Behind the Deal: Federal Judges Debate P2Ps and Copyright Infringement

In a debate over contributory copyright infringement, two federal judges-Alex Kozinski with the Ninth Circuit Court of Appeals in San Francisco and Richard Posner with the Seventh Circuit Court of App

In a debate over contributory copyright infringement, two federal judges- Alex Kozinski with the Ninth Circuit Court of Appeals in San Francisco and Richard Posner with the Seventh Circuit Court of Appeals in Chicago-faced off recently over peer-to-peer technology and the rights of copyright owners.

Presented by the Copyright Society on Nov. 19 in New York and moderated by Bill Patry with Thelen Reid & Priest, part of the discussion focused on the Ninth Circuit's decision finding P2P operators Grokster and StreamCast not secondarily liable for users' copyright infringements. The U.S. Supreme Court on Dec. 10 granted certiorari, agreeing to review the decision. Oral argument is expected to be held in March 2005.

Judge Kozinski was not one of the justices deciding that opinion. However, Judge Posner wrote the opinion in the case of In re: Aimster Copyright Litigation, which upheld an injunction in 2003 against the operator of P2P network Aimster.


In the case entitled Metro-Goldwyn-Mayer et. al. v. Grokster Ltd. et. al., the major movie studios, record labels and a certified class of 27,000 songwriters and music publishers (copyright owners) filed suit in 2001 against Grokster, StreamCast and others for copyright infringement.

In resolving one aspect of the case, the Ninth Circuit Court held on Aug. 19 that Grokster and StreamCast were not liable for contributory or vicarious copyright infringement (often simply called "secondary" infringement). The decision is based only on the software in use when the District Court granted the P2P distributors a partial summary judgment.

In this Grokster opinion, the appellate court noted the three factors that must be shown to prove contributory copyright infringement: (1) direct infringement by a primary infringer; (2) knowledge of the infringement; and (3) material contribution to the infringement.
The parties admitted direct infringement by primary infringers -computer users who shared unauthorized music and movie files.

The appellate court then determined what level of knowledge is required for defendants Grokster or StreamCast to be liable by setting up a two-question analysis.

If the technology is not capable of substantial or commercially significant noninfringing uses, then the copyright owner need only show that the defendant had constructive knowledge of the infringement. This means that the copyright owners' burden of proof only requires them to show that the defendants knew or should have known of infringing activity-something much easier to prove than knowledge of specific infringement.

If the technology is capable of substantial or commercially significant noninfringing uses, then the copyright owner must demonstrate that the defendant had reasonable knowledge of specific infringing files and failed to act on that knowledge to prevent infringement.

The appellate court affirmed the lower court's finding that the software-Grokster and StreamCast's Morpheus-was capable of substantial noninfringing uses: thousands of bands authorized free distribution of their music through the Internet, and the software has been used to share thousands of public domain literary works as well as historic public domain films.

The copyright owners, focusing on the huge percentage of infringing use, argued that the vast majority of people used the software for copyright infringement. However, the court took the position that under the standard set by the U.S. Supreme Court in the 1984 case of Sony Corp. of America v. Universal City Studios, known as the Sony Betamax case, a product need only be "capable" of substantial noninfringing uses.

In that case, Sony's Betamax video device was used to record programs to be watched at a later time (time-shifting, which was a lawful fair use), make copies of programs to build a video library (an infringement) tape programs to later skip commercials and play home movies (lawful uses).

The Supreme Court noted, therefore, that the video recorder was being used for a mixture of infringing and noninfringing uses once Sony sold the recorder and lost all control over it. The Court held that sale of the equipment was not contributory infringement since the product was widely used for legitimate, unobjectionable purposes.

In Grokster, the court held that P2P software is capable of substantial noninfringing uses and has commercial viability. Therefore, constructive knowledge was not the standard of review; the owners were required to show reasonable knowledge of specific infringement "to satisfy the threshold knowledge requirement."

The appellate court stated that the copyright owners were required to show that Grokster and StreamCast had specific knowledge of the users' infringement (the second element of proof) at a time when the companies materially contributed to the infringement (the third element of proof), and that they failed to act upon that information.

The court held that the "decentralized" software did not permit the companies to have such knowledge of specific infringement. Also, the companies did not materially contribute to the infringement because they had no ability to suspend user accounts, they were not access providers and they did not provide file storage and index maintenance.

On appeal to the Supreme Court, the copyright owners claim, among other things, that the appellate court misapplied the Sony Betamax standard to this case.


The following is an edited version of the debate between the judges.

PATRY: In the Grokster case, the court had a two-step process. If the technology is not capable of substantial noninfringing uses, then the copyright owner only has to show constructive knowledge of infringement to be secondarily liable for copyright infringement. If it's capable of significant noninfringing uses, then you have to show reasonable knowledge of specific acts of infringement. What role does "knowledge" play?

JUDGE POSNER: I [don't like] terms like constructive knowledge. A firm goes into the business of providing a sharing service or sharing software, it's going to have a pretty good idea of what uses will be made of it.

JUDGE KOZINSKI: I look at this with some type of skepticism, because the last time the entertainment industry nearly shot themselves in the head. You remember in the Sony Betamax case, all the scenarios of doom [offered by copyright owners], and they lost. What the Supreme Court said saved the industry from themselves and created this great new market that nobody ever dreamed about, nobody ever talked about at the time the Betamax was brought on the market-not even the people at Sony.

I've grown to be very skeptical over the years of people that are intellectual property holders and the way they state the future as if it were a fact. Nobody knows how it works out. Did the parties in the Sony Betamax case predict Blockbuster? Predict Hollywood Video, predict releases directly to DVD or cable to DVD? Nobody could imagine. Future technology holds great promise and it seems to me we ought to be really, really, really reluctant-we, the Judiciary, ought to be very reluctant to shut down technology that seems to comply with people's satisfaction, unless there's a highly compelling showing that there are no potential lawful uses.

JUDGE POSNER: I agree with [Judge Kozinski] that we should repeal the drug laws because they make people happy [said with laughter]. It seemed to be the case in Aimster that the service was designed to allow people to copy copyrighted works without paying a fee. That was the purpose. Of course, some of the works could be copied [permissibly] or maybe a music group that was just getting started, that wanted publicity, would be happy to grant a royalty-free license to anybody. But that possibility always exists and is not decisive.

To simply abolish contributory infringement as a category would be contrary to the statute (the Copyright Act) and it wouldn't make a lot of sense. There are all sorts of infringements that can only be dealt with, technically, by going after the enabler-the manufacturer, the service that enables the infringement. If you put on to the plaintiff the burden either of showing that there are no potential lawful uses or, even worse, no potential future lawful uses, then you repeal the contributory infringement provision; it's impossible to say what the future holds.

I don't even think future technology necessarily holds promise. It may also pose menace. So if there were some slight impediment to technological innovation as a result of contributory infringement suits, it wouldn't necessarily be a disaster.

But the most important point is you don't have some kind of balancing of the lawful uses against the infringing uses. It then puts on the copyright owners the burden of actually trying to go after, maybe with the aid of the Justice Department, millions of individual infringers. That's costly and bad for public relations.

Now maybe the technological advances in this area are unstoppable and will result in new technology for copying that is so cheap and so perfect and so quick and so concealable from the authorities that the music industry simply has to find alternative methods of protecting their investments. Perhaps they will turn to alternative methods, some kind of tax system or compulsory licensing. It wouldn't be the end of the world. But as long as we have this contributory infringement provision in the statute, it seems to me the judges are obliged to enforce it.

JUDGE KOZINSKI: The question is not whether there is a right [under copyright law]. The question is, "Where does the copyright end and where does the public's right begin?" It is not enough to say, "We have a property right and if we want to jump off the cliff, let's let the judges push us off that cliff," because you're not jumping by yourselves. If judges had killed Betamax, we wouldn't have Blockbusters today. We would have killed that industry. While there are some interests in the movie industry that are making megabucks from that, there's also the rest of us who enjoy movies at home. So when they jump off the cliff, they take all the rest of us with them.

Copyright is communication. You can't have effective communication unless you have a large public domain. We share content, we share ideas, we can make a joke, make a reference to an election, to a movie. We have this common way of communicating based on popular culture. Let's not let the people who own the copyrights kill it before it has a chance to develop. I think the burden should be enormous before you come into court and you say, "I want an injunction, I want the court to stop people from communicating." The burden should be enormous. I think there are far too many in the federal courts ready to grant injunctions. We are stopping speech, we are stopping communication.

JUDGE POSNER: You're over-reading [the Sony Betamax opinion]. There was substantial demonstration of noninfringing use in that case. There's a good argument that people actually enlarged the market for the copyrighted television program. I don't think Sony goes as far as you suggested when you said that if there is any potential future noninfringing use that there can't be copyright infringement.

I also think the notion of copyright laws stifling speech is [incorrect]. I do think it's important to have a broad fair-use test, in particular in the areas of parody or criticism, but on the other hand, if you don't have copyright protection you may end up with less expressive work because you can't create it-it's costly.

Do you really think you could have the movie industry operating under a regime of no intellectual property protection? Movies cost hundreds of millions of dollars-and then someone can copy it and distribute it worldwide within minutes of the release? And music, there's a lot of risk. To the extent that producing new songs is a costly and risky activity, if there's no property right protection, then there's going to be less of that output. People will still be sharing, but what will they be sharing? There will be less for them to share. That's the trade-off.

It has to be resolved pretty much case-by-case. You can't allow firms that are in fact simply engaged in facilitating illegal copying to get immunity by arguing, "Well, you know, my little piece of software, all it's good for now is violating copyright law but who knows? Maybe 20 years from now it will be the germ of some fantastic new product."

Given that the legislature has provided for contributory infringement category of liability, we can't indulge in the strong views that [Judge Kozinski] is expressing.

The Copyright Society of the U.S.A. (, with 11 regional chapters, gathers, disseminates and interchanges information concerning protection and use of rights in intellectual property. Its officers are Barry Slotnick (Loeb & Loeb), president; Helene Blue, VP/president elect; Jay Kogan, secretary; Donna DeGrandi, assistant secretary; Gloria Phares, treasurer; and Corey Field, assistant treasurer.