Siding with record labels and movie studios, the Supreme Court has held that peer-to-peer file sharing companies, such as Grokster and StreamCast can be held liable for contributory copyright infringement if their customers engage in illegal file-swapping while using their products.
Writing for the majority, Justice Souter summed up the decision in this way: “We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement.”
The Court was careful not to overturn its decision in the 1984 Sony Betamax decision. In that case, which addressed whether Sony could be held liable for creating a recording device that allowed third parties to infringe copyrighted works, the Court held that a company could not be held liable under a theory of contributory or vicarious copyright infringement for selling recording devices so long as the device had substantially non-infringing uses. Justice Souter noted that, in the Sony case, and the cases that followed, the creators of the technology were not actively encouraging illegal behavior. The Court underscored that the holding in the Sony case did not give companies a free pass on liability; in fact, the standard was that a product had to have a substantially non-infringing use, in order to avoid liability.
In the current case, wrote Souter, the evidence showed that Grokster and StreamCast made no efforts to put in place anti-infringement measures and in fact, seemed to be “aiming to satisfy a known source of demand for copyright infringement, the market comprising former Napster users.”
The court was careful to craft a decision that did not implicate any new technologies that might have the potential to foster illegal activity. Indeed, the ruling clearly suggests that technology alone is in sufficient to impute liability to a manufacturer. In short, the standard must involve technology-plus in order for liability to be found.