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

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7 N 2 4 2005

(2) OFFICE OF THE CLERK

No. 04-480 ting

IN THE

Supreme Court of the United States

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

Petitioners,

GROKSTER, LTD., ET AL.,

Respondents.

On Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

BRIEF OF DEFENDERS OF PROPERTY RIGHTS

AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

NANCIE G. MARZULLA THEODORE B. OLSON

ROGER MARZULLA Counsel of Record

DEFENDERS OF THOMAS H. DUPREE, JR.

PROPERTY RIGHTS MATTHEW D. MCGILL

1350 Connecticut Avenue, NW GIBSON, DUNN & CRUTCHER LLP

Suite 410 1050 Connecticut Avenue, NW

Washington, DC 20036 Washington, DC 20036

(202) 822-6770 (202) 955-8500

Counsel for Amicus Curiae

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TABLE OF CONTENTS

INTEREST OF AMICUS CURIA .....00.s00ssssesesnsssessssssessssenin l

STATEMENT................ ,eveouseseneesensiieseteevehsniiinnininininnnnnnnnn 2

SUMMARY OF ARGUMIEND ...000sccsssscsessocterescsnsssnsenneenunen 4

Il.

III.

THE FRAMERS RECOGNIZED THAT

“PROGRESS” IN THE CREATIVE ARTS

DEPENDS ON PROTECTING

INTELLECTUAL PROPERTY RIGHTG................ 6

THE DOCTRINE OF CONTRIBUTORY

BY COMMON-LAW PRINCIPLES OF

SECONDARY LIABILITY. .....................0::eseeeeees 7

A. At Common Law, Secondary Liability

Attached To Those Who Assisted Or

Encouraged Wrongful Acts. .....................:0008 8

B. Those Who Assist Or Encourage

Liable As Contributory Infringers. .................... 9

THE NINTH CIRCUIT’S APPROACH

MISAPPLIES SONY AND DEPARTS FROM

THE COMMON-LAW UNDERSTANDING

OF CONTRIBUTORY INFRINGEMENT............ 11

A. Respondents’ Conduct In Designing,

Marketing, And Supporting Their

Networks Renders Them Liable For

Aiding And Abetting Copyright

Be IRUUBRR. ... ..200cserssenecheesoctinesaiacsnetaianinaaaae 12

B. Respondents Are Contributorily Liable

For Distributing A Product That They

Know Is Overwhelmingly Used For

PRG TIOE.. «005. .0av0sasseasiantaneaneadaaee 13

C. This Court Should Reaffirm And Clarify

Sony’s Balanced Approach To

Contributory Infringement. ............................. 14

a. ovctonenconts 16

iV Vv

TABLE OF AUTHORITIES Mazer v. Stein, 347 U.S. 201 (1954) ......0.....ccccccceccccceeeeeeeeees 6

CASES Nike, Inc. v. Kasky, 539 U.S. 654 (2003)...0.00.......00.ccccccccceeee |

Am. Geophysical Union v. Texaco Inc., 802 Orff v. United States, SO l

F. Supp. 1 (S.D.N.Y. 1992), aff'd, 60 F.3d 913 Phillips v. Washington Legal Found.,

(2d Cir. 1994)... ee eecrsersecsseesnessnecsnnecnnsenesnnennneseneenen 7 Co | RRR AA an ae = I

Babbitt v. Sweet Home Chapter of Communities Rice v. Paladin Enterprises, Inc., 128 F.3d 233

for a Great Oregon, 515 U.S. 687 (1995)... A I a ei ake ee ct 9

Bennett v. Spear, 520 U.S. 154 (1997) .0000000 00. 2 Ruckelshaus v. Monsanto Co., 467 U.S. 986

Brown v. Perkins, 83 Mass. 89 (1861) ..............cccccccccc0eeeeeee 9 EEE ccsnscncaieetinthiasdadtitiinadtnediemiatsitiaiiilinnibieteliialiclia hinted 2

City of Monterey v. Del Monte Dunes at Sir John Heydon’s Case, 77 Eng. Rep. 1150

Monterey, Ltd., 526 U.S. 687 (1999)...............ccccccecceeee 1 IT cccictecicitinspnsinieectittbdcchasiedasitincaiaaibi ial iadiia li aati Tiles niide 8

Daingerfield v. Thompson, 74 Va. 136 (1880) ..................... 8 wae 8 ty 4 of a 7 County v.

es Army Corps of Engineers,

Dolan v. City of Tigard, S12 U.S. 374 (1994) ......-.---eoreeee 2 531 U.S. 159 (2001) ....ccccccecessssseseeee Bepiee ote

Eldred v. Ashcroft, 537 U.S. 186 (2003) Jeiidatiamaatatmintiiamtdiaiiingin 6-7 Sony Corporation of America v. Universal City

Gershwin Publishing Corp. v. Columbia Artists Studios, Inc., 464 U.S. 417 (1984) ......0.0.0..eeee passim

Management, 443 F.2d 1159 (2d Cir. 1971).................. 10 Suitum v. Tahoe Regional Planning Agency,

Graham v. John Deere Co. of Kansas City, Fe a CTE cctaiticlindiienpsicinabithidiitesdnciinpeinpiianiganti 2

Lk a EN es ls pe be 6 Tahoe-Sierra Preservation Council, Inc. v. Tal

Harper v. Shoppell, 28 F. 613 (C.C.S.D.N-Y. Regional Planning Agency, 535 U.S. 302

RE ARR ESS Ae 9 St sctiesenndietinintiiaaneldtliemaitinceniiiidadévamuantiedsens teiailaidgt ats |

In re Aimster Copyright Litig., 334 F.3d 643 Twentieth Century Music Corp. v. Aiken,

tt . 8 wp ER ee 10, 13, 15 422 U.S. 1S13 (BDTD) 2.-21-nconsveseecerenscssorercnrorencenrenressonsoses 4

Kalem Co. v. Harper Bros., 222 U.S. 55 (1911).......... 7, 9, 10 Washingtonian Pub. Co. v. Pearson, 306 U.S. 30

Keene Corp. v. United States, 508 US. 200 EERE RS Sars SER Sees 7

SERA RLM Sa SEE PIR ae ee) eee 2 CONSTITUTIONAL PROVISIONS

Lucas v. South Carolina Coastal Council, GER... ET, Be Direc tsinemertichnctidvsindiiadiinrdancbin 6

SER a epee 2

Matthew Bender & Co. v. West Publishing Co.,

Ee ee Sia tidectiinidibicrindcthaniatinciinnaatnas 13

STATUTES AND RULES

OS cicscnsicanssincsinnictaiatintcmaaibtieni~cintuasidiassebacaadts u

EE, Caen, SE TEI cniaccinensdilpniteniietebiganceltdienrtaaiondidmdibnisdantiaieaacatia l

OTHER AUTHORITIES

2 W. Blackstone, Commentaries .............................+ RES 2

The Federalist No. 43 (C. Rossiter ed. 1961) ............-..es.s-0« 7

Paul Goldstein, Copyright § 6.1 (2d ed. 1990).................... 10

W. Page Keeton et al., Prosser & Keeton on the

Law of Torts (Sth €d. 1984).................ccsseesseeseseeensee 8, 11

Nimmer on Copyright § 12-79 ..........c.c:ccccssesseeeeceeeeneeseees 13

Randal C. Picker, Copyright as Entry Policy:

The Case of Digital Distribution, 47 Antitrust

GD pecietecncttecstane soicnend ie ai ASL 4

Restatement (Second) of Torts (1979) ..................ccsse+sese0e00 8

ee -

BRIEF OF DEFENDERS OF PROPERTY RIGHTS

AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

Defenders of Property Rights (“Defenders”), as amicus

curiae, respectfully submits that the judgment below should

be reversed. !

INTEREST OF AMICUS CURIAE

Defenders is a national non-profit, public interest legal

foundation dedicated to the protection of constitutionally pro-

tected nghts in property. Defenders’ mission is to protect

those rights considered essential by the Framers of the Con-

stitution and to promote a better understanding of the rela-

tionship between private property rights and individual lib-

erty. To that end, Defenders advocates for protection of pri-

vate property rights in Congress and state and local legisla-

tures. ‘

Defenders also litigates cases and files amicus curiae

briefs on behalf of its members and the public interest in this

and other courts to defend the property rights of private citi-

zens against governmental and other incursions. Since its

founding in 1991, Defenders has participated in every sig-

nificant property rights case in this Court including Orff v.

United States, No. 03-1566; Nike, Inc. v. Kasky, 539 US.

654 (2003); Tahoe-Sierra Preservation Council, Inc. v. Ta-

hoe Regional Planning Agency, 535 U.S. 302 (2002); Solid

Waste Agency of Northern Cook County v. United States

Army Corps of Engineers, 531 U.S. 159 (2001), City of Mon-

terey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687

(1999), Phillips v. Washington Legal Found., 524 U.S. 156

! Pursuant to this Court’s Rule 37.6, amicus Defenders states that no

counsel for a party authored this brief in whole or in part. The Recording

Industry Association of America (“RIAA”) and the Motion Picture Asso-

ciation of America, Inc. (“MPAA”) have provided monetary contribu-

tions to fund the preparation and submission of this brief. Although nei-

ther RIAA nor MPAA is a party to this litigation, many of their constitu-

ent members are. All parties have consented to the filing of this brief,

and copies of the consents have been filed with the Clerk.

(1998); Suitum v. Tahoe Regional Planning Agency, 520 U.S.

725 (1997); Bennett v. Spear, 520 U.S. 154 (1997), Babbitt v.

Sweet Home Chapter of Communities for a Great Oregon,

515 U.S. 687 (1995); Dolan v. City of Tigard, 512 U.S. 374

(1994), Keene Corp. v. United States, 508 U.S. 200 (1993),

and Lucas v. South Carolina Coastal Council, 505 U.S. 1003

(1992).

This case concerns the intellectual property rights of art-

ists, authors, composers, software developers, and all other

creators and owners of copyrighted works. See Ruckelshaus

v. Monsanto Co., 467 U.S. 986, 1003 (1984) (endorsing “a

notion of ‘property’ that extends beyond land and tangible

goods and includes the products of an individual’s ‘labour

and invention’”) (quoting 2 W. Blackstone, Commentaries

*405).

Defenders has a strong interest in ensuring that these in-

tellectual property nights remain meaningful and protected in

the digital age.

STATEMENT

This case involves one of the biggest lootings of private

property in history. Respondents distribute, to hundreds of

thousands of people each week, tools designed to enable theft

on a massive and unprecedented scale. Respondents have

built a business on copyright infringement. Their profits de-

pend on facilitating this theft, and every day millions of peo-

ple worldwide use these tools to break the law and steal Peti-

tioners’ property.

The tools in question are Respondents’ peer-to-peer file

sharing services, which enable users to make illegal copies of

copyrighted musical works and motion pictures owned by

Petitioners. Although Respondents designed the services for

this exact purpose—although they profit in direct proportion

to the amount of unlawful copying their services enable—and

although infringement constitutes at least 90 percent of the

services’ activity—Respondents claim that they are beyond

the reach of the law because some people may actually use

their services in a lawful manner.

The Ninth Circuit found this argument persuasive. In-

voking this Court’s decision in Sony Corporation of America

v. Universal City Studios, Inc., 464 U.S. 417 (1984), the

court held that because Respondents’ services were “capable

of substantial non-infringing uses,” Pet. App. 12a (emphasis

added), Respondents could be held liable for contributory

of infringement at a time at which they contribute[d] to the

infringement and fail[ed] to act upon that information.” /d. at

13a. The court then concluded that because Petitioners’ no-

tices of infringement arrived too late—at a time when Re-

spondents “cannot do anything to stop” the intended conse-

quence of the product they unleashed—Respondents could

not be held secondarily liable and made to halt the millions

of infringements that continue to occur each day. /d.

Under the Ninth Circuit’s reasoning, an individual who

markets and sells burglary tools, and counsels customers on

how to use the tools to break into homes, would not be liable

on the theory that some customers might use the tools to

break into their own houses if they misplace their keys—or

the houses of their friends who give them permission.

The Ninth Circuit’s decision eviscerates intellectual

property rights. It frustrates those who have invested sub-

stantial resources in creating an original work, only to see the

fruits of their labors snatched away. It rewards those, like

Respondents, who unjustly profit by designing tools to en-

able the theft of private property. And it stifles innovation by

depriving citizens of the incentive to create works of art or

music or literature that can be enjoyed by people ages hence.

If left uncorrected, the decision below—in the short

term—will deny creators and artists the financial benefits that

are rightfully theirs. But in the long term, the costs will fall

on society as a whole in the form of songs and movies that

are not created, precisely because the law (as the Ninth Cir-

cuit sees it) will not protect and reward their investments of

time and money. The decision below thwarts the “basic pur-

pose” and “ultimate aim” of the Copyright Act: to “secure a

fair return for an author’s creative labor” and “by this incen-

tive, to stimulate artistic creativity for the general public

good.” Twentieth Century Music Corp. v. Aiken, 422 US.

151, 156 (1975) (internal quotation marks omitted).

Respondents’ services—and their false assertions that

what they do is legal—have spawned a culture of infringe-

ment that leads millions of people who would not dream of

stealing a compact disc or DVD from a store to rationalize

the unlawful downloading of copyrighted works. The sheer

scale of the problem makes lawsuits against direct infringers

a “teaspoon solution to an ocean problem.” Randal C.

Picker, Copyright as Entry Policy: The Case of Digital Dis-

tribution, 47 Antitrust Bull. 423, 442 (2002). Copyright

owners could bankrupt themselves filing John Doe lawsuits

against anonymous users of Respondents’ infringement net-

works (many of whom are judgment-proof) and not even put

a dent in the problem—particularly given the hundreds of

thousands of individuals who join these networks each

month.

A strong rule of secondary liability for copyright in-

fringement is therefore vital to safeguarding intellectual

property rights in the digital era. Copyright owners must

have recourse against entities like Respondents, whose busi-

ness is directed at enabling and facilitating the theft of private

property.

SUMMARY OF ARGUMENT

1. The Copyright Clause of the United States Constitu-

tion reflects the Framers’ understanding that “the Progress of

Science and useful Arts” is best advanced by protecting the

rights of individuals in their intellectual property. Ensuring

that artists, authors and composers are able to secure the fi-

nancial benefits of their labors preserves the incentive to cre-

ate orginal works that may be enjoyed by people throughout

the world.

2. Contributory copyright infringement is a common-

law doctrine rooted in longstanding principles of joint tort

liability. Since at least the nineteenth century, individuals

have been subject to liability in circumstances where they

assist Or encourage the act resulting in injury. In the context

of copyright infringement, persons who knowingly assist or

encourage unlawful copying have been deemed contributory

infringers. Cases in which a person sells a product or service

that can be used to infringe present a closer question. In

Sony, the Court analyzed the problem by drawing upon the

“staple article of commerce” doctrine from patent law, con-

cluding that selling the Sony Betamax did not constitute con-

tributory infringement because it was “principally” used for a

noninfringing purpose. 464 U.S. at 421.

3. The decision below misapplies Sony in two ways.

First, it interprets Sony as protecting those who, like Respon-

dents, actively encourage and facilitate copyright infringe-

ment. Unlike the defendants in Sony, Respondents have done

far more than simply release into the stream of commerce a

product that can be used to infringe. Rather, Respondents

have launched a scheme with the primary purpose of assist-

ing infringement, any lawful use of their services is an inci-

dental byproduct. Second, the decision below misapplies

Sony by asking whether the product has any noninfringing

use. In the context of peer-to-peer file sharing networks, the

answer will always be yes, given that the networks can be

used to transmit noncopyrighted works (or copyrighted

works that are transmitted with the author’s consent or per-

mission). The Ninth Circuit’s absolutist approach is incon-

sistent with settled principles of secondary liability, and ren-

ders the contributory infringement doctrine a virtual dead let-

ter if the defendant can conjure up some theoretical legiti-

mate use for its product.

4. This Court should reaffirm and clarify the approach it

took in Sony by focusing on Respondents’ conduct in design-

ing their services, luring in new participants, and operating

their business in a way specifically designed to maximize the

amount of illegal copying. Only if this Court concludes that

this conduct is not by itself sufficient to support liability for

contributory infringement, should it balance the actual nonin-

fringing uses of the product against the infringing uses. This

type of approach is consistent with the common law of sec-

ondary liability, and will help strike an appropriate balance

between encouraging the use and development of new tech-

nologies, while respecting and preserving the intellectual

property rights of copyright owners.

ARGUMENT

I. THE FRAMERS RECOGNIZED THAT

“PROGRESS” IN THE CREATIVE ARTS

DEPENDS ON PROTECTING INTELLECTUAL

PROPERTY RIGHTS.

The Framers recognized that private property rights are

at the core of a free and prosperous society. The Takings

Clause of the Fifth Amendment provides that “private prop-

erty [shall not] be taken for public use, without just compen-

sation.” The Copyright Clause, U.S. CONST., art. L § 8, cl. 8,

extends special protection to intellectual property, empower-

ing Congress “[t]o promote the Progress of Science and use-

ful Arts, by securing for limited Times to Authors and Inven-

tors the exclusive Right to their respective Writings and Dis-

coveries.”

This “constitutional command,” Graham v. John Deere

Co. of Kansas City, 383 US. 1, 6 (1966), reflects and incor-

porates the principle that the creative arts are best advanced

through a strong system of copyright that preserves the fi-

nancial incentive for writers, authors and composers to create

original works. As this Court has explained, “[t]he economic

philosophy behind the clause empowering Congress to grant

patents and copyrights is the conviction that encouragement

of individual effort by personal gain is the best way to ad-

vance public welfare through the talents of authors and in-

ventors in ‘Science and useful Arts.”” Mazer v. Stein, 347

U.S. 201, 219 (1954).

The Court elaborated on this principle in Eldred v.

Ashcroft, where it stated that “‘copyright law celebrates the

profit motive, recognizing that the incentive to profit from

the exploitation of copyrights will redound to the public

benefit by resulting in the proliferation of knowledge. ...

The pro“t motive is the engine that ensures the progress of

science.” 537 U.S. 186, 212 n.18 (2003) (quoting Am. Geo-

physical Union v. Texaco Inc., 802 F. Supp. 1, 27 (S.D.N_Y.

1992), aff'd, 60 F.3d 913 (2d Cir. 1994)). “Rewarding au-

thors for their creative labor and ‘promot[ing] . .. Progress’

are thus complementary, as James Madison observed, in

claims of individuals.”” Eldred, 537 U.S. at 212 n.18 (quot-

ing The Federalist No. 43, p. 272 (C. Rossiter ed. 1961)). In

this way, “copyright law serves public ends by providing in-

dividuals with an incentive to pursue private ones.” Eldred,

537 US. at 212 n.18.

Preserving a strong system of “enforceable rights” in

intellectual property thus “afford[s] greater encouragement to

the production of [creative] works of lasting benefit to the

world.” Washingtonian Pub. Co. v. Pearson, 306 U.S. 30, 36

(1939) (quotation omitted).

fl. THE DOCTRINE OF CONTRIBUTORY

COMMON-LAW PRINCIPLES OF SECONDARY

LIABILITY.

“The Copyright Act does not expressly render anyone li-

able for infringement committed by another.” Sony, 464 U.S.

at 434. Culpable parties “who have not themselves engaged

in infringing activity,” id. at 435, may nevertheless be held

secondarily liable pursuant to “p.inciples recognized in every

part of the law.” Kalem Co. v. Harper Bros., 222 U.S. 55, 63

(1911). Thus, contributory copyright infringement is funda-

mentally a common-law doctrine—“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.” Sony, 464 U.S. at 435.

A. At Common Law, Secondary Liability

Attached To Those Who Assisted Or

Encouraged Wrongful Acts.

By the early seventeenth century, it was recognized that

when multiple parties act in concert to commit a tort, “all

coming to do an unlawful act, and of one party, the act of one

is the act of all of the same party being present.” Sir John

Heydon’s Case, 77 Eng. Rep. 1150, 1151 (1613). Over the

course of nearly four centuries, the common law of joint li-

ability has identified and refined the various circumstances in

which parties can be said to be “acting in concert.” The prin-

ciple is now broad enough to encompass “[a]ll those who, in

pursuit of a common plan or design to commit a tortious act,

actively take part in it, or further it by cooperation or request,

or who lend aid or encouragement to the wrongdoer, or ratify

and adopt the wrongdoer’s acts done for their benefit.”

W. Page Keeton et al., Prosser & Keeton on the Law of

Torts, § 46 at 323 (Sth ed. 1984) (footnotes omitted).

As the Restatement explains, a defendant may be held li-

able “[fjor the harm resulting to a third person from the tor-

tious conduct of another” when the defendant “knows that

the other’s conduct constitutes a breach of duty and gives

substantial encouragement or assistance to the other so to

conduct himself.” Restatement (Second) of Torts § 876(b)

(1979). In such cases, secondary liability is just, because the

secondarily liable party has allied itself with the tortfeasor

and encouraged or assisted the tortfeasor in accomplishing

his aims, thereby making itself equally morally culpable.

Common-law courts have long applied these principles

in civil tort cases. For example, in Daingerfield v. Thomp-

son, 74 Va. 136 (1880), the Supreme Court of Appeals of

Virginia found that offering mere words of encouragement

could provide the basis for liability, holding that because the

defendant had “advised and instigated” the unlawful act, he

could be held civilly liable as “the aider and abettor” and

“must take the consequences of the result.” The Supreme

Judicial Court of Massachusetts applied a similar test, hold-

ing that “any person who is present at the commission of a

trespass, encouraging or exciting the same by words, ges-

tures, looks, or signs, or who in any way or by any means

- countenances or approves the same, is in law deemed to be

an aider and abettor, and liable as principal.” Brown v. Per-

kins, 83 Mass. 89, 98 (1861). See also Rice v. Paladin En-

terprises, Inc., 128 F.3d 233, 251 (4th Cir. 1997) (publisher

of a manual for contract killers can be subject to common-

law tort liability for aiding and abetting the wrongful death of

a murder victim whose killer had followed the manual’s in-

structions).2

B. Those Who Assist Or Encourage Copyright

Infringement Can Be Held Liable As

Contributory Infringers.

The doctrine of contributory copyright infringement

emerged from these common-law principles in the second

half of the nineteenth century. In 1886, a defendant was

found liable for contributory infringement when he sold a

printing plate from the plaintiff's illustrated newspaper to a

competing illustrated newspaper, which then printed and

published the material on the printing plate without the plain-

tiffs permission. Harper v. Shoppell, 28 F. 613

(C.C.S.D.N.Y. 1886). The court held that because the defen-

dant “kn[{ew] at the time of selling the plate” that it would be

used to infringe the plaintiff's copyright, the defendant “oc-

cupies the position of a party acting in concert with the pur-

chaser who printed and published it, and is responsible with

him as a joint tort-feasor.” Jd. at 615.

Twenty-five years after Harper, this Court found the

principle of contributory copyright infringement so unexcep-

tional that it pronounced it consonant with “principles recog-

nized in every part of the law.” Kalem Co., 222 US. at 63.

2 The federal criminal code, 18 U.S.C. § 2(a), also provides for aiding-

and-abetting liability: “Whoever commits an offense against the United

States or aids, abets, counsels, commands, induces or procures its com-

mission, is punishable as a principal.”

In Gershwin Publishing Corp. v. Columbia Artists Man-

agement, the Second Circuit penned the formulation of the

doctrine that remains the most-quoted standard today, apply-

ing contributory infringement liability to anyone “who, with

knowledge of the infringing activity, induces, causes or mate-

rially contributes to the infringing conduct of another.” 443

F.2d 1159, 1162 (2d Cir. 1971) (footnote omitted); see also

Paul Goldstein, Copyright § 6.1 at 705 & n.2 (2d ed. 1990).

In short, “the law allows a copyright holder to sue a contnbu-

tor to the infringement . . . in effect as an aider and abettor.”

In re Aimster Copyright Litig., 334 F.3d 643, 645-46 (7th

Cir. 2003).

Although the aiding-and-abetting standard was simple

enough to apply when the defendant supervised or directly

participated in the infringement, it was not as useful in re-

solving what Justice Holmes pointedly called the “nice ques-

tions” that arise in situations where the defendant does no

more than provide the materials or equipment used in the in-

fringement. Kalem Co., 222 U.S. at 62. In “cases where an

ordinary article of commerce is sold,” it can be difficult to

identify the point at which “the seller becomes an accomplice

in a subsequent illegal use by the buyer.” /d.

The Court confronted this question in Sony, where it

emphasized that “the contributory infringement doctrine is

grounded on the recognition that adequate protection [of the

look beyond actual duplication of a device or publication to

the products or activities that make such duplication possi-

ble.” 464 U.S. at 442. Drawing upon the staple article of

commerce doctrine in patent law, it held that because the

Sony Betamax was “widely used for legitimate unobjection-

able purposes” and “capable of commercially significant

noninfringing uses,” the defendants could not be held liable

for contributory infringement. /d.

Il. THE NINTH CIRCUIT’S APPROACH

MISAPPLIES SONY AND DEPARTS FROM THE

COMMON-LAW UNDERSTANDING OF

~ CONTRIBUTORY INFRINGEMENT.

The Ninth Circuit held that Respondents were not liable

for contributory infringement because they did not have

knowledge of the infringement. The court reasoned that ab-

sent proof that the defendant had “reasonable knowledge of

specific infringing files and failed to act on that knowledge to

prevent infringement,” it could not be held liable for con-

tributory infringement as long as its product or service “is

capable of substantial or commercially significant nonin-

fringing uses.” Pet. App. 10a-12a (emphasis added).

This approach cannot be reconciled with the common-

law authorities discussed above and is inconsistent with this

Court’s holding in Sony. Here, there is no dispute that illegal

copying constitutes more than 90 percent of the traffic on Re-

spondents’ networks. Nor is there any dispute that Respon-

dents are aware of this infringement and that they directly

profit from this infringement. Indeed, Respondents carefully

designed their products to facilitate copyright infringement—

and have carefully avoided taking any steps to curtail the il-

legal activity their products have generated.

This is a classic case of aiding and abetting illegal con-

duct. Respondents have enabled, encouraged and profited

from the infringement and should be held contributorily li-

able under ordinary common-law principles of secondary li-

ability. See Keeton et al., Prosser & Keeton on the Law of

Torts, § 46 at 323 (secondary liability encompasses “[{aJll

those who, in pursuit of a common plan or design to commit

a tortious act, actively take part in it, or further it by coopera-

tion or request, or who lend aid or encouragement to the

wrongdoer, or ratify and adopt the wrongdoer’s acts done for

their benefit”). As parties that assisted, encouraged and

benefited from the tortious conduct, Respondents are morally

culpable and should be deemed liable for the resulting harm.

The Ninth Circuit has adopted an absolutist approach to

secondary liability arising from the sale of a product: pro-

vided the defendant can show that its product is “capable” of

some noninfringing use, contributory liability will not lie (ab-

sent a heightened showing of knowledge of specific in-

fringements and failure to act—a showing that the Ninth Cir-

cuit has made virtually impossible to satisfy). This approach

is im direct conflict with Sony because it ignores Respon-

dents’ conduct in implementing a business plan aimed at fa-

cilitating copyright infringement, and further because it mis-

applies Sony’s balancing test.

A. Respondents’ Conduct In Designing, Marketing,

And Supporting Their Networks Renders Them

Liable For Aiding And Abetting Copyright

Infringement.

Sony was a case where the defendants did no more than

place a product into the stream of commerce that could be

used to infringe copyrights. This case, in contrast, involves

defendants who have taken affirmative to assist and en-

courage people to use their products to infringe copyrights.

Among other things, Respondents have intentionally config-

ured their services to facilitate the illegal copying of files

containing music, movies and software—whiie at the same

time deliberately limiting their own ability to prevent the

copying of copyrighted works. Indeed, ents’ “help

desk” actually instructs users on how to fer specific

copyrighted works. Respondents have also hed a mar-

keting campaign aimed at luring former Napster users. These

individuals are targeted for the sole that they have

demonstrated an interest in obtaining musi¢ and movies ille-

gally. To top it off, Respondents aggressively and falsely

proclaim that their services are legal, thus ing their cus-

tomers—1including millions of children—into lawbreaking.

This course of conduct amounts to aiding and abetting

dents’ services have a commercially significant use. As the

Second Circuit has explaimed, there are two general catego-

ries of activities that lead to contributory liability:

“(i) personal conduct that encourages or assists the infringe-

ment, and (ii) provision of machinery or goods that facilitate

the infringement.” Matthew Bender & Co. v. West Publish-

ing Co., 158 F.3d 693, 706 (2d Cir. 1998); accord Nimmer

on Copyright at § 12-79 (stating that “personal conduct that

forms part of or furthers the infringement” and “contribution

of machinery or goods that provide the means to infringe” are

separate bases for contributory liability). The Ninth Circuit

erred by declining to hold Respondents liable on the basis of

their personal conduct—namely, their design, marketing and

ongoing technical support efforts—all of which demonstrate

a clear intent and deliberate purpose of assisting the m-

fringement of copyrighted works.

B. Respondents Are Contributorily Liable For

Distributing A Product That They Know Is

Overwhelmingly Used For Infringement.

The Ninth Circuit further erred by refusing . ‘mpose

contributory liability on the basis of Respondents’ “provision

of machinery or goods that facilitate the infringement.” Mat-

thew Bender, 158 F.3d at 706. Even if Respondents could

somehow be deemed not to have engaged in personal con-

duct that furthered the infringement, they should have been

held liable for providing the goods that facilitated i. In con-

cluding otherwise, the Ninth Circuit misapplied Sony’s bal-

ancing test for determining when the provision of a good or

service used to infringe can lead to contributory liability.

In Sony, the Court sought to “strike a balance between

the 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.” 464 U.S. at 442; see also Aimster, 334

F.3d at 649 (noting the “Court’s action in striking the cost-

benefit tradeoff in favor of Sony”). The Court found that

“millions of owners” of video recorders used the devices for

the noninfringing use of time-shifting—trecording a program

in order to watch it at a later time—and that “the business

supplying the equipment that makes such copying feasible

should not be stifled simply because the equipment is used

by some individuals to make unauthorized reproductions of

[copyrighted] works.” Sony, 464 U.S. at 446. Indeed, time-

shifting was the “primary” and “principal[]” use for the “av- -

erage member of the public us{ing] a [video recorder].” /d.

at 421, 423. The noninfringing time-shifting use by “mil-

lions” thus outweighed the infringing library-building use of

“some individuals.” Here, of course, it is undisputed that Re-

spondents’ services are used overwhelmingly to violate the

rights of copyright owners and steal their property. Accord-

ingly, in this case the balance tilts heavily in favor of the

The Ninth Circuit’s absolutist approach grossly under-

protects intellectual property rights. As long as there is a

public domain of noncopyrighted (or uncopyrightable)

works, virtually every copying device placed into the stream

of commerce will be “capable” of noninfringing_uses, and

scale, systematic misappropriation of their property by enti-

ties such as Respondents, whose entire business is predicated

on the theft of copyrighted works.

C. This Court Should Reaffirm And Clarify

Sony’s Balanced Approach To Contributory

Infringement.

In Sony, this Court found a way to balance the develop-

ment of new technologies with our constitutional commit-

ment to protect and defend copyrights. The Court should ap-

ply the same approach here by reaffirming and clarifying that

traditional common-law principles of secondary liability fully

apply to on-line services that encourage and facilitate the il-

legal reproduction of copyrighted works.

This Court should make clear that Sony does not offer a

safe harbor for individuals and businesses, such as Respon-

dents, who aid and abet infringement by deliberately pursu-

ing a course of conduct intended to facilitate illegal copying.

As shown above, Respondents’ design, marketing and sup-

port activities directly assist infringers, and generate profits

for Respondents as a result of the infringements. These facts

establish Respondents’ moral culpability and illustrate that

their conduct is different in kind than the conduct of the

manufacturers of the video recorders in Sony. Cf. 464 U.S. at

438 (noting trial court finding that defendants’ conduct, in-

cluding their advertising, was not aimed at encouraging or

assisting infringement).

This Court should also reject the Ninth Circuit’s applica-

tion of Sony’s balancing test, and clarify that the balancing

test requires weighing the relative magnitude of the legal

uses of Respondents’ services against the illegal uses. This

was the general approach followed in Aimster. There, the

Seventh Circuit, in an opinion by Judge Posner, held that

when “substantial noninfringing uses, present or prospective,

are demonstrated,” courts should make “some estimate of the

respective magnitudes of these uses” and engage in a “bal-

ancing of costs and benefits.” 334 F.3d at 649.

A test that balances the interests at stake will not dimin-

ish the incentiv for legitimate innovation or hamper the

creation of nev echnologies. To the contrary, a balancing

approach will permit legitimate technologies that benefit the

public to flourish, while at the same time respecting the intel-

lectual property rights of copyright owners—a value the

Framers deemed to be of constitutional importance in pro-

tecting the creative process.

The irony in this case is that Respondents are victimizing

the very people whose creativity drives and sustains their

business. The law should not protect those who have built a

business based on the unjust exploitation of property owned

by another, and who continue to profit while disclaiming any

responsibility for the immense harm that is the expected and

intended consequence of their conduct.

CONCLUSION

‘The judgment of the Ninth Circuit should be reversed.

Respectfully submitted.