Why Grokster Stands Where Napster Fell

Grokster and StreamCast know that “many if not all of [the] individuals who download their software subsequently use it to infringe copyrights.” Nevertheless, the court held that when a defendant makes a product capable of “substantial non-infringing uses,” being aware that infringing activity may occur in the future is insufficient to warrant contributory copyright liability. That is, the defendant must have actual knowledge of specific infringement and affirmatively failed to act upon such knowledge.

Because there are substantial non-infringing uses for Grokster's and StreamCast's software, such as sharing public domain materials, government documents and other non-copyrighted works, and because plaintiffs' notices of infringing conduct were received after the infringements occurred, these defendants did not facilitate, and could not have done anything to stop, the alleged infringements by end-users.

One critical question before the court was whether Grokster and StreamCast facilitated their end-users' infringing activities. For its part, Napster indexed end-users' files available for exchange and provided the network for that exchange, thus providing the “site and facilities” for direct infringement. Unlike Napster, if either Grokster or StreamCast deactivated all computers within their control, users of their products could continue sharing files with no interruption. Moreover, Grokster's software communicates with a network owned by FastTrack. StreamCast uses the Gnutella network, an open-source network beyond the control of any single entity. The court held that Grokster and StreamCast do not have the ability to monitor and control infringing conduct, all of which occurs after their products have been downloaded by end-users.

Implications

The Grokster decision handed a stunning setback to record labels and movie studios intent on curbing unauthorized downloading of copyrighted works over the Internet. Hinging its decision on the specific technology used by Grokster and StreamCast, the court held that these P2P providers cannot be held secondarily liable for copyright infringement of which they are not aware until after it occurs.

Grokster provides support for the proposition that an Internet service provider (ISP) acting simply as a “passive conduit” to the Internet should not face copyright liability for past infringing conduct even if one of its subscribers downloaded infringing files via a P2P service. A copyright holder's notices of copyright infringement are, in the words of the California district court, “irrelevant if they arrive when defendants do nothing to facilitate, and cannot do anything to stop, the alleged infringement.” Furthermore, providing Internet access is certainly equivalent to providing a product capable a “substantial non-infringing uses.”

Similarly, with respect to vicarious liability, if a P2P service provider does not have the right and ability to control infringing activity before it happens, then a passive conduit ISP most certainly does not. Such ISPs do not store any files or data on their servers and thus do not have the ability to locate, remove or disable access to infringing material.

Grokster places great weight on the specific architecture of networks. ISPs that store files on their servers might not be treated the same as those who use the same technology as that used by Grokster or StreamCast. The key to the decision was the judge's belief that end-users, not P2P software distributors, should be held responsible for copyright infringement, and that any copyright protection responsibilities of new networks would be better left to Congress.

StreamCast's attorney, Charles Baker, applauded the Grokster decision because it soundly rejected the plaintiff's logic that P2P software distributors should be made responsible to incorporate state-of-the-art copyright protection in their programs. Such a mandate upon developers, he argued, would severely stifle technology.

An appeal is expected, according to AOL Time Warner attorney Robert Schwartz. However, Baker is confident that the defendants will prevail in the Ninth Circuit where “the plaintiffs now have to convince three judges as opposed to one.”

Baker acknowledged that an ultimate appeal the U.S. Supreme Court was possible, noting that “the issues raised in Grokster are historically as important to the relationship between copyright and technology as the Sony Betamax case was.”

In a landmark decision issued on April 25, 2003, a federal district judge in Los Angeles rejected claims that two leading decentralized, peer-to-peer (P2P) networks were liable for copyright infringement. The court quashed the request of motion picture and recording industry associations, professional songwriters and music publishers to shut down the Grokster and StreamCast Networks, two companies that distribute free, P2P software allegedly used for the exchange of copyrighted music, movies and other digital media over the Internet. MGM Studios, Inc. v. Grokster, Ltd., No. 01-08541, slip op. (C.D. Cal. Apr. 25, 2003).

The music industry plaintiffs argued that Grokster and StreamCast were liable for both contributory and vicarious copyright infringement on the heels of another California federal district court's ruling that found Napster secondarily liable for copyright infringement by end-users of its file sharing software. See , A & M Records v. Napster , 239 F.3d 1004 (9th Cir. 2001). The Grokster court sharply distinguished its facts from those of Napster, holding that Grokster and StreamCast, while operating in a manner “conceptually analogous” to Napster, were significantly different from Napster in their function, and thus were not secondarily liable for their end-users' copyright infringements.

Grokster distributes a branded version of Kazaa Media desktop software. StreamCast distributes its own software, called “Morpheus.” Both the Grokster and Morpheus platforms allow users to download software that enables users to share files with others. When launched on a user's computer, both types of software automatically connect to a P2P network and make shared files available for transfer to any other user connected to the same P2P. A user searches to locate specific files. The software then displays a list of users who are sharing files based on common criteria.

Grokster and StreamCast know that “many if not all of [the] individuals who download their software subsequently use it to infringe copyrights.” Nevertheless, the court held that when a defendant makes a product capable of “substantial non-infringing uses,” being aware that infringing activity may occur in the future is insufficient to warrant contributory copyright liability. That is, the defendant must have actual knowledge of specific infringement and affirmatively failed to act upon such knowledge.

Because there are substantial non-infringing uses for Grokster's and StreamCast's software, such as sharing public domain materials, government documents and other non-copyrighted works, and because plaintiffs' notices of infringing conduct were received after the infringements occurred, these defendants did not facilitate, and could not have done anything to stop, the alleged infringements by end-users.

One critical question before the court was whether Grokster and StreamCast facilitated their end-users' infringing activities. For its part, Napster indexed end-users' files available for exchange and provided the network for that exchange, thus providing the “site and facilities” for direct infringement. Unlike Napster, if either Grokster or StreamCast deactivated all computers within their control, users of their products could continue sharing files with no interruption. Moreover, Grokster's software communicates with a network owned by FastTrack. StreamCast uses the Gnutella network, an open-source network beyond the control of any single entity. The court held that Grokster and StreamCast do not have the ability to monitor and control infringing conduct, all of which occurs after their products have been downloaded by end-users.

Implications

The Grokster decision handed a stunning setback to record labels and movie studios intent on curbing unauthorized downloading of copyrighted works over the Internet. Hinging its decision on the specific technology used by Grokster and StreamCast, the court held that these P2P providers cannot be held secondarily liable for copyright infringement of which they are not aware until after it occurs.

Grokster provides support for the proposition that an Internet service provider (ISP) acting simply as a “passive conduit” to the Internet should not face copyright liability for past infringing conduct even if one of its subscribers downloaded infringing files via a P2P service. A copyright holder's notices of copyright infringement are, in the words of the California district court, “irrelevant if they arrive when defendants do nothing to facilitate, and cannot do anything to stop, the alleged infringement.” Furthermore, providing Internet access is certainly equivalent to providing a product capable a “substantial non-infringing uses.”

Similarly, with respect to vicarious liability, if a P2P service provider does not have the right and ability to control infringing activity before it happens, then a passive conduit ISP most certainly does not. Such ISPs do not store any files or data on their servers and thus do not have the ability to locate, remove or disable access to infringing material.

Grokster places great weight on the specific architecture of networks. ISPs that store files on their servers might not be treated the same as those who use the same technology as that used by Grokster or StreamCast. The key to the decision was the judge's belief that end-users, not P2P software distributors, should be held responsible for copyright infringement, and that any copyright protection responsibilities of new networks would be better left to Congress.

StreamCast's attorney, Charles Baker, applauded the Grokster decision because it soundly rejected the plaintiff's logic that P2P software distributors should be made responsible to incorporate state-of-the-art copyright protection in their programs. Such a mandate upon developers, he argued, would severely stifle technology.

An appeal is expected, according to AOL Time Warner attorney Robert Schwartz. However, Baker is confident that the defendants will prevail in the Ninth Circuit where “the plaintiffs now have to convince three judges as opposed to one.”

Baker acknowledged that an ultimate appeal the U.S. Supreme Court was possible, noting that “the issues raised in Grokster are historically as important to the relationship between copyright and technology as the Sony Betamax case was.”