Supreme Court Rules "Unanimously" Against Grokster 3-3-3

crossposted from blogologie

Well, this sure isn't going to help matters!

My initial reading of the three opinions in the Grokster case suggests that the justices' points of agreement are far more circumscribed than the 9-0 ruling suggests. Specifically, they agree that the case should head back to the 9th Circuit where summary judgment was improperly awarded to Grokster and Streamcast, and that the 9th Circuit must rule on whether Grokster and Streamcast are liable for inducing copyright infringement.After that, pretty much everything is up for grabs.

Here's the breakdown:

THE OPINION: written by Souter, joined by Thomas and Scalia

This opinion, to my mind, offers a clear substitute for the generally understood standard derived from the Betamax case. In Betamax, the Court ruled in favor of a technoology (the VCR)arguing that it, and similar technologies "need merely be capable of substantial non-infringing uses." The majority ummm ... opinion substitutes "capable of substantial lawful use" and the distinction is important. I think Souter, et al. misstate Sony in a concluding paragraph when they write "Sony dealt with a claim of liability based solely on distributing a product with alternative lawful and unlawful uses, with knowledge that some users would follow the unlawful course." The suggestion here is that most of the anticipated uses of the VCR were lawful and that only a small minority of the VCR's users would engage in arguably illicit behavior. The critical paragraph, to my eye, is:

Sony's rule limits imputing culpable intent as a matter of law from the characteristics or uses of a distributed product. But nothing in Sony requires courts to ignore evidence of intent if there is such evidence, and the case was never meant to foreclose rules of fault-based liability derived from the common law.

In other words, while you can't go after Grokster for the design of its products, and the ease with which the products can be used for infringing activities, you are free to pursue Grokster for knowingly and actively structuring itself as a promoter of infringements. The bottom line: Retry on inducement theory because boy, did Grokster and Streamcast ever induce!

THE DISSENT FIRST CONCURRENT OPINION: written by Breyer (huzzah!) and joined by Stevens and O'Connor

Stephen Breyer helpfully reminds us all that Sony, among other things, advertised that Betamax owners could use their machines to build libraries of taped copyrighted programs. Breyer also points up that the amoung of infringing use of the then-infant VCR relative to the assuredly non-infringing use was 90%-10%, almost precisely the percentages alleged in the Grokster litigation. Breyer concludes that, properly understood, the holding in Sony should rule. The bottom line: Retry, but because you got Sony right, this case is very narrowly about inducement and not about technology.

THE SECOND CONCURRENT OPINION: written by Ginsberg and joined by Rehnquist and Kennedy
These justices effectively rewrite Sony. No longer is the "capability" of substantial non-infringing use the standard. Now, the actual patterns of usage are, apparently, fair game, at least for this trio. In an overwhelmingly negative assessment of Grokster and Streamcast, the only real positive for those of us hoping for a different result is the following paragraph:

"The district court did not sharply distinguish between uses of Grokster's and Streamcast's products (which this case is about) and uses of peer-to-peer technology (which this case is not about)."

The bottom line: Retry on inducement and contributory liability based on distribution of their software products. You misread Sony to mean that contributory liability was off the table. As far as we're concerned it isn't.

Well, great.

This case gives me the rare opportunity to agree with Hillary Rosen - notably the somewhat conciliatory Hilary Rosen writing the day before the case was decided as opposed to the somewhat gloaty Hilary Rosen writing hours later. On June 26th, she wrote:

This is a big case with lots of money poured into it from all sides. It is said that the Supreme Court’s decision will be one of the most important copyright cases ever on the books. I think it has all the makings of being famous for another reason. Because while the victory of whoever wins maybe important psychologically, it just won’t really matter in the marketplace.

This is especially true now that the Court has passed up the opportunity to weigh in as forcefully and as clearly as it did with Betamax. Time will tell if this decision's apparent muddying of the Betamax case will have demonstrable effects on innovation. But at least even the most extreme of the decisions implicitly acknowledges the legality of peer-to-peer technologies. For now.