Senators Introduce Bill to Amend Copyright Act to Ban Inducement of Infringement

June 22, 2004. Sen. Orrin Hatch (R-UT) and others introduced S 2560, the "Inducing Infringement of Copyrights Act of 2004". The bill is very short and simple, but, if enacted, would bring about a major change in copyright law. It would create a new cause of action for "intentional inducement of infringement". It would not affect the existing court made law of contributory and vicarious infringement.

The bill does not enumerate any specific technologies. It is technology neutral. However, the wording of the bill suggests, and Sen. Hatch and Sen. Frist stated in the Senate, that the present intended target of the bill is the distributors of the peer to peer systems that are used to infringe copyrighted music.

Nevertheless, the statute does not limit its application to any one technology, and several commentors suggested that it would have application to a range of other activities.

Currently, 17 U.S.C. § 501 addresses infringement of copyright. S 2560 would add a new subsection (g) to this section. This new subsection, provides, in full, as follows:

"(1) In this subsection, the term `intentionally induces´ means intentionally aids, abets, induces, or procures, and intent may be shown by acts from which a reasonable person would find intent to induce infringement based upon all relevant information about such acts then reasonably available to the actor, including whether the activity relies on infringement for its commercial viability.
(2) Whoever intentionally induces any violation identified in subsection (a) shall be liable as an infringer.
(3) Nothing in this subsection shall enlarge or diminish the doctrines of vicarious and contributory liability for copyright infringement or require any court to unjustly withhold or impose any secondary liability for copyright infringement."

Subsection (a) now provides, in part, that "Anyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 121 ... or who imports copies or phonorecords into the United States in violation of section 602, is an infringer of the copyright ..."

The bill's list of cosponsors is bipartisan, and includes key leaders of the Senate. The lead sponsor is Sen. Hatch, the Chairman of the Senate Judiciary Committee (SJC), which has jurisdiction over this bill. Sen. Patrick Leahy (D-VT), the ranking Democrat on the SJC, is a cosponsor.

Sen. Lindsey Graham (R-SC), another member of the SJC, and Sen. Barbara Boxer (D-CA), a member of the Senate Commerce Committee, are also cosponsors.

Sen. Bill Frist (R-TN), the Senate Majority Leader, and Sen. Tom Daschle (D-SD), the Senate Minority Leader, are also cosponsors. The Nashville, Tennessee based music industry is in Sen. Frist's state.

Sen. Frist stated in the Senate that this bill "addresses the growing problem of online piracy -- the illegal downloading of copyrighted music. Piracy is devastating the music community and threatening other forms of copyrighted work."

He explained that "When I return home to Nashville and drive down Music Row, my heart sinks as I see the ``For Sale´´ and ``For Rent´´ signs everywhere. The once vibrant music community is being decimated by online piracy. No one is spared. It is hitting artists, writers, record companies, performing rights organizations, and publishers."

He continued that "Every month 2.6 billion music files are illegally downloaded using peer-to-peer networks, and it is not unusual for albums to show up on the Internet before they make it to the record store. The effect of this theft of intellectual property is disastrous to the creative industry. In the end, rampant piracy dries up income and drives away professional musicians. We get fewer artists and less music."

Sen. Frist added that "Online piracy affects more than just the music industry. It affects a broad swath of the creative field, including the movie and software industries. Music, movies, books, and software contribute well over half a trillion dollars to the U.S. economy each year and support 4.7 million workers. When our copyright laws are blatantly ignored or threatened, an enormous sector of our economy and creative culture is threatened."

Sen. Hatch (at right) stated in the Senate that "This Act will confirm that creative artists can sue corporations that profit by encouraging children, teenagers and others to commit illegal or criminal acts of copyright infringement."

During a lengthy address in the Senate he identified music P2P systems as an intended target of the bill.

However, he also gave a long and scathing criticism of the Supreme Court's decision in Sony v. Universal City Studios, 464 U.S. 417 (1984), which is also known as the Betamax case, and recent federal court opinions that have applied existing concepts of secondary liability to P2P systems. In essence, he argued that the Congress must legislate because the courts have failed in this area.

He reviewed the substantial non-infringing use holding in the Sony (Betamax) case, and then stated that "Unfortunately, Sony also proposed that if this rule proved problematic, Congress should alter it on a technology by technology basis. This proposal was flawed: In 1976, Congress redrafted the Copyright Act to avoid the need to re-adjust copyrights on a technology by technology basis because legislation could no longer keep pace with technological change."

Sen. Hatch continued that 'Returning to this impractical technology based approach would create an endless procession of ``tech-mandate´´ laws that discriminate between technologies Congress deems ``good´´ or ``bad.´´ But technologies are rarely inherently either ``good´´ or ``bad.´´ Most can be used for either purpose; the effect depends on details of implementation impossible to capture -- or predict -- in prospective legislation."

He also stated that "the dysfunctional corrective mechanism that Sony proposed would have become problematic only if the Sony limitation was misunderstood or misapplied by lower courts. Unfortunately, that has now happened. In cases like Napster and Grokster, lower courts misapplied the substantial non-infringing use limitation. These courts forgot about ``balance´´ and held that this limitation radically alters secondary liability. In effect, these cases retained secondary liability's control prong but collapsed its inducement prong. The results of these cases prove this point: Napster imposed liability upon a distributor of copying devices who controlled infringing users; Grokster did not impose liability upon distributors who appeared to induce and profit from users' infringement."

On April 25, 2003, the U.S. District Court (CDCal) issued its opinion holding that Grokster's and Streamcast's P2P file copying networks do not contributorily or vacariously infringe the copyrights of the holders of music and movie copyrights. See also, story titled "District Court Holds No Contributory or Vicarious Infringement by Grokster or Streamcast P2P Networks" in TLJ Daily E-Mail Alert No. 650, April 28, 2003; and story titled "Music Publishers File Appeal Brief in P2P Infringement Case", August 18, 2003.

Sen. Leahy (at right) stated that "Our legislation treats those who induce others to violate copyrights as infringers themselves. This is not a novel concept; it is the codification of a long-standing principle of intellectual property law: that infringement liability reaches not only direct infringers but also those who intentionally induce illegal infringement. And while the legal principle is an old one, the problems of inducement for copyright are a relatively new byproducts of the digital age -- an age in which it is easy, and often profitable, to induce others to violate copyrights through illegal downloading from the Internet."

Sen. Leahy also argued that "What the inducement bill does not do is just as important as what it does: It does not target technology. Useful legislation on this topic must address the copyright issue and not demonize certain software. As a practical matter, if a law is targeted at certain software, the designers will simply design around the law and render it useless. And as a matter of effectiveness, if the law addresses only well-understood present threats, it will necessarily be too narrow to encompass future technologies that may pose the same threat to copyrights. A law that deals simply with the copyrights -- and their violation -- is far less likely to be circumvented or out-dated before it can do any good. It will be both broad enough and sufficiently flexible to accommodate situations we cannot foresee."

He also said that "This legislation is also carefully crafted to preserve the doctrine of ``fair use.´´ ... Similarly, the bill will continue to promote the development of new technologies as it will not impose liability on the manufacturers of copying technology merely because the possibility exists for abuse. Finally, the bill will not affect Internet service providers who comply with the safe harbor provisions of the Digital Millennium Copyright Act."

And, Sen. Leahy argued that "the makers of electronic equipment, the software vendors who sell email and other programs, the Internet service providers who facilitate access to the Web -- all of these entities have nothing to fear from this bill. So long as they do not conduct their businesses with the intention of inducing others to break the law -- and I certainly have not heard from anyone who makes that claim -- they should rest easy. The only actors who have anything to fear are those that are already breaking the law; this bill simply clarifies and codifies that long-standing doctrine of secondary liability."

Jack Valenti, President of the Motion Picture Association of America (MPAA), issued a statement praising the bill.

Robert Holleyman, P/CEO of the Business Software Alliance (BSA), also praised the bill in a release. He stated that "BSA applauds Senators Hatch and Leahy for their leadership in introducing an important bill to stem the tide of illicit file sharing which is enabling software piracy and causing substantial harm to our members."

Gary Shapiro, P/CEO of the Consumer Electronics Association, does not like this bill. He stated in a release that "By establishing this new and vague cause of civil action, it essentially gives content owners another tool in their arsenal to sue legitimate companies over any device, software, home network, programming guide or database drawn from or linked to copyrighted material that they deem objectionable ... This gun hanging over the head of entrepreneurs, large and small, will stifle competition and prevent the introduction of products and technologies we cannot even begin to imagine."