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Two Defeats - and a Silver Lining

(June 28, 2005) - The Supreme Court delivered two defeats to media democracy and free expression yesterday, but at least one decision had a silver lining.

The first - and more highly publicized - case, MGM v. Grokster - involved the popular peer-to-peer (or "P2P") technologies that are used en masse to share copyright-protected music. The entertainment industry sued Grokster and StreamCast (makers of the Morpheus software), arguing that their technologies are mostly used for copyright infringement and therefore should be outlawed. The theory was that the makers of the technology are "contributory" copyright infringers.

The federal court of appeals ruled against them, based on a 1984 Supreme Court decision called Sony v. Universal City Studios. Sony turned back an attempt by the entertainment industry (shortsighted, as it turned out) to outlaw the video cassette recorder because it was being used for unlawful copying. The Court said in Sony that new technologies should not be squelched, even if they're used illegally, as long as they are also "capable of substantial noninfringing uses."

The Sony rule has provided critically important protection to all manner of innovative technologies that are capable of being misused, including photocopiers, cassette players, and computers. What complicated the Grokster case, and led to the Supreme Court's unanimous reversal of the court of appeals decision, was dubious behavior by Grokster and other companies at the time they took over the file-sharing field from the dying Napster (driven into the ground by a lawsuit for contributory infringement).

This post-Napster generation of creators and distributors were careful to avoid the centralized servers and indexes that had been found, in the Napster case, to be evidence of collusion in illegal music sharing. But the efforts of Grokster and others to attract file-sharers who were left in the lurch by Napster's demise smacked of profiteering. (Even though the software is free, its distributors make money from advertising.) This deliberate behavior in promoting illegal uses of its software created a strong likelihood - at least according to the Supreme Court - that Grokster was guilty of "inducement." Its "intent to bring about infringement" would make it liable even if the software itself were protected by Sony.

So the case will go back to the court of appeals to decide whether - as the Supreme Court very strongly suggested - Grokster and StreamCast are guilty of intentionally inducing massive copyright infringement.

The irony here is that in defending the case, Grokster's attorneys wisely separated out the evidence of inducement from the legal issue of whether Sony protects the wonderfully versatile peer-to-peer technology. MGM and its co-plaintiffs wanted either a modification of Sony, to outlaw a technology when its "primary" use is infringing - even if it's capable of substantial noninfringing uses - or else an interpretation of Sony that would achieve the same result.

The trial court and the court of appeals, recognizing the crippling effect that such a legal change would have on technological innovation and creativity, rejected the industry's argument. The courts entered "partial summary judgment" in Grokster's favor on the pure question of whether the current version of the software was protected by the Sony rule. It saved the rest of the case - the claim that Grokster and its co-defendants were guilty of bad acts of inducement - for later.

Evidently, though, the Supreme Court justices were so offended by Grokster et al's behavior that they ignored the matter of "partial summary judgment" and dove right into the issue of eager and imprudent marketing. They unanimously voted that Sony doesn't excuse intentional inducement of copyright infringement, especially where one is profiting financially through advertising.

As for the fact that only the legality of the present versions of Grokster and Morpheus were before them - not the allegations of past bad acts - Justice Souter's opinion for the Court dismissed it in a footnote. The present distribution of a product "can itself give rise to liability," he said, "where evidence shows that the distributor intended and encouraged the product to be used to infringe."

So where is the silver lining? Sony survived - more or less intact - and the standard for "inducement" liability is reasonably clear. Innovators and distributors of new technology will have to be careful about what they say and do that might be interpreted as encouraging infringement, but at least they won't have to worry that they'll be liable for bankrupting court judgments because a "primary" or significant portion of their customers might misuse their product.

The most important battle, then - for the future of P2P technology - was won, over the objection of three justices, led by Ruth Bader Ginsburg. (The other two were Rehnquist and Kennedy.) Here is where the lasting interest in Grokster lies - between Ginsburg's concurring opinion, which would have shrunk Sony dramatically had she garnered two more votes, and another concurrence, disputing her views, written by Stephen Breyer, and joined by Justices Stevens and O'Connor.

Ginsburg thought there really weren't "substantial noninfringing uses" for peer-to-peer file-sharing. She belittled the affidavits and testimony from musicians like Janis Ian, who distribute their work through P2P technology; Internet pioneers like Brewster Kahle, who make public domain works available on P2P; and Richard Prelinger, who distributes public domain films. She also ignored the important issue of future capabilities of new technology.

Justice Breyer thought just the opposite. He emphasized that even if only 10% of the traffic on P2P networks is legal, this is still a substantial noninfringing use. And he explained the importance of future capability to the Sony decision. Legitimate uses of P2P that are just now developing, he noted, include "the swapping of research information," public domain films, historical recordings and digital educational materials, digital photos, shareware, "news broadcasts past and present" (the BBC makes them available for ripping, mixing, and sharing), podcasts, and "all manner of free 'open market' works collected by Creative Commons." And other uses may arise, just as they did with the VCR.

"Of course, Grokster itself may not want to develop these other noninfringing uses," Breyer added. "But Sony's standard seeks to protect not the Groksters of this world (which in any event may well be liable under today's holding), but the development of technology more generally." Ginsburg's narrow reading of Sony would have constrained creative innovation and substituted for a clear rule a murky one that would have made innovators constantly unsure whether the distribution of their product would lead to costly lawsuits and potentially bankrupting liability.

A hidden time bomb in Grokster was filtering technology, which the plaintiffs, their supporters, and several filter manufacturers touted to the Court as mechanisms that P2P creators should be required to install in order to minimize unlawful copying. Even putting aside the possible malfunction of these filters, they are likely to be overinclusive, blocking access to public domain materials and preventing access for purposes of fair use under copyright law. Breyer noted that despite the promotional claims of filter manufacturers, a brief from computer science professors said that installing filters would not be an efficient solution.

Even Justice Souter's opinion for the Court, while taking Grokster and StreamCast to task for not making "an effort to filter copyrighted material from users' downloads," also noted that "in the absence of other evidence of intent, a court would be unable to find contributory infringement liability merely based on a failure to take affirmative steps to prevent infringement." Thus, the Grokster decision at least forestalls the unhappy prospect of a requirement that new technology be designed to satisfy the entertainment industry's thirst for total copyright control.


There is no comparable silver lining in the Court's other media-related decision, National Cable & Telecommunications Association v. Brand X Internet Services.

The question in the case was whether cable companies are "information services" or "telecommunications services" when they provide broadband Internet access. "Telecommunications services" must allow competitors to use their pipelines at nondiscriminatory rates (thus preventing monopolization); they also have public-interest obligations, including contributions to universal service and requirements relating to consumer privacy and access for the disabled. "Information services" are basically free of such requirements.

Cable broadband is a hybrid - it both provides access to the Internet (a "telecommunications service") and "information services" like email and Web browsing. But the important point (and one that the Supreme Court ignored) is that if one company in a community is allowed to monopolize cable broadband, which is currently the fastest form of Internet connection, its opportunities for not only excessive pricing but censorship of content are manifest. As the Brennan Center and the ACLU said in a friend-of-the-court brief, "a cable company that has complete control over its customers' access to the Internet could censor their ability to speak, block their access to disfavored information services, monitor their online activity, and subtly manipulate the information sources they rely on."

The Federal Communications Commission ruled that the two functions can't be separated: cable broadband is simply an information service. The U.S. Court of Appeals for the Ninth Circuit disagreed, saying that for purposes of Internet access, cable companies are telecommunications services. But where the law isn't clear, courts are supposed to defer to the judgment of the administrative agency that has expertise in the area, as long as that judgment is reasonable. This the court of appeals did not do, because it had decided the issue before the FCC weighed in. One likely outcome of the Brand X case, then, was that the Supreme Court would send it back to the Ninth Circuit for a more deferential look at the FCC's reasoning.

Instead, six justices (in an opinion by Clarence Thomas) said that the FCC's decision to relieve cable broadband providers of virtually any regulation, in the supposed interest of free-market economics, wasn't unreasonable. Three dissenting justices, led by Antonin Scalia, disagreed, saying that the FCC, in attempting to "establish a whole new regime of nonregulation," had given an implausible interpretation of the relevant law.

The Brand X decision, which consists mostly of dry arguments over administrative law, may be best remembered for its analogy to pizza delivery. The cable industry claims to be purely an information service because it offers Internet access "only in conjunction with particular applications and functions." Justice Scalia likened this to a pizzeria's assertion that it does not offer delivery - "but if you order a pizza from us, we'll bake it for you and then we'll bring it to your house."

"The logical response to this," Scalia said, "would be something on the order of, 'so, you do offer delivery.' But our pizza-man may continue to deny the obvious and explain, paraphrasing the FCC and the Court: 'No, even though we bring the pizza to your house, we are not actually "offering" you delivery,'" because the delivery is "part and parcel" of the pizza-at-home service. Scalia mused: "A reasonable customer would conclude at that point that his interlocutor was either crazy or following some too-clever-by-half legal advice."

In the wake of the Brand X decision, telephone companies that offer broadband (and that are clearly telecommunications services) will be pressing the FCC to re-categorize them also as "information services," thus further monopolizing Internet access and driving out smaller providers (including nonprofit ones). The cable industry, on the other hand, argues that there will still be lots of consumer choice, as wireless and other new technologies begin to compete with broadband. In the end, Congress may resolve the issue through new legislation that overrules the FCC's monopoly-friendly reading of the current telecommunications law.

Marjorie Heins

The Free Expression Policy Project began in 2000 as a project of the National Coalition Against Censorship, to provide empirical research and policy development on tough censorship issues and seek free speech-friendly solutions to the concerns that drive censorship campaigns. In 2004-2007, it was part of the Brennan Center for Justice at NYU School of Law. Past funders have included the Robert Sterling Clark Foundation, the Nathan Cummings Foundation, the Rockefeller Foundation, the Educational Foundation of America, the Open Society Institute, and the Andy Warhol Foundation for the Visual Arts.

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