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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0043%3A33

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2005
- **Citation:** 545 U.S. 913

## Text

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Supren

sourt, U.S.
FILED

(7) JAN 24 2005

No. 04-480 OFFICE OF THE CLERK

IN THE
Supreme Court of the Gnited States

METRO-GOLDWYN-MAYER STUDIOS INC. ef al.,
Petitioners,
Vv.

GROKSTER, LTD. et ai.,
Respondents.

On Writ of Certiorari
to the United States Court of Appeals
for the Ninth Circuit

BRIEF AMICUS CURIAE OF
AMERICANS FOR TAX REFORM
IN SUPPORT OF PETITIONERS

CARTER G. PHILLIPS*
ALAN CHARLES RAUL
JAY T. JORGENSEN
ROBERT N. HOCHMAN
Eric A. SHUMSKY
BRIAN M. PALMER
SIDLEY AUSTIN BROWN
& WOopD LLP
1501 K Street, N.W.
Washington, D.C. 20005
(202) 736-8000

Counsel for Amicus Curiae
January 24, 2005 * Counsel of Record

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QUESTION PRESENTED

Whether the Ninth Circuit erred in concluding, contrary to
long-established principles of secondary liability in copyright
law (and in acknowledged conflict with the Seventh Circuit),
that the Internet-based “file sharing” services Grokster and
StreamCast should be immunized from copyright liability for
the millions of daily acts of copyright infringement that occur
on their services and that constitute at least 90% of the total
use of the services.

TABLE OF CONTENTS

Page
QUESTION PRESENTED. ..........::sssessssesssssesssseessneeessvess
TABLE OF AUTHORITIES ............s::sssesssssessssesssnseesseees iv
INTERESTS OF AMICUS CURIAE .......sc.ccvesssvessss0e00000s !
INTRODUCTION AND BACKGROUND ............000000 !
SUMMARY OF ARGUMENT ..........::::ssessssesssseessneeesnes 2
chalice iiiintes ns icatlinnasniiey seialtieinatnic 4

I. PROTECTING INTELLECTUAL PROPERTY
AS FULLY AS TANGIBLE PERSONAL PROP-
ERTY SERVES THE PUBLIC INTEREST............ 4

A. Copyrights Are A Form Of Property That Has
Been Fully Protected By Federal Law Since

Fe Fe cenrssesemenssnemassgneenmneeeen 4
B. Intellectual Property Rights Require Vigilant
Protection In The Digital Age ................csceee 8

Il. RESPONDENTS’ BUSINESS MODEL IS UN-
LAWFUL BECAUSE IT SEEKS TO PROFIT
FROM INDUCING THE THEFT OF PERSON-
es | Tn 10

Ill. THIS COURT’S DECISION IN SONY HAS NO
APPLICABILITY HERE...............0..ccccscssscoscessesseees 13
CONCLUSION .............sscsscsscsssrsssessevensensssssesessnssscsossensees 18

(iii)

|
hii

iv

TABLE OF AUTHORITIES
CASES Page
A&M Records, Inc. v. Napster, Inc., 114 F. Supp.
2d 896 (N.D. Cal. 2000), aff'd in part & rev'd
in part, 239 F.3d 1004 (9th Cir. 2001)................. 10
A&M Records, Inc. v. Napster, Inc., 239 F.3d
OU 10
American Geophysical Union v. Texaco Inc., 802
F. Supp. | (S.D.N.Y. 1992), aff'd, 60 F.3d 913
oe ee en 6
Burrows-Giles Lithographic Co. v. Sarony, 111
Ef ene 6
Folsom v. Marsh, 9 F. Cas. 342 (C.C.D. Mass.
es See 6
Eldred v. Ashcroft, 537 U.S. 186 (2003)................ 6
Goldstein v. California, 412 U.S. 546 (1973)......... 6
New York Times Co. v. Tasini, 533 U.S. 483
GERRI P cecssccenmstocieisenninseuinctantieginigtstenetamteadictnntineis 9
Sony Corp. of Am. v. Universal City Studios, Inc.,
464 U.S. 417 (1984)... 13, 14, 15, 16, 17
CONSTITUTION AND STATUTES
ae 5,9
Copyright Act of 1909, ch. 320, 35 stat. 1075 ........ 6
Sound Recording Amendment Act of 1971, Pub.
Se 6
Co) 8 DD 5

INTERNATIONAL AGREEMENTS

Agreement on Trade-Related Aspects of
Intellectual Property Rights, Apr. 15, 1994,
Marrakesh Agreement Establishing the World
Trade Organization, Annex IC, Legal
Instruments-Results of the Uruguay Round vol.
DE, FS Rae GS Gee cecennenteenahntmmninn

v
TABLE OF AUTHORITIES—continued

Berne Convention for the Protection of Literary
and Artistic Works, Sept. 9, 1886, 828 U.N.T.S.
SEO cosesrpsscarssnnsenmsinniciintecanitastbianmsaiseniguetteampilane

FOREIGN CASE

Proceeding, Donaldson v. Beckett, | Eng. Rep.
837 (H.L. 1774), available at http://www.
copyrighthistory.com/donaldson.htm .................

FOREIGN STATUTE
yy

SCHOLARLY AUTHORITIES

Frank L. Easterbrook, Cyberspace and the Law of
the Horse, 1996 U. Chi. Legal F. 207..................

Jon M. Garon, Normative Copyright: A Con-
ceptual Framework for Copyright Philosophy
and Ethics, 88 Cornell L. Rev. 1278 (2003)........

Lyman Ray Patterson, Copyright in Historical
a

Richard A. Posner, Economic Analysis of Law
es SL ee

Alfred C. Yen, Restoring the Natural Law: Copy-
right as Labor and Possession, 51 Ohio St. L. J.
ff Se a Cy ee

OTHER AUTHORITIES

The Federalist No. 43 (James Madison) .................
William Enfield, Observations on Literary
ae
Lev Grossman, /t's All Free, Time, May 5, 2003 ...

vi
TABLE OF AUTHORITIES—continued

Lawrence R. Hefter & Robert D. Litowitz, What
is Intellectual Property? (Nov. 1999), available

at http://usinfo.state.gov/products/pubs/intelprp

1 Melville B. Nimmer & David Nimmer, Nimmer
6D CO ERE GOO ncccecesescnsstensrcceentimeremenaneene
Honorable Richard Posner, The Economics
Structure of Intellectual Property Law, Address
at the American Enterprise Institute (Nov. 19,
2002), available at http://techlawjournal.com/
intel pro/2002 1 119.aSP............rcereeereeseesseesersenes
Eric H. Smith, Foreword to Stephen E. Siwek,
Int'l Intellectual Prop. Alliance, Copyright
Industries in the U.S. Economy: The 2004
Report (2004), available at http://www.iipa.
com/pdf/2004_SIWEK_FULL.pdf......................

Page

INTERESTS OF AMICUS CURIAE'

Amicus Curiae Americans for Tax Reform (“ATR”) is a
coalition of individuals, taxpayer groups and businesses
concerned with promoting a vibrant economy through tax
policy, spending reduction, a balanced budget and restoring
accountability to elected officials. In support of all of these
goals, ATR seeks a government that adheres to constitutional
norms and this Nation’s founding principles of promoting free
markets and protecting property rights. As a supporter of
these ideals, ATR opposes any result in this cage_that would
sanction the widespread theft of property that has been
encouraged and facilitated by Respondents. Such a result
would undermine this country’s constitutionally rooted and
long-established protections for copyright, because it would
render a black market in copyrighted works functionally
immune from suit, and thereby profoundly distort the proper
functioning of legal markets in copyrighted works.

INTRODUCTION AND BACKGROUND

For generations, the concept of personal property rights and
the knowledge that the law will protect personal property
from theft have provided individuals with a compelling
incentive to work, to create new items of commerce, and
thereby to benefit themselves and society. From the
beginning of our Republic, those incentives have been applied
to the intangible product of American genius. As a result,
incentive to create and publish an ever-increasing array of
materials to educate, empower and entertain. That system of

' Pursuant to Supreme Court Rule 37.6, amicus curiae states that
counsel for amicus authored this brief in its entirety. No person or entity
other than amicus, its members, and its counsel made a monetary
contribution to the preparation of this orief. Letters of consent from all
parties have been filed with the Clerk of the Court.

2

legal protection for intellectual work product is the father of
the modern electronic revolution.

Ironically,. Respondents, while benefiting from the
innovations sparked by intellectual property protections, have
used those innovations to facilitate and profit from the
destruction of property rights. This case tests whether the
protections for personal property rights that have provided the
foundation for our economy will continue in the modern,
online environment. In previous cases, this Court has
indicated that the protections historically afforded to
copyright and patent holders will continue to apply to new
methods of creating, storing and sharing intellectual property.
The Court should_reaffirm that principle here by applying the
age-old principle that those who induce the violation of
intellectual property rights are secondarily liable for that
violation.

SUMMARY OF ARGUMENT

Our Nation’s history has shown that the predictable and
robust protection of personal property rights provides
innumerable benefits. Protecting personal property from theft
gives every person a healthy incentive to produce items or
services that are valuable to society. Since the Founding,
intellectual property has been among the products of personal
labor that have received the protections of federal law. As a
result, modern American consumers enjoy a rich and diverse
selection of artistic, educational, and technical works.

The Ninth Circuit's decision undermines these time-
honored protections for personal property. In focusing on the
question of the technology that Respondents use to induce
copyright violations, the Ninth Circuit’s decision fails to
recognize that facilitating and profiting from theft on the
Internet is no different from facilitating and profiting from
theft in any other context. It is Respondents’ business model,

3

not the technology they use to effectuate that model, that
merits legal sanction.

Given these fundamental principles, and the manner in
which Respondents flout them, it is no surprise that this
Court's decision in Sony is inapplicable here, for at least three
reasons. Although Respondents seek to wrap themselves in
the protection of Sony, this reliance is misplaced. Unlike this
case, Sony involved a claim of secondary infringement based
on nothing more than the mere sale of a potentially infringing
product; this case, by contrast, involves a business whose
very purpose and goal is to encourage and profit from
infringement. Although technology purveyors who sell a
product with substantial noninfringing uses are justifiably
protected by .Sony; Respondents do not qualify for that
protection because they distributed and marketed their service
by touting its usefulness in the commission of copyright
infringement and with the intent to profit from such
infringement. Furthermore, Sony dealt with the circum-
stances under which constructive knowledge could be
inferred from a defendant's conduct. But in this case, no such
inferences are required—the evidence abundantly demon-
strates that Respondents had active knowledge of the
infringement that occurs via their software. Finally, Sony was
a case in which the underlying conduct was blameless, as this
Court concluded that most uses of the product were fair.
Here, not even Respondents have made such a claim. This is
a case about widespread and blatant copyright infringement,
all encouraged by and to the profit of Respondents.

ARGUMENT

I. PROTECTING INTELLECTUAL PROPERTY AS
FULLY AS TANGIBLE PERSONAL PROPERTY
SERVES THE PUBLIC INTEREST.

A. Copyrights Are A Form Of Property That Has
Been Fully Protected By Federal Law Since The
Founding.

At least since passage of the 1710 Statute of Anne, Anglo-
American law has recognized copyright as a property interest.
8 Ann., c. 19, § 1 (1710) (Eng.). Through that landmark Act,
Parliament recognized the benefits that intellectual property
rights offer: profits for authors and progress for society.
Vesting a property right in authors incentivizes the cultivation
and development of creative expression, just as real property
rights promote the cultivation and development of land.

Early judges and commentators joined in adapting a
Lockean view of property, which would later become the
keystone of our Declaration of Independence, to the field of
copyright. See, e.g., Proceeding, Donaldson v. Beckett, |
Eng. Rep. 837 (H.L. 1774) (Lord Chief Baron Smythe),
available at http://www.copyrighthistory.com/donaldson.html
(“property did exist previous to publication, and that
publication could not alter it; for that publication neither
made it a sale, a gift, a forfeiture, nor an abandonment, which
were the only ways that a person could part with his
property”); William Enfield, Observations on Literary
Property 21 (1774) (“Labour gives a man a natural right of
property in that which he produces[.] [L]iterary compositions
are the effect of labour; authors have therefore a natural right
of property in their works.”), quoted in Jon M. Garon,
Normative Copyright: A Conceptual Framework for
Copyright Philosophy and Ethics, 88 Cornell L. Rev. 1278,
1296 & n.94 (2003); see generally Garon, supra. Several
states, even before the adoption of the Constitution, had also
equated the need to protect the fruits of intellectual labor with

the need to protect the fruits of manual labor. E.g., 1783 N.H.
Laws 305 (noting that government encourages human
progress by providing the “legal security of the fruits of
[human] study and industry [and that] no property [is] more
peculiarly a man’s own than that which is produced by the
labor of his mind”), quoted in Alfred C. Yen, Restoring the
Natural Law: Copyright as Labor and Possession, 51 Ohio
St. L. J. 517, 529 n.79 (1990) (and citing other similar state
statutes from the period).”

In light of this already solid foundation that existed for
intellectual property by 1787, it is unsurprising that the
Framers embraced intellectual property as essential to the
Nation’s future. U.S. Const. art. 1, § 8, cl. 8. James Madison
wrote of the Copyright Clause, “The utility of this power will
scarcely be questioned.” The Federalist No. 43. There were
apparently few who doubted that, as Madison recognized, the
“public good fully coincides - . . with the [intellectual
property] claims of individuals.” /d. One prominent
commentator has observed that “the men who wrote the
Constitution regarded the system of private property per se as
in the public interest. In according property status to
copyright, they merely extended a recognition of this public
interest... .” 1 Melville B. Nimmer & David Nimmer,
Nimmer on Copyright § 1.03[A], at 1-90 (2004) (footnote
omitted).°

? By the time the Framers gathered for the Constitutional Convention,
twelve of the thirteen original colonies had adopted some form of
intellectual property regime. Lyman Ray Patterson, Copyright in
Historical Perspective 194 (1968).

* The modern mind has no difficulty equating intellectual with tangible
personal property. | Nimmer & Nimmer, supra, § 1.03/A], at 1-90 (“[t}he
fruits of an author’s labor scem to be no less deserving of the privileges
and status of ‘property’ than are the more tangible creative efforts of other
laborers”); Richard A. Posner, Economic Analysis of Law 38 (4th ed.
1992) (“the economist experiences no sense of discontinuity in moving
from physical to intellectual property”).

6

The Framers recognized that the law generally protects rea!
and personal property in order to protect the progress society
has already made, but that the specific protections of
intellectual property promote future progress. The Founders
of our young Nation were keenly aware of the need to achieve
a level of economic advancement that would put the Nation
on par with its European forebearers. Accordingly, the
Framers understood that protecting intellectual property
would help ensure that the newly united States would not lag
in developing a marketplace of ideas behind their European
rivals. Put simply, copyright incentivizes private individuals
to create works that benefit the public as a whole.

This Court has recognized that copyright protection serves
the public by securing rewards to the efforts of individuals.
“[Cjopyright law celebrates the profit motive, recognizing
that the incentive to profit from the exploitation of copyrights
will redound to the public benefit by resulting in the
proliferation of knowledge.” American Geophysical Union v.
Texaco Inc., 802 F. Supp. 1, 27 (S.D.N.Y. 1992), aff'd, 60
F.3d 913 (2d Cir. 1994), quoted in Eldred vy. Ashcroft, 537
U.S. 186, 212 n.18 (2003).

The public benefits derived from the protection of
individual rights in copyright have led the Nation consistently
to expand the availability of intellectual property nghts. See,
e.g., Copyright Act of 1909, ch. 320, 35 Stat. 1075; Sound
Recording Amendment Act of 1971, Pub. L. No. 92-140, 85
Stat. 391; Folsom v. Marsh, 9 F. Cas. 342, 347 (C.C.D. Mass.
1841) (No. 4901) (Story, J.) (attributing public availability of
Founding Fathers’ papers to copyright protection); Burrows-
Giles Lithographic Co. v. Sarony, 111 U.S. 53 (1884)
(extending copyright to photographs); Goldstein v.
California, 412 U.S. 546, 561 (1973) (further extending
copyright to “any physical rendering of the fruits of creative
intellectual or aesthetic labor”). Today, intellectual property
rights are equally important on the international stage. One
commentator has noted that “[c]ountries with innovative local

>

industnes almost invariably have laws to foster innovation by
regulating the copying of inventions, identifying symbols, and
creative expressions.” Lawrence R. Hefter & Robert D.
Litowitz, What is Intellectual Property?, http://usinfo.
State.gov/products/pubs/intelprp/homepage.htm (Nov. 1999).
Moreover, the United States is a party to several international
accords protecting intellectual property rights. See, e.g.,
Agreement on Trade-Related Aspects of Intellectual Property
Rights, Apr. 15, 1994, Marrakesh Agreement Establishing the
World Trade Organization, Annex IC, Legal Instruments—
Results of the Uruguay Round, vol. 31, 33 1.L.M. 81 (1994);
Berne Convention for the Protection of Literary and Artistic
Works, Sept. 9, 1886, 828 U.N.T.S. 221.

The Framers’ vision of a nation driven forward based, in
part, on the fruits of intellectual labor has been realized
perhaps beyond their capacity to imagine. The importance of
copyright law to the U.S. and global economies can hardly be
overstated. In 2002, core copyright industries* accounted for
$626.6 billion, or 6% of the total U.S. gross domestic product.
Eric H. Smith, Foreword to Stephen E. Siwek, Copyright
Industries in the U.S. Economy: The 2004 Report, Int'l
Intellectual Prop. Alliance, (2004), available at http://www.
iipa.com/pdf/2004_SIWEK FULL.pdf. These _ industries
employ 4% of U.S. workers. Between 1997 and 2001, the
industries grew at 3.19% per year, more than double the
employment rate increase for the rest of the economy. In
2002, copyright industries accounted for $89.26 billion in
foreign sales and exports. /d. All of this, of course, does not
even begin to include the value to our economy and to our
standard of living that is contributed by the protection of
patent rights. In sharp contrast to the economy as a whole,
there is an intellectual property trade surplus, i.e., the U.S.
exports much more valuable intellectual property than it

* This group includes industries whose primary purpose is to produce or
distribute copyright materials, eg., newspapers, book puulishing,
recording, music, motion pictures, television broadcasting, and software.

8

imports. Honorable Richard Posner, The Economic Structure
of Intellectual Property Law, Address at the American
Enterprise Institute (Nov. 19, 2002), available at http://
www .techlawjournal.com/intelpro/2002 11 19.asp.

B. Intellectual Property Rights Require Vigilant
Protection In The Digital Age.

For as long as our law has recognized the immense benefits
of intellectual property nghts, there have been free riders and
thieves who violate the law. The Statute of Anne explicitly
stated that “persons[] have of late frequently taken the Liberty
of Printing . . . Books, and other Writings, without the
Consent of the Authors . . . to their very great Detriment, and
too often to the Ruin of them and their Families.” 8 Ann., c.
19, § 1 (1710) (Eng.).

Nearly three centuries later, the threats to our intellectual
property system posed by piracy take technologically
advanced forms. But the new dressing in which we find
modern piracy does not change its nature. Theft is theft.
Intentionally enabling and profiting from the theft of others
harms us all. The proper functioning of our free enterprise
system requires effective recourse for property holders when
their rights are invaded. Respondents are enabling and
profiting from massive theft. The law must respond.

The technologically advanced nature of the theft that leads
to Respondents’ profits only enhances its impact. No longer
does intellectual property piracy depend upon costly
machines and time-consuming copying processes. Low cost
computers and the Internet make piracy fast and easy. The
impact is staggering. The music, mo.ion picture, and video
game industries all report enormous losses on account of
piracy: 111,000 jobs in the software industry, $4 billion in
music sales, $3 billion in film sales, and $3 billion more in
lost video game sales. Garon, supra, at 1280.

Happily, the law is general enough and adaptable enough to
meet the needs of our technologically advanced society and

9

protect our intellectual property system from the massive theft
taking place at the behest of Respondents. As Petitioners and
other amici have demonstrated, and thus it does not require an
extended discussion here, standard rules of secondary liability
in copyright law apply to Respondents and warrant imposing
liability against them.* This is not surprising. The Internet,
though technologically foreboding, is no less amenable to the
application of the sound general rules of law that have served
our Nation and its economy well for centuries. See Frank H.
Easterbrook, Cyberspace and the Law of the Horse, 1996 U.
Chi. Legal F. 207, 208 (“Develop a sound law of intellectual
property, then apply it to computer networks.”). Through
three centuries, an effective legal framework has fostered
unimaginable innovations in technology, communications,
art, literature, film and music. No competent body has yet
determined that there is anything unique to the digital age that
would justify an abandonment of the same system that has
brought such profound gifts to society. When the Framers
empowered Congress to “securfe] . . . to Authors and
Inventors the exclusive Right to their respective Wniting and
Discoveries,” they surely meant “exclusive” without any
unexpressed exception for new methods. of copying and
distribution. Const. art. 1, § 8, cl. 8 (emphasis added). The
teaching of New York Times Co. v. Tasini confirms precisely
this point: the Court found “no basis . . . to shrink authorial
rights” simply because copyrighted works had moved into the
digital world. 533 U.S. 483, 506 (2001). Thus, this Court
ensured that the rights of authors wou!d remain fully
protected even as their creative expression migrates into
cyberspace. There is no reason to think that now is the time
to start developing an “Internet” exception to the laws that

protect property rights.

* See Brief Amici Curiae of States and Territories in Support of
Petitioner, No. 04-480 (U.S. filed Jan. 24, 2005).

10

Il. RESPONDENTS’ BUSINESS MODEL IS UN-
LAWFUL BECAUSE IT SEEKS TO PROFIT
FROM INDUCING THE THEFT OF PERSONAL
PROPERTY.

The Ninth Circuit's decision below must be rejected
because it adopts the wrong focus. The Ninth Circuit treated
this case as addressing the lawfulness of a particular
technology, but it is Respondents’ business model, and not
the technology by which they effectuate that model, tuat is
really at issue. If personal property is to be respected,
Respondents’ conduct must be illegal whether the technology
they use is on the cutting edge of development or centuries
old.

Respondents’ entire business model is based upon
encouraging the mass theft of copyrighted works over their
peer-to-peer (“P2P”’) networks and profiting from the volume
of theft that occurs. The record on this point is clear.
Respondents designed their networks with the express goal of
emulating Napster’s infringement-based business model. See
JA 738-739, 744-745, 749, 835, 836, 858-862, 864-865, 992-
998. At that time, Napster (which was the first large-scale
P2P network) was a notorious haven for copyright
infringement, with millions of copyrighted works being
illegally copied on a daily basis. See A&M Records, Inc. v.
Napster, Inc., 114 F. Supp. 2d 896, 911 (N.D. Cal. 2000),
aff'd in part & rev'd in part, 239 F.3d 1004 (9th Cir. 2001)
(“as much as eighty-seven percent of the files available [for
free duplication] on Napster may be copyrighted”); Napster,
239 F.3d at 1013-14 (noting the District Court’s finding that
that “‘a majority of Napster users use the service to download
and upload copyrighted music . . . [in] . . . direct infringe-
ment’” of the relevant copyrights) (quoting A&M Records,
Inc. v. Napster, Inc., Nos. 99-5183, 00-0074, 2000 WL
1009483, at *1 (N.D. Cal. July 26, 2000) (transcript of
proceedings)). Respondents’ original software operated in
substantially the same manner as Napster, and Respondents

even mimicked Napster’s name for the original version of
their service. See JA 250-251, 531, 579-586, 758-759.
Significantly, when the federal courts enjoined Napster from
continuing its infringement-driven business, Respondents did
not show any signs of concern that perhaps their services
were being used in an unintended unlawful manner. Rather,
Respondents demonstrated that they intended the logical
result of the actions they had taken in creating an
infringement-based P2P service. In fact, Respondents
vigorously marketed their services as an alternative for
Napster’s previous users. See, eg, Pet. App. 35a
(Respondents promoted themselves as “‘the next Napster’”);
JA 749, 861-862 (Respondents dec'ared that their networks
would “Do Napster better”); JA 836, 858-863, (StreamCast
advertised its network as “The #1 Alternative to Napster” and
the “Alternative Napster Network’’).

The intent behind Respondents’ efforts to identify
themselves with Napster is clear. Like Napster, Respondents
have structured their business model so that they receive
increased advertising revenues as the volume of traffic on
their networks increases. See JA 72, 258, 572, 759-760.
Under Respondents’ volume-based business model,
Respondents profit from each instance of illegal traffic.° Asa
result, Respondents have no incentive to discourage illegal
file sharing. To the contrary, Respondents have every
incentive to promote the idea that copyrighted works may be
duplicated on their networks for free. Respondents have
acted upon that incentive. For example, at one time
Respondents required users to create a unique username and

* Respondents and other similar P2P networks have succeeded in their
efforts to foster illegal infringement of property rights. During the
proceedings before the District Court in this case, more than 90% of the
material available on Respondents’ networks consisted of copyrighted
works that were being illegally infinged. See JA 436-439, 476-480. More
than 2.6 billion copyrighted songs are illegally downloaded from P2P
networks each month. See Lev Grossman, /t's All Free, Time, May 5,
2003.

12

password to log into their networks. By requiring each user
to log into the network, Respondents were able to monitor
their users and determine whether they were engaged in
prohibited conduct. However, several months after this
litigation began, Respondents disabled theirs log-in
requirement and thus ceased to use it as a device for deterring
illegal traffic. See JA 254, 271-272, 575-578, 623-625, 626-
628, 665-667, 766. Respondents have acknowledged that one
reason for this willful blindness is their desire to avoid any
iegal responsibility for the illegal traffic that they intend to
foster and from which they derive their business income. See
JA 791, 928-933 (Respondents’ employees acknowledge that
Respondents have the technical ability to see what files
Respondents’ users are copying, but noting that Respondents
wish to avoid such knowledge). In addition to the desire to
avoid liability for the conduct that they intend to foster,
Respondents must ensure that individual copyright infringers
can use their networks with relative anonymity so that they
will escape detection and prosecution.

In other words, Respondents’ business is like any business
that aids and abets illegal conduct. Respondents attract
business by informing those who are interested in
participating in illegal conduct of the opportunity
Respondents provide. At the same time, Respondents offer
their users some degree of anonymity so that those who might
use their service will not stay away out of fear of being
caught. Finally, Respondents have devised a mechanism by
which the illegal conduct they foster will redound to their
financial benefit. This is not a case about determining the
legality of file-sharing technology. This is a case about
whether a person may lawfully set up a marketplace and
means of exchange for trading stolen property, promote that
space as a haven for illegality, and then sell advertising
directed to the marketplace participants.

ee

13

Ill. THIS COURT’S DECISION IN SONY HAS NO
APPLICABILITY HERE.

For all of the reasons set forth above—the need for this
Court to embrace robust protection of property, including
copyrights; the need to guarantee such protection in the online
world; and, most of all, because of the unlawful business
model that Respondents have built here—this Court should
reject Respondents’ invitation, certain to be forthcoming, to
shield their unlawful conduct on the basis of Sony Corp. of
America v. Universal City Studios, Inc., 464 U.S. 417 (1984).
Throughout this litigation Respondents have invoked Sony,
but that decision is distinguishable here for at least three
important reasons. First, the claim of secondary infringement
in Sony was premised on the defendants’ bare sale of a
potentially infringing product, whereas Petitioners here make
the far more serious claim that Respondents deliberately
encouraged copyright infringement in order to profit from it.
Second, Sony addressed whether constructive knowledge (that
defendants were contributing to infringement) could be
established by the mere sale of a potentially infringing
product; in this case, by contrast, there is plentiful evidence
that Respondents had actual knowledge that that they were
contributing to infringement. Third, this Court in Sony took
pains to note that the bulk of the allegedly infringing conduct
to which the defendants had contributed was in fact fair use;
but here, no one—not even Respondents—has attempted to
justify the rampant illegal conduct carried out by the users of
Respondents’ products on any such basis. For each of these
reasons, this Court should reject categorically efforts by
secondary infringers, such as Respondents, to wrap
themselves in the mantle of Sony. —

1. The allegations in Sony were altogether different from
the allegations that Petitioners have made in this case. In
Sony, the plaintiffs claimed that “the sale of petitioners’
copying equipment to the general public” constituted
contributory copyright infringement. 464 U.S. at 420. The

14

only conduct at issue was the fact that “Sony manufactures
millions of Betamax video tape recorders [“VTRs”] and
markets these devices through numerous retail establish-
ments.” /d at 422. That this was the sole basis upon which
liability would be imposed understandably gave the Court
pause. The Court properly observed that “[wJhen a charge of
contributory infringement is predicated entirely on the sale of
an article of commerce that is used by the purchaser to
infringe . . ., the publ’ interest in access to that article of
commerce is necessarily implicated.” /d. at 440. To find
infringement on the basis of those limited allegations, the
Court recognized, would be “the functional equivalent of
holding that the disputed article is within [a] monopoly
granted to [a] patentee.” /d at 441; see also id at 421
(expressing concern about “enlargling] the scope of
respondents’ statutory monopolies to encompass control over
an article of commerce that is not the subject of copyright
protection”). That is, a finding of infringement in Sony would
have undermined rather than enhanced the efficient operation
of the intellectual property system by effectively preventing
the production of useful articles in commerce. Given those
concerns, the Court declined to impose secondary liability.

But the allegations in this case are altogether different.
There has been no argument that Respondents should be
subject to secondary liability merely for selling (or, more
pertinent in this case, for distributing) a product. On the
contrary, as set forth above, see supra Section II, the claim of
secondary infringement is premised upon Respondents’
deliberate decision to set up a business model that profits
from the infringing conduct of others. Respondents
materially contributed to that infringement by others by
advertising, distributing, and modifying a network that would
most effectively enable infringers to operate without
“detection. The easier and more secret the infringement by
Respondents’ users, the more money Respondents make. For
these reasons, there is no implication in this case—as there

1

was in Sony—that the imposition of liability here would mean
that anyone who sells or distributes P2P software is
secondarily liable and, therefore, there is no concern that
holding Respondents liable would functionally extend
Petitioners’ copyright monopoly to cover P2P software. The
distribution of articles of commerce (ie, P2P software)
remains unhampered in this case, even with the imposition of
secondary liability. Put simply, in Sony this Court was asked
to expand copyright protections so broadly as to interfere with
the production of perfectly lawful and socially beneficial
products. Here, no such expansion is at issue.’ Thus,
whereas in Sony the public interest would have been
adversely implicated by a finding of liability, a decision here
to immunize Respondents from liability would be ruinous to
the public interest because of the resulting adverse effect on
the proper functioning of the legitimate marketplace.

2. Sony is further inapplicable here because that case
addressed a different level of scienter, and different questions
about proof of scienter, than what is alleged in this case. The
Court in Sony did not address any claim of, nor did it consider
any evidence of, actual knowledge: “If vicarious liability is
to be imposed on petitioners in this case,” the Court wrote, “it
must rest on the fact that they have sold equipment with
constructive knowledge of the fact that their customers may
use that equipment to make unauthorized copies of
copyrighted material.” 464 U.S. at 439 (emphasis added).
The absence of evidence of actual knowledge was of critical
importance in shaping the rule adopted by this Court, as it
should have been. If the simple fact of selling a potentially
infringing product could amount to constructive knowledge of

services as both a mechanism and a place for illegal exchange, these
businesses produce articles of commerce that are designed, marketed and
sed for leniel infrinei

16

underlying infringement, and also establish the required
material contribution, then both elements of contributory
infringement would be established by conduct that was, in
important ways, hardly, if at all, blameworthy. For this
reason, the Court was unwilling to assume that the mere seller
of a product that has “substantial noninfringing uses,” id. at
442, had the requisite knowledge.

There 13 no claim in this case that Respondents possessed
mere constructive knowledge that the users of their software
would engage in copyright infringement. Rather, the
allegation is—and the evidence put forward at summary
judgment demonstrates—that Respondents were actively
aware of and relying on such infringing conduct. They knew
from the first that their businesses would attract would-be
infringers, which is precisely what happened, and on a
breathtaking scale. And, Respondents knew of the
infringement that occurred by means of their software, not
only because they actually searched the P2P networks and
came across infringing conduct, but also because they were
informed of infringement by rights-holders and by users.
Nothing about these facts, and Respondents’ choice brazenly
to ignore the infringement that they knew of and profited
from, bears the remotest resemblance to the knotty problems
of constructive knowledge that were at issue in Sony. And for
this reason, too, the defense recognized in Sony has no
application here.

3. Finally, this case must be distinguished from Sony
because the conduct allegedly facilitated by the defendants—
that is to say, the alleged primary infringement—is so entirely
different in the two cases. Critical to this Court’s decision in
Sony was its practical recognition that the underlying conduct
was not particularly culpable, and its legal determination that
much or most of that conduct was not actionable. The Court
concluded that most VTR users were not engaged in
copyright infringement. It pointed to findings that “the
average member of the public uses a VTR principally to

1?

record a program he cannot view as it is being televised and
then to watch it once at a later time,” 464 U.S. at 421; accord
id. at 423 (surveys “showed that the primary use of the
machine for most owners was ‘time-shifting’”), and it held
that time-shifting (whether authorized or not) is a
noninfringing use, id. at 442-56. The fact that such
noninfringing uses were not only potential, but were actually
common, necessitated the Court’s conclusion that secondary
liability was inappropriate. See, e.g., id. at 446 (“the business
of supplying the equipment that makes [non-infringing]
copying feasible should not be stifled simply because the
equipment is used by some individuals to make unauthorized
reproductions of respondents’ works”).

Here, the underlying conduct could not be more different.
Predominant legality has been replaced with overwhelming
illegality. The users of Respondents’ P2P networks are
engaged in untold quantities of copynght infringement—
which Respondents do not even dispute. See Pet. App. l6a
(“The element[{] of direct infringement . . . [is] undisputed in
this case.”). Respondents’ software has facilitated the illegal
copying of millions of copyrighted works, and there is no
claim here—as there was in Sony—that most (or even many)
of the uses of Respondents’ software are non-infringing.
Sony was a case about lawful product sellers and lawful
product users; this is a case about those who deliberately

encourage and then profit from rampant illegality.

CONCLUSION

For the foregoing reasons, the judgment of the Ninth
Circuit should be reversed.

Respectfully submited,

CARTER G. PHILLIPS*
ALAN CHARLES RAUL
JAY T. JORGENSEN
ROBERT N. HOCHMAN
Eric A. SHUMSKY
BRIAN M. PALMER
SIDLEY AUSTIN BROWN
& WOOD LLP
1501 K Street, N.W.
Washington, D.C. 20005
(202) 736-8000

Counsel for Amicus Curiae
January 24, 2005 * Counsel of Record

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0043%3A33. Public record. Not legal advice.