Information Technology Reference
In-Depth Information
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The defendants' networks were used to transfer billions of files every month.
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About 90 percent of the files available on Grokster's FastTrack network were copy-
righted.
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Grokster and StreamCast promoted their networks to investors and potential cus-
tomers as replacements for Napster.
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An internal StreamCast document revealed that StreamCast's executives wanted
to have more copyrighted songs available on their network than on competing
networks.
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Grokster sent its users a newsletter touting its ability to deliver popular copyrighted
songs.
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Grokster and StreamCast provided technical support to users who were having
difficulty locating or playing copyrighted content.
A US District Court granted Grokster and StreamCast a summary judgment; that is,
it made its decision without a trial based on the facts and evidence collected. According
to the judge, “The defendants distribute and support software, the users of which can
and do choose to employ it for both lawful and unlawful ends. Grokster and StreamCast
are not significantly different from companies that sell home video recorders or copy
machines, both of which can be and are used to infringe copyrights” [96]. The judge
referred to
Sony v. Universal City Studios
, the Supreme Court's 1984 ruling on the legality
of Sony's Betamax VCR. MGM appealed to the US Court of Appeals for the Ninth
Circuit, which upheld the ruling.
After another appeal, the US Supreme Court unanimously reversed the decision
of the lower courts in June 2005. Justice Souter wrote: “The question is under what
circumstances the distributor of a product capable of both lawful and unlawful use is
liable for acts of copyright infringement by third parties using the software. We hold 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” [97].
The Supreme Court made clear it was not reversing the Sony Betamax decision.
Instead, it ruled that the “safe harbor” provided to Sony did not apply to Grokster and
StreamCast. The Sony Betamax VCR was primarily used for time-shifting television
shows, which the Court found to be a fair use. There was no evidence Sony had done
anything to increase sales of its VCRs by promoting illegal uses. Therefore, Sony could
not be found liable simply for selling VCRs.
The situation for Grokster and StreamCast was quite different. Both companies gave
away their software but made money by streaming advertisements to users. Advertising
rates are higher when the number of users is greater. Hence both companies wanted to
increase their user base. They realized the way to do this was to make sure their net-
works had the content people were interested in downloading. The opinion notes dryly,
“Users seeking Top 40 songs, for example, or the latest release by Modest Mouse, are cer-
tain to be far more numerous than those seeking a free Decameron, and Grokster and
