Supreme Court Hears Oral Argument in MGM v. Grokster

March 29, 2005. The Supreme Court heard oral argument in MGM v. Grokster. Justices were active in asking tough questions of both the peer to peer (P2P) and entertainment industries' counsel.

Background. Metro Goldwyn Meyer (MGM), and other movie companies, and various record companies, filed a complaint in the in the U.S. District Court (CDCal) against Grokster, Streamcast and Kazaa alleging copyright infringement, in violation of 17 U.S.C. § 501. They alleged contributory and vicarious infringement.

In addition, professional songwriters and music publishers filed a class action complaint against the same defendants alleging contributory and vicarious infringement. The two actions were consolidated. The parties filed cross motions for summary judgment regarding software provided by Grokster and Streamcast.

On April 25, 2003, the District Court issued its opinion holding that Grokster's and Streamcast's P2P 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

On August 19, 2004, the U.S. Court of Appeals (9thCir) issued its opinion [26 pages in PDF], affirming the District Court holding that Grokster's and Streamcast's P2P networks do not contributorily or vicariously infringe the copyrights of the holders of music and movie copyrights. See, story titled "9th Circuit Holds No Vicarious Infringement in Grokster Case" in TLJ Daily E-Mail Alert No. 963, August 20, 2004. The 9th Circuit's opinion is reported at 380 F.3d 1154.

The individual infringers are not involved in this case.

The Office of the Solicitor General (SG) backs the copyright holders. See, SG brief urging reversal, and story titled "Petitioners, Solicitor General, & Amici Urge Supreme Court to Reverse in MGM v. Grokster" in TLJ Daily E-Mail Alert No. 1,063, January 26, 2005.

Oral Argument. All of the Justices participated in the questioning of counsel, except Clarence Thomas, who was present, but who rarely asks questions at oral argument. When counsel for MGM and the U.S. presented their arguments, Justices asked them tough questions. Then, when counsel for the P2P companies presented his argument, many of the same Justices gave him tough questions and comments.

Justice Stephen Breyer asked MGM's counsel if he was sure he could recommend to Johannes Gutenberg and the inventors of the iPod that their inventions would have meet the test that MGM urges the court to apply. Breyer then suggested that "the monks had a fit when Gutenberg made his press".

MGM's counsel (Donald Verrilli of the law firm of Jenner & Block) argued that Grokster's P2P service has "no commercially significant non-infringing use". He responded to Justice Breyer that when the iPod was invented there was "a very significant lawful use for that device going forward".

Justice Antonin Scalia suggested that under the standard urged by MGM, many inventors will know that "I am going to get sued right away", and before they have a chance to build up their businesses.

Justice David Souter said of the "no commercially significant non infringing use" test, that "there is never evidence at the time the guy is sitting in the garage" developing his invention. So, Souter asked, what gives the inventor confidence to go ahead? And, Souter asked, why is it not a foregone conclusion that the inventor is going to loose his shirt?

Justice Souter also suggested that MGM's test would hang the mythical "Damoclean sword" over inventors of products like the iPod.

MGM's counsel responded that in the real world these inventors "have not immediately gotten sued".

Justice Scalia told counsel for the U.S. that "what I worry about is the suit that comes right out of the box". He asked whether the inventor should not get time to develop a commercial use.

Paul Clement, the acting Solicitor General, responded that in the Grokster case, the business plan "from day one" was to make money off of infringing use.

Counsel for Grokster (Richard Taranto of the law firm of Farr & Taranto) urged adherence to Sony, which he called "a clear test".

The Supreme Court held in Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984), that the "sale of video cassette recorders (``VCR´´s) did not subject Sony to contributory copyright liability, even though Sony knew as a general matter that the machines could be used, and were being used, to infringe the plaintiffs' copyrighted works. Because video tape recorders were capable of both infringing and ``substantial noninfringing uses,´´ generic or ``constructive´´ knowledge of infringing activity was insufficient to warrant liability based on the mere retail of Sony’s products."

However, Justice Ruth Ginsburg asked how it is that the Sony case could be considered to provide a clear test. She pointed out that after stating the test, the Court continued to explain it for another 13 pages. How can it be clear if it took 13 pages to explain, she asked.

Justice Scalia interjected, "this Court is certainly not going to decide this case on the basis of stare decisis."

Justice Breyer questioned why Sony's "capable of substantial non-infringing uses" test should be the test.

Kennedy offered no kind words for the P2P position. He suggested that what Grokster is asking is that a P2P software company be allowed to use stolen property "as part of the start up capital for his product".

Justice Ginsburg also characterized the 9th Circuit's decisions in the Napster and Grokster cases as "two apparently conflicting decisions". See, A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (2001).

Justice Souter also questioned counsel for Grokster regarding willful ignorance. "Why isn't this a classic willful ignorance case", he asked. Counsel denied that it is, but Souter followed up, "it seems like that is what we got".

Justice Scalia then added that it appears that Grokster decentralized "solely to get around Napster".

Reaction. The questions and comments of Justices gave encouragement to the proponents of both the P2P companies' and copyright holders' positions.

Gary Shapiro, P/CEO of the Consumer Electronics Association (CEA), told TLJ outside the Court afterwards that his was "very encouraged" by the oral argument. He was particularly pleased that Justice Breyer raised Gutenberg's press and the iPod.

Shapiro said that "I thought it was absolutely terrific that they focused on the real problems that inventors have".

Gigi Sohn, President of Public Knowledge, to reinforce this point, wore an iPod Shuffle around her neck as she spoke to reporters in front of the Court.