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

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In the Supreme Court of the Gnited States

METRO-GOLDWYN-MAYER STUDIOS, INC., ET AL.,

Petitioners,

GROKSTER, LTD., ET AL.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF OF THE DIGITAL MEDIA ASSOCIATION,

NETCOALITION, THE CENTER FOR DEMOCRACY

AND TECHNOLOGY, AND THE INFORMATION

TECHNOLOGY ASSOCIATION OF AMERICA AS AMICI

CURIAE IN SUPPORT OF NEITHER PARTY

JONATHAN POTTER LAWRENCE ROBBINS*

Executive Director ALAN UNTEREINER

Digital Media Association DAMON TAAFFE

1615 L Street, N.W. Robbins, Russell, Englert,

Suite 1120 Orseck & Untereiner LLP

Washington, D.C. 20036 1801 K Street, N.W.

(202) 775-2660 | Washington, D.C. 20006

(202) 775-4500

MARKHAM C. ERICKSON

General Counsel

NetCoalition

400 N. Capitol Street, N.W.

Suite 585

Washington, D.C. 20001

(202) 783-5300 *Counsel of Record

{additional counsel listed on inside cover|

ee eee

JERRY BERMAN

President

ALAN B. DAVIDSON

Associate Director

and Staff Counsel

Center for Democracy

and Technology

1634 I St., N.W., Suite 1100

Washington, D.C. 20006

(202) 637-9800

SUSAN P. CRAWFORD

Assistant Professor

Cardozo School of Law

55 Fifth Avenue

New York, N.Y. 10003

(202) 790-0493

Counsel for Amicus Center for

Democracy and Technology

JOSEPH TASKER, JR.

General Counsel

Information Technology

Association of America

1400 Wilson Boulevard

Suite 1100

Arlington, Va. 22209-2318

(703) 284-5331

TABLE OF CONTENTS

Page

py Fe Fly) es) iii

INTEREST OF THE AMICI CURIAE ................ l

INTRODUCTION AND SUMMARY

EES 3

PT iwi poh cecicce hh se eebeeeedseescect 7

L. Sony Shields Conduct Relating To Technology

Design, Distribution, And Routine Advertising

And Support, But Not Active Encouragement Of

A. What The Sony Court Said.............. 8

B. Interpreting And Clarifying The Literal

Language Of The Sony Rule ........... 11

Cc. Conduct That Falls Outside The Sony

Defense May Give Rise To Liability

Under Traditional Theories Of

Secondary Lisbility ..... ccc ccccceces 16

Il. The Ninth Circuit Misunderstood The Scope Of

EE Sti deecdbdnebsceeéecvevce 20

Ill. The Seventh Circuit Effectively Refused To

RE OE ee 22

A. The Seventh Circuit Improperly

Engrafted A Balancing Test Onto The

REE Rg 22

(i)

TABLE OF AUTHORITIES

TABLE OF CONTENTS — Continued

Page Page(s)

Cases:

B. The Seventh Circuit Improperly

Considered Alternative Technology A&M Records, Inc. v. Napster, Inc.,

Designs In Determining Contributory 239 F.3d 1004 (9th Cir. 2001) ... 2... 0... e ea uee

CERT LAURE ~ 0c ccc ceccescctcecs 23

ACLU v. Reno, 929 F. Supp. 824 (E.D. Pa. 1996),

C. The Seventh Circuit’s Approach Would GEG, Fa UE. GOOCH t cc ncnccccéiovccs cece

Wreck Havoc In Practice ............. 25

Ashcroft v. ACLU, 124 S. Ct. 2783 (2004) ............

IV. Vicarious Liability Does Not Lie In This Case ... 28

Cable/Home Communication Corp. v.

V. A Remand Is Warranted To Allow The District Network Productions, Inc.,

Court To Consider The Record In Light Of A 902 F.2d 829 (11th Cir. 1990) ................

CREED. ov coccocéentcashavodaens 28

Dynacore Holdings Corp. v. U.S. Philips Corp.,

CUMS vaccosesceducdusshicceubdameen 30 363 F.3d 1263 (Fed. Cir. 2004) ...............

Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824) ........

In re Aimster, 334 F.3d 643 (7th Cir. 2003),

cert. denied, 640 U.S. 1107 (2004) ......... passim

Sega Enterprises, Lid. v. MAPHIA,

948 F. Supp. 923 (N.D. Cal. 1996) ............

Sony Corp. v. Universal City Studios,

GU TA. SEF GES cove ctevessvecéccesce passim

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

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

Statutes:

SOUR Be a kiccnson cdcuees ad saeaes

TABLE OF AUTHORITIES—Continued

Page

SS UGE, OUI «. .occscancascseekelsse 16-17

SUBS BINS .. fine ax: ccdbasdiiveescaae 16-17

Miscellaneous:

Feder, /s Betamax Obsolete? Sony Corp. of America

v. Universal City Studios, Inc., in the age of

Napster, 37 CREIGHTON L. REV. 859 (2004) ..... 12

BRIEF OF THE DIGITAL MEDIA ASSOCIATION,

NETCOALITION, THE CENTER FOR DEMOCRACY

AND TECHNOLOGY, AND THE INFORMATION

TECHNOLOGY ASSOCIATION OF AMERICA AS

AMICI CURIAE IN SUPPORT OF NEITHER PARTY

INTEREST OF THE AMICI CURIAE'

The Digital Media Association (“DiMA”) is a trade

association composed of 20 member companies that create,

license, sell, and use Internet-based and digital technologies that

allow or facilitate the programming and distribution of lawful

digital music and other media products and services. DiMA

members include America Online, Apple Computer, CNET

Networks, DMusic, Gibson Audio, Liquid Digital Media,

Live365, Mercora, Microsoft, Motorola, Music Choice Europe,

MusicNow, MusicRebellion, Napster, NativeRadio.com, Onion

River Radio, Orb Networks, RealNetworks, RuckusNetwork,

and Yahoo!.

NetCoalition serves as the public policy voice for some of

the world’s most innovative Internet companies, including

Google, Yahoo!, CNET Networks, and Bloomberg.

NetCoalition provides creative and effective solutions to the

critical legal and technological issues facing the Internet. By

enabling industry leaders, policymakers, and the public to

engage directly in the consideration of these issues,

NetCoalition has helped to ensure the integrity, usefulness, and

continued expansion of this dynamic new medium.

The Center for Democracy and Technology (“CDT”) is a

non-profit public interest group dedicated to promoting civil

' The parties’ letters of consent to the filing of this brief have been

lodged with the Clerk. Pursuant to Rule 37.6 of the Rules of this Court,

amici curiae state that no counsel for a party has written this brief in

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

members, or their sounsel, has made a monetary contribution to the

preparation or submission of this brief.

hberties online. CDT represents the public’s interest in an open,

decentralized Internet reflecting the constitutional values of free

expression, privacy, and individual liberty.

The Information Technology Association of America

(“ITAA”) provides 380 corporate members with global public

policy, business networking, and national leadership that

promotes the continued rapid growth of the IT industry. ITAA

members range from the smallest IT start-ups to industry leaders

in the Internet, software, IT services, digital content, systems

integration, telecommunications, and enterprise solution fields.

Amici represent some of the most technologically

innovative companies in America today. Their members’

offerings include portable music devices (such as Apple’s iPod),

music subscription services (such as Real Networks’

RealRhapsody), digital rights management technology (such as

Microsoft's Windows Media DRM), instant messaging products

(such as those by Yahoo!, AOL, and Microsoft), and myriad

other email, web browsing, and Internet communications

technologies. Amici also include a non-profit group

representing the broad public interest in protecting copyright

consistent with the openness and innovation that have been vital

to realizing the democratic potential of new digital media.

Amici do not condone — indeed, they strongly condemn —

the use of peer-to-peer technologies to violate copyright law.

Neither, however, do amici support the substantial broadening

of the standards for secondary uability that petitioners urge this

Court to adopt. Amici submit this brief to apprise the Court of

the dangers to technological innovation, free expression, and

democratic values online that are posed by petitioners’ position.

Amici urge this Court to reaffirm and clarify the reasoning

set forth in this Court’s decision in Sony Corp. v. Universal City

Studios, 464 U.S. 417 (1984). Without the crucial protections

for technology innovators recognized in Sony, courts would be

put in the untenable position of deciding when a provider of

novel technology has “done enough” to prevent intentional

misuse by others. Worse yet, courts would be called upon to

balance the theoretical cost-efficiency of potentially unproven

design changes that a technology provider might make to reduce

the risk that technology users might violate the copyright laws.

Under such a regime, technology companies would rightly

innovate with great trepidation, training one eye toward the

potential liability their new technologies could incur if abused

by purchasers, licensees, or sub-licensees. Inevitably,

technological progress would be impeded, as the potential for

secondary liability would cause innovators to withhold

technologies and product features that would benefit legitimate

users. In the long run, innovation — and therefore society as a

whole — would suffer.

Amici submit this brief to explain how the twin goals of

protecting copyright and protecting legitimate innovators are

both profoundly important, and why Sony provides exactly the

right approach to ensuring continued harmony between

innovators and copyright owners.

INTRODUCTION AND SUMMARY OF ARGUMENT

All technologies that enable the distribution of information

~ from the typewriter to the tape recorder, copy machine, VCR,

and cellular phone — may be used to infringe copyrighted works.

In the digital world, too, computer operating systems, programs

for recording and playing music, e-mail programs, compact

discs, and peer-to-peer technology may be used to infringe

copyrights. At the same time, all of these technologies have

important and far-reaching legal uses, the full extent of which

is inherently unpredictable.

between protecting copyright owners and shielding innovative

companies from secondary liability resulting from the misuse of

their novel technologies (which include products as well as

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

417 (1984), this Court struck that balance correctly, holding that

distribution of technology does not give rise to liability for

“merely * * * capable of substantial noninfringing uses.” /d. at

442. That legal framework has contributed significantly to

twenty . ears of unprecedented technological advance — a period

that has witnessed the rise and proliferation of compact discs,

personal computers, cellular phones, work and home networks,

on-demand information and the Internet.

The explosion of innovation enabled by Sony has had three

salient characteristics. First, digital technology is now a central

part of the everyday lives of average Americans. At work we

are more productive, composing documents on personal

computers; searching for information on the Internet;

communicating with colleagues across the hall and around the

world by e-mail; and maintaining our calendars with personal

digital assistants. At home, we record our favorite television

shows for later viewing on personal video recorders; we check

our stock portfolios and buy airline tickets online; and we

communicate with friends and relatives through instant

messaging. And when in transit, we use portable music players

to listen to our favorite music and cell phones to ask what to buy

at the grocery store or what movie is playing at the local

multiplex.

Second, each technology has advanced in a series of rapid

incremental steps, building on previous innovations. Every

twelve to eighteen months, Intel has released a new

microprocessor that was significantly faster than the previous

version. Computer storage capacity has increased dramatically

each year. The speed of Internet connectivity has progressed

incrementally from 28k modem to 56k modem to DSL and

cable modem. As a result, amici’s members now provide users

with many valuable new technologies (both products and

services), most of which existed only in the imagination of

computer scientists at the time of the Sony decision. Sony

permitted each of these rapid, incremental innovations by

shielding companies (and their shareholders) from copyright

litigation so long as technological innovations were capable of

substantial noninfringing use.

Third, the digital technologies that owe their existence to

Sony have helped to bring about a revolution in communications

and free expression in the digital age. Today these technologies

foster free expression and First Amendment values by playing

an indispensable role in the most speech-enabling medium in

our history. “As the most participatory form of mass speech yet

developed, the Internet deserves the highest protection from

governmental intrusion.” ACLU v. Reno, 929 F. Supp. 824, 883

(E.D. Pa. 1996) (Daizell, J., concurring), aff'd, 521 U.S. 844

(1997). The World Wide Web might never have achieved the

broad popularity it has if designers of web server software faced -

the copyright challenges that Sony foreclosed.

Despite the overwhelming success of the Sony standard in

striking the proper balance between protecting copyright and

encouraging innovation, confusion has arisen in the lower courts

regarding, among other things, the relationship between Sony’s

“substantial noninfringing use[]” test and the Court’s reference

elsewhere in the opinion to the existence of “commercially

significant noninfringing uses” for the Betamax. 464 U.S. at

442. Read properly, the latter reference is but one way of

applying the “substantial noninfringing use” test of Sony. In

other words, tion of a commercially significant

noninfringing use is sufficient to show that a product is capable

of substantial noninfringing use, but is not necessary to make

that showing. Thus, a court may find that a technology falls

within Sony’s safe harbor without complex analysis of the

degree to which its profitability “depends” on one or another

type of use. Pet. 19. Petitioners’ proposed tests, which focus on

the proportion of infringing use and the subjective intent of the

product’s distributor, are not faithful to Sony and would create

a deeply flawed, subjective standard that would chill technology

development by legitimate companies such as amici’s members.

Nevertheless, Grokster’s conduct in this case may well give

rise to liability. Although the Sony defense shields technology

vendors’ design, manufacture, distribution, general advertising,

and routine support activities from secondary liability, that safe

harbor dees not extend to a vendor’s other conduct. Rather,

such other conduct is evaluated according to traditional

principles of secondary liability, with remedies for any liability

narrowly tailored to address the infringing acts that the vendor’s

conduct encouraged.

This is the point missed by both the court below and the

Seventh Circuit in Jn re Aimster, 334 F.3d 643 (2003), cert.

denied, 640 U.S. 1107 (2004). The Seventh Circuit held the

designer of a peer-to-peer file-sharing technology liable for

contributory copyright infringement, but it did so only after

abandoning the Sony rule in everything but name. In contrast,

in the decision below, the Ninth Circuit reached a different but

equally flawed result. Based on a stipulation that 10% of the

files shared using Grokster’s technology constituted

noninfringing uses, the court concluded that the legitimate

portion was sufficient to meet the Sony test, and thus to preclude

secondary liability on any basis. Accordingly, the Ninth Circuit

held that the copyright owners’ only recourse was to sue direct

infringers individually. Both courts got it wrong, because

neither recognized that the Sony defense does not apply to other

conduct that might give rise to liability under traditional

secondary liability standards? The Seventh Circuit could

almost certainly have held Aimster liable on precisely that

theory; there was no need to abandon the Sony doctrine to reach -

the correct outcome. Similarly, in this case, the Ninth Circuit

affirmed summary judgment for Grokster without determining

* As explained in detail below, this brief draws a distinction between two

types of conduct. Neutral conduct, which relates to the design,

manufacture, distribution, and routine operation and support of a

technology (by its vendor or distributor), falls within the Sony defense to

contributory liability if the technology is capable of substantial

noninfringing uses. In contrast, conduct that actively encourages users

to violate copyright is not protected by Sony, but is instead evaluated

according to traditional secondary liability doctrines, including whether

the requisite level of scienter or knowledge has been proven.

whether the record contained evidence of active encouragement

of copyright infringement.

In short, the balance the Court struck in Sony is as viable

today as it was twenty years ago. The Court need only clarify

certain ambiguities in Sony to ensure both that copyright holders

retain the full protection granted to them by Congress and that

American technological leadership continues on its remarkable

trajectory, free from the specter of uncertain secondary liability

for copyright infringement.

ARGUMENT

It is critical to preserve the Sony defense, which allows

technology vendors to innovate without fear of liability imposed

simply because their socially valuable technologies are misused

by third parties to infringe copyright. This Court should

emphatically reject the Seventh Circuit’s attempt to engraft a

nebulous balancing test onto the venerable Sony defense, and it

should also make clear that courts ought not to inquire into

whether a technology might have been designed differently to

reduce or eliminate infringement. No such radical surgery is

necessary because, when properly understood, the Sony defense

offers no shelter to rogue companies for conduct that actively

encourages their users to infringe.

I. Sony Shields Conduct Relating To Technology Design,

Manufacture, Distribution, And Routine Advertising

And Support, But Not Active Encouragement Of

When properly understood, the Sony framework preserves

robust copyright protections while at the same time allowing

innovators to design socially valuable technologies without fear

of legal repercussions. Unfortunately, recent lower court

decisions betray a lack of understanding about Sony’s core

reasoning, and it is these misapprehensions that have led

tribunals like the Ninth Circuit to conclude that the law affords

no copyright protection against companies such as Grokster. To

see where these lower courts have gone astray, it is necessary

first to analyze this Court’s decision in Sony.

Sony’s Betamax technology, which was popular in the late

1970s and early 1980s, was the first version of the modern

VCR: it allowed home television viewers to record programs

when they were initially broadcast, and enabled them to replay

those recorded programs at a later time. It also permitted users

to manipulate the replays through pause, rewind, and fast-

forward functionality. Because virtually all television

broadcasts were copyrighted by their producers, use of Betamax

machines led to the duplication of copyrighted materials on an

unprecedented scale.

A group of copyright owners (“the Producers”) filed suit

against Sony alleging that, by selling the Betamax, it had

materially contributed to home viewers’ copyright infringement

in at least two ways. First, the Betamax enabled “time-

shifting,” the practice of recording a program when it is

broadcasted and playing it back later. That use was particularly

appealing to consumers because it granted them a degree of

control over their viewing schedules, and also allowed them to

view two programs broadcasted simultaneously by watching

one “live” while recording the other. 464 U.S. at 422. Second,

the Betamax allowed viewers to create libraries of previously

recorded copyrighted programming. /d. at 423. It also enabled

viewers to fast-forward through commercials, thereby reducing

the Producers’ ability to sell those commercials. |

A. What The Sony Court Said

The Court acknowledged at the outset that “(t]he Copyright

Act does not expressly render anyone liable for the infringement

committed by another.” 464 U.S. at 434. Nevertheless, the

Court determined that a technology provider can be secondarily

liable for copyright infringement where it has the type of “direct

involvement” with infringing activity that would give rise to

liability under traditional principles of contributory and

vicarious liability. /d. at 447. “[V]icarious liability,” the Court

explained, “is imposed in virtually all areas of the law, and the

concept of contributory infringement is merely a species of the

broader problem of identifying the circumstances in which it is

just to hold one individual accountable for the actions of

another.” Ibid.’

Having concluded that secondary copyright infringement

was a viable theory of liability, the Court nevertheless

recognized that the Producers’ application of that theory was

unprecedented. Although certain lower courts had found

contributory infringement in copyright cases involving an

“ongoing relationship” between the direct and contributory

infringers, 464 U.S. at 437, “the only contact between Sony and

_ the users of the Betamax * * * occurred at the moment of sale.”

Id. at 438. Moreover, the district court had found “no evidence

> The Seventh and Ninth Circuits have reachea conflicting conclusions

on the question whether the Sony defense applies only to contributory

liability (or instead to both contributory and vicarious liability).

Compare A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1022 (9th

Cir. 2001) (contributory liability only) with /n re Aimster Litigation, 334

F.3d 643, 654 (7th Cir. 2003) (both). In amici’s view, the Court’s

opinion in Sony is properly understood to apply to both forms of

secondary liability - and the Court should use this case to clarify this

point. As Judge Posner correctly noted (334 F.3d at 654), the Sony

opinion appears to use contributory and vicarious liability

interchangeably. Moreover, the district court in Sony separately analyzed

the issues of contributory and vicarious liability, see Universal City

Studios, Inc. v. Sony Corp. of America, 480 F. Supp. 429, 459-62 (C.D.

Cal. 1979), and this Court was well aware that both theories were being

advanced (and discussed them both under the rubric of “liab[ility] for

infringement committed by another” (464 U.S. at 434-35)). In

concluding that the Sony defense applies only to contributory liability,

the Ninth Circuit cited only (1) a treatise on copyright law that, in fact,

did not endorse any such limit on Sony; and (2) a practitioner’s article

(written for a conference of the Practicing Law Institute) that, in turn,

relied on nothing other than the RIAA’s appellate brief in the Napster

case. See 239 F.3d at 1022. In amici’s view, there is no sound legal or

public policy reason for drawing a distinction between contributory and

vicarious liability for purposes of the Sony defense.

that any of the copies made by [the Betamax users] were

influenced or encouraged by [Sony’s] advertisements.” /bid.

(internal quotations omitted).

Because the Copyright Act contained no mention of

secondary liability, the Court sought guidance from the patent

laws, and in particular from 35 U.S.C. § 271, which defines the

concept of contributory infringement in that setting. The Court

drew two conclusions. First, the Patent Act’s prohibition

against contributory infringement does not allow a patentee to

enlarge his monopoly by objecting to a technology offering that,

while infringing his patent, “might [also] be used [legally] in

connection with other patents.” 464 U.S. at 440. Second, the

Patent Act “expressly provides that the sale of a ‘staple article

or commodity of commerce suitable for substantial

noninfringing use’ is not contributory infringement.” bid.

Together, these rules mean that if a technology is capable of

substantial noninfringing uses, courts will not allow a patentee

to obstruct others’ use of that technology merely because the

technology could also be used to infringe his patent. In other

words, although the protection of patents is important, it cannot

trump others’ rights to engage in iegitimate commerce.

This Court “recognize[d] that there are substantial

differences between the patent and copyright laws,” 464 U.S. at

442, but concluded that similar policy interests were at stake in

the two settings. It therefore imported the “staple article of

commerce” concept into copyright law, explaining that the

doctrine “must strike a balance between a copyright holder’s

legitimate demand for effective — not merely symbolic —

protection of the statutory monopoly, and the rights of others

freely to engage in substantially unrelated areas of commerce.”

Ibid. The Court then announced the defense under which

American technological innovation has flourished for two

decades:

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

articles of commerce, does not constitute contributory

infringement if the product is widely used for legitimate,

unobjectionable purposes. Indeed, it need merely be

capable of substantial noninfringing uses.

Ibid. (emphasis added).

Next, the Court applied its “substantial noninfringing uses”

rule to the Betamax machines by inquiring “whether the

Betamax is capable of commercially significant noninfringing

uses.” 464 U.S. at 442. Because the Court shifted from the

“substantial” formulation to a “commercially significant”

formulation seamlessly and without comment — indeed, the two

formulations are contained in consecutive sentences — it clearly

regarded them as equivalent. Since “one potential use of the

Betamax plainly satisfie{d] this standard, however it is

understood,” the Court saw no need to “give precise content to

the question of how much use is commercially significant.”

Ibid. It thus held that Sony was not secondarily liable for

Betamax users’ direct copyright infringement.

B. Interpreting And Clarifying The Literal Language Of

The Sony Rule

The Sony Court's failure to give content to the rule it

established has spawned confusion in the lower courts on two

issues: what significance, if any, to accord to this Court's

alternate use of the terms “substantial” and “commercially

significant,” and whether “capable of” requires courts to

imagine even c>mote possibilities.

1. The substantiality test, not commercial significance, is

the true Sony rule. Courts, litigants, and commentators have

struggled to make sense of Sony's alternate formulations,

questioning whether any difference was intended, what sense of

“commercial” the Court contemplated, and how “significance”

should be measured in any particular context. This case

illustrates the confusion. The district court found that there

were substantial noninfringing uses for the Grokster software,

such as distributing free songs and the works of Shakespeare,

without examining (or even mentioning) whether those uses

were “commercially significant.” See Pet. App. 33a. In

affirming, the Ninth Circuit reasoned that “the Software

Distributors have not only shown that their products are capable

of substantial noninfringing use, but that the uses have

commercial viability.” Id. at 12a (emphasis added). Certain

commentators have sei... on this “commercial viability” rubric

as a way to give conten: 4 the Sony “commercially significant”

formulation. See, e.g., Feder, /s Betamax Obsolete? Sony Corp.

of America v. Universal City Studios, Inc., in the Age of

Napster, 37 CREIGHTON L. REV. 859, 899 (2004).

If the Sony Court had meant to establish two distinct

standards, it would doubtless have said so. Instead, the majority

shifted from substantiality to commercial significance in

consecutive sentences without comment, making clear that it

considered “commercially significant” to be a fact-specific

application of the broader term “substantial.”

The critical point is that substantiality, not commercial

significance, is the actual Sony rule. It is entirely possible for

a use of a technology to be “substantial” without involving a

commercial marketplace. For example, a disaster-relief non-

profit organization might offer a peer-to-peer service to allow

field volunteers to share information among themselves.

Similarly, a student might devise an innovative file compression

algorithm and make it available for public download. Neither

of these services would be “commercial” in the sense of being

market-oriented, yet surely both could generate substantial

noninfringing use.

Even technologies offered to the marketplace by for-profit

companies can be “commercially significant” without

generating any direct revenue. “Commerce” is not only the sale

of goods and services; rather, in this Court’s words,

““Icjommerce’ is intercourse; [even] in its most limited meaning

it embraces traffic.” Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1,

189 (1824). It is, in other words, trade or interaction, and it has

no necessary relationship to revenue or profit. Thus, even if the

noninfringing uses of a technology do not generate revenue, that

does not imply that the vendor is a secondary infringer.

Needless to say, any interpretation of the Sony rule that would

require a technology to be “commercially viable” is

inappropriate to the extent that it requires revenue or

profitability. Amici are concerned that if the Court conducts a

“commercial significance” inquiry in this case without clearly

explaining that “commerce” and “revenue” are distinct

concepts, subsequent courts will equate the two and allow

liability merely because a technology is not profitable or

revenue-generating. Should that occur, legitimate organizations

that offer socially valuable technologies and services would face

the risk of enormous secondary liability.

Legal doctrines aside, there also are compelling practical

reasons to eschew any standard that turns on a technology’s

whether a particular technology offering could be profitable or

commercially viable would yield far more questions than

answers. Moreover, many of the technologies that would face

contributory infringement allegations would be too novel to

permit a satisfactory analysis of their true market potential.

In short, although there are circumstances in which the

ially signifi ieftnctnn oat? Innis tn On

accurate application of Sony’s “substantial noninfringing use”

rule, the danger of its misapplication is significant. Amici

strongly urge the Court to clarify that the “substantial

noninfringing uses” test is the true Sony rule.

2. In Aimster, the Seventh Circuit worried that, if the

“capable of” standard in Sony were read literally,

all Aimster has to show in order to escape liability for

contributory infringement is that its file-sharing system

could be used in noninfringing ways, which obviously it

could be. Were that the law, the seller of a product or

service used solely to facilitate copyright infringement,

ee ee ee ee

would be immune from liability for contributory

infringement. That would be an extreme result, and one

not envisaged by the Sony majority.

334 F.3d at 651.

Judge Posner is certainly right that almost any technology

offering might be deemed “capable of” substantial

noninfringing use if considered with sufficient imagination, and

amici agree that the Sony Court did not intend to craft a

meaningless standard. At the same time, however, recent

history is replete with examples of novel technologies that

arrived years before their primary markets emerged or

flourished —- VCRs and Internet search engines being prime

examples of late bloomers.

Viewed sensibly, the “capable of” phrase merely

encourages courts to consider whether there exists a reasonable

possibility that there will be substantial use of a technology

offering for noninfringing activities. Its message is cautionary:

because new technologies often meet with confusion, resistance,

fear, or even hostility, courts should be circumspect in deciding

that a novel offering is unlikely ever to provide real value to

society. Simply put, judges entertaining claims of secondary

liability based on new technologies should err on the side of

caution, resisting the instinct to infer that the future use of a

technology will invariably be limited to its present use. To do

otherwise would impede the course of technological progress

and innovation.

3. Given the evident confusion surrounding the “capadle

of” and “substantial noninfringing use” formulations, amici

respectfully offer for the Court’s consideration a reformulation

that would materially preserve the present state of the law while

bringing needed clarity: /f there exists a reasonable possibility

that there will be substantial current or future use of a

technology for noninfringing activities, the provider of that

technology is not secondarily liable for copyright infringement

even though users misuse it. However, where the provider has

actively encouraged specific acts of infringement, such conduct,

if coupled with knowledge of infringement, can give rise to

liability under the traditional doctrines of secondary liability.‘

In that situation, liability is imposed not because the vendor

provided the technology — conduct that continues to be

immunized under Sony — but rather because the provider’s

conduct encouraged specific infringing uses of the technology.

The proposed reformulation has several virtues to

recommend it. First, by clearly encouraging courts to focus on

reasonable possibilities for actual use, it limits the need to

speculate about purely theoretical technological capabilities, a

singularly imprecise task and one that makes doctrinal

consistency difficult to achieve. Second, it is safely applicable

to technology offerings without regard to whether they generate

revenue.

Finally, this reformulation preserves a court’s discretion to

acknowledge qualitatively significant noninfringing uses that

may not be quantitatively significant. For example, an instant

messenger technology might allow video to be broadcast from

a handheld device, such as a cell phone or personal data

assistant. That technology would enable users to broadcast

infringing video from a movie theater, but it would also allow

soldiers in the field to send video intelligence in real time and

would be highly useful in search-and-rescue operations.

Therefore, even if the infringing broadcasts significantly

significance of the noninfringing uses should satisfy the Sony

test.

* “Active encouragement” is not used as a new standard of liability, but

rather as a description of the narrow category of conduct that may

constitute the kind of material contribution to infringement potentially

giving rise to liability under traditional standards.

C. Conduct That Falls Outside The Sony Defense May

Give Rise To Liability Under Traditional Theories Of

Secondary Liability

The Sony Court answered only the narrow question

whether a technology provider can be held liable for the design,

manufacture, distribution, general advertising, and routine

support of an offering, for no other facts were presented. The

Court tock pains to note that it was not possible for Sony

directly to encourage Betamax users, for “(t]he only contact

between Sony itself and the users of the Betamax * * * occurred

at the moment of sale.” /d. at 438. Likewise, “no employee of

Sony * * * had either direct involvement with the allegedly

infringing activity or direct contact with purchasers of Betamax

who recorded copyrighted works.” /bid. (internal quotations

omitted). Finally, Sony did not encourage infringement through

its marketing, for the record contained no “evidence that any of

the copies made by [the Betamax users] in this suit were

influenced or encouraged by [Sony’s] advertisements.” /bid.

(internal quotations omitted).

Because the record reflected no action on Sony’s part to

encourage Betamax users to infringe copyrights, this Court’s

decision did not address whether liability could be imposed for

such encouragement. * The lower courts, however, have

* The patent laws - abi On Soup Coat ee te ee

recognizing liability for contributory copyright infringement — confirm

that the Sony defense does not shield conduct that actively encourages

infringement. The Patent Act contains two relevant subsections:

(b) Whoever actively induces infringement of a patent shall be

liable as an infringer.

in practicing a patented process * * * knowing the same to be

especially made or especially adapted for use in an infringement

of such patent, and not a staple article or commodity of

commerce suitable for substantial noninfringing use, shall be

liable as a contributory infringer.

35 U.S.C. § 271(b), (c). As the text of subsection (c) makes clear,

repeatedly held that a technology provider can be liable for

contributory infringement if it actively promotes infringing uses

of its offering. See, e.g., Cable/Home Communication Corp. v.

Network Productions, Inc., 902 F.2d 829, 837-39 (11th Cir.

1990) (developer liable for promoting television signal

descrambling chips); Sega Enterprises, Ltd. v. MAPHIA, 948 F.

Supp. 923, 933 (N.D. Cal. 1996) (Internet bulletin board

operator liable for actively encouraging users to upload

copyrighted games). The Sony defense must be understood

against this backdrop of settled law.

The importance of this point is difficult to overstate. Even

if a technology vendor is able to show that its offering has

substantial noninfringing uses, the Sony defense does not shield

a vendor who, with knowledge of infringement, actively

encourages users to infringe copyrights using its technology.

Such conduct must instead be evaluated under the “material

contribution” prong of the traditional test of contributory

liability. As explained in greater detail below, the district

court’s failure to analyze potential acts of “active

encouragement” in this case warrants a remand to allow the

lower courts to consider, in the first instance, respondents’

conduct independent of the Sony defense.

Because the record in this case is limited, this Court should

not use this case to elaborate upon the circumstances in which

liability as a contributory patent infringer is permitted only when the

component of the patented machine or process is “not a staple

article * * * of commerce suitable for noninfringing use.” /d. § 271(c).

Although noninfringing uses might immunize the seller of a component

under subsection (c) — the source of the Sony defense to contributory

in other actions that induce infringement, a subject separately addressed

by subsection (b). See, e.g., Dynacore Holdings Corp. v. U.S. Philips

Corp., 363 F.3d 1263 (Fed. Cir. 2004). This confirms that the

Sony defense cannot (or should not) be stretched to insulate from liability

not only the design, manufacture, distribution, and routine support of

technology, but also conc ict that actively encourages consumers to

infringe copyrights.

secondary liability may be imposed for active encouragement of

infringement. It need only recognize that this case does not

necessarily end simply because respondents may not be held

liable merely for the distribution of technologies with

substantial noninfringing uses.

If this Court were to address the scope of secondary

liability for active encouragement of infringement, however, it

should make clear that this form of liability must be narrowly

crafted. In particular, the Court should clarify the types of

conduct that are not sufficient to give rise to secondary liability.

As it happens, petitioners’ submissions at the petition stage

provide a long list of such examples. See Pet. 4-8. First,

liability should not lie merely because a company profits

indirectly from infringing use. Any technology company that

sells advertisements will profit in proportion to the size of its

user base, but that fact is hardly evidence that a company

actively encourages its users to infringe copyright. Relatedly,

evidence that a business plan was not “commercially viable”

without infringing use is insufficient, because (as explained

above) that approach is simply a misapplication of the

“commercially significant” language in Sony. In short, business

plans per se do not create contributory liability without

corresponding acts of active encouragement.

Second, the Court should clarify that the purpose for which

a technology has been designed or distributed is irrelevant to

any assessment of whether the technology vendor or developer

has materially contributed to infringement. Such a standard

would inevitably chill the creative process, not least because it

could rarely be resolved on summary judgment. Vendors would

inevitably become embroiled in litigation that would ultimately

curtail innovation and progress.

Third, the mere fact that a vendor or distributor maintains

an ongoing relationship with its customers should not give rise _

to secondary liability. Although the Sony Court observed that

Sony’s involvement with Betamax users ended at the time of

sale, no such product/service distinction is tenable regarding

modern technology. Software updates, technical support,

operation of the technology by the vendor or distributor, and

similar interactions are both ubiquitous and necessary, and it

would be senseless to discourage such socially beneficial

ongoing relationships by allowing them to be used as evidence

of secondary liability.

Fourth, no act relating to the design, manufacture, general

advertising, routine support, or distribution of a technology

should give rise to secondary liability if there exists a

reasonable possibility that the technology will be used for

substantial noninfringing activities. For example, if a vendor

designs or redesigns a technology offering in a manner that

protects users’ anonymity, that design decision is shielded from

liability. Likewise, a vendor is not secondarily liable merely

because it allows users to download its software anonymously.

Fifth, as noted above, acts that do not relate to design,

manufacture, distribution, general advertising, or routine

support — and that are therefore not subject to the Sony defense

— are to be evaluated under the traditional principles of

secondary liability, which require either knowing and material

contribution to infringement, or profit from infringement and

ability to control it. By contrast, a company that engages in

facially neutral activities does not become secondarily liable

simply because its actions facilitate both infringement and legal

activity. For example, an advertising or marketing campaign

that merely describes a technology’s features is facially neutral.

Finally, the remedy for secondary liability should be

narrowly tailored to the underlying violation. Damages should

be awarded only for harm directly caused by a company’s active

encouragement. Moreover, any injunctive relief should be

limited to enjoining a defendant from engaging in the conduct

that gave rise to liability, and should not prevent distribution of

the technology itself. Any injunction against distribution would

allow a single plaintiff to shut down a multi-use technology,

even if other copyright holders benefit from use of the

technology. Thus, the Sony Court observed that it would be

“extraordinary to suggest” that individual copyright holders

could enjoin the distribution or operation of a technology

“simply because [it] may be used to infringe copyrights.” 464

U.S. at 441 n.21. ,

II. The Ninth Circuit Misunderstood The Scope Of The

Sony Defense

The Ninth Circuit affirmed the district court’s grant of

partial summary judgment to respondents because it agreed that

Sony required actual knowledge of infringement at a time when

respondents could prevent that infringement. See Pet. App. 10a-

13a. The court of appeals observed that respondents’ peer-to-

peer architecture transmitted infringing files directly from one

user to another, never passing through respondents’ servers.

Pet. App. 14a-15a. Furthermore, unlike in Napster, the Grokster

and StreamCast software did not depend on the vendor’s file

servers to index shared files — as the court put it, “even if

{Grokster and StreamCast] ‘closed their doors and deactivated

all computers within their control, users of their products could

continue sharing files with little or no interruption.’” Pet. App.

13a. The Ninth Circuit therefore observed that, although

respondents had actual knowledge of infringing files, that

knowledge was “irrelevant because [it] arrive[s] when

Defendants do nothing to facilitate, and cannot do anything to

stop, the alleged infringement of specific copyrighted content.”

Ibid. (internal quotations omitted). On that basis, the Ninth

Circuit affirmed partial summary judgment in favor of

respondents.

That analysis, although factually correct, was misguided

and unnecessary — the district court and Ninth Circuit simply

asked the wrong question because they were constrained by the

Ninth Circuit’s erroneous ruling in Napster J. There, the Ninth

Circuit concluded that the Sony defense focuses on knowledge,

not conduct:

If the product at issue is not capable of substantial or

commercially significant noninfringing uses, then the

—-—

constructive knowledge of the infringement. On the other

hand, if the product at issue is capable of substantial or

commercially significant noninfringing uses, then the

reasonable knowledge of specific infringing files and failed

to act on that knowledge to prevent infringement.

Pet. App. 10a (citing Napster I, 239 F.3d at 1027). Properly

understood, however, the Sony rule defines not the type of

knowledge required, but the type of conduct protected.° Actions

taken and decisions made in the course of designing,

manufacturing, distributing, and routinely supporting a

technology do not give rise to contributory liability if that

technology is capable of substantial noninfringing uses, for

liability based on an “infringing design” theory would allow a

useful technologies.

In contrast, it is well established that if companies actively

encourage specific copyright infringement through conduct

(beyond the design, manufacture, distribution, general

advertising, and routine support of technology) in a manner that

materially contributes to the infringing activity, coupled with

knowledge of that iniringement, they may be contributorily

liable for harm that directly results from such conduct. See

pages 15-17, supra. If respondents actively encouraged users to

infringe copyrights using their software in a manner that

materially contributed to the infringement, they may be

* In fact, the Sony Court’s approach is remarkable for its Jack of focus on

the knowledge element of contributory infringement. In part III of the

Sony opinion, see 464 U.S. at 434-42, where the Court set forth the

“substantial noninfringing uses” rule, the Court referred to contributory

infringement at least eleven times while mentioning knowledge only

once. That sole instance occurred when the Court observed that, if Sony

were to be secondarily liable for infringement, it could be due only to

Sony’s possession of constructive knowledge that the Betamax was used

for infringement (that being the only sort of knowledge consistent with

the record). /d. at 439.

secondarily liable for that conduct. But, because the district

court and Ninth Circuit were constrained by the erroneous

Napster I precedent, neither asked whether respondents had

engaged in conduct that met this standard.

III. The Seventh Circuit Effectively Refused To Apply Sony

Whereas the Ninth Circuit in this case misunderstood the

scope and thrust of the Sony defense, the Seventh Circuit all but

abandoned the defense due to its mistaken belief that it would

have snielded Aimster from contributory liability. In doing so,

it made two distinct mistakes that would have devastating

effects if embraced by this Court.

A. The Seventh Circuit Improperly Engrafted A

Balancing Test Onto The Sony Defense

The Seventh Circuit concluded that it is not sufficient for

a technology offering to be capable of substantial noninfringing

uses; rather, “when a supplier is offering a product or service

that has noninfringing [uses] as well as infringing uses, some

estimate of the respective magnitudes of these uses is necessary

for a finding of contributory infringement.” 334 F.3d at 649.

“(I)f 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.”

Id. at 653.

The Seventh Circuit’s balancing approach finds no basis in

the Sony opinion. Although four Justices dissented, not one

implied that, following a showing of substantial noninfringing

use, secondary liability could be resurrected if the copyright

owner demonstrates that the technology is actually used for a

substantial number of infringing purposes. Indeed, the

formulation adopted in Sony precludes such an interpretation: if

a technology offering “need merely be capable of substantial

noninfringing uses,” id. at 442 (emphasis added), it follows that

actual usage patterns cannot, standing alone, determine liability.

The Sony Court confirmed that it meant what it said when

it applied the test to the Betamax, explaining that “we need only

consider whether * * * a significant number of [uses] would be

noninfringing.” /d. at 442 (emphasis added). The substantiality

rule was plainly met, the Court reasoned, because many

shifting was fair use even as to those that did object. Yet, if

actual use were relevant, the Court almost certainly could have

found that, in practice, the Betamax was also employed for a

substantial number of infringing uses. It declined even to

consider that issue — a fact the Seventh Circuit failed to

acknowledge.

Putting aside the obvious impropriety of engrafting a

balancing element onto the Sony defense, the notion that courts

can accurately determine whether eliminating infringing use

would be “disproportionately costly” is wishful thinking. The

word “disproportionate” implies a comparison of the cost of

reconfiguring technology against the ongoing harm to a

cases are often both enormous and subjective, meaning that, in

practice, the “disproportionately costly” standard would always

favor copyright owners unless the amount of infringing use is

effectively zero. As amici and other technology leaders are all

too aware, that statistic is virtually impossible to achieve. In

practice, then, the “disproportionately costly” standard would

amount to a rule in which technologies capable of being used

for copyright infringement are simply not offered, despite their

socially valuable uses. Were that to happen, both business and

society would suffer.

B. The Seventh Circuit Improperly Considered

Alternative Technology Designs In Determining

Contributory Copyright Liability

The Seventh Circuit compounded its misreading of Sony by

proposing a standard that would embroil courts in deciding

among myriad ways of presenting and protecting copyrighted

content, an unprecedented and flatly unworkable approach to

liability in the copyright setting. The Sony Court never went

down that path — because Sony’s involvement with Betamax

users ended at the point of sale, the majority had no occasion to

ask whether Sony could have made design modifications to the

Betamax before the point of sale to reduce its usefulness for

infringing copyrights. The dissent, in contrast, observed that

“[r]emedies may well be available that would not interfere with

authorized time-shifting at all. * * * Sony may be able, for

example, to build a [Betamax] that enables broadcasters to

scramble the signal of individual programs and ‘jam’ the

unauthorized recording of them.” 464 U.S. at 494 (Blackmun,

J., dissenting).

The Seventh Circuit concluded that the majority’s silence

regarding alternative designs was simply an oversight, and

seized on a technology provider’s choice among possible

designs as evidence of an intent to facilitate infringement:

Although Sony could have engineered its video recorder in

a way that would have reduced the likelihood of

infringement, * * * the majority did not discuss these

possibilities and we agree * * * that the ability of a service

provider to prevent its customers from infringing is a

factor to be considered in determining whether the

provider is a contributory infringer-

Aimster, 334 F.3d at 648 (emphasis added). That is precisely

the wrong inference to draw from the Sony majority’s silence

regarding alternative designs. This Court considered the Sony

case for more than a year and heard oral arguments twice; those

facts, combined with the vigorous dissent’s mention of

alternative design possibilities, strongly rebut any suggestion

that the majority simply failed to consider the possibility of

alternative designs. Rather, its silence was surely intentional,

meaning that it considered the existence of alternative design

possibilities ‘rrelevant to the question whether the current

Betamax design gave rise to contributory copyright liability.

In short, Sony instructs that a court should take a

technology offering as it exists and simply determine whether

that technology, as designed, is capable of substantial

noninfringing uses. Contrary to the Seventh Circuit's

suggestion in Aimster, once a court has determined that there are

substantial noninfringing uses, it is inappropriate to engage in

an additional balancing test. Use of a balancing test would

destroy one of the principal benefits of the Sony defense:

providing innovators with a clear, objective standard by which

to assess the risk of liability.

C. The Seventh Circuit’s Approach Would Wreak Havoc

In Practice

The Aimster approach improperly assigns to courts the role

of applying a subjective, indeterminate test that is utterly

unlikely to produce an accurate answer (much less one that is

predictable in advance by businesses that must operate under it).

This is a task for which courts lack the institutional capacity.

Moreover, if contributory liability could arise due to the

application of the Seventh Circuit’s complex balancing test,

research and innovation would be significantly chilled, as

businesses are forced to worry constantly about liability arising

from consumers’ unforeseen exploitation of legitimate design

choices. Consider the following real-world examples:

1. A provider of an e-mail service allows subscribers to

attach files to e-mails sent by the subscribers. A substantial

number of the attachments are infringing files. Under an

Aimster approach, a court could order that the system be

redesigned to prevent the sending of any attachments, or any

attachments other than text files, which tend to be

noninfringing.

2. A company allows individuals to upload photographs

onto a website so that other users can view and download them.

Although the company designed the service to permit families

and friends to share baby pictures and vacation photos, many

people also use the service to exchange infringing pictures of

celebrities and magazine centerfolds. A court might mandate

that the service be redesigned to require an uploader to identify

who he is, or to restrict access to the photos to individuals

specifically designated by the uploader.

3. A manufacturer of a portable music player includes

storage capacity of far more songs than a typical user purchases

in a lifetime. One might argue that this excess capacity

encourages some users to download songs illegally. A court

might order that the device be redesigned to reduce its storage

capacity.

As these scenarios illustrate, the Seventh Circuit’s

approach to contributory copyright liability would impose

substantial economic and social costs on society.’ The litigation

costs alone would be enormous — not only would volumes of

expert testimony be required regarding the chosen technology,

but similar testimony would be required on dozens of

hypothetical alternatives. Technology innovators, many of

which are relatively small companies, would simply be

overwhelmed by litigation expenses.

The impact on society would also be pronounced, because

the digital technology product cycle is often as short as six

months, with each new release making incremental

improvements over the previous release. The Seventh Circuit

approach would completely derail this schedule, as attorneys

’ In practice, the chilling effect would likely fall more heavily on

legitimate companies than on those bent on encouraging copyright

infringement. Because technology is so mobile, any decision in which

a court ordered a relatively small, contributorily infringing company to

redesign its software would likely spur that company to distribute its

product from a foreign jurisdiction where it would be difficult to enforce

United States copyright law. Numerous file-sharing companies are

already located offshore, including perhaps the most popular platform,

Kazaa. Cf. Ashcroft v. ACLU, 124 S. Ct. 2783, 2786 (2004) (“COPA’s

effectiveness is likely to diminish even further if it is upheld, because

providers of the materials covered by the statute simply can move their

operations overseas.”).

would scrutinize each design decision and balance its potential

for infringing uses and the availability of alternatives. Even if

they approve a new release, content providers may well ask a

court to second-guess the cost-benefit analysis. The judicial

process will take far more than six months, particularly given

the extensive discovery the plaintiff would take of the

defendant’s engineers.

Petitioners doubtless will insist~that they would not

challenge basic technologies such as e-mail, search engines, and

MP3 players. And petitioners themselves may very well decide

not to abuse the power conferred upon them under an Aimster-

type approach. But the universe of potential copyright plaintiffs

is far larger than petitioners, and far less responsible; indeed,

legitimate companies such as eBay, AOL, and Google have

already been sued for copyright infringement based on

providing such services as online auctions, access to usenet

groups, and search results that include images. The Aimster

approach would literally open the floodgates of litigation.

The superior framework is the one Sony established, which

has proved effective over the course of twenty years of

unprecedented technological innovation. In fact, a proper

application of the Sony rule may well have allowed the Seventh

Circuit to find Aimster contributorily liable. Aimster’s tutorial

gave as its only examples of file sharing the sharing of

copyrighted music, which even the Seventh Circuit recognized

was “the invitation to infringement that the Supreme Court

found was missing in Sony.” 334 F.3d at 651. Similarly,

Aimster’s “Club Aimster” function allowed a user to perform a

1-click download of the 40 most popular songs among Aimster

members, all of which were copyrighted. /d. at 652. These are

precisely the sorts of active encouragements to infringe that the

Sony “substantial noninfringing use” rule does not protect.

Thus, there was simply no need for the Seventh Circuit to blaze

new doctrinal trails in order to bring Aimster to justice.

IV. Vicarious Liability Does Not Lie In This Case

Petitioners offer “vicarious liability” as a doctrinal

backstop, arguing that even if a technology vendor lacks

knowledge of the infringing activity or does not materially

encourage it, the vendor may nevertheless be secondarily liable

if he directly profits from the infringement and has the ability to

control it. Pet. 16. Amici believe that the Ninth Circuit in this

case correctly rejected vicarious liability on the part of the

respondents.

The district court found no evidence in the record that

respondents currently had the ability to control the ongoing

infringement. Pet. App. 53a-54a. The Ninth Circuit found no

factual error in this, and agreed that petitioners’ evidence of the

right and ability to supervise was little more than a contention

that “the software itself could be altered to prevent users from

sharing copyrighted files.” Pet. App. 19a (internal quotations

omitted). The courts below correctly understood that the Sony

case imposes no obligation on a technology vendor to design its

product to avoid or reduce infringement in order to avoid

secondary liability. After all, Sony certainly could have

redesigned its Betamax device to avoid or reduce infringement,

thereby gaining more control over how its device was used, and

the dissent expressly noted that possibility (464 U.S. at 494).

Nevertheless, as explained above, this Court imposed no such

duty. In sum, the ability to have provided a different product is

not the kind of “control” sufficient to give rise to vicarious

liability — in this or any analogous context — and the courts

below correctly rejected liability under a vicarious theory.

Vv. A Remand Is Warranted To Allow The District Court

To Consider The Record In Light Of A Clarified Sony

Rule

The district court briefing was constrained by the Ninth

Circuit's erroneous determination in Napster / that the Sony rule

bears only on the requisite showing of knowledge. On appeal,

the Ninth Circuit perpetuated the error, ruling that if a

ee ee

technology is capable of substantial noninfringing uses, then a

higher standard of knowledge is required for imposition of

contributory liability with regard to any conduct in which the

defendant engages. Pet. App. 10a (“[I]f the product at issue is

capable of substantial or commercially significant noninfringing

uses, then the copyright owner must demonstrate that the

defendant had reasonable knowledge of specific infringing files

and failed to act on that knowledge to prevent infringement.”).

Because the Ninth Circuit found the higher standard of

knowledge not met, it essentially ignored any further

meaningful analysis of conduct that might have actively

encouraged the infringing activity at issue.

Had Ninth Circuit precedent correctly focused the district

court and the parties on conduct that encouraged infringement,

summary judgment might not have been granted in favor of

respondents. Among other things, the record reflected that

StreamCast’s advertisements featured screen shots of infringi

files, including The Eagles’ Greatest Hits. Pet. C.A. Br. 30-31.

In addition, both respondents aggressively cultivated Napster

users at a time when the Napster system had been adjudicated

to be in violation of the copyright laws: StreamCast advertised

itself as “the Alternative Napster network” (Pet. C.A. Br. 10),

and Grokster used metatags to attract former Napster users

(id. at 12). Given the court decisions holding Napster liable as

a secondary infringer and Napster’s highly publicized shutdown

by court order, those actions arguably gave rise to factual issues

as to whether the respondents were actively encouraging

infringement by users.

In the Seventh Circuit’s words, these communications to

direct infringers were “the invitation to infringement that the

Supreme Court found was missing in Sony.” 334 F.3d at 651.

Indeed, the record may well contain evidence of conduct like

that in Aimster, where Aimster’s software tutorial prominently

featured infringing works and the company offered | -click

downloading of the most frequently requested works, all of

which were infringing. /bid. Because the record in this case is

. 30

sealed, amici are unable to provide a comprehensive list of such

“invitations to infringement”; on remand, however, the district

court will have the opportunity for further evaluation of the

record with an eye to conduct that actively invites or encourages

infringement.

Although the district court’s failure to examine the record

for evidence of active encouragement justifies a remand in this

case, the Court should nevertheless make clear that the range of

potential guilty conduct is quite limited. First, active

encouragement does not exist merely because a technology

vendor profits indirectly from infringing use — any business plan

based on advertising will profit in proportion to the number of

users a technology has, but that fact alone does not demonstrate

active encouragement of illegal activity. Second, the presence

of encouragement is a question of overt acts, and the purpose for

which a technology may have been designed plays no part in

that inquiry. See note 2, supra. Third, the fact that a vendor

maintains an ongoing relationship with its customers does not,

without more, demonstrate encouragement. Fourth, no acts

(by the vendor or distributor) of a technology that is capable of

substantial noninfringing uses could constitute impermissible

encouragement. Finally, the question whether an act constitutes

active encouragement turns on traditional principles of

contributory liability.

CONCLUSION

For the foregoing reasons, this Court should vacate the

decision of the Ninth Circuit with instructions to remand the

case to the district court for further consideration.

Respectfuily submitted.

JONATHAN POTTER

Executive Director

Digital Media Association

1615 L Street, N.W.

Suite 1120

Washington, D.C. 20036

(202) 775-2660

MARKHAM C. ERICKSON

General Counsel

NetCoalition

400 N. Capitol Street, N.W.

Suite 585

Washington, D.C. 20001

(202) 783-5300

JERRY BERMAN

President

ALAN B. DAVIDSON

Associate Director

and Staff Counsel

Center for Democracy

and Technology

1634 I St., N.W., Suite 1100

Washington, D.C. 20006

(202) 637-9800

JANUARY 2005

LAWRENCE ROBBINS*

ALAN UNTEREINER

DAMON TAAFFE

Robbins, Russell, Englert,

Orseck & Untereiner LLP

1801 K Street, N.W.

Washington, D.C. 20006

(202) 775-4500

JOSEPH TASKER, JR.

General Counsel

Information Technology

Association of America

1400 Wilson Boulevard

Suite 1100

Arlington, Va. 22209

(703) 284-5331

SUSAN P. CRAWFORD

Assistant Professor

Cardozo School of Law

55 Fifth Avenue

New York, N.Y. 10003

(202) 790-0493

Counsel for Amicus Center

for Democracy and

Technology

*Counsel of Record

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.