Impact on Peer-to-Peer Cases: Vicarious Liability Claims May Have Their Limits

In the area of copyright law, however, courts have developed an expanded form of vicarious liability that has been applied without regard for traditional limits on vicarious liability. The Ninth Circuit described this court-created copyright rule in its 1996 decision, Fonovisa Inc. v. Cherry Auction Inc.: “The concept of vicarious copyright liability was developed in the Second Circuit as an outgrowth of the agency principles of respondeat superior. … Noting that the normal agency rule of respondeat superior imposes liability on an employer for copyright infringements by an employee, the court endeavored to fashion a principle for enforcing copyrights against a defendant whose economic interests were intertwined with the direct infringer's, but who did not actually employ the direct infringer.” 76 F.3d 259, 262 (9th Cir. 1996) (citing Shapiro, Bernstein and Co. v. H.L. Green Co., 316 F.2d 304 (2d Cir.1963)). In light of Fonovisa and the Second Circuit case law it followed, courts now impose vicarious liability for copyright infringement where the defendant has “the right and ability to supervise infringing activity and also has direct financial interest in such activities,” regardless of whether a principal/agent relationship exists. See In re Aimster Litigation, 252 F.Supp.2d 634, 654 (N.D. Ill. 2003).

The most significant push for vicarious copyright liability in recent years has been made by the Recording Industry Association of America (RIAA) and other copyright owners in the continuing war against peer-to-peer file sharing and music piracy. The RIAA routinely has sued peer-to-peer services and software providers such as Napster, Aimster, and, more recently, Grokster, Morpheus, and KaZaA, on both contributory infringement and vicarious liability grounds. The copyright owners typically assert vicarious liability as an alternative theory of relief and sometimes even characterize it as an easier option for a court to accept. And while no principal/agent relationship normally exists between the purveyors of file swapping software and the users of the software (who are considered the direct infringers), courts have sometimes accepted the arguments of the copyright owners and imposed vicarious liability on the software providers. See A&M Records v. Napster Inc., 239 F.3d 1004, 1022-24 (9th Cir. 2001); In re Aimster, 252 F.Supp.2d at 654-55.