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     125 S.Ct. 2764 FOR EDUCATIONAL USE ONLY Page 1 545 U.S. 913, 125 S.Ct. 2764, 162 L.Ed.2d 781, 73 USLW 4675, 2005 Copr.L.Dec. P 29,007, 75 U.S.P.Q.2d 1001, 33

    Media L. Rep. 1865, 05 Cal. Daily Op. Serv. 5620, 05 Daily Journal D.A.R. 7666, 18 Fla. L. Weekly Fed. S 547

     (Cite as: 545 U.S. 913, 125 S.Ct. 2764)

     Cited Cases One infringes a copyright contributorily by Supreme Court of the United States intentionally inducing or encouraging direct METRO-GOLDWYN-MAYER STUDIOS INC., et infringement and infringes vicariously by profiting al., Petitioners, from direct infringement while declining to exercise v. a right to stop or limit it. GROKSTER, LTD., et al.

     No. 04-480.

    [2] Patents 291 259(1)

    Argued March 29, 2005.

    Decided June 27, 2005. 291 Patents

     291XII Infringement

     291XII(A) What Constitutes Infringement Background: Copyright holders including 291k259 Contributory Infringement; songwriters, music publishers, and motion picture Inducement studios brought copyright infringement action 291k259(1) k. In General. Most Cited against distributors of peer-to-peer file sharing

    Cases computer networking software. The United States Under patent law's traditional staple article of District Court for the Central District of California, commerce doctrine, distribution of a component of Stephen V. Wilson, J., 259 F.Supp.2d 1029, granted a patented device will not violate the patent if it is partial summary judgment in favor of the suitable for use in other ways. 35 U.S.C.A. ? 271(c). distributors on issues of contributory and vicarious infringement, and plaintiffs appealed. The United

    States Court of Appeals for the Ninth Circuit, 380 [3] Patents 291 227 F.3d 1154, affirmed, and the Supreme Court granted certiorari. 291 Patents 291XII Infringement

    Holding: The Supreme Court, Justice Souter, held 291XII(A) What Constitutes Infringement that one who distributes a device with the object of 291k227 k. Intent or Purpose, and promoting its use to infringe copyright, as shown by Knowledge. Most Cited Cases

    clear expression or other affirmative steps taken to One who makes and sells articles which are only

    foster infringement, is liable for the resulting acts of adapted to be used in a patented combination will be

    infringement by third parties. presumed to intend the natural consequences of his

    acts; he will be presumed, for purpose of resulting

    infringement action, to intend that they shall be used Vacated and remanded.

    in the combination of the patent. 35 U.S.C.A. ? 271(c). Justice Ginsburg filed concurring opinion in which

     Chief Justice Rehnquist and Justice Kennedy joined.

    [4] Patents 291 227

     Justice Breyer filed concurring opinion in which

    291 Patents Justice Stevens and Justice O'Connor joined.

     291XII Infringement 291XII(A) What Constitutes Infringement West Headnotes 291k227 k. Intent or Purpose, and Knowledge. Most Cited Cases [1] Copyrights and Intellectual Property 99 Where an article is good for nothing else but patent 77 infringement, there is no legitimate public interest in its unlicensed availability, and there is no injustice 99 Copyrights and Intellectual Property in presuming or imputing to one who makes and 99I Copyrights sells the article an intent to infringe. 35 U.S.C.A. ? 99I(J) Infringement 271(c). 99I(J)2 Remedies 99k72 Actions for Infringement [5] Patents 291 259(1) 99k77 k. Persons Liable. Most

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     125 S.Ct. 2764 FOR EDUCATIONAL USE ONLY Page 2 545 U.S. 913, 125 S.Ct. 2764, 162 L.Ed.2d 781, 73 USLW 4675, 2005 Copr.L.Dec. P 29,007, 75 U.S.P.Q.2d 1001, 33

    Media L. Rep. 1865, 05 Cal. Daily Op. Serv. 5620, 05 Daily Journal D.A.R. 7666, 18 Fla. L. Weekly Fed. S 547

     (Cite as: 545 U.S. 913, 125 S.Ct. 2764)

    infringing uses, and shows statements or actions directed to promoting infringement, the 291 Patents staple-article rule set forth in Sony Corp. of America 291XII Infringement v. Universal City Studios, Inc., limiting the imputing 291XII(A) What Constitutes Infringement of culpable intent as a matter of law from the 291k259 Contributory Infringement; characteristics or uses of a distributed product, will Inducement not preclude liability for inducing copyright 291k259(1) k. In General. Most Cited infringement.Cases

     Patent law's staple article of commerce doctrine

    absolves the equivocal conduct of selling an item [8] Patents 291 259(1)

    with substantial lawful as well as unlawful uses, and limits liability for infringement to instances of more 291 Patents acute fault than the mere understanding that some of 291XII Infringement one's products will be misused, leaving breathing 291XII(A) What Constitutes Infringement room for innovation and a vigorous commerce. 35 291k259 Contributory Infringement; U.S.C.A. ? 271(c). Inducement

     291k259(1) k. In General. Most Cited [6] Copyrights and Intellectual Property 99 Cases

    Patent Act's exemption from liability for those who 77

    distribute a staple article of commerce does not extend to those who induce patent infringement. 35 99 Copyrights and Intellectual Property U.S.C.A. ? 271(b, c). 99I Copyrights

     99I(J) Infringement

     99I(J)2 Remedies [9] Copyrights and Intellectual Property 99

     99k72 Actions for Infringement 77

     99k77 k. Persons Liable. Most Cited Cases 99 Copyrights and Intellectual Property Although secondary liability for copyright 99I Copyrights infringement may not be imposed by presuming or 99I(J) Infringement imputing intent to cause infringement solely from 99I(J)2 Remedies the design or distribution of a product capable of 99k72 Actions for Infringement substantial lawful use, which the distributor knows 99k77 k. Persons Liable. Most is in fact used for infringement, this bar does not Cited Cases mean that a producer can never be held contributorily liable for third parties' infringing use Patents 291 227 of a product capable of substantial lawful use, notwithstanding an actual purpose to cause 291 Patents infringing use, unless the distributors had specific 291XII Infringement knowledge of infringement at a time when they 291XII(A) What Constitutes Infringement contributed to the infringement and failed to act 291k227 k. Intent or Purpose, and upon that information. Knowledge. Most Cited Cases Evidence of active steps taken to encourage direct [7] Copyrights and Intellectual Property 99 patent or copyright infringement, such as 77 advertising an infringing use or instructing how to engage in an infringing use, show an affirmative 99 Copyrights and Intellectual Property intent that the product be used to infringe, and a 99I Copyrights showing that infringement was encouraged 99I(J) Infringement overcomes the law's reluctance to find liability when 99I(J)2 Remedies a defendant merely sells a commercial product 99k72 Actions for Infringement suitable for some lawful use. 99k77 k. Persons Liable. Most Cited Cases [10] Copyrights and Intellectual Property 99 Where evidence goes beyond characteristics of 77 product that may be used to infringe copyrights or knowledge that such product may be put to

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     125 S.Ct. 2764 FOR EDUCATIONAL USE ONLY Page 3

    545 U.S. 913, 125 S.Ct. 2764, 162 L.Ed.2d 781, 73 USLW 4675, 2005 Copr.L.Dec. P 29,007, 75 U.S.P.Q.2d 1001, 33

    Media L. Rep. 1865, 05 Cal. Daily Op. Serv. 5620, 05 Daily Journal D.A.R. 7666, 18 Fla. L. Weekly Fed. S 547

     (Cite as: 545 U.S. 913, 125 S.Ct. 2764)

    99 Copyrights and Intellectual Property 99I Copyrights [13] Copyrights and Intellectual Property 99 99I(J) Infringement 77 99I(J)2 Remedies 99k72 Actions for Infringement 99 Copyrights and Intellectual Property 99k77 k. Persons Liable. Most 99I Copyrights Cited Cases 99I(J) Infringement One who distributes a device with the object of 99I(J)2 Remedies promoting its use to infringe copyright, as shown by 99k72 Actions for Infringement clear expression or other affirmative steps taken to 99k77 k. Persons Liable. Most foster infringement, is liable for the resulting acts of Cited Cases infringement by third parties. In the absence of other evidence of intent to cause copyright infringement by distribution of a product [11] Copyrights and Intellectual Property 99 with infringing uses, a court would be unable to find 77 contributory infringement liability as to one who

     makes and sells the product merely based on a

    failure to take affirmative steps to prevent 99 Copyrights and Intellectual Property

     99I Copyrights infringement, if the device otherwise was capable of

     99I(J) Infringement substantial noninfringing uses.

     99I(J)2 Remedies 99k72 Actions for Infringement [14] Copyrights and Intellectual Property 99 99k77 k. Persons Liable. Most 77 Cited Cases Mere knowledge of infringing potential or of actual 99 Copyrights and Intellectual Property infringing uses would not be enough to subject to 99I Copyrights copyright infringement liability a distributor of a 99I(J) Infringement product capable of infringing uses, nor would 99I(J)2 Remedies ordinary acts incident to product distribution, such 99k72 Actions for Infringement as offering customers technical support or product 99k77 k. Persons Liable. Most updates, support liability in themselves; instead, Cited Cases liability for inducement of infringement is premised Inducement liability for copyright infringement on purposeful, culpable expression and conduct, and goes beyond encouraging a particular consumer to thus does nothing to compromise legitimate infringe a copyright, and the distribution of a commerce or discourage innovation having a lawful product can itself give rise to liability where promise. evidence shows that the distributor intended and encouraged the product to be used to infringe; in [12] Copyrights and Intellectual Property 99 such a case, the culpable act is not merely the 77 encouragement of infringement but also the

     distribution of the tool intended for infringing use.

    99 Copyrights and Intellectual Property FN* 99I Copyrights **2766 *913 Syllabus 99I(J) Infringement 99I(J)2 Remedies FN* The syllabus constitutes no part of the 99k72 Actions for Infringement opinion of the Court but has been prepared 99k77 k. Persons Liable. Most by the Reporter of Decisions for the Cited Cases convenience of the reader. See United Proving that a message was sent out to potential States v. Detroit Timber & Lumber Co., copyright infringers is the preeminent but not 200 U.S. 321, 337, 26 S.Ct. 282, 50 L.Ed. exclusive way of showing that active steps were 499. taken by message sender that distributed device capable of infringing uses, with the purpose of Respondent companies distribute free software that bringing about infringing acts, for purpose of allows computer users to share electronic files contributory copyright infringement claim against through peer-to-peer networks, so called because sender, and of showing that infringing acts took the computers communicate directly with each other, place by using the device distributed. not through central servers. Although such networks

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    545 U.S. 913, 125 S.Ct. 2764, 162 L.Ed.2d 781, 73 USLW 4675, 2005 Copr.L.Dec. P 29,007, 75 U.S.P.Q.2d 1001, 33

    Media L. Rep. 1865, 05 Cal. Daily Op. Serv. 5620, 05 Daily Journal D.A.R. 7666, 18 Fla. L. Weekly Fed. S 547

     (Cite as: 545 U.S. 913, 125 S.Ct. 2764)

    can be used to share any type of digital file, noninfringing uses and because respondents had no recipients of respondents' software have mostly used actual knowledge of infringement owing to the them to share copyrighted music and video files software's decentralized architecture, the court held without authorization. Seeking damages and an that they were not liable. It also held that they did injunction, a group of movie studios and other not materially contribute to their users' infringement copyright holders (hereinafter MGM) sued because the users themselves searched for, retrieved, respondents for their users' copyright infringements, and stored the infringing files, with no involvement alleging that respondents knowingly and by respondents beyond providing the software in the intentionally distributed their software to enable first place. Finally, the court held that respondents users to infringe copyrighted works in violation of could not be held liable under a vicarious the Copyright Act. infringement theory because they did not monitor or

    control the software's use, had no agreed-upon right or current ability to supervise its use, and had no Discovery revealed that billions of files are shared independent duty to police infringement.across peer-to-peer networks each month.

     Respondents are aware that users employ their

    software primarily to download copyrighted files, Held: One who distributes a device with the object although the decentralized networks do not reveal of promoting its use to infringe copyright, as shown which files are copied, and when. Respondents have by clear expression or other affirmative steps taken sometimes learned about the infringement directly to foster infringement, going beyond mere when users have e-mailed questions regarding distribution with knowledge of third-party action, is copyrighted works, and respondents have replied liable for the resulting acts of infringement by third with guidance. Respondents are not merely passive parties using the device, regardless of the device's recipients of information about infringement. The lawful uses. Pp. 2775-2783.

    record is replete with evidence that when they began to **2767 distribute their free software, each of (a) The tension between the competing values of them clearly voiced the objective that recipients use supporting creativity through copyright protection the software to download copyrighted works and and promoting technological innovation by limiting took active steps to encourage infringement. After infringement liability is the subject of this case. the notorious file-sharing service, Napster, was sued Despite offsetting considerations, the argument for by copyright holders for facilitating copyright imposing indirect liability here is powerful, given infringement, both respondents promoted and the number of infringing downloads that occur daily marketed themselves as Napster alternatives. They using respondents' software. When a widely shared receive no revenue from users, but, instead, generate product is used to commit infringement, it may be income by selling advertising space, then streaming impossible to enforce rights in the protected work the advertising to their users. As the number of users effectively against all direct infringers, so that the increases, advertising opportunities are worth more. only practical alternative is to go against the device's There is no evidence that either respondent made an distributor for secondary liability on a theory of effort to filter copyrighted material from users' contributory or vicarious infringement. One downloads or otherwise to impede the sharing of infringes contributorily by intentionally inducing or copyrighted files. encouraging direct infringement, and infringes

     vicariously by profiting from direct infringement While acknowledging that respondents' users had while declining to exercise the right to stop or limit directly infringed MGM's copyrights, the District it. Although [t]he Copyright Act does not expressly Court nonetheless granted respondents summary render anyone liable for [another's]

    judgment as to liability arising from distribution of infringement, Sony, 464 U.S., at 434, 104 S.Ct.

    their software.*914 The Ninth Circuit affirmed. It 774, these secondary liability doctrines emerged read Sony Corp. of America v. Universal City from common law **2768 principles and are well

    Studios, Inc., 464 U.S. 417, 104 S.Ct. 774, 78 established in the law, e.g., id., at 486, 104 S.Ct.

    L.Ed.2d 574, as holding that the distribution of a 774. Pp. 2775-2776.

    commercial product capable of substantial noninfringing uses could not give rise to (b) Sony addressed a claim that secondary liability contributory liability for infringement unless the for infringement can arise from the very distribution distributor had actual knowledge of specific of a commercial product. There, *915 copyright instances of infringement and failed to act on that holders sued Sony, the manufacturer of knowledge. Because the appeals court found videocassette recorders, claiming that it was respondents' software to be capable of substantial contributorily liable for the infringement that

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    545 U.S. 913, 125 S.Ct. 2764, 162 L.Ed.2d 781, 73 USLW 4675, 2005 Copr.L.Dec. P 29,007, 75 U.S.P.Q.2d 1001, 33

    Media L. Rep. 1865, 05 Cal. Daily Op. Serv. 5620, 05 Daily Journal D.A.R. 7666, 18 Fla. L. Weekly Fed. S 547

     (Cite as: 545 U.S. 913, 125 S.Ct. 2764)

    occurred when VCR owners taped copyrighted sells a commercial product suitable for some lawful programs. The evidence showed that the VCR's use. A rule that premises liability on purposeful, principal use was time-shifting, i.e., taping a culpable expression and conduct *916 does nothing

    program for later viewing at a more convenient time, to compromise legitimate commerce or discourage which the Court found to be a fair, noninfringing innovation having a lawful promise. Pp. 2779-2780.use. 464 U.S., at 423-424, 104 S.Ct. 774. Moreover, there was no evidence that Sony had desired to bring (d) On the record presented, respondents' unlawful about taping in violation of copyright or taken active objective is unmistakable. The classic instance of steps to increase its profits from unlawful taping. Id., inducement is by advertisement or solicitation that at 438, 104 S.Ct. 774. On those facts, the only broadcasts a message designed to stimulate others to conceivable basis for liability was on a theory of commit violations. MGM argues persuasively that contributory infringement through distribution of a such a message is shown here. Three features of the product. Id., at 439, 104 S.Ct. 774. Because the evidence of intent are particularly notable. First, VCR was capable of commercially significant **2769 each of the respondents showed itself to be noninfringing uses, the Court held that Sony was aiming to satisfy a known source of demand for not liable. Id., at 442, 104 S.Ct. 774. This theory copyright infringement, the market comprising reflected patent law's traditional staple article of former Napster users. Respondents' efforts to supply commerce doctrine that distribution of a component services to former Napster users indicate a principal, of a patented device will not violate the patent if it is if not exclusive, intent to bring about infringement. suitable for use in other ways. 35 U.S.C. ? 271(c). Second, neither respondent attempted to develop The doctrine absolves the equivocal conduct of filtering tools or other mechanisms to diminish the selling an item with lawful and unlawful uses and infringing activity using their software. While the limits liability to instances of more acute fault. In Ninth Circuit treated that failure as irrelevant this case, the Ninth Circuit misread Sony to mean because respondents lacked an independent duty to that when a product is capable of substantial lawful monitor their users' activity, this evidence use, the producer cannot be held contributorily underscores their intentional facilitation of their liable for third parties' infringing use of it, even users' infringement. Third, respondents make when an actual purpose to cause infringing use is money by selling advertising space, then by shown, unless the distributors had specific directing ads to the screens of computers employing knowledge of infringement at a time when they their software. The more their software is used, the contributed to the infringement and failed to act more ads are sent out and the greater the advertising upon that information. Sony did not displace other revenue. Since the extent of the software's use secondary liability theories. Pp. 2776-2779. determines the gain to the distributors, the

     commercial sense of their enterprise turns on (c) Nothing in Sony requires courts to ignore high-volume use, which the record shows is evidence of intent to promote infringement if such infringing. This evidence alone would not justify an evidence exists. It was never meant to foreclose inference of unlawful intent, but its import is clear in rules of fault-based liability derived from the the entire record's context. Pp. 2780-2782.

    common law. 464 U.S., at 439, 104 S.Ct. 774. Where evidence goes beyond a product's (e) In addition to intent to bring about infringement characteristics or the knowledge that it may be put to and distribution of a device suitable for infringing infringing uses, and shows statements or actions use, the inducement theory requires evidence of directed to promoting infringement, Sony's actual infringement by recipients of the device, the staple-article rule will not preclude liability. At software in this case. There is evidence of such common law a copyright or patent defendant who infringement on a gigantic scale. Because not only expected but invoked [infringing use] by substantial evidence supports MGM on all elements, advertisement was liable for infringement. Kalem summary judgment for respondents was error. On Co. v. Harper Brothers, 222 U.S. 55, 62-63, 32 S.Ct. remand, reconsideration of MGM's summary 20, 56 L.Ed. 92. The rule on inducement of judgment motion will be in order. Pp. 2782-2783. infringement as developed in the early cases is no different today. Evidence of active steps taken to 380 F.3d 1154, vacated and remanded. encourage direct infringement, such as advertising an infringing use or instructing how to engage in an SOUTER, J., delivered the opinion for a unanimous infringing use, shows an affirmative intent that the Court. GINSBURG, J., filed a concurring opinion, product be used to infringe, and overcomes the law's in which REHNQUIST, C. J., and KENNEDY, J., reluctance to find liability when a defendant merely

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     125 S.Ct. 2764 FOR EDUCATIONAL USE ONLY Page 6

    545 U.S. 913, 125 S.Ct. 2764, 162 L.Ed.2d 781, 73 USLW 4675, 2005 Copr.L.Dec. P 29,007, 75 U.S.P.Q.2d 1001, 33

    Media L. Rep. 1865, 05 Cal. Daily Op. Serv. 5620, 05 Daily Journal D.A.R. 7666, 18 Fla. L. Weekly Fed. S 547

     (Cite as: 545 U.S. 913, 125 S.Ct. 2764)

joined, post, p. 2783. BREYER, J., filed a Justice SOUTER delivered the opinion of the Court.

    concurring opinion, in which STEVENS and *918 The question is under what circumstances the O'CONNOR, JJ., joined, post, p. 2787. distributor of a product capable of both lawful and

    unlawful use is liable *919 for acts of copyright infringement by third parties using the product. We Paul D. Clement, for United States as amicus curiae, hold that one who distributes a device with the by special leave of the Court, supporting the object of promoting its use to infringe copyright, as Petitioners. shown by clear expression or other affirmative steps Kenneth W. Starr, Steven A. Engel, Susan E. Engel, taken to foster infringement, is liable for the Kirkland & Ellis LLP, Washington, DC, Russell J. resulting acts of infringement by third parties. Frackman, George M. Borkowski, Mitchell,

     Silberberg & Knupp LLP, Los Angeles, CA, Donald

    B. Verrilli, Jr., Counsel of Record, Ian Heath I

    Gershengorn, William M. Hohengarten, Steven B. Fabrizio, Thomas J. Perrelli, Matthew J. Oppenheim, A Jenner & Block LLP, Washington, DC, David E. Kendall, Robert J. Shaughnessy, Thomas G. Hentoff, Respondents, Grokster, Ltd., and StreamCast Williams & Connolly LLP, Washington, DC, Networks, Inc., defendants in the trial court, Gregory P. Goeckner, Dean C. Garfield, Motion distribute free software products that allow Picture Association of America, Inc., Encino, CA, computer users to share electronic files through Elaine J. Goldenberg, Matthew Hersh, Kathleen R. peer-to-peer networks, so called because users' Hartnett, Brian Hauck, Jenner & Block LLP, computers communicate directly with each other, Washington, DC, Steven M. Marks, Stanley not through *920 central servers. The advantage of Pierre-Louis, Recording Industry Association of peer-to-peer networks over information networks of America, Inc., Washington, DC, Counsel for other types shows up in their substantial and Motion Picture Studio and Recording Company growing popularity. Because they need no central Petitioners. computer server to mediate the exchange of Robert M. Schwartz, Drew E. Breuder, O'Melveny information or files among users, the & Myers LLP, Los Angeles, California, Counsel for high-bandwidth communications capacity for a Petitioners Warner Bros. Entertainment Inc. and server may be dispensed with, and the need for New Line Cinema Corporation. costly server storage space is eliminated. Since Kelli L. Sager, Andrew J. Thomas, Jeffrey H. Blum, copies of a file (particularly a popular one) are Jeffrey L. Fisher, Davis Wright Tremaine LLP, Los available on many users' computers, file requests Angeles, CA, Carey R. Ramos, Counsel of Record, and retrievals may be faster than on other types of Peter L. Felcher, Aidan Synnott, Theodore K. networks, and since file exchanges do not travel **2770 Cheng, John H. Longwell, Paul, Weiss, through a server, communications can take place Rifkind, Wharton & Garrison LLP, New York, NY, between any computers that remain connected to the Counsel for Songwriter and Music Publisher network without risk that a glitch in the server will Petitioners. disable the network in its entirety. Given these Michael H. Page, Mark A. Lemley, Keker & Van benefits in security, cost, and efficiency, Nest, LLP, San Francisco, CA, Counsel for peer-to-peer networks are employed to store and Grokster. distribute electronic files by universities, Charles S. Baker, Porter & Hedges, LLP, Houston, government agencies, corporations, and libraries, TX, Cindy A. Cohn, Counsel of Record, Fred Von FN1among others. Lohmann, Electronic Frontier Fndtn., San Francisco, CA, Counsel for StreamCast. FN1. Peer-to-peer networks have Matthew A. Neco, Wendy Millar Goodkin, disadvantages as well. Searches on StreamCast Networks, Inc., Woodland Hills, CA, peer-to-peer networks may not reach and Counsel for StreamCast. uncover all available files because search Richard G. Taranto, H. Bartow Farr, III, Farr & requests may not be transmitted to every Taranto, Washington, DC, Counsel for computer on the network. There may be Respondents.For U.S. Supreme Court briefs, redundant copies of popular files. The see:2005 WL 166587 (Pet.Brief)2005 WL 166588 creator of the software has no incentive to (Pet.Brief)2005 WL 508120 (Resp.Brief)2005 WL minimize storage or bandwidth 640966 (Reply.Brief)2005 WL 640697 consumption, the costs of which are borne (Reply.Brief) by every user of the network. Most relevant

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    545 U.S. 913, 125 S.Ct. 2764, 162 L.Ed.2d 781, 73 USLW 4675, 2005 Copr.L.Dec. P 29,007, 75 U.S.P.Q.2d 1001, 33

    Media L. Rep. 1865, 05 Cal. Daily Op. Serv. 5620, 05 Daily Journal D.A.R. 7666, 18 Fla. L. Weekly Fed. S 547

     (Cite as: 545 U.S. 913, 125 S.Ct. 2764)

    here, it is more difficult to control the other file in that folder.

    content of files available for retrieval and the behavior of users. FN3. Subsequent versions of Morpheus,

     released after the record was made in this Other users of peer-to-peer networks include case, apparently rely not on Gnutella but on individual recipients of Grokster's and StreamCast's a technology called Neonet. These software, and although **2771 the networks that developments are not before us.

    they enjoy through using the software can be used to share any type of digital file, they have prominently *922 In the Gnutella network made available by employed those networks in sharing copyrighted Morpheus, the process is mostly the same, except music and video files without authorization. A that in some versions of the Gnutella protocol there group of copyright holders (MGM for short, but are no supernodes. In these versions, peer computers including motion picture studios, recording using the protocol communicate directly with each companies, songwriters, and music publishers) sued other. When a user enters a search request into the Grokster and StreamCast for their users' copyright Morpheus software, it sends the request to infringements, alleging that they *921 knowingly computers connected with it, which in turn pass the and intentionally distributed their software to enable request along to other connected peers. The search users to reproduce and distribute the copyrighted results are communicated to the requesting works in violation of the Copyright Act, 17 U.S.C. ? computer, and the user can download desired files FN2101 et seq. (2000 ed. and Supp. II). MGM directly from peers' computers. As this description sought damages and an injunction. indicates, Grokster and StreamCast use no servers to

     intercept the content of the search requests or to

    FN2. The studios and recording companies mediate the file transfers conducted by users of the

    software, there being no central point through which and the songwriters and music publishers

    filed separate suits against the defendants the substance of the communications passes in FN4that were consolidated by the District either direction.

    Court.

     FN4. There is some evidence that both Discovery during the litigation revealed the way the Grokster and StreamCast previously software worked, the business aims of each operated supernodes, which compiled defendant company, and the predilections of the indexes of files available on all of the users. Grokster's eponymous software employs what nodes connected to them. This evidence, is known as FastTrack technology, a protocol pertaining to previous versions of the developed by others and licensed to Grokster. defendants' software, is not before us and StreamCast distributes a very similar product except would not affect our conclusions in any that its software, called Morpheus, relies on what is event. FN3known as Gnutella technology. A user who downloads and installs either software possesses the **2772 Although Grokster and StreamCast do not protocol to send requests for files directly to the therefore know when particular files are copied, a computers of others using software compatible with few searches using their software would show what FastTrack or Gnutella. On the FastTrack network is available on the networks the software reaches. opened by the Grokster software, the user's request MGM commissioned a statistician to conduct a goes to a computer given an indexing capacity by systematic search, and his study showed that nearly the software and designated a supernode, or to some 90% of the files available for download on the other computer with comparable power and capacity FastTrack system were copyrighted FN5to collect temporary indexes of the files available on works. Grokster and StreamCast dispute this the computers of users connected to it. The figure, raising methodological problems and supernode (or indexing computer) searches its own arguing that free copying even of copyrighted works index and may communicate the search request to may be authorized by the rightholders. They also other supernodes. If the file is found, the supernode argue that potential noninfringing uses of their discloses its location to the computer requesting it, software are significant in kind, even if infrequent in and the requesting user can download the file practice. Some musical performers, for example, directly from the computer located. The copied file have gained new audiences by distributing *923 is placed in a designated sharing folder on the their copyrighted works for free across peer-to-peer requesting user's computer, where it is available for networks, and some distributors of unprotected other users to download in turn, along with any

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    Media L. Rep. 1865, 05 Cal. Daily Op. Serv. 5620, 05 Daily Journal D.A.R. 7666, 18 Fla. L. Weekly Fed. S 547

     (Cite as: 545 U.S. 913, 125 S.Ct. 2764)

    content have used peer-to-peer networks to download copyrighted works, and each took active disseminate files, Shakespeare being an example. steps to encourage infringement.

    Indeed, StreamCast has given Morpheus users the opportunity to download the briefs in this very case, After the notorious file-sharing service, Napster, though their popularity has not been quantified. was sued by copyright holders for facilitation of

     copyright infringement, A&M Records, Inc. v.

    FN5. By comparison, evidence introduced Napster, Inc., 114 F.Supp.2d 896 (N.D.Cal.2000),

    by the plaintiffs in A&M Records, Inc. v. aff'd in part, rev'd in part, 239 F.3d 1004 (C.A.9

    Napster, Inc., 239 F.3d 1004 (C.A.9 2001), 2001), StreamCast gave away a software program of

    showed that 87% of files available on the a kind known as OpenNap, **2773 designed as

    Napster file-sharing network were compatible with the Napster program and open to

    copyrighted, id., at 1013. Napster users for downloading files from other

    Napster and OpenNap users' computers. Evidence indicates that [i]t was always [StreamCast's] intent As for quantification, the parties' anecdotal and to use [its OpenNap network] to be able to capture statistical evidence entered thus far to show the email addresses of [its] initial target market so that content available on the FastTrack and Gnutella [it] could promote [its] StreamCast Morpheus networks does not say much about which files are interface to them, App. 861; indeed, the OpenNap actually downloaded by users, and no one can say program was engineered to leverage Napster's 50 how often the software is used to obtain copies of million user base, id., at 746. unprotected material. But MGM's evidence gives

     reason to think that the vast majority of users'

    downloads are acts of infringement, and because StreamCast monitored both the number of users well over 100 million copies of the software in downloading its OpenNap program and the number question are known to have been downloaded, and of music files they downloaded. Id., at 859, 863, 866.

    billions of files are shared across the FastTrack and It also used the resulting OpenNap network to Gnutella networks each month, the probable scope distribute copies of the Morpheus software and to of copyright infringement is staggering. encourage users to adopt it. Id., at 861, 867, 1039.

    Internal company documents indicate that StreamCast hoped to attract large numbers of former Grokster and StreamCast concede the infringement Napster users if that company was shut down by in most downloads, Brief for Respondents 10, n. 6, court order or otherwise, and that StreamCast and it is uncontested that they are aware that users planned to be the next Napster. Id., at 861. A kit employ their software primarily to download developed by StreamCast to be delivered to copyrighted files, even if the decentralized advertisers, for example, contained press articles FastTrack and Gnutella networks fail to reveal about StreamCast's potential to capture former which files are being copied, and when. From time Napster users, id., at 568-572, and it introduced to time, moreover, the companies have learned itself to some potential advertisers as a company about their users' infringement directly, as from which is similar to what Napster was,id., at 884. It users who have sent e-mail to each company with broadcast banner advertisements to users of other questions about playing copyrighted movies they Napster-compatible software, urging them to adopt had downloaded, to whom the companies have FN6its OpenNap. Id., at 586. An internal e-mail from a responded with guidance. App. 559-563, company executive stated: We have put this 808-816, 939-954. And MGM notified the network in *925 place so that when Napster pulls companies of 8 million copyrighted files that could the plug on their free service ... or if the Court orders be obtained using their software. them shut down prior to that ... we will be positioned to capture the flood of their 32 million users that will FN6. The Grokster founder contends that be actively looking for an alternative. Id., at in answering these e-mails he often did not 588-589, 861. read them fully. App. 77, 769. Thus, StreamCast developed promotional materials Grokster and StreamCast are not, however, merely to market its service as the best Napster alternative. passive recipients of information about infringing One proposed advertisement read: Napster Inc. has use. The record is replete with evidence that from announced that it will soon begin charging you a fee. the moment Grokster *924 and StreamCast began to That's if the courts don't order it shut down first. distribute their free software, each one clearly What will you do to get around it? Id., at 897. voiced the objective that recipients use it to Another proposed ad touted StreamCast's software

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     125 S.Ct. 2764 FOR EDUCATIONAL USE ONLY Page 9

    545 U.S. 913, 125 S.Ct. 2764, 162 L.Ed.2d 781, 73 USLW 4675, 2005 Copr.L.Dec. P 29,007, 75 U.S.P.Q.2d 1001, 33

    Media L. Rep. 1865, 05 Cal. Daily Op. Serv. 5620, 05 Daily Journal D.A.R. 7666, 18 Fla. L. Weekly Fed. S 547

     (Cite as: 545 U.S. 913, 125 S.Ct. 2764)

    as the # 1 alternative to Napster and asked nothing. Instead, both companies generate income [w]hen the lights went off at Napster ... where did by selling advertising space, and they stream the the users go? Id., at 836 (ellipsis in advertising to Grokster and Morpheus users while FN7original). StreamCast even planned to flaunt the they are employing the programs. As the number of illegal uses of its software; when it launched the users of each program increases, advertising OpenNap network, the chief technology officer of opportunities become worth more. Cf. App. 539, the company averred that [t]he goal is to get in 804. While there is doubtless some demand for free trouble with the law and get sued. It's the best way to Shakespeare, the evidence shows that substantive get in the new[s]. Id., at 916. volume is a function of free access to copyrighted

    work. Users seeking Top 40 songs, for example, or the latest release by Modest Mouse, are certain to be FN7. The record makes clear that far more numerous than those seeking a free StreamCast developed these promotional Decameron, and Grokster and StreamCast translated materials but not whether it released them that demand into dollars.to the public. Even if these advertisements

     were not released to the public and do not

    show encouragement to infringe, they Finally, there is no evidence that either company

    illuminate StreamCast's purposes. made an effort to filter copyrighted material from

    users' downloads or otherwise impede the sharing of copyrighted files. Although Grokster appears to The evidence that Grokster sought to capture the have sent e-mails warning users about infringing market of former Napster users is sparser but content when it received threatening notice from the revealing, for Grokster launched its own OpenNap copyright holders, it never blocked anyone from system called Swaptor and inserted digital codes continuing to use its software to share copyrighted into its Web site so that computer users using Web files. *927 Id., at 75-76. StreamCast not only search engines to look for Napster or [f]ree file rejected another company's offer of help to monitor sharing would be directed to the Grokster Web site, infringement, id., at 928-929, but blocked the where they could download the Grokster software. Internet Protocol addresses of entities it believed Id., at 992-993. And Grokster's name is an apparent were trying to engage in such monitoring on its derivative of Napster. networks, id., at 917-922. StreamCast's executives monitored the number of B songs by certain commercial artists available on

     their networks, and an internal communication

    indicates they aimed to have a larger number of After discovery, the parties on each side of the case copyrighted songs available on their networks*926 cross-moved for summary judgment. The District than other file-sharing networks.**2774 Id., at 868. Court limited its consideration to the asserted The point, of course, would be to attract users of a liability of Grokster and StreamCast for distributing mind to infringe, just as it would be with their the current versions of their software, leaving aside promotional materials developed showing whether either was liable for damages arising from

    copyrighted songs as examples of the kinds of files past versions of their software, or from other past available through Morpheus. Id., at 848. Morpheus activities. 259 F.Supp.2d 1029, 1033

    in fact allowed users to search specifically for Top (C.D.Cal.2003). The District Court held that those 40 songs, id., at 735, which were inevitably who used the Grokster and Morpheus software to copyrighted. Similarly, Grokster sent users a download copyrighted media files directly infringed newsletter promoting its ability to provide particular, MGM's copyrights, a conclusion not contested on popular copyrighted materials. Brief for Motion appeal, but the court nonetheless granted summary Picture Studio and Recording Company Petitioners judgment in favor of Grokster and StreamCast as to 7-8. any liability arising from distribution of the

    then-current versions of their software. Distributing that software gave rise to no liability in the court's In addition to this evidence of express promotion, view, because its use did not provide the distributors marketing, and intent to promote further, the with actual knowledge of specific acts of business models employed by Grokster and infringement. Case No. CV 01 08541 SVW (PJWx) StreamCast confirm that their principal object was (CD Cal., June 18, 2003), App. 1213. use of their software to download copyrighted

     works. Grokster and StreamCast receive no revenue

    from users, who obtain the software itself for The Court of Appeals affirmed. 380 F.3d 1154

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     125 S.Ct. 2764 FOR EDUCATIONAL USE ONLY Page 10

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    Media L. Rep. 1865, 05 Cal. Daily Op. Serv. 5620, 05 Daily Journal D.A.R. 7666, 18 Fla. L. Weekly Fed. S 547

     (Cite as: 545 U.S. 913, 125 S.Ct. 2764)

(C.A.9 2004). In the court's analysis, a defendant Perspective, 16 Harv. J.L. & Tech. 395 (2003).

    was liable as a contributory infringer when it had knowledge of direct infringement and materially The tension between the two values is the subject of contributed to the infringement. But the court read this case, with its claim that digital distribution of **2775Sony Corp. of America v. Universal City copyrighted material threatens copyright holders as Studios, Inc., 464 U.S. 417, 104 S.Ct. 774, 78 never before, because every copy is identical to the L.Ed.2d 574 (1984), as holding that distribution of a original, copying is easy, *929 and many people commercial product capable of substantial (especially the young) use file-sharing software to noninfringing uses could not give rise to download copyrighted works. This very breadth of contributory liability for infringement unless the the software's use may well draw the public directly distributor had actual knowledge of specific into the debate over copyright policy, Peters, Brace instances of infringement and failed to act on that Memorial Lecture: Copyright Enters the Public knowledge. The fact that the software was capable Domain, 51 J. Copyright Soc. 701, 705-717 (2004) of substantial noninfringing uses in the Ninth (address by Register of Copyrights), and the Circuit's view meant *928 that Grokster and indications are that the ease of copying songs or StreamCast were not liable, because they had no movies using software like Grokster's and Napster's such actual knowledge, owing to the decentralized is fostering disdain for copyright protection, Wu, architecture of their software. The court also held When Code Isn't Law, 89 Va. L.Rev. 679, 724-726 that Grokster and StreamCast did not materially (2003). As the case has been presented to us, these contribute to their users' infringement because it was fears are said to be offset by the different concern the users themselves who searched for, retrieved, that imposing liability, not only on infringers but on and stored the infringing files, with no involvement distributors of software based on its potential for by the defendants beyond providing the software in unlawful use, could limit further development of the first place. beneficial technologies. See, e.g., Lemley & Reese,

     Reducing Digital Copyright Infringement Without The Ninth Circuit also considered whether Grokster Restricting Innovation, 56 Stan. L.Rev. 1345, and StreamCast could be liable under a theory of 1386-1390 (2004); Brief for Innovation Scholars vicarious infringement. The court held against and Economists as Amici Curiae 15-20; Brief for

    liability because the defendants did not monitor or Emerging Technology Companies as Amici Curiae

    control the use of the software, had no agreed-upon 19-25; Brief for Intel Corporation**2776 as Amicus FN8right or current ability to supervise its use, and had Curiae 20-22.

    no independent duty to police infringement. We granted certiorari. 543 U.S. 1032, 125 S.Ct. 686, FN8. The mutual exclusivity of these 160 L.Ed.2d 518 (2004). values should not be overstated, however.

     On the one hand technological innovators,

    II including those writing file-sharing

    computer programs, may wish for effective copyright protections for their work. See, A e.g., Wu, When Code Isn't Law, 89 Va. L.Rev. 679, 750 (2003). (StreamCast itself MGM and many of the amici fault the Court of was urged by an associate to get [its] Appeals's holding for upsetting a sound balance technology written down and [its between the respective values of supporting creative intellectual property] protected. App. pursuits through copyright protection and 866.) On the other hand the widespread promoting innovation in new communication distribution of creative works through technologies by limiting the incidence of liability improved technologies may enable the for copyright infringement. The more artistic synthesis of new works or generate protection is favored, the more technological audiences for emerging artists. See Eldred innovation may be discouraged; the administration v. Ashcroft, 537 U.S. 186, 223-226, 123 of copyright law is an exercise in managing the S.Ct. 769, 154 L.Ed.2d 683 (2003) tradeoff. See Sony Corp. v. Universal City Studios, (STEVENS, J., dissenting); Van supra, at 442, 104 S.Ct. 774; see generally Houweling, Distributive Values in Ginsburg, Copyright and Control Over New Copyright, 83 Texas L.Rev. 1535, Technologies of Dissemination, 101 Colum. L.Rev. 1539-1540, 1562-1564 (2005); Brief for 1613 (2001); Lichtman & Landes, Indirect Liability Sovereign Artists et al. as Amici Curiae 11. for Copyright Infringement: An Economic

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