The Lurking Design Issue in Grokster

Larry was right to focus on footnote 12 of the Grokster opinion.

So we have at least two issues that we need to figure out with regard to the continuing role of Sony. One is how the inducement test that the Court now has imported into copyright will interact with Sony. The second is how courts going ahead should understand the substantial noninfringing use test. That is the issue raised by the concurring opinions and Larry has a post on that already; I will address that in a subsequent post. Here I went to focus on the interaction of Sony and inducement.

The court was appropriately aware of the need to navigate between Sony and inducement (pages 19 to 20):

We are, of course, mindful of the need to keep from trenching on regular commerce or discouraging the development of technologies with lawful and unlawful potential. … The inducement rule, instead, premises liability on purposeful, culpable expression in conduct, and thus does nothing to compromise legitimate commerce or discourage innovation having a lawful promise.

The question is whether the Court can have its cake and eat it, too. A critical question for new products is what kind of design obligations come with innovation. I have addressed elsewhere why I think that inquiry should look different when we are dealing with network products like peer-to-peer software and TiVo. I think that we very well may conclude that network products require a different set of design obligations then we saw for offline products such as the VCR.

This issue arises that a couple of points in the Court’s opinion. So when discussing what Grokster and StreamCast had done, the Court says (pages 8 to 9):

Finally, there is no evidence that either company made an effort to filter copyrighted material from users’ downloads or otherwise impede the sharing of copyrighted files. Although Grokster appears to have sent e-mails warning users about infringing content when it receive threatening notice from the copyright holders, it never blocked anyone from continuing to use its software to share copyrighted files. Id., at 75-76. StreamCast not only rejected another company’s offer of help to monitor infringement, id., at 928-929, but blocked the Internet Protocol addresses of entities that believed were trying to in deeds and such monitoring on its networks, id., at 917-922.

So the key issue is how are we going to show inducement? So as Doug Lichtman emphasizes in his post (and see Larry’s responsive post), we will get only so many bites on an intent-based standard. Internal e-mails loomed large in the federal government’s prosecution against Microsoft: it would be interesting to know what Microsoft’s email culture looks like today. The same was true in the government’s prosecution of Arthur Andersen.

And even advertising to the public can be shaped to reflect the legal regime as my younger colleague Lior Strahilevitz emphasizes in his Grokster and Bongs post.

That leaves us with design and that takes us back to footnote 12 and how Grokster and Sony will work together. Towards the end of his opinion, Justice Souter looks to what he describes as “three features of this evidence of intent.” One of these was evidence of the intent to meet a market demand for software that would facilitate the downloading of copyrighted works. Another was a business model driven by eyeballs, where eyeballs were much more likely to appear again if copyrighted works were available for downloading on the network.

But the third is a design point. As the Court puts it (page 22):

Second, this evidence of unlawful objective is given added significance by MGM’s showing that neither company attempted to develop filtering tools or other mechanisms to diminish the infringing activity using their software. While the Ninth Circuit treated the defendants’ failure to develop such tools as irrelevant because it lacked an independent duty to monitor their users’ activity, we think this evidence underscores Grokster’s and StreamCast’s intentional facilitation of their users’ infringement.

But the Court—and now I am not sure what to say—undercuts/confuses/frames this by adding footnote 12:

Of course, in the absence of other evidence of intent, a court would be unable to find contributory infringement liability merely based on a failure to take affirmative steps to prevent infringement if the device otherwise is capable of substantial noninfringing uses. Such a holding would tread too close to the Sony safe harbor.

So is this a standard of willful design plus? Some evidence of intent + design that doesn’t attempt to control infringement—see the Court’s quotes above—and now we have enough for liability?

Note that the court also does not address MGM’s vicarious liability theory. See footnote 9 pages 12 to 13.