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

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No. 04-480

IN THI

Supreme Court of the United States

Metro-Gotpwyn-Mayer Srupios, INc., et al.,

Petitioners,

GROKSTER, Lip. et al.,

Respondents.

On Writ or Certiorari To THE UNITED STATES

Court OF APPEALS FOR THE Ninru Circuit

Britt oF Amici Curtat Tue Consumer ELECTRONICS

Association, THe Computer & COMMUNICATIONS INDUSTRY

ASSOCIATION, AND THe Home RecorpinGc RiGcuts Coatirion

IN SUPPORT OF AFFIRMANCE

Bruce G. Joserx

Counsel of Record

KARYN K. ABLIN

Scott E. Bain

Wirey Rew & Fie_pinc LLP

1776 K Street, N.W.

Washington, D.C. 20006

(202) 719-7000

Counsel for Amici Curtae

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TABLE OF CONTENTS

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II.

The Only Question Before this Court Is

Whether Providing a Technology Capable of

Substantial Noninfringing Use Constitutes

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The Betamax Doctrine Is the Foundation of

this Nation’s Explosive Technological Growth

Over the Last Twenty Years and

Is Particularly Critical to New Digital

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A. Dhigital Technology Operates by Making,

Manipulating and Moving Copies. ....

B. Without Betamax, Copyright Law Would

Create the Risk of Massive Liability for

Almost Every Participant in Our Digital

. <0ds Can batunecuonen reas

C. Copyright Owners Have a Long History

of Exploiting Uncertainties in Copyright

Law To Attack New Technologies. ....

D. The Betamax Doctrine Is Essential To

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Page

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Contents | Contents

Page Page

Ill. The Copyright Act Forecloses Judicial D. Providing a Technology that Is Capable

Abrogation of the Betamax Doctrine. ..... 13 of Substantial Noninfringing Use Is Not

DD vivecechddaececesvece. 25

A. Copyright Is a Carefully Balanced,

Statutory Right Intended To Serve the E. There Is No Duty To Design Technologies

Public Interest that Should Not Be To Minimize the Possibility of Infring-

Judicially Expanded. ............... 13 ment.

B. The Copyright Act Does Not Permit EE EE a es 30

Imposition of Liability for Providing “

Technology that Is Capable of Substantial

Noninfinging Use. ...cccsecsndeden 15

C. The Betamax Doctrine Applies ;

Regardless of Whether Secondary |

“Contributory” or “Vicarious.”....... 19

IV. Petitioners’ Theories for Imposing Secondary

Liability and Limiting Betamax Are an

Improper Invitation to Judicial Legislation. .. 20

A. Petitioners’ “Principal Use” Standard *

and the United States’ “Relative

Significance” Test Are Foreclosed by

SMP 21

B. Petitioners Are Incorrect To Focus on

Current Uses of a Technology. ....... 23

C. The United States’ Focus on Respondents’

Business and “Commercial Viability”

Misconstrues the Betamax Standard. . . 24

TABLE OF CITED AUTHORITIES

Page

Cases:

A&M Records, Inc. v. Napster, Inc.,

239 F.3d 1004 (9th Cir. 2002) ...........-45. 20

In re Aimster,

334 F.3d 643 (7th Cir. 2003) ............... 5, 20, 27

Ashcroft v. ACLU,

US. _, 1248. Ct. 2783 (2004) ........... 21

Central Bank v. First Interstate Bank,

SOG CLG, BGC ERIOSD ci ccccnddvevc douccessses 15, 16

Confederated Salish & Kootenai Tribes v.

United States,

343 F.3d 1193 (9th Cir. 2003) ............-.4.. 17

Correctional Services Corp. v. Molesko,

534 U.S. 61 (2001) ....... eeecededeocxeasks 16

County of Washington v. Gunther,

463 US. 068 CISGE) . cccccccccccccsscsevecs 3,17

Ellison v. Robertson,

357 F.3d 1072 (9th Cir. 2004) ............. 12, 19, 25

Fogerty v. Fantasy, Inc.,

SOO UG. FSe GES e. cc ccccccessccecenss 3, 9, 14, 20

Fonovisa, Inc. v. Cherry Auction, Inc.,

76 F.3d 259 (9th Cir. 1996) ...........50005: 19

» ee ated rer

Cited Authorities

Gershwin Publishing Corp. v. Columbia Artists

Management, Inc., “

Jf tif is % ., | Saeee eee

International Union v. Westinghouse

Electric Corp.,

631 F.2d 1094 (3d Cir. 1980) ................

Kalem Co. v. Harper Bros.,

Se SEED Abnddicccecdbuchedbaacnel

Kelly v. Arriba Soft Corp.,

coR A Pile. Lo .) ee

MGM Studios, Inc. v. Grokster, L..,

259 F. Supp. 2d 1029 (C.D. Cal. 2003) ........

MGM Studios, Inc. v. Grokster Ltd.,

380 F.3d 1154 (9th Cir. 2004) ...............

Manville Sales Corp. v. Paramount System Inc.,

917 F.2d 544 (Fed. Cir. 1990) ...............

Mertens v. Hewitt Associates,

Fae Gas DOPE veéatnadd ccndc hea

Muscarello v. United States,

Se Ws BaP CED cSbandcsscowcréecnetenns

Perfect 10, Inc. v. Visa International Service Ass'n,

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

pwey & ROE eres: f-mite ne

Page

17, 18

5, 26

Cited Authorities

Page

RIAA v. Diamond Multimedia System,

180 F.3d 1072 (9th Cir. 1999) ...........5-45. 10, 11

Religious Technology Center. v. Netcom On-Line

Communication Services, Inc.,

907 F. Supp. 1361 (N.D. Cal. 1995) .......... 19

Reno v. ACLU,

SEG TE. BRS CIG GD. 6c cndccccttesnceuscsass 8

Sony Corp. v. Universal City Studios, Inc.,

4G64 UD. SET CUSSED cc ccccccccccsccccveseses passim

Stewart v. Abend,

GBB ULSD. FOF CIGTED ce cccdccecsscccsvcedeess 15

Thompson v. Hubbard,

BDO CLG, CRP COED oc cccdvsccdececoccusvss 15

Twentieth Century Music Corp. v. Aiken,

GER UG. 156 GESTED kwsecvtscccecessdescess 14

UMG Recordings, Inc. v. MP3.com, Inc.,

56 U.S.P.Q.2d 1376 (S.D.N.Y. 2000) ......... 9

Universal City Studios, Inc. v. Sony Corp. of Am.,

480 F. Supp. 429 (C.D. Cal. 1979) ........... 27

Wheaton v. Peters,

33 U.S. (8 Pet.) 591 (1834) ..........02000- 3, 13

White-Smith Music Publishing Co. v. Apollo Co.,

BED UG. 8 CIBER ccccccsccvctesvccovceseses 13-14

vii

Cited Authorities

Page

Constitution, Statutes, and Rules:

U.S. Cotesr., ast. 1, § 6,68. Bo... cc ccccccccccces 3, 8, 14

TY WHE COON eb bvecceonchcubaseodssuenile 22

Sp as OUD sinsccnanteepaudas ebeuuwuuen 3, 15, 16

OF We OOF Kase pedetskenvoncinudccteco 10

BP WOE onic nde 4b cdedsacbduddecereles 15

BF Ws BSED 0:0 0us cnkedbebevceveneebies 16

SF Ge OUND hon cc euctacdiscactuastacwe on

FP ee PS cnvscsbuceaudccwounereasuee 13

BY Wee: © SUMO kbc cckacncccndevedecoure 28-29

FFs DOMED. vbdedces betncennecaoasul 29

SY Wu OF SUE Saus von Sens ete bicntuuaaeen 13

ep Gea © RD. een ddewbnnuddxiassaeiuiies 6

Sa ORE chonent dinncckvanacceee 5

we ERA. 6 OGD 6 ois civic dns cvccgetsescauseen 22

35 U.S.C. § 103 py 6d6andneasnededesseboumanne 22

vill ix

Cited Authorities Cited Authorities

SS Page Page

Audio Home Recording Act, Pub. L. No. 102-563, H.R. Rep. No. 106-216 (1999) ................. 9

106 Stat. 4237 (1992) (codified at 17 U.S.C.

$§ 1001-1010). «2.6... eee cece eee e eee eees 10-11, 13 S. Rep. No. 93-983 (1974) ..........seeeeeeeees 18

Digital Millennium Copyright Act, Pub. L. No. 105- S. Rep. No. 94-473 (1975) ...... ccc cece cence 18

304, 112 Stat. 2860 (1998) (codified at 17 U.S.C.

§§ > 8 > .) rrerevirriry Tir rie 13, 28 Miscellaneous:

Ded, BR. Gov. F.. Seen occsccevesussteseutseseus 5 John Perry Barlow, The Next Economy of Ideas,

Wirep, Oct. 2000, http://www.wired.com/wired/

Legislative Materials: ; archive/8.10/download_pr.html. ............. 24

144 Cona. Rec. E2144 f Biack’s Law Dictionary (4th ed. 1968) ......... 17

(daily od. Oct. 13, 1996)... ceccccccccveees 29 '

: Biack’s Law Dictionary (Sth ed. 1979) .......... 16-17

144 Cona. Rec. E2166

(daily ed. Oct. 14, 1998) seseecsoeseceeseeveeee 29 . BLACK "s Law DICTIONARY (6th ed. 1990) Re ee 17

144 Cone. Rec. H10621 BLack’s Law Dictionary (8th ed. 1999) ....... es 17

(daily ed.Oct. 12, 1998) ........... cece eeee 29

William Bowen, How the Japanese Won the VCR

144 Cona. Rec. H7094-95 . Wars, Fortune, June 8, 1987 ................ 23

(daily ed. Aug. 4, 1998) ........-..e eee cues 29

Complaint, Cahn v. Sony Corp.,

144 Cona. Rec. $11887-88 No. 90 civ. 4537 (S.D.N.Y. July 9, 1990) ...... 1

(daily ed. Oct. 8, 1998) .......... cee eeeeeees 29

| Complaint, Perfect 10, Inc. v. Google, Inc.,

151 Conc. Rec. $482 | No. 04-9484 (C.D. Cal. filed Nov. 19, 2004) ... 12

(daily ed. Jan. 25, 2005) ........-. cece evenness 18 |

Jocelyn Dabeau & William Fisher, The DAT

H.R. Rep. No. 94-1476 (1976) .........0 cee eee 18 ) Controversy, at http://www.law.harvard.edu/

faculty/tfisher/music/DAT.html (visited Feb. 28,

H.R. Rep. No. 102-873 (1992) ......-0-02ee0ee: 10 : UUW 3:45 nPivrisndes dadecd cummed eedenee 10

Cited Authorities

Page

Benny Evangelista, Piracy Suits Chill Valley, Moves

Peril Profit, Techies Say, SAN FRANCISCO CHRONICLE,

PO A SD Kccinccvdsenesavenshtecunsoes 11

2 Paut GoLpstTEIn, CopyriGut § 6.1.2

COE GE, SUED an nc oWabeckesccnnnetsnesense 20

Marci A. Hamilton, Copyright at the Supreme Court:

A Jurisprudence of Deference, 47 J. CopyRiGHT

Recwty SSA: Fas Gee 54d cnutacvcevsentect 14, 15

Jennifor Holt, /n Deregulation We Trust: The Synergy

of Politics and Industry in Reagan-era Hollywood,

Firm QuartTerty (Winter 2001), http://

www.findarticles.com/p/articles/mi_m1070/

he 2 SGM GIST TSST wo ccccadccccevesecsedes 23

Brad King, MP3.com Goes Universal, WireD News

(May 25, 2001), http://www.wired.com/news/mp3/

RP oF pk 5 Err 9

Jim Krane, FCC's Powell Declares TiVo ‘God's

Machine,’ TutsA Wor p, Jan. 11, 2003 ........ ®

Jessica Litman, Dicitat Copyricut (2001) ........ 15

Peter S. Menell, Symposium, /V. Can Our Current

Conception of Copyright Law Survive the Internet

Age?, 46 N.Y. L. Scn. L. Rev. 63 (2002) ...... 7,12, 13

MGM Complaint, MGM Studios, Inc. v. ReplayTV,

Inc., No. 01-09801 (C.D. Cal. filed Nov. 14,

BUGS sicdiubusdeces ian dae étadonaaneeee 11

Cited Authorities

Page

Motion Picture Studios Defendants’ Statement

Clarifying Claims, Huntsman v. Soderbergh, —

No. 02-M-1662 (D. Colo. Mar. 11, 2003) ...... 11

Order Certifying April 25, 2003 Order for Immediate

Appeal, MGM Studios, Inc. v. Grokster, Ltd.,

No. CV 01-08541-SVW (C.D. Cal. filed June 18,

WONG 6s pxtNesnnsdhedawkaanastene nibs 6

Time Warner Complaint, MGM Studios, Inc. v.

ReplayTV, Inc., No. 01-09801 (C.D. Cal. filed

We: 0 SOUR io ook oven ee 11

INTEREST OF THE AMICI'

In this brief, amici curiae the Consumer Electronics

Association (“CEA”), the Computer & Communications

Industry Association (““CCIA”) and the Home Recording Rights

Coalition (“HRRC”’) offer a critical perspective on the “capable

of substantial noninfringing use” doctrine (the “Betamax

doctrine’) enunciated in Sony Corp. of America v. Universal

City Studios, Inc., 464 U.S. 417 (1984) (“Betamax”). The

Betamax doctrine stands as the Magna Carta of the Digital Age.

It has permitted the development of manifold technologies and

devices ranging from VCRs to personal video recorders such as

TiVo to computers to digital television and radio to the Internet

itself, all of which operate by making multiple copies of

information.

CEA is the principal U.S. trade association of the consumer

electronics industry, the industry that gave rise to the VCR at

issue in Betamax and myriad other digital technologies that

enrich peoples’ lives. CEA represents more than 2,000

manufacturers of consumer electronics devices, computers, and

other technologies. CEA members range from some of the largest

information technology companies in the world to family-

sell a wide variety of innovative digital and analog consumer

electronics equipment.

CCIA members come from all sectors of the computer

and communications industry. Ranging in size from small

entrepreneurial firms to some of the largest companies in the

industry, CCIA members employ over half a million workers

and generate over $200 billion in annual sales. For 33 years,

CCIA has been dedicated to promoting open markets, open

systems, open networks and full, fair and open competition.

CCIA members believe that intellectual property protection is a

1. The parties have filed letters with the Court consenting to all

amicus briefs. No counsel for a party has written this brief in whole or

in part, and no person or entity, other than amici, their members, or their

counsel, has made a monetary contribution to the preparation or

submission of this brief.

vital component of the innovation dynamic, but that excessive

protection can be as harmful as too little. The vigorous

competition and interactive dynamic nature of innovation, which

are the keys to the success of all technology industries, require

a well-balanced system.

The HRRC was founded in 1981, shortly after the Ninth

Circuit announced the decision ultimately reversed by this Court

in Betamax. It is a leading advocacy group dedicated to

preserving consumers’ rights to use home electronics products

for private, noncommercial purposes, including the right to use

these products to make lawful fair uses of copyrighted works.

The members and supporters of HRRC include consumers,

retailers, manufacturers, and professional servicers of consumer

electronics products.

Amici believe in strong copyright protection and recognize

the important relationship between electronics devices and the

commercial content available for use on those devices.’ At the

same time, amici are steadfast in their conviction that strong

such as those advocated by petitioners, that will suffocate the

invention and introduction of new technology. Neither the

case requires such a rule.

SUMMARY OF ARGUMENT

This case comes to this Court on an interlocutory appeal

sought by petitioners and certified by the court below as to only

one narrow issue—whether respondents’ distribution of the

current versions of their software constitutes copyright

infringement, ve/ non. Notwithstanding petitioners’ overstated

“question presented” and rhetoric, respondents’ alleged past bad

2. Thus, amici neither condone nor support any business built “with

the specific intent of inducing infringement,” to profit from that

infringement, Mot. Picture Studio & Recording Co. Pet’rs (“MPRC”)

Br. 26, by providing technology “knowing full well [it is) used for massive

infringement and little or nothing else.” /d. at 25.

conduct, intent and means of building their businesses are still

before the district court, and not before this Court. /nfra, Part I.

This Court has consistently held that copyright is solely a

creature of statute, not the common law, and that the scope of

the nght, and the available remedies, must be strictly construed.

E.g., Wheaton v. Peters, 33 U.S. (8 Pet.) 591, 659-64, 667-68

(1834); Betamax, 464 U.S. at 430. The need for strict

construction is heightened by the fact that the ultimate goal of

interest, see, e.g., U.S. Consrt., art. I, § 8, cl. 8; Betamax, 464

U.S. at 429; Fogerty v. Fantasy, Inc., 510 U.S. 517, 527 (1994).

Achieving that goal requires a delicate and “difficult balance

between the interests of authors .. . and society’s competing

interest in the free flow of ideas, information, and commerce.”

Betamax , 464 U.S. at 429. The task of balancing falls to

Congress, for only “Congress has the .. . institutional ability to

accommodate fully the varied permutations of competing

interests.” /d. at 431. Congress can effect this balance only if

courts hew closely to the statute as written. /nfra, Part IILA.

There is no basis in the Copyright Act to impose liability

on one who provides a technology that is capable of substantial

noninfringing use. ae Copyright Act imposes liability only on

those who “do” or “authorize” the violation of one of six

paihal Yardesias Gla its tasiih teieenaned dake

17 U.S.C. § 106. Petitioners do not contend that respondents

“do” any act invading any of these exclusive rights. Nor can

they credibly maintain that respondents improperly “authorize”

such acts by providing software. County of Washington v.

Gunther, 452 U.S. 161, 168-69 (1981) (““‘authorize’” means to

“empower, to give a right or authority to act’” (citation

omitted)). Any other result would run counter to the Copyright

Act and to this Court’s admonitions that secondary liability

under statutory causes of action must be narrowly construed.

Infra Part ULB.

Moreover, the Betamax doctrine has served this nation well.

The Digital Age, which has revolutionized the way Ameri

express themselves, do business, communicate and even engage

in political speech and action, owes its existence to the principle

that the copyright monopoly does not control technologies

capable of substantial noninfringing use. All digital technologies

operate by making copies of millions upon millions of bits.

Without Betamax, technology inventors and investors would

be subject to claims that they are liable for infringement by

others and would face potentially ruinous statutory damages.

Infra Part ILA & B.

These risks are exacerbated because the precise scope of

copyrights in the Digital Age remains controversial. Copyright

owners of all types and sizes have been quick to challenge any

new technology they believe threatens existing business models.

This has included efforts to stop the sale of hugely popular

products such as digital video recorders and MP3 players, and

software that empowers families to skip offensive material in

motion pictures, as well as efforts by pornographers to hold

Internet search engines and even credit card companies

responsible for infringement of their pornography. /nfra Parts

ILC & D.

Petitioners and their supporting amici ask this Court to

legislate expansive new “federal common law” theories of

secondary copyright liability that have no basis in the Copyright

Act or Betamax. These theories would chill innovation and stifle

growth. Conversely, none would serve petitioners’ purpose, for

any software found to be infringing under petitioners’ theories

would remain freely available from overseas websites.

Petitioners’ “principal use” test and the government’s

“relative significance” and “commercial viability” tests

contravene Betamax. That case specifically found that authorized

time shifting, a fractional minority use, sufficed to justify the

sale of VCRs, without regard to commercial viability. 464 U.S.

at 444-47. Betamax also makes clear that petitioners’ focus on

current use is misplaced. History shows that technologies and

their uses can change dramatically over time. Nor is there any

—" 2 hice Wren

precedent or basis for petitioners’ proposed, unbounded cause

of action for inducement. °

Petitioners request that this Court follow the Seventh

Circuit’s creative enterprise in /n re Aimster, 334 F.3d 643

(7th Cir. 2003), and require a post hoc analysis of the steps a

technology designer might have taken to limit infringement.

This would create a nightmare for innovators and courts alike.

As the government recognizes, the “rule is neither desirable

mete pee by precedent.” U.S. Br. 19-20 n.3. Moreover, it

is flatly inconsistent with the policy expressly adopted b

Congress when it considered this very ‘sue in the 1996 Digind

Millennium Copyright Act (“DMCA”).

The liability that petitioners seek to impose inexorably

would eviscerate the Betamax doctrine, extend the copyright

monopoly beyond protected expression to include control over

technology, obligate manufacturers and technology providers

to restrict designs of products and services capable of lawful

and valuable uses, and chill development of exciting new

technologies. If adopted, petitioners’ brand of copyright law

would yield exactly the opposite result from that mandated by

the Constitution—it would stifle rather than “promote the

Progress of Science and useful Arts.”

ARGUMENT

I, THE ONLY QUESTION BEFORE THIS COURT IS

WHETHER PROVIDING A TECHNOLOGY

CAPABLE OF SUBSTANTIAL NONINFRINGING

USE CONSTITUTES INFRINGEMENT.

This case comes to this Court on petitioners’ appeal of an

interlocutory order directing entry of partial final judgment under

Fep. R. Civ. PB. 54(b) and a certification under 28 U.S.C.

§ 1292(b) on only one narrow issue—whether the distribution

of respondents’ current versions of their software constitutes

259 F. Supp. 2d 1029, 1033 (C.D. Cal. 2003) (“the Court at this

time considers only whether the current versions of Grokster’s

and StreamCast’s products and services subject either party to

liability”), Order Certifying Apr. 25, 2003 Order for Immediate

Appeal, at 3, MGM Studios, Inc. v. Grokster, Lid., No. CV 01-

08541-SVW (C.D. Cal. filed June 18, 2003) (“Plaintiffs’

are factually (and, potentially, legally) distinct”); id. at 8-9

(Apr. 25 Order did not reach liability issues “arising from past

versions of their software, or from other past activities’”).

Further, petitioners have cited little, if any, bad conduct tied to

distribution of the current software. Thus, all that is at issue is

the distribution of the current software.

Despite their strategic decision to pursue this limited

interlocutory appeal, petitioners now urge this Court to consider

respondents’ alleged past bad conduct, bad intent and their

unlawful building of businesses based on infringement. Those

issues are pending in the district court and are not before this

Court. The district court retains jurisdiction to determine the

appropriate scope of forward-looking equitable relief if past

wrongful conduct is shown.

Petitioners have grossly overstated the question presented

in their Petition for Certiorari and opening briefs. Nothing in

the Ninth Circuit’s decision purports to “immunize([]

[respondents] from copyright liability.” MPRC Br. i. This Court

should not change settled law, create a cause of action not

recognized by Congress, and place the growth of the entire digital

economy at risk on the basis of an undeveloped record and

overstated and erroneous concerns—not properly before this

Court—that bad actors may escape liability.

“-

3. Cf 28 U.S.C. § 1254(1) (permitting extraordinary grant of cert.

petition before judgment only as to cases pending in the courts of

appeals).

+ oy Pe

;

ll. THE BETAMAX DOCTRINE IS THE FOUNDATION

OF THIS NATION’S EXPLOSIVE TECH-

NOLOGICAL GROWTH OVER THE LAST

TWENTY YEARS AND IS PARTICULARLY

CRITICAL TO NEW DIGITAL TECHNOLOGIES.

Since the Betamax decision, this nation has experienced a

transformation in the way its citizens express themselves, do

memories. That transformation is a direct result of huge

investments in resources, energy and creativity in digital

technology. No success story has been more important to the

public or the economy in the past twenty years.‘

_ It is no overstatement to say that the Digital Age owes its

existence to the Betamax doctrine. Thus, while the technology

sector is speaking before this Court with numerous voices that

have filed amicus briefs with various captions, the message

across the entire sector is the same. The technology industries

are united in their views that the Betamax doctrine must be

upheld and not weakened.’

4. The U.S. information technology sector accounts for more than

$500 billion in domestic sales (more than $1 trillion worldwide) and

generates a huge portion of the nation’s GDP growth. Business Software

Alliance (“BSA”) Br. 4 & n.5. “The economic significance of the

technology sector to the United States economy vastly exceeds the

contributions of the content industries.” Peter S. Menell, Symposium,

dgc?, 4G NL. Seu. L. Rar 63, 168 & 0368 (2002) (Ths consomer

?, 46 N.YL. . L. Rev. 63, 168 & n.368 (2002) (The consumer

film industries combined.”).

ee ae een Renee tae as eS

support of petitioners,” BSA Br., and “in support of neither »” Digital

Media Ass'n et al. (“DiMa”) Br; IEEE-USA Br. Numerous briefs, in

addition to this one, are being filed “in support of affirmance,” e.g.,

Internet Amici Br. All of these parties also agree that (i) “capable of

substantial noninfringing use” does not mean “primary use,” infra Part

IV.A, and (ii) requiring a post-hoc analysis of steps that the technology

provider might have taken to minimize infringement would destroy

innovation and is contrary to law, infra Part IV_D.

A. Digital Technology Operates by Making,

Manipulating and Moving Copies. =

All digital technologies operate by making copies of

millions of digital bits of information. This is obvious in the

case of devices such as digital cameras, digital video recorders,°

portable MP3 players, like the Rio and iPod, and digital audio

recording media such as recordable compact discs. Personal

computers are, similarly, enormous copying machines with

immense storage capacity. Nearly every major institution and

enterprise depends upon digital infrastructures and computer

networks that copy and store information. Other digital products

and services, including digital television and satellite radio, rely

upon copying less obviously but just as extensively, through

buffering and other routine operations.

The Internet itself also operates by copying undifferentiated

and often unidentified binary data. Every piece of information

that a person encounters while browsing the Internet is copied

both in the random access memory and on the hard drive of that

person’s computer. The bits are moved using “store and forward”

technology wat literally copies them in multiple servers and

routers in the course of transmission. In other words, digital

copying technology is responsible for what this Court described

as “a unique and wholly new medium of worldwide human

communication,” and a “new marketplace of ideas” containing

“vast democratic forums,” from which “any person with a phone

line can become a town cnier with a voice that resonates farther

than it could from any soapbox.” Reno v. ACLU, 521 U.S. 844,

850, 868, 870, 885 (1997).

Each of these technologies promotes “the Progress of

Science.” U.S. Const. art. L, § 8, cl. 8. Indeed, they most directly

serve a core interest of copyright—the “interest in the free flow

of ideas, information, and commerce,” Betamax, 464 U.S. at 429,

6. The digital video recorder has so changed how the public

experiences television that the Chairman of the FCC described the

pioneering TiVo as “God's Machine.” Jim Krane, FCC's Powell Declares

TiVo ‘God's Machine,’ Tusa Worn, Jan. 11, 2003, at E3.

a eo

and “the purpose of enriching the general public through access

to creative works,” Fogerty, 510 U.S. at 527—providing the

very means by which information flow and access are provided.

B. Without Betamax, Copyright Law Would Create

the Risk of Massive Liability for Almost Every

Participant in Our Digital Economy.

Without the Betamax doctrine, each of these technologies

would be subject to claims that it “promotes,” “contributes to,”

“benefits from” or even “induces” infringement. Techno

succeed. The Copyright Act provides for statutory damages of

up to $30,000 per infringed work with a mandatory minimum

of $750 per work for even ordinary, non-willful infringement.’

When technologies are capable of handling thousands or tens

of thousands of separate works, even the mandatory minimum

can quickly become ruinous.’ Congress carefully calibrated the

— remedies available in copyright law to deter direct

infringement; they are not desi to ize legiti

ent; sda gned to penalize legitimate

7. 17 U.S.C. § 504(c). The per-work maximum for willful

infringement is $150,000. /d. This discussion highlights two of many

fundamental errors in the brief of the economics professors. Kenneth J.

Arrow et al. (“Economists”) Br. They acknowledge that where “penalties

can be raised such that the low likelihood of prosecution can be offset

by high penalties(,] .. . direct deterrence will work and indirect liability

is therefore unnecessary and likely unwise.” /d. at 5. But that is precisely

the basis of copyright statutory damages. Second, there is no legal ground

for their suggestion, id. at 10, that a court can, in cases of secondary

liability, award only injunctive relief and not statutory damages.

8. See, e.g., UMG Recordings, Inc. v. MP3.com, Inc. ,56U.S.P.Q.2d

1376, 1381 (S.D.N.Y. 2000) (awarding $25,000 per work for thousands

of works “copied” in connection with service, without demonstration of

injury). These damages forced MP3.com to sell itself to one of the

plaintiffs. Brad King, MP3.com Goes Universal, WineD News (May 25,

2001), http://www.wired.com/news/mp3/0,1285,43972,00.html.

9. See, e.g., H.R. Rep. No. 106-216, at 3 (1999) (statutory damages

increased to deter “computer users” who “believe that they will not be

(Cont'd)

C. Copyright Owners Have a Long History of

Exploiting Uncertainties in Copyright Law To

Attack New Technologies.

Worse yet, the precise scope of copyright nghts vis-a-vis

the innovative products and services of the Digita: Age remains

subject to uncertainty and controversy. Copyright owners have

been quick to challenge digital technologies that facilitate

arguably lawful uses they dislike. The fair use doctrine, 17 U.S.C.

§ 107, has been under constant attack. Moreover, these

challenges have not been limited to distribution technologies;

they include attacks on technologies that facilitate private

conduct relating to lawfully acquired content.

Starting in the mid-eighties, copyright owners delayed for

years the introduction of digital audio tape technology using

lobbying and lawsuits.'° The impasse was broken only after

lengthy negotiations among electronics manufacturers and

1992 (“AHRA”), which immunized from suit the sale and use

of digital audio recording devices and separately imposed a duty

to use a specific copy limitation technology.

in 1999, copyright owners tried to enjoin the manufacture

and sale of MP3 players, now among the most popular new

consumer electronics devices on the market. The recording

industry’s trade association (RIAA) sued Diamond Multimedia

over the company’s Rio product, an early portable MP3 player.

RIAA vy. Diamond Multimedia Sys., 180 F.3d 1072 (9th Cir.

1999). RIAA asserted that demand for these devices would be

non-existent without infringement and maintained that the

(Cont'd)

caught or prosecuted” and “individuals” who use “new technology” to

store massive amounts of material and create perfect copies).

10. See Jocelyn Dabeau & William Fisher, The DAT Controversy,

at http://www.law harvard.edu/faculty/tfisher/musicDAT html (visited

Feb. 28, 2005); H.R. Rep. No. 102-873, at 9-10 (1992); Complaint,

Cahn v. Sony Corp. of Am., No. 90 civ. 4537 (S.D.N.Y. filed July 9,

1990).

devices had to be redesigned to comply with the AHRA. /d. at

1075. The Ninth Circuit disagreed, holding that MP3 players

were not subject to the AHRA and noting with foresight that

the popularity of the devices was driven in part by a

A ani legitimate trade in Internet music. /d. at 1074,

In 2001, seeking to narrow Betamax, the movie industry

attacked DVRs, separately challenging both their consumer-

friendly storage and indexing capabilities as well as features

facilitating the skipping of material and permitting remote

access.'' The defendants, ReplayTV and its parent, could not

afford to defend themselves and were forced into bankruptcy. '?

The movie industry more recently has targeted Clearplay,

which provides software that allows viewers to skip violent or

sexual content when watching DVDs at home. Even though

Clearplay’s software resides on the playback device, is entirely

user-driven and does not copy or alter the underlying DVD in

any way, the industry has asserted various infringement theories.

Mot. Picture Studio Defs. Stmts. Clarifying Claims, Huntsman

v. Soderbergh, No. 02-M-1662 (D. Colo. Mar. 11, 2003). Similar

content provider efforts to block and force modifications to new

technologies, such as the TiVo and Digital Audio Broadcasting,

are well documented. See Internet Amici Br. Part IL.

Attacks on technology are not limited to the major record

or movie companies. Non-mainstream copyright owners and

a 2 Pompey “" 24-25, MGM Studios, Inc. v. ReplayTV, Inc.,

Nov. 14, 2001) (including

slated t sasha, sanasfing, Socing, end dannge os “ebeeamer? to

infringement); Time Warner Compl., id. (Nov. 9, 2001).

12. See Benny Evangelista, Piracy Suits Chill Valley, Moves Peril

Profit, Techies Say, SAN FRANCISCO CHRONICLE, Feb. 20, 2003 (“Sonicblue

Chief Executive Officer Greg Ballard said his company is spending $3

million per quarter on legal fees to defend itself {in the ReplayTV case].

Ballard said the legal costs are in turn preventing Sonicblue from hiring

about oe ee

company.”).

- 12

individuals also push to expand the limits of copyright protection

at the expense of innovation.'’

These challenges are only the latest in a long history of

misguided attempts by copyright owners to stifle or control new

technology. See MGM Studios, Inc. v. Grokster Ltd., 380 F.3d

1154, 1167 (9th Cir. 2004) (referencing history of attacks on

the player piano, photocopier, tape recorder, etc.). In most cases,

the federal courts have rejected these requests for judicial

legislation.

D. The Betamax Doctrine Is Essential To Protect

Innovation.

Innovation is inherently risky and requires substantial

capital investment. Such risks will not be taken in an

environment where market uncertainties are compounded by

the threat of suit and possible massive statutory liability even if

the innovation is successful, and even if the use that is fostered

is lawful. See Menell, supra note 4, at 160-61 (recounting how

after Napster, “venture capitalists became increasingly wary of

the legal costs, economic risk, and potential vicarious liability

associated with investing in these ventures”).'* Investment has

13. See, e.g., Compl., Perfect 10, Inc. v. Google, Inc., No. 04-

9484 (C.D. Cal. filed Nov. 19, 2004) (pornography copyright owner

suing Internet search engine for providing links to allegedly infringing

works); Perfect 10, Inc. v. Visa Int'l Serv. Ass'n, No. C-04-0371, 2004

WL 1773349 (N.D. Cal. Aug. 5) (suit against credit card companies

used by allegedly infringing website operators); Ellison v. Robertson,

357 F.3d 1072, 1074 (9th Cir. 2004) (author suit against AOL for copies

of works stored by third-party user); Kelly v. Arriba Soft Corp., 336

F.3d 811 (9th Cir. 2003) (photographer suit against search engine for

display of search results).

14. Ironically, Professor Menell seeks to increase the chilling ef fect

he recognizes in his academic writing by advocating an unpredictable

“comprehensive balancing test” that would expand secondary liability.

Professors Peter S. Menell ef a/. Br. This test proceeds from two false

premises. First, the professors posit separate worlds of “patented” and

“copyrighted” goods, as if the two were unrelated. Menell himself

recognizes an “inherent conflict” as “regulating digital devices in the

(Cont'd)

been further chilled by some copyright owners’ attacks on not

only the innovators, but also the investors, advisors, and even

attorneys associated with the new technology. See id. at 160-61

(citing suits against officers, directors, and venture capitalists

involved in Napster and MP3.com’s attorneys).

The Betamax doctrine fulfills this Court’s admonition that

for copyright to enrich the public through access to creativity, it

must achieve a delicate and “difficult balance between the

interests of authors .. . and society’s competing interest in the

free flow of ideas, information and commerce.” Betamax, 464

U.S. at 427. As a result, it has permitted the most creative minds

to innovate, contributing billions of dollars to the economy, and

aa ee ee eee

ill. THE COPYRIGHT ACT FORECLOSES JUDICIAL

ABROGATION OF THE BETAMAX DOCTRINE.

A. Copyright Is a Carefully Balanced, Statutory

Sasnetud Wo Saove the Pubite Sensmuat Ghee horas

Not Be Judicially Expanded.

From the very first, this Court has consistently held that a

copynght is solely a creature of statute, not the common law or

any theory of natural or moral right, and that the scope of the

night is strictly limited by the statutory grant. Wheaton v. Peters,

33 US. (8 Pet.) 591, 659-64, 667-68 (1834) (holding that the

night “does not exist at common law— it originated, if at all,

under the acts of congress” and remanding for determination of

whether all statutory conditions were satisfied); White-Smith

(Cont'd)

name of content protection hinders progress of digital technology.”

Menell, supra note 4, at 197. Second, they posit that the AHRA, Pub. L.

No. 102-563, 106 Stat. 4237 (1992) (codified at 17 U.S.C. §§ 1001-1010),

and Title I of the DMCA, Pub. L. No. 105-304, 112 Stat. 2860 (1998)

(codified at 17 U.S.C. §§ 1201-1205), were congressional elaborations

of copyright liability, which they emphatically are not. Rather, both

create separate causes of action, 17 U.S.C. §§ 1009 & 1203, further

demonstrating that when Congress seeks to limit the sale of “dual use”

technology, it does so explicitly and narrowly. See infra Part IVE.

Music Publ’g Co. v. Apollo Co., 209 U.S. 1, 15 (1908) (“it is

perfectly well settled that the protection given to copyrights in

this country is wholly statutory”); Betamax, 464 U.S. at 429

n.10 (noting that copyright law ““is not based upon any natural

right that the author has,”” and describing the balance between

stimulating the producer and “‘the evils of the temporary

monopoly” (quoting H.R. Rep. No. 2222, 60th Cong., 2d Sess.

7 (1909))); see Marci A. Hamilton, Copyright at the Supreme

Court: A Jurisprudence of Deference, 47 J. Copyricut Soc’y

U.S.A. 317, 320-21 (2000) (“From the first case, through the

present, the Court has treated copyright law as positive law, the

parameters of which are determined by the Congress.”).'°

Moreover, the Court has consistently emphasized that the

ultimate goal of copyright is to serve the public interest, not

authors’ private interests, see U.S. Const., art. I, § 8, cl. 8:

The monopoly privileges that Congress may authorize

are neither unlimited nor primarily designed to provide

a special private benefit. Rather, the limited grant is a

means by which an important public purpose may be

achieved.

Betamax, 464 U.S. at 429; accord Twentieth Century Music

Corp. v. Aiken, 422 U.S. 151, 156 (1975) (“[T]he ultimate aim

is, by this incentive, to stimulate artistic creativity for the general

public good.”); Fogerty, 510 U.S. at 526 (“[T]he policies served

by the Copyright Act are more complex, more measured, than

infringement.”); id. at 527 (“Copyright law ultimately serves

the purpose of enriching the general public.”).

For copyright to enrich the public through access to creative

works, “it is peculiarly important that the boundaries of copyright

law be demarcated as clearly as possible.” Jd. This task

15. Accordingly, the efforts of petitioners and their amici to rely

on common law principles are misplaced. E.g., Songwriter & Music

Publisher Petrs. (“SW”) Br. 10 (relying on common law); id. at 14

(secondary copyright liability based on “judicial efforts”); Defenders of

Property Rights Br. 7-15 (relying entirely on “common law principles”).

is constitutionally assigned to Congress, for only “Congress has

the ... institutional ability to accommodate fully the varied

permutations of competing interests.” Betamax, 464 U.S. at

431.'° This Court has no mandate to alter that balance. Cf.

Stewart v. Abend, 495 U.S. 207, 230 (1990) (“{I]t is not our role

to alter the delicate balance Congress has labored to achieve.”).

B. The Copyright Act Does Not Permit Imposition of

Liability for Providing Technology that is Capable

of Substantial Noninfringing Use.

There is no basis in the Copyright Act to impose liability

for providing a technology that, though capable of substantial

noninfringing use, is used for infringement. Providing such a

technology neither “does” nor “authorizes” any of the acts

constituting infringement. See 17 U.S.C. §§ 106, 501.

The remedies for infringement and the parties liable for

infringement are part and parcel of the scope of the copyright

itself. As statutory creations defined by Congress, they must be

strictly construed. Thompson v. Hubbard, 131 U.S. 123, 151

(1889) (rejecting a copyright cause of action that did not strictly

meet statutory requirements because “[t]his right of action, as

well as the copyright itself, is wholly statutory, and the

means of securing any right of action in Hubbard are only

those prescribed by Congress”); Betamax, 464 U.S. at 431

(“The remedies for infringement ‘are only those prescribed by

Congress.”” (quoting Thompson, 131 U.S. at 151)).

Recent cases confirm that the availability of secondary

liability under statutory causes of action must be narrowly

construed. In Central Bank v. First Interstate Bank, 511 U.S.

164 (1994), this Court rejected aiding and abetting liability under

section 10(b) of the Securities Exchange Act of 1934, stating

that it has “refused to allow 10b-5 challenges to conduct not

16. See Hamilton, at 325 (Congress filters views “to arrive at

determinations that are supposed to be in the best interest of the polity

as a whole” through a process of “compromise and debate”); Jessica

Litman, Dicrrat CopyriGuT 61 (2001) (describing legislative process as

accommodation of complex competing interests).

prohibited by the text of the statute.” /d. at 173. The Court

reasoned that “Congress knew how to impose aiding and abetting

liability when it chose to do so” and that “[tJhe issue ... is not

whether imposing private civil liability on aiders and abetters .

is good policy but whether aiding and abetting is covered by

the statute.” /d at 176-77: see Mertens v. Hewitt Assocs., 508

U.S. 248, 254-55 (1993) (rejecting non-fiduciary liability under

ERISA because, despite common law duty, no statutory

provision imposed obligations on non-fiduciaries).'’

The Copyright Act expressly defines an “infringer” of

the copyright owner.” 17 U.S.C. § 501(a). The exclusive nghts

are defined as the rights “to do or to authorize” six specific

activities with respect to a copyrighted work, the most relevant

here being reproduction and distribution to the public. /d. § 106.

Respondents do not themselves actually “do” the acts of

reproduction or distribution to the public of petitioners’ works.

Indeed, no petitioner here advances a claim that respondents

are liable as direct infringers. MPRC Br. 23, 42 (asserting claims

of contributory and vicarious liability); SW Br. 10 (asserting

secondary liability).

Nor can it reasonably be argued that providing a technology

that is capable of substantial noninfringing use “authorizes”

infringement. The plain meaning of the term denotes an

intentional action to communicate approval for an act under

color of right. From 1968 through 1990, including 1976, when

the Copyright Act was passed, Black’s Law Dictionary defined

“authorize” as “[t]o empower, to give a right or authority to

act,” commenting that “it has a mandatory effect or meaning

17. This narrow view of secondary liability is consistent with the

Court’s general hostility toward implying congressional action where

the statute is silent. See Corr. Servs. Corp. v. Molesko, 534 U.S. 61, 67

n. 3 (2001) (Court has “retreated from [its] previous willingness to imply

a cause of action where Congress has not provided one” (citing cases)).

implying a direction to act.”* This Court has agreed, relying

on Black’s to hold, under Title VII, that “authorize” requires an

affirmative grant of right. Gunther, 452 U.S. at 168-69 (quoting

Black’s Law Dictionary (Sth ed. 1979)); accord Confederated

Salish & Kootenai Tribes v. United States, 343 F.3d 1193, 1196

(9th Cir. 2003) (“[A ize” means “to endow with authority

or effective legal power, warrant, or right”); /nt’] Union v.

Westinghouse Elec. Corp., 631 F.2d 1094, 1100 (3d Cir. 1980)

(relying on dictionary definitions to ascertain the “plain

language” of the statutory term and explaining that “{njormally

the term ‘authorized’ is used to describe something that is

endorsed or expressly permitted and not ... something which

is merely not prohibited”).

This Court in Betamax faithfully adhered to this statutory

limitation on infringement liability, observing that secondary

liability exists where “the ‘contributory’ infringer was in a

position to control the use of copyrighted works by others and

had authorized the use without permission from the copyright

owner.” Betamax, 464 U.S. at 437 (emphasis added); id. at 435

n.17 (noting liability for one who “authorizes the use of a

copyrighted work”). The Court analyzed the only case in which

it has upheld the imposition of secondary copyright liability,

Kalem Co. v. Harper Bros., 222 U.S. 55 (1911),'* emphasizing

18. Black’s Law Dict. 133-34 (6th ed. 1990); Black’s Law Dict.

122 (Sth ed. 1979); Black’s Law Dict. 169 (4th ed. 1968). The definitions

also say, in the same vein, “[t]o clothe with authority, warrant, or legal

power. .. . To permit a thing to be done in the future.” E.g., Black’s

Law Dict. 169 (4th ed. 1968). The current definition is to the same

effect, but shorter: “to give legal authority; to empower” and “to formally

approve; to sanction.” Black’s Law Dict. 143 (8th ed. 1999). This Court

considers ordinary dictionary definitions in statutory construction. See,

€.g., County of Washington v. Gunther, 452 U.S. 161, 168-69 (1981)

(citing Black’s Law Dict.); Muscarello v. United States, 524 U.S. 125,

127-31 (1998) (citing dictionaries and other sources).

19. The fact pattern of Kalem also is the only ided in

dp ccly quan ots Coleaans teemaam oF ak Soe ae a

explaining the meaning of “to authorize”:

(Cont'd)

that the producer ‘had authorized [the infringing) use by his

sale of the film to jobbers” where that use “was not his to

authorize.” Betamax, 464 U.S. at 436 (emphasis added). In fact,

the produ.er created the film and distributed it with the express,

advertised purpose that it be used for infringing performances.

Id. at 435-36.

The authorization found in Kalem bears no resemblance to

the provision of a technology capable of substantial

noninfringing use, as the Court made clear in Betamax. Id. at

437 (describing the theory of liability asserted against the

Betamax as “novel’); id. at 436 (attempt to equate two

circumstances is “a gross generalization that cannot withstand

(Cont'd)

Use of the phrase “to authorize” is intended to avoid any

questions as to the liability of contributory infringers. For

example, a person who lawfully acquires an authorized copy

of a motion picture would be an infringer if he or she engages

in the business of renting it to others for purposes of

unauthorized public performance.

H.R. Rep. No. 94-1476, at 61 (1976); S. Rep. No. 94-473, at 57 (1975)

(quoting same language); S. Rep. No. 93-983, at 111 (1974) (quoting

essentially same language). The addition of the words “to authorize”

and this explanation were new to the 1976 Act. Contrary to petitioners’

claim (MPRC Br. 21 n.15), they thus provide no evidence of broad

ratification of particular doctrines of secondary liability, and certainly

do not evidence expansion of those doctrines or its application to the

provision of technology. The 1998 DMCA could not ratify broad

doctrines of secondary liability, as it did not reenact copyright liability.

Petitioners cite section 1201(c)(2), which simply says that section 1201,

in defining a new non-infringement cause of action, should not be

construed to affect copyright infringement liability related to technology.

If it ratifies anything, it ratifies the Betamax doctrine. The various

defenses and exceptions cited by petitioners similarly do not evidence

the existence of liability. As Senator Hatch recently stated, “[I)ndeed,

the Copyright Act contains literally scores of similar exemptions, and

none of those exemptions have been or should be construed to imply

anything about the legality of conduct falling outside their scope.” 151

Conc. Rec. $482 (daily ed. Jan. 25, 2005).

scrutiny”). As this Court found in Betamax, providing a

technology does not “authorize” the use of that technology to

violate any right of a copyright owner.’° It is not infringement.

C. The Betamax Doctrine Applies Regardless of

Whether Secondary Copyright Liability Is Labeled

“Contributory” or “Vicarious.”

From the foregoing, it is clear that the Betamax doctrine

applies regardless of whether secondary liability is labeled

“contributory” or “vicarious,” even assuming that vicarious

liability extends beyond its onty doctrinal underpinnings in the

concept of respondeat superior. Copyright liability simply does

not, by statute, extend to the situation at issue in Betamax—

regardless of the label applied. As this Court recognized in

Betamax, distinctions between “contributory” and “vicarious”

liability “are not clearly drawn” and “analysis of respondents’

unprecedented contributory infringement claim necessarily

entails consideration of arguments and case law which may also

be forwarded under the other labels.” 464 U.S. at 435 n.17.

Similarly, the Ninth Circuit’s view that the Betamax doctrine

is limited to the issue of whether a defendant has constructive

PP Poe ee a gens rey ean eer eee

Statutory mandate in construing the scope of

baility. See Fonovisa, Inc v. Cherry Auton, Ine, 76 34.259, 200 (Oth

Cir. 1996) (“support services” such as parking and utilities distinguish

swap meet operator from landlord and are “material contribution”);

tu attain rayne pte granary aamatnmages , 907 F.

1, 1375, 1376 (N.D. Cal. 1995) (providing access to computer

system used to infringe is material contribution; control for vicarious liability

can be theoretical and indirect, based on contractual relationship with

BBS operator rather than direct infringer); Ellison, 357 F.3d at 1078 (AOL's

“knowledge” imputed from one email it never received, and “material

contribution” was automated copying incidental to Usenet access); id at

1078-79 (For vicarious liability, there is “no requirement that the draw be

‘substantial.’ . . . The essential aspect . . . is whether there is a causal

relationship between the [infringement] and any financial benefit”). Far

pre petitioners’ se ateanrt ners Raped aalt sb

rein in to

a a secondary liability to accord more directly

knowledge, A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004,

1020 (9th Cir. 2002), is incorrect. The Betamax doctrine is not

tied to the state of defendants’ knowiedge; rather, it is based on

the public’s interest in access to technology. 464 U.S. at 440-

42. The Ninth Circuit stands alone in this erroneous view.

E.g., Aimster, 334 F.3d at 649 (rejecting Ninth Circuit view);

2 Paut Gotpstem, CopyriGut § 6.1.2, at 6:12-1 (2d ed. 2003)

(“The substantial noninfringing use doctrine serves a purpose

entirely separate from the knowledge requirement.”). Thus,

petitioners’ attack on the knowledge standard applied by the

Ninth Circuit, MPRC Br. 38-41, is pointless. The Betamax

doctrine does not depend on lack of knowledge.

IV. PETITIONERS’ THEORIES FOR IMPOSING

SECONDARY LIABILITY AND LIMITING

BETAMAX ARE AN IMPROPER INVITATION TO

JUDICIAL LEGISLATION.

Although the question presented is narrow, the relief sought

by petitioners reaches far beyond whether distribution of a

_ particular version of software constitutes infringement.

Petitioners propose numerous wide-ranging expansions of

secondary liability and weakening of the Betamax standard. Any

such change will have adverse effects throughout the economy.

The short answer to petitioners’ proposals is that each would

create a cause of action for copyright infringement that simply

is not found in the Copyright Act. See supra Part Ill. Petitioners’

request for judicial legislation should be rejected.

Petitioners’ proposed causes of action inevitably also would

destroy any demarcation of the boundaries between lawful and

unlawful conduct that this Court found “peculiarly important.”

Fogerty, 510 US. at 527. They would give a multitude of copynght

owners “effective control over” digital technology and “block

the wheels of commerce.” Betamax, 464 U.S. at 441.

Nor would these free-floating doctrines of secondary

liability have the beneficial effect petitioners seek. Peer-to-peer

software would remain freely available to would-be infringers

through off-shore websites beyond the reach of U.S. cooynght

law. As this Court recognized last term, laws regulating conduct

on the Internet tend to be ineffective “because providers of the

materials covered by the statute can simply move their operations

overseas.” Ashcroftv. ACLU, U.S. _,124S. Ct. 2783, 2786

(2004). The predictable effect of weakening the Betamax

doctrine will be that those who wish to defy the Court’s ruling

will simply move offshore, while legitimate U.S. technology

companies, with millions of employees in the United States,

who wish to comply with the law, will be burdened with

A. Petitioners’ “Principal Use” Standard and the

United States’ “Relative Significance” Test Are

Foreclosed by Betamax.

Petitioners ask this Court to rewrite the Betamax doctrine

so that it would “not apply when the primary or principal use of

a product or service is infringing.” MPRC Br. 31. Petitioners

argue that where the primary current use of a technology is

infringement, the provider of that technology is not “engaged

in “substantially unrelated’ commerce,” id., and invoke the

“economic philosophy behind the [copyright] clause,” id.

Economic philosophy notwithstanding, neither Betamax, nor

the patent law doctrine on which the Betamax doctrine was

based, supports such a construction.

Betamax made crystal clear that a technology provider

dhuies an tees aoeenn nae eee

uses so as Is

token enti entate ee

described the doctrine’s patent law roots, observing that in that

context, the rule properly causes courts to “deny the patentee

any nght to control the distribution of unpatented articles unless

they are unsuited for any commercial noninfringing use” and

that “the item must almost be uniquely suited as a component

of the patented invention.” Id. at 441 (emphasis added). The

ee ee ee

importance of not allowing the patentee to extend his

sapund Go Ruin eftde quill oma At tits ban Ghana

force in copyright, where the standard of protection is simple

originality and not novelty and nonobviousness, compare

17 U.S.C. § 102, with 35 U.S.C. §§ 102(a), 103, and rights

exist automatically in a vast array of works, with no examination

by the government, see 17 U.S.C. § 102.

The United States similarly ignores the plain language of

Betamax and the genesis of the “capable of substantial

noninfringing use” standard. Instead, the government concocts

a novel, multi-factor test, nowhere found in Betamax, that

depends upon the “Relative Significance of the Infringing and

Noninfringing Uses.” U.S. Br. 14-17.

The United States starts from the erroneous premise that

Betamax implicitly found that authorized time shifting was not

“substantial noninfringing use” and thus found it “necessary”

to consider whether unauthorized time shifting was fair use.

Id. at 12. In fact, the Court’s opinion belies this argument.

The Court credited the district court's finding that “the evidence

concerning ‘sports, religious, educational, and other

programming’ was sufficient to establish a significant quantity

of broadcast programming whose copying is now authorized,

and a significant potential for future authorized copying.”

464 US. at 444. After discussing the evidence on authorized

time shifting, the Court concluded:

If there are millions of owners of VTR’s who make

copies of televised sports events, religious broadcasts,

and educational programs such as Mister Rogers’

Neighborhood, and if the propnetors of those programs

welcome the practice, the business of supplying the

equipment that makes such copying feasible should

not be stifled simply because the equipment is used by

some individuals to make unauthorized reproductions

of respondents’ works.

Id. at 446-47 (concluding that seller of equipment “cannot be a

contributory infringer’”). This language can only be read as an

wa yewEa YS a

shifting to be a sufficient “substantial noninfringing use.”?'

See also id. at 444 (it would be “‘extremely harsh” to deprive

the public of a tool “‘capable of some noninfringing use’”

(quoting 480 F. Supp. at 468)).

B. Petitioners Are Incorrect To Focus on Current Uses

of a Technology.

Petitioners also are incorrect in their focus on current uses.

Betamax makes clear that a technology need not currently be

used for legitimate purposes, but must simply be “capable” of

legitimate uses, necessarily including uses that may only be

future or potential uses. 464 U.S. at 442.

The uses of technology change over time, as the VCR

industry was introduced, the

to be very lucrative for the studios pape nem A cso

used the devices to watch rented and purchased videotapes.’

Only three years after the Betamax decision, “home video had

become the industry’s chief revenue source. This market was

theatrical revenues ($1.6 billion).’*’

21. This conclusion similarly dooms the argument of the United

States (at 17-21) that, if the principal use of a technology is infringement,

courts must look to “subsidiary indicia.” See also infra Part VLE,

discussing the error of the “steps taken to discourage infringing uses”

22. The product likely would not have had the same success in the

marketplace without the record function. See, e.g., William Bowen, How

the Japanese Won the VCR Wars, Fortune, June 8, 1987, at 163

(describing how VCR prevailed over laser discs because it could both

play pre-recorded material and record).

23. Jennifor Holt, Jn Deregulation We Trust: The Synergy of Politics

and Industry in Reagan-era Hollywood, Fim Quarterty (Winter 2001)

(citation omitted), http://www. _m1070/

is_2 55/ai_83477537. Fourteen years later, one that

“[dJespite the ubiquity of VCRs, more people go to the movies than

ever, and videocassette rentals and sales account for more than half of

(Cont'd)

The tremendous. windfall that the VCR provided to the

movie industry demonstratés the folly banning or restricting

the use of new technologies based on early usage patterns. As

technologies evolve, and as content providers find new ways to

work with them, it is inevitable that the public’s use of the

technologies also will change. The recent success of iTunes and

other legitimate music sites shows that even in the context of

digital distribution, uses evolve as content providers,

manufacturers, and distributors probe the best ways to exploit

new technologies and markets. Giving copyright owners a veto

over the development of technology early in its evolution, based

on early misuse, would cause untold harm to the development

of new arts and sciences, and would ultimately damage both

the public and the copyright owners themselves.

C. The United States’ Focus on Respondents’ Business

and “Commercial Viability” Misconstrues the

Betamax Standard.

The United States argues (at 13) that the “capable of

substantial noninfringing use” standard must be considered in

light of the “defendant's particular business.” It also argues

(at 11) that the proper test is “commercial viability.” Like the

government's “relative significance” test, these arguments

cannot survive an examination of Betamax’s discussion of

authorized time shifting. Nowhere in Betamax does the Court

consider whether consumers would have purchased the Betamax

in order to record sports or Mister Rogers’ Neighborhood or,

for that matter, whether the product would have been viable

based on noninfringing uses.’*

(Cont'd)

Hollywood's revenues.” John Perry Barlow, The Next Economy of Ideas,

Wren, Oct. 2000, http://www.wired.com/wired/archive/8. 10/download_

pr.html.

24. Curiously, the United States relies on the Betamax dissent to

create its “commercial viability” standard. U.S. Br. 1). Of course, the

dissent was not the majority. But the United States even misreads the

dissent. The full passage cited by tee United States tasas Ghat “]i9f vematly

(Cont'd)

<q ae ane ee

Moreover, a standard based on commercial viability is

neither administrable nor consistent with the United States’

concession that “where noninfringing uses predominate,

plaintiffs will not prevail.” U.S. Br. 17. Viability of a product

will depend on complex analysis of diverse economic factors,

including costs, revenues, and retums on investment, an analysis

of a product. Nothing in Betamax suggests that courts are

required to make (let alone institutionally capable of making)

that analysis. Attempting to predict a product's future markets,

assigning an internal rate of return, and predicting future

profitability are not normal enterprises for Article III judges.

The standard also would tum Betamax on its head. It may

well be, for example, that a technology with overwhelmingly

noninfringing use is only marginally profitable, and that some

incidental infringing use is enough to sustain the product. Such

a product would fail the United States’ viability test, depriving

the technology to the vast majority of noninfringing users.°

D. Providing a Technology that Is Capable of

Substantial Noninfringing Use Is Not Inducement.

In their effort to avoid the Betamax doctrine, petitioners

argue that it does not apply where defendants have “intentionally

facilitated and actively encouraged and assisted infringement.”

MPRC Br. 27. This argument fails for two reasons. First, the

lower courts found no such conduct in connection with the

(Cont'd)

all of the product’s use, however, is to infringe, contributory liability

may be imposed; if no one would buy the product for noninfringing

purposes alone, it is clear that the manufacturer is purposely profiting

from the infri and that liability is appropriately imposed.” 464

U.S. at 491 (Blackmun, J., dissenting). A requirement that “no one would

buy the product for noninfringing purposes alone” is very different from

a standard of “commercial viability.”

25. Similarly, the United States’ repeated references (at 8, 14, 17)

to whether the “draw” of a product is infringement does not advance the

analysis, as it says nothing about how much of a “draw” is required. In

Ellison, 357 F.3d at 1079, the Ninth Circuit found even an insubstantial

é-zw to give rise to vicarious liability. See supra note 20.

distribution of the current version of the respondents’ software.

See, e.g., MGM Studios, 259 F. Supp. 2d at 1041-43. Thus, either

petitioners are relying on conduct related to prior versions of

the software, or they are relying on the distribution of the

software itself. As discussed in Part |, supra, conduct related to

prior versions of the software is not the subject of this appeal.

If petitioners are relying on the distribution of the software itself,

there is no way to distinguish this case from Betamax.

Petitioners’ exception would swallow the rule.

Second, despite dicta in one copyright case that has been

formulaically restated in later decisions, see Gershwin Publ’g

Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159 (2d Cir.

1971), petitioners have not cited to any case in which

infringement liability has been imposed on the basis of

“inducement.” In other words, there is no such doctrine, which

is why Congress has been working on creating one. See Internet

Amici Br. Part LIL.

Nor should this Court create it. Even if this were an

appropriate case to opine about inducement (which it is not),

petitioners’ proposed doctrine has no practical bounds.

Petitioners cite the patent law doctrine of inducement, descnibing

it as “encompass[ing] a wide range of conduct. . . including

licensing, repair and maintenance, design, instruction and

advertising.” MPRC Br. 28-29 n.18. Maintenance, design, repair

and instruction are normal incidents of providing technology.

Moreover, inducement under the patent law requires a specific

intent to cause the infringement of a particular known patent.

Manville Sales Corp. v. Paramount Sys. Inc., 917 F.2d 544, 553

(Fed. Cir. 1990). Petitioners can show no such intent here on

the limited record before this Court.

E. There Is No Duty To Design Technologies To

Minimize the Possibility of Infringement.

Petitioners ask this Court to turn the law of secondary

respondents—and all consumer electronics, information

technology, and telecommunications companies as well—to

have the interests of copyright owners rather than consumers

uppermost in their minds when making design decisions.

See MPRC Br. 33-34, 38-41. This is not a novel demand. The

movie companies made the same demand in their challenge to

the Betamax more than 25 years ago and were rebuffed by the

district court. See Universal City Studios, Inc. v. Sony Corp. of

Am., 480 F. Supp. 429, 462-69 (C.D. Cal. 1979) (rejecting

demand that the Betamax’s television tuner be eliminated to

preclude recording of programs); see also 464 U.S. at 494

(Blackmun, J., dissenting) (arguing that Sony “may be able, for

example, to build a VTR that enables broadcasters to scramble

the signals of individual programs and ‘jam’ the unauthorized

recording of them’”’).’®

Amici are aware of no case, other than Aimster, that has

recognized such a theory. In Aimster, Judge Posner stated:

Even when there are noninfringing uses of an Internet

file-sharing service ... if the infringing uses are

substantial then to avoid liability as a contributory

infringer the provider of the service must show that it

would have been disproportionately costly for him to

eliminate or at least reduce substantially the infringing

uses.

334 F.3d at 653.

Betamax does not permit such a conclusion, as this Court

gave no weight to the studios’ arguments that Sony could have

redesigned its product to avoid or decrease infringing uses. The

United States, for its part, agrees that “such a rule is neither

desirable nor supported by precedent,” noting that such a rule

“would have the undesirable effect of chilling technological

innovation and constraining the product development options

of developers of software and other digital technologies.” U.S.

Br. 19-20 n.3. Incongruously, however, and with no more

precedent or greater desirability, the United States attempts to

26. In other words, contrary to petitioners’ assertion, MPRC Br.

33-34, the Betamax Court did not face an “all-or-nothing” choice.

backdoor the same approach, arguing that steps taken (or not

taken) by the technology provider to prevent infringement should

be one of three “subsidiary indicia” of whether a technology

provider should be liable. /d. at 17, 19-21.

Either Aimster or the United States’ standard would create

a nightmare for courts and for inventors and their investors.

If technologies reached consumers’ hands in such a world, courts

would be required to second-guess each design decision. Any

system and argue that it would have been relatively inexpensive

for the technology’s creator to adopt it. Courts would be required

to perform technical and economic analyses of mynad protection

technologies, including various forms of encryption,

watermarking, fingerprinting, signaling, digital rights

management, and others not yet invented. They also would be

required to determine which technologies would be

“disproportionately costly” and to consider whether other, less

costly means could be employed by either the technology

provider or copyright owner. Such a rule would require a court-

ordered allocation of resources in every case.

Congress consistently has rejected such efforts by copynght

owners to force manufacturers to redesign their technology to

implement undefined content protection systems. In fact, the

last time Congress passed major legislation relating to copyright,

the DMCA, it relieved manufacturers of any burden to design

their products t> respond to copyright protection schemes that

says:

(3) Nothing in this section shall require that the design

of, or design and selection of parts and components

for, a consumer electronics, telecommunications, or

computing product provide for a response to any

particular technological measure, so long as such part

or component, or the product in which such part or

component is integrated, does not otherwise fall within

the prohibitions of [17 U.S.C. § 1201] (a2) or (6X1).

17 U.S.C. § 1201(c)(3).?’ This legislation was passed with the

support of respondents and other copyright owners.

As the legislative history makes clear, Congress intended

to ensure that manufacturers cf technology products would not

be under any obligation to design their devices in any particular

way. Then-Senator and former Attorney General John Ashcroft,

a leader in the development of Section 1201(c)\3), after citing

“the reasonable and accustomed home taping practices of

consumers recognized in the Supreme Court’s [Betamax ]

decision,” said:

It thus should be about as clear as can be to a judge or

jury that, unless otherwise specified, nothing in this

legislation should be interpreted to limit manufacturers

of legitimate products with substantial noninfringing

uses — such as VCRs and personal computers — in

making fundamental design decision or revisions.

144 Conca. Rec. $11887-88 (daily ed. Oct. 8, 1998).?*

If petitioners’ theories are adopted, virtually all digital

technologies will be subject both to advance clearance by a small

group of content conglomerates and to after-the-fact second

guessing by virtually any copyright owner about how the

technology was designed and how it is being used.” If a

27. The only exception to this rule was a very narrow, specific

mandate applicable to analog videocassette recorders. 17 U.S.C.

§ 1201(k). That provision contains balanced “encoding rules” that

prohibit copyright owners from applying the technology to prevent the

recording of certain copyrighted content, including broadcast television

and subscription pay satellite and cable channels.

28. These sentiments were also repeatedly expressed in the House

of Representatives. See, e.g., 144 Conc. Rec. H10621 (daily ed. Oct.

12, 1998) (statement of Rep. Klug ); see also 144 Conc. Rec. E2166

(daily ed. Oct. 14, 1998) (statement of Rep. Boucher); 144 Cone. Rec.

E2144 (daily ed. Oct 13, 1998) (statement of Rep. Tauzin); 144 Cono.

Rec. H7094-95 (daily ed. Aug. 4, 1998) (statement of Rep. Bliley).

29. Even under the current law, copyright owners continue to press

(Cont'd)

technology provider guesses wrong, it will bé subject to

potentially ruinous statutory damages. Innovation and

investment cannot survive in such an environment.

This Court should reject petitioners’ request thai it adopt

the Aimster standard and the United States’ suggestion that

failure to design technology in the manner sought by content

providers is indicative of infringement.

CONCLUSION

The judgment of the court of appeals should be affirmed.

Respectfully submitted,

Bruce G. JosePH

Counsel of Record

Karyn K. ABLIN

Scott E. Bain

Wiey Rew & Fre_pic LLP

1776 K Street, N.W.

Washington, D.C. 20006

(202) 719-7000

Counsel for Amici Curiae

March 1, 2005

———

(Cont'd)

claims based on the failure of innovators to apply favored content

protection technology, often trying to prevent lawful uses of content.

See Internet Amici Br. Part I1.2 (discussing RIAA’s reasons for attacking

Diamond’s Rio, MPAA’s challenge to TiVo’s content protection

technology, and RIAA’s request to the FCC for broad limitations on

digital radio).

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.