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As the Supreme Court mulls the fate of file-swapping networks, justices are studying a rarely used element of copyright law that sparked bitter controversy when raised in Congress last year.
Last week, the nation’s top court heard arguments from the entertainment industry and file-swapping software companies in a landmark review of the legal status of peer-to-peer networks. In the course of that hearing, several of the justices appeared interested in finding a middle ground that would focus on companies that actively encouraged, or “induced,” copyright infringement.
A similar idea was at the core of last year’s debate over the “Induce Act,” a U.S. Senate bill sponsored by the record labels and staunchly opposed by much of the technology world. Applying this concept to file-swapping companies would be an unusual twist in copyright law, but the idea has been backed by some influential groups, including the Institute of Electrical and Electronics Engineers, or IEEE.
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As the Supreme Court ponders the fate of peer-to-peer networks, justices appear interested in finding a middle ground that would focus on companies that actively encouraged copyright infringement.
Bottom line: 
Applying this concept to file-swapping companies would be an unusual twist in copyright law, and would mean another long round of litigation for Grokster and StreamCast.
“It would allow the legal test to focus on your own behavior, over which you have complete control, rather than on the action of third parties,” said Annette Hurst, a San Francisco copyright attorney who has been following the Grokster case.
The Grokster case remains one of the most closely watched technology court cases in recent history, with the entertainment and technology industries each contending that an unfavorable outcome could devastate their ability to operate.
The Supreme Court is reviewing two separate lower court decisions that said file-swapping software companies Grokster and StreamCast Networks should not be held legally responsible for the copyright infringement that takes place on their networks.
The hearings last week allayed some fears on both sides. The judges appeared unwilling to let new peer-to-peer companies use “unlawful expropriation of property as a kind of start-up capital,” as Justice Anthony Kennedy said. Entertainment companies said that showed the court had little sympathy for file-swapping software companies.
But justices were clearly sensitive to the computer industry’s concerns that technology itself could trigger lawsuits, even when companies develop products with legal uses in mind. That fear appeared to lead several to seek a middle ground focusing on companies’ behavior, rather than the technology itself.
“Given that there are conceptually excellent uses of this technology…does actual inducement take care of (the problem)?” Justice Stephen Breyer asked the government’s attorney, who was arguing on behalf of the entertainment companies.
Middle ground or lawsuit heaven?
The inducement idea hinted at by the court could open new vistas in copyright law, drawing a line for acceptable behavior in the
technology world which has remained ambiguous for years.
In patent law, inducement happens when a company produces a product and then provides instructions on how to use it in a way that violates another company’s patent, or advertises it in a way that encourages infringement. That could happen with an add-on component that isn’t itself illegal, but that isn’t allowed to be used with another patented product, for example.
Courts haven’t used similar reasoning as the foundation for settling a major copyright case for decades, attorneys say. But some groups, including the IEEE, which filed an independent brief with the Supreme Court pointing to the issue, say it’s the best way to balance modern technology and copyright.
The trick is to figure out exactly what “inducement” might mean.
“That’s my big worry, that the court wants to recognize some inducement claim, then we face another 15 years of litigation to figure out what that means.”
–Fred von Lohmann, attorney, Electronic Frontier Foundation
Last year, the Recording Industry Association of America was the primary supporter of Sen. Orrin Hatch’s Induce Act, which purported to focus on companies’ behavior in this way, rather than on the technology itself.
But critics across the technology industry worried that the language of that bill was too broad, and could even trigger lawsuits against the producers of MP3 players like Apple Computer’s iPod. Similarly, any effort by the Supreme Court to focus legal liability on active encouragement could open up a Pandora’s box of definitions and subsequent lawsuits, some say.
“That’s my big worry, that the court wants to recognize some inducement claim, then we face another 15 years of litigation to figure out what that means,” said Electronic Frontier Foundation attorney Fred von Lohmann, who represents StreamCast Networks.
If the court does decide to focus on the issue of inducement, it almost certainly will mean another long round of litigation for Grokster and StreamCast Networks. The current hearings have focused only on a summary judgment ruling in the entertainment companies’ case, which has not yet gone to a full trial.
Early briefs from Hollywood studios and record labels cited e-mails from the file-swapping companies that allegedly showed Grokster and StreamCast Networks wanted to “surpass” Napster.
It’s impossible to tell exactly where the Supreme Court justices are heading with their decision, and their questioning on the issue last week may provide only false clues. In the meantime, file-swapping fans are still doing their best to help persuade the court that peer-to-peer networks can have legal uses.
Bloggers, asserting that court clerks are testing out the Grokster technology, are encouraging readers to download Grokster and use it to provide files that are legal to trade. Experts say that’s likely to have little effect on the court’s ruling–even if a clerk did happen to stumble on one of the legitimate files–because justices are primarily focused on the facts already established in the record of the case.
The court is expected to rule in mid-June.
