Dec 2 2005

Inducing copyright infringement

The Supreme Court in Grokster established an action for "inducing" copyright infringement. This changes the context of debate between "rights enforcers" and "rights restrictors" and benefits protection of property rights. But the rule raises questions about its scope and how it affects other relationships.

The Grokster site and commercial system is history. Its brief existence will be a minor historical blip. But the Supreme Court decision is a major event.

If copyright is to balance interests of copyright owners and others, it is important that law and technology not shift the balance too strongly against copyright owners. Grokster responded to this risk by establishing the tort of inducing infringement. Under this rule, a company or person can be liable indirectly even though its acts were not themselves infringing and even though it did not substantially contribute to infringement, so long as the person induced infringement by others.

The systems set out by Grokster, Napster and others were designed to use new technology to exploit a weakness in copyright law protection. That weakness, it was argued, allowed a company to make a system available for infringing conduct and promote it in that way without liability, so long as the technology or service had non-infringing uses. While that was probably never true, the Supreme Court clearly closed that door in Grokster.

What does the new tort mean?

While the copyright rule is new, the idea that you can be liable for inducing wrongful behavior has a long history in law, including in intellectual property law. It has been referenced in the Patent Act since 1952 ("Whoever actively induces infringement of a patent shall be liable as an infringer." 35 U.S.C. § 271(b)). The patent statute refers to "active" inducement, a term the Supreme Court did not use in describing the copyright law rule. While cases in patent law provide some guidance, the circumstances involving inducing patent infringement are different in many ways.

The important thing is that, while the Grokster decision arose in a very clear, mass-market setting, its implications are far broader than in the mass market. Indeed, Grokster involved a licensing system. Everyone dealing with intellectual property needs to understand the implications of this decision.

Let's talk some basics.

First, as with any type of indirect infringement (e.g., being held liable for what someone else does), there needs to be direct infringement. You can't be held liable for inducing wrongdoing when no wrongdoing occurred. But the induced target does not have to be a specific person. Selling, licensing, or giving away a product with intent to induce an infringement which then occurs is infringement by the distributor. This is true even if most customers or licensees do not infringe.

Second, the inducement must have some connection to infringement that occurs. Saying at a cocktail party that everyone should copy Microsoft Word is not inducement unless the comments, in context, lead to actual infringement. There must be inducement, not a mere desire to induce.

Third, inducement is different from substantially contributing to infringement. The two overlap, but are different. The difference lies in intent, the words and the motivations involved. For inducement, it is not necessary that the inducer substantially contribute to enabling the infringement. For inducement, you must intend to induce the conduct that constitutes infringement and the infringement must in some way be said to occur because of your acts. The patent law cases are unclear on whether you must know that the acts infringe a patent, as compared to knowing what acts are being induced, but that difference will seldom be relevant in copyright contexts.

Compare inducement to its cousins - other forms of indirect liability in copyright law:

*Inducement liability: acts or words that manifest an intent to induce others to conduct that infringes when at least some of those others actually infringe in part because of the acts or words.
*Contributory infringement: acts that substantially contribute to an infringement by others where the actor knows or has reason to know that infringement is occurring, the infringement(s) in fact occurs, and the person does not act to stop its contribution.
*Vicarious liability: obtaining a direct or indirect financial benefit from acts of infringement by others where you have the right and ability to control that conduct.

It is likely that conduct that constitutes contributory infringement or vicarious liability often constitutes "inducement." But there are acts that constitute inducement and meet neither of the other two causes of action. That is, you can infringe by inducement even if 1) you lack the control and financial incentive for vicarious liability, and 2) you did not substantially contribute to infringement with knowledge that it was happening.

What does this mean? It means that the infringing conduct involves intent, rather than control or impact. The Supreme Court explained that there was no social purpose served by acts or expressions aimed at causing infringement, nor is there a social harm involved by holding the actor liable for infringements reasonably attributed to or caused by its inducement. In other words, like other protected social and property interests, copyright merits protection against acts that cause and enable others to take actions to harm the legally protected interest.

Simple enough. But it is on the issue of intent that the rubber meets the road. Inducement is intent-based liability. Proving intent is the key. This will often (not always) be a question of fact. Intent can be proven by circumstantial evidence (e.g., something other than you standing up and shouting it to the mountains). Here are a few guidelines:

*Distributing a product that has both infringing and non-infringing uses: Results in inducement liability or not depending on how the product is marketed. Marketing will be viewed in context, rather than simply in terms of what is directly said. Distributing a "copy" program without more is not inducement.
*Licensing a technology: Inducement liability hinges on the nature of the license and the authority of the licensor. Some licenses do not grant a "right" to do specific acts, but merely a promise that, if you do those acts, I will not sue for infringing my rights. Whether or not your acts infringe others' rights is not pertinent.
*Indemnity clause in a transfer: Is not in itself proof of intent to induce, but might be so in context where the goal of the transferor is to cause the infringing acts to occur.
*Distributing a technology that allows the user to circumvent copy protection technology: This is now at risk under copyright law. It has always been at risk under DMCA and the federal Communications Act.

This new law requires reconsideration of licensing, advertising and other business practices.

Written By:Matt On December 6, 2005 6:50 PM

Professor Nimmer writes: "Grokster responded to this risk by establishing the tort of inducing infringement. Under this rule, a company or person can be liable indirectly even though its acts were not themselves infringing and even though it did not substantially contribute to infringement, so long as the person induced infringement by others." Grokster created, I think, a new inducement theory of secondary copyright infringement liability within the Copyright Act's "statutory walls", if you will. The Court added to existing secondary claims for contributory infringement and vicarious liability. But context was everything. Sony still holds sway, but the unanimous Court seemed to feel a Sony analysis wasn't up to the task. The Court was concerned both about the "staggering" scope of infringement here and the growing disdain for copyright in such business models. It remains to be seen how available this new theory of secondary liability will be in run of the mill copyright disputes.

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