Grokster Case Debated

July 8, 2005. The Progress and Freedom Foundation (PFF) hosted a panel discussion on Capitol Hill titled "MGM v. Grokster: What's Next?".

On June 27, 2005, the Supreme Court issued its unanimous opinion [55 pages in PDF] in MGM v. Grokster, reversing the judgment of the U.S. Court of Appeals (9thCir) regarding vicarious copyright infringement by the distributors of peer to peer (P2P) systems.

The Supreme Court held that "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." See also, story titled "Supreme Court Rules in MGM v. Grokster" in TLJ Daily E-Mail Alert No. 1,163, June 28, 2005.

The speakers at the PFF event were Cary Sherman (President of the Recording Industry Association of America), Sarah Deutsch (General Counsel of Verizon), Gigi Sohn (President of the Public Knowledge), James Burger (an attorney with the law firm of Dow Lohnes, who filed an amicus curiae brief with the Supreme Court on behalf of Intel), and Jim DeLong (PFF).

The RIAA's Sherman said that "we are very gratified by what the Court did". Verizon's Deutsch said that "Verizon was very pleased with the decision." Burger said that "I am reasonably pleased with the decision". Sohn said that some of the Court's opinion is "disturbing".

Burger elaborated that he is concerned that under the Court's inducement test, some small technology companies will not be able to obtain dismissal of meritless actions at the summary judgment stage. He suggested that some porm content providers might engage in "greenmail" litigation.

The panel also debated what the Congress should, or should not, do now. Sherman asserted that "the idea of legislation as a necessary fix has gone away". He added that the Congress could not have enacted legislation that "threads the needle" any better than the Supreme Court did in its opinion.

Sohn argued that the Congress needs to hold hearings on the Grokster opinion to hear from smaller technology companies and venture capitalists about the possible unintended consequences of the opinion.

Burger said that "there is not much more to learn from Grokster", except what can be done to help legitimate online services.

Sohn added that "nothing more is necessary". In particular, she argued that the Congress should not enact legislation sought by movie and record companies on other issues. She reasoned that since the content industry did well in the Grokster case, and has also benefited this year from the passage of the S 167, the "Family Entertainment Copyright Act", and from Department of Justice (DOJ) actions against online infringers, the industry "should stop asking Congress for tech mandates, like the broadcast flag".

(The Senate passed S 167 on February 3, 2005. See, story titled "Senate Approves Copyright Bill" in TLJ Daily E-Mail Alert No 1,069, February 3, 2005. The House approved it on April 19, 2005. See, story titled "House Approves Copyright Bill" in TLJ Daily E-Mail Alert No. 1,119, April 20, 2005. President Bush signed it on April 27, 2005. It is now Public Law No. 109-9.)

David Green, of NBC Universal, attended the event. He argued that the broadcast flag issue has nothing to do with the Grokster opinion, and that the Congress should enact broadcast flag legislation. The Federal Communications Commission (FCC) did promulgate broadcast flag rules. However, on May 6, 2005, the U.S.Court of Appeals (DCCir) issued its opinion [34 pages in PDF] in American Library Association v. FCC, overturning these rules. The Court held that the Congress has not given the FCC authority to write such rules. See, story titled "DC Circuit Reverses FCC's Broadcast Flag Rules" in TLJ Daily E-Mail Alert No. 1,131, May 9, 2005.

Sohn also made the point the historically the content industry runs to the Congress for legislation protecting copyrighted works, while the technology industry does not. Sherman replied that there are differences in the two industries. He said that when the content industry puts out a digital product, it is final. In contrast, when the software industry puts out a product, it can protect its interests through subsequent updates, upgrades, and service.

The panel also discussed what is likely to happen in the lower courts. Sohn, who is disturbed by the opinion, said that it is just a first step. There will be lower court opinions. She stated that she hopes that the content industry will not be able to use the opinion "as a cudgel".

Burger said that "there will be some devil in the details stuff in the lower courts".

DeLong said that there will be litigation, and some appeals court opinions, implementing the Supreme Court's opinion. He said that P2P network providers will push right up to the line, and the content industry will sue them. He suggested that one issue to be resolved is what is the consequence of P2P providers assisting their users in breaking digital rights management (DRM). He said another would be the consequence of P2P providers offering anti-spoofing filters.

Deutsch said that the Grokster opinion "is a full employment act for lawyers".

The panel discussion was attended by Capitol Hill staff, representatives of content companies, lobbyists, reporters, and government employees from the agencies that write copyright related regulations -- the Copyright Office and the FCC.

Neither the House nor the Senate Commerce or Judiciary Committees have yet announced hearings on the Grokster opinion. On July 19, 2005, the Advisory Committee to the Congressional Internet Caucus will host a panel discussion titled "Interpreting Grokster".