Richard Epstein: Contributory infringement wars

Contributory infringement wars
Richard A. Epstein
Financial Times
January 27, 2005

In 1984, the United States Court held in Sony Corporation v Universal City Studios (Betamax) that the owners of motion pictures could not sue the sellers of Betamax machines for contributory copyright infringement, just because their then-new equipment allowed ordinary users to record their copyrighted material.

Betamax stressed that Sony's equipment had an extensive variety of noninfringing uses, including the simple time-shifting of recorded events that left all advertisements in tact. The case was widely regarded as a backhanded victory for the short-sighted film industry that didn't quite get that Betamax and the VCR would open up an entire new revenue stream - home videos - for the very ndustry that sought to shut down the new technology. Like the old player-piano cases, a gentle judicial hand facilitated a wider commercial market for copyrighted works.

Right now (in a case where I am consulting with the Business Software Alliance, although the views here are my own) the battlelines are forming anew as the Supreme Court prepares to hear MGM v Grokster.

Is a peer-to-peer file sharing network, over which copyrighted songs are illegally swapped, likewise immune from charges of contributory infringement because, as the lower court held, Grokster's creators did not run a centralised music directory on the forbidden Napster model?

Once again, the hue and cry is that the content industry should stay its hand lest it kill a technology from which it ultimately benefits. The opponents of copyright liability are refighting the last war, only this one is much more complicated.

Initially, no one is happy about how the law of contributory infringement plays out. Conceding that the direct swap of copyright material is illegal, it still can't be the case that anyone who "facilitates"
thousands of independent transfers should bear those sins as his own. By that logic every hardware or software supplier whose equipment is used for illegal swaps is branded a wrongdoer. That the net of liability cannot spread that far was a large portion of the intuition in the Betamax case. But here the institutional dynamics are quite different. Most critically, there's no intermediate business layer between Betamax and the ordinary consumer. The Supreme Court's stark choice was either too much or too little liability, and it opted for the latter. But in the case of Grokster, a no-liability rule for box manufacturers, web designers and email suppliers is easier than it was in Betamax, precisely because Grokster now occupies that crucial intermediate position.

Adopting this fixed position means that we don't have to explore a terrifying possibility, suggested by Judge Richard A. Posner in his 2003 Aimster decision: if initially presuming that so long as infringing uses are substantial (as they are with any computer), then to escape liability "a provider of the service must show that it would have been disproportionately costly for him to eliminate or at least reduce substantially the infringing use." That open-ended inquiry creates the nightmarish possibility that just about everyone in the chain of distribution - unless the term "provider of service" is narrowly construed - bears the burden of proof of showing that no technological fix was available.

No one can make these complex design determinations sensibly, even prospectively. Worse still, no jury should ever be allowed to use hindsight to impose huge damages in endless contributory infringement cases brought years after those original design decisions were made.

But as for the Groksters of this world? For them, my personal judgment - Betamax's reprieve - is all too generous. Grokster can't raise even one whiff of the fair use defence that loomed so large in Betamax.

First, there's no class of nonobjecting owners of copyrighted material who don't mind copying. Second, there is no advertisements that can be watched at a different time. And third, this time the content providers, moreover, are right to assume that this new technology won't open up new revenue streams given that iTunes has already figured out how to tap this segment of the market.

This immediate facilitator shouldn't escape because there are some noninfringing uses; there always are. Rather, Grokster should be held liable for fuelling a huge explosion in illegal transfers, even if its originators have tried to distance themselves from the illegal swaps that take place daily. If Grokster has some legitimate use, then it can be reconfigured, perhaps with consultation with the content owners, in ways that allow for the legal sharing of data, a critical function that looms larger each passing day.

Here's our moral. In dealing with contributory infringement, we can't expect the precision that is found in infringement suits directed against individual players. All that can be asked is that we try to minimise the sum of two errors, for over and underenforcement. In this case, I believe that shutting down Grokster, and leaving everyone else alone, marks the sensible first approximation to the correct solution.

The writer is the James Parker Hall Distinguished Service professor of law at the University of Chicago and Peter and Kirsten Bedford Senior Fellow at the Hoover Institution.

Richard A. Epstein