The Toronto Star features a special edition of my Law Bytes column (freely available hyperlinked version; Toronto Star reg. version) reflecting on Monday's Grokster decision. I argue that while the highest court in the U.S. unanimously ruled 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 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 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.