Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.
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Full Opinion
delivered the opinion , of the Court.
The question is under what circumstances the distributor of a product capable of both lawful and unlawful use is liable
I
A
Respondents, Grokster, Ltd., and StreamCast Networks, Inc., defendants in the trial court, distribute free software products that allow computer users to share electronic files through peer-to-peer networks, so called because usersâ computers communicate directly with each other, not through
Other users of peer-to-peer networks include individual recipients of Groksterâs and StreamCastâs software, and although the networks that they enjoy through using the software can be used to share any type of digital file, they have prominently employed those networks in sharing copyrighted music and video files without authorization. A group of copyright holders (MGM for short, but including motion picture studios, recording companies, songwriters, and music publishers) sued Grokster and StreamCast for their usersâ copyright infringements, alleging that they
Discovery during the litigation revealed the way the software worked, the business aims of each defendant company, and the predilections of the users. Groksterâs eponymous software employs what is known as FastTrack technology, a protocol developed by others and licensed to Grokster. StreamCast distributes a very similar product except that its software, called Morpheus, relies on what is known as Gnutella technology.
Although Grokster and StreamCast do not therefore know when particular files are copied, a few searches using their software would show what is available on the networks the software reaches. MGM commissioned a statistician to conduct a systematic search, and his study showed that nearly 90% of the files available for download on the FastTrack system were copyrighted works.
As for quantification, the partiesâ anecdotal and statistical evidence entered thus far to show the content available on the FastTrack and Gnutella networks does not say much about which files are actually downloaded by users, and no one can say how often the software is used to obtain copies of unprotected material. But MGMâs evidence gives reason to think that the vast majority of usersâ downloads are acts of infringement, and because well over 100 million copies of the software in question are known to have been downloaded, and billions of files are shared across the FastTrack and Gnutella networks each month, the probable scope of copyright infringement is staggering.
Grokster and StreamCast concede the infringement in most downloads, Brief for Respondents 10, n. 6, and it is uncontested that they are aware that users employ their software primarily to download copyrighted files, even if the decentralized FastTrack and Gnutella networks fail to reveal which files are being copied, and when. From time to time, moreover, the companies have learned about their usersâ infringement directly, as from users who have sent e-mail to each company with questions about playing copyrighted movies they had downloaded, to whom the companies have responded with guidance.
Grokster and StreamCast are not, however, merely passive recipients of information about infringing use. The record is replete with evidence that from the moment Grokster
After the notorious file-sharing service, Napster, was sued by copyright holders for facilitation of copyright infringement, A&M Records, Inc. v. Napster, Inc., 114 F. Supp. 2d 896 (ND Cal. 2000), affâd in part, revâd in part, 239 F. 3d 1004 (CA9 2001), 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 usersâ computers. Evidence indicates that â[i]t was always [StreamCastâs] 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,â App. 861; indeed, the OpenNap program was engineered â âto leverage Napsterâs 50 million user base,â â id., at 746.
StreamCast monitored both the number of users downloading its OpenNap program and the number of music files they downloaded. Id., at 859,863,866. It also used the resulting OpenNap network to distribute copies of the Morpheus software and to encourage users to adopt it. Id., at 861, 867, 1039. 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. Id., at 861. A kit developed by StreamCast to be delivered to advertisers, for example, contained press articles about StreamCastâs potential to capture former Napster users, id., at 568-572, and it introduced itself to some potential advertisers as a company âwhich is similar to what Napster was,â id., at 884. It broadcast banner advertisements to users of other Napster-compatible software, urging them to adopt its OpenNap. Id., at 586. An internal e-mail from a company executive stated: â âWe have put this network in
Thus, StreamCast developed promotional materials to market its service as the best Napster alternative. One proposed advertisement read: âNapster Inc. has announced that it will soon begin charging you a fee. Thatâs if the courts donât order it shut down first. What will you do to get around it?â Id., at 897. Another proposed ad touted StreamCastâs software as the â#1 alternative to Napsterâ and asked â[w]hen the lights went off at Napster . . . where did the users go?â Id., at 836 (ellipsis in original).
The evidence that Grokster sought to capture the market of former Napster users is sparser but revealing, for Grok-ster 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 âNapsterâ or â[f]ree file sharingâ would be directed to the Grokster Web site, where they could download the Grokster software. Id., at 992-993. And Groksterâs name is an apparent derivative of Napster.
StreamCastâs 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 net
In addition to this evidence of express promotion, marketing, and intent to promote further, the business models employed by Grokster and StreamCast confirm that their principal object was use of their software to download copyrighted works. Grokster and StreamCast receive no revenue from users, who obtain the software itself for nothing. Instead, both companies generate income by selling advertising space, and they stream the advertising to Grokster and Morpheus users while they are employing the programs. As the number of users of each program increases, advertising opportunities become worth more. Cf. App. 539, 804. While there is doubtless some demand for free Shakespeare, the evidence shows that substantive volume is a function of free access to copyrighted work. Users seeking Top 40 songs, for example, or the latest release by Modest Mouse, are certain to be far more numerous than those seeking a free Decameron, and Grokster and StreamCast translated that demand into dollars.
Finally, there is no evidence that either company made an effort to filter copyrighted material from usersâ downloads or otherwise impede the sharing of copyrighted files. Although Grokster appears to have sent e-mails warning users about infringing content when it received threatening notice from the copyright holders, it never blocked anyone from continuing to use its software to share copyrighted files.
B
After discovery, the parties on each side of the case cross-moved for summary judgment. The District Court limited its consideration to the asserted liability of Grokster and StreamCast for distributing the current versions of their software, leaving aside whether either was liable âfor damages arising from past versions of their software, or from other past activities.â 259 F. Supp. 2d 1029, 1038 (CD Cal. 2003). The District Court held that those who used the Grokster and Morpheus software to download copyrighted media files directly infringed MGMâs copyrights, a conclusion not contested on appeal, but the court nonetheless granted summary judgment in favor of Grokster and StreamCast as to any liability arising from distribution of the then-current versions of their software. Distributing that software gave rise to no liability in the courtâs view, because its use did not provide the distributors with actual knowledge of specific acts of infringement. Case No. CV 01 08541 SVW (PJWx) (CD Cal., June 18, 2003), App. 1213.
The Court of Appeals affirmed. 380 F. 3d 1154 (CA9 2004). In the courtâs analysis, a defendant was liable as a contributory infringer when it had knowledge of direct infringement and materially contributed to the infringement. But the court read Sony Corp. of America v. Universal City Studios, Inc., 464 U. S. 417 (1984), as holding that distribution of a commercial product capable of substantial nonin-fringing uses could not give rise to contributory liability for infringement unless the distributor had actual knowledge of specific instances of infringement and failed to act on that knowledge. The fact that the software was capable of substantial noninfringing uses in the Ninth Circuitâs view meant
The Ninth Circuit also considered whether Grokster and StreamCast could be liable under a theory of vicarious infringement. The court held against liability because the defendants did not monitor or control the use of the software, had no agreed-upon right or current ability to supervise its use, and had no independent duty to police infringement. We granted certiorari. 543 U. S. 1032 (2004).
I â ( h-i
A
MGM and many of the amici fault the Court of Appealsâs holding for upsetting a sound balance between the respective values of supporting creative pursuits through copyright protection and promoting innovation in new communication technologies by limiting the incidence of liability for copyright infringement. The more artistic protection is favored, the more technological innovation may be discouraged; the administration of copyright law is an exercise in managing the tradeoff. See Sony Corp. v. Universal City Studios, supra, at 442; see generally Ginsburg, Copyright and Control Over New Technologies of Dissemination, 101 Colum. L. Rev. 1613 (2001); Lichtman & Landes, Indirect Liability for Copyright Infringement: An Economic Perspective, 16 Harv. J. L. & Tech. 395 (2003).
The tension between the two values is the subject of this case, with its claim that digital distribution of copyrighted material threatens copyright holders as never before, because every copy is identical to the original, copying is easy,
The argument for imposing indirect liability in this case is, however, a powerful one, given the number of infringing downloads that occur every day using StreamCastâs and Groksterâs software. When a widely shared service or product is used to commit infringement, it may be impossible to
One infringes contributorily by intentionally inducing or encouraging direct infringement, see Gershwin Pub. Corp. v. Columbia Artists Management, Inc., 443 F. 2d 1159, 1162 (CA2 1971), and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it, Shapiro, Bernstein & Co. v. H. L. Green Co., 316 F. 2d 304, 307 (CA2 1963).
B
Despite the currency of these principles of secondary liability, this Court has dealt with secondary copyright infringement in only one recent case, and because MGM has tailored its principal claim to our opinion there, a look at our earlier holding is in order. In Sony Corp. v. Universal City Studios, supra, this Court addressed a claim that secondary liability for infringement can arise from the very distribution of a commercial product. There, the product, novel at the time, was what we know today as the videocassette recorder or VCR. Copyright holders sued Sony as the manufacturer, claiming it was contributorily liable for infringement that occurred when VCR owners taped copyrighted programs because it supplied the means used to infringe, and it had constructive knowledge that infringement would occur. At the trial on the merits, the evidence showed that the principal use of the VCR was for ââtime-shifting,ââ or taping a program for later viewing at a more convenient time, which the Court found to be a fair, not an infringing, use. Id., at 423-424. There was no evidence that Sony had expressed an object of bringing about taping in violation of copyright or had taken active steps to increase its profits from unlawful taping. Id., at 438. Although Sonyâs advertisements urged consumers to buy the VCR to â ârecord favorite showsâ â or ââbuild a libraryââ of recorded programs, id., at 459 (Black-mun, J., dissenting), neither of these uses was necessarily infringing, id., at 424, 454-455.
On those facts, with no evidence of stated or indicated intent to promote infringing uses, the only conceivable basis for imposing liability was on a theory of contributory infringement arising from its sale of VCRs to consumers with knowledge that some would use them to infringe. Id., at 439. But because the VCR was âcapable of commercially significant noninfringing uses,â we held the manufacturer
This analysis reflected patent lawâs traditional staple article of commerce doctrine, now codified, that distribution of a component of a patented device will not violate the patent if it is suitable for use in other ways. 35 U. S. C. § 271(c); Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U. S. 476, 485 (1964) (noting codification of cases); id., at 486, n. 6 (same). The doctrine was devised to identify instances in which it may be presumed from distribution of an article in commerce that the distributor intended the article to be used to infringe anotherâs patent, and so may justly be held liable for that infringement. âOne who makes and sells articles which are only adapted to be used in a patented combination will be presumed to intend the natural consequences of his acts; he will be presumed to intend that they shall be used in the combination of the patent.â New York Scaffolding Co. v. Whitney, 224 F. 452, 459 (CA8 1915); see also James Heekin Co. v. Baker, 138 F. 63, 66 (CA8 1905); Canda v. Michigan Malleable Iron Co., 124 F. 486, 489 (CA6 1903); Thomson-Houston Electric Co. v. Ohio Brass Co., 80 F. 712, 720-721 (CA6 1897); Red Jacket Mfg. Co. v. Davis, 82 F. 432, 439 (CA7 1897); Holly v. Vergennes Machine Co., 4 F. 74, 82 (CC Vt. 1880); Renwick v. Pond, 20 F. Cas. 536, 541 (No. 11,702) (CC SDNY 1872).
In sum, where an article is âgood for nothing elseâ but infringement, Canda v. Michigan Malleable Iron Co., supra, at 489, there is no legitimate public interest in its unlicensed availability, and there is no injustice in presuming or imputing an intent to infringe, see Henry v. A. B. Dick Co., 224 U. S. 1, 48 (1912), overruled on other grounds, Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U. S. 502 (1917). Conversely, the doctrine absolves the equivocal conduct of selling an item with substantial lawful as well as unlawful uses, and limits liability to instances of more acute
The parties and many of the amici in this case think the key to resolving it is the Sony rule and, in particular, what it means for a product to be âcapable of commercially significant noninfringing uses.â Sony Corp. v. Universal City Studios, supra, at 442. MGM advances the argument that granting summary judgment to Grokster and StreamCast as to their current activities gave too much weight to the value of innovative technology, and too little to the copyrights infringed by users of their software, given that 90% of works available on one of the networks was shown to be copyrighted. Assuming the remaining 10% to be its noninfring-ing use, MGM says this should not qualify as âsubstantial,â and the Court should quantify Sony to the extent of holding that a product used âprincipallyâ for infringement does not qualify. See Brief for Motion Picture Studio and Recording Company Petitioners 31. As mentioned before, Grokster and StreamCast reply by citing evidence that their software can be used to reproduce public domain works, and they point to copyright holders who actually encourage copying. Even if infringement is the principal practice with their software today, they argue, the noninfringing uses are significant and will grow.
We agree with MGM that the Court of Appeals misapplied Sony, which it read as limiting secondary liability quite beyond the circumstances to which the case applied. Sony barred secondary liability based on presuming or imputing intent to cause infringement solely from the design or distribution of a product capable of substantial lawful use, which the distributor knows is in fact used for infringement. The
This view of Sony, however, was error, converting the ease from one about liability resting on imputed intent to one about liability on any theory. Because Sony did not displace other theories of secondary liability, and because we find below that it was error to grant summary judgment to the companies on MGMâs inducement claim, we do not revisit Sony further, as MGM requests, to add a more quantified description of the point of balance between protection and commerce when liability rests solely on distribution with knowledge that unlawful use will occur. It is enough to note that the Ninth Circuitâs judgment rested on an erroneous understanding of Sony and to leave further consideration of the Sony rule for a day when that may be required.
C
Sonyâs rule limits imputing culpable intent as a matter of law from the characteristics or uses of a distributed product. But nothing in Sony requires courts to ignore evidence of intent if there is such evidence, and the case was never meant to foreclose rules of fault-based liability derived from
The classic case of direct evidence of unlawful purpose occurs when one induces commission of infringement by another, or âentic[es] or persuad[es] anotherâ to infringe, Blackâs Law Dictionary 790 (8th ed. 2004), as by advertising. Thus at common law a copyright or patent defendant who ânot only expected but invoked [infringing use] by advertisementâ was liable for infringement âon principles recognized in every part of the law.â Kalem Co. v. Harper Brothers, 222 U. S., at 62-63 (copyright infringement). See also Henry v. A. B. Dick Co., 224 U. S., at 48-49 (contributory liability for patent infringement may be found where a goodâs âmost conspicuous use is one which will cooperate in an infringement when sale to such user is invoked by advertisementâ of the infringing use); Thomson-Houston Electric Co. v. Kelsey Electric R. Specialty Co., 75 F. 1005, 1007-1008 (CA2 1896) (relying on advertisements and displays to find defendantâs âwillingness ... to aid other persons in any attempts which they may be disposed to make towards [patent] infringementâ); Rumford Chemical Works v. Hecker, 20 F. Cas. 1342, 1346 (No. 12,133) (CC NJ 1876) (demonstrations of infringing activity along with âavowals of the [infringing] purpose and use for which it was madeâ supported liability for patent infringement).
For the same reasons that Sony took the staple-article doctrine of patent law as a model for its copyright safe-harbor rule, the inducement rule, too, is a sensible one for copyright. We adopt it here, holding that one who distributes a device with the object of promoting its use to infringe copyright, as
t â l f
A
The only apparent question about treating MGMâs evidence as sufficient to withstand summary judgment under the theory of inducement goes to the need on MGMâs part to adduce evidence that StreamCast and Grokster communicated an inducing message to their software users. The classic instance of inducement is by advertisement or solicitation that broadcasts a message designed to stimulate others to commit violations. MGM claims that such a message is shown here. It is undisputed that StreamCast beamed onto the computer screens of users of Napster-compatible programs ads urging the adoption of its OpenNap program, which was designed, as its name implied, to invite the custom of patrons of Napster, then under attack in the courts for facilitating massive infringement. Those who accepted StreamCastâs OpenNap program were offered software to perform the same services, which a factfinder could conclude
In StreamCastâs case, of course, the evidence just described was supplemented by other unequivocal indications of unlawful purpose in the internal communications and advertising designs aimed at Napster users (âWhen the lights went off at Napster ... where did the users go?â App. 836 (ellipsis in original)). Whether the messages were communicated is not to the point on this record. The function of the message in the theory of inducement is to prove by a defendantâs own statements that his unlawful purpose disqualifies him from claiming protection (and incidentally to point to actual violators likely to be found among those who hear or read the message). See supra, at 935-937. Proving that a message was sent out, then, is the preeminent but not exclusive way of showing that active steps were taken with the purpose of bringing about infringing acts, and of showing that infringing acts took place by using the device distributed. Here, the summary judgment record is replete with other evidence that Grokster and StreamCast, unlike the manufacturer and distributor in Sony, acted with a purpose to cause copyright violations by use of software suitable for illegal use. See supra, at 924-927.
Second, this evidence of unlawful objective is given added significance by MGMâs showing that neither company attempted to develop filtering tools or other mechanisms to diminish the infringing activity using their software. While the Ninth Circuit treated the defendantsâ failure to develop such tools as irrelevant because they lacked an independent duty to monitor their usersâ activity, we think this evidence underscores Groksterâs and StreamCastâs intentional facilitation of their usersâ infringement.
Third, there is a further complement to the direct evidence of unlawful objective. It is useful to recall that StreamCast
The unlawful objective is unmistakable.
B
In addition to intent to bring about infringement and distribution of a device suitable for infringing use, the inducement theory of course requires evidence of actual infringement by recipients of the device, the software in this case. As the account of the facts indicates, there is evidence of infringement on a gigantic scale, and there is no serious issue of the adequacy of MGMâs showing on this point in order to survive the companiesâ summary judgment requests. Al