Re-grokking Grokster

Editors' Note: The following is the text of the June 9 and June 23
editions of Doc Searls' SuitWatch newsletter.

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Ten days have passed since the Supreme Court decided unanimously in
favor of the plaintiff in MGM v. Grokster. I posted some of my
thinking, but mostly a few slices of other people's, the day after
the decision in "Grokking Grokster" at IT Garage (see Resources).
My bottom line:

Grokster has turned out to be the kind of friend that assures the
worst enemies. Among those enemies is a Supremely false distinction
between creativity and technology. I don't know how we're going to
unf**k this one, but I'm sure it will take a very long time. And that
tech can't do it alone.

Now that Very Long Time is nine days shorter, and I think we're at
least a little closer to understanding What Needs to Be Done.

We can start by looking at the distinction between market behavior
and technology innovation and how the Court's opinion did its best
to prevent a bad form of the former from stifling the latter. As Lyle
Denniston puts it in SCOTUS blog:

Justice David H. Souter's opinion for the Court, in fact, provides a
reliable guide to avoiding copyright liability for such software. It
apparently was written in that way to try to avoid the risk of
stifling ingenuity in software design.

The technology alone, Souter made clear, does not by itself run afoul
of the copyright laws. The chief characteristic of download-and-share
software is that it enables the use of the Internet to reach files,
some of which may be copyrighted works. If that were all that a
software company did, according to the opinion, legal fault would not
yet exist--especially, if it crafted the design in such a way as to
filter out copyrighted material. In addition, the mere fact that the
developer knows someone may or even will use the software to purloin
copyrighted files, the Court made clear, is not sufficient, either.

What counts most of all, it is apparent, is that a software developer
promote the use of the product explicitly to stimulate computer users
to use the product solely or at least primarily as a
copyright-infringing mechanism. The Court, while not finally deciding
that there was contributory infringement by the software developers
in this case, found what it called "unmistakable" proof that an
"unlawful objective" did exist.

Kevin J. Heller at Induce Act Blog agreed, while also adding:

This item on Boing Boing says the Supreme Court has invented a "new
thought crime" by focusing on intent in deciding if a legal wrong has
taken place--a concept that is actually several millennia old. This
is the kind of silliness that gives skulls full of mush a bad name.

"This item" is "Supreme Court Strikes a Blow Against P2P Sharing: The
Real Victim: American Innovation", by Cory Doctorow, in Popular
Science. Cory explains:

The second you show a hint of "inducement," you open your company up
to having a court pick over the bones of every e-mail from every
engineer, every call and every PowerPoint presentation, looking for
evidence of thought-crime: Have you had a subversive thought while
designing this? Did it ever occur to you that you could have made it
a little clunkier and, in so doing, made it less infringing? Two
companies that ship the same product face different liability based
on whether one of them had an engineer who told her manager that she
thought she could make it harder to infringe copyright merely by
doubling the cost of development.

Kevin is right that intent is an ancient legal issue, but there's
nothing silly about the penumbra of fear that extends far beyond the
umbra of fine legal distinctions. And that's the mushy zone where
innovative companies and individuals operating in the United States
now find themselves.

Mark Cuban, for example, is an exceptionally innovative American
individual who works on both sides of the Entertainment/Technology
fence. From Broadcast.com to the Dallas Mavericks to HDnet to his own
TV show, Mark knows how the games are played and has played them all
very well. He's smart, shrewd and nobody's fool.* At the Web 2.0
conference last fall, he said, "When you're sitting around a table at
a tough negotiation, you need to look around and see who the sucker
is. If you don't find one, it's you." IT Conversations has a podcast
of the whole interview--highly recommended.

Mark has been a staunch opponent of the DMCA, the INDUCE Act and most
though not all forms of DRM. "Had there not been a Digital
Millennium Copyright Act, there probably would have been a whole lot
more bandwidth coming into our homes right now", he said in that same
Web 2.0 interview. About the INDUCE Act, he added, "Your livelihood
is at risk. There's gonna be people shooting at you like fish in a
barrel if that passes. It's just the worst thing possible. Basically,
it says, 'If anybody can imagine a business that could distribute
content illegally, based off of your technology, then they could come
after you, and have to prove that the basis of your business isn't
illegal distribution.' That's like saying you can't wear pants with
pockets in them because you might shoplift."

INDUCE failed in committee last October. But did it succeed in
Grokster? A friend of mine, who prefers not to be named, with a
background in both technology and entertainment put it this way:

This is "judicial legislating" at its most blatant. This supposedly
conservative court is writing laws that no legislative body ever
considered, let alone passed. And we are not better off for it. We
have a whole legislative branch, where people have election
certificates, for this very purpose.

Let me give you a small metric on how blatant their disregard for
Congressional intent really is. In the 1984 Betamax decision, the
Court referred to "deference to Congress" and "congressional intent"
22 times (by my count). And in that opinion the Court referred to
Congress generally over 50 times. In contrast, in the Grokster
opinion there are ZERO references to Congress.

To add insult to the process injury, this opinion enacts into
substantive law (almost VERBATIM) the INDUCE legislation that was
considered by the Senate Judiciary Committee last year. That
legislation could never get passed--too many opponents--but here
it is, now the law of the land, without ever seeing the light of
legislative debate. It is an historic expansion of copyright law,
with unknown consequences, effected not by legislators who can be
debated in the open and defeated at election time, but by judges who
are appointed for life.

And the body of the opinion is at odds with its declared "holding".
Instead of sending the case back for consideration in light of the
holding, the court goes on to act as a trier of fact (a jury) itself
--assessing the evidence, deciding what is important and not and
basically delivering a final judgment. All of this, mind you, BEFORE
ANY EVIDENCE HAS BEEN PRESENTED AT TRIAL. This all went up to the
Court on a pre-trial motion for summary judgment.

So, to me, this is a Constitutionally improper opinion, a poorly
drafted opinion, and a cynical opinion.

On the plus side, he adds:

The Sony Betamax case went to the Supreme Court three times and took
seven years. By the end of it the nation and the Court had figured
out that VCRs were not the end of civilization.

The INDUCE Act is a briefly worded bill to amend title 17, United
States Code. Its initials spell "Inducement Devolves into Unlawful
Child Exploitation". The entire text reads:

Under the INDUCE Act, in its current draft, the following text
would be added to the Copyright Act (as an addition to chapter 5 of
Title 17 of the USC Code):

(g) Intentional Inducement of Infringement.
Whoever intentionally induces any violation identified in
subsection (a) of this section shall be liable as an infringer.
(1) In subsection (g), "intentionally induces" means
intentionally aids, abets, induces, counsels, or procures, and intent
may be shown by acts from which a reasonable person would find intent
to induce infringement based upon all relevant information about such
acts then reasonably available to the actor, including whether the
activity relies on infringement for its commercial viability.
(2) Nothing in this section shall enlarge or diminish the
doctrines of vicarious or contributory liability for copyright
infringement or require any court to unjustly withhold or impose any
secondary liability for copyright infringement.

I am not a lawyer, etc., but I would like readers to help us
understand the difference between "intent to induce infringement" and
this, from the Supreme Court decision on Grokster:

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

Seems to me that the difference between "induce" and "foster" is
zero and that Hollywood got INDUCE passed by the Supreme Court
rather than by Congress.

In his blog, Mark Cuban weighs the practical outcomes of the decision:

The bad news is that the MPAA and RIAA will jump all over the
slightest double technology entendre that any marketing blurb or item
could have....

How are companies who invest in technology going to protect
themselves and their investments against it?

This is from a contract for an investment that I was looking at. It
was a very smart move to ask for this protection and I have every
intention of stealing it and using it in any digital asset
acquisition I undertake in the future:

Digital Millennium Copyright Act Compliance. Seller has complied
with all the requirements in Section 512(c) and 512(i) of Title 17 of
the United States Code to qualify for a limitation on liability for
copyright infringement, including without limitation (i) having no
actual knowledge that any material or an activity using the material
on the Seller Websites is infringing; (ii) having no awareness of
facts or circumstances from which infringing activity is apparent;
(iii) upon obtaining knowledge or awareness that material or an
activity using the material on the Seller Websites is infringing,
acting expeditiously to remove or disable access to any infringing
material, and (iv) upon receiving notification of claimed
infringement, responding expeditiously to remove or disable access to
material that is claimed to be infringing or to be the subject of
infringing activity.

Like Cory, Mark goes on to wonder if this will be enough, or if
companies will have to append marketing materials to contracts and watch
for hints of copyright wrongdoing in every e-mail. He also wonders:

Is this the start of a "Sarbanes Oxley" type environment for
technology companies? Will companies have to save and document
everything they do in the marketing and promoting of their
technologies? Will they, or rather, should they video all
presentations and record all phone calls?

How else can we know that we are protected against unwarranted law
suits that are used as competitive weapons to slow new technologies?

I don't know how it will all turn out. It's probably not as bad as our
worst nightmares, but there is the risk that it just might be.

I guess the only certainty from all of this is that it's probably a
good time to create a new type of insurance that insures companies
against the cost of defending the Grokster lawsuits that are sure to
come.

When I first heard about Grokster, two precedents came to mind:
Sarbanes-Oxley and SCO. "Sarbox" or "S-OX" fostered a vast new
business-numbing bureaucracy around a well-intended law with
unintended consequences out the wazoo. SCO had the effect of putting
lawyers in charge of large IT customers and their respective IT
departments.

Sitting on top of a pile of mail to my left here is the MIS Training
Institute 2005 Course Catalog, Spring Edition. Its top course
category is Internal Audit, and the top two courses in that category
concern "S-OX Compliance" and "S-OX Testing". S-OX may have done some
good for corporate governance and reduction of white collar crime,
but it is a huge PITA for IT and for everybody other than lawyers,
consultants and auditors.

Which brings us to SCO.

Things had been quiet for awhile on the SCO news front. Then, last
Friday, District Court Judge Dale Kimball denied one SCO motion "For
Leave to File Third Amended Complaint" while allowing a motion to
depose IBM Chairman and CEO Sam Palmisano. The decision also includes
a timetable ending in a jury trial beginning February 26, 2007: more
than a year and a half from now.

At this point SCO is a lawsuit traveling as a software company. I
don't know anybody outside of SCO itself who believes SCO's
complaints against IBM, Linux and open source have any merit. And, to
my knowledge SCO hasn't produced a shred of damning evidence, even in
its near-countless press conferences and press releases.

Regardless of the merits of its legal claims, SCO's PR effects have
been monstrous. As FUD campaigns go, it's a huge winner. Before SCO
started its litigation and FUD campaign, getting IT workers at large
companies to talk about their use of Linux and open source was a
piece of cake. Since then it's been like pulling teeth.

So, if one little company's unproven claims can tighten the legal
sphincters of big companies to widths that only pass occasional
molecules of information about Linux and FOSS--even as Linux and
FOSS grow throughout those companies IT infrastructures--consider
the effects of a unanimous yet ambiguous Supreme Court decision
regarding peer-to-peer file sharing.

It's only reasonable to expect a whole new industry to grow around
Grokster fearmongering. All those DRM specialists already established
in Hollywood will expand their practices to the technology sector,
with all the body-snatching consequences you can imagine.

Unless, of course, the tech sector has the spine to resist it.

Which shouldn't be hard to do. Grokster and Streamcast were, like
Napster before it, special cases. The damage they caused might be
debatable, but not to the aggrieved industries that took this case to
the Supreme Court and won unanimously.

Most tech innovations, even those built around the peer-to-peer
nature of the Net, are not intentionally threatening to
copyright-holders. In fact, we have seen, with Creative Commons, a
successor copyright regime based on free market principles, rather
than on permission market principles.

What's next in the Old Regime's crosshairs? In a word, BitTorrent.

Edward Felten writes:

Few tears will be shed if Grokster and StreamCast are driven out of
business as a result of the Supreme Court's decision. The companies
are far from lovable, and their technology is yesterday's news anyway.

A much more important issue is what the rules will be for the next
generation of technologies. Here the Court did not offer the clarity
we might have hoped for, opting instead for what Tim Wu has described
as the Miss Manners rule, under which vendors must avoid showing an
unseemly interest in infringing uses of their products. This would
appear to protect vendors who are honestly uninterested in fostering
infringement, as well as those who are very interested but manage to
hide it.

Lower courts will be left to apply the Grokster Court's inducement
rule to the facts of other file distribution technologies. How far
will lower courts go? Will they go too far?

The litmus test is BitTorrent. Here is a technology that is widely
used for both infringing and non-infringing purposes, with
infringement probably predominating today. And yet: It was originally
created to support noninfringing sharing (of concert recordings, with
permission). Its creator, Bram Cohen, seems interested only in
noninfringing uses, and has said all the right things about
infringement - so consistently that one can only conclude he is
sincere. BitTorrent is nicely engineered, offering novel benefits to
infringing and noninfringing users alike. It is available for free,
so there is no infringement-based business model. In short,
BitTorrent looks like a clear example of the kind of dual-use
technology that ought to pass the Court's active inducement test.

Well, "seems" may be in error. Rogers Cadenhead points to the
a_technological_activists_agenda.html page at BitTorrent creator Bram
Cohen's home site, where Bram declares:

I am a technological activist. I have a political agenda. I am in
favor of basic human rights: to free speech, to use any information
and technology, to purchase and use recreational drugs, to enjoy and
purchase so-called 'vices', to be free of intruders, and to privacy.

I further my goals with technology. I build systems to disseminate
information, commit digital piracy, synthesize drugs, maintain
untrusted contacts, purchase anonymously, and secure machines and
homes. I release my code and writings freely, and publish all of my
ideas early to make them unpatentable.

Does that foster infringement?

Don't be the judge. In fact, don't bother with it at all. That's my
advice on this whole thing.

The only sane outcome of this mess is for innovative companies to
press ahead without worrying about whether somebody will accuse them
of being another Grokster. Invent and innovate without fear.

Because fear is the enemy here. Not P2P.

Peer-to-Peer is fundamental to the Net. It's the bedrock of the
largest and most open free market the world has ever known. The best
way to keep that market free is to exercise that freedom. That's a
job for engineers and business people. Not for their lawyers.

Although it helps to have lawyers who articulate opportunity in
positive terms. For that it should help to give the final word here
to Anupam Chander and Madhavi Sunder, two professors of law at
UC-Davis, writing in Findlaw's Writ:

Some worry that the Court's new inducement standard will stifle
innovators because they might not have a clear sense of the standards
for inducement. The worry is intensified because the Court's
unanimous opinion is clouded by its two concurrences, with three
justices arguing for interpreting the Sony exception to liability
strictly, and three others arguing for a broader interpretation.

Fortunately, though, Justice Souter's opinion stands on its own as
the governing rule. Yes, companies will have to worry that they are
inducing infringement, but they should not have to worry too much,
for the line Souter draws is more than tolerably clear: Inducement
requires a "clear expression or other affirmative steps taken to
foster infringement." And it "does not include ordinary acts incident
to product distribution," such as product updates or technical
support.

After the Grokster decision, information technology companies today
are freer to innovate. They no longer face the risk of a substantial
reworking of the Sony standard - the one that favored technologies
with substantial noninfringing uses, ranging from the VCR to the iPod
to P2P software (when not accompanied by inducement).

That means that Steve Jobs, or someone else in a garage or a
boardroom, is now freer to invent the next iPod.

* Note: Mark Cuban's influence is even more far-reaching than it appears.
For example, his smart negotiations with RIAA, not long after he sold
Broadcast.com to Yahoo, provided the RIAA with the leverage it needed
to convince the Copyright Office that Webcasting should be as costly
and difficult as possible, all but killing the whole business. As a
result, podcasting has emerged to become what Apple heralds as "the
future of radio". Time-shifted listening to Webcasts will be more
popular than live listening for the simple reason that it's
relatively hassle-free and unregulated.
Here are the
details.
Resources
Supreme Court of the United States

Grokster Decision

Grokking
Grokster

Lyle
Denniston on Grokster

Kevin Heller on
Grokster

Cory
Doctorow on Grokster

Mark
Cuban on Grokster

IT
Conversations podcast of Mark Cuban at Web 2.0

INDUCE
Failure in Committee

Latest Decision on SCO

DRMwatch

BitTorrent

Edward Felten on Grokster

Rogers
Cadenhead on Bram Cohen's Agenda

Bram Cohen's Site

Bram
Cohen's Agenda Page

Mark Cuban and Webcasting Royalty Rates

and more.

Web2.0 Conference

Chander
and Sunder on Grokster

Mises
Economics Blog

Corp Law
Blog

Doc Searls is Senior Editor of Linux
Journal. He writes the Linux for Suits column, and he also
presides over Doc Searls' IT
Garage, which is published by SSC, the publisher of
Linux Journal.