Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.
162 L. Ed. 2d 781, 125 S. Ct. 2764 (2005)
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Rule of Law:
A distributor of a device capable of both lawful and unlawful uses is liable for copyright infringement committed by third-party users if the distributor promotes the device with the object of fostering infringement, as shown by clear expression or other affirmative steps.
Facts:
- Respondents Grokster, Ltd., and StreamCast Networks, Inc., distributed free peer-to-peer file-sharing software that allowed users to share digital files directly between their computers.
- The software was widely used to share copyrighted music and video files without authorization from the copyright holders.
- After a similar service, Napster, was shut down by court order for facilitating copyright infringement, both Grokster and StreamCast intentionally marketed their software to former Napster users.
- StreamCast's internal communications and promotional materials expressed a clear objective to capture the Napster market, with one executive stating, "The goal is to get in trouble with the law and get sued. It’s the best way to get in the new[s]."
- Grokster used search engine keywords like "Napster" to direct users to its website, named a related program "Swaptor," and sent newsletters promoting access to popular copyrighted songs.
- A commissioned study showed that nearly 90% of the files available for download on one of the networks were copyrighted works.
- The business model for both companies was based on selling advertising space to users of their software; revenue was directly proportional to the number of users and the volume of use, which was overwhelmingly infringing.
- Neither company made any effort to develop filtering tools or otherwise impede the sharing of copyrighted files on their networks.
Procedural Posture:
- A group of copyright holders (MGM) sued Grokster and StreamCast in the U.S. District Court for the Central District of California for contributory and vicarious copyright infringement.
- The parties cross-moved for summary judgment.
- The District Court granted summary judgment to Grokster and StreamCast, holding that they could not be held liable because their decentralized software did not give them actual knowledge of specific infringing acts.
- MGM, the plaintiff-appellant, appealed to the U.S. Court of Appeals for the Ninth Circuit.
- The Ninth Circuit affirmed the district court's decision, reasoning that the software was capable of substantial noninfringing uses, which shielded the distributors from secondary liability under the Sony precedent.
- MGM petitioned the U.S. Supreme Court for a writ of certiorari, which was granted.
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Issue:
Does a company that distributes free peer-to-peer file-sharing software, which can be used for both lawful and unlawful purposes, become liable for copyright infringement by its users when it promotes the software with the intent to encourage such infringement?
Opinions:
Majority - Justice Souter
Yes. One who distributes a device with the object of promoting its use to infringe copyright is liable for the resulting acts of infringement by third parties. The Court established an "inducement rule," holding that where evidence shows a distributor acted with the purpose of causing copyright violations, liability for infringement exists. This theory is distinct from the one analyzed in Sony Corp. v. Universal City Studios, which held that distribution of a product capable of substantial noninfringing uses does not, by itself, give rise to contributory liability. The Sony rule does not immunize a distributor who takes affirmative steps to foster infringement. The evidence in this case—including targeting former Napster users, a business model dependent on infringing volume, and a failure to curb infringement—demonstrates a clear, unlawful objective to encourage copyright violations, which is sufficient to establish liability under the inducement theory.
Concurring - Justice Ginsburg
Yes. Grokster and StreamCast could be found liable not only under the majority's inducement theory but also for contributory copyright infringement by misapplying the Sony test. The lower courts erred in granting summary judgment because the evidence of the software's noninfringing uses was merely anecdotal and insufficient to prove they were "substantial" or "commercially significant," especially when weighed against the overwhelming evidence of infringing use. A product's mere capability for some lawful use is not enough to grant summary judgment under Sony when the record shows its use is predominantly for infringement and there is no reasonable prospect of substantial noninfringing uses developing.
Concurring - Justice Breyer
Yes. While Grokster is liable under the majority's inducement theory, the Ninth Circuit's application of the Sony test was correct and should not be disturbed. The record demonstrates that the software is capable of substantial noninfringing uses, with roughly 10% of available files being noninfringing and a significant potential for future lawful uses, a situation analogous to the facts in Sony. The Sony standard is intentionally technology-protecting and forward-looking, and interpreting it more strictly, as Justice Ginsburg suggests, would chill technological innovation. The proper course is to find liability based on the specific evidence of inducement while preserving the Sony safe harbor for dual-use technologies.
Analysis:
This case established the "inducement theory" of secondary copyright liability, creating a crucial tool for copyright holders against distributors of technology used for infringement. The decision clarifies that the safe harbor from Sony Corp. v. Universal City Studios is not absolute; even if a product has substantial noninfringing uses, its distributor can be held liable if they actively encourage and profit from its infringing applications. This shifts the legal focus from a technology's capabilities alone to the distributor's intent and conduct, creating a significant deterrent for businesses built on facilitating piracy while claiming technological neutrality.
