Michael Geist
June 2005

Appeared in the Toronto Star, June 29, 2005


The release of the United States Supreme Court’s Grokster decision this past Monday generated, as expected, an avalanche of breathless headlines proclaiming victory for the recording industry and a “shutting of the tap” of music on peer-to-peer file sharing systems.  While the highest court in the U.S. did indeed unanimously rule that two file sharing services – Grokster and Streamcast – can be sued for actively encouraging copyright infringement by their users, the decision is not the clear cut win its supporters suggest.

The latest chapter in the ongoing battle between the recording industry and peer-to-peer file sharing originated from the Napster case fallout. Napster burst onto the scene in the late 1990s by linking users in a manner that enabled them to easily transfer music files from one computer to another without prior authorization. The recording industry reacted to the service with alarm, quickly suing it on copyright infringement grounds. 

After the industry succeeded in shutting down the massively successful file sharing network several years ago, dozens of alternatives filled the void.  Many of those services adopted a distributed model of file sharing, hoping to avoid the legal pitfalls that befell Napster.

The industry quickly sued two of the most prominent services, but failed to convince either a trial judge or a federal appellate court in California that the services should be held responsible for the conduct of their users. Those services relied on a 1984 U.S. Supreme Court decision involving the Sony Betamax, arguing that new technologies that featured substantial non-infringing uses were protected under the law. 

Sony, which developed the Betamax as an early rival to today’s VCR, faced a hostile reception from the entertainment industry, which claimed that the device facilitated large-scale copyright infringement.  The U.S. Supreme Court ruled in Sony’s favour, concluding that the company’s ability to demonstrate that the Betamax was capable of non-infringing uses was sufficient to shield it from copyright infringement claims for the activities of its customers.

When the U.S. Supreme Court agreed to hear the recording industry’s case, analysts immediately recognized that the ramifications extended far beyond file sharing.  Rather, the future of the principle established in the Sony Betamax case, viewed by many in the technology community as essential to innovation, was at stake.  Accordingly, dozens of interested parties, including scientists, artists, and leading technology firms such as Intel, submitted briefs to the court,

The U.S. Supreme Court found itself in a difficult position.  Grokster and Streamcast did not make for particularly sympathetic defendants, however, punishing them could negatively impact the technology community and the innovation process. 

Monday’s decision attempts to have it both ways, by holding out the prospect of liability for these particular services but preserving the principles that the technology community holds dear.  The court left the core Sony Betamax principle untouched (though it is clear from two concurrent judgments that the court is actually split three ways in its view of how far the principle should extend), yet it revived the doctrine of active inducement of copyright infringement.  In applying the doctrine, file sharing services that “actively induce” their users to engage in copyright infringement would be unable to rely on the protections afforded by the Sony Betamax case.

While that may be bad news for Grokster and Streamcast, the decision may actually provide helpful guidance to other file sharing services on how they can survive in the current legal climate.  In seeking to define the meaning of “active inducement”, the court ruled that liability would require a demonstration of “purposeful, culpable expression and conduct.”  Moreover, it concluded that there would be no liability for knowledge of potential or actual infringement; no liability for product support or technical updates, and no liability for failure to take affirmative steps to prevent infringement.

In other words, so long as a P2P service demonstrates that it has non-infringing uses and that it does not actively market its service as an opportunity for infringement, it could argue that it is protected by the Sony Betamax principle.  This would apply even in the face of evidence that it knew that its users were engaging in copyright infringement or that it could have adopted measures to prevent such infringement from occurring.

How might this test be applied to current P2P service providers?

Consider the case of BitTorrent, which is presently responsible for the largest percentage of peer-to-peer file sharing traffic. With origins that were focused on non-infringing purposes, it is widely used for authorized distribution of independent films, software, podcasts, and even court files as users value the efficiencies of distributing large files using peer-to-peer technologies.  The service does not encourage copyright infringement, though some of its traffic may involve unauthorized activity.  Given the test articulated by the U.S. Supreme Court, BitTorrent would present a strong case for avoiding liability if it faced a Grokster-like lawsuit.

Last month, the Canadian Federal Court of Appeal issued a much-discussed decision that addressed the ability of the Canadian Recording Industry Association to sue individual file sharers.  When the court denied CRIA’s motion for information on 29 alleged file sharers, the media described the decision as yet another loss for the industry.  CRIA claimed total victory, however, arguing that the decision provided it with a roadmap for future lawsuits.

In many respects the Grokster decision is a mirror image of the CRIA case.  While the unanimous verdict left the industry calling it a “9-0 shellacking”, the reality is that many file sharing services will be pleased with the decision as it provides them with a roadmap to avoid future liability.  Moreover, with U.S. Congressional leaders such as Senator Orrin Hatch indicating that there is now no rush to legislate, the threat of new anti-P2P statutes has also subsided.

It invariably takes several years for the effects of landmark court cases to emerge.  The recording industry hopes that the Grokster case will end unauthorized P2P file sharing services.  With the U.S. Supreme Court upholding the potential legality of those services, however, it seems more likely that the decision will one day be viewed as the beginning of the end of the legal war against P2P services.

Michael Geist is the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa. He can be reached by email at mgeist@uottawa.ca and is on-line at www.michaelgeist.ca.

Full Column Archive

Canadian Copyright Bill A Missed Opportunity Toronto Star (27 June 2005)
The State of File Sharing and Canadian Copyright Law Toronto Star (6 June 2005)
Reconciling Canadian Content Requirements in the Age of the Internet Toronto Star (20 June 2005)
File Sharing Decision States the Case For Privacy Toronto Star (30 May 2005)
Domain Name Dispute Puts Dot-Ca in the Spotlight Toronto Star (13 June 2005)
Like It Or Not, Napster and Its Kind Are Here To Stay Globe and Mail (14 February 2001)
The State of File Sharing and Canadian Copyright Law Toronto Star (6 June 2005)

File Sharing Decision States the Case for Privacy Toronto Star (30 May 2005)