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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0043%3A43

## Record

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

## Text

In the Supreme Court of the Gnited States

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

r
v*

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
Copyright Inffingemoent .... 0.0... ccc ce cccess 7
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

iv

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.

2

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

3

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.

Copyright law must therefore strike a careful balance
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

4

copyright infringement so long as the technology is
“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

5

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

6

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.

7

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
Copyright Infringement

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

8

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

9

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.

10

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,

11

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

12

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.

13

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

14

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,

15

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.

16

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.

(c) Whoever sells a component of a patented machine * * * for use
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,

17

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
copyright infringement — the seller can still incur liability if he engages
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.

18

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

19

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

20

“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

—-—

21

copyright owner need only show that the aefendant had
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
copyright owner must demonstrate that the defendant had
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
copyright owner to prevent others from marketing socially
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.

22

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.

23

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
copyright owners did not object to time-shifting and time-
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
copyright owner. But the damages alleged in infringement
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

24

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.

25

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

~~

26

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.”).

27

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.

28

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

29

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

relating to the design, manufacture, distribution, or operation ©

(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

31

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0043%3A43. Public record. Not legal advice.