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Technological changes have called into question the viability of the U.S. Supreme Court’s jurisprudence regarding copyright infringement. Legislation may be the only way to strike a balance between protecting the expression of ideas so creativity can flourish and permitting market forces to drive technological innovation. Modern technology has been especially challenging for content owners and potential copyright infringers who are indirect or secondary suppliers of the mechanism that enables the infringement. Prior to Sony Corp. of America v. Universal City Studios Inc (1984) — commonly known as the Betamax case — courts recognized two kinds of secondary liability for copyright infringement: vicarious infringement and contribution to an infringement. Vicarious infringement occurs, for example, when an employer (the vicarious infringer) does not direct employees to infringe a copyright, but nevertheless is deemed by the courts to be an infringer when an employee installs unauthorized copies of a software program on company computers. American law holds the company vicariously liable for direct infringing conduct of its employees who made the copies and installed them in a tangible medium. Contribution to infringement is where one aids another who is a direct infringer, such as loaning a DVD to a friend to copy. In applying these classic tests, the courts have sometimes sought to stretch the notion of contribution, for example, to reach non-infringing conduct of others who materially have provided means used to infringe. Illustrations of this include copying machines, scanners, and audio and video recording equipment, both analog and digital. In the mid-1980s, this equipment converged with the technologies of communication and computing, including the Internet. This convergence led to remarkable new ways to distribute, share and view content. It also held the potential to destroy the worth of the content providers, at least their current paradigms for how to distribute to make money. In Betamax, the U.S. Supreme Court refused to grant “all copyright owners collectively … the exclusive right to distribute [products] simply because they may be used to infringe copyrights.” Copyright owners were not permitted to leverage their statutory monopoly into technology markets. It is not sufficient that the product be merely capable of a substantially infringing use. Copyright lawyers (and their teenage children) thought the Supreme Court had settled the issue of what they could record. That feeling of certainty was appropriate back when American media consumers were happily using tape recorders to record music. Digital media was a thing of the future, as was the huge success of the Internet, Napster and Grokster. The content providers were not happy with the decision, but Congress declined to respond to their complaints with legislation. Two decades later, Americans live in a digital environment. They can digitally publish almost anything with no substantial drain on resources or requirements to print or otherwise fix a copy permanently in tangible media. The analog recording mechanisms of 20 years ago, with their built-in obsolescence — degradation of quality with each successive recording of a work — that satisfied most content providers that their creations were at least partially secure is also now almost obsolete. Americans now easily make digital recordings, each of which is at least almost as good as the master. Content providers saw an economic threat to their products, especially in entertainment, even without the added pressure of mass linkage to those who had recordings they could send by e-mail. Napster created a whole new situation for the content providers. It combined digital recording and network communication technologies to create a person-to-person file-sharing technology. This time around, the courts sided with the content providers. The 9th U.S. Circuit Court of Appealhjs 2001 and 2002 decisions in A&M Records Inc. v. Napster found Napster liable for copyright infringement, based on its apparent failure to control its file system to stop customers who used the service to infringe others’copyrights, despite its alleged right and to supervise the music file-sharing and its reaping a direct financial benefit from the infringement. The 7th Circuit followed similar reasoning in 2003′s In Re: Aimster Copyright Litigation. However basing copyright jurisprudence on the mere ability to control of the type in Napster and Aimster creates a problem. A judge can impute capacity to control to those running any network distribution technology with a centralized server. Potentially all vendors of every new technology interfacing with a network could be liable for failure to satisfy every owner of content as to the exercise of control. This would have a chilling effect on all technology development in the United States. Indeed, after Napster and Aimster, it was almost impossible for copyright lawyers to provide an unqualified opinion concerning infringement for any technology connected to a network. In response to the Napster and Aimster cases, on Aug. 19, the 9th Circuit decided in MGM Studios Inc. v. Grokster Ltd. that capacity to control was not enough. Grokster differed from Napster and Aimster in that its engineers designed a system that delegated any capacity to control to a decentralized network and only centralized advertising for use of the service. Grokster still permits, in situations dictated by the design of the hardware, the exploitation and facilitation of copyright infringement on a massive scale. Thus, Americans now face a situation in which case law has not created a standard that will encourage new forms of media and distribution of media. It appears unlikely that the Supreme Court will be able to rationally resolve this issue without Congress stepping in to pass legislation. CONGRESSIONAL ACTION Even before Napster, the content providers had begun seeking legislation from Congress protecting their recordings. Now faced with a much larger number of direct consumer infringers, the content industry pressured Congress to grant authors control over any technology that consumers may incidentally use to infringe upon a work. Thus, rather than initially subjecting consumers to litigation (although the recording industry has sued hundreds of music downloaders for infringement), the content providers would prefer to litigate against those who facilitated copying of copyrighted works: first the direct infringement facilitators such as Napster and then the indirect infringement facilitators such as Grokster. This raises the current problem in copyright law: How much indirect infringement will the law tolerate? A bill pending in the Senate, S.2560, would define indirect infringement differently for copyrights than indirect or secondary infringement of patents. However, for years patents have offered a model of how to treat secondary liability, which judges could apply to the Copyright Act. Using the patent model would lets courts uphold the Betamax decision while at the same time punishing those who intentionally induce infringement or sell systems whose only purpose is facilitating infringement. The fate of the Senate bill should become clear in the fall, and with it the fate of U.S. technology manufacturers, who may need to shy away from any network interface (and thus lose ground to their foreign counterparts who aren’t constrained by unknown liability factors). The bill’s success will also help determine whether the courts will follow established precedents that give more freedom to technology companies but less certainty to content providers. These issues will have a long-term effect on America’s ability to exploit one of its greatest sources of wealth, the innovation of its citizens, which in turn is driven by a large, demanding market. At the moment, U.S. corporations outsource much of the manufacturing of devices Americans use all the time. That teaches offshore entities about technology the United States has been developing for years. It is unlikely that this trend will change. If America discourages its innovators and fails to strike a rational balance between innovation and abuse of content providers, it is possible the United States will also lose its ability to compete successfully through innovation, in order to replace what’s lost in outsourcing. David M. Ostfeld is of counsel at Adams and Reese s Houston office and is an active volunteer lobbyist for the Institute of Electrical and Electronic Engineers Inc. If you are interested in submitting an article to law.com, please click here for our submission guidelines.

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