File-Sharing Software and Copyright Infringement: Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd.

Publication Date: December 2004

Publisher: Library of Congress. Congressional Research Service

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Research Area: Law and ethics

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Abstract:

Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. is a Ninth Circuit Court of Appeals decision considering allegations of contributory and vicarious copyright infringement by companies which distribute peer-to-peer file-sharing software. The software facilitates direct copyright infringement by its users. It is the first decision to reject infringement claims against and find in favor of companies distributing the software. To date, other digital media file-sharing software decisions have found in favor of the copyright holders, most notably A & M Records, Inc. v. Napster, Inc. and In re: Aimster Copyright Litigation. But in Grokster, the court granted summary judgment for the software companies. This report provides a general overview of peer-to-peer file-sharing technology and then examines why Grokster produced a result different from those in other peer-to-peer software litigation. On December 10, 2004, the U.S. Supreme Court granted a writ of certiorari to hear an appeal in the Grokster case.

One explanation for Grokster is the differences in the technological design of the various peer-to-peer systems. While the pioneering file-sharing network Napster provided exclusively for the exchange of audio files, the software companies sued in Grokster employ more advanced peer-to-peer technology that allows the additional sharing of video clips, text documents, and computer programs. The Grokster court acknowledged these expanded capabilities as legitimate uses of the software, and thus became the first court to accept the "substantial, noninfringing uses" defense to copyright infringement liability, a defense developed by the U.S. Supreme Court in Sony Corp. of America v. Universal City Studios, Inc. Two months after the U.S. district court decision in Grokster, the Seventh Circuit Court of Appeals in Aimster also expressed qualified support for application of the Sony defense to file-sharing software, but nevertheless upheld a preliminary injunction against Aimster because the software company failed to demonstrate that its peer-to-peer service was ever actually used for any substantial noninfringing purposes.

Another factor determinative to the Grokster court was the software companies' limited contribution to the infringing activity of its software users, and their limited ability to police their networks. Whereas Napster actively provided on-going services and technical support to its users in locating and downloading music files, the Grokster defendants distribute software that operates across peer-to-peer networks outside of their control and supervision. This more sophisticated software allows users to connect to each other and swap files directly, without the need for a centralized search index or website to facilitate the file transfers, as Napster had maintained.