Separating the Sony Sheep from the Grokster Goats: Reckoning the Future Business Plans of Copyright-Dependent Technology Entrepreneurs

Abstract:     
U.S. and many other national copyright systems have by statute or caselaw (or both) established rules engaging or excusing liability for facilitating (or, in commonwealth countries, "authorizing") copyright infringement. Taken as a group, they share a goal of insulating the innovator whose technology happens, but was not intended, to enable its adopters to make unlawful copies or communications of protected works. The more infringement becomes integrated into the innovator's business plan, however, the less likely the entrepreneur is to persuade a court of the neutrality of its venture. The US Supreme Court's 2005 decision in MGM v Grokster, established that businesses built from the start on inducing infringement will be held liable; judges will frown on drawing one's start-up capital from other people's copyrights. Thus, the inferences entrepreneurs may draw from the Court's elucidation of the elements of inducement may advise pro-active measures to prevent infringement from becoming a business asset. As a result, even businesses not initially built on infringement, but in which infringement comes to play an increasingly profitable part, may find themselves liable unless they take good faith measures to forestall infringements.

This article addresses the evolution of the U.S.'s judge-made rules of secondary liability for copyright infringement, and the possible emergence of an obligation of good faith efforts to avoid infringement. The recent announcements of inter-industry "Principles for User Generated Content Services" and of complementary "Fair Use Principles for User-Generated Video Content" suggest that proactive avoidance measures may become a matter of "best practice." The article then turns to the statutory regime of safe harbors established for certain Internet service providers and considers whether the statute insulates entrepreneurs who would have been held derivatively liable under common law norms. Finally, the article compares the U.S. developments with recent French decisions holding the operators of "user-generated content" and "social networking" websites liable for their customers' unauthorized posting of copyrighted works.

Working Paper Series