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

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IN THE

Supreme Court of the Anited States

METRO-GOLDWYN-MAYER STUDIOS INC., ef ai.,

Petitioners,

Vv.

GROKSTER, LTD., et ai.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF OF KIDS FIRST COALITION, CHRISTIAN

COALITION OF AMERICA, CONCERNED WOMEN

FOR AMERICA, ENOUGH IS ENOUGH, MORALITY

IN MEDIA, INC., NATIONAL CENTER FOR MISSING

AND EXPLOITED CHILDREN, NATIONAL

FRATERNAL ORDER OF POLICE, NATIONAL LAW

CENTER FOR CHILDREN AND FAMILIES, AND

WE CARE AMERICA AS AMICI CURIAE

IN SUPPORT OF PETITIONER

VIET D. DINH

Counsel of Record

CHRISTOPHER D. THUMA

BRIAN A. BENCZKOWSK1I

BANCROFT ASSOCIATES PLLC

2121 Bancroft Place, N.W.

Washington, D.C. 20008

(202) 234-0090

Counsel for Amici

Whether the Ninth Circuit erred in concluding, contrary to

long-established principles of secondary liability in copyright

law (and in acknowledged conflict with the Seventh Circuit),

that the Internet-based “file sharing” services Grokster and

StreamCast should be immunized from copyright liability for

the millions of daily acts of copyright infringement that occur

on their services and that constitute at least 90 percent of the

total use of the services.

TABLE OF CONTENTS

QUESTION PRESENTED...........0:cc.ccccsssssescssessrsessssecees

TABLE OF AUTHORITIEBG..............ccccrccccsesscssessseeeeees

SUMMARY OF ARGUMENT oocccossecssssecsssvssosesosssesssees

CT, Ee Sarde ee SP

BY SANCTIONING RESPONDENTS’

STRATEGY TO EVADE LEGAL LIA-

BILITY, THE DECISION BELOW PRO-

VIDES SANCTUARY FOR _ ILLEGAL

ACTIVITY SUCH AS THE DISTRIBUTION

OF CHILD PORNOGRAPHY, OBSCENITY,

AND OTHER PROHIBITED MATERIALG....

A. The Decision Below Sanctioned Respon-

dents’ Evasion of Law and Encourages the

Development of Anarchic Networks ...........

THE LAW CONSISTENTLY HOLDS

PARTIES LIABLE WHEN THEY FACIL-

ITATE THE ILLEGAL ACTIONS OF

Coun fe = <

TABLE OF CONTENTS—Continued

Page

B. The Decision Below is an Anomaly

Among Traditional Principles of Sec-

ee 24

En 29

TABLE OF AUTHORITIES

CASES Page

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

Eee een passim

A&M Records, Inc. v. Napster, Inc., 114 F. Supp.

NG Oe 22

In re Aimster Copyright Litigation, 334 F.3d 643

a passim

Dawson Chem. Co. v. Rohm & Haas Co., 448

ed BR ED crttansncescnenstiuntinsmsmsennigipinmiintliniin 23

Dreamland Ball Room, Inc. v. Shapiro, Bernstein

& Co., 36 F.2d 354 (7th Cir. 1929) ..00....ccccceee 23

Doe v. Walker, 193 F.3d 42 (ist Cir. 1999).......... 27

Fonovisa, Inc. v. Cherry Auction, 76 F.3d 259

ee 12,21

Gershwin Publ’g Corp. v. Columbia Artists

Memt., Inc., 443 F.2d 1159 (2d Cir. 1971)........ 21

Gerentine v. Coastal Security Sys., 529 So.2d

1191 (Fla. Dist. Ct. App. 1988).................. fess 26

Grosfield v. United States, 276 U.S. 494 (1928)... 25

Kalem v. Harper Bros., 222 U.S. 55 (1911).......... 21, 25

Metro-Goldwyn-Mayer Studios, Inc. v. Grokster,

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

Metro-Goldwyn-Mayer Studios, Inc., v. Grokster,

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

New York vy. Ferber, 458 U.S. 747 (1982)............. 15

Roth v. United States, 354 U.S. 476 (1957) .......... 15

Screen Gems-Columbia Music, Inc. v. Mark-Fi

Records, Inc., 256 F. Supp. 399 (S.D.N.Y.

Se ntnemeemssntennenneseeesqpisnemantbiemenimensias 23

Shapiro, Bernstein & Co. v. H. L. Green Co., 316

yn 21,23

Sony “erp. of America v. Universal City Studios,

Inc., 464 U.S. 417 (1984) ......cccccscceseesseseesseeenes passim

TABLE OF AUTHORITIES—Continued

Page

Stalzer v. European Am. Bank, 448 N.Y .S.2d 631

eR ee eee ee 26

Staples v. CBL & Assocs., Inc., 15 $.W.3d 83

CORI, GID consennsimatennenpneememenesntinenaen 27

United States v. Bestfoods, 524 U.S. 51 (1998) .... 28

United States v. Jewell, 532 F.2d 697 (9th Cir.

re nsscensatensenaieanisapiiapiimastiatiiateasiiasiiatiatitninleatiaaiaas 27, 28

United States v. Peoni, 100 F.2d 401 (2d Cir

ee creccinsrenninensienguapiasitininniatnbtastinteaiiestietibinlees 14

United States v. Pino-Perez, 870 F.2d 1230 (7th

Re ee Se ec ee wn 14

Universal City Studios, Inc. v. Sony Corp., 480 F.

Ft 2 22

STATUTES

ORI OO cecctettctiternntncia 20

Fe le te itiicrsinnicnicncrunesiaiimiiatiiads 20

18 U.S.C. §§ 1460-70 (2004) 200.0... ccccccecceceeeceeees 15

ee es Se ED ciccernrcccaisieniinnninieinnis 15

LEGISLATIVE MATERIAL

H.R. Rep. No. 1476, 94th Cong., 2d Sess.

el canenisiteaicendianmeciadaeiesiintaitiattaainiatidaseiiidia tintin 20

Legislative Proposals to Protect Children from

Inappropriate Materials on the Internet, Hear-

ing Before the Subcommittee on Telecommu-

nications, Trade, and Consumer Protection of

the House Committee on Commerce, 105th

Cong. 26 (1998) (statement of Stephen R.

Wiley, Chief, Violent Crimes and Major

Offenders Sections, Federal Bureau of

vii

TABLE OF AUTHORITIES—Continued

Online Pornography: Closing the Doors on Per-

vasive Smut, Hearing Before the House Sub-

committee on Commerce, Trade, and Con-

sumer Protection, 108th Cong. (May 6, 2004)

(statement of Ernie Allen, President and Chief

Executive Officer, National Center for Missing

and Exploited Children).................cccccseeeeeeeeeee 19, 24

Online Pornography: Closing the Doors on Per-

vasive Smut, Hearing Before the House Sub-

committee on Commerce, Trade, and Con-

sumer Protection, 108th Cong. (May 6, 2004)

(statement of Penny Nance, President, Kids

FES GD ensccssescccesesasencenssesenesiasteemniionments 8, 24

S. Rep. No. 106-141, 106th Cong., Ist Sess.

CRIP recrsnracazsssemesseccsepensenmnesassctnnseqpemamasnapnaniens 8, 15,17

Special Investigations Division, Minority Staff

of House Comm. on Government Reform,

107th Cong., Children’s Access to Por-

nography Through Internet File-Sharing

CARTIER, PURE Seer e a ncccresercasuisincimenitnpisiipiaemes 16

Staff of House Comm. on Government Reform,

Report Prepared for Rep. Tom Davis and Rep.

Henry A. Waxman, 108th Cong., File-Sharing

Programs and Peer-to-Peer Networks Privacy

and Security Risks (Comm. Print May 2003)..8, 17, 18

Statement of the Honorable Marybeth Peters,

Senate Committee on the Judiciary, 108th

Come: Gast, Di, Fie eccecterssnstniinssvescsnsion 13

U.S. General Accounting Office, Report GAO-

04-757T, File Sharing Program: Users of

Peer-to-Peer Networks Can Readily Access

Child Pornography (May 6, 2003)...............0+ 15, 16

Vill

TABLE OF AUTHORITIES—Continued

MISCELLANEOUS

Alan O. Sykes, The Economics of Vicarious

Liability, 93 Yale L.J. 1231 (1984) .......ccccceeees

Audrey Gillan, Race to Save New Victims of

Child Porn, The Guardian, Nov. 4, 2003,

available at http://www.guardian.co.uk/child/

story/0,7369,1077260,00.html (last visited Jan.

BE, Tibi Pcccececassinnsesstaggnicteapinesinatinnenastitinasinaseies

Darell Smith, The File Sharing Dilemma, CNet

News (Feb. 3, 2004), available at http://news.

com.com/The+file+sharing+dilemma/2010-

1027 3-5152265.html (last visited Jan. 21,

David Luban, Contrived Ignorance, 87 Geo. L.J.

GF CRF Re iccrecnansenstensncncesscqnesenninnstamemsecmstanenes

Jane C. Ginsburg, Copyright Use and Excuse on

the Internet, 24 Colum. VLA J.L. & Arts |

John Foley, Reports of Child Pornography

Continue to Climb, Information Week (Jan.

11, 2005), available at http://www.information

week.com/story/show Article.jhtml?articleID=

57700595 (last visited Jan. 21, 2005)...........000+

National Center for Missing and Exploited Chil-

dren, CyberTipline: Annual Report Totals by

Incident Type: January 1, 1998 to December

5G, FOS Ga rcccscscrentiqscesscunnenamiennietiiainains

Page

16, 17

TABLE OF AUTHORITIES—Continued

Peer-to-Peer File-Sharing Technology: Con-

sumer Protection and Competition Issues,

Hearing Before the Federal Trade Commission

(Dec. 15, 2004) (statement of Michelle

Collins, Director of the Exploited Child Unit

of the National Center for Missing and Ex-

ploited Children), available at http://fic.gov/

bcp/workshops/filesharing/transcript 041215.

pdf (last visited Jan. 21, 2005)............ccccceceereeee

Remarks of Attorney General John Ashcroft,

Peer-to-Peer Announcement (May 14, 2004),

available at http://www.usdoj.gov/ag/

speeches/2004/51404agwebp2p.htm (last vis-

FORE FUN Be, Bie cccccpniancssetscintetetnattinesiamenasces

Restatement (Second) of Torts § 302A (1965)......

Restatement (Second) of Torts § 344 (1965).........

16, 19

INTERESTS OF AMICI CURIAE'

Amici are a variety of national, non-profit organizations

broadly representing the interests of parents, children, and

law enforcement officers. They share a commitment to the

effective enforcement of the law, in particular prohibitions

against child pornography, obscenity, and other predatory

behavior against the Nation’s children. Amici are concerned

that the decision below will spawn a proliferation of

anonymous, decentralized, unfiltered, and untraceable peer-

to-peer networks that facilitate crimes against children and

that frustrate law enforcement efforts to detect and investigate

these crimes.

Kids First Coalition is a grassroots, non-profit organization

of parents, grandparents, and future parents dedicated to ad-

vancing the interests of children and families and to educating

the country about the needs of children. Penny Nance is the

founder and president of Kids First Coalition. Membership

includes parents from all walks of life throughout the United

States. Kids First Coalition advocates on behalf of a variety of

issues relating to children, including decency in broadcasting

and on the Internet, alcohol regulation, the Innocence Pro-

tection Act, and other pro-family initiatives.

The Christian Coalition of America is a tax-exempt

organization and one of the largest grassroots political groups

in the country with over 2 million members. The orga-

' Petitioners and Respondents have consented to the filing of this brief.

Consistent with Rule 37.6, this brief is not authored in whole or in part by

counsel for any party. No person, other than amici or their counsel, has

made a monetary contribution to the preparation or submission of this

brief. Counsel of record is an independent, non-executive director of the

News Corporation, parent company of Petitioner Twentieth Century Fox

Film Corporation. Bancroft Associates PLLC provides ongoing public

affairs and political strategy advisory services to the Recording Industry

Association of America and the Motion Pictures Association of America,

of which some Petitioners are members.

nization is involved in educating public officials and

members of the community on important, pro-family issues

of national concern. The Christian Coalition has played a

particularly active role in state and federal efforts to enact

laws regulating obscenity, child pornography, indecency, and

materials that are harmful to minors.

Concerned Women for America is the nation’s largest

public policy women’s organization. The organization pro-

vides policy analysis, legislative assistance and research for

pro-family organizations. Concerned Women for Amer-

ica’s research and publications on the impact of pornography

have been distributed to scholars, organizations, and citi-

zens across the country. The organization’s Chief Counsel

has also filed briefs with this Court on the subject of

pornography.

Enough is Enough is a non-partisan, non-profit, edu-

cational organization dedicated to making the Internet safe for

children and families. The organization is committed to

raising public awareness regarding the dangers of Internet

pornography and sexual predators, and advancing solutions

that promote shared responsibility between the public,

technology, and the law. Individuals involved with Enough is

Enough come from varied backgrounds, professions, reli-

gions, non-profit organizations, and political affiliations.

Morality in Media, Inc., is a national, non-profit orga-

nization established in 1962 to combat obscenity and uphold

decency standards in the media. Its public information and

public affairs activities are designed to help individuals deal

effectively and constitutionally with the threat of illegal

pornography in their communities and the erosion of decency

standards in the media. Morality in Media specializes in

providing assistance on issues related to the laws of

obscenity, child pornography, broadcast indecency, and the

display and dissemination of materials that are harmful to

minors. The organization regularly prepares proposed legis-

lation and administrative regulations, testifies before

legislative and administrative bodies, and submits briefs

amicus curiae in state and federal courts. Morality in Media

also maintains the National Obscenity Law Center, a

clearinghouse of legal materials on obscenity law.

The National Center for Missing and Exploited Children

(“NCMEC”) is a private, non-profit organization that pro-

vides services nationwide for families and professionals to

prevent the abduction, endangerment, and sexual exploitation

of children. Pursuant to its mission and congressional

mandate (see 42 U.S.C. §§ 5771 et seqg.; 42 U.S.C. § 11606;

22 C.F.R. § 94.6), NCMEC operates a CyberTipline that

allows the public to report Internet-related child sexual

exploitation and provides technical assistance to individuals

and law-enforcement agencies in the prevention, investiga-

tion, and prosecution of cases involving missing and

exploited children.

The National Fraternal Order of Police is the world's

largest organization of sworn law enforcement officers, with

more than 318,000 members in all 50 States. The orga-

nization is a non-profit corporation created to represent the

interests of its members including participation as amicus

curiae before this Court in matters in which the organization

has unique expertise and insight. In particular, the organi-

zation understands the difficulties faced by law enforcement

in the investigation of crimes involving child pornography.

The National Law Center for Children and Families is a

non-profit corporation and educational organization special-

izing in legal issues related to obscenity, child pornography

and sexual abuse, Internet regulations, and the display and

dissemination of materials harmful to minors. Through

training, advice, and legal research, the organization provides

support on these issues to concerned citizens, local, state and

federal government officials as well as law enforcement

agencies across the United States. The Center has also filed

numerous briefs amicus curiae in this Court and in other

federal and state courts.

We Care America is a faith-based organization dedicated to

community development through governmental and private

advocacy. We Care America sponsors initiatives to support

needy children through adoption and foster care programs

and provides avenues for various community volunteer

opportunities.

STATEMENT Cr THE CASE

Amici adopt the statement of the case presented in the Brief

for Petitioner. For the Court’s convenience, amici highlight

below the facts most salient to the analysis that follows.

Peer-to-peer technology allows a member of an on-line

network to access the computer files of other members.

Because the accessible files are distributed throughout the

members’ computers, not stored in a centralized server, peer-

to-peer software is necessary to catalogue available files,

match the members’ request with files, and connect the

members to facilitate the file transfer. By linking information

localized in individual computers into a network of global

reach, peer-to-peer technology holds great potential for facili-

tating legal, productive activities.

Like any non-sentient, non-judgmental technology, peer-

to-peer technology can be misused for illegal, pernicious

activities. In A&M Records, Inc. v. Napster, Inc., 239 F.3d

1004 (9th Cir. 2001), the court authorized an injunction

against a peer-to-peer network for the illegal transfer of

copyrighted works among its members if the network “knows

or should know that such files are available” on the system

and “fails to act to prevent viral distribution of the works.”

Id. at 1027. The relevant network in that case, Napster,

maintained central servers to catalogue files available on its

members’ computers, to match its members’ searches, and to

connect the requesting “peer” to the offering “peer.”

Napster’s failure to prevent viral distribution of copyrighted

works opened the network to secondary liability for its

members’ illegal trade in the works.

With the fall of Napster, peer-to-peer companies that were

built on the same foundation—infringing content—had a

choice: to act responsibly to prevent illegal activity or to turn

in the opposite direction by taking steps to ensure that such

illegal activity could continue to occur. Respondent

StreamCast’s own former Chief Technology Officer stated

that “there are no technical limitations to the ability to filter”

illegal content. Darell Smith, The File Sharing Dilemma,

CNet News (Feb. 3, 2004), available at http://news.com.com/

The+file+sharing+dilemma/2010-1027_35152265.html (last

visited Jan. 21, 2005). It is not a question of “whether file-

sharing companies can filter, but whether they will.” Jd.

Respondents Grokster and StreamCast took the opposite

tack and disabled technologies to monitor and control

network activities. They relocated their central server indices

to the members’ computers and decentralized the search

function. They dismantled log-in and registration require-

ments and refused to install filtering software. Metro-

Goldwyn-Mayer Studios, Inc., v. Grokster, Ltd., 380 F.3d

1154, 1165 (9th Cir. 2004) (hereinafter Grokster II). They

then disclaimed responsibility for the content distrib-

uted over the network that they created and set out to target

former Napster users deterred from the trade in illegal files.

Billing themselves as “the next Napster,” Respondents’

profited from the infringing activities of their users. Metro-

Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 259 F. Supp.

2d 1029, 1044 n.11 (C.D. Cal. 2003) (hereinafter Grokster /).

As the District Court noted and Respondents do not dispute:

StreamCast had $1.8 million in revenue in 2001 from

advertising. And as of July of 2002, StreamCast had $2

million in revenue and projects $5.7 million by the end

of the year. Grokster also derives substantial revenue

from advertising. The more individuals who download

the software, the more advertising revenue Defendants

collect. And because a substantial number of users

download the software to acquire copyrighted material,

a significant proportion of Defendants’ advertising

revenue depends upon the infringement. Defendants

thus derive a financial benefit from the infringement.

Id. at 1044 (internal citations omitted).

Petitioners are U.S. motion picture studios, record com-

panies, and a certified class of 27,000 music publishers and

songwriters. Petitioners sought an injunction against

continuing copyright infringement on the Grokster and

StreamCast services based on contributory and vicarious

infringement theories of copyright liability. The District

Court granted summary judgment for Respondents. Grokster

1, 259 F. Supp. 2d at 1046.

The Court of Appeals for the Ninth Circuit affirmed.

Grokster I], 380 F.3d at 1167. The Ninth Circuit recognized

that the Grokster and StreamCast software “enables the user

to participate in the respective peer-to-peer file-sharing net-

works,” id. at 1160; that “the vast majority of the files are

exchanged illegally in violation of the copyright law,” id.;

that Grokster and StreamCast know their systems are being

used for infringement; and that they profit handsomely from,

and in direct proportion to, the level of infringement, id. at

1160, 1164.

Despite these undisputed facts, the court concluded that

Grokster and StreamCast did not materially contribute to the

infringement because they did not possess the “right and

ability to supervise” and control the behavior of its users. /d.

at 1164-65. The Ninth Circuit also rejected Petitioners’ claim

that Respondents should be held liahle because they refused

to take steps to monitor the behavior of their users. /d.

Finally, the Ninth Circuit dismissed the argument that

Grokster and StreamCast should not be able to escape

vicarious liability by simply turning a “blind eye” to the

relying on that activity in order to be profitable. /d. at 1166.

The decision below stands in contrast to /n re Aimster

Seventh Circuit there rejected the efforts of the software

designers to blind themselves to illegal activity. /d. at 650.

Aimster involved a peer-to-peer system that used encryp-

tion in an attempt to disclaim responsibility for the illegal

activity on its network. /d. at 646, 649. Although the encryp-

tion prevented Aimster from obtaining actual knowledge of

specific infringement, Judge Posner recognized that “a

deliberate effort to avoid guilty knowledge is all that the law

requires to establish a guilty state of mind.” Jd. at 650. What

matters for contributory liability is not artfully evasive struc-

turing of the network, but rather the magnitude of infringing

and non-infringing uses for the software. /d. at 649-50.

SUMMARY OF ARGUMENT

Respondents designed their business and deployed their

technology to evade the requirements of law. In Napster, the

Ninth Circuit authorized an injunction against a peer-to-peer

network—-similar to that owned by Respondents— in part for

failure to detect and stop infringement. 239 F.3d at 1024,

1029. By redesigning their business model and software so

that they could disclaim any knowledge or control over

distributed content, Respondents sought to profit from the

illegal activity as the “next Napster.” Grokster I, 259 F.

Supp. 2d at 1044 n.11.

The Ninth Circuit’s decision to endorse Respondents’

evasive strategy has implications far beyond that of copyright

law. The decision below shelters not only illegal copyright

infringement, but gives sanctuary to the distribution of child

pornography and obscenity and other illegal activity con-

ducted on peer-to-peer networks. In alarming numbers,

pedophiles are using peer-to-peer systems to trade in illicit

material other than copyrighted works. See S. Rep. No. 106-

141, 106th Cong. Ist Sess. at 3 (1999); Online

Pornography: Closing the Doors on Pervasive Smut, Hearing

Before the House Subcommittee on Commerce, Trade, and

Consumer Protection, 108th Cong. (May 6, 2004) (statement

of Penny Nance, President, Kids First Coalition). Identity

thieves and malicious hackers are similarly drawn to the

anonymity and lack of accountability that these networks

provide. See Staff of House Comm. on Government Reform,

Report Prepared for Rep. Tom Davis and Rep. Henry A.

Waxman, 108th Cong., File-Sharing Programs and Peer-to-

Peer Networks Privacy and Security Risks at 1, 5-9 (Comm.

Print May 2003) (hereinafter Privacy and Security Risks).

The Ninth Circuit’s decision encourages network architects to

blind themselves to such unlawful content and discourages

the detection and prevention of illegal activity.

The decision below is an anomaly among traditional prin-

ciples of secondary liability in copyright law. Courts have

consistently allocated responsibility for copyright infringe-

ment to those who have an ongoing relationship with the

direct infringer. See Sony Corp. of America v. Universal City

Studios, Inc., 464 U.S. 417, 437 (1984). Respondents’ ability

to update their software and otherwise maintain contact with

their customers demonstrates such a relationship. The Ninth

Circuit adopted a false analogy to a manufacturer that sells a

product and loses all control over its use. See Grokster II,

380 F.3d at 1160-61. Respondents, however, are not limited

in filtering infringing use by any technological barrier, but

rather by conscious choice.

These concepts of copyright secondary liability that the

Ninth Circuit ignores general concepts of secondary liability

from other areas of law, such as property, tort, criminal, and

corporate law. The law has consistently taken a dim view of

owners who fail to end illegal use of their property, or who

take actions which increase the likelihood of illegal activity.

Respondents did not merely abdicate their responsibility to

prevent illegal activity, but took affirmative steps to facilitate

illegal acts on their networks and benefited from those illegal

acts. Holding Respondents responsible for the illegal use

of the their networks is no different than ensuring that

a landowner does not allow tenants to use property illegally,

holding a store owner responsible for maintaining a safe

workplace.

ARGUMENT

I. BY SANCTIONING RESPONDENTS’ STRA-

TEGY TO EVADE LEGAL LIABILITY, THE

DECISION BELOW PROVIDES SANCTUARY

FOR ILLEGAL ACTIVITY SUCH AS THE

DISTRIBUTION OF CHILD PORNOGRAPHY,

OBSCENITY, AND OTHER PROHIBITED

MATERIALS.

Respondents designed their business and deployed their

technology to evade the requirements of law. Napster

authorized an injunction against a peer-to-peer network in

part because it employed a centralized server and search

engine. 239 F.3d at 1023-24. Respondents structured their

business and technology to evade that ruling. By designing

their software so that they could disclaim any knowledge or

control over distributed content, they hoped to continue to

profit from illegal activity as the-“next Napster.” Grokster /,

259 F. Supp. 2d at 1036, 1044 n.11.

The Ninth Circuit’s endorsement of engineered ignorance

of use and content carries consequences far beyond copyright

law. The decision below shelters file-sharing networks from

architects to design their systems deliberately to disclaim

knowledge of or control over other illegal conduct. The deci-

sion encourages peer-to-peer networks to blind themselves to

distributed content and to avoid detecting and filtering illegal,

pernicious activities such as the trafficking of child

pornography and obscenity.

A. The Decision Below Sanctioned Respondents’

Evasion of Law and Encourages the Develop-

ment of Anarchic Networks.

The central question in this litigation is whether a network

owner can divest liability for illegal activity facilitated by its

service simply by structuring its business plan, legal instru-

ments, and technology choices to disclaim any supervision or

control over such illegal activity. The Ninth Circuit disag-

gregates its reasoning into two theories of liability, contrib-

utory and vicarious, each with its own three subparts—

respectively, “(1) direct infringement by a primary infringer,

(2) knowledge of the infringement, and (3) material con-

tribution to the infringement,” Grokster I/, 380 F.3d at 1160,

and “(1) direct infringement by a primary party, (2) a direct

financial benefit to the defendant, and (3) the right and ability

to supervise the infringers,” id. at 1164. There is no dispute,

however, that there is direct infringement by Grokster and

Streamcast members, Grokster J, 259 F. Supp. 2d at 1034,

that the networks know that over 90 percent of their traffic is

for infringing use, Grokster II, 380 F.3d at 1157, and that

they profit from advertising revenue derived from such

traffic. Grokster 1, 259 F. Supp. 2d at 1036, 1044 n.11.

According to the decision below, the remaining third prongs

of either theory of liability are simply two sides of the same

coin, for a network owner materially contributes to in-

fringement if it fails to stop the known infringement, Grokster

Il, 380 F.3d at 1163, and is vicariously liable if it does not

exercise the right and ability to supervise its network against

illegal conduct. /d. at 1164-65.

The Ninth Circuit absolved Respondents of legal liability

because they have adopted business, legal, and technological

strategies that disclaim any right and ability to supervise their

network and thus to monitor or stop illegal conduct. Napster

was liable, so goes the reasoning, because it operated “an

integrated service” and “because it controlled the central

indices of files, users were required to register with Napster,

and access to the system depended on the validity of a user’s

registration.” /d. at 1165 (citing Napster, 239 F.3d at 1011-

12, 1023-24); see also Grokster II, 380 F.3d at 1163 (same

for material contribution).

Grokster, by contrast, is not liable because even though it

“nominally reserves the right to block access to individual

users,” it does not exercise that right “given the lack of a

registration and log-in process.” Grokster II, 380 F.3d at

1165. Moreover, “its licensing agreement with KaZaa/

Sharman does not give it the ability to mandate that root

nodes be shut down.” /d. Thus, Grokster bears no legal

responsibility for the design of its business, legal, and

technological structure after it releases the network software

because “possibilities for upgrading software located on

another person’s computer are irrelevant to determining

whether vicarious liability exists.” /d. at 1166.

These business, legal, and technological distinctions did

not arise by happenstance, but rather reflect Respondents’

effort to evade legal requirements. Respondents’ systems

initially operated using the same centralized index server

concept that Napster employed. After the Napster injunction,

they reprogrammed their software to hijack members’

computers to serve as decentralized indexing nodes. JA 279-

86 (Kleinrock declaration).? Likewise, Respondents initially

required individualized registration with a username and

? All citations to record evidence are to the Joint Appendix (“JA”)

before the Ninth Circuit.

password. JA 1096, 574-77. During this litigation, Re-

spondents eliminated the log-in feature and thereby dis-

claimed any ability to deny access. Finally, Respondents

initially had user agreements in which they reserved the right

to terminate members’ access to the networks. JA 340-43,

1005-07. During this litigation, StreamCast renounced this

reservation and Grokster denied any enforcement capacity.

The Ninth Circuit blithely dismissed the import of these

evasive maneuvers because “[t]he technology has numerous

other uses, significantly reducing the distribution costs of

public domain and permissively shared art and speech, as

well as reducing the centralized control of that distribution.”

Grokster II, 380 F.3d at 1164. But surely a person’s

numerous innocent reasons for driving down the street in no

way excuse his failure to pull over when followed by a police

car with its lights flashing.

Consider the breathtakingly perverse implications of the

Ninth Circuit’s reasoning. The classic swap meet owner

liable for the trade in infringing products on his premises,

Fonovisa, Inc. vy. Cherry Auction, 76 F.3d 259, 261 (9th Cir.

1996), can divest legal liability simply by eschewing “the

ability to exclude individual participants [and] a practice of

policing the aisles,” Grokster IJ, 380 F.3d at 1165. The

dance hall operator—another classic case of secondary lia-

bility, id. at 1164-65—can absolve liability by throwing the

doors open to brigands and thieves. He can even profit by

selling as much liquor as he wants, provided that he has

disclaimed any responsibility to stop serving alcohol under

any conditions. It defies law and logic that, by opening the

doors wider to illegal activity, the property owner absolves

himself of legal liability. |

The decision below is not only perverse, it is pernicious.

The owners’ engineered ignorance of the content distributed

over their networks extends not only to copyright works, but

also to illegal distribution of other prohibited materials, such

as child pornography and obscenity. A system that blinds

itself to infringement also blinds itself to the illegal transfer of

other prohibited materials. Conversely, a responsible net-

work that implements systems to monitor, prevent, and assist

law enforcement prosecute distribution of prohibited mate-

rials stands at a commercial disadvantage to its compete-

tors operating under the Ninth Circuit’s legal sanctuary.

It is of little moment that Respondents have employed a

search filter purportedly to weed out untoward searches.

Whenever a user enters certain search terms—for example,

“nude”—a dialogue box pops up asking whether the user

would like to tum off the adult screening function and

continue with the search. The “filter” thus functions more as

an alert for inadvertent searches rather than a screening filter.

More important, Respondents have restructured their system

to disable any effective screen or filter of illegal use or

content—as “none of the communication between defendants

and users provides a point of access for filtering or searching

for infringing files, since infringing materials and indexing

information do not pass through defendants’ computers.”

Grokster II, 380 F.3d at 1165. Such engineered futility

facilitates illegal activity on a “mind-boggling” scale; the

decision below sanctions a safe haven for such unfettered

illegal activity.

By sanctioning Grokster’s conduct, the Ninth Circuit has

effectively shielded the provider of an ignorant network from

any form of culpability, whether civil or criminal. The

closest analogue in the criminal context to secondary civil

liability is the law of aiding and abetting. Aimster, 334 F.3d

at 651. The law of aiding and abetting requires more than

* Statement of the Honorable Marybeth Peters, Register of Copyrights,

Hearing Before the Senate Committee on the Judiciary, 108th Cong.

(Sept. 9, 2003).

simply providing a means or a component necessary for the

completion of an unlawful activity. As Judge Learned Hand

explained, it requires that the alleged aider and abettor “in

some sort associate himself with the venture, that he

participate in it as in something that he wishes to bring about,

that he seek by his action to make it succeed.” United States

v. Peoni, 100 F.2d 401, 402 (2d Cir. 1938). This requires

both knowledge of the intended unlawful activity and

material assistance in that venture in an effort to help it

succeed. See, e.g., United States v. Pino-Perez, 870 F.2d

1230, 1235 (7th Cir. 1989) (en banc). If a network provider

can disavow civil liability simply by constructing a network

of ignorance, it follows, a fortiori, that criminal liability

cannot attach. The Ninth Circuit decision simply ignores the

longstanding and common sense rule that “a deliberate effort

to avoid guilty knowledge is all that the law requires to

establish a guilty state of mind.” Aimster, 334 F.3d at 650;

see generally David Luban, Contrived Ignorance, 87 Geo.

L.J. 957, 959 (1999).

B. The Decision Below Encourages the Prolifer-

ation of Irresponsible Networks that Facilitate

Unfettered Distribution of Illegal Materials.

The failure of regulatory mechanisms to curb illegal uses

of peer-to-peer networks, of which the decision below stands

as the preeminent example, has denigrated this valuable

technology to its lowest form. “Peer-to-peer facilitates the

most extreme, aggressive and reprehensible types of behavior

that the Internet will allow.” Audrey Gillan, Race to Save

New Victims of Child Porn, The Guardian, Nov. 4, 2003

(quoting David Wilson, professor of criminology at the

University of Central England), available at http://www.

guardian.co.uk/child/story/0,7369,1077260,00.htm! (last vis-

ited Jan. 21, 2005).

These networks place children at serious risk of physical

harm. Congress, in passing the Child Internet Protection Act

(“CIPA”), documented increasing incidents of professional

pedophiles using the Internet to prey on children. “[A]n

increasingly disturbing trend is that of highly organized, and

technologically sophisticated groups of pedophiles who

utilize advanced technology to . . . sexually exploit and abuse

children.” S. Rep. No. 106-141, at 3-4 (1999). The Internet

and other on-line services are “one of the most prevalent

techniques by which pedophiles and other sexual predators”

identify “children for sexually explicit relationships.”

Legislative Proposals to Protect Children from Inappropriate

Materials on the Internet, Hearing Before the Subcommittee

on Telecommunications, Trade, and Consumer Protection of

the House Committee on Commerce, 105th Cong. 26 (1998)

(statement of Stephen R. Wiley, Chief, Violent Crimes and

Major Offenders Sections, Federal Bureau of Investigation).

Disturbingly, peer-to-peer networks are becoming the

preferred method to transfer child pornography. The United

States General Accounting Office (“GAO”) recently con-

cluded that peer-to-peer networks are quickly emerging as a

major conduit for the distribution of child pornography.‘

U.S. General Accounting Office, Report GAO-04-757T,

File Sharing Program: Users of Peer-to-Peer Networks Can

Readily Access Child Pornography, at 2, 11 (May 6, 2003)

(hereinafter GAO Report 1). In one search of peer-to-peer

networks using 12 keywords known to be associated with

child pornography on the Internet, GAO identified 1,286 titles

and file names, determining that 543 (about 42 percent) were

* See 18 U.S.C. §§ 2251-52 (2004) (prohibiting the creation, posses-

sion, transport, sale, distribution, receipt, and advertisement of child

pornography); 18 U.S.C. §§ 1460-70 (2004) (prohibiting the trans-

portation, transmission, and sale of obscene material). Child pornography

is unprotected by the First Amendment. See New York v. Ferber, 458

U.S. 747 (1982). Nor do First Amendment protections extend to the

production, distribution, or transfer of obscene material. See Roth v.

United States, 354 U.S. 476 (1957).

associated with child pornography images. /d. Of the

remaining, 34 percent were classified as adult pornography

and 24 percent as non-pornographic. In another search using

three keywords, a U.S. Customs analyst downloaded 341

images, of which 149 (about 44 percent) contained child

pornography. /d. Similarly, a congressional report noted that

the sixth most popular search on one peer-to-peer network

was the word “teen” and the eighth most popular was

“preteen.” Special Investigations Division, Minority Staff

of House Comm. on Government Reform, 107th Cong.,

Children’s Access to Pornography Through Internet File-

Sharing, at 5 (Comm. Print 2001).

The National Center for Missing and Exploited Children

(“NCMEC”) has found that peer-to-peer technology is in-

creasingly popular for the dissemination of child pornog-

raphy. GAO Report | at 2, 11. The technology makes it

easier to distribute, hide, and access illicit images and videos.

Id. Peer-to-peer technology enables pedophiles to download

larger files—for example, a 10-minute movie with sound—

which they cannot easily obtain through websites or email.

Peer-to-Peer File-Sharing Technology: Consumer Protection

and Competition Issues, Hearing Before the Federal Trade

Commission, at 84 (Dec. 15, 2004) (statement of Michelle

Collins, Director of the Exploited Child Unit of the National

Center for Missing and Exploited Children), available at

http://ftc.gov/bcp/workshops/filesharing/transcript_041215.pdf

(last visited Jan. 21, 2005). Accordingly, reports to NCMEC

of child pornography on peer-to-peer networks increased

more than fivefold from 2001 to 2003. GAO Report | at 2,

11. In 2004, the Center received 39 percent more reports of

suspected child pornography than it did the previous year, due

in part to the increasing popularity of peer-to-peer networks.”

* Reports of child pornography to the Center have increased every year

since the organization established a 24-hour hotline in 1998 to collect tips

on child exploitation. John Foley, Reports of Child Pornography

National Center for Missing and Exploited Children, Cyber

Tipline: Annual Report Totals by Incident Type: January 1,

1998 to December 31, 2004 (2005).

Anonymous peer-to-peer networks—of the type that Re-

spondents engineered to evade the Napster decision—present a

particularly acute problem. The absence of registration on

peer-to-peer networks conceals pedophiles’ efforts to identify,

lure, and seduce children into illegal and abusive sexual

activity. S. Rep. No. 106-141, at 3 (1999). Many pedophiles

believe it is harder for them to be detected on peer-to-peer

networks as opposed to other on-line services. Audrey Gil-

lan, Race to Save New Victims of Child Porn, The Guardian,

Nov. 4, 2003, available at http://www.guardian.co.uk/child/

story/0,7369,1077260,00.html (last visited Jan. 21, 2005).

Other types of criminals are similarly attracted to file-

sharing networks. Unlike Napster, which was limited audio

files, the new file-sharing programs allow users to download

any type of file from other computers connected to the

network. Privacy and Security Risks at 1. This feature creates

unique privacy and security risks, because file-sharing

programs potentially make every file on a computer available

to millions of other users on the network. In fact, many users

of file-sharing programs inadvertently make highly personal

information available to. other users. /d. at 1, 5-9. Con-

gressional committee investigators “found that file-sharing

programs could be used to easily obtain tax returns, medical

records, attorney-client communications, and personal cor-

respondence” from peer-to-peer user:.° Id.

Continue to Climb, Information Week, Jan. 11, 2005, available at

http://www. infomrationweek.com/story/show Article eeecunnc bas:

00595 (last visited Jan. 21, 2005).

1 a gaits et baneiedtimanr sie teaientkaieiiiena

Money backup files, which store the user’s personal financial records,

available for download. Privacy and Security Risks at |.

High-tech vandals also exploit peer-to-peer networks to

release computer viruses, worms, and other malicious

computer files, often masking their handiwork as popular

music files. Privacy and Security Risks at 11 (quoting Dr.

John Hale, Director of the Center for Information Security at

the University of Tulsa). Computer experts warn that the

risks of viruses induced by security vulnerabilities in peer-to-

peer software make using such software much more

dangerous than merely surfing the Internet. /d. at 5. First,

peer-to-peer networks put users’ computers at high risk for

viruses and other malicious files due to increased con-

nectivity, flaws in software design, and potential for quick

distribution of malicious programs. /d. Second, peer-to-peer

networks offer little in the way of protection, leading one

expert in computer security to state “banning [peer-to-peer]

systems is definitely part of any reasonable best-practices

approach to network security.” /d. at 11-12.

Respondents engineered anonymous, decentralized, un-

supervised, and unfiltered networks to create the fiction of

ignorance of, and inability to control, illegal activity. The

Ninth Circuit blessed these networks that make it increas-

ingly difficult for law enforcement to detect distribution of

child pornography and other illegal activity.

Peer-to-peer programs have made it more difficult to

identify the users. In the past [NCMEC was] able to

easily identify offenders trading child pornography using

peer-to-peer programs because their Internet Protocol

(IP) addresses were visible and they were required to

reveal their email addresses. This is no longer the case.

When [NCMEC] receive[s] reports . . . , it is almost

impossible to identify the perpetrators responsible for

trading the illegal files. The anonymity of recent peer-to-

peer technology has allowed individuals who exploit

children to trade images and movies featuring the sexual

assault of children with very little fear of detection.

Online Pornography: Closing the Doors on Pervasive Smut,

Hearing Before House Subcommittee on Commerce, Trade,

and Consumer Protection, 108th Cong. (May 6, 2004) (state-

ment of Ernie Allen, President and Chief Executive Officer,

National Center for Missing and Exploited Children).

Because the average user does not know whence she

downloaded a file, she cannot give law enforcement any

substantial information to track the offender. Peer-to-Peer

File-Sharing Technology: Consumer Protection and Com-

petition Issues, Hearing Before the Federal Trade Commis-

sion, at 86 (Dec. 15, 2004) (statement of Michelle Collins,

Director of the Exploited Child Unit of the National Center

for Missing and Exploited Children), available at http://

ftc.gov/bcp/workshops/filesharing/transcript_041215.pdf (last

visited Jan. 21, 2005). Once the users disable their con-

nection, law enforcement can do nothing to track down the

offenders. /d.

Il. THE LAW CONSISTENTLY HOLDS PARTIES

LIABLE WHEN THEY FACILITATE THE

ILLEGAL ACTIONS OF OTHERS.

The decision below is_an anomaly among traditional

principles of secondary liability in copyright law. Courts

have consistently allocated responsibility for copyright in-

fringement to those who have an ongoing relationship with

the direct infringer. See Sony, 464 U.S. at 437. Respondents

have the ability to update their software and otherwise

maintain contact with their customers: facts that make their

relationship with their users akin to that of a service provider

who has an ongoing relationship with its customers. The

Ninth Circuit ignored these facts and created a false analogy

to a manufacturer that sells a product and loses all control

over its use. See Grokster IT, 380 F.3d at 1154. Respondents,

however, unlike Sony, are not limited in filtering infring-

ing use by any technological or practical barrier, but by

conscious choice.

These concepts of copyright secondary liability the Ninth

Circuit ignores simply reflect general concepts of secondary

liability from other areas of law, such as property, tort,

criminal, and corporate law. The law has consistently taken a

dim view of owners who fail to end illegal use of their

property, or to take actions which increase the likelihood of

illegal activity taking place. Respondents did not merely

abdicate their responsibility to prevent illegal activity, but

took affirmative action by facilitating illegal acts on their

networks, and benefited from those illegal acts. Holding

Respondents responsible for the illegal use of their networks

is no different than ensuring that a landowner does not allow

tenants to illegally use property and holding a store owner

responsible for maintaining a safe workplace.

A. The Decision Below is an Anomaly Among

Traditional Principles of Copyright Law.

Through the doctrine of secondary liability, courts recog-

nize that it is improper to build a business based on the

infringement of others’ copyrights.’ Sony, 464 U.S. at 438

” The Copyright Act defines an infringer as “anyone who violates any

of the exclusive rights of the copyright owner... .” 17 U.S.C. § S01(a)

(2004). Courts have not limited this definition to direct infringers, but

imposed secondary liability to those who have some degree of

involvement in the infringement. Sony, 464 U.S. at 434-35. Although the

Act does not expressly mention secondary liability, Congress acknowl-

edged its existence in the Act’s legislative history. H.R. Rep. No. 1476,

94th Cong., 2d Sess. at 61, 159-60 (1976). Similarly, the Digital

Millennium Copyright Act did not abolish secondary liability. Aimster,

334 F.3d at 655; see also 17 U.S.C. § 512. Although the Act gives

Internet service providers safe harbor from liability in some cases, the

service providers “must do what [they] can reasonably be asked to do to

prevent the use of its service by ‘repeat infringers."” Aimster, 334 F.3d at

655 (citing 17 U.S.C. § 512 (i 1 (A)).

n.18 (quoting Shapiro, Bernstein & Co. v. H. L. Green Co.,

316 F.2d 304, 308 (2d Cir. 1963)). This liability extends

beyond those who actually manufacture or sell infringing

material, and can apply to conduct that assists others in

infringement. Fonovisa, Inc., 76 F.3d at 259, 261.

In applying secondary liability to copyright law, courts

have attempted to allocate responsibility for infringement

where it may be most effectively exercised. Sony, 464 U.S. at

438 n.18; Shapiro, 316 F.2d at 307; Gershwin Publ'g Corp.

v. Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir.

1971). The ubiquitous example of this allocation of

responsibility in copyright is that of the dance hall cases. The

common facts of these cases involve a dance hall owner who

hires a band that plays copyrighted music without

authorization. Aimster, 334 F.3d at 654. The owners have

contact with the bands, which are otherwise transient and

difficult for the copyright holders to locate. Thus, courts

reasoned it is the capability to contact and interact with the

potential infringer that imposes responsibility to supervise

their conduct. See id.; Sony, 464 U.S. at 437 (citing Kalem v.

Harper Bros., 222 U.S. 55 (1911)); Shapiro, 316 F.2d at 307

(finding liability derives from “ability to supervise”’).

Respondents, like the dance hall owners before them, have

a “continuing relation with [the potential infringers]” which

imbues them with responsibility for their actions. Aimster,

334 F.3d at 648. Respondents concede that they send

advertising to their members. Grokster I], 380 F.3d at 1166.

It is technically possible to even upgrade the software on the

users’ computers. JA 228-29, 182-83, 279-286. They chose

to dismantle log-in and registration requirements that would

give them additional contact with their users. Grokster II,

380 F.3d at 1165.

This ability to reach out to customers and alter a product in

their hands—whether exercised or not—justifies the imposi-

tion of liability. This is precisely the type of situation where

the application of secondary liability is particularly appro-

priate. Sony, 464 U.S. at 437. On similar facts to the instant

case, the Seventh Circuit found the designers of a peer-to-

peer network provide a service as well as a product. Such

service providers have:

[A] continuing relation with [their] customers and there-

fore should be able to prevent, or at least limit, their

infringing copyright by monitoring their use of the

service and terminating them when it is discovered that

they are infringing.

Aimster, 334 F.3d at 648.

When the Ninth Circuit found that Respondents did not

have the ability to supervise infringing conduct, it ignored the

fact that it did so by choice, not from any technological

constraints. Grokster II, 380 F.3d at 1163. The Court stated

that “[gjiven the lack of a registration and log-in process . . .

Grokster has no ability to actually terminate the file sharing

functions” despite the fact that Respondents themselves dis-

abled these features. /d. at 1165.

The Ninth Circuit ignored the difference between flexible

peer-to-peer technology and static products such as video tape

recorders (“VTR”). As the District Court in Napster recog-

nized, once a VTR was sold, its producer could no longer

follow up with how consumers employed it. A&M Records,

Inc. v. Napster, Inc., 114 F. Supp. 2d 896, 916-17 (N.D. Cal.

2000). “Limiting distribution o. the [VTR] machine to a

class of non-infringers was not a possibility.” Jane C. Gins-

burg, Copyright Use and Excuse on the Internet, 24 Colum.

VLA J.L. & Arts 1, 37 (2003) (hereinafter Ginsburg); see

also Sony, 464 U.S. at 437-38 (observing that manufac-

turer had no ongoing relationship after sale); Universal City

Studios, Inc. v. Sony Corp., 480 F. Supp. 429, 461-62 (C.D.

Cal. 1979).

Sony thus presented an all-or-nothing choice: if the manu-

facturers were liable, then the product could not be sold,

despite its capacity for non-infringing uses; if manufacturers

were not liable, then the product could be sold, despite its

capacity for infringing uses. Ginsburg at 37. Left with this

all-or-nothing choice, the Court allowed the new technology

to survive. /d.

Technological advancements since Sony have removed the

barrier between seller and user of the product and require that

Respondents take responsibility for the use of their network.

Peer-to-peer’s “online technology makes possible the con-

finement of the service to a class of non-infringers.” /d.

Respondents are prevented from doing so only by choice and

not by any technological barrier. Thus, the all-or-nothing pre-

dicament has been removed. Sony, 464 U.S. at 438 n.18. Sony

noted that secondary liability “places responsibility where it

can and should be effectively exercised,” not merely where

Respondents desire to do so. /d. (emphasis added).

Respondents not only have the ability to identify their

infringing users, they are the only ones who may practically

do so. Courts have found that recovering from direct

infringers frequently proves difficult or impossible. See

Dreamland Ball Room, Inc. v. Shapiro, Bernstein & Co., 36

F.2d 354 (2d Cir. 1929) (citing example of iterant orchestras);

Shapiro, 316 F.2d at 307-308 (2d Cir. 1963) (citing cases);

Screen Gems-Columbia Music, Inc. v. Mark-Fi Records, Inc.,

256 F. Supp. 399 (S.D.N.Y. 1966) (discussing “fly-by-night”

record pirates). Therefore, the only effective relief was found

from a party in a position to stop the infringement. See

Aimster, 334 F.3d at 654; Alan O. Sykes, The Economics of

Vicarious Liability, 93 Yale L.J. 1231, 1241-42, 1272 (1984);

see also Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S.

176, 188 (1980) (noting a similar rationale for the doctrine of

contributory infringement in patent law). The Ninth Circuit,

however, denies Petitioners a remedy and leaves them with

the impractical option of suing “a multitude of individual

infringers” whose identities are close to impossible to obtain.

Aimster, 334 F.3d at 645.

Similarly, parents and others concerned about the illegal

activity are also without adequate remedy. For those outside

the network, pedophiles and child pornographers are as

difficult to identify as the infringing users. See Online

Pornography: Closing the Doors on Pervasive Smut, Hearing

Before the House Subcommittee on Commerce, Trade, and

Consumer Protection, 108th Cong. (May 6, 2004) (statement

of Erie Allen, President and Chief Executive Officer,

National Center for Missing and Exploited Children). As

gatekeepers to the network, Respondents are the ones most

capable of interdicting this illegal conduct.

A proper application of the doctrine of secondary liability

serves the interests of the copyright holders, as well as law

enforcement. As the only ones who can effectively exercise

responsibility, Respondents must do so. See Sony, 464 U.S.

at 438 n.18. Increased diligence in this area may give child

predators and other criminals pause before engaging in their

illegal conduct. “Just as the [Internet service providers] are

working to tighten [their] content and shield kids, so must the

peer-to-peer systems take responsibility.” Online Pornog-

raphy: Closing the Doors on Pervasive Smut, Before the

House Subcommittee on Commerce, Trade, and Consumer

Protection, 108th Cong. (May 6, 2004) (statement of Penny

Nance, President, Kids First Coalition).

B. Decision Below is an Anomaly Among Tra-

ditional Principles of Secondary Liability

Generally

The Ninth Circuit’s holding runs counter to the under-

pinnings of longstanding, accepted theories of secondary

liability in areas of the law beyond copyright. As Justice

Holmes noted almost one hundred years ago, the concept of

secondary liability in copyright is premised “on principles

recognized in every part of the law.” Kalem, 222 U.S. at 63.

An examination of these principles shows that the law

requires individuals to supervise the use of their property and

prohibits them from reducing the level of security in the face

of known dangers. These concepts are widely applicable and

extend to diverse areas of the law, including both civil (e.g.,

tort, property, and corporate law) and criminal law. Persons

may not condone illegal acts on their property (through

inaction) nor endorse it (through positive action that encour-

ages or otherwise supports illegal acts).

General principles of property law provide seminal exam-

ples of secondary liability of property owners for the illegal

use of their property. In Grosfield v. United States, 276 U.S.

494, 495-496 (1928), the Court enjoined a property owner

against the use of his property for the illegal manufacture of

liquor by his tenant. This Court rejected the landlord’s efforts

to disclaim responsibility for the illegal use of the property by

the tenant, noting:

[I}t is no answe. .o the suit to say that the owner did not

participate in the criminal act of the tenant. That the

tenant may have been ousted and the illegal use of the

premises ended before the decree is not conclusive, if the

evidence furnish reasonable ground for apprehending a

repetition of such use.

Id. at 498. Thus, the owner bears first responsibility to end

the illegal use of his property. Indeed, the language suggests

that the landlord has the burden of preventing reasonably

foreseen repetition of the illegal use of the property.

Basic principles of tort law, likewise, place responsibility

upon the landowner to adequately supervise his property to

prevent illegal acts by any persons. See Restatement

(Second) of Torts § 302A (1965). For instance, a landowner

may be held liable for failing to provide adequate security

protection under circumstances in which criminal attacks

upon entrants are otherwise foreseeable." In Gerentine v.

Coastal Security Sys., 529 So.2d 1191 (Fla. Dist. Ct. App.

1988), the Court upheld a complaint seeking damages for the

death of a convenience store employee who was abducted

from the defendant’s store. /d. at 1192. Interpreting Florida

law, the Court found that the defendant’s actions in reducing

security protection despite four previous robberies of the

convenience store, together with his decision not to create and

enforce any policy to deter or prevent robberies, permitted

recovery. /d. at 1193. This previous history of prevalent

crime is analogous to the dominant use of Respondents’

networks for illegal acts. Just as the convenience store owner

was held liable for not taking steps to ensure the safe, legal

use of his property, Respondents should be similarly liable for

not preventing illegal use of their network.

Courts also recognize that in certain cases—even where

they are otherwise under no preexisting duty to prevent a

* See Restatement (Second) of Torts § 344 cmt. f (1965):

Since the possessor is not an insurer of the visitor's safety, he is

ordinarily under no duty to exercise any care until he knows or has

reason to know that the acts of the third person are occurring, or are

about to occur. He may, however, know or have reason to know,

from past experience, that there is a likelihood of conduct on the

part of third persons in general which is likely to endanger the

safety of the visitor, even though he has no reason to expect it on the

part of any particular individual. If the place or character of his

business, or his past experience, is such that he should reasonably

anticipate careless or criminal conduct on the part of third persons,

either generally or at some particular time, he may be under a duty

to take precautions against it, and to provide a reasonably sufficient

number of servants to afford a reasonable protection.

See also Stalzer vy. European Am. Bank, 448 N.Y .S.2d 631, 635 (Civ. Ct.

1982) (finding that since the plaintiff was robbed while inside the defen-

dant’s bank, the defendant's knowledge of prior similar criminal activity

imposed an obligation to “take all necessary protective measures and to

provide a reasonably sufficient number of servants to afford security

protection”).

harmful act by some third party—an individual may still be

liable for a failure to respond to illegal activity. In Doe v.

Walker, 193 F.3d 42 (lst Cir. 1999), the plaintiff, a social

guest invited to the defendant’s home, was raped by three

male guests of the defendant. /d. at 45-46 (applying

Massachusetts law). The Court opined that if a social host

becomes aware of criminal conduct being committed by one

of his guests against another guest, and does nothing to avert

or otherwise ameliorate the danger at no risk to himself, this

failure to act could justify criminal charges against the host.

Id. Even assuming, arguendo, Respondents have no other

pre-existing duty to prevent the use of their network for child

pornography, Respondents have knowledge that 90 percent of

the traffic on their network is being used for illegal

infringement and have failed to avert this danger.”

In addition, criminal law teaches that concepts of sec-

ondary liability extend to persons who have positively acted

to encourage or otherwise endorse the illegal action in order

to impose sanctions upon all that are culpable. In United

States v. Jewell, 532 F.2d 697 (9th Cir. 1976), the defendant

agreed to drive a car back from Mexico for an individual he

had met in a bar. /d. at 699 n.1. The defendant became

aware of a secret compartment in the vehicle, but deliberately

avoided obtaining actual knowledge of the 110 pounds of

marijuana contained therein. /d. at 698-99. The Court upheld

a jury instruction which stated that knowledge of the

controlled substance in his vehicle could be derived “solely

and entirely because of a conscious purpose on his part to

avoid learning the truth.” /d. at 698. The Ninth Circuit

wrongly dismissed the concept that Respondents should not

be able to escape liability by willfully blinding themselves to

* See also Staples v. CBL & Assocs., Inc., 15 $.W.3d 83, 90 (Tenn.

2000) (Finding that liability was incurred where the plaintiff was abducted

from a shopping mall after reporting suspicious activity of her abductor to

store employees and they took no further action).

the infringement as “rhetoric.” Grokster II, 380 F.3d at 1165.

Just as Mr. Jewell’s narrow definition of knowing was

inconsistent with congressional intent to effectively deal with

“with the growing menace of drug abuse in the United

States,” Jewell, 532 F.2d at 703, so does the Ninth Circuit’s

reasoning render secondary liability meuningless.

Corporate law uses a similar concept of secondary liability

to prevent endorsement and support of illegal acts.

Generally, a parent corporation is not liable for the acts of its

subsidiaries. United States v. Bestfoods, 524 U.S. 51, 61

(1998). This Court, however, has recognized an exception to

this canonical rule to encourage corporations to structure

themselves to comport with the law. “[A]n equally funda-

mental principle of corporate law, applicable to the parent-

subsidiary relationship . . . , [is] that the corporate veil may be

pierced and the shareholder held liable for the corporation’s

conduct when, inter alia, the corporate form would otherwise

be misused to accomplish certain wrongful purposes. .. .” /d.

at 62. The parent corporation bears responsibility over

the conduct of its subsidiary where the corporation—like

Respondents’ network—is constructed merely to evade the

law. The very creation of the shell corporation to absolve the

parent of liability is a positive act that breeds illegal behavior,

and Bestfoods stands for the proposition that such a positive

act endorsing illegal behavior incurs secondary liability.

Secondary liability extends to persons that both condone

illegal activity on their property through their own non-

action, and endorse it through positive steps that encourage or

support the illegal activity. In the same way, Respondents

took no steps to secure their network in the face of known

dangers. In fact, Respondents turned a blind eye to this

danger. They were well aware of, and benefited from, the

high propensity of infringement present in such places. See

Aimster, 334 F.3d at 645 (stating “(t]he [file] swappers are

ignorant or more commonly disdainful of copyright and in

any event discount the likelihood of being sued or

prosecuted”). The incidents of child pornography and other

illegal activity on these networks are well-known and well-

documented. See Remarks of Attorney General John Ash-

croft, Peer-to-Peer Announcement, May 14, 2004, available

at http://www.usdoj.gov/ag/speeches/2004/5 1404agwebp2p.

htm (last visited Jan. 21, 2005). Yet, like the store owner in

Gerentine, Respondents not only failed to sécure their

network, but instead took positive action to reduce security

and disabled devices able to detect and stop such activity.

Respondents’ removal of previously existing security re-

strictions on the Grokster network, such as removing the

central server and the log-in requirement, is no different than

the Gerentine convenience store’s reduction of security

protection. Like the store owner, Respondents should not

escape liability for their actions.

CONCLUSION

For the foregoing reasons, as well as those set forth in the

Brief for Respondents, the decision below should be reversed.

Respectfully submitted,

Viet D. DINH

Counsel of Record

CHRISTOPHER D. THUMA

BRIAN A. BENCZKOWSKI

BANCROFT ASSOCIATES PLLC

2121 Bancroft Place, N.W.

Washington, D.C. 20008

(202) 234-0090

Counsel for Amici

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