The Grokster case has been characterized as the Copyright Industrys attempt to overthrow the Sony rule. The Sony rule was articulated in the case of Sony v. Universal Studios in which the Copyright Industry of the day attempted to outlaw VCRs.
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.
- Jack Valenti (then and current President of the MPAA) in 1982 testimony to the House of Representatives.
The Supreme Court declined to outlaw VCRs, and instead offered technologists a bright line rule to follow in developing future disruptive technologies: as long as the technology that you develop is merely capable of non-infringing uses, then it will be legal to sell or distribute your technology, regardless of how your customers may actually use it. This is the Sony rule. This is the rule that makes it legal to make iPods and personal computers.
A couple of decades later, post-Napster P2P file sharing services like Kazaa and Morpheus burst on the scene, facilitating copyright infringement on a scale equivalent to VCR to use. The P2Ps attempted to recapture Napster glory by avoiding the two fatal flaws of Napster 1) centralized indexing server; and 2) no revenue model. The P2Ps accomplished this by distributing software that allowed file sharers to connect directly to each other, rather than connecting through a centralized server. Consequently, P2Ps are not running a service so much as distributing software. To generate revenue, the P2Ps put adware and/or spyware into their software and thereby get advertising income.
In an attempt to stop the P2Ps, the Copyright Industry sued Grokster et al on the theory that the Sony rule only excused secondary liability for technology in which the principal use was non-infringing.
Regarding this issue, we get this from the court:
This is not terribly satisfying, as the VCRs in Sony were principally used for infringing purposes, and Grokster is capable of non-infringing uses (non-infringing works can be distributed through P2Ps as easily as infringing works).
Finding itself stuck between the Sony rule and the perceived egregious conduct of P2Ps, the court found an out by creating a new theory of secondary liability for copyright infringement the Inducement Theory.
Sonys rule limits imputing intent as a matter of law from the characteristics or uses of a distributed product. But nothing in Sony requires courts to ignore evidence of intent if there is such evidence, and the case was never meant to foreclose rules of fault-based liability derived from the common law.
The Inducement Test states 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, is liable for the resulting acts of infringement by third parties. The court goes to great pains to stress that the inducement rule premises liability on purposeful, culpable expression and conduct, and thus does nothing to compromise legitimate commerce or discourage innovation having a lawful promise.
In applying the Inducement Test, the court looked at:
The court particulary focused on the last element, and asked the question " Did Grokster communicate an inducing message to users?" The court indicated that the functions of the messages in the theory of inducement is to provide by a defendant's own statements that his unlawful purpose disqualifies him from claiming protection (and incidentally point to actual violators likely to be found among those who hear or read the message).
The court indicated that proving that an inducing message was sent out was the best, but not only, way of showing that active steps were taken with the purpose of bringing about infringing acts, and of showing that infringing acts took place by using the device distributed.
As far as Grokster was concerned, the court had no problem findig such communication. Unlike Sony, Grokster acted with a purpose to cause copyright violations by use of software suitable for illegal use, as evidenced by the following:
The court intimated that the last item alone would not justify an inference of unlawful intent, but viewed in the context of this case, an unlawful objective was clear.
The court concluded that evidence of Grokster's words and deeds going beyond distribution as such showed a purpose to cause and profit from third-party acts of copyright infringement. Consequently, liability for inducing infringement will not be on the basis of presuming or imputing fault, but from inferring a patently illegal objective from statements and actions showing what that objective was. In other words, they must hang themselves with their own words.
As a result, another chapter in file sharing history was closed. Instead of being greeted with the promise of vast amounts of free music, visitors to Grokster are now greeted by the following scary page: