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This year we celebrate the 20th anniversary of Sony Corporation of America v. Universal City Studios Inc., a Supreme Court decision that is the Magna Carta for consumers and producers of innovative electronics. Motion picture studios had tried to hold the makers of videocassette recorders responsible for any copyright infringement engaged in by VCR users. But a 5-4 Court found that Sony was not liable as a contributory infringer. Now the consumers’ Magna Carta could be on the verge of elimination. The issues the Court addressed in 1984 are still debated today, and some critics still have problems with the Sony case — that is, with the Court’s refusal to find the manufacturers liable because VCRs, like other “copying equipment,” are “capable of substantial non-infringing uses.” Yet our electronics and information technology industries have rejoiced in the Sony doctrine. The most popular digital devices of the past two decades — personal computers, CD burners, TiVo, etc. — would not have been possible without it. When the maker of the trailblazing Diamond Rio MP3 player was sued by the recording industry, claiming that it should be liable for copyright infringement by MP3 users, Sony prevailed. As a direct result, we have the wild success of the iPod. SPURRED BY GROKSTER The latest test of the Sony doctrine involves what could arguably be the most disruptive digital technology of this generation — peer-to-peer (P2P) file sharing over the Internet. P2P technology allows a group of computer users to share text, audio, and video files stored on each other’s computers. In MGM Studios Inc. v. Grokster Ltd., the motion picture and recording industries sought to have copyright liability attach to the creators and distributors of commercial P2P software like Morpheus and KaZaA. Affirming the lower court’s holding that no liability attached, the U.S. Court of Appeals for the 9th Circuit on Aug. 19 relied on Sony, finding that P2P networks have substantial noninfringing uses. Unhappy both with Grokster and Sony, the content industries ran to Capitol Hill, which quickly obliged. In June, Sens. Orrin Hatch (R-Utah), Patrick Leahy (D-Vt.), Bill Frist (R-Tenn.), and Tom Daschle (D-S.D.) introduced S. 2560, the Inducing Infringements of Copyrights Act. The Induce Act, as it is commonly known, would make anyone liable for copyright infringement who “intentionally aids, abets, induces, or procures” such infringement. The bill defined “intent to induce infringement” as that which a “reasonable person would find . . . based upon all relevant information about such acts then reasonably available to the actor.” The bill’s powerful sponsors made clear their intention that this bill was meant to hit only bad actors, as Hatch said, “without unduly burdening companies that engage in lawful commerce in the wide range of devices and programs that can copy digital files.” But the consumer electronics and high tech industries (including their venture capitalists) and consumer advocates saw it as an end run around the Sony doctrine. Under the intent standard, anyone would be liable who, among other things, manufactures, finances, or even writes about a technology capable of infringing uses, even if that technology is also capable of substantial noninfringing uses. The Electronic Frontier Foundation constructed a brilliant mock complaint against Apple for making the iPod, claiming that under the Induce Act a “reasonable person” would have known that the iPod’s huge storage capacity and ability to store MP3 files, along with Apple’s “Rip, Mix and Burn” campaign, would “induce” consumers to illegally download songs. The fear among tech companies and consumer groups was plain: The Induce Act would give the content industries a sure-fire way to chill innovation. Nobody would want to invest money in or build a copying technology, no matter how legitimate, because under the Induce Act, the maker of such technology could not win a motion for summary judgment. And no businessperson wants to be the next Sony, which bet its entire company on the litigation bearing its name and survived only by the margin of a single Supreme Court justice. The July 22 Senate hearing on the Induce Act was remarkable in that, despite the sponsorship of the chairman and ranking member of the Senate Judiciary Committee and the Senate majority and minority leaders, four of the five industry witnesses opposed the bill. But the testimony of a sixth witness, Register of Copyrights Marybeth Peters, packed a very powerful punch in the opposite direction. Peters not only voiced her support for the bill, but also urged Congress to revisit and perhaps undo the Sony doctrine. AN EFFORT TO LISTEN The hearing, extensive press coverage, and editorials by both The Wall Street Journal and The New York Times criticizing the bill meant that the Induce Act, as introduced, would not survive. Hatch and Leahy called upon the Copyright Office to draft a new version, working with affected stakeholders from across industry and within the public interest community. Despite the efforts of the Copyright Office and Senate staff to reconcile the concerns of all stakeholders, drafting a new bill has proven very difficult. After two subsequent versions received criticism from all sides, a fourth version was released on Sept. 27. Unfortunately, this latest draft still suffers from the same fundamental deficiencies as the first bill, because it would (1) punish far more than just the bad actors that its drafters claim to want to reach; (2) fail to prevent a torrent of frivolous suits that would chill innovation; and (3) undermine the essence of the Sony decision. In some ways, the new version is more troublesome: While it appears to take into account the concerns of tech companies and consumer groups by including a number of exceptions to the inducement cause of action (e.g., for investing venture capital, advertising, providing information), they do nothing more than put lipstick on the pig. The exceptions apply only when the inducement is not caused “merely” by one of the listed activities. Any smart plaintiffs lawyer could craft a complaint to show that a party was doing more than “merely” engaging in those activities. What will ultimately result from this months-long effort is anyone’s guess. If nothing else, it has demonstrated how difficult it is to find a middle ground among stakeholders with very different views over who should ultimately control technological design. The content industries would like to have a say in that design — or, failing that, to give some power to government officials, whom they can influence. To the tech industry and many consumer groups, that notion is anathema. ‘ALWAYS DISRUPTIVE’ History often gets lost in debates over proposed copyright laws like the Induce Act. The motion picture industry may have lost the Sony case, but it won a lot more. The industry now derives more than 40 percent of its revenues from sales of home videos and DVDs, and overall revenues are bigger than ever. That suggests that in the current debate, the content industries might be wise to heed the words of the 9th Circuit in the Grokster case: “The introduction of new technology is always disruptive to old markets, and particularly to those copyright owners whose works are sold through well-established distribution mechanisms. Yet, history has shown that time and market forces often provide equilibrium in balancing interests, whether the new technology be a player piano, a copier, a tape recorder, a video recorder, a personal computer, a karaoke machine, or an MP3 player. Thus, it is prudent for courts to exercise caution before reconstructing liability theories for the purpose of addressing specific market abuses, despite their apparent present magnitude.” In short, the court warned the content industries that where new technologies are concerned, be careful what you ask for. Gigi B. Sohn ([email protected]) is the president of Public Knowledge, a D.C.-based nonprofit organization that addresses the public’s stake in IP law and technology policy, and the principal coordinator of an ad hoc coalition working to change or defeat the Induce Act.

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