Justices Seem Responsive to Arguments on File Sharing By LINDA GREENHOUSE
Published: March 29, 2005 http://www.nytimes.com/2005/03/29/technology/30bizcourtcnd.html WASHINGTON, March 29 - The much-heralded Supreme Court showdown in the Grokster case today between old-fashioned entertainment and new-fangled technology found the justices surprisingly responsive to warnings from Grokster and its allies that a broad definition of copyright infringement could curtail innovation. Justice David H. Souter asked Donald B. Verrilli, Jr., the lawyer arguing for the Hollywood studios and the recording industry, to envision "a guy sitting in his garage inventing the iPod." "I know perfectly well that I can buy a CD and put it on my iPod," Justice Souter said. "But I also know if I can get music without buying it, I'm going to do so." Since that possibility was so obvious, he continued: "How do we give the developer the confidence to go ahead? On your theory, why isn't a foregone conclusion from the outset that the iPod inventor is going to lose his shirt?" That David Souter, the least technically minded of the justices, who still drafts his opinions by hand on a legal pad, could even invite a dialogue about iPods, much less suggest that he could be tempted to engage in illegal file sharing, was an indication of how this confrontation of powerful interests had engaged the court. But by the end of the lively argument, any prediction about what the court will actually decide appeared perilous. The justices themselves seemed taken aback by the procedural complexities of the case, Metro-Goldwyn-Mayer Studios v. Grokster Ltd., No. 04-480, which moved through the lower federal courts on summary judgment, without a trial. Some justices appeared tempted by the prospect of allowing the studios and record companies to get to trial on a legal theory that the lower courts did not address: that Grokster and the other defendant, StreamCast Networks, which offers the Morpheus file-sharing service, are liable for copyright infringement for having actively induced consumers to use their software to commit widespread copyright infringement. The federal district court in Los Angeles, in a decision affirmed last year by the United States Court of Appeals for the Ninth Circuit in San Francisco, took a different approach, ruling that the file-sharing networks were not liable because their services were "capable of substantial non-infringing uses." The lower courts took that test from the Supreme Court's 1984 decision that absolved the Sony Corporation, manufacturer of the Betamax video recorder, of copyright liability for infringing uses that consumers might make of the product. The Sony decision provided the right answer, and that should be the end of the case, Richard G. Taranto, arguing for Grokster and StreamCast, told the court. He said it was "critical" for the Supreme Court to adhere to the "clear Sony rule" for the sake of "innovation protection." Justice Ruth Bader Ginsburg objected, noting that the 1984 decision "goes on for 13 more pages" after articulating the test that provided Sony's defense. "If the standard was that clear, the court would have stopped there," Justice Ginsburg continued. "I don't think you can take one sentence from a rather long opinion and say 'Ah-ha, we have a clear rule.' " In briefs filed as "friends of the court," the file-sharing networks' allies in various technology industries and civil liberties organizations have depicted file sharing as a useful, if not vital, means of expanding knowledge through the inexpensive transmission and Internet archiving of lawful, public-domain material. As long as the non-infringing uses were not "far-fetched," Mr. Taranto said, the defense that applied to videocassette recorders should be available for his clients' "autonomous communication tool," as he described file sharing. Whether this argument makes headway may depend on the technological universe that the court considers in applying it. Grokster and StreamCast are asking the court to look at all possible uses of file sharing, not just the use that is made of their own software. The plaintiffs, backed by the Bush administration, are asking the court to focus on the defendants' own business. Paul D. Clement, the acting solicitor general, told the justices that while the Ninth Circuit had used as its test "the mere theoretical capability of non-infringing uses," the Supreme Court should look at the actual "business model" used by the defendants. It was an "extreme case," Mr. Clement said, a model built on "copyright infringement without liability, with the full knowledge that the draw is unlawful copying." "Sony could have set up a 'theoretical capability' test, but it didn't," Mr. Clement continued. Instead, he pointed out, the Sony decision required evidence of a "substantial" non-infringing use. The court in that decision found that consumers used their VCR's primarily for recording television programs that they could watch later, a non-infringing use referred to as time-shifting. Justice Antonin Scalia said he was concerned that non-infringing uses of a new technology might need some time to become established; in the meantime, the developer would be defenseless against a copyright infringement suit. "What I worry about is a suit right out of the box," he said. "Do you give a company a couple of years to show 'substantial' non-infringement?" Mr. Clement replied that in the government's view, there should be "a lot of leeway at the beginning." But that was "not this case," he said, asserting that Grokster and Morpheus had "a business plan from day one to capitalize on Napster." Napster, the original file-sharing network, was put out of business by a Ninth Circuit ruling in 2001 that it was secondarily liable for the copyright infringement committed by its users. The Ninth Circuit found that Grokster differed significantly from Napster because its software permits users to share files with one another directly, rather than going through a central server. Mr. Verrilli, the plaintiffs' lawyer, urged the justices not to rely on that distinction. "There is a shell game going on here," he said. "Our position is that we're entitled to injunctive relief against the continued operation of this gigantic machine that was built on infringement." In a second argument today, the court heard an appeal by the Federal Communications Commission and the cable industry of another Ninth Circuit ruling, this one with implications for the development of the high-speed Internet access business. The Ninth Circuit rejected the commission's view that companies offering cable modem service should be considered in the "information service" rather than telecommunications business, and as such were exempt from the extensive regulation to which federal law subjects conventional telephone companies. At issue is the ability of Internet service providers to force cable companies to open their broadband lines. The outcome of the case, National Cable and Telecommunications Association v. Brand X Internet Services, No. 04-277, is likely to depend on how much deference the justices decide to give to the F.C.C. Based on the argument, the outlook is uncertain. You are a subscribed member of the infowarrior list. 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