Re-grokking Grokster

by Doc Searls

Editors' Note: The following is the text of the June 9 and June 23 editions of Doc Searls' SuitWatch newsletter. Sign up to be a subscriber of this bi-weekly newsletter.

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 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 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.

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.

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