So it's come to this. The U.S. Supreme Court has granted a writ of certiorari to the Grokster case, which proves to be the next landmark legal decision in copyright law (the first being Sony v. Universal, 464 U.S. 417 (1984), the so-called Betamax case). In that case, the Court ruled that the Betamax did not infringe upon the copyrights held by respondents Universal City Studios and Walt Disney Company. The Court didn't buy the argument that "supplying the 'means' to accomplish an infringing activity and encouraging that activity through advertisement are sufficient to establish liability for copyright infringement." And finally -- and most importantly -- the Court ruled that "[t]he sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes, or, indeed, is merely capable of substantial noninfringing uses." The notion that "an article of commerce" may be able to infringe copyright but can still be legal as long as it has "substantial noninfringing uses" is what has allowed things like photocopiers, VCRs, CD burners, and so on and so forth.

At issue in MGM v. Grokster, 03-55894 (2004) is "whether distributors of peer-to-peer file-sharing computer networking software may be held contributorily or vicariously liable for copyright infringements by users." The Ninth Circuit Court of Appeals didn't believe so, and ruled in August 2004 that Grokster was not liable for contributory infringement.

The Ninth Circuit Court observed, rightly, that ever since "the advent of the player piano, every new means of reproducing sound has struck a dissonant chord with musical copyright owners, often resulting in federal litigation."

Contributory infringement

It wouldn't be a federal court case without prongs, and MGM v. Grokster is no exception. In order to prove contributory infringement, the following three prongs must be met: "(1) direct infringement by a primary infringer, (2) knowledge of the infringement, and (3) material contribution to the infringement." The lack of any one prong means that the activity does not constitute contributory infringement.

No one disputes the element of direct infringement, so that's one prong. Two more to go until we've got contributory infringement.

The "knowledge" prong gets tricky, because if the device in question is not capable of "substantial non-infringing uses," then "the copyright owner need only show that the defendant had constructive knowledge of the infringement." "Constructive" in this case means that, although the defendant did not, in reality, actually know that infringement was occurring, the situation was such that the defendant could probably surmise that infringement was occurring, since the device had no non-infringing uses.

But, "if the product at issue is capable of substantial or commercially significant noninfringing uses, then the copyright owner must demonstrate that the defendant had reasonable knowledge of specific infringing files and failed to act on that knowledge to prevent infringement." "Reasonable" means that the defendant had rational or appropriate knowledge. It is a higher standard of knowledge: the defendant could not merely surmise that infringement was occurring, since non-infringing activity could also be occurring; therefore, he had to know that infringement was taking place.

The Circuit Court determined that Grokster was capable of "substantial non-infringing uses," even though the respondents insisted that a majority of the activity on Grokster's network was illegal. That doesn't matter, though, since, "in order for limitations imposed by Sony to apply, a product need only be capable of substantial noninfringing uses." The law says nothing about quantity of noninfringing use. Boo-yah!

Thus, the standard is "reasonable knowledge of specific infringement": Grokster had to know that copyright infringement was taking place. Did they? The Ninth Circuit Court's argument is sketchy here, although ultimately they conclude that Grokster did have knowledge of specific infringement.

And what of "material contribution"? In the Napster case, the Circuit Court ruled that "Napster provides the site and facilities for direct infringement." Grokster is different because of its distributed architecture: "even if the Software Distributors 'closed their doors and deactivated all computers within their control, users of their products could continue sharing files with little or no interruption.'" Thus, it is here that the argument fails: Grokster does not materially contribute to infringement, and thus, it does not meet the third prong of the test, meaning that there is no contributory infringement.

And the Ninth Circuit adds, "The 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."

Vicarious infringement

Okay, maybe Grokster didn't contribute to infringement. But maybe, through negligence -- by not doing something they could have done -- they indirectly contributed to infringement. This is "vicarious infringement," and Grokster is being charged with that, too.

Time for more prongs. To prove "vicarious infringement," there must be "(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." The "direct financial benefit" in this case is advertising revenue, since Grokster (and Kazaa, another respondent) uses ad-supported software (this is the one and only time I'll be on spyware's side). The Court also did not dispute the existence of "direct infringement." That's two prongs down.

Does Grokster have "the right and ability to supervise the infringers"? Not really. "It does not appear from any of the evidence in the record that either of the defendants has the ability to block access to individual users," the Court said. "The nature of the relationship between Grokster and StreamCast and their users is significantly different from the nature of the relationship between a swap meet operator and its participants [a reference to another case determining a relationship between an infringer and a potential infringee; cf. Fonovisa v. Cherry Auction, 76 F.3d 259 (1996)], or prior versions of Napster and its users, since Grokster and StreamCast are more truly decentralized, peer-to-peer file-sharing networks." They fail to meet the third prong, so there's no vicarious infringement.

And so, the case is over in the Ninth Circuit Court of Appeals, with the respondents urging for a renovation of copyright laws, which the Court said would be "unwise," since it "would also alter general copyright law in profound ways with unknown ultimate consequences outside the present context." Now here's a great paragraph which I will quote here, without citations. It describes exactly what copyright law does and what it doesn't do:

Further, as we have observed, we live in a quicksilver technological environment with courts ill-suited to fix the flow of internet innovation. The introduction of new technology is always disruptive to old markets, and particularly to those copyright owners whose works are sold through well-established distribution mechanisms. Yet, history has shown that time and market forces often provide equilibrium in balancing interests, whether the new technology be a player piano, a copier, a tape recorder, a video recorder, a personal computer, a karaoke machine, or an MP3 player. Thus, it is prudent for courts to exercise caution before restructuring liability theories for the purpose of addressing specific market abuses, despite their apparent present magnitude.

And so the case will be heard by the Supreme Court on March 25. Rehnquist himself voted against the Betmax decision back in 1984, but I'll bet he has a VCR now. This time, the case is more sound, as the Ninth Circuit Court stuck to the letter of the law, something that will please Justice Scalia (although it doesn't bring in larger Western, male, heterosexual traditions -- which are perfectly acceptable as law -- so he might cry just a little bit). This case is different from Betamax in that the words of the law are clear: Grokster does not meet all the requirements for vicarious or contributory infringement. The Supreme Court will not have to fashion a brand-new interpretation of the law to fit a brand-new situation as it did in 1984.

And if the Court rules that file-sharing on a peer-to-peer network is illegal, how else will Clarence Thomas get his episodes of Sex and the City?

For more information, please visit EFF's big page of MGM v. Grokster case files.