Sunday, July 03, 2005

Less-than-Supreme Grokster Decision

I've been out of town in a serious way--a week in CO and 2 in CA--since my last post. It should be unsurprising, therefore, that I come back just in time to post an outdated commentary on the Grokster decision.

Much has already been said here. First and foremost, consider this Wall Street Journal Grokster roundtable. It features a useful array of insightful comments; the only person whose value to the discussion is, IMHO, questionable is Christopher S. Ruhland, former Senior Counsel at Disney. (The only truly objectionable comment is his quip that entertainment industries don't oppose innovation because they're gung-ho about digital cinema. This is a shorter version of the entertainment industry's collective lying about their history of litigating against technological innovation. Mostly, though, Ruhland just says very little.) The roundtable also features Ernest Miller who, as I've already mentioned, is the bomb.

While I'm giving props to Ernest, check out his post on Corante, "Kicking the Sony Can Down the Road". My favorite line is: "'Active inducement' is a pretty good test, and one that I'm not opposed to for secondary liability. However, the Court seems to have set a fairly low and confusing bar for finding the 'active' part of the inducement." He rightly expresses the concern that this will hit small start-ups far harder than Intel and Apple. Nonetheless, Miller argues that time is on our side--that the case has effectively been postponed and that new innovations will have been developed and standardized by the time the court actually revisits the Sony standard.

I also like Ed Felten's discussion of the impact of Grokster on technology design. Felten raises a very valid and all-too-likely worst-case scenario. "Legitimate technologists will still worry that a well-funded plaintiff can cook up a stew of product design second-guessing, business model second-guessing, and occasional failures of copyright compliance by low-level employees, into an active inducement case."

With true word economy, William Patry provides a damning critique. Most interestingly, he notes that Ginsburg's and Breyer's readings of the case, as expressed in their concurring opinions, each attracted only two additional justices. The remaining three stuck with the relatively weak official ruling. This, Patry argues, will undermine the "unanimous" Souter opinion and further muddy the already-unpredictable legal waters.

Patry is also the first blogger I've found who raises the concern that EFF and others noted in light of the proposed Induce Act: why not the iPod? Patry mentions the VCR instead, but the argument is the same: early advertisements advocate multiple uses, some legal and some not. "Recall Sony advertised that people could use it to copy their favorite movies, and we're talking here about librarying, not just time-shifting." In Apple's case, it's the "Rip-Mix-Burn" campaign which drew an indictment by Disney CEO Michael Eisner. Eisner claimed that the message induces customers to commit copyright infringement.

The court puts the next iPod in a precarious position. It says, on pp. 21-23 of the slip opinion, that Grokster and StreamCast made three main mistakes. First, they advertised to known copyright infringers--in this case, former Napster users. Second, they did not implement potential piracy-reducing technologies. (See footnote 12 for a bit of good news: this alone does not equal liability.) Third, they profited from infringement. The court makes it fairly clear that the first standard is the most important, but all three are rather frightening. Does "Rip-Mix-Burn" meet the first test? Does the decision to design iPods to play MP3 files meet the second? Does Apple's sale of iPods that carry more music than could reasonably be purchased meet the third test?

In short, why is Morpheus illegal and the iPod legal? I could come up with a number of legal doctrines that would make this delineation, but the unanimous court doesn't really try. Downright frightening.

I have tremendous concern for diminished innovation by small companies. I think Apple's lawyers are ready for this one. The RIAA won't sue over the iPod because it's already used by millions, but Apple, HP, and even Microsoft (oh, the irony) should be concerned that their next great digital media toy will be in danger. Yet they'll probably win--after a few million in legal bills. I'm worried about the lone inventor who has just barely patented her invention or the head of a small startup who doesn't have the money to defend his company's design choices.

This decision is nothing that either side can get too excited about; it's too vague for that. Each side's lawyers, however, should be very happy; the Supremes just gave them even more solid job security for the foreseeable future.


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