The Ninth Circuit's Grokster decision come down just before our Aspen conference, holding that two of the file-sharing networks could not be liable for allegedly contributing to infringement by their users based on their "current activities." I last addressed this issue in a paper in early March, in which I argued that the Ninth Circuit should reverse Judge Wilson's decision. Now that the Aspen haze has lifted, I thought I would offer a couple comments, although I confess I have not had time to keep up on this issue since that time. Fortunately, since the Ninth Circuit largely adopts what it characterizes as Wilson's "well reasoned analysis," my arguments as to why Wilson was wrong apply (or don't apply) with essentially equal force to the Court of Appeals decision.

I believe that the Grokster decision is wrong, and that its failure to impose liability on such P2P systems could have devastating effects on efforts to develop legitimate markets for online content. Hopefully, the importance of this decision will lead the Supreme Court to grant cert and decide for itself whether these systems should be subject to contributory infringement liability (and in the process enlighten us on the standard it adopted twenty years ago in Sony).

Moreover, my paper discusses, there are clear contrasts between the analyses of the Ninth Circuit and District Court in Grokster and the approach of Judge Posner's Aimster opinion, making cert even more likely. Based on my quick reading of the Ninth Circuit decision, three conflicts are worth noting:

Applying the Sony standard The Grokster court held that the mere existence of any non-infringing use triggers the need for plaintiffs to establish actual knowledge under Sony. Posner held that where there are infringing and non-infringing uses, a "balancing of the costs and benefits is necessary."

Relevance of willful blindness Judge Posner held that Aimster could not avoid liability as a contributory infringer on the theory that its encryption software prevented it from having specific information, declaring that "[w]illful blindness is knowledge, in copyright law." The Grokster court rejected the notion that there is a "separate 'blind eye' theory of liability" under vicarious infringement, but does not explain why this does not provide sufficient evidence of knowledge to justify liability for contributory infringement.

Facilitating infringement through product features Judge Posner held that even if there are substantial non-infringing uses, an alleged contributory infringer must show that "it would have been disproportionately costly" to prevent infringement. He cites Aimster's encryption feature. The Grokster court failed to consider this in evaluating whether the systems' design and distribution of software materially contributed to infringement.

As to my overall view of the policy issues, let me make just a few points.

First, P2P technologies offer potential benefits in a variety of contexts, and the technology should not itself be attacked. But these file-sharing businesses are designed primarily to promote infringement on a massive scale, know that this is their dominant use, and arguably have chosen not to incorporate features that could have reduced infringement. File-sharing systems can provide some advantages in free distribution over, say, central servers. But they have an overwhelming disadvantage for commercial distribution. As currently run, these file-sharing systems are designed to enable users to avoid payment. By spawning a huge black market, they undermine the development of legitimate markets for digital content.

Second, contributory infringement is specifically designed to enable copyright holders to efficiently enforce their rights against a relatively small number of facilitators in situations where large numbers makes enforcement actions against direct infringers inefficient or impractical. It's hard to imagine a more striking example than this case - a handful of file-sharing networks service millions and millions of infringing users. Direct infringement actions are necessary to establish key principles and educate users, but are ultimately a "teaspoon solution to an ocean problem" of enforcement.

Moreover, relying on actions against direct infringers raises special concerns here. Many file-sharers contend that they had no idea that they are doing anything wrong. While I am skeptical, it is true that they incur liability simply by using these systems as intended. Many users, especially minors, may naturally think that if file-sharing software is legally available, using it for its intended function must be legal. Thus these systems not only facilitate the efforts of those seeking engage in infringement, they may induce unsuspecting kids to engage in illegal infringement and risk incurring legal sanctions.

Third, as my paper emphasizes, protecting innovation is important. Reasonable people can disagree regarding how best to limit liability for contributory infringement and design appropriate remedies. I believe that a proper balancing of the factors identified in my paper and by Judge Posner would lead to liability for Grokster et al without threatening innovation. In this regard, let me commend to you Solveig Singleton's thoughtful contribution in this space this past Wednesday.

These issues deserve more attention than I can give them now, but I hope to have more time in the future.