Off and running!

A big thanks to Denise Howell of Bag and Baggage for linking up to this site. Denise is actually part of the Grok news today, as she is moderating an ABTL Panel Dinner to discuss the Grokster decision. If you live near Los Angeles, it's be a great thing to attend. And yes, Denise, Wikipedia is amazing.

Another Grok event is coming up, right here in Tucson. The Intellectual Property Student Association at the University of Arizona will host a discussion on Grokster 9/12, with more details forthcoming.

Grokster Decision Tested

Here we are, just five months after the Grokster decision was handed down, and already it's being called into use as a precedent case. Perfect 10, an adult entertainment company, is suing Google for displaying their images on their image search engine.

Dr. Norm Zada, the founder of Perfect 10, says if unchecked, the ability of search engines to distribute copyrighted material will be "the end of intellectual property in this country." (Didn't a teacher ever tell him hyperbole weakens an argument?)

The search results that display on Google's site do not point to images on Perfect 10's site, but rather to third party websites who are illegally displaying the images. Perfect 10 is suing Google for infringement, and hopes to draw support from the Grokster decision.

It's not very likely that if the courts do rule in favor of Perfect 10, that they will do so on the basis of Grokster. Google clearly does not advertise to infringing users in an attempt to capture their business, nor do they have a business model which implies dependence upon infringing users. These things were at the heart of the MGM v. Grokster reversal. Perfect 10's best ammunition against Google is that Google's image index consists of thumbnail-sized images of all searchable files, and sharing those images could be viewed as infringement.

Blessing in Disguise?

While some have misgivings about the effect of MGM v. Grokster on the tech industry, the music industry has taken the decision to mean support for legitimate digital trade, bolstering the industry's confidence in the success of online music sales. Warner Music announced this week that they will be launching a digital music label, which may be good news for struggling independent artists. "The decision in the Grokster case creates an economic incentive to invest in the digital music space ... (accelerating) the growth of legitimate digital music services,"said Warner CEO Edgar Bronfman, Jr. See CNN's full story for more.

The continued reinforcement of legitimate e-commerce in the music industry may ultimately outweigh whatever short-term chill is suffered by innovators in the tech industry. And as of yet, that chill has yet to be evidenced.

First Impact

On the surface, the Grokster decision seems a slap in the face to both innovators and the casual downloader, as it could be interpreted to place inventors of technology at risk for liability if they fail to safeguard their inventions from illegal use. The court barred Grokster from protection under the Sony rule because it could be interpreted based on the merits that Grokster acted intentionally to capture a market of abusers. They 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, is liable for the resulting acts of infringement by third parties."

Some are quick to interpret this decision as an affront to the process of innovation, and envision that future distributors of p2p or other sharing technologies would be required to carefully document the steps they take to avoid inducing infringement. Some see this as hedging on the Sony rule territory, and could lead to vast uncertainties on who is and is not liable of vicarious infringement, and particularly what constitutes active inducement. Brian's Brain holds such an opinion.

However, the court carefully trods around the Sony rule, stating very explicitly that "of course, in the absence of other evidence of intent, a court would be unable to find contributory infringement liability merely based on a failure to take affirmative steps to prevent infringement, if the device otherwise was capable of substantial noninfringing uses" [fn12]. Thus, the decision can only apply where "the plaintiff is able to show, by direct or indirect evidence, that the defendant intended users to engage in copyright infringement and encouraged them to do so" (Reed Smith).

The Supreme Court is being criticized for not clearly defining the criteria under which it can be shown that a company is promoting the infringement of copyright to its users. However, that is not their responsibility. They merely need to see enough evidence to believe that such a claim might be found by a trial court. Many contend that the decision in Grokster will only be used in the narrow arena of P2P software and its cousins. This is argued in further detail on Forbes.com.

The long-term impact remains to be seen. What happens at trial may be entirely different from what is expected by the suggestions following the Supreme Court's decision. As Charles Petit mentions on IT Conversations, the sealed record of the case likely contains some "juicy little bits" that could decide the fate of Grokster, or even change the trial's course so drastically as to make it unrecognizable. The trial may have less to do with the specific technology of p2p than it does the sanctions of the record industry in general. At this point, such conjecture is purely speculative.

Understanding the Supreme Court Decision

The first step in understanding where the Grokster decision is headed is to understand what the decision is. The facts of the case are that MGM and several other hollywood movie studios brought suit against Grokster and StreamCast for vicarious and contributory copyright infringement. In brief, Grokster's p2p service, while capable of the substantial noninfringing issue of legal file sharing, is largely used to illegally share copyrighted material. The program was advertised to Napster users as an alternative sharing program during the time that Napster's case was being tried in court. None of the preceding facts are contested.

What MGM argues is that such advertisement shows evidence that Grokster intended to contribute to copyright violations, and expressed that intent through those advertisements.

Grokster defends by denying that intent, and cites that therefore they cannot be found guilty under the Sony rule. Further, their software does not allow them either to filter content or block specific users, and the design of their technology provides no way of knowing about infringing transfers until after they are complete.

The decision of the Supreme Court can largely be thought of as a procedural one. The district court granted summary judgment to Grokster on both the count of vicarious infringement and the count of contributory infringement, holding that the evidence at hand was not strong enough for any reasonable jury to find for MGM. The Ninth Circuit District Court of Appeals affirmed.

The Supreme Court reversed that summary judgment, stating that ultimately, there is enough evidence that summary judgment is not available. That is, a reasonable jury might find that Grokster's advertisements were specifically intended to capture a market of infringing users, thus making Grokster guilty by the standard of assertive inducement of copyright infringement.

The unofficial source for all your Grok news!

Welcome to No Sharing Allowed, the first weblog dedicated to the MGM v. Grokster decision and its effects both in industry and in court.

For those unacquainted, MGM v. Grokster was a case recently on appeal before the Supreme Court of the United States concerning whether peer-to-peer filesharing software distributors could be held liable for the copyright-infringing actions of their users.

This case immediately calls to mind Sony Corporation of America v. Universal City Studios, Inc. (the "Sony rule"), an important precedent case. This case pitted Sony against Universal for making VCRs which could record copyrighted materials, and those new recordings were being distributed in an infringing manner. In that case, the court ruled that since Universal's products had legitimate, legal purposes for which they were originally intended and advertised, Universal could not be held liable. In Grokster, the Ninth Circuit District Court followed that precedent, and granted summary judgment in favor of the defendant. The Supreme Court overturned the decision of the District Court to grant Summary Judgment in favor of the defendant, and has sent the case back to trial court.

This blog is dedicated to explaining what the case means to the law, what it means to the industry, and how those things continue to change as the case moves forward. For now, though Grokster still has an opportunity to prevail, the court's decision already speaks loudly to the industry; distributors of p2p technology can possibly be held liable for the actions of their end users, in certain situations. Stay tuned for further explanations of the legal ramifications of this decision, as well as what it means for innovators in the IT industry.

For further reading, please explore the links to the right, which contain ample information about the beginnings of this landmark case.