1. Class 18 Copyright, Autumn, 2016 Third-Party Liability
9/20/2018
Class 18 Copyright, Autumn, Third-Party Liability
Randal C. Picker
James Parker Hall Distinguished Service Professor of Law
Ludwig & Hilde Wolfe Teaching Scholar
The Law School
The University of Chicago

2. Third Party Liability Relevant Law
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Third Party Liability Relevant Law
Two Step Process
Establish primary liability
Establish secondary liability of third party
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3. Third Party Liability Relevant Law
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Third Party Liability Relevant Law
Copyright Act does not explicitly render anyone liable for infringements committed by another
Contrast to Patent Act, which does
Common Law in the Copyright Context
September 20, 2018

4. Evaluating Different Uses
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Evaluating Different Uses
Time Shifting
Private home copying: watch and re-record
Librarying
Private home copying for repeated viewing
Copying Business
Copy off the air and rent/sell tapes for home consumption
September 20, 2018

5. Consent to Use How should we evaluate consent to use in this case?
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Consent to Use
How should we evaluate consent to use in this case?
Mr. Rogers: “You are an important person just the way you are. You can make healthy decisions.”
September 20, 2018

6. Evaluating Fair Use Doing the four factors:
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Evaluating Fair Use
Doing the four factors:
1. The purpose and character, including whether the use is commercial
2. Nature of the copyrighted work
3. Amount of the work used in relation to the copyrighted work as a whole
4. The effect on the potential market for or value of the copyrighted work
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7. Evaluating Fair Use Across the Three Cases
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Evaluating Fair Use
Across the Three Cases
Factors 2 and 3 will be unchanging
1 and 4 may change from case to case
Understanding Commercial Use
An effort to make money vs. a transaction that substitutes for a commercial transaction
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8. Evaluating Fair Use The Potential Market Value of the Copyrighted Work
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Evaluating Fair Use
The Potential Market Value of the Copyrighted Work
The Broadcast TV Market
Fast-forwarding over commercials?
Repeats and syndication after first broadcast
The Video Rental and Sales Market
Doesn’t copying substitute directly for this market?
September 20, 2018

9. Allocating Liability The Role of Third-Party Liability
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Allocating Liability
The Role of Third-Party Liability
When should we add third-party liability to first-party liability?
Does that depend on how we enforce first-party liability?
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10. Two Theories Vicarious Liability
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Two Theories
Vicarious Liability
When one party has control over another and also enjoys a direct financial benefit from infringement
No knowledge required.
Flea market (control: kick them out; benefit: patronage)
September 20, 2018

11. Contributory Copyright Infringement
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Contributory Copyright Infringement
Statement of Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir. 1971):
“[O]ne who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a ‘contributory’ infringer.”
September 20, 2018

12. 9/20/2018
35 USC 271
(a)
Except as otherwise provided in this title, whoever without authority makes, uses or sells any patented invention, within the United States during the term of the patent therefor, infringes the patent.
September 20, 2018

13. 9/20/2018
35 USC 271
(b)
Whoever actively induces infringement of a patent shall be liable as an infringer.
September 20, 2018

14. 35 USC 271 (revised since Sony)
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35 USC 271 (revised since Sony)
(c)
Whoever sells a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.
September 20, 2018

15. The Sony Test Says the Court
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The Sony Test
Says the Court
“Accordingly, the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses.”
September 20, 2018

16. 9/20/2018
In Sony: Two Key Issues
Third party liability, either vicarious or contributory
Premised on underlying violation by consumers
No underlying violation, as consumers engaged in fair use
September 20, 2018

17. Design Incentives Hypo
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Design Incentives
Hypo
Suppose Sony could have spent $10 to eliminate all infringing uses of the VCR
Under Sony, would it have an incentive to do so?
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18. The Design of the VCR Consider the design choices for the VCR:
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The Design of the VCR
Consider the design choices for the VCR:
Recorder rather than just pre-recorded tape player
Fast forward button
No capability for recognizing “jamming” signals to prevent recording
Should Sony have been liable for these design choices?
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19. Design Incentives Hypo How would we revise Sony to address this?
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Design Incentives
Hypo
Suppose product generates $10 million in beneficial noninfringing uses and $1000 in infringing uses
Suppose producer could spend $5 to eliminate $1000 in infringing uses
How would we revise Sony to address this?
September 20, 2018

20. 9/20/2018
Use and Design
Weak Relationship between Use-Based Tests and Design Incentives
Sony: Substantial noninfringing uses
So long as you have those, extent of infringing uses irrelevant
No incentive to redesign to eliminate infringing uses
September 20, 2018

21. Use and Design Primary Use Test
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Use and Design
Primary Use Test
Suppose no third-party copyright liability so long as primary use of product is noninfringing
What incentives for design to eliminate infringing uses?
Only at margin
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22. Use and Design Bottom Line? Address design duties separately from use
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Use and Design
Bottom Line?
Address design duties separately from use
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23. Limits of the Decision Justice Blackmun’s Second Footnote
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Limits of the Decision
Justice Blackmun’s Second Footnote
“This case involves on the home recording for home use of televisions broadcast free over the airwaves. No issue is raised concerning cable or pay television, or the sharing or trading of tapes.”
What turns on the fact the broadcasts are free?
September 20, 2018

24. Implementing Consent Should we implement a consent regime
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Implementing Consent
Should we implement a consent regime
for copying?
for redistribution?
Blackmun Again
“Sony may be able, for example, to build a VTR that enables broadcasters to scramble the signal of individual programs and ‘jam’ the unauthorized recording of them”
September 20, 2018

25. Copyright © 2005-07 Randal C. Picker
9/20/2018
Old-School Copying
Facts
A buys CD
A plays it and uses a cassette tape recorder, over the air, to copy it on a cassette to listen in his car.
What result for A? Copyright infringement? Fair use? Something else?
September 20, 2018
Copyright © Randal C. Picker

26. New-School Copying, Circa 1987
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New-School Copying, Circa 1987
Facts
A buys CD
A establishes a direction digital connection between CD player and digital audio tape recorder and makes a copy
What result for A?
September 20, 2018
Copyright © Randal C. Picker

27. Copyright © 2005 Randal C. Picker
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Screen Capture Slide
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Copyright © 2005 Randal C. Picker

28. 9/20/2018
17 USC 1008: “No action may be brought under this title alleging infringement of copyright based on the manufacture, importation, or distribution of a digital audio recording device, a digital audio recording medium, an analog recording device, or an analog recording medium, or based on the noncommercial use by a consumer of such a device or medium for making digital musical recordings or analog musical recordings.”
September 20, 2018
Audio Home Recording Act of 1992

29. Copyright © 2005-07 Randal C. Picker
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Copying under the AHRA
Three Types
Analog Recording
The old school original
AHRA Digital Recording
Recording that tracks the definitions set out in 1001
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Copyright © Randal C. Picker

30. Copyright © 2005-07 Randal C. Picker
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Copying under the AHRA
Non-AHRA Digital Recording
All of the other digital recording
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Copyright © Randal C. Picker

31. Copyright © 2005-07 Randal C. Picker
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Protection under 1008
For consumers engaging in noncommercial use
Of analog recording
Of AHRA Digital Recording
But
No protection for Non-AHRA Digital Recording
September 20, 2018
Copyright © Randal C. Picker

32. Diamond sells the Rio, an early MP3-player
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Diamond sells the Rio, an early MP3-player
The RIAA challenges the Rio as violating the Audio Home Recording Act of 1992, which requires certain recording devices to include SCMS, the Serial Copy Management System. The Rio doesn’t include SCMS.
The Act imposes a royalty system on targeted devices and copying media.
September 20, 2018
RIAA v. Diamond, 180 F.3d 1072 (9th Cir. 1999)

33. 9/20/2018
Diamond wins: “Under the plain meaning of the Act’s definition of digital audio recording devices, computers (and their hard drives) are not digital audio recording devices because their ‘primary purpose’ is not to make digital audio copied recordings.”
September 20, 2018
RIAA v. Diamond, 180 F.3d 1072 (9th Cir. 1999)

34. 9/20/2018
“In fact, the Rio’s operation is entirely consistent with the Act’s main purpose—the facilitation of personal use. As the Senate Report explains, “[t]he purpose of [the Act] is to ensure the right of consumers to make analog or digital audio recordings of copyrighted music for their private, noncommercial use.” S. Rep , at *86 (emphasis added).”
September 20, 2018
RIAA v. Diamond, 180 F.3d 1072 (9th Cir. 1999)

35. 9/20/2018
“The Act does so through its home taping exemption, see 17 U.S.C. § 1008, which “protects all noncommercial copying by consumers of digital and analog musical recordings,” H.R. Rep (I).”
September 20, 2018
RIAA v. Diamond, 180 F.3d 1072 (9th Cir. 1999)

36. 9/20/2018
“The Rio merely makes copies in order to render portable, or ‘space-shift,’ those files that already reside on a user’s hard drive. Cf Sony Corp. of America v. Universal City Studios, 464 U.S. 417 (1984) (holding that ‘time-shifting’ of copyrighted television shows with VCR’s constitutes fair use under the Copyright Act, and thus is not an infringement). Such copying is paradigmatic noncommercial personal use entirely consistent with the purposes of the Act.”
September 20, 2018
RIAA v. Diamond, 180 F.3d 1072 (9th Cir. 1999)

37. 9/20/2018
“For the foregoing reasons, the Rio is not a digital audio recording device subject to the restrictions of the Audio Home Recording Act of The district court properly denied the motion for a preliminary injunction against the Rio's manufacture and distribution.”
September 20, 2018
RIAA v. Diamond, 180 F.3d 1072 (9th Cir. 1999)

38. 9/20/2018
Source:
September 20, 2018

39. 9/20/2018
“Napster contends that MP3 file exchange is the type of ‘noncommercial use’ protected from infringement actions by [Section 1008]. Napster asserts it cannot be secondarily liable for users’ nonactionable exchange of copyrighted musical recordings. … We agree with the district court that the Audio Home Recording Act does not cover the downloading of MP3 files to computer hard drives.”
September 20, 2018
A&M Records v Napster, 239 F.3d 1004 (9th Cir. 2001)

40. 9/20/2018
“We conclude that the district court did not err when it refused to apply the ‘shifting’ analyses of Sony and Diamond. Both Diamond and Sony are inapposite because the methods of shifting in these cases did not also simultaneously involve distribution of the copyrighted material to the general public; the time or space-shifting of copyrighted material exposed the material only to the original user.”
September 20, 2018
A&M Records v Napster, 239 F.3d 1004 (9th Cir. 2001)

41. 9/20/2018
“In Diamond, for example, the copyrighted music was transferred from the user’s computer hard drive to the user’s portable MP3 player. So too Sony, where ‘the majority of VCR purchasers did not distribute taped television broadcasts, but merely enjoyed them at home.”
September 20, 2018
A&M Records v Napster, 239 F.3d 1004 (9th Cir. 2001)

42. 9/20/2018
“We find no error in the district court’s determination that plaintiffs will likely succeed in establishing that Napster users do not have a fair use defense.”
September 20, 2018
A&M Records v Napster, 239 F.3d 1004 (9th Cir. 2001)

43. 9/20/2018
“The record supports the district court’s finding that Napster has actual knowledge that specific infringing material is available using its system, that it could block access to the system by suppliers of the infringing material, and that it failed to remove the material.”
September 20, 2018
A&M Records v Napster, 239 F.3d 1004 (9th Cir. 2001)

44. 9/20/2018
“Here, plaintiffs have demonstrated that Napster retains the right to control access to its system. Napster has an express reservation of rights policy … . To escape imposition of vicarious liability, the reserved right to police must be exercised to its fullest extent. Turning a blind eye to detectable acts of infringement for the sake of profit gives rise to liability. …”
September 20, 2018
A&M Records v Napster, 239 F.3d 1004 (9th Cir. 2001)

45. 9/20/2018
“The district court correctly determined that Napster had the right and ability to police its system and failed to exercise that right to prevent the exchange of copyrighted material.”
September 20, 2018
A&M Records v Napster, 239 F.3d 1004 (9th Cir. 2001)

46. 9/20/2018
“Even when there are noninfringing uses of an Internet file-sharing service, moreover, if the infringing uses are substantial then to avoid liability as a contributory infringer the provider of the service must show that it would have been disproportionately costly for him to eliminate or at least reduce substantially the infringing uses.”
September 20, 2018
In re Aimster Copyright Litigation, 334 F.3d 643 (7th Cir. 2003)

47. 9/20/2018
“This appeal presents the question of whether distributors of peer-to-peer file-sharing computer networking software may be held contributorily or vicariously liable for copyright infringements by users. Under the circumstances presented by this case, we conclude that the defendants are not liable for contributory and vicarious copyright infringement and affirm the district court's partial grant of summary judgment.”
September 20, 2018
MGM v Grokster, 380 F.3d 1154 (9th Cir. 2004)

48. Grokster in the Sup Ct Two Cuts
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Grokster in the Sup Ct
Two Cuts
Grokster loses 9-0 on an inducement theory
We get a decision on Sony
Souter, Thomas & Scalia: 9th Cir wrong on Sony and no more
Ginsberg, The Chief Justice & Kennedy: Liable under Sony
Breyer, Stevens & O’Connor: Not liable under Sony
September 20, 2018

49. Grokster Key Questions How does Grokster relate to Sony?
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Grokster
Key Questions
How does Grokster relate to Sony?
What does it take to avoid liability under Grokster?
September 20, 2018

50. Three Pieces of Evidence
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Three Pieces of Evidence
1. Satisfying known demand for copyright infringement
Trying to get Napster users
2. Business model driven by advertising
Turns on infringing high-volume use
September 20, 2018

51. Three Pieces of Evidence
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Three Pieces of Evidence
3. Didn’t try to filter out infringing uses
“Underscores … intentional facilitation of their users’ infringement”
September 20, 2018

52. Three Pieces of Evidence
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Three Pieces of Evidence
But See Footnote 12
“Of course, in the absence of other evidence of intent, a court would be unable to find contributory infringement liability merely based on a failure to take affirmative steps to prevent infringement, if the device otherwise was capable of substantial noninfringing uses. Such a holding would tread too close to the Sony safe harbor.”
September 20, 2018