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Liability for Heinous Behavior

Posted By Barry Ritholtz On June 28, 2005 @ 9:29 am In Music | Comments Disabled

Lefsetz observes that "Conventional wisdom is the content companies won, P2P lost. The Grokster decision was heralded as a great day in the fight against file-trading and the establishment of legitimate online services.

The only problem is this is not what Justice Souter’s opinion said.

Justice Souter questioned whether file-trading was even hurting the labels. He restated the essence of Sony Betamax. The judgment didn’t turn on broad intellectual property issues, rather the decision took the form of castigation and liability for heinous behavior."

Below please find from Souter’s decision the actual behavior of Grokster and Streamcast:

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MGM v. Grokster decision [1] (pdf)

"The record is replete with evidence that from the moment  Grokster and StreamCast began to distribute their free  software, each one clearly voiced the objective that recipients use it to download copyrighted works, and each took active steps to encourage infringement.

After the notorious file-sharing service, Napster, was sued by copyright holders for facilitation of copyright infringement, A & M Records, Inc. v. Napster, Inc., StreamCast gave away a  software program of a kind known as OpenNap, designed  as compatible with the Napster program and open to Napster users for downloading files from other Napster and OpenNap users’ computers.  Evidence
indicates that "[i]t was always [StreamCast's] intent to use [its OpenNap  network] to be able to capture email addresses of [its] initial target market so that [it] could promote [its] StreamCast Morpheus interface to them"; indeed, the OpenNap program was engineered to leverage Napster’s 50 million user base.

StreamCast monitored both the number of users downloading its OpenNap program and the number of music files they downloaded.  It also used the resulting OpenNap network to distribute copies of the Morpheus software and to encourage users to adopt it.  Internal company documents indicate that StreamCast hoped to attract large numbers of former Napster users if that company was shut down by court order or otherwise, and that StreamCast planned to be the next Napster.  A kit developed by StreamCast to be delivered to advertisers, for example, contained press articles about StreamCast’s potential to capture former Napster users, and it introduced itself to some potential advertisers as a company which is similar to what Napster was.  It broadcast banner advertisements to users of other Napster-compatible software, urging them to adopt its OpenNap. An internal e-mail from a company executive stated: "We have put this network in place so that when Napster pulls the plug on their free service . . . or if the Court orders them shut down prior to that . . . we will be positioned to capture the flood of their 32 million users that will be actively looking for an alternative."

Thus, StreamCast developed promotional materials to market its service as the  best Napster alternative.  One proposed advertisement read: "Napster Inc. has announced that it will soon begin charging you a fee.  That’s if the courts donĂ­t order it shut down first.  What will you do to get around it?" Another proposed ad touted StreamCast’s software as the ‘"#1 alternative to Napster" and asked "[w]hen the lights went off at Napster . . . where did the users go?" StreamCast even planned to flaunt the illegal uses of its software; when it  launched the OpenNap network, the chief technology officer of the company averred that "[t]he goal is to get in trouble with the law and get sued.  It’s the best way to get in the new[s]."

The evidence that Grokster sought to capture the market of former Napster users is sparser but revealing, for Grokster launched its own OpenNap system called Swaptor and inserted digital codes into its Web site so that computer users  using Web search engines to look for "Napster" or "[f]ree filesharing" would be directed to the Grokster Web site, where they could download the Grokster software. And Grokster’s name is an apparent derivative of Napster.

The record makes clear that StreamCast developed these promotional materials  but not whether it released them to the public.  Even if these advertisements  were not released to the public and do not show encouragement to infringe, they illuminate StreamCastĂ­s purposes.

StreamCast’s executives monitored the number of songs by certain commercial  artists available on their networks, and an internal communication indicates  they aimed to have a larger number of copyrighted songs available on their networks than other file-sharing networks.  The point, of course, would be to attract users of a mind to infringe, just as it would be with their promotional materials developed showing copyrighted songs as  examples of the kinds of files  available through Morpheus.  Morpheus in fact allowed users to search specifically for "Top 40" songs, which were inevitably copyrighted.  Similarly, Grokster sent users a newsletter promoting its ability to provide particular, popular copyrighted materials.


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[1] MGM v. Grokster decision: http://www.eff.org/IP/P2P/MGM_v_Grokster/04-480.pdf

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