MGM Studios v. Grokster

PETITIONER: Metro-Goldwyn-Mayer Studios Inc., et al.
RESPONDENT: Grokster, Ltd., et al.
LOCATION: Texas State Capitol

DOCKET NO.: 04-480
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 544 US 903 (2005)
GRANTED: Dec 10, 2004
ARGUED: Mar 29, 2005
DECIDED: Jun 27, 2005

ADVOCATES:
Donald B. Verrilli, Jr. - argued the cause for Petitioners
Paul D. Clement - argued the cause for Petitioners
Richard G. Taranto - argued the cause for Respondents

Facts of the case

Grokster and other companies distributed free software that allowed computer users to share electronic files through peer-to-peer networks. In such networks, users can share digital files directly between their computers, without the use of a central server. Users employed the software primarily to download copyrighted files, file-sharing which the software companies knew about and encouraged. The companies profited from advertising revenue, since they streamed ads to the software users. A group of movie studios and other copyright holders sued and alleged that Grokster and the other companies violated the Copyright Act by intentionally distributing software to enable users to infringe copyrighted works. The district court ruled for Grokster, reasoning that the software distribution companies were not liable for copyright violations stemming from their software, which could have been used lawfully. The Ninth Circuit affirmed.

Question

Were companies that distributed file-sharing software, and encouraged and profited from direct copyright infringement using such software, liable for the infringement?

Media for MGM Studios v. Grokster

Audio Transcription for Oral Argument - March 29, 2005 in MGM Studios v. Grokster

Audio Transcription for Opinion Announcement - June 27, 2005 in MGM Studios v. Grokster

David H. Souter:

The second case in which I have the opinion to delivery is Metro-Goldwyn-Mayer Studios against Grokster, the number is 04-480.

This case comes to use on writ of certiorari to the United States Court of Appeals for the Ninth Circuit.

The respondents, Grokster and StreamCast are companies in the business of giving away software that allows users to exchange electronic files across peer-to-peer networks, networks where users computers communicate directly with each other and not though any central computer.

The two companies make their money by being paid advertising through the computers that use their software but because of the decentralize software design, Grokster and StreamCast do not know what files their users exchange or when.

What they do know however, is that the vast majority of the billions of files exchanged contain copyrighted music and movies.

Both companies took active steps to encourage copyright infringement by the users of the free software.

For example, each distributed software of a kind known as OpenNap which is compatible with the Napster file sharing service known to be used predominantly for copyright infringement.

StreamCast marketed its peer-to-peer software to Napster users as an alternative to Napster and Grokster tried to divert internet search queries for Napster to its own website.

Both companies provided technical support to users who wanted help in playing copyrighted movies and music.

The petitioners are a large group of copyright holders which we are calling MGM for short who sued Grokster and StreamCast and claimed that the companies were secondarily liable for copyright infringement, i.e. that they were responsible for the copyright infringements committed by the people who used their software.

The District Court granted summary judgment in favor of Grokster and StreamCast and the Ninth Circuit affirmed.

In the Circuit's view, the software was capable of substantial lawful use such as the exchange of public domain works or the authorized copying of media files.

The Circuit read this Court's case Sony v. Universal City Studios as precluding secondary labiality by the provider of a device with substantial lawful uses.

We granted certiorari and as explained in a unanimous opinion filed with the Clerk today, we vacate the judgment of the Ninth Circuit.

In the Sony case, the manufacturer of the video cassette recorder was sued for the unlawful taping of broadcast programs by VCR users.

There was no evidence that the manufacturer induced infringement and there were substantial lawful uses for the VCR.

We held that the manufacturer was not liable.

It had shown no bad faith in distributing the VCR nor could bad faith be imputed solely from the paucity of lawful uses for the device.

But this case is not like Sony.

Long established common law principles indicate that one who distributes product with a purpose such as fostering copyright infringement is shown by active steps taken to promote unlawful uses is liable for the unlawful use that results.

In this case, there is evidence in the record that Grokster and StreamCast each have such a purpose and have taken steps to induce copyright violations.

Evidence shows that each aimed to satisfy the demand for copyright infringement in the market of former Napster users, each promoted and profited from the infringing uses of the software and neither one made any effort to stop the infringement.

In light of this substantial evidence in MGM's favor on all elements of the inducement theory of contributory infringement, it was error to grant summary judgment in favor of the two companies.

The opinion does not reach the further question imposed by MGM about the Sony rule that is how much lawful use is necessary to avoid liability simply for distributing a product used by some others for infringement.

The case is remanded for further proceedings and for reconsideration of MGM's motion for summary judgment on the theory we set out today.

Justice Ginsburg has filed a concurring opinion in which the Chief Justice and Justice Kennedy join; Justice Breyer has filed a concurring opinion in which Justice Stevens and Justice O'Connor join.