Supreme Court Standards for Peer-to-Peer and Beyond

Although some people may not like it, copyright laws and regulations exist. Those who engage in mass copying and distribution of copyrighted works typically must pay licensing fees, or at least enter into an agreement with the owner of the content. That makes the free, unauthorized trading of massive numbers of music or video files over peer-to-peer networks illegal.

So far, the situation is clear.

What is not clear is the circumstances under which a technology company should be held liable if its product can be used to violate copyright restrictions. What standard should be used to judge this liability? How can one craft that standard so that the threat of liability is not so broad that it discourages beneficial technological innovation?

These are the questions before the United States Supreme Court now as it considers the case of Metro-Goldwyn-Mayer Studios and many assorted entertainment companies and artists versus Grokster and other peer-to-peer software companies.

Degrees of Control

P-to-P networks are notorious for enabling millions of users to illegally share millions of songs, movies, or TV shows for free. The original Napster service was shut down by lawsuits much like the current one against Grokster for doing that very thing.

What differentiates Grokster from the old Napster?

The entertainment companies essentially argue that nothing does: The P-to-P services act in much the same way, and so their creators are equally guilty of contributing to copyright infringement.

The Ninth Circuit Court of Appeals, however, upheld a lower court's ruling that did see a key difference: control over the trading of files. The old Napster used a centralized server that handled all user requests, and therefore Napster was involved in some way with each act of infringement. The services from Grokster and fellow defendant StreamCast Networks (distributor of Morpheus) are decentralized--there is no one server that fields each request--so the companies are not directly involved in each infringing act as users trade files. Moreover, the appeals court said that the networks support uses that do not infringe upon copyright: People can use them to trade uncopyrighted files, so they could serve legitimate purposes.

I tend to agree with the entertainment companies on this one. The fact that the new P-to-P services are decentralized is immaterial to the intent of the defendants in creating and distributing the software. And of course, this has no bearing on the end result: Users do trade copyrighted materials on P-to-P networks. But the issues are not that simple.

Guilty of What?

The problem here involves how to properly hold a company responsible for what users choose to do with its products. Should gun makers be held responsible for murders committed with their firearms? Should manufacturers who make lockpicks be responsible for thieves who use their tools in break-ins? Should makers of VCRs or DVD recorders be responsible for illegal copying of copyrighted content?

By law or by court decision, in each of the above instances we as a society have decided that, in general and for a variety of reasons, the answer is no: Vendors of these products are not responsible for what the people who buy them do with them.

But there are instances when the law says a company should be held liable, and the entertainment industry's representatives say that the current situation is one. They argue that the P-to-P networks we're talking about intentionally set up their businesses so that they can turn a blind eye to illegal file trading by deliberately not monitoring for it, but still use the lure of illegal files as the primary selling point of their software.

Nobody disputes that fact that the majority of files traded on Grokster or Morpheus are illegal. There seems to be no argument over the fact these P-to-P companies knew this situation was likely when they set up and distributed their software. Does that make them guilty of indirect copyright violations?

These companies created and distributed a tool that they knew people would likely, even mainly, use to break copyright law. One could argue that they optimized their tools for that purpose. The services pay no one for the copyrighted files traded, but they earn advertising revenue from the software's distribution--the success of which they owe in part or nearly wholly to the presence of those illegal files.

From the entertainment companies' perspective, these P-to-P vendors built their businesses on enabling copyright violations and should be held accountable for that.

To read the oral arguments made on March 29 before the Supreme Court, go to the court's Argument Transcripts site. The arguments for this case (U.S. 04-480) should appear in the next week. The court's decision should come in a few months.

The Sony Betamax Defense

In their defense, P-to-P companies liken themselves to Sony with its 1984 Betamax videotape recorder. Movie studios sued when it came out, arguing that the defendant's products could be used for copyright infringement, and that Sony knew this, and even advertised the offending copying function.

In the Betamax case, the Supreme Court ruled that Sony was not liable for secondary copyright infringement, in part because general knowledge of infringement was not enough to make Sony guilty of infringement itself, and because the VCR had substantial noninfringing uses such as fair use, as in time shifting programs, authorized copying of content, or copying content that was unprotected by copyright.

Like Sony, P-to-P companies and their representatives know in general that users perform illegal activities with their products. But they, too, have no direct control over individual instances of copyright violation. And they can also claim there are substantial noninfringing uses of their software--namely, the fact that users trade legitimate files over the networks.

Moreover, P-to-P companies say that allowing the entertainment companies to win would detract from what arguably is a fairly clear direction to current and future technology vendors. Others go further and argue that a win would also mean any tech company whose products could be used for copyright violations would be liable. Tech companies would have to get their products approved by the entertainment industry before going to market, stifling innovation.

Loaded Questions

As I said above, I think you can make a case that these P-to-P companies are guilty of something. But articulating that something means generalizing from this specific instance to a broader one, and that is where we get into trouble.

Does a company have to predict what the majority of users are going to do with a product before it's released? Before it's even fully invented?

Does a product have to be used primarily for something illegal before you consider the company that makes it indirectly guilty of that illegal act? How do you determine when a product is being "primarily" or "substantially" (the language in the Sony Betamax case) used for legal or illegal purposes? How much "substantial" legal use do products have to have for their creators to be safe?

Does marketing matter? If a company does not advertise the illegal functions of its product, is it still guilty of any possible copyright infringements? What if everyone knows via some other means, and the potential for illegal uses can be considered common knowledge?

What if a product has a legitimate use, but fewer people would buy it if it had only that function? How can you predict that?

Does a vendor have the responsibility to do everything in its power to limit the illegitimate uses that a product can be put to? What if those restrictions not only lessen the appeal of the product for the criminally minded, but affect its appeal to law-abiding users? Can or should the law make vendors put in those restrictions anyway? (Before you say yes to that question, ask yourself whether U.S. or Japanese auto makers should be forced to make cars that cannot exceed the speed limit.)

Last year's Induce Act, (S. 2560) introduced in the U.S. Senate, attempted to articulate what exactly P-to-P companies are doing wrong in regards to copyright, and to then clearly prohibit such activity. According to the bill, the problem lies in the indirect but intentional encouragement or inducement of others to commit copyright violations. However, the bill ran into problems due to its broad definitions that potentially affect far more than was intended, according to its critics. For more on the bill, read my July 2004 column.

The Supreme Court is faced with the same problem, and now it must try to answer at least some of the questions that I raise here.

This is not a case about peer-to-peer technology. It is a case about the standards we will use from here on out to judge whether some technology or company violates copyright simply by creating or making possible products that others can use to do so. That's what makes the case so difficult. Of course, the Supreme Court could kick the case back to lower courts on a technicality. But the very fact that it's taken the case implies it'll act otherwise.

And, I suspect, Congress will have to get involved to address what the Supreme Court does not--perhaps this time with a well-targeted bill that closes the loophole for illegal trading on P-to-P networks, but leaves future innovations (and our fair use) alone.

There is no easy answer here, and a perfect answer may not be possible. But we sure as heck will reap the consequences of an unbalanced answer, either with a slower pace of innovation if the court finds for the content providers, or draconian controls over digital entertainment if the P-to-P companies win and the entertainment industry feels it has to protect its property.

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