Debate over the Grokster case.
This past Friday I had the unique opportunity to watch a lively debate at a luncheon seminar for attorneys. Two area copyright law professors debated the merits of each side in the upcoming
MGM Studios v. Grokser case that
will be heard by the U.S. Supreme Court March 29.
For those of you unfamiliar with the case, the makers of Grokster were sued by MGM for vicarious and contributory infringement, with MGM claiming that Grokster's P2P software contributes to infringement by its users. After losing at trial, MGM appealed to the 9th Circuit Court of Appeals in Los Angeles. The 9th Circuit affirmed the trial court decision, ruling that Grokster was not liable for its users' infringing activity. The 9th Circuit did not state that the sharing of copyrighted files is legal, just that P2P software companies are not liable for users' activity that is out of their control.
Now the case will be heard next month by the U.S. Supreme Court, and it's anybody's guess as to which way the nation's highest court will go. This is an important case. At stakes here is the future of many forms of technology, which could be deemed illegal if used by infringers. For over 20 years, the law of the land has been that any technology that is "capable of substantial, non-infringing use," it is legal,
even if the technology can and is being used for infringing uses. This is a result of the so-called
"Betamax" case of 1984, where Sony Corp. was sued by Universal Studios because Sony's VCRs were being used by many people to copy TV shows and movies. Sony prevailed in the case, and the film industry later made billions from the technology they once feared.
In Friday's debate, each side brought up interesting, if not predictable arguments. The professor "representing" MGM argued that Grokster had designed its decentralized P2P system specifically to allow its users to avoid detection, thus Grokster materially participated in contributing to infringement. This argument is dubious, as there are many compelling legitimate reasons why a decentralized P2P network would be superior. More efficient use of bandwidth and the system's innate ability to shift traffic on the fly are but a few reasons why decentralization is better than relying on a central server.
MGM also argued that shifting from a centralized architecture (like the old Napster) to the decentralized one used by Grokster offers no commercial advantage (in an attempt to further support the idea that a decentralized system is aimed only at infringing uses). However, I find this a weak, if not erroneous, argument, as the marketplace is normally what decides whether or not an architecture or system is commercially viable, not the blanket assertions of an interested party seeking to downplay the usefulness of the technology.
Finally, MGM argued that the judicial system, and not Congress, was the proper avenue for resolving this problem. It was argued that Congress is a "blunt and ineffective tool" for addressing this type of issue and that the courts should decide it. However, the entertainment industry has been quite opportunistic in its use of both branches of government to solve its problems. Congress has considered a number of measures that would provide relief to the music and film industries, most notably the
Induce Act, which failed to pass in last year's Congressional session but may be revived this year, and the
Piracy Deterrence and Education Act (PDEA), which was passed by the House and awaits a decision by the Senate.
The professor on the Grokster side maintained that the legacy of the Betamax case should be left intact, that P2P systems like Grokster are capable of substantial non-infringing use. Even if 90% of Grokster traffic involves infringing activity, the 10% that is not infringing is still considered "substantial." In addition, it was argued that some forms of file-sharing may be protected by
section 1008 of the copyright code, a 12 year-old provision that the entertainment industry hopes would just go away.
It was noted by the Grokster side that the current case is one in which the entertainment industry is asking the Supreme Court to decide the merits of one kind of technology over that of another. Throughout history, it has been shown repeatedly that new technology is always profoundly destabilizing to existing industry. In fact, new technology tends to scare the hell out of the content owners. Over the past 100 years, technologies as diverse as player piano rolls, radio, television, tape recorders, digital recorders, and now Internet distribution, have all put fear into the hearts of media moguls everywhere.
The entertainment industry is asking the courts to apply a "balancing test" between the volume of infringing activity versus the volume of non-infringing activity, in hopes it will tip the scales in their favor. But the Betamax case clearly rejected that balancing test, stating that it's not a factor of balance, but rather a factor of "substantial non-infringing use." Only about 10% is all that is necessary for it to be "substantial." In fact the Betamax court didn't even require that the non-infringing use be presently occurring, merely that the technology be
capable of some non-infringing use. In 1984, some people were using their VCRs to record TV programs for later viewing (so-called "time-shifting"), an activity that was upheld as non-infringing by the 1984 court. The fact that many more people were using the machines for other, infringing uses was immaterial. The court deemed the machines as non-infringing devices. The bottom line here, as it was 20 years ago, is that established industries should not be allowed to control future technologies.
Finally, the Grokster side argued that in order for the record industry to obtain relief by the courts, it must clearly show that it has suffered damages. The RIAA has long claimed that P2P file-sharing has significantly cut into their sales. But the truth is, in the first quarter of 2004 when P2P use had been steadily climbing, the RIAA had enjoyed a
10% increase in U.S. CD sales, with a
2.3% increase overall for 2004. There are many factors that could have contributed to the slump in sales: slow economy, consumers having less disposable income, lack of new creative music, increasing CD prices, etc. In recent years there have been many other things competing for consumers' money, such as games, DVDs, electronic devices, software, etc. People are spending their hard-earned cash on other things besides CDs.
This case, while not directly addressing the issue of individual file-sharers, is nonetheless an important one. A reversal by the Supreme Court could place a chilling effect on developers of new software and hardware devices and systems. Engineers will be uncertain about whether their new creations will be used for infringing uses, and what liability falls on them. No one seems to have an idea which way the court will go on this. We'll have to wait and see.
Cheers.