FILE SHARING & LIABILITY


background information and the laws governing file sharing

What is file sharing?
Most file sharing over the internet is performed using peer-to-peer (“P2P”) networks. P2P software providers, such as KaZaA, Grokster, Gnutella, Morpheus, eDonkey and LimeWire, distribute file-sharing software which enables individual users to easily search millions of other in-network consumers’ computers for files to download. The files most often downloaded are music and videos.

What is "load distribution"?
P2P distribution networks spread the load for file downloading across millions of machines. Each computer makes files available to every other computer in the P2P network. As there is no way a single central server could have enough disk space to hold all the files, or enough bandwidth to handle all the requests, P2P file sharing accomplishes what would be impossible any other way.

How does the P2P software find the file that I am searching for?
The P2P software must provide a method of indexing the available files so users can access them. Currently, there are three primary methods of indexing:

Central server indexing. Central server indexing, used by the original Napster, is a system in which users install software onto their computers that tells a central server which files are available for download. Thus, the central server, owned and operated by the P2P software provider, has a complete list of every shared file available on every computer connected to the system. If users want to search for a file, they use the software on their computers to query the list on the central server. For example, if a user is looking for the song “Vertigo” by U2, the central server will create a list of all the machines storing that song. After the user picks a version of the song from the list, his computer connects to the user’s machine that has the song and downloads the song directly from that machine.

BitTorrent appears to be a subset of central server indexing.

Decentralized indexing. The P2P software on each user’s computer maintains a list of files available for download. There is no central server. When looking for a file, the software searches the individual index files of all the computers on the network. Gnutella and Morpheus use decentralized indexing.
Supernode system.Users with the fastest Internet connections and processing speed are automatically designated as Supernodes. Each Supernode functions as an indexing server to which oher users in the neighborhood will automatically upload a list of files they are sharing. When a user searches for a file, the software first connects with the closest Supernode which searches its index and supplies the user with the results. If the desired file isn’t found on the first Supernode, the software will search the next closest Supernode and so on. KaZaa developed and currently uses the supernode architecture.

How do P2P providers make $?
Non-subscription based P2P providers profit by selling advertisements that appear both on their websites and on the users’ computers when they employ the file-sharing software. Some of these advertisements are generated by third-party software providers who partner with P2P providers to bundle their software with the P2P software in exchange for a fee.

U.S. Copyright Laws Governing File Sharing  
This website limits coverage of the laws governing file sharing to U.S. copyright law and does not attempt to examine other bodies of law or legal principles that might apply to P2P file sharing, including patent, trademark, trade secret, unfair competition and criminal statutes.

Title 17 of the United States Code includes the Copyright Act of 1976 and all subsequent amendments to U.S. copyright law. This section is meant to provide a brief overview of U.S. Copyright Law, nothing more. If you are looking for a more complete understanding, please read the code. For the entire text of Title 17 and related amendments, go to http://www.copyright.gov/title17/.

Exclusive rights of the copyright holder
An individual is liable for copyright infringement if he violates the exclusive rights of the copyright holder. The exclusive rights of a copyright holder are:
The right to reproduce the copyrighted work
The right to prepare derivative works based on the copyrighted work (i.e., adapt)
The right to distribute copies of the copyrighted work
The right to publicly perform or display the copyrighted work

File-sharing copyrighted information violates the right to reproduce and the right to distribute. Courts have held that file sharing, which involves making and transmitting a ditigal copy of music, infringes copyright.

Proving copyright infringement
To prove copyright infringement, the copyright holder must show two things: (1) he owns a valid copyright; and (2) the defendant infringed on that copyright. Infringement may be inferentially proven by showing that the defendant had access to the copyrighted material, work in the possession of the defendant is substantially similar to the copyrighted material, and one of the copyright owner’s rights (reproduction, distribution, etc.) was compromised. Neither intent nor knowledge is an element of copyright infringement.

Fair Use defense to copyright infringement
For certain copyright infringements, the fair use doctrine provides a potential defense. The Copyright Act enumerates the following four "fair use factors" that must be analyzed to determine whether a particular use of a copyrighted work is fair use.
Commercial vs. Educational Use. The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.
Nature of the copyrighted work.
Amount and substantiality of the portion used in relation to the copyrighted work as a whole.
Effect of the use upon the potential market for or value of the copyrighted work.

Remedies for copyright infringement.
For each copyright infringement, the United States Copyright Act, U.S.C. Title 17 § 504, enables copyright owners to elect to recover either actual damages or between $750 and $30,000 in court awarded damages, plus costs and attorneys fees. In the event willful infringement is proven, courts may award damages up to $150,000 per copyrighted work. Therefore, an individual who intentionally downloads 10 songs from a P2P service could theoretically be liable for $1,500,000 damages in a copyright infringement suit despite the fact that the actual retail value of the 10 copies of the songs may be less than $100.

Digital Millennium Copyright Act (DMCA)
The Digital Millennium Copyright Act, signed into law by President Clinton on October 28th 1998, amended Title 17 and added various other provisions of U.S. Copyright Law. The DMCA implements treaties signed in December 1996 at the World Intellectual Property Organization (WIPO) Geneva conference and contains additional provisions addressing related matters.

Highlights of the DMCA
Makes it a crime to circumvent anti-piracy measures built into most commercial software.
Outlaws the manufacture, sale, or distribution of code-cracking devices used to illegally copy software.
Does permit the cracking of copyright protection devices, however, to conduct encryption research, assess product interoperability, and test computer security systems.
Provides exemptions from anti-circumvention provisions for nonprofit libraries, archives, and educational institutions under certain circumstances.
In general, limits Internet service providers from copyright infringement liability for simply transmitting information over the Internet.
Service providers, however, are expected to remove material from users' web sites that appears to constitute copyright infringement.
Limits liability of nonprofit institutions of higher education -- when they serve as online service providers and under certain circumstances -- for copyright infringement by faculty members or graduate students.
Requires that "webcasters" pay licensing fees to record companies.
Requires that the Register of Copyrights, after consultation with relevant parties, submit to Congress recommendations regarding how to promote distance education through digital technologies while "maintaining an appropriate balance between the rights of copyright owners and the needs of users."
Explicitly states that "[n]othing in this section shall affect rights, remedies, limitations, or defenses to copyright infringement, including fair use..."

Common Law Doctrines: Contributory and Vicarious Copyright Infringement
One can be liable for copyright infringement without being directly responsible for the violation. Two recognized theories of secondary copyright liability are contributory copyright infringement and vicarious copyright infringement. These common law doctrines are very important for corporations, internet service providers, software developers, educational institutions, and parents to consider when assessing their exposure to file sharing liability. In order to be held liable for copyright infringement under either of these secondary theories, some direct infringement must have occurred.

Contributory Copyright Infringement
Contributory infringement is “the act of participating in, or contributing to, the infringing acts of another person.” In the copyright context, knowing (or having reason to know) about the copyright infringement and inducing, causing, or materially contributing to the violation constitutes contributory infringement.

Substantial Non-Infringing Uses (a.k.a. Betamax) Defense
If the defendant accused of contributory copyright infringement manufactures or creates the means with which copyright infringement can occur, constructive knowledge of the infringing activity will be imputed unless the defendant can show that the product is capable of substantial or commercially significant non-infringing uses. If a substantial non-infringing use is shown, the copyright owner must demonstrate that the defendant had reasonable knowledge of the specific violations and failed to act on that knowledge to prevent infringement.

Currently, there is a circuit split as to whether a product must be actually used for a non-infringing purpose in order to be “capable” of it. In In re Aimster Copyright Litig., the Seventh Circuit held that being physically capable of a non-infringing use is not enough; the defendant must produce evidence that shows the product is actually used for the stated non-infringing purposes. However, in MGM Studios, Inc. v. Grokster Ltd., the Ninth Circuit held that a product only need only have the capacity to be used for a substantial or commercially significant non-infringing purpose in order require the copyright owner to demonstrate that the defendant had reasonable knowledge of specific violations.

Vicarious Copyright Infringement
Vicarious infringement is “a person’s liability for an infringing act of someone else, even though the person has not directly committed an act of infringement." For example, a concert theater can be vicariously liable for an infringing performance of a hired band or an employer can be vicariously liable for the acts of its employees.

In order to be held vicariously liable for copyright infringement, the “principal,” such as the theater or employer, must have the ability and right to oversee users’ conduct and enjoy a direct, financial benefit as a result of the wrongful acts.

hot topics

BitTorrent. Is the fusion of P2P file sharing and traditional downloading too good to quash? See also, BitTorrent FAQ and Guide.

TV. The new wave of online piracy is all about TV -- Hollywood is sending lawyers.

Academic life. Colleges offer students music downloads.

Speed. Upcoming technology will allow a full movie to download in 6 seconds.

Deception. FTC asked to probe deceptive music-downloading sites.

Supernode Liability. Can a supernode be held liable for contributory or vicarious copyright infringement?

P2P (More) Legal in France. On March 10, 2005, a French court of appeals ruled in favor of a man who downloaded about 500 movies, on the grounds that the copies were private, the copies were not redistributed, and the man paid tax on the blank media. See CoCo and Slashdot.

Big Champagne. Tracks every download and sells this data to the music industry. How one company is turning file-sharing networks into the world's biggest focus group. See wired.com and bigchampagne.com.

Marketing. The Role of Peer to Peer File Sharing in Law Firm Marketing.

for more information

The “file sharing portal.” Has tons of information on file sharing.

File sharing news. www.slyck.com

P2P Code. In case you are dying to see a sample of P2P code, here you go!

Film distribution and cyber piracy.

Good description of central server and decentralized indexing.Howstuffworks.com

Decentralized indexing. Neo Network – used by Morpheus.

• DMCA.
Official text of the DMCA.
Provisions of the DMCA not contained within Title 17.
US Copyright Office summary of the DMCA.
The UCLA Online Institute for Cyberspace Law and Policy. Highlights of the DMCA.
WIPO Copyright Treaty. Adopted by the Diplomatic Conference on Certain Copyright and Neighboring Rights Questions on December 20, 1996.

• Overview of file sharing liability.Overview of file sharing liability. Hernstadt, Edward. File-Sharing Liability: What Employers - and Parents - Need to Know.

• FTC Act and COPPA. Whitepaper demonstrates how P2P providers may be liable for activities that violate the FTC Act and COPPA.

P2P United

anti-DMCA

RIAA

comic relief

Doonesbury takes a look at file-sharing.

FoxTrot


Information on this website was last updated on April 19, 2005.
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