Monday, November 2, 2009 - The Progress & Freedom Foundation Blog

Grokster and Indirect Liability for Copyright Infringement

Recently, Ben Shefner of Copyrights & Campaigns discussed the emerging consensus among federal judges that a Grokster-like inducement claim is a type of contributory-liability claim that need not be pled separately. See, e.g., MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005).

This seems reasonable: In the context of pleading, I do not see why Inducement should have to be pled separately. But when thinking about the three current forms of indirect liability for copyright infringement--inducement, contributory liability and vicarious liability--all three claims must be kept analytically distinct. For at least two reasons, they differ in ways that can be dispositive in practice.

First, an inducement claim under Grokster differs from both contributory-liability and vicarious-liability claims in a critical respect: the causation requirement. Arguably, this was the most important legal change worked by Grokster. After all, the idea of intent-based contributory liability was well-established even before the Copyright Act of 1976, and the majority opinion in Sony suggests that its authors did not intend for their "Sony defense" to limit inducement claims. Compare Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir. 1971), with Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 439 n.19 (1984).

Nevertheless, before Grokster, intent-based inducement liability was moribund. Nor is it difficult to imagine why--causation would often be impossible to prove, particularly if claims were brought against a distributor of a widely-used device or program. How would you prove that particular inducing acts proximately caused particular infringing uses? Indeed, this was how the Sony majority dismissed the relevance of Sony's "build a library" advertisements. Compare 464 U.S. at 438, with id. at 459 (Blackmun, J., dissenting).

But in Grokster, 545 U.S. at 940 n.13, the Court unanimously resolved these causation problems in favor of copyright owners:

It is not only that encouraging a particular consumer to infringe a copyright can give rise to secondary liability for the infringement that results. Inducement liability goes beyond that, and the distribution of a product can itself give rise to liability where evidence shows that the distributor intended and encouraged the product to be used to infringe. In such a case, the culpable act is not merely the encouragement of infringement but also the distribution of the tool intended for infringing use.
This was a profound change in the law that sent a powerful message to program and device distributors: Don't mess around with an inducement claim.

Second, Grokster also seems to resolve many doubts about whether an otherwise qualifying entity can invoke a "Sony defense" against a claim for vicarious liability for copyright infringement. The Sony case itself might suggest that the Sony defense does apply to vicarious-liability claims. See 464 U.S. at 435. But in A & M Records, Inc. v. Napster, Inc., the Ninth Circuit held the Sony defense inapplicable to vicarious-liability claims. See 239 F.3d 1004, 1022-23 (9th Cir. 2001).

Many, including me, found that conclusion perplexing, and the analysis supporting it underdeveloped. Napster just did not convincingly explain why the Sony defense should be inapplicable to vicarious-liability claims.

But Grokster supplied the rationale that Napster did not. In Grokster, the Court unanimously held that the Sony defense defined when intent could be imputed or presumed as a matter of law. 545 U.S. at 932 ("there is no injustice in presuming or imputing an intent to infringe"); id. at 933 ("Sony barred secondary liability based on presuming or imputing intent to cause infringement solely from the design or distribution of a product capable of substantial lawful use, which the distributor knows is in fact used for infringement"); id. at 934 ("Sony's rule limits imputing culpable intent as a matter of law from the characteristics or uses of a distributed product"); see also id. at 940, 941.

Now that we know that the Sony defense defines when intent can be presumed as a matter of law--rather than proven as a matter of fact, as in an inducement claim--then the Sony defense should be inapplicable to a vicarious-liability claim. Intent is not relevant to a vicarious-liability claim, which focuses, instead, on broadly defined elements of "right-or-ability to control," and "direct financial benefit." See, e.g., Grokster, 545 U.S. at 930 n.9.

Of, course, this begs another question: If the Sony defense is inapplicable to vicarious liability claims against device distributors or Internet service providers, then what standards do apply?

One obvious answer might be, "the same control/benefit-based standards applicable to everyone else." But an obvious answer need not be the right answer. Cases like Sony and Grokster strongly suggest that under the Copyright Act of 1976, the Supreme Court concludes that courts retain their common-law power to evolve the standards for indirect liability to ensure that they produce sound results when applied to newer types of intermediaries like device distributors, program distributors, and online service providers.

I am not sure whether the traditional standards for vicarious liability do produce optimal results in these contexts. In particular, it is not clear to me that the traditional standards adequately accommodate both (1) the legitimate interests of distributors that want to exercise control while taking reasonable, but perhaps imperfect, measures to deter unlawful uses of their programs, devices, or services; and (2) the legitimate interests of copyright owners that do not want distributors to be able to adopt lame, well-below-state-of-the-art half-measures to deter infringement in order to reap both the benefits of control and the benefits of infringing uses.

Thinking further about how vicarious liability ought to work in this context is one of the items on my substantive "To Do" list. I urge others to think about it as well.

N.B.: To be very clear, as to direct liability for copyright infringement, I do not think that the Copyright Act of 1976 gives court any lawful authority to concoct novel limitations on direct liability--like "volitionalness." I have discussed why in more detail here. But suffice it to say that in the 1976 Act, Congress set the standards for direct liability for infringement. Consequently, only Congress can change them.

posted by Thomas Sydnor @ 1:05 PM | Copyright , IP , Internet