Redefining Responsibility in MGM Studios v. Grokster: The Doctrine of Inducement and the Evolution of Secondary Copyright Liability

In common law, secondary copyright infringement liability refers to when a party does not directly commit the legal wrong, but still benefits, facilitates, or profits from the infringed-upon copyrighted work. This is fundamentally distinct from primary infringement, which denotes directly copying a copyrighted work. As a result, secondary liability broadens the scope of accountability as it targets inducement and contributory actions.

There are two kinds of secondary liability: as aforementioned, contributory infringement and vicarious liability. Contributory infringement is applicable when a third party intentionally aids or abets another party to infringe upon a copyright. Conversely, vicarious liability occurs when a third party — even if not an explicit participant — benefits from the infringement and has the right to regulate the infringing behavior. Businesses that profit from the infringements of others but do not engage in direct infringement are frequently subject to this kind of liability. For contributory or vicarious liability to be applied on a third party, there must be an underlying direct infringement. 

The foundation of all copyright law, the Copyright Act, has no specific provisions that impose secondary liability, meaning provisions are “judge-developed” with no open-ended statutory basis that is granted to fair use jurisprudence. Because it is not expressly codified, legal standards for secondary liability are manifold and can vary across federal appellate courts. Thus, courts utilize the inherent structures of contributory and vicarious liability to determine accountability. The Supreme Court has yet to address these variations, highlighting the lack of uniformity across cases of this nature.

MGM Studios, Inc. v. Grokster, Ltd.

When beginning to understand the doctrine of inducement, it is important to turn to the case that established it. The 2005 Supreme Court decision in MGM Studios, Inc. v. Grokster, Ltd. found that the defendants, peer-to-peer file sharing companies Grokster and Streamcast, could be liable for “inducing” copyright infringement by way of distribution, not creation, setting the precedent for secondary liability. Because peer-to-peer file sharing is decentralized, it is inherently difficult to monitor and regulate the files that are shared. This decision ultimately redefined how the courts evaluate intent, inducement, and liability in cases involving secondary copyright infringement. Because it established unambiguous evidentiary standards, the Grokster ruling continues to serve as a crucial precedent that continues to influence copyright law. 

MGM presented evidence that Grokster's software was frequently used to illegally obtain copyrighted media, including movies and music. It was evident that the most common application of P2P technology was the unapproved sharing of copyrighted content, despite the defendants' claims that it might be employed for non-infringing purposes.

Citing Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984), the Ninth Circuit determined that the software companies could not be held liable due to “substantial noninfringing uses.” The Supreme Court also ruled that a technology manufacturer cannot be held liable for the copyright infringement conducted by its user base, especially if unauthorized copying on a greater scale is improbable and “does not have its ordinary effect of militating against a finding of fair use.” 

Selling a device with significant noninfringing uses — such as VCRs used for legal “time-shifting” by recording television shows for subsequent personal viewing — did not amount to contributory infringement, the Court ruled in the Sony case. According to the Ninth Circuit, Grokster could only be held accountable if it knew about particular instances of infringement and did nothing about them. The Ninth Circuit decided that Grokster was not responsible because of its decentralized nature, which precluded it from determining which particular files were transferred.

Analysis

The Grokster ruling ultimately solidified the “doctrine of inducement” in copyright law, holding 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 by third parties.” Simply, the Court expanded contributory liability by introducing this doctrine, which also considers affirmative conduct.  

Justice David H. Souter, writing for a unanimous Court, stated liability cannot be recognized strictly on the basis of “mere knowledge” of the infringement, meaning ancillary actions will not solely establish liability. The ruling predicates the establishment on a “purposeful, culpable expression and conduct.” Evidence in the Grokster case showcased this standard of culpability: the companies deliberately failed to set mechanisms in place that may restrict illicit activity and openly promoted their software as alternatives to Napster, which had been taken down for infringement facilitation. The acts in question indicated a deliberate strategy to lure users looking to obtain access to copyrighted works without authorization.

Additionally, the Court found that the respondents’ financial benefits were directly related to the infringement. A significant portion of the software they used was infringing, and their business model depended on advertising revenue that increased with software usage. The Court highlighted the respondents’ failure to attempt to implement the necessary mechanisms as proof of intent, irrespective of their argument that doing so was complicated. The Court held that even though the respondents’ software had significant non-infringing uses, like educational materials, the distributors were still liable under the inducement rule if there was a clear intent to encourage infringement. This nuance emphasizes that the intentionally found in facilitating illegal actions does not become excused by lawful use.

The Court remanded the matter for additional hearings and ultimately vacated the Ninth Circuit's ruling, which vindicated the respondents. Consequently, the Grokster ruling established a crucial precedent in copyright law and demonstrated the delicate balance that must be struck between safeguarding creative property and integrating technological advancement.

Image Source: Bill of Rights Institute