Lichtman: Reading Wu, Reading Grokster

Tim sees all sorts of limitations and constraints announced in the Grokster opinion. He sees a distinction between protocols and business models; he perceives a safe harbor; and so on. That leads him to reject the worries raised by Fred, Rebecca, me and others. But I think Tim misses the mark.

Start with the text of the unanimous opinion. I take it that there are only two definitive statement in there that will be hard for litigants to later reinterpret. The first is the one that opens the opinion: “We hold that one 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 by third parties." The second is the much-discussed footnote 12. Beyond that, the rest looks like a free-wheeling conversation of factors that mattered in this case but might or might not be dispositive in later cases.

Broaden, now, to the concerns that Tim seems to doubt. First, lots of us think that the Grokster decision will chill legitimate innovation. The worry, put simply, is that honest descriptions of business models and protocols (ie “Rip. Mix. Burn.”) will open the door to plausible litigation. Yes, the makers of a new bittorrent-like protocol might ultimately emerge victorious on an inducement theory; but the music industry will have a credible threat to sue, and an ability to keep the thing in discovery for a while. That will change the dynamics of innovation and negotiation. (Remember when ReplayTV caved in the face of a threat of litigation?)

Second, lots of us simultaneously think that Grokster is too easy for bad actors to evade. The point there is that I can dishonestly describe my new protocol, and in that way fully duck inducement-style liability. So I built the new protocol and advertise it as a great way to move Shakespeare – ignoring that it can also trade music files – and inducement is no worry. Then, as Lior points out, other folks will spread the word for me that the Shakespeare network can also carry Madonna’s prose.

Third, Grokster leaves fully open the question of vicarious liability. It also renders more precarious the Sony rule, which lots of people had wishfully interpreted as a bright-line immunity for dual-use goods. Here again legal uncertainty for everyone.

Overall, then, I think Tim might be too optimistic. The Court left intact most of the uncertainty that was already in place, and (at best) added to the risk associated with inducement (by elevating its prominence) and that associated with Sony (by showing that there is not overwhelming support for the bright-line version of its rule.)

Ok -- Tim, where am I all wet?

Comments

[Fred von Lohmann]

What Doug said. :-)

With respect to fn 12, in particular, I would note that the Court ringed it about with "in the absence of other evidence of intent" and "based merely." The fn is also a bit puzzling as it addresses contributory infringement. The "could have designed it differently" theory, however, was always pressed in the context of vicarious liability. So how does fn 12 apply there?

And finally, the ReplayTV case is instructive regarding the burden of discovery on innovators. Replay was spending, according to published reports, over $1 million/month on legal fees during discovery. In addition, as someone tangentially involved in that litigation, I think it is fair to say that Replay's lawyers relied on the Betamax case as an important bulwark to limit the scope of discovery. That bulwark is now circumvented by pleading inducement and making everything about "intent" relevant for discovery.

Of course, in addition to the discovery burden imposed by the new inducement theory, the Court's opinion failed to clarify traditional contributory and vicarious liability principles. In the wake of Grokster, I know how to advise a company to avoid inducing. But I do not know how to advise them on contributory (scope of Betamax) or vicarious ("could have designed it differently") liability.

So I agree with Doug that Tim's earlier post misstates the fears of those of us who see the Grokster case as potentially chilling innovators.

But I disagree with Doug when he says that Grokster has painted a roadmap for evading liability. True for inducement, not true for other theories.

[Bill Patry]

I think the importance of footnote 12 is being overblown, at least by itself. By that I mean once you throw out the Ninth Circuit's egregious misreading of Sony on the degree of knowledge required, it should be obvious that failure to act cannot meet the promotion/inducement standard. Silence doesn't equal copyright liability. So, I don't think the Court was throwing anyone a bone. And the fact that all 9 could sign on to this should indicate it is a simple proposition.