Behind The Deal: Will The Supreme Court Hear A Grokster Appeal?

The Ninth Circuit Court of Appeals on Aug. 19 held that Grokster and StreamCast were not contributorily or vicariously liable for copyright infringement.

The Ninth Circuit Court of Appeals on Aug. 19 held that Grokster and StreamCast were not contributorily or vicariously liable for copyright infringement. The charges related to computer users illegally downloading and sharing entertainment files while using certain versions of the companies' peer-to-peer technology.

Some attorneys in the case indicate that the film, music-publisher and record-label appellants will probably file a petition for writ of certiorari with the U.S. Supreme Court (Billboard, Sept. 4). But will the Court grant cert?

As lawyers know, parties who lose in a federal Court of Appeals don't have an absolute right of appeal to the U.S. Supreme Court. The high Court is not an error-correcting court of appeal; it's a court that interprets the U.S. Constitution and resolves significant questions of federal law in a few select cases -- but only when there is a compelling reason to do so.

The Supreme Court reviews federal appellate decisions through its certiorari jurisdiction, meaning the Court's decision whether or not to review a case is entirely within its discretion.

Convincing the U.S. Supreme Court to grant certiorari is a monumental task. Often, causes of action, defenses and evidence must be set up strategically early in the case -- sometimes before the lawsuit formally commences. Even if the case qualifies for review and ends up on the Court's steps, roughly 98% of the 7,000 or so petitions filed each year are denied without consideration.

Some of the standards the Court uses in making its decision to grant or deny the petition are stated in the Court's rules and in many of its case opinions. They include consideration of whether: (1) a U.S Court of Appeals decision conflicts with another U.S. Court of Appeals decision on the same important matter, (2) a U.S. Court of Appeals has decided an important federal question in a way that conflicts with a relevant decision of the Supreme Court, (3) an important federal issue is involved, and (4) any other important issue is involved.

During an interview with Billboard, Carey Ramos, a partner with Paul Weiss Rifkind Wharton & Garrison who represents various music publishers in the Grokster case, explained why the Supreme Court may decide to review this decision.

In Grokster, which doesn't present any constitutional issues, the parties must rely on the questions of federal law involved in the case. As the lawyers know, however, having a case that involves a federal statute -- the Copyright Act -- isn't enough. Other factors must persuade at least four Justices to grant review.

Courts deciding cases involving P2P technology and illegal file sharing have relied upon the U.S. Supreme Court's decision in Sony Corp. of America v. Universal City Studios Inc. (1984) 464 U.S. 417, known as the Sony-Betamax case. In that case, the court held that the sale of videotape recorders could not give rise to contributory copyright infringement liability even though the defendant knew the machines were being used to commit infringement. The court held that it would be sufficient to defeat a claim of contributory infringement if the defendant showed that the product was "capable of substantial" or "commercially significant noninfringing uses."

In 2003, the U.S. Court of Appeals for the Seventh Circuit interpreted the Sony-Betamax decision in a case involving Aimster, a company that used P2P technology. The court determined that an important additional factor to consider is the probability of noninfringing uses. In finding copyright infringement, Ramos believes the court applied a balancing test, balancing noninfringing uses and infringing uses to determine whether a party should be liable for infringement.

The Ninth Circuit Court in Grokster noted that the Aimster decision was premised on a "fundamental disagreement" with an earlier Ninth Circuit opinion in a Napster case; therefore, the Grokster court would not follow the same interpretation in applying the Sony-Betamax principles to this case.

The Grokster court noted that "even at a 10% level of legitimate use ... the volume of use would indicate a minimum of hundreds of thousands of legitimate file exchanges." Thus, the court seemed to be placing importance on the actual number of legitimate users, rather than the small percentage. The Sony-Betamax Court may not have intended this result.

The Supreme Court could see that two federal circuits are now in conflict on the same matter of federal law.

Ramos also believes that this reliance on the Sony-Betamax case by all the courts and the various interpretations may persuade the Supreme Court to review Grokster, finding that it is time to clarify the Sony-Betamax decision as it relates to technology today. After all, Sony-Betamax was decided 20 years ago, when computers were at an incipient stage. He also believes that the old opinion is ambiguous and in need of current interpretation.

Will the court review its own decision in light of the changing times?

The Sony-Betamax case was not decided unanimously by the Supreme Court. It was a close decision at the time, with five Justices in favor of the holding and four against. In fact, Ramos says, papers released after the death of Justice Marshall, who joined the dissent in the case, indicate that Sony-Betamax was originally decided the other way -- finding copyright infringement. In an unusual circumstance, the details of which Ramos does not recall precisely but may have involved a Justice retiring, the Court requested arguments to be made a second time. The final decision changed, by one vote. This may lend support to reviewing this decision now, especially in light of the great changes in technology, the Internet and the development of P2P file sharing.

The Grokster case is also high-profile. It has not only generated enormous press attention, but it involves issues publicly debated throughout the world and in Congress. The importance of the entertainment industry to the national economy and the massive losses attributable to digital piracy all lend credence to Grokster as an important issue.

In addition, every term, the Supreme Court selects a number of intellectual property cases to review. The Grokster case is probably the most famous copyright case in the country right now, Ramos says.

As for the Justices, Ramos notes that this is the type of interesting case that he believes would appeal to Justice Breyer. Justice Ginsburg tends to be pro-copyright protection. Justice Scalia and federal appellate Judge Posner, who wrote the Aimster opinion, were colleagues at one time, so this connection may intrigue Scalia to review the issue. It seems possible that a fourth required Justice would agree to review the case if three are already on board.

In the next few weeks, the parties will decide whether to file a motion for the Ninth Circuit Court of Appeals to reconsider its decision sitting en banc or to file a petition for a writ of certiorari with the Supreme Court. They may do both, says Ramos. If they want a shot at having the Supreme Court review Grokster this term, which begins in October, they will most likely have to file the petition by then.


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