US Appeals Court Relieves P2P Software Developers of Liability

On August 19, 2004, the 9th US Circuit Court of Appeals for the Ninth District upheld a lower court decision that peer-to-peer (P2P) software developers are not liable for vicarious and contributory copyright infringement (Metro-Goldwyn-Mayer v Grockster, 04 CDOS 7624). A coalition of movie studio and record company copyright owners sued defendants Grokster Ltd and Streamcast Networks Inc in an effort to shut down trading of pirated files. The plaintiffs argued that they were entitled to monetary and injunctive relief from the companies who write and distribute file-sharing software because people use the software to illegally trade in copyrighted works. The P2P system allows users to trade files using a decentralized system of computers. The information available for access does not reside on a central server but, instead, each computer makes information available to every other computer on the network. The software companies do not provide the site and facilities for the sharing of files; rather, it is the software users who create the network and provide the access. This can be distinguished from an earlier model of file sharing, formerly used by companies such as Napster (which was forced by the same Court to shut down its network), by which searches and indexing of available files are carried out using a central server operated by the software company. A decentralized system, it was argued successfully, gives the software distributors less control over the users and implies an inability to supervise infringers. The Court agreed and held that the defendants could not be held liable for vicarious copyright infringement. The Court also relied on the "Sony-Betamax" doctrine (see Sony Corp of America v Universal Studios Inc, 464 US 417). There, the US Supreme Court held that the sale of video tape recorders could not give rise to contributory copyright infringement liability even though the defendant knew the machines were being used to perpetrate infringement because the equipment was also capable of commercially significant non-infringing uses. Similarly, the Court here held that the file-trading networks were also capable of substantial non-infringing uses and were therefore legal, notwithstanding they might also be used for illegal activities. The plaintiffs are considering whether to appeal. For related news stories, visit: http://makeashorterlink.com/?Q5CC25D29; http://www.law.com/jsp/article.jsp?id=1090180370553; or http://makeashorterlink.com/?A2DC53D29. For the text of the decision, see: http://makeashorterlink.com/?I6F421919. Summary by: Clare McCurley