Content’s Attack

— Leave a comment

Litigation Against Technology

While record label’s efforts in the marketplace have largely failed, their aggressive litigation strategies have won some technology-crushing verdicts.  Ever since the landmark case Sony Corp. of Am. v Universal City Studios, Inc.[1] the content and technology industries have frequently engaged in courtroom battles.  Three of the most influential decisions of the last decade will be summarized here.

First, UMG Recordings, Inc., v MP3.com, Inc.[2] in 2000, was centered on a website, MP3.com, which permitted users to access a huge database of music over the Internet after demonstrating independent ownership of an original copy of that recording.  The district court found MP3.com directly liable for copyright infringement because it failing to obtain authorization from plaintiffs to copy and distribute their copyrighted works, a violation of plaintiffs’ exclusive rights under §106 of the Copyright Act.[3] The court also rejected MP3.com’s Fair Use defense.  The court found that the purpose and character of MP3.com’s use of the plaintiff’s work was commercial and non-transformative; the nature of the work used was core protected content; the work was copied and distributed in its entirety; and finally, MP3.com’s actions would have an adverse market affect on the plaintiff’s music.[4]

Second, A&M Records v Napster, Inc.[5] in 2001, brought Napster, the principal architect of the online file-sharing, to its knees under the theory of contributory liability.  Napster freely distributed file-sharing software to its users, which allowed them to share music by uploading and downloading recordings in the form of mp3 files to centralized servers at the Napster website.  In 1999, record companies and music publishers filled suit against Napster claiming that Napster is contributorily and vicariously liable for copyright infringement for allowing users of the Napster website to misappropriate copyrighted music.  The court granted a preliminary injunction against Napster.  Napster’s defense strategy was to defeat the underlying infringement claim against its users on the basis of Fair Use, which would then make any claims of contributor or vicarious liability void.  This defense was summarily rejected.  The 9th Circuit affirmed in part, reversed in part, and remanded holding that 17 USC §106 (1) & (3) were infringed.  Napster again asserted a Fair Use defense on appeal on the part of its users based upon three arguments: (1) users were simply sampling music before they bought it; (2) users were space shifting music they already owned; and (3) some of the content available was part of a permissive distribution scheme by the artists.  In affirming the rejection of Napster’s users’ Fair Use defense, the court reasoned that the purpose and character of the use was non-transformative, because downloading does not transform and retransmission is similarly not sufficient to satisfying this element.  Further, the use was commercial because the host user sending the mp3 file was doing so to an anonymous second user and that anonymous second user was thereby transferred intellectual property they would ordinarily have to pay for.  Furthermore, the nature of the subject matter was creative, and thus, core protected material.  The amount and substantiality of the work used element also went to A&M Records’ favor because works were copied in their entirety, although some cases do allow the entire subject matter to be copied.[6] The market harm was primarily evidenced by reduced CD sales in college students.  Once direct infringement had been established, A&M Records then proved Napster was contributorily liable because of its constructive knowledge of the direct infringement.

Finally, Metro-Goldwyn-Mayer Studios, Inc. v Grokster, Ltd.,[7] in 2005. Grokster offered a similar service as Napster but shared movies in addition to music files.  Where Grokster differed was in the technological structure of its service.  Almost as if building a business in response to the decision proffered in A&M Records v Napster, Grokster employed no centralized servers.  Their file sharing software worked directly between users.  This distinguished Grokster from Napster in that it lacked knowledge and control over its users.  Grokster made a seemingly savvy, cost-saving and legally-protective business decision to operate without a centralized server.  As clever as its founders thought they were, Grokster’s key mistake was in their promotion of the site.  They had branded the service as the “new Napster.“  The company went so far as to distribute the Grokster software over the Napster file-sharing network hoping to capture users.  Metro-Goldwyn-Mayer Studios brought suit for illegal distribution and reproduction of its protected works.  The district court held that Grokster’s users were liable for direct infringement but distribution of the Grokster software did not give rise to the knowledge element of contributory liability.  The court of appeals went even further in Grokster’s favor in applying the Sony exception to Grokster because site was capable of substantial non-infringing uses.[8] Much to Grokster’s surprise, the US Supreme Court ruled that:

[o]ne who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.[9]

Evidence of Grokster’s efforts to promote the infringing capabilities of its software was abundant.  Grokster had provided helpful responses to user emails inquiring as to how to play a copyrighted infringed movie, used technology to block some companies who were trying to monitor them, and sent out materials to their users explaining how not to be caught for infringement.[10]

The landmark Grokster decision has not gone without criticism.  In adding the inducement exception to the Sony exception, the court created ambiguity in what constitutes inducement to infringement.  For example, Apple used the slogan “rip, mix, burn” in an advertising campaign in 2001.[11] This slogan seems to induce Mac users to engage in what could be an infringing activity.  Without legislative or judicial clarification as to the meaning of inducement in the context of contributory liability, the business and legal communities are left guessing how to operate within the confines of the law.  Additionally, ambiguity exists in what percentage of the total uses have to be non-infringing to meet the “substantial non-infringing uses” guideline.  For example, a growing number of independent film distributors and bands have embraced bit torrent technology to distribute their work, (i.e., a non-infringing use).  As a matter of fact, bit torrent technology has proven to be an incredibly efficient vehicle for the instant dissemination of large files. This is an invaluable tool for an independent producer who wishes to get his work in the hands of as many viewers as possible.  Under the Grokster decision it is unclear how many of these independent releases via bit torrent would be needed to constitute substantial non-infringing uses.  It is quite possible that future legal action could bring down this technology as well, foreclosing the opportunity of independent free distribution for those that want it.

Regardless of the ambiguities that remain, defeating MP3.com, Napster, and Grokster were tremendous victories for the content industry.  Grokster, and its progeny had distributed untold amounts of core protected content and caused a great deal of damage before injunctions were issued.  To illustrate, at its peak, Napster had more than 800 million registered users, making it the fastest growing service on the internet[12] and approximately 90% of the material on the Grokster network was infringing.

Litigation Against Consumers

In addition to its attack on technology, the record industry has shown no fear in pursuing litigation directly against its customer base.  In BMG Music v Gonzalez,[13] Defendant Gonzalez downloaded 1400 songs via a peer-to-peer file-sharing service called KaZaa.  Most of the content she downloaded she already owned but conceded to infringing upon 30 songs.  BMG sought statutory damages for the 30 admittedly downloaded songs and the court decided to assess damages at the bottom of the statutory range, totaling $22,500.[14] Ms. Gonzalez is only one of a long string of attacks against direct infringers but exemplifies the record industry’s aggressive stance on litigation.  This pro-litigation strategy of deterring the users of peer-to-peer technologies has upset many music fans.

In another consumer punishing move, record labels were actually in stride with technology in the implementation of a form of Digital Rights Management (“DRM”) technology called FairPlay.   FairPlay is copy protection technology embedded in iTunes digital downloads that prevents users from playing their music on more than five devices.  This protective measure benefited Apple far more than it benefited the labels.  The benefits were so great that European regulators complained that Apple was using this scheme to corner the digital music market unfairly.[15] After years of complaints from consumers and competitive market pressures digital download services like iTunes have recently to abandoned DRM schemes, like FairPlay, and adopted a totally open, restriction-free mp3 file format.

Legislative Efforts

In addition to the preceding litigation, the content industry also engaged technology on the battleground of legislation.  One example of which was an act that recently passed providing a new level of protection against piracy.  The Digital Millennium Copyright Act[16] (“DMCA”) makes it a crime in and of itself to circumvent DRM technology.  In effect, this act overreaches the mark by limiting access to not only copyrightable DRM protected works but also non-copyrightable DRM protected works.   In its interpretation the DMCA has lead to a bizarre conundrum where using circumvention software is lawful but trafficking in devices that are primarily designed for that purpose is not.[17]

On the other side of the battle, technology lobbyists were thrilled when the Safe Harbor provision of Title 17 was passed.[18] The Safe Harbor provision states Internet service providers and web hosts (“ISPs”) cannot be forced to indemnify their copyright infringing users for the users’ actions so long as the ISPs comply with a properly issued Take Down Notice.   This allows websites like YouTube.com and others to exist without constant fears of contributory or vicarious liability for users’ infringement.  Critics of this provision argue the burden should not be placed on the creators of content to have to police the internet to find infringement and give notice.  Additionally, if a Take Down Notice is not prepared to satisfy all of the enumerated statutory criteria, it will likely be ignored by an ISP and the infringing acts will continue.

[Photo by Amanda M Hatfield @Flickr]


[1] See Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417.

[2] See UMG Recordings v. Mp3.com, Inc., 92 F. Supp. 2d 349.

[3] See 17 USC §§106 (1) & (3).

[4] See UMG Recordings v. Mp3.com, Inc., 92 F. Supp. 2d 349.

[5] See A&M Records v. Napster, Inc., 239 F.3d 1004.

[6] See Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417.

[7] See MGM Studios Inc. v. Grokster, Ltd., 545 U.S. 913.

[8] See Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417.

[9] See MGM Studios Inc. v. Grokster, Ltd., at 919.

[10] Id.

[11] Apple, http://www.apple.com/pr/library/2001/feb/22imac.html (last visited March 28, 2009)

[12] Matt Richtel, Napster Says It Is Likely to Be Liquidated, available at http://www.nytimes.com/2002/09/04/business/technology-napster-says-it-is-likely-to-be-liquidated.html (September 4, 2002).

[13] See BMG Music v. Gonzalez, 430 F.3d 888.

[14] See 17 U.S.C. § 504 (2009).

[15] Steve Knopper, Appetite for Self-Destruction (2009).

[16] See 17 U.S.C. §1201 et sec.

[17] See United States v. Elcom Ltd., 203 F. Supp. 2d 1111, 1121 (N.D. Cal. 2002), where the court reasoned that “circumventing use restrictions is not unlawful, but in order to protect the rights of copyright owners while maintaining fair use, Congress banned trafficking in devices that are primarily designed for the purpose of circumventing any technological measure that ‘effectively protects a right of a copyright owner,’ or that have limited commercially significant purposes other than circumventing use restrictions, or that are marketed for use in circumventing the use restrictions.”

[18] See 17 U.S.C. §512 et sec.




*Ian Gibson, Esq. is an attorney licensed to practice in the state of California. This article is for informational purposes only and is not intended to constitute legal advice. Visiting iangibson.com does not create an attorney-client relationship. This material may be considered advertising under applicable state laws. Copyright © 2012-2013 Ian Gibson, Esq.

No Comments

Be the first to start the conversation.

Leave a Reply