U.S. Supreme Court ruling in 'Grokster' is both good and bad news,

Daily Record (Rochester, NY), Jul 1, 2005 by Daily Record Staff

The U.S. Supreme Court's decision in MGM v. Grokster offers both good news and bad news for copyright law and followers of new technologies, like peer-to-peer (P2P), according to Shubha Ghosh, professor of law at the University at Buffalo and an expert on intellectual property and cyberspace law.

The Good News

The good news, Ghosh noted, is the decision did not suggest Grokster and Streamcast are clearly liable for copyright infringement. Instead, the court concluded that a trial was necessary to determine the services' liability. This result is different from the Napster case, in which the lower courts ruled that the service clearly was in violation of copyright law.

The other piece of good news is that the court did affirm the Sony standard, Ghosh said. Under the Sony standard, a creator of new technology that permits copying is not liable if the technology has substantial non-infringing uses. Liability rests on the design and uses of the technology.

The lower court held that Grokster and Streamcast are not liable under the Sony standard because of the design of the P2P service permitting non-infringing uses, he stated. The Supreme Court, however, concluded that the lower court had misapplied the Sony standard by focusing exclusively on the question of design and not enough on the intent of the creators of Grokster and Streamcast.

The Bad News

Here's where the bad news starts.

The Supreme Court basically created another way for the creator of new technology to be liable for copyright infringement, Ghosh said. If the creator intended to induce copyright infringement, then the creator can also be found liable. To quote the court: 'one 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.'

After the Grokster decision, there are two potential pitfalls for creators of new technology, according to Ghosh.

The first, under Sony, is to create technology that because of its design and uses has primarily infringing uses, he said. The second, under Grokster, is to create technology with the intent to induce infringement by third parties. The Sony standard focuses on the design of the technology; the Grokster standard, on the intent of the creator.

Even if the design of technology may have a lot of non- infringing uses - as Grokster and Streamcast allegedly did - the creator of new technology still can be found liable if his purpose in creating the technology was to permit copyright infringement, Ghosh added. In Sony, the court borrowed from the law on contributory infringement in patent law; in Grokster, the court borrowed from patent law's rules about inducement.

In its defense, Ghosh stated, [the] opinion, totaling more than 50 pages in length, did show sensitivity to the arguments about technological innovation that were raised in the litigation. However, the decision also complicates copyright law by creating a new - and questionable - legal standard. Only future cases will tell how this standard will affect P2P and other technologies.