Stemming the Peer To Peer Outflow at Source – maybe

April 30, 1998

For well over a year, instances of the recorded music industry taking out well-publicised cases against individuals, mostly teenagers or their parents, for illegally downloading and sharing tracks free have moved nearer to our shores. Recently they started to happen here, – clear attempts to make an example of a few with demands for thousands of pounds in unpaid rights or the threat of court action, in order to discourage the others.

But the record and movie companies have been only too aware that in their crusade to protect their intellectual property rights, these cases are unlikely to provide the complete solution. In fact, they run the risk of losing the public relations battle as they are seen as huge, still powerfully wealthy multinationals punishing a few misguided children just looking for a cheap way to listen to their music.

Something of a backlash has indeed built up in the US including civil rights groups. The recording industry exercising its right to subpoena internet service providers to hand over the names and addresses of those with the peer-to-peer software on their computers that enables them to share files has been attacked as an invasion of privacy. There is also the fact that, while these high-profile cases might deter some potential copyright infringers, there’s always going to be an element of “it’ll never happen to me” in the minds of the public.

All this has pointed to the need, as far as the entertainment industry is concerned, to tackle instead what it sees as the source of the problem and Public Enemy Number One – the P2P provider. Hence, in its battle on a number of fronts there have been and continue to be a number of court cases around the world, both against the ISPs and the supposed owners and creators of the P2P software. The most notable have been in Australia and the Netherlands.

Despite these, P2P has survived relatively unscathed. But the industry is likely to consider them as only minor setbacks in comparison with the ongoing case in the US, which is undoubtedly on its “home turf” and the one it is determined to win whatever the cost. And the fight has just gone through a key round in which, if the industry and some commentators are to be believed, a knock-out blow has finally been delivered to free downloading and file-sharing.

Well, it might, or it might not. Dominating the arguments in MGM and others v Grokster – Grokster being the corporate identity of the creators and operators of KazAa and other P2P programs – has been the ruling in a much older case, Sony v Universal. In this, Sony successfully argued that its Betamax video recorder, although capable of allowing people to infringe copyright, had sufficient non-infringing uses that it should not be banned.

Grokster adopted this in its argument, when MGM brought its action, that it did not perpetrate any infringement of copyright but merely provided the software which was itself capable of legitimate use. What individuals then chose to do with the software is beyond its control, it claimed, and it could not be held liable for their actions if they did infringe someone’s copyright using it.

That had successfully convinced two lower courts. However, MGM took the case to the Supreme Court. In its long-awaited decision, it recently ruled unanimously in favour of the entertainment industry. It held that the two lower courts had interpreted the Sony decision too broadly. They had taken the view that any provider of a technology, like Sony with its video recorders, whose beneficial uses outweigh its malicious uses can never be held liable for third parties’ actions.

However, the Supreme Court said, the lower courts had taken no account of the behaviour of the particular provider in either encouraging or discouraging the technology’s use to infringe copyright. “The record is replete with evidence that from the moment Grokster . began to distribute its free software, [it] clearly voiced the objective that that recipients use it to download copyrighted works, and . took active steps to encourage infringement,” Justice David H Souter said for the Supreme Court. So P2P companies can be liable for third parties’ infringements, depending on their own behaviour in providing the software.

The general media’s initial response was somewhat premature, such as that of The Times in describing this as “the biggest copyright case of the internet age”. For a start, the Supreme Court was only ruling on the one specific mater of applying the Sony case. The case goes back to the lower court to decide, though it is hard to envisage it ignoring such a strong statement. Grokster seems to face a uphill struggle in having to show it either did not actively encourage infringing use or, better still, that it actively discouraged it.

Meanwhile, the Supreme Court also did not do what MGM wanted it to do – which was to revisit the whole Sony decision and possibly reverse the balance so that the potential for misuse of a technology outweighs any beneficial use it may have. The Supreme Court left that “for a day when that may be required”.

So promoting and distributing P2P may be illegal. But, for now, creating it is not.

David Flint is a partner with MacRoberts, specialising in IT and intellectual property law.