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

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No. 04-480

IN THE

Supreme Court of the United States

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

Petitioners,

Vv.

GROKSTER, LTD., et al.,

Respondents.

On Writ oF CERTIORARI TO THE

Univep Staves Court ov APPEALS FOR THE Nintu Circuit

Brite oF INteRNET Avior: CELLULAR TELECOMMUNICATIONS &

INreRNET Association, Unirep States Tetecom Association,

US Intervet INpusrry Association, AT&T Core., Beri Souru

Corporation, MCI, Inc... SAVVIS Communications

Corporation, SBC Internet Services, INC., SUN Microsystems,

Inc., AND VERIZON COMMUNICATIONS INC.

IN Support Or AFFIRMANCE

ANpDREW G. McBript

Counsel of Record

KATHRYN COMERFORD Topp

Josnua S. TURNER

Witey Rew & FiecpinG LLP

1776 K Street, N.W.

WASHINGTON, D.C. 20006

(202) 719-7000

Counsel for Amict Curiae

(Additional Counsel Listed on Signature Pages)

TABLE OF CONTENTS

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

STATEMENT OF INTEREST ..................

INTRODUCTION AND SUMMARY OF

RTE. 86 8 482 ch bh anehs KeWs SeeR beeen

Il.

III.

Petitioners’ New Multi-Factor “Common

Law” Tests Would Eviscerate Sony's Bright-

REED «6's haha Y otis Chae kekekiowees

Fearing Innovation, Copyright Owners Have

a Long and Unsuccessful History of Trying

To Use the Courts To Halt New Technologies,

Including Distribution Technologies .....

Recent Multi-Industry Negotiations over

Legislative Solutions Exemplify the

Constitutionally Mandated Process for any

Expansion of Petitioners’ Copyrights .....

The Expansive Secondary Liability Sought by

Petitioners Is Inconsistent with Federal Law

and Policy Regarding the Internet and

Broadband Internet Access .............

GRORRAIEOS oc bb cnn estbederuscnesecenuens

Page

TABLE OF CITED AUTHORITIES

Cases: x

In re Aimster Copyright Litigation,

334 F.3d 643 (7th Cir. 2003) ............045.

Ashcroft v. ACLU,

US. _, 1268. Cx 209 GS Le

Broadcast Music, Inc. v. CBS,

441 U.S. 1 CIDTD) 2... cccccsusecsuneneeee

City of Milwaukee v. Illinois & Michigan,

451 U.S. 304 (1961)... ssvcsecesvuuew neue

Fortnightly Corp. v. United Artists Television, Inc.,

392 U.S. 390 (19GE) ..cccccccvcsensvaeeueee

Perfect 10, Inc. v. Visa International Service.

Association, et al.,

No. C-04-0371, 2004 WL. 1773349 (N.D. Cal.

Ame, 5, 2000) .....50c0000ennn) Coenen

Playboy Enterprises v. Frena,

839 F. Supp. 1552 (M.D. Fla. 1993) ..........

RIAA v. Diamond Multimedia Systems, Inc.,

180 F.3d 1072 (9th Cir. 1999) ...............

Sony Corp. of America v. Universal City Studios,

464 U.S. 417 (1964) ...ccscssvncscuesenenee

Page

nt ee

ili

Cited Authorities

Page

United States v. Am. Soc'y of Composers, Authors &

Publishers (“ASCAP’”),

No. 41-1395, 2001 WL 1589999 (S.D.N.Y.

I ne uod 6 sub Whee bo-00 0000006 7

White-Smith Music Publishing v. Apollo Co.,

i hace ees yc ebaset eoeese 11

Statutes:

hi cth eiddbcebecavedveate sos 7

SPO UUIPUEED Scbvcccecesccccecescdes 25

EEE 25

BF We WF PUMEEIUID oc ccccccccccecsccccccs 26

ees lib wcessabboceeces 26

IIE KhaWad sede dbanedccecccenseee 26

PP ae Ee POUND Sc ods ccdecccceccsccees 25-26

Eo héceavenecanesccteveces 26

PEED .6.5Gccleadcbcadsectsceces 26

Pe EEE Biducbeccdebbeceecdveesdacces 7

Telecommunications Act of 1996, § 706,

Pub. L. No. 104-104, 110 Stat. 153 (1996) ..... 24

Cited Authorities

Legislative Materials:

150 Cona. Rec. $7189-S7193

(daily ed. June 22, 2004) .............:-. 17,

H.R. 3632, 108th Cong. (2002) ................

H.R. Conr. Rep. No. 104-458 (1996) ............

H.R. Rep. No. 105-551 (1998) ...........-2e0ee

H.R. Rep. No. 108-600 (2002) ..............45..

S. 2395, 107th Came, GaP ccccccscccccdscess

S. Conr. Rep. No. 104-230 (1996) ..............

S. Rep. No. 105-190 (1998) ............255-- 24,

Artists’ Rights and Theft Prevention (ART) Act,

S. 1932, 108th Cong. (2004) .............4..

Consumer Broadband and Digital Television

Promotion Act, S. 2048, 107th Cong. (2002) ...

Family Entertainment and Copyright Act of 2005,

S. 167, 109th Cong. (2005) ..............4..

Piracy Deterrence and Education Act of 2004,

H.R. 4077, 108th Cong. (2004) ..............

Protecting Children from Peer-to-Peer Pornography

Act, H.R. 2885, 108th Cong. (2003) ..........

Page .

25, 27

Cited Authorities

Page

Consumer Privacy and Government Technology

Mandates in the Digital Media Marketplace,

Hearing before the Senate Commerce Commitee

(Sept. 17, 2003), http://commerce.senate.gov/

hearings/testimony.cfm?id=919&wit_id=2584 .. 15

Home Recording of Copyrighted Works, Hearings on

H.R. 4783 et al. before the Subcommittee on Courts,

Civil Liberties, and the Administration of Justice

of the House Committee on the Judiciary, 97th ,

GD GI Ss ddcccvsWedende <édcbilunnddaee 11, 12

Privacy of Intellectual Property «n Peer-to-Peer

Networks: Hearing before Subcor wmitee on Courts,

the Internet and Intellectual Property of House

Committee on the Judiciary, 107th Cong. (Sept. 26,

UGE cecedetwiedieds bhideensiaaeea 17

Protecting Innovation and Art while Preventing

Piracy, Hearing before the Senate Committee on

the Judiciary (July 22, 2004), at http://

judiciary.senate.gov/hearing.cfm?id=1276 ..... 18

Administrative Materials:

Comments of RIAA, Digital Audio Broadcasting

Systems & Their Impact on the Terrestrial Radio

Broadcast Service, FCC MM Docket. No. 99-325

UG TE, BED occas dctdesvdsecdaatambasie 13

Digital Output Protection Technology and

Recording Method Certifications,

SP PLL ED BIO GOO cc ccccctvbiousccces 14

Cited Authorities

Miscellaneous:

2004 Transcript of Q&A with RIAA President Cary

Sherman, Tue Dairy Texan, Mar. 25, 2004, http://

www.dailytexanonline.com/news/2004/03/25/

Focus Transcript.Of.Qa. With.Riaa. President CarySherman

GORDO TANS onc-cceG eee tv acvdasctesstenss

Amended Complaint, Paramount Pictures Corp. v.

ReplayTV, Inc., 298 F. Supp. 2d 921 (C.D. Cal.

SED cnkcednccdcubssdeueduneveaweaeneses

Brooks Boliek, /nduce Act Stalls as Compromise Talks

Break Down, Tut Hottywoop Reporter, Oct. 8,

2004, at http://www.hollywoodreporter.com/thr/

article display.jsp?vnu_content_id=1000661869

eeeeeeeeeeeeeeveeeeeeeeeveeeeeeeeeeeeveeee ee

Brooks Boliek, Mouse Grouse: Dis Boss Lays into

Computer Biz, Tat HoLLywoop Reporter, Mar. |,

2002, at http://www.larta.org/pl/NewsArticles/

02MarcO! HR Eisner.htm ...............-...

Ted Bridis, Senate Talks Fail on File-Sharing

Software, MSNBC News, Oct. 7, 2004, at http:/

msnbc.msn.com/id/6200562/ ..............+-

Complaint, Perfect 10, Inc. v. Google, Inc., No. 2:04-

cv-09484 (C.D. Cal. filed Nov. 19, 2004) ......

Conference: Digital Technology and Copyright: A

Threat or a Promise?, 39 IDEA 291 (1999)

(remarks of Dean Marks) ...............055.

Page

vii

Cited Authorities

Industry Insiders, Comm. Day, Sept. 7, 2004 ..

athttp://www.corante.com/importance/archives/

induce_copyright_owner_tentative proposal_10-

POPES .S concdivssancuee sveduatbenenennt

Sean Daly, /0 Million iPods, Previewing the CD's

End, Wasu. Post, Feb. 13, 2005, at AO]. ......

FTC Press Release, Record Companies Settle FTC

Charges of Restraining Competition in CD Music

Market, May 10, 2000, at http://www.ftc.gov/opa/

SOOPER 0 6 6 60 06esbeeenteetissees

Orrin Hatch, Antitrust in the Digital Age, Address

before The Progress & Freedom Foundation, Feb.

1998, http://www.pff.org/issues-pub/futureinsights/

fi5. lantitrustdigitalage.html .................

Hatch Puts Off Induce Act for One Week, Comm.

AR, GOR. Beat ca 6 dnecddé nbvessusvatebe

Letter from Association of American University ef al.

to Senators Hatch and Leahy, Sept. 17, 2004, az

http://www.publicknowledge.org/news/-letters/

IND 0 veo cucuscucdbiccdceedncandeck

Letter from Co-Sponsors of Induce Act to Marybeth

Peters, Register of Copyrights, Aug. 13, 2004,

athttp://leahy.senate.gov/press/200408/

Ge PPS vn. c constidicdedoabisedatebods

Page

vill

Cited Authorities

Page

David Lieberman, States Settle CD Price-Fixing Case,

USA Topay, Sept. 30, 2002, http://www.usatoday.

com/life/music/news/2002-09-30-cd-settlement_

se PPPPTTTTTTTTT TTT 7

Jessica Litman, Diaitat Copyricut (2001) ........ 19

MPAA Press Release, Valenti Testifies Piracy

Threatens To Destroy Movie Industry and U.S.

Economy, Feb. 12, 2000, at http://;www.mpaa.org/

jack/2002/2002 02_l2a.htm .............65. 15

Mark S. Nadel, How Current Copyright Law

Discourages Creative Output: The Overlooked

Impact of Marketing, 19 Berxevey Tecu. L.J. 785,

SGD oc cdc vecveneeeaweseeunseeeasees 12

Recommendation and Explanatory Memorandum,

at http://www.copyright.gov/docs/S2560.pdf

(visited Feb. 10, 2005) ...........eeeeeeeeee 20

RIAA Press Release, RJAA Takes Stand to Protect

Legitimate On.ine Marketplace, Oct. 9, 1998, at

http://www.riaa.com/news/newsletter/press 1 998/

PSBOTRAED cccccccccccccecveseccncccedsves 13

Timothy Wu, Copyright’s Communications Policy,

103 Micu. L. Rev. 278 (2004) ...........45.. 12

STATEMENT OF INTEREST'

Amici curiae are enterprises that, collectively, provide the

digital transmission facilities, routers, modems, Internet

connectivity, and content and services that constitute the

Internet (“Internet amici”). Internet amici have invested and

will invest tens of billions of dollars in the hardware and

software that makes the Internet so valuable.

Many Internet amici create and distribute copyrighted

works, including web pages, copyrighted software, cell phone

“ring tones,” and other material. None of the Internet

amici condones copyright infringement and none endorses

respondents’ particular business model. On this point, Internet

amici agree with petitioners that a business model consciously

built to exploit past infringing activity (such as the capture of

the Napster customer base), that subsists almost exclusively

upon infringement, and that appears to involve a corporate

decision at the highest levels both to promote infringement

and to create “ plausible deniability,” should be subject to some

form of legal sanction and redress.”

Ai the same time, Internet amici disagree with petitioners

as to the scope and urgency of the problem at hand and the

appropriate forum and means for its solution. Petitioners and

their amici (including the United States) ask this Court to erase

the clear line between the copyright monopoly, which attaches

only to forms of expression, and the freedom and incentive to

innovate in the technologies and services that are the means

for dissemination of copyrighted content.

The bright-line rule adopted in Sony Corp. v. Universal City

1. Pursuant to Rule 37.3, the parties have consented to filing of this

brief and their consent letters have been lodged with the Clerk of the Court.

Pursuant to Rule 37.6, Internet amici state that no counsel for a party has

written this brief in whole or in part and that no person or entity, other

than Internet amici, their members, or their counsel, has made a monetary

contribution to the preparation or submission of this brief.

2. Internet amici and their members are harmed by the unlawful

duplication or dissemination of protected content. Many Internet Service

Providers (“ISPs”) have joint ventures or revenue-sharing relationships

with lawful music and movie websites. Thus, Internet amici also suffer

revenue losses when peer-to-peer software is misused to bypass these

legitimate content sources and infringe copyrighted material.

Studios, 464 U.S. 417 (1984), has stood the test of time and

allowed the United States to pioneer innovation in

communications and Internet technologies. Internet amici have

invested billions of dollars in reliance upon that bright-line

rule. The surest way to depress capital investment in new

Internet technologies, such as wireless data services, on-

demand video, and “seamless mobility” — the transmission of

content from television, :o computer, to cell phone, to new

devices yet to be created or marketed —is to modify Sony by

adopting any of the malleable, multi-factored tests proffered

by petitioners and their amici.

consumer —to “induce” the artist to create and release artistic,

scientific, or informational works. Sony, 464 U.S. at 429 (citing

United States v. Paramount Pictures, Inc., 334 U.S. 131, 158

(1948)). Suppressing distribution technologies, while possibly

beneficial to the artist in the short run in creating exclusive

distribution chains and maximizing monopoly profits, is

antithetical to the purpose of Copyright. The difference

between these two related but distinct concepts — rewarding

the artist versus benefiting the consumer — is seen in numerous

laws that condemn or limit improper extension of the

purpose, both creation of works and delivery of the works must

be promoted. The artist is entitled to the quiet of a limited

statutory monopoly to reward creative effort, but should not

be able to extend that monopoly to all present and future

outlets for distribution. They are (and should be) subject to

the “creative destruction” of a free-market economy, including

improvements in distribution and technological innovation.

Only Congress has the constitutional mandate and

institutional capacity to address peer-to-peer technology in a

way that promotes the good and punishes the bad. Internet

amici stand ready to work with copyright owners and the

content community to arrive at a comprehensive legislative

solution to this problem. Internet amici urge this Court,

however, not to craft “federal common law” remedies that

would take this critical issue away from the Political Branches

and create a litigation nightmare for legitimate innovators and

service providers. °

INTRODUCTION & SUMMARY OF ARGUMENT

Like other modern tools that have vastly increased human

understanding and the ability to communicate, the Internet is

a “multiple-use” technology. While most people use the

Internet for lawful (and constitutionally protected) expressive

activity, there is a series of unlawful practices—such as

spamming, spyware, identity theft, modem hijacking, and

other online schemes and frauds — that injure Internet-related

businesses and Internet users. Petitioners maintain, and

Internet amici agree, that they have been victimized by one

such practice: individuals’ use of peer-to-peer file-sharing

software for unlawful copying and distribution of copyrighted

sound recordings and motion pictures.

This wanton disregard of intellectual property rights

should be stopped. Internet amici have complied with lawfully

issued subpoenas obtained by copyright owners in their

campaign to identify more than 8,400 individuals alleged to

have engaged in direct infringement through the misuse of

peer-to-peer file-sharing software. That effort to punish and

deter the direct infringers themselves is bearing fruit and

requires no alteration of existing copyright law.‘

3. The current appeal concerns only a narrow, certified issue

pertaining to respondents’ current software. Respondents’ alleged past

bad conduct, intent, and means of building their businesses are still before

the district court, and not before this Court. The district court retains

jurisdiction to determine both monetary relief and the appropriate scope

of forward-looking equitable relief if past wrongful conduct is shown.

4. Enforcement against direct infringers has generated thousands of

monetary settlements and has increased public awareness of the unlawful

nature of distributing protected works and decreased the

volume of infringement. See, e.g., 2004 Transcript of Q&A with RIAA

President Cary Sherman, THe Dany Texan, Mar. 25, 2004, http://

www.dailytexanonline.com/news/2004/03/25/Focus/Transcript.

Of.Qa.With.Riaa.President.Cary Sherman-641217.shtm! (RIAA President

explaining “[w]e’ve seen a marked decline in illegal file-sharing, a marked

increase in business at the legitimate online music services, and a spike in

CD sales as well”). Both CD sales and lawful online sales of music have

increased in the wake of this litigation and public education effort

direct infringers. See, e.g., Sean Daly, 10 Million iPods, Previewing the CD’s

End, Wash. Post, Feb. 13, 2005, at A01.

Unfortunately, petitioners seek to use this case to radically

expand the limited statutory monopoly. Their immediate target

is peer-to-peer technology, but their positions threaten all

multiple-use technologies and services. Petitioners could (and

did) ask Congress to expand the Copyright Act to prohibit the

offering of specific peer-to-peer software. But dissatisfied with

the legislative process they initiated, they now are asking this

Court to create a new “federal common law” of secondary liability

for all technology and service providers. Hoping to bypass the

negotiation and accommodation of competing interests that is

part of any legislative change, petitioners and their amici have

filed a raft of Brandeis briefs, literally begging this Court to

pretermit the normal legislative process.

Petitioners proffer various formulations of a broad new

“federal common law” rule that would encompass not only peer-

to-peer abusers, but also a myriad of legitimate Internet businesses

and technologies. Internet amici and the technologies that they

are developing provide the possibility of vast new international

markets where domestic copyright owners’ products can be

profitably disseminated. With no principle that would capture

only those parties who most agree should be condemned,

petitioners’ submissions translate into two vastly overbroad rules

of secondary copyright liability.

First: An entity would be presumptively liable for

contributory infringement if (a) it “know{s] full well” that some

illegal activity is taking place using its technology and (b) the

technology “make[{s] possible the infringement that could not

otherwise occur.” Motion Picture Studio & Recording Co. Pet'rs

(“MPRC”) Br. 17-18; see id. at 25-26. But every Internet-related

company could be made aware that infringement occurs via its

service, and almost any computer system component may “make

possible” infringement in the sweeping sense that petitioners use

that phrase. Therefore, the content providers’ new theory of

liability is almost limitless and would force Internet amici to seek

to control the content of every Internet user's private communications.

Second: Any business is vicariously liable if (a) it derives some

monetary value (even indirectly through advertising revenue)

from use of its service or technology for infringement, and (b)

the firm could re-engineer its product or service better to

supervise and control customers’ activities. Id. at 19-20, 43-44,

46-47. This theory treats Internet users like employees, with

Internet amici required to monitor, supervise, and control tens

of millions of subscribers. Neither “test” finds any logical or

doctrinal roots in the Copyright Act, in Sony, or elsewhere.

Moreover, such rules cannot be applied to ISPs, as they conflict

with Congress's clear intent, expressed in numerous statutory

protections, to prevent the imposition of “Big Brother” duties

on Internet amici.

The judicial expansion of secondary copyright liability

advocated by petitioners is precisely the wrong approach.

It is simply impossible for this Court to craft a rule that will

target only a particular business model connected with a

specific technology without the threat that the new doctrine

will be used by copyright owners — reputable or otherwise —

to impose judicially created duties on legitimate businesses

and technologies. The result will be a new form of copyright

“strike suit” that will reduce innovation and investment in

the Internet arid, perversely, hamper the most robust forum

for the dissemination of copyrighted works.

Only Congress has the institutional capacity to find facts,

weigh countervailing economic interests, and arrive at an

acceptable approach that will protect copyright owners, while

also avoiding excessive restrictions on technological

development. Congress works with a scalpel; the common law

is a blunderbuss. Only a statute can precisely define liability

in such a way as to target only truly culpable offenders; create

exemptions or safe harbors protecting those parties (such as

libraries) or technologies (such as broadband) least threatening

or most in need of deployment incentives; and carefully tailor

remedies to be precise and effective.

In fact, late in the 108th Congress, Members of Congress

and interested parties almost reached an accord on this

problem, and that compromise is nothing like the broad and

unbridled new doctrines that petitioners demand from this Court.

Moreover, the only pronouncements Congress has made in

this area point in exactly the opposite direction, e.g., protection

of the Internet and Internet amici from ill-defined policing

duties or liability for the personal communications of

individual Internet users. This Court should decline

petitioners’ invitation to create a broad common law rule that

expands secondary copyright liability and instead defer to

Congress to arrive at a legislative solution —as it has done so

many times before—to harmonize the Copyright Act with

technological change.

ARGUMENT

Petitioners’ occasional nod to the text of the Copyright

Act and use of carefully isolated snippets from this Court's

prior decisions cannot camouflage the fact that petitioners’

enterprise is a radical one. What they are seeking is an

unprecedented judicial expansion of the reach of the copyright

monopoly. Petitioners’ proposed rewrite of the Copyright Act

and this Court's decision in Sony would render every multiple-

use technology manufacturer or service provider

presumptively liable for infringement by others.

I Petitioners’ New Multi-Factor “Common Law” Tests

Would Eviscerate Sony's Bright-Line Rule.

At the heart of Sony lies the Court’s recognition that

innovative companies should not be forced to abandon

development of multi-use technologies that also can be used

to commit individual acts of copyright infringement. To avoid

that risk and to limit the bounds of the copyright monopoly

to the “grants authorized by Congress,” 464 U.S. at 421, the

Court crafted a bright-line rule that would prevent copyright

owners from holding hostage any new technology with a

potential for infringement. That rule, which has promoted

American success in the high-tech sector for the last two

decades, is this: A technology provider is not liable for secondary

non-infringing use. 464 U.S. at 442.

This rule has properly confined the copyright monopoly

to the parameters of the limited privilege authorized by

Congress. It has also ensured that technology innovators and,

indeed, creators of any consumer electronics product that is

“merely capable” of any “substantial non-infringing use,” can

develop and market their products without facing a “veto

power” from -opyright owners. The Sony defense, as applied

to information distribution technologies, directly furthers the

purpose of Copyright — not only to foster the creation of new

SR POC eT 8

port

works — but to allow for their broad dissemination to an ever

wider national and international audience. Suppression of new

distribution technologies will inevitably reduce both incentives

to create (by limiting output) and reduce the public enjoyment

of copyrighted works (by raising prices and reducing market

penetration of expressive works).

Petitioners acknowledge no limits as to who may be

conscripted to help them enforce the copyright monopoly. But

extreme enforcement efforts that threaten to constrict the very

distribution channels through which copyrighted works are

disseminated disserve the consumer interest as surely as does

failure to create content in the first place. It is for this reason

that the courts and Congress alike have time and again limited

or condemned the improper extension of the copyright

monopoly into the means and technology of distribution. For

example, record companies may not fix prices of music CDs°;

songwriters may not tie all songs into unregulated blanket

licenses® ; cable operators may not discriminate against rivals

by denying them access to satellite-delivered programming

they or their affiliates create, 47 U.S.C. § 548; and television

program owners may be compelled to sell their programs to

cable operators for statutory license fees, 17 U.S.C. § 111.

Maximizing the monopoly profits of content creators has never

justified restraints on content delivery.

Petitioners’ four proposed alterations of Sony's bright-line

rule, if adopted, would create uncertainty and chill the

technological advancement that Sony sought to protect. A small

group of copyright owners would hold sway over our entire

digital economy, including the high-tech means of distributing

copyrighted works to the public.

1. According to petitioners, the substantial noninfringing

use test in Sony should not apply if the “defendant engages in

5. E.g., FTC Press Release, Record Companies Settle FTC Charges of

Restraining Competition in CD Music Market, May 10, 2000, at http:/ /

www ftc.gov/opa/2000/05/cdpres.htm; David Lieberman, States Settle CD

Price-Fixing Case, USA Tonay, Sept. 30, 2002, http:/ / www.usatoday.com/

life / music / news /2002-09-30-cd-settlement_x.htm.

6. E.g., United States v. Am. Soc’y of Composers, Authors & Publishers

(“ASCAP”), No. 41-1395, 2001 WL 1589999 (S.D.N.Y. June 11, 2001).

conduct that encourages or assists infringement.” MPRC Br.

18. That exception would eviscerate the Sony defense

altogether because the conduct petitioners describe as evidence

“of encouraging and assisting infringement” is no different

from the neutral act of selling the multi-use technology that

was before the Sony Court. 464 U.S. at 440.

For example, petitioners find evidence of infringement in

the fact that respondents’ technology is “ tailor-made for media

files” and their technology offers users anonymity. MPRC

Br. 25. Petitioners also see respondents’ efforts to “maintain

and upgrade their networks” as evidence of infringement.

Id. at 26. But Sony’s Betamax was no less “guilty” of being

tailor-made for recording video images and was no less

anonymous. Nor did the Court suggest that Sony could not

provide service or technological upgrades to customers

without risking secondary liability. Indeed, in the digital age,

it is difficult to contemplate a competitive (multi-use)

technology that lacks the promise of service and upgrades;

orphan hardware or software is well nigh valueless.

, 2. Petitioners’ next exception permits a copyright owner

to prevail merely by showing that the current, principal use of

a iti-use technology is infringing. Id. at 18-19, 30-38. That

exception would stop innovation in its tracks regardless of

the potential benefits of a new product. The fact is, teenagers

and young adults have often been the first adopters of picture

phones, digital music players, online games, and so forth, and

their circumstances (no cash) and attitudes (no respect for

“old-people” rules) often determine how a new technology is

first employed. But technologies prone to mischief in their

youth often grow up to contribute substantially to our

economy. In the 1960s, over-the-air broadcasters vehemently

attacked cable operators for “ pirating” their broadcast signals.

The Court's decision in Fortnightly Corp. v. United Artists

Television, Inc., 392 U.S. 390 (1968), allowed the cable operators

to expand and mature to the point that those same broadcasters

were eventually demanding the right to force cable operators

to carry their content over the same technology broadcasters

had tried to demonize scant decades before.

Sony wisely rejected applying a premature brake on new

innovations in content distribution technology, ruling that

multi-use technology is lawful as long as it is “merely .. .

capable of substantial noninfringing uses.” 464 U.S. at 442

(emphasis added). Were the rule otherwise, the acts of direct

infringers would enable copyright owners to veto neutrally

designed technologies that offer substantial noninfringing uses

to consumers. Id. at 441 n.21. As this Court recognized,

“it seems extraordinary” to give a veto to copyright owners

over new technologies “simply because they may be used to

infringe copyrights.” Id. That observation is as true today as it

was in 1984.

3. Petitioners’ next limitation would render the Sony

defense inapplicable whenever a technology provider can

develop and implement some means of separating infringing

from noninfringing uses. E.g., MPRC Br. 32-34. But Sony

rejected this same argument when copyright owners argued

that Sony should have been required to implement

filtering or blocking devices. This Court declined to consider

alternative versions of technology eschewed by Sony in

considering whether the Sony defense was applicable. 464 US.

at 422-23, 442-55. This decision reflected the sound

understanding that courts should not be in the business of

second-guessing the engineering solution chosen

by the technology provider. Any such second-guessing,

necessarily based on 20/20 hindsight regarding the

predominant use of the technology and subsequent advances

in filtering devices, would chill innovation. Even the United

States agrees that “[p]roduct manufacturers do not have an

independent legal duty under copyright law to modify their

products so as to control their customers’ infringing conduct.”

US. Br. 19 & n.3, 30 n.6.

4. Petitioners argue that the Sony defense does not apply

to vicarious liability. MPRC Br. 48. But this limitation on Sony

i math pene meaningless. Under

any technology who

derives any financial benefit from any ities aan ot its

(even if it would derive this benefit

of the use or misuse by individual consumers) and who,

with a certain investment of time and money, could devise a

way (however crude or imperfect) to separate infringing from

noninfringing use, is liable for vicarious infringement. Under

this theory, few technology providers could escape liability

because, with the right investment of time and money (and

no concern for consumer privacy and First Amendment

freedoms), some crude filtering device almost always could

be jury-rigged. This Court could not have intended Sony to

provide a bright-line defense to contributory infringement only

to have the same technology providers subjected to debilitating

liability under a closely related theory. ’

5. Finally, several amici attempt to roll these four ill-

advised new exceptions to Sony, along with a grab bag of other

“factors,” into a “totality of the circumstances” test. This is

essentially the test created by Judge Posner's opinion in In re

Aimster Copyright Litigation, 334 F.3d 643 (7th Cir. 2003). Such

a test would require the federal district courts to determine,

on a case-by-case basis, whether a variety of factors, including

the current break-down of companies’ revenues, the current

predominant use of the multi-use technology, and the cost of

filtering alternatives, counsels in favor of imposing liability.

That approach is little better than giving the courts no direction

at all, since amici do not identify any necessary and sufficient

criteria for liability; do not posit any ordinal relationship

among these factors; and do not even say whether the various

factors they do identify are exclusive. The Aimster approach is

judicial legislation at its worst. It does not merely blur Sony's

bright-line protection; it erases it altogether.

Il. Fearing Innovation, Copyright Owners Have a Long and

Unsuccessful History of Trying To Use the Courts To

Halt New Technologies, Including Distribution

Technologies.

This case is the latest in a long string of instances in which

development, use the same set of tired arguments and

overblown rhetoric to defend comfortable delivery systems

by asking the federal courts to curtail access to the

7. It is no surprise, then, that even several amici supporting petitioners

or vacatur acknowledge that the Sony defense applies to vicarious liability.

E.g., Business Software Alliance Br. 8 n.6; American Intellectual Property

Law Ass'n Br. 7 n.3.

development of new content distribution technology. These

unsuccessful attempts to restrict new technologies date back

to the invention of the mechanical player piano, nearly 100

years ago, see White-Smith Music Publ’g v. Apollo Co., 209 U.S. 1

(1908). The briefs of petitioners and their amici in this case echo

all of these prior, unsuccessful arguments.

1. Copyright owners always employ ominous rhetoric

(more suited to a mystery novel than a legal brief) to describe

the supposed threat created by advances in distribution

technology. In hindsight, the concerns expressed by copyright

owners about such threats have frequently proven overblown

or unfounded.

For example, after the Ninth Circuit found that the makers

of Sony Betamax VCRs were liable for contributory

infringement, but prior to this Court's reversal of that decision,

considered a number of bills to correct the enormous

and commercial roadblock created by the lower

court's decision. In hearings on those bills, Jack Valenti, the

president of the Motion Picture Association of America

(“MPAA”), warned a subcommittee of the House Judiciary

Committee that unless licensing fees were imposed on the

VCR, the “VCR avalanche” would “strip[] . . . clean [the post-

theatrical market for movies] of . .. profit potential,” and that

those markets would be “decimated, shrunken [and]

collapsed” by widespread use of the VCR.* The VCR,

according to Mr. Valenti, was “to the American film producer

and the American public as the Boston strangler is to the

woman home alone.”* The same dire appeared in

the content providers’ briefs to this Court in Sony itself.

See, e.g., Br. of Sony Respondents (Oct. 1982) (“Respondents

simply seek protection against the permanent loss of control

over their property and the concomitant erosion of their

copyrights that will necessarily result as millions of VTRs are

8. Home Recording of Copyrighted Works, Hearings on H.R. 4783 et al.

before Subcomm. on Courts, Civil Liberties, and the Administration of Justice of

the House Comm. on Judiciary, 97th Cong. 4, 8 (1982) (testimony of Jack

Valenti, President, MPAA) (“HRCW”).

9. Id.

sold and hundreds of millions of unauthorized VTR copies of

respondents’ works are made.”)."°

After this Court refused to expand the copyright

monopoly in Sony, 464 U.S. at 456, the motion picture industry

readily adapted to the VCR. Far from destroying the post-

theatrical market for movies and ruining the industry, the VCR

(and successor technologies) has vastly increased the

profitability of films, and has allowed studios to produce

movies that could not have survived on theater revenues

alone.'' Contrary to Mr. Valenti’s dire predictions, the VCR

and related technologies turned out to be “the greatest friend

that the American film producer ever had.” HRCW 8. With

the benefit of hindsight, it is now clear that had the Ninth

Circuit's decision been affirmed, the harm to the public and

to the motion picture industry itself would have been

irreparable.

2. Nor is this the first time that copyright owners have

argued that innovators have an affirmative duty to alter their

technology in ways dictated by the copyright industry, just as

10. See also Br. of Sonv Respondents (“[I}f petitioners are permitted to

continue their activities \. ithout compensating respondents,” such activities

will “prejudicfe] the entire television viewing public, VTR and non-VTR

owners alike.”); MPAA Sony Br. (Oct. 1982) (“[D]Jue to VTRs, the works of

[MPAA‘s] members have become ‘so easy of replication’ that incentive to

produce would be depressed ‘by the prospect of rampant reproduction by

free-loaders.’” (citation omitted)).

11. “By the 1990s, a film's income from videotapes dwarfed all other

revenue streams.” Mark S. Nadel, How Current Copyright Law Discourages

Creative Output: The Overlooked Impact of Marketing, 19 Berxevey Tecnu. L.J.

785, 823 (2004) (citations omitted); see Timothy Wu, Copyright’s

Communications Policy, 103 Micn. L. Rev. 278, 347 (2004) (noting that VCRs

became one of the most lucrative inventions for movie producers since the

movie projector). Time Warner's senior intellectual property counsel noted:

[T}he film industry got together and brought the famous, or

infamous, Betamax case thinking that these VCRs were going to

destroy the economic basis of film distribution, particularly

’ al exhibition and profitable television distribution. What

actually happened was just the opposite.... This has become

one of the most profitable channels of distribution for the film

industry.”

Conference: Digital Technology and Copyright: A Threat or a Promise?, 39 IDEA

291, 305 (1999) (remarks of Dean Marks).

they contend here. E.g., MPRC Br. 47, 48. The

Industry Association of America, Inc. (“RIAA”) sought to

dsnadeibdananel , one of the first

music or players, a of device of which Apple's

Fed ts puhers Gn tae bo The argument made by

RIAA in the Diamond Rio case, that innovators have a

duty to alter their technology to meet the demands of the

recording industry, is the same as the claim made by

petitioners in this case. Id. at 47-48 (“[R]espondents have also

refused to implement other readily available mechanisms that

would prevent the transfer of works that infringe petitioners

copyrights.”).

Indeed, RIAA's statements in the Diamond Rio case—

iticizing the inventors for their effrontery in failing to include

RIAA in the design of the underlying product, and their

unwillingness to alter their business plan to accommodate

RIAA —lay bare the veto RIAA to wield over the

development and marketing of any potential multi-use

technology. aes Diamond declined to

its uct launch so that we could

address the issues, oduned Wil ap amareniriabame

legal action to prevent distribution of these devices.” RIAA Press

Release, RIAA Takes Stand to Protect Legitimate Online Marketplace,

Oct. 9, 1998, at http:/ /www.riaa.com/news/ newsletter /

press1998 /100998.asp.

Using similar logic, RIAA asked the Federal

Communications Commission (“FCC”) to impose expansive

constraints on Digital Audio (“DAB”), which uses

digital technologies to enable or to better sound

over traditional AM and FM radio frequencies.'® The motion

picture industry also has demanded to the Digital Video

Recorder (“DVR”), made popular under the TiVo and ReplayTV

brand-names, claiming that this technology infringes its

Ce. th Ran both teenies

There, the Ninth Circuit rejected the RIAA’s attempt to

dao nowth dathen on © Guhal aulio teuaiinn Gein oat mae

reach of the Audio Home Recording Act. Id. at 1081.

13. Comments of RIAA, Digital Audio Broad. Sys. & Their Impact on the

at tee , FCC MM Dkt. No. 99-325 at iv-v (June 16,

copyrights even though it performs the same functions as the

VCR (but is easier to program than a VCR and allows users

more easily to fast-forward through commercials).'* The

plaintiffs urged the court to find ReplayTV liable for copyright

infringement in part because the defendants made “a

deliberate decision to offer their users features that are

specifically designed to enable widespread infringements,

when they have the ability to control or greatly limit that

conduct by declining to offer or to facilitate or support use of

those unlawful features.” Paramount Compl. ¢ 85. Similarly,

the motion picture industry opposed certification of TiVo’s

Broadcast Flag solution at the FCC, which (ironically) is an

FCC effort to certify specific methods of blocking redistribution

of digital television programs using peer-to-peer software.”

3. The recording and motion picture industries invoke

the same dire themes and make the same legal arguments in

this case. See, e.g., MPRC Br. 43 (“[R]espondents make their

money from advertising to users each time they access the

services to copy and distribute copyrighted works. The larger

the number of users attracted by the infringing content, the

more money Grokster and Streamcast make.”). Copyright

owners have ‘eveled these same amorphous and overbroad

accusations against broadband networks, personal computers,

and even peripheral capabilities such as Internet search

engines and credit card companies.

RIAA singled out broadband before Congress, claiming

that “ Verizon and SBC have little or no economic incentive to

combat piracy . . . [because] music downloading is driving the

14. See, e.g., Am. Compl., Paramount Pictures Corp. v. ReplayTV, Inc.,

298 F. Supp. 2d 921 (C.D. Cal. 2004) (“Paramount Comp!.”).

15. Digital Output Protection Technology and Recording Method

Certifications, 19 F.C.C.R. 15,876, 15,876 (¢ 1) (2004). TiVo developed a

technology that the FCC found met the goals of preventing the mass

indiscriminate redistribution of content, id. at 15,925 (¢ 108), but the MPAA

urged the FCC to reject this solution both in an initial opposition and on

reconsideration because it permitted the user to access the recorded

programs remotely and did not tie the user to his or her living room. Opp’n

of the MPAA, Digital Output Protection Technology and Recording Method

Certifications, FCC MB Dkt. No. 04-63 (Apr. 4, 2004); Pet’n for Partial Recon.,

Digital Output Protection Technology and Recording Method Certifications, FCC

MB Dkt. No. 04-63 (Sept. 13, 2004).

[DSL] business.”’° The recording industry has repeatedly

argued that copyright law reaches mere Internet conduits like

Verizon and SBC, and that were it not for the specific “safe

harbors” created by the Digital Millennium wn im ot Act

(“DMCA”), these “ISPs could face enormous

for the actions of their subscribers. With the current ovale of

piracy, that could translate into enormous monetary

liability.”’” Echoing his concerns of 20 years before about the

VCR, Jack Valenti said in Senate testimony that the lack of

broadband access was a “moat” that has “slowed a wide-

spread assault” on movies.”

The stratagem of attacking new distribution

and channels of distribution, once given legal sanction and

set loose upon society, would apply to products as well as

services. Thus, copyright owners have complained about

personal computers. In March 2002, during a hearing before

the Senate Commerce Committee, Michael Eisner, CEO of

Disney, accused computer manufacturers generally, and se

specifically, of promoting copyright piracy. Brooks

Mouse Grouse: Dis Boss Lays into Computer Biz, THz Hottywoop

Reporter, Mar. 1, 2002, at http://www.larta.org/ pl/

NewsArticles/02Marc01_HR_Eisner.htm (Mr. Eisner

that “(t]he killer app for the computer industry is piracy,” and

“[t]hey think their short-term growth is predicated on pirated

content”; accusing Apple of “telling people ‘that they can create

a theft if they buy this computer’).

As noted above, there is no doubt that copyright owners

have legitimate grievances against some peer-to-peer software

distributors. Internet amici support targeted legislation that

outlaws certain specific products offered in carefully defined

ways as opposed to attacking (or allowing debilitating

litigation attacks) on multi-use technology in general.

16. Consumer Privacy and Gov't Tech. Mandates in the Digital Media

Marketplace, Hr’g Before the Sen. Commerce Comm. (Sept. 17, 2003) (testimony

of Cary Sherman, President and Counsel, RIAA), http:/ /commerce.

senate gov /hearings/ testimony .cfm?id=919&wit_id=2584.

17. Id.

18. See MPAA Press Release, Valenti Testifies Piracy Threatens To Destroy

Movie Industry and U.S. Economy, Feb. 12, 2000, at http:/ / www.mpaa.org/

jack /2002/2002_02_12a.htm.

Unfortunately, copyright owners—not all ot which are as

responsible as the plaintiffs in this litigation — cannot resist

the temptation to overreach. For example, Perfect 10, a

infringement suit against Google, one of the most popular

Internet search engines, asserting that Google’s business is

based on the “draw” of illicit content.”

Perfect 10 argued that Google derives a “ direct financial

benefit” from the alleged infringement by charging fees to

allegedly infringing websites and from the increase in traffic

to Google’s website from the “draw” of these allegedly

infringing sites. Google Compl. ¢ 56. Perfect 10's theory, that

Google should affirmatively alter its practices to distinguish

between copyrighted and non-copyrighted works in its search

function, mirrors petitioners’ argument here that technology

companies must give copyright owners a co-equal role in the

innovation process and must satisfy any concerns raised by

any copyright holder in order to avoid suit. Perfect 10 has gone

so far as to argue that infringement liability should extend to

Visa and MasterCard, because those companies allegedly

derive a benefit from infringing conduct.”

In sum, petitioners and other copyright owners routinely

target any innovation that alters the status quo and claim that

it will result in the Gétterdammerung of Copyright. While

petitioners focus on the alleged bad acts of respondents, the

history of the copyright owners’ prior conduct shows that their

arguments have no theoretical or practical limit and no sense

of balancing future innovation (and new and valuable

distribution technologies and channels) against today’s

monopoly profits. If the Court expands copyright liability in

the unprecedented manner called for by petitioners, there can

be no doubt that they will continue to use these same

arguments against any technology that they claim benefits

from infringement in any way, which, in this digital world, is

nearly any technology at all.

19. Compl., Perfect 10, Inc. v. Google, Inc., No. 2:04-cv-09484 (C.D. Cal.

filed Nov. 19, 2004) (“Google Compl.”).

20. Perfect 10, Inc. v. Visa Int'l Serv. Ass‘n, et al., No. C-04-0371, 2004

WL 1773349 (N.D. Cal. Aug. 5).

ii. Sere .

III. Recent Multi-Industry Negotiations over Legislative

Solutions Exemplify the Constitutionally Mandated

Process for any Expansion of Petitioners’ Copyrights.

Congress opened debate on abuses of peer-to-peer file-

sharing technology (including copyright infringement) almost

three years ago.”' Since then, Members have introduced

numerous bills designed to address such problems. ??

Specifically, in June 2004 six Senators introduced a bill

designed to address the type of abuse in which respondents

are alleged to have engaged—the use of peer-to-peer

technology to induce others to engage in copyright

infringement. The history of this bill, the Inducing

soe ya etn «ge p-tmenmmenae orn anand eer

,an multi-party negotiations-based approach that

almost produced a “consensus” draft, demonstrate the correct

process for solving this problem. Notably, the solution toward

which the legislative process was converging in no way

resembles the new judicially-created common law rule that

petitioners demand here.

1. OnJune 22, 2004, Senators Hatch, Leahy, Frist, Daschle,

Graham, and Boxer introduced the Induce Act to codify an

expanded notion of secondary copyright liability that would

reach the type of peer-to-peer firms that intentionally induce

others to engage in massive copyright infringement.”* In his

introductory remarks, Senator Hatch described the bad acts

or business models that he sought to ban as the theft and

widespread distribution of copyrighted material through the

21. Privacy of Intellectual Property on Peer-to-Peer Networks: Hr'g before

Subcomm. on Courts, the Internet and Intellectual Property of House Comm. on

the Judiciary, 107th Cong. 21 (Sept. 26, 2002).

22. See, e.g., Family Entm’t and Copyright Act of 2005, S. 167, 109th

Cong. (2005); Artists’ Rights and Theft Prevention (ART) Act, S. 1932, 108th

Cong. (2004); Piracy Deterrence and Educ. Act of 2004, H.R. 4077, 108th

Cong. (2004); Protecting Children from Peer-to-Peer Act, H.R.

2885, 108th Cong. (2003); Consumer Broadband and Digital Television

Promotion Act, S. 2048, 107th Cong. (2002).

23. See 150 Conc. Rec. S7189-S7192 (daily ed. June 22, 2004); id. at

$7192 (describing the bill as importing a codified form of liability in patent

8 “ statutory copyright law); id. at S7192 (statement of Sen. Leahy)

same).

use of third-party shields.** Throughout his remarks, Senator

Hatch made clear that the proposed legislation targeted a

narrow group of “bed actors” and constituted a change in the

existing law of secondary liability in order to reach them.”

Senator Hatch and his colleagues quickly realized that

targeting “bad actors,” without doing damage to Internet amici

and our digital economy, was not an easy task. Any legislative

solution had to “address{] this serious threat to children and

copyrights without unduly burdening companies that engage in

lawful commerce in the wide range of devices and programs that can

copy digital files.”** As co-sponsor Senator Leahy explained, it

was critical that the bill reach only bad actors and not “target

24. The evil he sought to remedy was

the intentional inducement of global distribution of billions of

infringing copies of works at the prodding and instigation of

sophisticated corporations that appear to want to profit from

piracy, know better than to break the law themselves, and try to

shield themselves from secondary liability by inducing others

to infringe and then disclaiming control over those individuals.

Id.; see id. at S7193 (statement of Sen. Frist) (explaining the bill was designed

to “target[] the bad actors who are encouraging others to steal”).

25. See, e.g., id. at $7189, $7190, $7191, S7192; see also Protecting

Innovation and Art while Preventing Piracy, Hearing before the Sen. Comm. on

Judiciary (July 22, 2004) (“Induce Act Hr'g”), at http:/ /judiciary.senate.gov/

hearing.cfm?id=1276 (statement of Sen. Hatch) (“[I]t is our intent that S.

2560 change the law of contributory liability only for a very narrow class

of defendants.”).

26. Id. at S7192 (emphasis added); see id. at S7190 (“[AJll agree that

non-piracy-adapted implementations of P2P could have legitimate and

beneficial uses.”); see also id. at S7192 (statement of Sen. Leahy) (identifying

the goal “to bring affordable and reliable Internet access to every

household”); Induce Act Hr'g (statement of Sen. Leahy) (“Senator Hatch

and I have worked to promote the great possibilities of the Internet and the

technologies that capitalize on its potential.”). These sentiments are

consistent with Senator Hatch’s own observations as early as 1999 that

“[hjigh technology is the single largest industry in the United States” and

“is the key to the development of our future economy.” Orrin Hatch,

Antitrust in the Digital Age, Address before The Progress & Freedom

Foundation, Feb. 1998, at 3 (stressing importance of protecting

“technological paradigm shifts” like that being wrought by the

Internet), http:/ / www.pff.org/issues-pubs /futureinsights/fi5.lantitrust

digitalage. html.

technology” or “demonize certain software.””” As co-sponsor

and Senate Majority Leader Frist emphasized, “[t]his bill

should not. . . threaten in any manner the further advancement

of technology.””

The Senators co-sponsoring this bill understood that the

only way to achieve their twin goals of protecting copyrights

in the digital environment while also protecting new digital

ies was to “ build{] that consensus that is the hallmark

of successful and useful legislation,””’ especially in copyright

law.*® Accordingly, Senator Hatch explained that the

Committee was “willing to enter into a constructive di

to ensure that the language is drawn as tightly as possible.”™

2. Despite the co-sponsors’ intentions narrowly to target

certain actors, most of the experts who testified before the

Senate Judiciary Committee agreed that the original draft fell

short in two ways: It threatened many legitimate companies

and technology developers with liability, and it failed

necessarily to capture the specific bad practices and bad actors

at which it was aimed.*? As one participant explained, S. 2560

27. 150 Conc. Rec. $7192; Induce Act Hr’g (Sen. Leahy) (agreeing that

“technology is not to blame, we need to target those who have hijacked

technology and undermined the rights of copyright holders”).

28. 150 Conc. Rec. S7193; Induce Act Hr’g (Sen. Leahy) (“This bill will

protect our copyright holders and spur innovation.” (emphasis added)).

29. Id. (Sen. Leahy); see id. (statement of Sen. Hatch) (“We want to

continue to work with interested parties [including ‘leading technology

companies’ ] to make refinements that will help us achieve the bill’s intent.”).

30. Multi-industry negotiation is the paradigm of amendment to the

out the text of bills,” particularly copyright bills, because “[t]he negotiation

process delegates everything to people who are, after all, the real copyright

experts, and allows Congress to exploit their accumulated expertise. The

— pants are people who will have to order their day-to-day business

tions with one another around the of the >

— yy provisions legislation.” Jessica

31. Induce Act Hr’g (statement of Sen. Hatch).

32. See, e.g., id. (statement of Gary J. Shapiro, President and CEO,

Consumer Electronics Ass’n and Chairman, Home Recording Rights

Coalition) (“In our view, S. 2560 is the most fundamental threat that

consumers and industries have faced since the Ninth Circuit's

decision in 1981,” which was overturned in Sony.).

threatened to gut the defenses of Sony and included an intent

standard that was “hopelessly [s]ubjective” such that it

“{w]ould [t]hreaten [i]nnovation” and “verge[d] perilously on

punishing speech.”* Still another participant warned that

numerous key areas needed revision, “including an express

preservation of the defenses outlined in Sony,” a clear

statement that “mere knowledge” does not demonstrate intent

to induce copyright infringement, a carving out of conduct

such as “advertising or providing support to users” from

consideration in finding liability, and a mechanism effectively

to deter “ weak, harassing or frivolous law suits.”™

In order to reach a consensus on a targeted legislative

solution, the Senate co-sponsors directed the Register of

Copyrights to work with the interested parties “to achieve

consensus proposals.” Letter from Co-Sponsors of Induce Act

to Marybeth Peters, Register of Copyrights, Aug. 13, 2004,

http:/ /leahy.senate.gov / press/ 200408 /081704.html. The co-

sponsors explained, “[w]e are open to any constructive input

on how Congress can best frame a technology-neutral law

directed at a small set of bad actors while protecting our

legitimate technology industries from frivolous litigation.” Id.

3. In ber 2004, the Copyright Office forwarded its

recommended text to the Committee, but that draft also was

unsuccessful. Even with the input of dozens of leading

technology companies, technology and copyright owner trade

organizations, individuals, consumer groups, and copyright

owners who welcome free distribution of their works, the

the original version of S. 2560. Its proposal cast the liability

net too broadly, potentially sweeping within its ambit

legitimate Internet-related businesses and technologies. As a

coalition of 42 technology industry leaders, trade groups,

education and library associations, service providers,

33. Id. (Mr. Shapiro); see also id. (Mr. Greenberg) (explaining that the

“{p}ractical [u)ncertainty over [the] scope and [a}pplication of the [njew

standard will [cJhill innovation”).

34. Id. (statement of Robert Holleyman).

35. Recommendation and Explanatory Mem., at http://www.

re awe -

—— a

equipment manufacturers, and consumer groups explained

to the Committee, the Copyright Office’s “draft raise[d] a host

of new issues and would [have] create[d] an unprecedented

new form of liability of uncertain, but potentially unlimited,

reach.”

4. With the failure of the Copyright Office’s draft to garner

anything approaching a consensus, the co-sponsors turned to

the industries themselves to negotiate a draft that would

achieve the balance between copyright protection

and the legitimate concerns of the high-tech community. This

multi-industry group met in a series of off-the-record meetings

oy Committee staff and attempted to shape a consensus

Although these discussions occurred behind closed doors,

enough of their substance is contained in the public record to

demonstrate that the tentative drafts created in this process

were substantially more narrowly tailored than the original

bill as introduced. They included more precise language and

express savings clauses that simply could not be mirrored in

any broad common law rule. They were in fact light years

away from the new tests advocated by petitioners (and the

United States) in this case.* Specifically, the discussions

36. Letter from Ass’n of Am. Univ. et al. to Senators Hatch and Leahy,

Sept. 17, 2004, at http:/ / www.publicknowledge.org/news/ -letters/

inducegroup; see, e.g., Copyright Office Draft of INDUCE Fails To Inspire

Industry Insiders, Comm. Dany, Sept. 7, 2004 (describing the objections of

the Consumer Electronics Association, NetCoalition, and Verizon to the

37. See, e.g., Hatch Puts Off Induce Act for One Week, Comm. Damcy,

Oct. 1, 2004 (describing a meeting between Judiciary Committee staff and

" ives of telecom, high tech, consumer and content interests” );

Ted Bridis, Senate Talks Fail on File-Sharing Software, MSNBC News, Oct. 7,

2004, at http:/ / msnbc.msn.com/id/6200562/ (“Sensing an impasse after

weeks of acrimonious debate, Hatch invited lawyers and lobbyists

representing the sides to propose their own compromise in the waning

days of this congressional session.”).

38. See, e.g., Copyright Owners’ Tentative Proposal (Oct. 5, 2004),

at http:/ / www.corante.com/im /archives/induce_copyright_

owner_tentative_proposal_10-5-04.pdf (“Oct. 5 Draft”). “Copyright

industry executives defended the process, however, saying the criticism

obscured the progress that is being made. ‘What we're really quibbling

(Cont'd)

included, among others, the following limitations, safeguards,

and exemptions designed to weed out bad actors without

ensnaring legitimate businesses or threatening them with

crippling litigation:

(i) Expansion of liability only to a defined subset of

“covered peer-to-peer product(s],” a term that expressly

excluded ISPs. Liability would have been premised on two

fundamental requirements: the defendant must

“manufacture[], offer[] to the public, or provide[] a covered

peer-to-peer product” and the defendant must have engaged

in “covered viral infringement,” see, e.g., Oct. 5 Draft (g)(1).

Both key statutory terms were carefully defined with the

intention of reaching only the type of conduct that created a

certain level of risk to copyright owners and not all multi-use

distribution and reproduction technology, see id. (g)(2).”

(ii) Further limitations on the business models subject to

liability to those for whom “the majority of the revenues,

including revenues from advertising, of a covered peer-to-peer

product result[ed] from covered viral infringement,” see, e.g,

id. (g)(i)(A) & (B), where “the availability of copies or

phonorecords resulting from covered viral infringement is the

principal reason the majority of users are attracted to the

covered peer-to-peer product,” id. (g)(1)(B).

(Cont'd)

over here is how to define P2P,’ the executive said. ‘That's not easy,

but it’s solvable."” Brooks Boliek, Induce Act Stalls as Compromise

Talks Break Down, Tut Hottywoop Reporter, Oct. 8, 2004, http://

www.hollywoodreporter.com/thr article_display.jsp?vnu_content_

id=1000661869.

39. In the Oct. 5 Draft, for example, “[t}he term ‘covered peer-to-peer

product’ .... mean(t] a widely available device, or computer program for

execution on a large number of devices, communicating over the Internet

or any other publicly available network and performing or causing the

performance at each such device all of the following functions,” including

“ providing search information relating to copies of phonorecords available

for transmission to other devices,” locating other devices to respond to the

search requests; and “transmitting a requested copy or phonorecord to

another device that located the copy or phonorecord through such other

device's performance of the [locating] function,” “unless the provider of

the device or computer has the right and ability to control the

copies or phonorecords that may be located by its use.” Id. (g)(2)(B).

(iii) Limitations on frivolous lawsuits and extended

discovery until a prima facie case is presented that the

ee ee

(iv) “Limitations on Remedies,” permitting “[njo award

of statutory damages . . . unless the owner sustains

the burden of proving, and the court finds, that such violation

was committed willfully,” see, e.g., id. (g)(4)(A), and directing

courts, “[iJn granting injunctive relief ... to the extent

practicable, {to} limit the scope of the injunctive relief so as

not to prevent or restrain uses of the covered

peer-to-peer product,” id. (g)(4)(B).

(v) Preclusion of any possibility that courts could add a

layer of secondary liability to the new violation. See, e.g., id.

(g)(5) (“No court shall apply a doctrine of secondary lisbility

to the cause of action created by this subsection.”).

(vi) Preservation of limitations in existing doctrines of

liability. See, e.g., id. (g)(6) (“Nothing in this

subsection shall enlarge or diminish liability for direct

infringement or the doctrines of vicarious and contributory

infringement, including any defenses thereto or any limitations on

rights or remedies for infringement.” (emphasis added)). This

provision would have protected the existing parameters of the

Sony defense — something the content owners are now trying

to undo through this lawsuit.

(vii) Broad protections for service providers for

functions defined under Section 512 of the DMCA

performing

(for example, ee ee

See, e.g., Oct. 5 Draft . Even “service providers tha

satiny haath on Dihalll vechateateh or ebvertieath, the cate

or offering for sale of covered peer-to-peer products by third

parties [their] website[s]” were to be exempted if they

complied the conditions in Section 512(c)(1) of the DMCA.

See, e.g., id. (g)(8).

While imperfect, the bills discussed in the negotiations

came closer to targeting only those actors whose behavior the

co-sponsors intended to than did the original bill or

the Copyright Office draft. They also included some of the

provisions that, with revisions, would be necessary to protect

other technologies both present and future, such as exempting

Internet service providers, and preserving the Sony defenses.

By contrast, none of the new “federal common law” rules

proposed by petitioners or their amici contains these limiting

attributes.

IV. The Expansive Secondary Liability Sought by

Petitioners Is Inconsistent with Federal Law and Policy

Regarding the Internet and Broadband Internet Access.

In the 1996 Telecommunications Act, Congress sought to

“accelerate rapidly private sector deployment of advanced

telecommunications and information technologies

and services.”*° Congress directed the regulatory agencies

to “encourage the deployment. . . of advanced telecommuni-

cations capability to all Americans ... by utilizing ...

methods that remove barriers to infrastructure investment.”*

Congress has also spoken directly to the issue of secondary

liability and Internet service providers. In the DMCA,

Congress expressly limited the applicability of copyright

remedies to service providers based upon the functions that

they perform, in storing, transmitting, or providing Internet

links to all forms of content. The DMCA contains an express

disclaimer of any intent to require ISPs to monitor (let alone

police) any user-to-user communications, as well as

recognition that technological protection measures for

copyrights must be developed by consensus among the

relevant industry parties in an open process.

Congress cautioned that, “without clarification of their

liability, service providers may hesitate to make the necessary

investment in the expansion of the speed and capacity of the

Internet.”*? Specifically, Congress was concerned that the

40. S. Cone. Rev. No. 104-230, at 1 (1996); H.R. Gone. Rev. No. 104-

458, at 1 (1996).

41. Telecommunications Act of 1996, § 706, Pub. L. No. 104-104, 110

Stat. 153 (1996), reprinted in 47 U.S.C. § 157 note.

42. S Rep. No. 105-190, at 8 (1998); see id. at 19-20 (describing need for

“ greater certainty to service providers concerning their legal exposure for

infringement that may occur in the course of their activities”).

ee ah ed OV eden,

le ee °

possibility of courts imposing liability on the functions

performed by most service providers, such as in the case of

Playboy Enterprises v. Frena, 839 F. Supp. 1552 (M.D. Fla.

1993) (holding bulletin board service strictly liable for

material posted on its service without regard to knowledge),

would chill investment in Internet access upgrades. S. R er.

No. 105-190, at 8, 19 & n.20 (1998).

To this end and after “3 months of negotiations

supervised by [Senate Judiciary Committee staff and]

Chairman Hatch and assisted by Senator Ashcroft among

the major copyright owners and the major OSP{]s and

ISP{|s,” id. at 9, Congress expressly limited copyright

remedies against those service providers who perform

conduit, caching, storage, and information location

functions, 17 U.S.C. § 512(a)-(d). Congress, however, went

further than curbing such liability for service providers,

announcing that nothing in the DMCA could be construed

as imposing a duty on service providers to monitor their

services for infringement. H.R. Rep. No. 105-551, Pt. 2, at 61

(1998) (nothing in the DMCA “suggest(s] that a provider

must investigate possible infringements, monitor its service,

or make difficult judgments as to whether conduct is or is

not infringing”).

Service providers are obligated only to avoid

interference with “standard technical measures” — measures

that, among other things, “have been developed pursuant

to a broad consensus of copyright owners and service

providers in an open, fair, voluntary, multi-industry

standards process” and “do not substantial costs

on service i or substantial burdens on their

or networks.” 17 U.S.C. § 512(i). The DMCA also forbids

the imposition of affirmative duties on service providers to

police their users’ communications or to deploy

technological measures that could weed out from

noninfringing communications. Id.; H.R. Rep. No. 1 1,

at 61. In fact, a different law, the Electronic Communications

Privacy Act, codified at 18 U.S.C. §§ 2701, et seq., makes

unauthorized access to private electronic communications a

federal felony.®

The DMCA squarely placed the burden on copyright

owners to investigate infringement and invited all implicated

industries to take part in reaching a “broad consensus” on the

appropriate “technological solutions” that should be used, 17

U.S.C. § 512(i)(2)(A); H.R. Rep. No. 105-551, at 61. Thus, the

DMCA evinces a clear intent to limit copyright liability for

service providers, and to insulate them from any general duty

to police their services or unilaterally to install filters or other

devices to sort out infringing content.*

The broad multi-factored tests for contributory and

vicarious liability advocated by petitioners here are

antithetical to the goals of the DMCA and would do precisely

what Congress wished to preclude in that legislation.*°

43. Various other statutes demonstrate the same national policy of

protecting the Internet from crippling duties or monetary liability: a)

Congress immunized providers of “interactive computer service(s]” from

liability as a “ publisher or speaker” of any content provided by another

information content provider, 47 U.S.C. § 230(c)(1); b) in the child protection

statute at issue in Ashcroft v. ACLU _ US. __, 124 S. Ct. 2783 (2004),

Congress exempted from all liability a whole host of passive carriers and

Internet-related technologies and services, including telecommunications

carriers, Internet access providers, and providers of Internet directories

and hypertext links, 47 U.S.C. § 231(b); and c) last Fall, in amendments to a

against trafficking in falsified authentication features for copyrighted works,

Congress jettisoned earlier versions of the legislation that would have

imposed potential liability on service providers for electronic dissemination

of authentication features, see H.R. Rer. No. 108-600, at 6 (2002); compare

Section 103(a)(2) of H.R. 3632, as enrolled, 108th Cong. 2d Sess. (2002),

uth S. 2395 as reported, 107th Cong. 2d Sess. (2004).

44. The DMCA reflects extraordinary solicitude to Internet users’

privacy and makes clear that service providers need not engineer their

systems to include measures to protect copyrights. Specifically, Congress

“designed” Section 512(m) “to protect the privacy of Internet users,”

H.R. Rer. No. 105-511, at 64, and “ma[d]e{] clear that the applicability of”

the limitations on liability outlined in the DMCA “is in no way conditioned

on a service provider,” id.,“ monitoring its service or affirmatively seeking

facts indicating infringing activity, except to the extent consistent with the

‘standard technical measures’],” 17 U.S.C. § 512(m)(1).

45. See, e.g., MPRC Br. 32-33 (asking this Court to consider “ separating

(Cont'd)

Petitioners’ new “federal common law” rules would require

courts to circumvent the approach Congress mandated in the

DMCA (and has adopted whenever it sought to amend

and would virtually guarantee that multi-use

providers must violate the privacy rights of their subscribers

in order to avoid liability. Congress never contemplated that

courts could or would create such sweeping new rules of

struck by the DMCA * Indeed, because Congres has spoken

struc because has

directly to the duties that may and may not be imposed on

service providers in the name of ght law, “the need for

such an unusual exercise of [federal common] lawmaking by

federal courts disappears.” City of Milwaukee v. Illinois &

Michigan, 451 U.S. 304, 314 (1981).

(Cont'd)

mechanisms [that] are readily available” in determining liability); id. at 39-

40 (same for “ willful blindness” or the decision not to monitor the content

of users’ communications); id. at 40-41 (advocating that the Court create

incentives for multi-use technology providers unilaterally to implement

filtering mechanisms); id. at 44-46 (same).

46. Although Senate Committee Reports did suggest that “the

Committee decided to leave current law in its evolving state and, instead,

to create a series of ‘safe harbors,’ for certain common activities of service

providers,” S. Rep. No. 105-190, at 19, there is no suggestion that eviscerating

the defenses and of deference identified in Sony would be

considered part of the “evolving state” or that the law could “evolve” in

such a way as to permit courts to impose the very duties on service providers

that Congress had foreclosed by statute.

28 29

CONCLUSION Pranx L. Foutano

The judgment of the court of appeals should be affirmed. Laura Kaster

AT&T Corr.

Respectfully submitted. 1AT&T yon

Anprew G. McBrive (908) 532-1860

Counsel of Record

KATHRYN COMERFORD Topp Bennett L. Ross

JosHua S. TURNER BettSoutH CORPORATION

Wirey Rew & Fievoinc LLP 1133 21st Street, N.W.

1776 K Street NW Suite 900

Washington, D.C. 20006 Washington, D.C. 20036

(202) 719-7000 (202) 463-4113

Counsel for Amici Curiae lesdaay A. Racnow

MCL, Inc.

Mica. AuscHuL 1133 19th Street, N.W.

Cellular Telecommunications Washington, D.C. 20036

AND INTERNET ASSOCIATION (202) 736-6933

1400 16th Street, N.W.

Suite 600

Washington, D.C. 20036 aes ne pat

(202) 785-0081 CATHLEEN K. WaAsILEWSKI

SAVVIS ComMUNICATIONS

James W. OLson Comenenen

Rosi E. Tutte 1 Ww Dri

Unrrep- State TeLecom AssociATION 2851 a oi _

1401 H Street, N.W. 0s yr “hts

Suite 600

Washinggan, D.C. MicHaet STANDARD

(202) 326-7300 SBC Internet Services, INc.

1010 N.

Dav P. McCuwre ee St. Mary's Street

US Internet INpusTRY ASSOCIATION San Antonio, TX 78215

815 Connecticut Avenue, N.W. (210) 246-8106

Suite 620

Washington, D.C. 20006

(703) 924-0006

Lowe. SACHS

SuN Microsystems, INc.

1300 I Street, N.W.

Suite 420 East

Washington, D.C. 20005

(202) 326-7521

JouHN THORNE

SarAH B. Deutscu

Paut J. Larkin, JR.

VERIZON COMMUNICATIONS INc.

1515 N. Courthouse Road

Fifth Floor

Arlington, VA 22201

(703) 351-3900

Counsel for Individual Amicus Curiae

as Designated Above

March 1, 2005

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.