Thursday, August 19, 2004

Ninth Circuit Affirms Grokster

The Ninth Circuit Court of Appeals affirmed that P2P has substantial noninfringing uses and that Grokster and Morpheus are not contributorily or vicariously liable for copyright violations ocurring by users of their software in Metro-Goldwyn-Mayer v. Grokster (9th Cir. Aug. 19, 2004).

In the opinion, the court finds that P2P is capable of substantial non-infringing uses and so developers of decentralized P2P software are not liable for copyright infringement under current law. The court declines to play a role in regulating new technologies which have substantial non-infringing uses and advises judicial exercise of caution in regulating such technologies.

At the Induce Act hearings, proponents of the proposed IICA draft noted that the Ninth Circuit might find Grokster and Morpheus to be infringing uses and there would be no need for new legislation to regulate P2P. Register of Copyright Marybeth Peters testified that the District Court's Grokster decision was "wrongly decided" and that court misapplied the Sony and secondary liability doctrines in the peer-to-peer context. The Ninth Circuit not only affirms the District Court and finds that Grokster has substantial non-infringing uses, but argues that the judicial activism is not the proper way to affect significant changes in copyright law. The court cautions Congress to avoid overzealous regulation of new technologies which may impact the rights of copyright owners. Market forces, rather than acts of Congress may lead to the best equilibrium between interests of copyright holders and technology developers.
Further, as we have observed, we live in a quicksilver technological environment with courts ill-suited to fix the flow of internet innovation. AT&T Corp. v. City of Portland, 216 F.3d 871, 876 (9th Cir. 1999). The introduction of new technology is always disruptive to old markets, and particularly to those copyright owners whose works are sold through well established distribution mechanisms. Yet, history has shown that time and market forces often provide equilibrium in balancing interests, whether the new technology be a player piano, a copier, a tape recorder, a video recorder, a personal computer, a karaoke machine, or an MP3 player. Thus, it is prudent for courts to exercise caution before restructuring liability theories for the purpose of addressing specific market abuses, despite their apparent present magnitude.

Indeed, the Supreme Court has admonished us to leave such matters to Congress. In Sony-Betamax, the Court spoke quite clearly about the role of Congress in applying copyright law to new technologies. As the Supreme Court stated in that case, “The direction of Art. I is that Congress shall have the power to promote the progress of science and the useful arts. When, as here, the Constitution is permissive, the sign of how far Congress has chosen to go can come only from Congress.” 464 U.S. at 456 (quoting Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 530 (1972)).

Proponents of the IICA may see this as a call to action for why new legislation is necessary as soon as possible. Opponents of the IICA may see a reason for a slow and deliberate process to determine whether new legislation is necessary and what form of that legislation will provide the most equitable balancing of interests between copyright owners and technological innovators.

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