Amicus Curiae Brief — Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.

(1) FILED

No. 04-480 ‘& NOV - 8 ll

IN THE

Supreme Court of the United States

METRO-GOLDWYN-MAYER STUDIOS INC., et al.,

Petitioners,

v.

GROKSTER, LTD., et a/.,

Respondents.

On Petition FoR A Writ oF CERTIORARI TO THE

Unirep States Court OF APPEALS FOR THE NINTH CIRCUIT

AMICUS CURIAE BRIEF OF THE AMERICAN

INTELLECTUAL PROPERTY LAW

ASSOCIATION IN SUPPORT

OF NEITHER PARTY

Me -vin C. GARNER Me tvin C. GARNER

President Elect Counsel of Record

AMERICAN INTELLECTUAL Amy J. BENJAMIN

Property Law ASSOCIATION Darsy & DarBy

2001 Jefferson Davis Hwy 805 Third Avenue

Suite 203 New York, NY 10022

Arlington, VA 22202 (212) 527-7700

(703) 4: 5-0780

Amicus Curiae

Attorneys for Amicus Curiae

_—_——

190817 g

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

i

TABLE OF CONTENTS

TABLE OF CITED AUTHORITIES ............

INTERESTS OF AMICUS CURIAE ............

SUMMARY OF ARGUMENT .................

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I. The Ambiguities in Sony Have Resulted in a

Conflict Between the Circuits With Respect

to the Standard for Secondary Copyright

Bo EEN DE ree ee Se Par

A. Sony’ “Substantial Noninfringing Uses”

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B. The Ninth Circuit Reads Sony To

Require That The Device Be “Capable

of Substantial NonInfringing Uses” .. .

C. The Seventh Circuit’s Standard Requires

The Substantial Noninfringing Uses to

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Il. The Court Should Clarify Sony with Respect

to the Amount of Evidence Required to

Avoid Liability for Secondary Copyright

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TABLE OF CITED AUTHORITIES

P

FEDERAL CASES baat

A&M Records v. Napster, 239 F.3d 1004 (9th Cir.

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In re Aimster Copyright Litigation, 334 F.3d 643

(7 Cie, BOGS) 2. cv ccsonneauetennmueaeeeee passim

Metro-Goldwyn-Mayer, Inc. v. Grokster, 380 F.3d

1536 (DL. Cal, FIB® oo. cccscenueoaee 2, 6, 7, 10

Sony Corp. v. Universal City Studios, Inc., 464 U.S.

GET CISGS) . oc ccccvncncndedundeneee passim

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AMICUS CURIAE BRIEF OF THE AMERICAN

INTELLECTUAL PROPERTY LAW ASSOCIATION

IN SUPPORT OF NEITHER PARTY

The American Intellectual Property Law Association

(“AIPLA”) respectfully submits this brief as amicus curiae

in support of neither party.

INTERESTS OF AMICUS CURIAE'

The AIPLA is a national bar association of more than

16,000 members with interests and practices primarily in the

areas of patent, trademark, copyright, trade secret, and other

areas of intellectual property law. Unlike areas of practice in

which separate and distinct plaintiffs’ and defendants’ bars

exist, most intellectual property lawyers represent both

intellectual property owners and alleged infringers.

The AIPLA has no interest in any party to this litigation

or stake in the oufcome in this case, other than its interest in

seeking a correct interpretation and application of the

copyright laws.

In accordance with Supreme Court Rule 37.3(a), the

AIPLA has obtained written consent to the filing of this brief

from the counsel of record for the parties. The letters of

consent have been filed with the Clerk of the Court.

1. In accordance with Supreme Court Rule 37.6, amicus curiae

states that this brief was not authored, in whole or in part, by counsel

to a party, and that no monetary contribution to the preparation or

submission of this brief was made by any person or entity other than

the amicus curiae or its counsel.

2

SUMMARY OF ARGUMENT

The concept of secondary liability is well recognized in

virtually every area of the law. While the Copyright Act does

not explicitly provide that one party can be held liable for

the infringement committed by another, secondary liability

for copyright infringement in the form of contributory or

vicarious liability has been imposed by the Courts under

certain circumstances.

In Sony Corp. v. Universal City Studios, Inc., 464 U.S.

417 (1984), the Court’s most recent pronouncement of the

standard to be applied to a claim for contributory or vicarious

copyright infringement, the Court held that “the sale of

copying equipment, like the sale of other articles of

commerce, does not constitute contributory infringement if

the product is widely used for legitimate, unobjectionable

purposes. Indeed, it need merely be capable of substantial

noninfringing uses.” Jd. at 442. The courts and the parties

recognize that Sony is controlling here, but differ as to its

requirements and application.

Relying on its interpretation of Sony in A&M Records v.

Napster, 239 F.3d 1004 (9" Cir. 2001), the Ninth Circuit

held in the case at bar that “if a defendant could show

that its product was capable of substantial or commercially

significant noninfringing uses, then constructive knowledge

of the infringement could not be imputed ..., the

copyright owner would be required to show that the defendant

had reasonable knowledge of specific infringing files.”

Metro-Goldwyn-Mayer, Inc. v. Grokster, 380 F.3d 1154,

1160-61 (D.C. Cal. 2004). In contrast, the Seventh Circuit,

in In re Aimster Copyright Litig., 334 F.3d 643 (7® Cir. 2003),

stated that a defendant must present evidence of actual

3

noninfringing uses. “As should be evident from our earlier

discussion the question is how probable are [the

noninfringing uses]. It is not enough as we have said, that a

product or service be physically capable, as it were, of a

noninfringing use.” Aimster, 334 F.3d at 651. If the Seventh

Circuit’s interpretation of Sony is correct, then evidence of

some undefined level of actual noninfringing use would seem

to be required to avoid liability for contributory or vicarious

copyright infringement.

The conflict caused by the Ninth and Seventh Circuit’s

differing interpretations of Sony places a significant burden

on copyright holders and developers of products which may

be used for both infringing and noninfringing purposes.

Without clarification of the standard for secondary liability,

extensive on-line copyright infringement is likely to continue,

and at the same time, software developers such as

Respondents will be stymied in their efforts to avoid

secondary liability by developing systems with sufficient

noninfringing uses.

ARGUMENT

I. The Ambiguities in Sony Have Resulted in a Conflict

Between the Circuits With Respect to the Standard

for Secondary Copyright Liability

A. Sony’s “Substantial Noninfringing Uses”

Standard

In 1984, the Court addressed the issue of when the maker

of a device which enables third parties to directly infringe

copyrighted works may be held liable for secondary copyright

infringement. Sony Corp. v. Universal Studios, Inc., 464 U.S.

4

417 (1984). At issue in Sony was the then-new video tape

recorder (“VTR”) which for the first time allowed users to

record television programs and movies broadcast over the

air, fast forward through commercials and make multiple

copies. Universal alleged that the public’s use of Sony’s

Betamax VTR in this manner subjected Sony to contributory

or vicarious copyright infringement. /d. at 422-23.

Affirming the district court’s findings that at least some

uses of the VTR by the public were noninfringing, such as

“time-shifting”’ or copying public domain works broadcast

over the air, this Court found that Sony could not be held

liable for secondary copyright infringement. In doing so, the

Court set forth the following standard for secondary liability

for copyright infringement:

[T]he sale of copying equipment, like the sale of

other articles of commerce, does not constitute

contributory infringement if the product is widely

used for legitimate, unobjectionable purposes.

Indeed, it need merely be capable of substantial

noninfringing uses.

Id. at 442. This seemingly straight forward standard has

recently resulted in a split among the Circuits when

confronted with claims of secondary liability for copyright

infringement, particularly as it is applied to more advanced

technologies such as the peer-to-peer file sharing at issue in

2. The Court indicated that both parties had conducted surveys

on the way the VTR was used. “Although there were some differences

in the surveys, they both showed that the primary use of the machine

for most owners was ‘time-shifting’ — the practice of recording a

program to view it once at a later time, and thereafter erasing it.”

Id. at 423.

5

the case at bar. Indeed, as explained below, the Ninth Circuit

relied on the second sentence for a rule that precludes

secondary liability where a product is “merely capable” of

substantial non-infringing uses; the Seventh Circuit relied

on the first sentence for a standard that considers if a product

“is widely used for legitimate, unobjectionable purposes.”

The technological landscape has significantly changed

since Sony was decided in 1984. Although it was a

technological breakthrough in the 1980s, the video tape

recorder at issue in Sony could be considered archaic by

today’s standards. The peer-to-peer file sharing systems at

issue in the case at bar, in Aimster and Napster can be used

for .opyright infringement on a much greater, wider and faster

scale than the video tape recorder at issue in Sony. The speed

by which a motion picture or sound recording can be infringed

on-line using these types of services is further compounded

by the quality of the copies made. The video tape recorder

made analog copies from broadcasts. The quality of the video

and fidelity of the audio decreased with every copy, thereby

reducing the benefits of infringement and creating a market

for authorized video tapes of motion pictures and television

programs. Today, on-line copies are digital and there is no

loss of fidelity or picture quality when a motion picture or

sound recording is downloaded off the Internet. Each copy

is as good as the original. Many have argued that this has

resulted in a decrease in the market for authorized music

and motion pictures.

These technological changes have made the issue of

secondary liability for copyright infringement extremely

important to both the copyright holders and the developers

of software and systems for peer-to-peer file sharing. It is

imperative that the standard be clearly understood and

6

consistently applied so that the copyright holders and the

developers know the bounds of what is permissible.

B. The Ninth Circuit Reads Sony To Require That

The Device Be “Capable of Substantial

NonInfringing Uses”

In the case at bar, the Ninth Circuit held that the peer-to-

peer software distributed by Respondents did not subject

them to secondary liability for copyright infringement

because their software was “capable of substantial

noninfringing uses.” Grokster, 380 F.3d. at 1162. The court

below cited its 2001 opinion in Napster as precedent.

Id. at n.9.

Relying on Sony, the Ninth Circuit ruled in the prior

Napster case that merely supplying the “means to accomplish

an infringing activity” does not lead to the imposition of

secondary liability. Napster, 239 F.3d at 1021 (quoting Sony,

464 U.S. at 436). The Ninth Circuit determined that the

district court had improperly found that Napster had “failed

to demonstrate that its system is capable of commercially

significant noninfringing usés.” It further held that

We depart from the reasoning of the district

court that Napster failed to demonstrate

that its system is capable of commercially

significant noninfringing uses. ... The district

court improperly confined the use analysis to

current uses, ignoring the system’s capabilities.

See generally Sony, 464 U.S. at 442-43 (framing

[the] inquiry as whether the video tape recorder

is “capable of commercially significant

noninfringing uses”). Consequently, the district

7

court placed undue weight on the proportion of

current infringing use as compared to current and

future noninfringing use.

Napster, 239 F.3d at 1021 (citation omitted).

Based on this reading of Sony’s substantial noninfringing

use standard, the Ninth Circuit in the case at bar affirmed

the district court’s finding that the Grokster and Streamcast

systems were capable of substantial noninfringing uses.

Grokster, 380 F.3d at 1162. Petitioners argued below that

the “vast majority” of the uses made of Respondents’ systems

were for copyright infringement. Jd. The Ninth Circuit

concluded that this argument “misapprehends the Sony

standard as construed in Napster, which emphasized that in

order for limitations imposed by Sony to apply, a product

need only be capable of substantial noninfringing uses.” Jd.

(citing Napster, 239 F.3d at 1021) (emphasis in original).

Ultimately, the court found that because Respondents had

demonstrated that their systems were capable of substantial

noninfringing uses, they could not be held liable for

constructive knowledge of infringement.

C. The Seventh Circuit’s Standard Requires The

Substantial Noninfringing Uses to Be “Probable”

The Seventh Circuit’s decision in Aimster indicated that

a product must be more than merely capable of substantial

noninfringing uses. While acknowledging that the Aimster

system was capable of at least five different types of

noninfringing uses, it stated:

All five of our examples of actually or arguably

noninfringing uses of Aimster’s service are

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possibilities, but as should be evident from our

earlier discussion the question is how probable

they are. It is not enough as we have said, that a

product or service be physically capable, as it

were, of a noninfringing use. Aimster has failed

to produce any evidence that its service has ever

been used for a noninfringing use, let alone

evidence concerning the frequency of such uses.

Aimster, 334 F.3d at 653.

The Aimster court read Sony to hold “that the producer

of a product that has substantial noninfringing uses is not a

contributory infringer merely because some of the uses

actually made of the product ... are infringing. ... How

much more the Sony Court held is the principal issue. .. .”

Aimster, 334 F.3d at 647 (internal quotations and citations

omitted) (citing Sony, 464 U.S. 417). The Aimster court then

quoted from Sony:

The [Supreme ClJourt ruled that ‘the sale of

copying equipment, like the sale of other articles

of commerce, does not constitute contributory

infringement if the product is widely used for

legitimate, unobjectionable purposes. Indeed, it

need be merely capable of substantial

noninfringing uses. ... Moreover, in order to

resolve this case we need not give precise content

to the question of how much use is commercially

significant.

Aimster, 334 F.3d at 648 (citing Sony, 464 U.S. at 438, 442)

(citations omitted).

9

The Seventh Circuit emphasized, albeit in dictum, that

the controlling issue was not the existence of some actual

legitimate use, but the ratio of legitimate use to unlawful

use. “What is true is that when a supplier is offering a product

or service that has noninfringing as well as infringing uses,

some estimate of the respective magnitudes of these uses is

necessary for a finding of contributory infringement.”

Aimster, 334 F.3d at 649.

Affirming the district court’s preliminary injunction, the

Seventh Circuit agreed that “no evidence whatsoever” had

been submitted to show that “Aimster is actually used for

any of the stated noninfringing purposes.” /d. at 653

(emphasis in original).

Il. The Court Should Clarify Sony with Respect to the

Amount of Evidence Required to Avoid Liability for

Secondary Copyright Infringements

If the Seventh Circuit is correct that evidence of actual

noninfringing uses is required, no guidelines exist to measure

how much use will suffice. The Aimster court found that there

were five possible noninfringing uses of the Aimster system,

but that no evidence of actual noninfringing uses was

submitted’. In contrast, the court noted that the copyright

holders had submitted enough evidence of infringing uses

“to shift the burden of production to Aimster to demonstrate

3. The district court disregarded the single declaration

submitted by one of the defendants. Instead, the district court seemed

to require, and the Seventh Circuit agreed, that evidence from

“... ‘real-life’ Aimster users demonstrating that they made actual

noninfringing uses of Aimster, was necessary.” Aimster, 334 F.3d at

653 (quoting Jn re Aimster Copyright Litig., 252 F. Supp. 2d 634,

653 (N.D. Ill. 2002).

10

that its service has substantial noninfringing uses.” Aimster,

334 F.3d at 652. It observed that “Aimster has failed to

produce any evidence that its service has ever been used for

a noninfringing use, let alone evidence concerning the

frequency of such uses.” /d. at 653. It also implied that

Aimster needed to establish that the noninfringing uses

predominated over infringing ones. /d.

While the Seventh Circuit required evidence it did not

find, the Ninth Circuit found evidence it did not need.

The Grokster court, holding that mere capability of

noninfringing use is enough, confirmed the district court’s

finding that the system was used for some legitimate

purposes:

A careful examination of the record indicates that

there is no genuine issue of material fact as to

noninfringing uses. Indeed, the Software

Distributors submitted numerous declarations by

persons who permit their work to be distributed

via the software, or who use the software to

distribute public domain works. . . . Indeed, even

at a 10% level of legitimate use, as contended by

the Copyright Owners, the volume of use would

indicate a minimum of hundreds of thousands of

legitimate file exchanges.

Grokster, 380 F.3d at 1161, n.10.

The genesis of the disagreement lies within the opinion

in Sony. The Court there said that a product “need merely be

capable of substantial noninfringing uses”; but it also said

that there would be no contributory infringement “if the

product is widely used for legitimate, unobjectionable

ll

purposes.” Is the standard “mere capability”, or “wide use”?

The split in authority between the Ninth Circuit and the

Seventh Circuit plagues important sectors of the economy

with confusion and uncertainty. Copyright holders need

practical protection from rampant infringement of their

works, and software and equipment suppliers need

predictable boundaries for the marketing of lawful products.

CONCLUSION

For the foregoing reason, the AIPLA respectfully requests

the Court grant certiorari to resolve the judicial disagreement

over the meaning of Sony.

Respectfully submitted,

Me vin C. GARNER ME Lvin C. GARNER

President Elect Counsel of Record

AMERICAN INTELLECTUAL Amy J. BENJAMIN

Property Law ASSOCIATION Darsy & DarBy

2001 Jefferson Davis Hwy 805 Third Avenue

Suite 203 New York, NY 10022

Arlington, VA 22202 (212) 527-7700

(703) 415-0780

Amicus Curiae

Attorneys for Amicus Curiae

4. Indeed, Sony seems to have implicitly relied, at least in part,

on evidence that the video tape recorders were actually used for

noninfringing purposes such as time shifting, which the Court

determined was a fair use. Sony, 464 U.S. at 434 (“As was made

clear by their own evidence, the copying of the respondents’ programs

represents a small portion of the total use of [video tape recorders].”).

“Sony demonstrated a significant likelihood that substantial numbers

of copyright holders who license their works for broadcast on free

television would not object to having their broadcasts time-shifted

by private viewers. ... The Betamax is, therefore, capable of

substantial noninfringing uses.” Jd. at 456.