Copyright

In this paper we aim to discuss the application of the copyright law:

• to computer programs and web content;

• to the distribution of copyrighted work using the internet.

We first need to present the law and related decisions and concepts, notably:

• the Apple v. Microsoft ruling;

• the Sony Betamax ruling.

We would like to mention here an excellent FAQ about copyright, http://www.eff.org/IP/?f=copyright.faq.txt.

The copyright protects original works of authorship, and not discoveries, ideas, concepts, principles or potentially inventive procedures, processes, systems, methods of operation that helped producing said works of authorship.

Protected original works of authorship are fixed in a tangible medium of expression that defines what is protected. On the opposite to protect an invention an inventor has to declare what constitutes said invention in a patent application and to file this application to a patent office.

This is not so obvious to see what authorship means in the context of copyright. We may prefer the UK definition that does not use authorship:

"A work is subject to copyright if it is regarded as original, and exhibits a degree of labour, skill or judgement."

When a copyrighted work is published "a notice of copyright [...] may be placed on publicly distributed copies from which the work can be visually perceived, either directly or with the aid of a machine or device.

[... This notice] shall consist of the following three elements:

1. the symbol (c) (the letter C in a circle), or the word 'Copyright', or the abbreviation 'Copr.'; and

2. the year of first publication of the work[...]; and

3. the name of the owner of copyright in the work, or an abbreviation by which the name can be recognized, or a generally known alternative designation of the owner.

[...] The notice shall be affixed to the copies in such manner and location as to give reasonable notice of the claim of copyright [§ 401 of the US Copyright act]."

The "All Rights Reserved" notice no longer serves much useful purpose. It comes from a Buenos Aires international treaty in 1911 that stated that once copyright was obtained for a work in one signatory country, all other signatories accorded protection as well without requiring any further formalities provided that the work contained a notice reserving these rights but now this is the Berne convention that applies and this convention states that copyright should not depend on formalities such as registration or copyright notice.

However if the copyright notice was omitted an infringer can base her defend on innocent infringement.

A copyright owner can still obtain registration of the copyright claim by delivering to a copyright office a deposit, together with an application and fee but such registration is not a condition of copyright protection. Said copyright office then will classify the copyright [this classification having no significance with respect to the subject matter of copyright or the exclusive rights provided by the copyright], examine the application and grant a certificate of registration. In judicial proceedings a certificate of a registration is useful because

• it constitutes prima facie evidence of the validity of the copyright and of the facts stated in the certificate;

• in court actions attorney’s fees and statutory damages are awarded to the copyright owner [USA].

About registration you can also read DO I NEED TO REGISTER MY COPYRIGHTS? by Ivan Hoffman.

The scope of the exclusive right granted by copyright is not so easy to determine. It actually depends on the originality of the copyrighted work. 102(b) of the US Copyright act reads:

"In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work."

Whatever in the copyrighted work can be deduced from its purpose, subject... is excluded from the copyright protection. For an illustration of this rule you may look at Ets-Hokin v. Skyy Spirits, Inc., et. Al. More precisely there are:

• An originality rule: what can be protected by copyright is what was independently created by the author and possesses some degree of creativity.

• A merger doctrine: when the expression is inseparable from the idea it expresses, the expression and the idea merge, and the combined idea-expression is not protected.

• A scene a faire doctrine: "scenes a faire are sequences of events necessarily resulting from the choice of setting or situation, or incidents, characters or settings that are indispensable in the treatment of a given topic." For computer programs it means that the expression is not protected "as it is dictated by such factors as (1) the mechanical specifications of the computer on which a particular program is intended to run; (2) compatibility requirements of other programs with which a program is designed to operate in conjunction; (3) computer manufacturers’ design standards; (4) demands of the industry being serviced; and (5) widely accepted programming practices within the computer industry."

The US Copyright act defines a program as "a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result." A program is a literary work. Other examples of literary work are:

• written materials such as journal articles, novels, poems, song lyrics and reports; and

• compilations such as directories and databases.

US Congress explained that "section 102(b) is intended, among other things, to make clear that the expression adopted by the programmer is the copyrightable element in a computer program, and that the actual processes or methods embodied in the program are not within the scope of the copyright law."

So a program copyright may protect but not necessarily protects more than the source code and any binary code produced through the compilation of said source code. For instance the copyright does not protect the function and code constructions that are necessary to perform a given function. A first illustration of this is Incredible Technologies, Inc. vs. Virtual Technologies, Inc. dba Global VR. A second illustration is APPLE COMPUTER, INC. v. MICROSOFT CORP we present below. You may also read Software and copyright law.

Copyright law follows from the same sentence of the Constitution as the patent law "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Patent law secures the exclusive right of inventors whereas Copyright law secures the exclusive right of authors.

Copyright is governed by the Copyright act that was signed in 1909, modified in 1979 and subsequently amended notably to conform to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and to the Digital Millennium Copyright Act.

As explained in a Rights Granted Under Copyright Law document of Bitlaw "the Copyright Act grants five rights to a copyright owner, which are described in more detail below.

1. the right to reproduce the copyrighted work;

2. the right to prepare derivative works based upon the work;

3. the right to distribute copies of the work to the public;

4. the right to perform the copyrighted work publicly; and

5. the right to display the copyrighted work publicly."

See § 106 for more details

§ 102 defines the subject matter of copyright:

"Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression [...]. Works of authorship include the following categories:

1. literary works;

2. musical works, including any accompanying words;

3. dramatic works, including any accompanying music;

4. pantomimes and choreographic works;

5. pictorial, graphic, and sculptural works;

6. motion pictures and other audiovisual works;

7. sound recordings; and

8. architectural works."

The Copyright act defines a derivative work as "a work based upon one or more pre-existing works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted" and a compilation as "a work formed by the collection and assembling of pre-existing materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship." The copyright in a compilation or derivative work extends only to the material contributed by the author of such work.

There are limitations to the exclusive rights granted by copyright, notably

• fair use [§ 107];

• transfer of copy [§ 109];

• computer programs [§ 111].

The fair use of a copyrighted work for purposes such as criticism, comment, news reporting, teaching scholarship, or research, is not an infringement of copyright. Fair use is a privilege for others than the owner of a copyright to use the copyrighted material in a reasonable manner without his consent, notwithstanding the monopoly granted to the owner. You can find an analysis of fair use at Bitlaw. The problem with fair use is that it evolves to deal with technological changes and that the public cannot easily predict how it will evolve. In the Sony Betamax ruling the appeal court explained: "If an author's exclusive rights over his work were unlimited, his personal economic incentive could surpass what is necessary for encouragement and actually work against the public by decreasing access to these works."

The transfer of copy limitation relates to the "first sale doctrine", which states that after the first sale or distribution of a copy, the copyright holder can no longer control what happens to that copy. The owner of a lawfully made copy of a copyrighted work is "entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy." There are exceptions to the first sale doctrine, including a prohibition on the rental of software and phonorecords.

"It is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided:

1. that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner, or

2. that such new copy or adaptation is for archival purposes only and that all archival copies are destroyed in the event that continued possession of the computer program should cease to be rightful."

This limitation is related to technical constraints. Without it a computer program would be less useful and therefore would sell less. Note that today with download and online update the user does not acquire the ownership of a program copy. She buys a right to use a certain version of a program in a certain way. She is not necessarily aware about the number of updates and backups that were performed by the publisher on her computer and her right to resell the program can also be restricted. You may check the Microsoft Office License example.

Copyright vests initially in the author or authors of the work but if a work was made for hire, "the employer or other person for whom the work was prepared is considered the author[...],and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright [§ 201]."

The registration center for USA is the United States Copyright Office whose URL is http://www.copyright.gov/.

The main treaty governing copyright is the Berne Convention for the Protection of Literary and Artistic Works now administered by the World Intellectual Property Organization (WIPO).

Article 5 reads:

1. "Authors shall enjoy, in respect of works for which they are protected under this Convention, in countries of the Union [members of the Berne convention] other than the country of origin, the rights which their respective laws do now or may hereafter grant to their nationals, as well as the rights specially granted by this Convention.

2. The enjoyment and the exercise of these rights shall not be subject to any formality; such enjoyment and such exercise shall be independent of the existence of protection in the country of origin of the work. [...]"

Art. 5 (1) means that an author’s rights are respected in another country as though the author were a national and Art. 5 (2) means that copyright does not depend on formalities such as registration or copyright notice, which does not mean that a member of the Berne convention cannot take formalities in account to determine what remedies apply.

Members of the Berne convention must protect seven rights:

• Paternity/ integrity Art. 6bis (1) "Independently of the author’s economic rights, and even after the transfer of the said rights, the author shall have the right to claim authorship of the work and to object to any distortion, mutilation or other modification of, or other derogatory action in relation to, the said work, which would be prejudicial to his honor or reputation."

• Translation Art. 8 "Authors of literary and artistic works protected by this Convention shall enjoy the exclusive right of making and of authorizing the translation of their works throughout the term of protection of their rights in the original works."

• Reproduction Art. 9 "(1) Authors of literary and artistic works protected by this Convention shall have the exclusive right of authorizing the reproduction of these works, in any manner or form. (2) It shall be a matter for legislation in the countries of the Union to permit the reproduction of such works in certain special cases, provided that such reproduction does not conflict with a normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the author. [...]" So the Berne convention allows member nations to decide about exclusions from the reproduction right though Art. 10 and 19bis provide some guidelines.

• Public performance Art. 11 and 11ter.

• Broadcasting Art. 11bis.

• Adaptation Art. 12 "Authors of literary or artistic works shall enjoy the exclusive right of authorizing adaptations, arrangements and other alterations of their works."

Program sources are usually assimilated to literary work but are mentioned nowhere in the Berne convention. When a program source is a literary work Art. 12 provides the exclusive right of authorizing derivative works.

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement was negotiated in the Uruguay round of World trade discussions. This treaty is non-discriminatory. A agreement member must treat its own nationals and foreigners equally and treat nationals of all trading partners in the World Trade Organization (WTO) equally. Part II Section 1 relates to copyright and related rights. Art. 9 says that agreement members shall comply with the Berne convention. Art. 10 says that Computer programs, whether in source or object code, shall be protected as literary works under the Berne Convention. TRIPS leaves some space for interpretation, Art. 13 reading: "Members shall confine limitations or exceptions to exclusive rights to certain special cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder."

We recommend reading a brilliant document entitled "COPYRIGHT AND FREEDOM OF EXPRESSION IN EUROPE" by Bernt Hugenholtz. We do not resist quoting:

"There are a number of explanations for the late development of European interest in the potential copyright/free speech conflict. One important factor is the natural law mystique that traditionally has surrounded copyright (droit d’auteur) on the European continent. Unlike the law of the United States, where utilitarian considerations of information policy are directly reflected in the Constitution ('to promote science and the useful arts...' ), continental-European 'author’s rights' are based primarily on notions of natural justice: 'author’s rights are not created by law but always existed in the legal consciousness of man'. In the pure droit d’auteur philosophy, copyright is an essentially unrestricted natural right reflecting the 'sacred' bond between the author and his personal creation."

The Art. 10 of the European Convention on Human Rights to which Bernt Hugenholtz refers reads:

1. "Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers. [...]

2. The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, [...]for the protection of the reputation or the rights of others [...]"

Copyright owners and societies representing authors’ interests are also probably an unbalanced lobbying force. In the same way the data they publish are rarely challenged. A report of the French Senate says that counterfeiting cut 40,000 jobs in France. A FACT web site reported that the UK industry lost in excess of £9 billion to intellectual property theft in 2002, not including online copyright and trademark infringements. But the benefits of a loose copyright standard are not discussed:

• In a report about TRIPS an Indian deputy, Debabrata SAHA, wrote "IP assets is intended to serve the interest of rent seekers, who are predominantly in developed countries, rather than that of the public in developing countries."

• Copyright favors the short term interest of copyright owners but, as the Sony Betamax case, shows not necessarily their long term interest. The copyright is a part of the deal proposed by the copyright owner to the public. If the deal is not good the public does not buy or buy much less.

• This is not only the lack of experience that makes that copyright owners do not actively enforce their copyright when they release something new. The market adopts a new product faster without the copyright burden. For instance the interest of a software publisher can be to not initially prevent software piracy to increase the number of users because customers do not buy products nobody knows and employees recommend products they know.

• There is a concern about online copyright and trademark enforcement versus freedom of expression. Publishing on the web costs virtually nothing, requires minimal skills and is usually viewed by few people. But this is this aggregate work of thousands of anonymous people that makes of Internet a unique experience in the history. Just creating Fear, Uncertainty and Doubt (FUD) about legal liability may hurt this effort.

• There is a concern about online copyright and trademark enforcement versus right to information and competition. Search engines (see the Google case), syndication sites, sites comparing prices, virtually everything that inform about what is going on on Internet, is on the infringement borderline.

The net result is that in continental Europe and especially in France courts tend to enforce copyright (and trademark) in a stricter way than in countries where utilitarian considerations dominate.

You can find European documents including directives governing copyright at http://europa.eu.int/comm/internal_market/copyright/documents/documents_en.htm. Maybe a little clarification is needed here. European membership is like any international treaty membership. Member states commit to modify their national law in order to implement European directives as they commit to modify their national law in order to implement treaties like Berne convention and TRIPS. There is an issue in Europe in that people who write directives are not accountable for their choices in the same way as members of Congress for instance. It has probably more to do with lack of European opinion (for instance there is nothing like a European newspaper – though there is a European internal market – European companies think in European and global terms) than with lack of democracy. A consequence is that countries that are interested by a subject matter write the directives and trade these directives with other members.

Directive 2004/48/EC describes the measures, procedures and remedies necessary to ensure the enforcement of intellectual property rights. Its preamble is utilitarian:

"Without effective means of enforcing intellectual property rights, innovation and creativity are discouraged and investment diminished. It is therefore necessary to ensure that the substantive law on intellectual property, which is nowadays largely part of the acquis communautaire, is applied effectively in the Community. In this respect, the means of enforcing intellectual property rights are of paramount importance for the success of the internal market. [3]"

"The objective of this Directive is to approximate legislative systems so as to ensure a high, equivalent and homogeneous level of protection in the internal market. [10]"

Said measures are:

• if a party specified evidence which lies in the control of the opposing party, the competent judicial authorities may order that such evidence be presented by the opposing party; [Art. 6, Art. 8]

• measures for preserving evidence [Art. 7];

• provisional and precautionary measures [like injunction, Art. 9];

• damage costs [Art. 13];

• legal costs [Art. 14];

• publication of judicial decisions [Art. 15].

Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society says that member States shall provide for the exclusive right to:

• authorise or prohibit direct or indirect, temporary or permanent reproduction [reproduction right Art. 2];

• authorise or prohibit any communication to the public of their works [communication right Art. 3];

• authorise or prohibit any form of distribution to the public by sale or otherwise [distribution right Art. 4].

Exceptions include "acts of reproduction referred to in Article 2, which are transient or incidental [and] an integral and essential part of a technological process and whose sole purpose is to enable:

• a transmission in a network between third parties by an intermediary, or

• a lawful use of a work or other subject-matter to be made, and which have no independent economic significance, shall be exempted from the reproduction right provided for in Article 2."

Art. 2 of the Directive 91/250/EEC on the legal protection of computer programs reads:

• "In accordance with the provisions of this Directive, Member States shall protect computer programs, by copyright, as literary works within the meaning of the Berne Convention for the Protection of Literary and Artistic Works. For the purposes of this Directive, the term 'computer programs` shall include their preparatory design material.

• Protection in accordance with this Directive shall apply to the expression in any form of a computer program. Ideas and principles which underlie any element of a computer program, including those which underlie its interfaces, are not protected by copyright under this Directive. [...]"

You can find a summary of the UK law in the UK Copyright Service site. For the full text you can look at http://www.patent.gov.uk/copy/legislation/copylaw.htm.

There is no official registration and the answer to the FAQ "Should I use an unofficial copyright register?" can hardly been regarded as a strong recommendation to use an unofficial copyright register.

Apple registered the Graphical User Interface (GUI) of the Macintosh for copyright as an audiovisual work. [Apple did not rely on the program that implemented said interface.] When Microsoft Corporation released Windows 1.0, having a similar GUI, Apple complained. As a result, the two agreed in November 1985 to a license giving Microsoft the right to use and sub-license derivative works generated by Windows 1.0 in present and future products. However with Windows 2 and Windows 3 Microsoft enhanced the Windows interface, making it closer to the Macintosh user interface. On March 17, 1988, Apple filed a suit against Hewlett-Packard and Microsoft, claiming seven counts of copyright infringement by their Windows 2.03 and NewWave programs, finding 189 similarities between the Macintosh and Windows 2.03 and 147 for NewWave. In April 1991 Apple filed a supplemental list of similarities, claiming additional copyright infringements by Windows 3.0 and NewWave 3.0.

A Comparison of the Apple vs. Hewlett-Packard/Microsoft and Lotus vs. Borland and Paperback Software Cases by Michelle M. Hsu reports:

"On April 14, 1992, the [district] court ruled that the Windows and NewWave programs did not in fact infringe upon Apple's copyright, except for the trash can and file-folder icons used by NewWave. One of the main problems with Apple's defense is that they relied too heavily upon the 'look and feel' phrase, which is not an actual legal term.

Apple claimed that the "look and feel" of the Macintosh user interface, taken as a whole, was protected by copyright, and that each individual element of the interface (for instance windows that were rectangular, resizable, overlapping and had title bars) was not as important as all these elements taken together.

Michelle M. Hsu added:

"An interesting statement made during the hearings is that Apple claims that they wouldn't have complained if only parts of things were taken, such as just the overlapping window or just the trash can, but when all of these were put together, then a situation was created that 'cries out for protection under the copyright law.' [Oral arguments in court before Judge Walker, April 14, 1992, and ruling] The judge did not agree with this argument, because under these circumstances, the only person who may determine when there has been a copyright infringement is Apple, and a competitor of Apple cannot. However, this is not the way the law should work; the law should define the property rights in a way that is reasonably predictable by all people in the field. During the proceedings, the court was attempting to determine a standard by which each of the elements on the list could be judged to decide which belongs to Apple and which does not. A strict 'blanket' standard was not actually determined; it was only concluded that in this case the elements cited on the list of similarities were considered 'unprotectible'."

You can find the final decision on appeal at http://home.earthlink.net/~mjohnsen/Technology/Lawsuits/appvsms.html.

The appeal court summarized:

"The district court construed the agreement to license visual displays in the Windows 1.0 interface, not the interface itself; determined that all visual displays in Windows 2.03 and 3.0 were in Windows 1.0 except for the use of overlapping windows3 and some changes in the appearance and manipulation of icons; dissected the Macintosh, Windows and NewWave interfaces based on a list of similarities submitted by Apple to decide which are protectable; and applied the limiting doctrines of originality, functionality, standardization, scenes a faire and merger to find no copying of protectable elements in Windows 2.03 or 3.0, and to limit the scope of copyright protection to a handful of individual elements in NewWave.4 The court then held that those elements in NewWave would be compared with their equivalent Apple elements for substantial similarity, and that the NewWave and Windows 2.03 and 3.0 works as a whole would be compared with Apple's works for virtual identity."

The appeal court found:

"It is clear that treatment of Apple's GUIs, whose visual displays are licensed to a great degree and which are a tool for the user to access various functions of a computer in an aesthetically and economically pleasing way, follows naturally from a long line of copyright decisions which recognizes that works cannot be substantially similar where analytic dissection demonstrates that similarities in expression are either authorized, or arise from the use of common ideas or their logical extensions."

Therefore the appeal court held:

1. "Because there was an agreement by which Apple licensed the right to make certain derivative works, the district court properly started with the license to determine what Microsoft was permitted to copy. Infringement cannot be founded on a licensed similarity. We read Microsoft's license as the district court did, to cover visual displays - not the Windows 1.0 interface itself. That being so, the court correctly decided first to identify which visual displays in Windows 2.03, 3.0 and NewWave are licensed and which are not.

2. The district court then properly proceeded to distinguish ideas from expression, and to 'dissect' unlicensed elements in order to determine whether the remaining similarities lack originality, flow naturally from basic ideas, or are one of the few ways in which a particular idea can be expressed given the constraints of the computer environment. Dissection is not inappropriate even though GUIs are thought of as the 'look and feel' of a computer, because copyright protection extends only to protectable elements of expression.

3. Having found that the similarities in Windows 2.03 and 3.0 consist only of unprotectable or licensed elements, and that the similarities between protectable elements in Apple's works and NewWave are de minimis, the district court did not err by concluding that, to the extent there is creative expression left in how the works are put together, as a whole they can receive only limited protection. When the range of protectable and unauthorized expression is narrow, the appropriate standard for illicit copying is virtual identity. For these reasons, the GUIs in Windows 2.03, 3.0 and NewWave cannot be compared for substantial similarity with the Macintosh interface as a whole. Instead, as the district court held, the works must be compared for virtual identity."

Apple case was difficult for two reasons:

1. If you think in term of look and feel you can find that Microsoft ripped off Apple, who had ripped off Xerox, who had ripped off Douglas Engelbart (the inventor of the mouse and of the windows). Apple was a substantial contributor as reminded by Bruce Horn in On Xerox, Apple and Progress. They invented the finder, the drag and drop, the clipboard, and pull-down menus. They could have patented some key components but they preferred to copyright their design.

2. Apple agreed upon a licensing agreement designed by Microsoft to include use of Apple features in Windows 1.0 and all future Microsoft software programs. Then a court had necessarily to check whether each similarity was covered by the license.

It has to be reminded here that

• Software patents were not officially supported in 1983, when Apple should have filed patent applications for key elements.

• Hypothetical Apple patents would have solved non-technical problems. Today this is not anymore an issue but in 1983 Apple could have faced difficulties for instance to convince an examiner that using drag and drop to link or copy files was an invention.

• Precisely because this case helped drawing the limits of the protection by copyright Apple could not foresee the outcome of litigation.

The MGM v. Grokster case we present below should answer the question of whether the distributor of a multi-purpose tool is liable for the infringements that may be committed by end-users of the tool. The answer will apply in USA. In countries like France, as you can see in the Google v. Meridien case the answer is already yes, the one who provides a means allowing infringing is liable for the infringements that may be committed by the users of the means.

In Sony Corporation of America v. Universal City Studios, Inc. (a.k.a. the "Sony Betamax ruling") the Supreme Court held in 1984 that a distributor cannot be held liable for users' infringement so long as the tool is capable of substantial non-infringing uses.

"It is thanks to the Betamax ruling that the makers of not just VCRs, but also every other technology capable of being used for infringement (e.g., photocopiers, personal computers, Cisco routers, CD burners, and Apple's iPod) can continue to sell their wares without fear of lawsuits from copyright owners."

Laws ruling economical matters are designed:

• To have a positive economical impact. A good law is a law that enables the marketplace to be Pareto efficient. A Pareto efficient marketplace is a marketplace that cannot be improved to make at least one individual better off, without making any other individual worse off. A good law is also a law that favors the public interest. The vast majority of the public should be made better off (number of jobs, progress, competitive advantage) to the expense of a minority made worse off.

• To be consistent with the rest of the law and its history.

The weight of the consistency requirement should not be underestimated. At first glance you could think that countries making more money with infringement means than with infringed objects (China, Japan, maybe USA too) should rule that the provider is not liable for users' infringement so long as the tool is capable of substantial non-infringing uses whereas countries making more money with infringed objects (France for instance) than with infringement means should rule that the provider is liable for any user infringement.

However in France first, as we have seen above, the droit d’auteur philosophy dominates and second the code civil reads:

• in article 1382 that the one who harms has to provide a remedy; and

• in article 1383 that the one whose negligence or carelessness caused harm is responsible for said harm.

In USA, as pointed by http://www.eff.org/legal/cases/betamax/ "on which item the courts ruled that manufacturers and retailers be held responsible for having supplied the equipment [weapon]?", the second amendment reads "A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed."

The user owns the weapon, the VCR, the photocopier, personal computer, Cisco router, CD burner, or Apple's iPod whereas said user simply hosts on her personal computer a program

• that she may have got for free, and

• that when used in a certain infrastructure,

• that could implement a police,

• allows her to infringe the copyright law.

So the question to be answered in MGM v. Grokster is not the same as in Sony Betamax ruling. The issue is also complicated by technical factors:

1. Most P2P programs are Open Source programs, which means that users can download their sources, disable modules that would enforce the law and recompile them or to say it in a different way that users can be the co-authors of the infringing means.

2. Program publishing is global whereas laws are national, which means that a publisher may release different versions for France, USA, China and Yugoslavia and publishers have no effective means to prevent a user to download a version which is illegal in her country.

Said infrastructure comprises a global network, Internet, accessed through access points provided by ISPs. So French approach was to make ISPs

• liable for infringement; and

• responsible for police.

ISPs are required to enforce court decisions such as cancellation of the infringer’s subscription to their service and had to sign a "Charte d’engagement pour le développement de l’offre légale de musique en ligne, le respect de la propriété intellectuelle et la lutte contre la piraterie numérique" with representatives of the copyright owners, by which they commit to:

• educate users;

• promote legal offers;

• notify users that they were found to be infringing by the copyright owners; and

• work on P2P filtering (preventing P2P programs to transfer illegal stuff on their network.

For another presentation of the case you may look at http://www.eff.org/legal/cases/betamax/.

Universal City Studios, Inc. and Walt Disney Productions filed a suit,

• alleging that the Sony’s "Betamax was designed and distributed for the sole purpose of inducing purchasers of the machine to record television shows, including movies that they have produced"; and

• "seeking an accounting, damages and injunctive and declaratory relief for copyright infringement, unfair competition."

On March 28, 1977 a court of California dismissed the Universal and Disney's Lanham Act [trademark] claims.

Universal City Studios, Inc. and Walt Disney Productions alleged "that defendants [Sony...] have failed to advise the public that use of the Betamax to copy copyrighted programs off the air constitutes copyright infringement and that this failure has caused the public to be confused and misled into believing that copying of television programs, including those of the plaintiffs, is done with the permission of the copyright owners and that it is otherwise legal."

Universal City Studios, Inc. and Walt Disney Productions relied on statements in defendants' advertising referring to "your favorite Monday night 9 o'clock show." The court found that saying that "this product is capable of copying television shows" is not the same as saying "when you use this product to copy television shows you are acting legally" and therefore dismissed the plaintiffs’ Lanham Act claim about public confusion.

On October 2, 1979 said court of California ruled in favor of Sony and other defendants, finding that:

1. 'Neither the Copyright Act of 1909 ("Old Act") nor the revised Act of 1976 ("New Act") gave copyright holders monopoly power over an individual's off-the-air copying in his home for private, non-commercial use. This court is not deciding whether tape duplication or copying from pay television is prohibited. Nor is this court ruling on off-the-air recording by individuals or groups for use outside the home.

2. Even if the Copyright Act did prohibit home-use copying, Sony, Sonam, DDBI and the retail stores would not be liable under any of the theories of direct or contributory infringement or vicarious liability.

3. The retail defendants have not infringed plaintiffs' copyrights.

4. Even if home-use copying were infringement and defendants were deemed liable therefor, this court could not grant the injunctive relief requested by plaintiffs.'

Plaintiffs contended that

1. recording plaintiffs' copyrighted works off-the-air is copyright infringement, even for home use, and not fair use; and

2. "the involvement of Sony, Sonam, DDBI, and the retail stores in the manufacturing, distributing, advertising, and selling of the Betamax makes the defendants liable as direct or contributory infringers or under the theory of vicarious liability."

Universal City Studios, Inc. and Walt Disney Productions contended that § 106(1) ("[exclusive right] to reproduce the copyrighted work in copies or phonorecords") gave the owner of the copyright an unqualified and exclusive right to "reproduce the copyrighted work in copies or phonorecords." However the court found that Congress did not find that protection of copyright holders' rights over reproduction of their works was worth the privacy and enforcement problems which restraint of home-use recording would create.

[Though this is impractical to check whether end users infringe a law, when said infringement is possible only with an enabling device, it is still possible to prohibit said device sells. But this is lawful only when the device was designed and distributed for the sole purpose of infringing the law.]

The court found that home-use recording was fair use. § 107 reads:

"[...] In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include

1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

2. the nature of the copyrighted work;

3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

4. the effect of the use upon the potential market for or value of the copyrighted work.

The court first considered the issue of harm, important to determine the effect of the use upon the potential market for or value of the copyrighted work, whether an injunction was appropriate and, assuming infringement, what the damages were. Plaintiffs originally overestimated the damages. The chief or Motion Picture Association of America even said "I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone." But in lawsuit plaintiffs had to admit that no actual harm to their copyrights had occurred to date. Their profits have increased yearly, including the years in which VTR technology was introduced and growing and the court did not identify "probable effects" of home-use copying.

The court further found that Betamax owners used plaintiffs' works non-commercially and privately increasing the owners' access to material voluntarily broadcast to them free of charge over public airwaves, notably because of the competitive practice of counter-programming.

As explained in the ISP Liability page of Bitlaw the difference between contributory infringement and vicarious liability is the following:

• When a party cause or contribute to the infringing conduct of another with knowledge of the other party's infringing activities said party may be guilty of copyright infringement. Then this is contributory infringement.

• A party may be liable for the infringing actions of another if said party has the right and ability to control the infringer's acts and receives a direct financial benefit from the infringement, even if it does not have actual knowledge of the infringer activity. Then this is vicarious liability. For instance "to be held a related or vicarious infringer in the case of performing rights, a defendant must either actively operate or supervise the operation of the place wherein the performances occur, or control the content of the infringing program, and expect commercial gain from the operation and either direct or indirect benefit from the infringing performance." [H.R.Rep.No.1476, Supra]

This court found that defendants’ knowledge was insufficient to make them contributory infringers. Even if they knew that people would use the Betamax to record copyrighted works for home-use, defendants could not know that this was an infringing activity. It had yet to be determined (the court determined that this was fair use).

Regarding vicarious liability, plaintiffs suggested that defendants could develop a jamming system to prevent recording of anything copyrighted. The court found that:

"Whether or not such jamming is technologically feasible, this supervision would not be within the power of these defendants. A jamming system would most likely require the cooperation of many others: broadcasters, producers and perhaps the Federal Communications Commission."

Therefore the defendants could not control the use of the Betamax.

The court further found that:

"Here, defendants do not profit from the infringing activity directly. They receive financial benefit from the sale of tapes, regardless of their subsequent use. They benefit directly from the allegedly infringing use only if they sell more because that use is available."

[Four parties were involved in the alleged infringement:

1. the plaintiff, provider of the copyrighted work;

2. the broadcaster who collects the copyrighted work’s revenue;

3. the manufacturer of the VTR;

4. the user of the VTR, who indirectly, through advertising, generates the copyrighted work’s revenue.

Internet cases may involve more parties and notably more parties like ISPs that do not contribute to the copyrighted work’s revenue.]

On October 19, 1981 the appeal court reversed in part the district court decision.

The appeal court found that "off-the-air copying of copyrighted audiovisual materials by owners of videotape recorders in their own homes for private noncommercial use, constitutes an infringement of appellants' copyrighted audiovisual materials.

Regarding fair use the appeal court quoted a book "Exemptions and Fair Use in Copyright" by Leon Seltzer:

"The subject matter of fair use [...] has always had to do with the use by a second author of a first author's work. Fair use has not heretofore had to do with the mere reproduction of a work in order to use it for its intrinsic purpose--to make what might be called the 'ordinary' use of it."

For the appeal court when a copyrighted material is reproduced for its intrinsic use and not for a productive work [new author] then fair use does not apply.

The appeal court further disagreed with a sentence of the district court:

"This taking of the whole [off-the-air usually involves copying the entire work] still constitutes fair use, because there is no accompanying reduction in the market for 'plaintiff's original work.'" The appeal court found that the issue was not whether the copyright owner had been harmed: "Copyright is a property interest and that it is impermissible, in the vast majority of cases, to 'appropriate' the copyrighted material without the owner's consent."

Regarding contributory infringement the appeal court wrote:

"It is not necessary that an alleged contributory infringer have actual knowledge that activity which he makes possible constitutes a copyright infringement. A copyright defendant's 'innocence' does not absolve him of liability; it only affects the remedies available." Therefore the appeal court found Sony accountable for copyright infringement. However it did not granted an injunction to plaintiffs because of the public interest and suggested a continuing royalty as an appropriate relief for the infringement.

On January 17, 1984 the Supreme Court reversed the appeal court decision and wrote:

"An explanation of our rejection of respondents' unprecedented attempt to impose copyright liability upon the distributors of copying equipment requires a quite detailed recitation of the findings of the District Court. In summary, those findings reveal that the average member of the public uses a VTR principally to record a program he cannot view as it is being televised and then to watch it once at a later time. This practice, known as 'time-shifting,' enlarges the television viewing audience. For that reason, a significant amount of television programming may be used in this manner without objection from the owners of the copyrights on the programs. For the same reason, even the two respondents [plaintiffs] in this case, who do assert objections to time-shifting in this litigation, were unable to prove that the practice has impaired the commercial value of their copyrights or has created any likelihood of future harm. Given these findings, there is no basis in the Copyright Act upon which respondents can hold petitioners liable for distributing VTR's to the general public. The Court of Appeals’ holding that respondents are entitled to enjoin the distribution of VTR's, to collect royalties on the sale of such equipment, or to obtain other relief, if affirmed, would enlarge the scope of respondents' statutory monopolies to encompass control over an article of commerce that is not the subject of copyright protection. Such an expansion of the copyright privilege is beyond the limits of the grants authorized by Congress."

The Supreme Court wrote:

"If vicarious liability is to be imposed on Sony in this case, it must rest on the fact that tit has sold equipment with constructive knowledge of the fact that its customers may use that equipment to make unauthorized copies of copyrighted material. There is no precedent in the law of copyright for the imposition of vicarious liability on such a theory."

The Supreme Court found that imposing vicarious liability to the provider of something enabling infringement would make sense for patent law because contributory infringement is defined in the Patent Act. 35 USC § 271(c) reads:

"Whoever sells a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial non-infringing use, shall be liable as a contributory infringer."

Even so case laws denied the patentee any right to control the distribution of unpatented articles unless they are "unsuited for any commercial non-infringing use." Applying this principle the Supreme Court found that:

"the seller of the equipment that expands [through time-shifting for private home use] producers' audiences [non-infringing use] cannot be a contributory infringer if, as is true in this case, it has had no direct involvement with any infringing activity."

The Supreme Court clarified the difference between commercial and non-commercial use:

"Although every commercial use of copyrighted material is presumptively an unfair exploitation of the monopoly privilege that belongs to the owner of the copyright, noncommercial uses are a different matter. A challenge to a noncommercial use of a copyrighted work requires proof either that the particular use is harmful, or that if it should become widespread, it would adversely affect the potential market for the copyrighted work. Actual present harm need not be shown; such a requirement would leave the copyright holder with no defense against predictable damage. Nor is it necessary to show with certainty that future harm will result. What is necessary is a showing by a preponderance of the evidence that some meaningful likelihood of future harm exists. If the intended use is for commercial gain, that likelihood may be presumed. But if it is for a noncommercial purpose, the likelihood must be demonstrated." [The burden of proof is on the copyright owner]

The reason is that the prohibition of noncommercial uses that do not have "demonstrable effect upon the potential market for, or the value of, the copyrighted work" would "merely inhibit access to ideas without any countervailing benefit."

In France the law:

1. affirmed that the owner of the copyright has an unqualified and exclusive right to reproduce the copyrighted work in copies or phonorecords;

2. recognized that it could not enforce copyright over home-use reproduction because (1) devices such as VTRs were allowed elsewhere it was unpractical to forbid their use in France (2) protection of copyright holders' rights over reproduction of their works was not worth the privacy and enforcement problems which restraint of home-use recording would create;

3. established therefore a exclusion in L. 122-5 (2) and L. 211-3 (2) stating that copyright owner cannot forbid home-use copy; and

4. established a tax for private copy in L. 311-1 on recording media (tape, CD, DVD...) which is distributed to copyright owners to compensate the revenue loss caused by the exclusion.

This is close to the appeal court reasoning. The implementation of such tax raises three difficulties:

1. Not all recording media are used for home-use copy (this is especially true for CDs and DVDs).

2. The determination of the revenue loss caused by the exclusion. For instance a pay TV channel broadcasted films when people were normally asleep or at work precisely because they knew that their users had VTR. In this example the fact that users had VTRs and tapes generated an additional revenue for the broadcaster and hence for copyright owners.

3. The distribution of the tax revenue to copyright owners. In France a commission was created with representatives of the copyright owners and consumers to ensure an equitable distribution to societies representing copyright owners [L. 214-4]. Said societies use selling measuring services to determine an equitable distribution to copyright owners.

For another presentation of the case you may look at http://www.eff.org/IP/P2P/MGM_v_Grokster/.

Plaintiffs:

• Metro-Goldwyn-Mayer Studios Inc.;

• Columbia Pictures Industries, Inc.;

• Plaintiff Disney Enterprises, Inc.;

• New Line Cinema Corporation;

• Paramount Pictures Corporation;

• Time Warner Entertainment Company;

• Twentieth Century Fox Film Corporation;

• Universal City Studios, Inc.;

• Arista Records, Inc.;

• Atlantic Recording Corporation;

• Atlantic Rhino Ventures Inc.;

• Bad Boy Records;

• Capitol Records, Inc.;

• Elektra Entertainment Group Inc.;

• Hollywood Records, Inc.;

• Interscope Records;

• LaFace Records;

• London-Sire Records Inc.;

• Motown Record Company;

• The RCA Records Label;

• Sony Music Entertainment Inc.;

• UMG Recordings, Inc.;

• Virgin Records America, Inc.;

• Walt Disney Records;

• Warner Bros. Records Inc.;

• WEA International Inc.;

• WEA Latina Inc.

• Zomba Recording Corporation

(studios, record companies) filed an action for copyright infringement against:

• Grokster Ltd.;

• Musiccity.com [Morpheus – now known as StreamCast];

• Musiccity Networks Inc.;

• Consumer Empowerment Bv [now known as KazaA Bv].

on October 2, 2001, alleging that defendants had:

• "developed and control a network largely dedicated to the repeated and exploitative unauthorized distribution and reproduction of Plaintiffs’ protected works";

• created "a protected zone for piracy" through encryption; and

• "sought to turn their growing user base into profit through advertising and investment dollars."

About the plaintiffs’ claim that defendants encourage, enable, and profit from the massive infringements of Plaintiffs’ copyrighted works on the Internet we can check what defendants say and said about copyright on their sites.

In http://www.grokster.com/us/help/p2pu.html Grokster writes "P2P technology makes it possible to share all kinds of information. Some information is protected by copyright, which means that you generally need the copyright owner's permission before you make it available to other P2P users. Popular music, movies, games, and software are often protected by copyright." This page also contains "Support the artist. Buy the record." The statement comes from P2P United, "the unified voice of the peer-to-peer ("P2P") technology industry's leading companies and proponents" [bearshare, blubster, grokster, edonkey 2000 and morpheus].

In http://www.morpheus.com/notices.html StreamCast warns that "individuals who reproduce, distribute copies, receive copies, publicly perform or display works or inventions other than their own and without the consent of the owners or holders of rights, or their authorized agents, in original works of authorship or inventions, may be in violation of copyright, patent and other laws applicable to an individual's specific country."

The KazaA end-user agreement includes "You agree not to use the Software to [...] transmit, access or communicate any data that infringes any patent, trademark, trade secret, copyright or other proprietary rights of any party." This notice was already essentially the same in September 2000 as you can see with the wayback machine (http://web.archive.org/web/20011108223540/www.kazaa.com/index.php?page=tosdesktop).

In the same way in 2001 the Grokster site already contained a content provider notice that read:

"Content providers such as musicians, artists, composers, movie producers, graphic artists, writers, etc wishing to distribute there work through the Grokster system are welcome to do so."

[Studios and record companies were notoriously slow to adopt online distribution.]

There is no doubt that P2P providers are commercial companies making money through advertising and licenses. Users are given the choice between a free version of the product with advertising and an ad-free version users have to pay for. See for instance "How can Kazaa be free?" and advertiser support pages like http://www.morpheus.com/contact.html.

StreamCast [Musiccity] essentially replied that they lacked sufficient knowledge to admit or deny plaintiff allegations. Kazaa made the same answer and explained:

"The Fast Track Peer-to-Peer Stack cannot differentiate between copyrighted and non-copyrighted material transferred over a network created with the software. In that respect, it is much like the structure of the Hyper-Text

Transfer Protocol ('http,' the technological protocol behind Web browsers such as Microsoft Internet Explorer) that allows users to download Web pages regardless of copyright status, or how an e-mail protocol (e.g., Post Office Protocol ('POP') used by Qualcomm Eudora or Microsoft Outlook) allows users to transfer e-mail messages regardless of whether the messages contain infringing or authorized material."

[This sentence is not entirely convincing. HTTP allows searching content but not concealing a copyright infringement whereas mail allows concealing a copyright infringement but not searching content.]

In an amended complaint plaintiffs also sued founders of Kazaa and an Australian company, Sharman, now owner of Kazaa. Said company explained that:

• for decades the music and motion picture industries had largely profited, not directly from ownership of copyright but from ownership of the physical products and distribution systems used to deliver copyrighted content to consumers;

• said music and motion picture industries were highly concentrated; plaintiffs and associates have a monopoly power;

• Sharman embedded digital right management features into Kazaa allowing copyright owners to be paid for right managed content but plaintiffs concertedly declined to participate to P2P distribution.

StreamCast brought a motion for partial summary judgment using the following arguments:

1. the Supreme court found in the Sony Betamax ruling that "the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial non-infringing uses;"

2. in Napster the appeal court emphasized a "clear distinction between the architecture of the Napster system [legitimate by the Sony Betamax ruling] and Napster’s conduct in relation to the operational capacity of the system [because their product was using centralized servers, Napster could identify infringing activities];"

3. in the defendants’ self-organizing networks users communicate with each other without assistance from defendants. If they ceased to operate, or if their servers became inoperative, "the searching, indexing, transferring, downloading, managing, display and play functions of the software would continue unaffected. The only changes would be (1) the display of advertisements and the display of graphics on the software user interface would be interrupted, and (2) the user’s username would not be properly displayed on the user network." [StreamCast acknowledges that advertisement and graphic display is centrally managed, which means that StreamCast could have knowledge of infringements. However this does not mean that StreamCast is "in a position to control the use of copyrighted works" because (1) what StreamCast could reasonably do is to log user activity and periodically send said log to a central location, which would only give them an a posteriori knowledge of infringement; (2) there is no information in transferred files allowing identifying infringing activity.]

They explained that the summary judgment and contributory infringement standards together meant plaintiffs had to provide evidence excluding the potential for the defendant software program’s non-infringing use.

Grokster filed a colorful memorandum (read Jennifer story) in support for of said motion in which they explained that:

1. they were a small family-run business distributing a product licensed from Kazaa BV without access to the source code and understanding of the inner working of Kazaa product; [Grokster is the only American defendant – the others are Australian and Dutch]

2. plaintiffs also filed a suit in Netherlands and the Dutch appeal court found that Kazaa did not infringe on the plaintiffs’ copyright;

3. they cooperated with plaintiffs in responding to notifications of copyright infringement;

4. they partnered for distributing the work of 7000 artists that authorized the distribution of their music via Grokster and found that many more were using Grokster to cut distribution costs;

5. Grokster allowed sharing files of any time (free ebooks, open source programs...)

6. Grokster was not a system or service but a piece of software.

Plaintiffs filed a memorandum to oppose to the motion. They explained that MusicCity [StreamCast] attracted and kept "its millions of registered users for one reason: it provides vast collections of unauthorized copies and motion pictures that are available for free." Plaintiffs also quoted a Dutch court that rejected the "not a system or service but a piece of software" argument:

"The fact that the eventual provision of music files from one user to another runs via a peer-to-peer network and not actually via KazaA website makes no difference. [...] This manner of electronic provision is but a part of the system designed by KazaA, which system can be regarded as a technical unity."

["not a system or service but a piece of software" does not stands in our view. Any scalable distributed system comprises several computers running the same piece of software. Patent offices rightfully grant patents for such systems because the motivation for designing them in a certain way as well as their function can only be understood when they are considered as a whole. On the other hand:

• the system considered in this dispute certainly does not include devices like MP3 players that make the infringement useful, tools allowing encoding sounds and motion pictures, and the standardized infrastructure (network, personal computers...) hosting said system;

• as the Dutch court affirmed said system is a system and not a service.

In that respect defendant case is stronger than the Sony Betamax case. Without a VTR end consumers cannot record video whereas P2P systems are just a better way for infringing copyright than FTP and HTTP. In their opposition plaintiffs tried to circumvent this issue by explaining that the infrastructure and the MP3 player are staple articles of commerce like a VTR (a "thing", not a service) whereas P2P systems are not.]

In its opinion the district court granted defendants’ motions for summary judgment.

The district court first noticed that:

• both parties maintained that the only question before the Court was whether Defendants’ materially undisputed conduct gives rise to copyright liability;

• one of the defendants, StreamCast [MusicCity] no longer used the same Kazaa technology as the others but the open Gnutella technology.

Then the district court defined the scope of the order:

• Sharman excluded;

• Damages arising from current versions of defendant products.

The district court found that plaintiffs demonstrated that some of the Defendants’ end-users were engaged in direct copyright infringement, which was a prerequisite to find either contributory or vicarious infringement liability.

The district court explained that:

1. Contributory infringement requires both knowledge and material contribution.

2. Regarding knowledge the Napster court found that "Absent any specific information which identifies infringing activity, a computer system operator cannot be liable for contributory infringement merely because the structure of the system allows for the exchange of copyrighted material." The question is "whether actual knowledge of specific infringement accrues at a time when either Defendant materially contributes to the alleged infringement, and can therefore do something about it."

3. Regarding material contribution the question is whether Defendants "do anything, aside from distributing software, to actively facilitate – or whether they could do anything to stop – their users’ infringing activity."

The district court found that, because "when a user selects a file, the transfer is initiated directly between the two users" whereas in case of Napster "each and every search request passed through Napster’s servers," defendants were not liable for contributory infringement.

The district court explained that vicarious infringement requires a financial benefit and the defendant’s right and ability to supervise the infringing conduct.

The district court found that defendants derived a financial benefit from the infringing conduct but did not have the ability to supervise and control the infringing conduct and therefore were not liable for vicarious infringement.

In its ruling the appeal court affirmed the district court grant of partial summary judgment.

Regarding contributory infringement the appeal court explained that:

"If the product at issue is not capable of substantial or commercially significant non-infringing uses, then the copyright owner need only show that the defendant had constructive knowledge of the infringement. On the other hand, if the product at issue is capable of substantial or commercially significant non-infringing uses, then the copyright owner must demonstrate that the defendant had reasonable knowledge of specific infringing files and failed to act on that knowledge to prevent infringement."

The appeal court found that the district court correctly concluded that the software was capable of substantial non-infringing uses and therefore that plaintiffs had to show that defendants had reasonable knowledge of specific infringement at the time at which they contributed to the infringement, and failed to act upon that information.

The appeal court explained that the "right and ability to supervise" condition for vicarious infringement describes a relationship between the defendant and the direct infringer. The appeal court found that defendants did not have the ability to block access to individual users and that "none of the communication between defendants and users provides a point of access for filtering or searching for infringing files."

Plaintiffs filed a petition for writ of certiorari seeking review of the appeal court decision by the Supreme Court.

In USA a writ of certiorari is a legal document issued by a superior court to one of inferior jurisdiction demanding the record of a particular case. Most cases that reach the US Supreme Court do so by such petitions for writ of certiorari. The petition must conform to Supreme Court rules 10 to 16.

In their petition plaintiffs explained that the question was how principles of secondary liability apply "to the unprecedented phenomenon of Internet services such as Grokster and StreamCast, whose overwhelming use is for the unauthorized distribution of copyrighted works to millions of users for free."

Plaintiffs disagreed with the appeal court conclusion that defendants could not be held responsible for the acts of infringement occurring on their services even though:

• infringement is the primary use for their services, their business model depends on this volume of infringing use, and, indeed, their advertising revenues are directly tied to the amount of infringement taking place;

• defendants had tied their own hands by disabling mechanisms for blocking infringement on their services.

They explained that they would be left with only the impractical and inadequate option of suing a multitude of individual infringers.

They wrote that:

1. conservative independent estimates of lost music sales alone ranged from $700 million to several billion dollars annually;

2. adding lost sales for motion pictures rose the aggregate harm to staggering levels;

3. the district court decision would also threaten legitimate Internet media downloading services.

Defendants filed a brief in opposition of the petition, in which they explained that plaintiffs were asking the Supreme Court to overturn settled principles of secondary copyright liability though this is the Congress which is in charge of determining what is just and economically rational.

They explained that the Congress was "in the midst of considering two particular measures intended to address P2P file sharing directly

1. An omnibus copyright measure that combines several proposals intended to develop public copyright education programs and enhance penalties for direct infringers. This approach emphasizes deterrence and education aimed at direct infringers in place of expanded liability for software vendors. [...]

2. The Inducing Infringement of Copyrights Act, squarely addresses the question Petitioners [plaintiffs] seek to put to this Court: whether copyright’s secondary liability rules should be radically reconfigured in order to give copyright owners control over new technologies that can be used for infringement. [...] During the course of these negotiations, it became clear that Congress needed to balance carefully the competing interests, and that the matter was too complex to be resolved in haste in the final days of the current session."

They wrote that plaintiffs, "apparently disappointed with the pace of the legislative process, filed the instant petition one day after it became clear that their desired revision would not be enacted during this congressional session."

A large number of briefs were filed. To get an idea of these briefs you may read a summary by Jonathan Band.

The Supreme Court made its decision on June 27, 2005.

You can find the decision text at http://www.eff.org/IP/P2P/MGM_v_Grokster/04-480.pdf.

The Supreme Court summarizes the defendant [Grokster and StreamCast] case in the following way:

"Respondents are aware that users employ their software primarily to download copyrighted files, although the decentralized networks do not reveal which files are copied, and when. Respondents have sometimes learned about the infringement directly when users have e-mailed questions regarding copyrighted works, and respondents have replied with guidance. Respondents are not merely passive recipients of information about infringement. The record is replete with evidence that when they began to distribute their free software, each of them clearly voiced the objective that recipients use the software to download copyrighted works and took active steps to encourage infringement. After the notorious file-sharing service, Napster, was sued by copyright holders for facilitating copyright infringement, both respondents promoted and marketed themselves as Napster alternatives. They receive no revenue from users, but, instead, generate income by selling advertising space, then streaming the advertising to their users. As the number of users increases, advertising opportunities are worth more. There is no evidence that either respondent made an effort to filter copyrighted material from users’ downloads or otherwise to impede the sharing of copyrighted files."

The Supreme Court acknowledged that plaintiffs rightfully sued defendants:

"When a widely shared product is used to commit infringement, it may be impossible to enforce rights in the protected work effectively against all direct infringers, so that the only practical alternative is to go against the device’s distributor for secondary liability on a theory of contributory or vicarious infringement."

The Supreme Court held 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, going beyond mere distribution with knowledge of third-party action, is liable for the resulting acts of infringement by third parties using the device, regardless of the device’s lawful uses."

• "Advertising an infringing use or instructing how to engage in an infringing use" is "evidence of active steps taken to encourage direct infringement."

Therefore the Supreme Court found that the judgement of the Appeal Court was in error, and hence vacated and remanded the case [that will be resubmitted to a district court.] Justice Ginsberg explained:

"If, on remand, the case is not resolved on summary judgment in favor of MGM based on Grokster and StreamCast actively inducing infringement, the Court of Appeals, I would emphasize, should reconsider, on a fuller record, its interpretation of Sony’s product distribution holding [Sony Betamax case]."

However the Supreme Court held that secondary liability for infringement does not arise from the very distribution of a commercial product [following from Sony Betamax ruling.]

Supreme Court decision narrows the gap between American and European rulings but can be hard and expensive to implement. We can expect cases related to "active steps taken to encourage direct infringement." When Sony released the Betamax the main ways to advertise were TV and newspapers and the main way to get instructions was to call the support or a reseller. Phone calls were not recorded and companies could easily ensure that ads were not encouraging direct copyright infringement. Today web site content can be assimilated to advertising and support may use public forums, newsgroups and mailing lists. Odds for doing something that can be perceived as encouraging copyright infringement are higher and evidence is easier to collect. The Supreme Court decision may therefore contribute to reduce the amount of content and the use of forums, newsgroups and mailing lists by companies.

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