FILE SHARING & LIABILITY




provider liability

How do ISPs get involved?
Internet service providers (ISPs) and file sharing software developers get involved in the file sharing controversy because they provide the means for individuals to engage in potentially illegal activity. Since it can be very difficult to find and punish individual infringers, copyright holders have seized on the opportunity to cut illegal file sharing off at the knees by going after the providers of the means to engage in the activities. Furthermore, these providers, theoretically, presented much deeper pockets for the copyright holders’ monetary damages. Copyright holders have sued providers with mixed results.

When is an ISP or software developer vicariously liable for the actions of their users?
ISPs and Software Developers are potentially liable for copyright infringement based on the secondary liability theories of contributory or vicarious infringement. In order for the provider to be held liable, some direct infringement must have occurred and the provider must meet the requirement of either contributory copyright infringement or vicarious copyright infringement.

For more on contributory and vicarious copyright infringement, click here.

Application of Secondary Liability Theories to ISPs
Depending on the circumstances of the case, an ISP could potentially be subject to both contributory and vicarious liability. Whether an ISP is liable for contributory copyright infringement will depend on whether the ISP had knowledge of the infringement and induced, caused or materially contributed to the infringement. The knowledge question will depend on the factual situation, but one could easily surmise that providing a user with access to the Internet constitutes a material contribution to the infringement. Whether an ISP is vicariously liable for copyright infringement will depend on whether the provider has the ability to supervise users and a direct financial interest in the infringement. An ISP’s ability to supervise users will depend on licensing agreements and usage agreements. If the ISP has the ability to terminate a user’s access, they will likely have an ability to control the user sufficient to meet this prong of the test. A financial interest likely exists as access to copyrighted works an increase the interest in the Internet access and thus, increases the number of subscribers.

Application of Secondary Liability Theories to Software Developers
The law on secondary liability for developers has evolved as technology has provided users with the ability to infringe on copyrights. These are some of the key cases on the topic of secondary liability for developers.

Sony Corporation of America v. Universal City Studios, Inc.
In response to a suit brought against VCR manufacturers, the Supreme Court determined that the manufacturer of a product was not liable for contributory copyright infringement where the product can be used for substantial non-infringing reasons (the Betamax defense). The court was not concerned with the proportions of infringing versus non-infringing uses. The court also seemed influenced by the fact that the relationship between the infringing and the manufacturer ceased as soon as the sale was completed.

A & M Records, Inc. v. Napster
Napster was a file sharing software system that utilized central server indexing to allow users to share copyrighted materials. The Court found to be contributory liability because Napster had actual knowledge of the infringement, as evidenced by internal messages, and materially contributed to the infringement by providing the site and facilities for the infringement. The Court also found vicarious infringement because Napster had the right and ability to control the system, through the reserved right to terminate a user’s access, and it derived financial benefit from the infringement, because the ability to share copyrighted material served as a draw for the software.

In re Aimster Copyright Litigation
The Aimster program allowed users to share files using AOL Instant Messenger. The Court in Aimster upheld a preliminary injunction based on contributory infringement. Aimster had actual knowledge of the infringing activities of its users proven with letters to users on the topic of copyright infringement, tutorials regarding how to use the system, and chat room and bulletin board discussions about the issue. Furthermore, Aimster chose to make itself blind to the activities of its users by encrypting all shared files. Aimster materially contributed to the infringement by providing the servers, software etc. Aimster used central server indexing, but the Court seemed to suggest that a central server was not key to a determination of contributory liability.

Another interesting development in the Aimster case was the application of the Betamax defense. The court refused to consider the availability of non-infringing uses because Aimster did not present any. By putting the burden on the defendant, the Court appears to have changed the doctrine because in Sony, the burden was on the plaintiff to prove that there were no non-infringing uses for the product.

MGM v. Grokster
Grokster is the latest chapter in the controversy regarding the liability to file sharing network creators. A key difference between Grokster and it predecessors was the lack of a central server indexing. Grokster utilized decentralized indexing (link) to allow users to search and share other user's files, but it did not maintain any sort of database of files. The Court in Grokster found this factor to be pivotal: the software developers were unable to control the users or remove any infringing content, upon notice from the copyright holder. Grokster did not have any sort of licensing agreement that enabled it to terminate user access. Furthermore, the lack of a central server meant no “site and facilities” to contribute to the infringement. In addition, the court found that the software had substantial non-infringing uses, echoing Sony. Grokster was not found liable for either contributory or vicarious copyright infringement. The Supreme Court has agreed to hear this case, so everything we know about secondary liability for copyright infringement could change.

As it now stands, software developers are more likely to be held secondarily liable for infringement where the program utilizes a central server or does not have substantial non-infringing uses.

How can ISPs and Software Developers avoid liability?
The DMCA creates a safe harbor that protects ISPs from liability so long as the provider meets the following provisions:
ISPs must adopt and notify users of termination policy for repeat copyright infringement and accommodate and not interfere with technical measures used by copyright holders to track infringers.
ISPs must designate a copyright agent to receive notices of infringement.
ISPs must, upon notice, remove or disable access to infringing material. This is often referred to as the notice and takedown provision. The notice and take down provision does not apply when the university is merely a conduit for information.
ISPs must not have known or been aware of facts making the infringement apparent.
And, the ISP must not derive any financial benefit from the copyright infringement.

If an ISP follows all of the provisions of the DMCA, its liability will be limited will regards to the activities of its users.

The best way software developers can protect themselves from liability is with the software design and user licensing agreement. Software should be designed using the Grokster model: decentralized indexing. User licensing agreements should not reserve the right to terminate user access, thereby eliminating the right to control issue.

hot topics

• MGM v. Grokster The Grokster case was heard by the Supreme Court on March 29, 2005.…will this mean the death of the Betamax defense?

• Is it a neverending chase? How much are service providers required to do? Where does it end? Hackers have seemingly endless creativity.

• Jailtime for software developers? A bill introduced in California's legislature has raised the possibility of jail time for developers of file-swapping software who don't stop trades of copyrighted movies and songs online.

for more information

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

17 U.S.C.S §512 (2005).

Elliot M. Zimmerman, P2P File Sharing: Direct and Indirect Copyright Infringement, 78 Fla. Bar J. 40 (May, 2004).

Robert A Gilmore, Peer-to-Peer: Copyright Jurisprudence in the new File-Sharing World, The Post Grokster Landscape of Indirect Copyright Infringement and the Digital Millennium Copyright Act, 5 Fl. Coastal L. J. 85 (Spring 2004).


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