, and their shills, and start over from scratch. The only concern should be producing the greatest public benefit, regardless of how that leaves authors or industry. This means looking at how to best encourage the creation of original works, while not overencouraging them. It also means trying to encourage the creation of derivatives, and making copyright have the smallest footprint in terms of scope and duration.

One would hope the copyright bar would be pushing for this, since they have a duty to the public as well. Unfortunately, only a handful seem to be living up to their responsibilities.

William Patry said...

Dear Anonymous:

Respectfully, I find it dificult to think that the Sony Corporation didn't have actual knowledge, much less inducement under the Grokster standard. Sony's ads encouraged people to copy their favorite movies of which very very few were PD. There was also encouragement to library. The whole purpose of the record function was to enagage in copying of copyrighted works. Unless knowledge means knowledge that a divided Supreme Court will use the staple article of commerce doctrine to excuse the machine, there was knowledge of every stripe.

Anonymous said...

Prof. Patry--
Respectfully, I find it dificult to think that the Sony Corporation didn't have actual knowledge, much less inducement under the Grokster standard.

Grokster is neither here nor there. That standard didn't exist at the time, and inducement may yet be avoided through caution, just as Grokster avoided contributory and vicarious liability.

As for Sony's actual knowledge, the Court didn't agree with you: This case, however, plainly does not fall in that category. The only contact between Sony and the users of the Betamax that is disclosed by this record occurred at the moment of sale. The District Court expressly found that "no employee of Sony, Sonam or DDBI had either direct involvement with the allegedly infringing activity or direct contact with purchasers of Betamax who recorded copyrighted works off-the-air."

Sony's ads encouraged people to copy their favorite movies of which very very few were PD. There was also encouragement to library. The whole purpose of the record function was to enagage in copying of copyrighted works.

And as it turns out, a substantial amount of that was authorized or fair use. Sony can't be in hot water for encouraging people to engage in non-infringing activities. While Sony probably wouldn't want to engage in the precise same advertising now, they are hardly precluded from similar advertisements for similar devices in the future, even accounting for Grokster: [O]ne 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. We are, of course, mindful of the need to keep from trenching on regular commerce or discouraging the development of technologies with lawful and unlawful potential. Accordingly, just as Sony did not find intentional inducement despite the knowledge of the VCR manufacturer that its device could be used to infringe, mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability. It sounds as though Sony would only have to make sure that it was clear that its object was to have users record programs when it was lawful for them to do so. That the technology is capable of allowing infringing recordings still can't be held against them.

Of course a lot of this could be avoided by a simple statutory exception which made anything done by natural persons, in a non-profit manner, not an infringement. Let copyright infringement be something for businesses to worry about. It's already obvious that ordinary individuals couldn't care less. Forcing it on them is as silly as Prohibition was. And like Prohibition, it's also resulting in disrespect for other laws, support for commercial infringers, etc.

William Patry said...

Dear Anonymous:

The record before the district court shows alot of active inducement by Sony, especially by explicit advertising. The story is told in great detail in James Lardner's book "Fast Forward: A Machine and the Commotion It Caused" (Rev. ed. 1987).

The Supreme Court chose what it wanted to cherry-pick for its opinion for its own purposes, but even the Court's internal memoranda reveal awareness of many facts inconsistent with the ultimate opinion.

It also bears noting that the basis for the opinion, the ground on which it was decided, shifted materially a number of times: Stevens' original view was there was no direct infringement because, like the district court, he felt copyright owners had no right to stop home taping at all. Only near the end did he focus on the stape article of commerce as a way to rope in Justice O'Connor. Then, he needed to cull some facts to support that new theory. This story is told in an comprehensive article by Peter Menell and David Nimmer "Unwinding Sony: tracing, testing, and Correcting the 'Historic Kinship' Premise."

William Patry said...

Here is a link to a comment by Rebecca Tushnet right after Grokster that reproduces one of the Sony Betamax ad,

Prosfilaes said...

Penny Arcade points out that NCSoft didn't do a great job of covering itself; that several of the abilities in their game seem designed to emulate the abilities of published characters. E.g. the claws are very similar to the claws that Wolverine has, in that there are three metal claws that extend with a distinct "snikt".