Grokster Loses at Supreme Court

MGM v. Grokster (2005).

by Cory Hojka

The Supreme Court, in a unanimous decision, has rejected the 9th Circuit’s holding that secondary liability could not apply to a defendant who has no direct knowledge of, nor direct control over, acts of copyright infringement committed by users of the defendant’s file-sharing network. The 9th Circuit’s error, according to Justice Souter’s majority opinion, was that such a ruling overextended the protection offered by the “substantial non-infringing” test in Sony Corp v. Universal Studios. Instead, the Court found that a device’s capability for lawful use is irrelevant to secondary liability when evidence shows that a party has promoted the usefulness of a product they distribute as a means to commit infringement. To support this conclusion for secondary liability, the Court explicitly incorporated into copyright law the inducement theory of liability from patent law:

[O]ne who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement of third parties.

In addition, the court addressed what evidence was sufficient to support intent toward inducement. First, it was compelling that both defendants had sought to satisfy a known source of demand for copyright infringement by pursuing former Napster users. Second, the Court focused on the defendants’ lack of attempts to discourage infringement by users of the file-sharing network. The Court though was careful to note in a footnote that such negative evidence alone is not sufficient, since that result would be contrary to Sony. Third, the Court held that the business models developed by the defendants lend support to a finding of intent, as their revenues were primarily dependent on the scale of infringement occurring on their networks.

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Finally, in separate concurrences with equal support Justices Breyer and Ginsburg decided to duke it out over what are “substantial non-infringing” uses under Sony. Ginsburg argued that the burden of proof in Sony requires a showing of “substantial or commercially significant” non-infringing uses. To her, potential capability or future possible prospects of substantial non-infringing uses are insufficient. In contrast, Breyer contended that Grokster met the Sony standard based on the evidence provided and its potential for future non-infringing uses. Breyer concludes with an extensive argument that the overall harm to technological developments would outweigh the benefits to copyright holders if the Court were to move to a heightened standard in Sony.

Note: Cory Hojka is a law clerk at McDonnell Boehnen Hulbert & Berghoff LLP and a law student at the University of Chicago Law School in Hyde Park.