In MGM Studios Inc. v. Grokster, Ltd., 125 S. Ct. 2764, 162 L. Ed. 2d 781, 75 USPQ2d 1001 (U.S. 2005), the Supreme Court found defendant Grokster for inducement to infringe copyrights without regard to whether Grokster’s technology allows for substantial non-infringing uses. Grokster distributes free software that allows computer users to share electronic files through peer-to-peer networks. Unlike Napster, where one server has references items available, Grokster uses no central servers. While the resulting peer to peer networks can be used to share any type of digital file, there was evidence that Grokster’s software was mostly used to share copyrighted music and video files. Additionally, there was evidence that Grokster marketed itself as not reachable by copyright as was Napster. Metro-Goldwyn-Mayer Studios Inc. (MGM) and other studios own infringed copies found on the peer-to-peer network created by Grokster’s software. MGM sued Grokster alleging that Grokster knowingly and intentionally distributed their software to enable users to infringe copyrighted works in violation of the Copyright Act.
The Supreme Court held that Grokster was liable for inducing infringement through the distribution of its software. In finding infringement, the Supreme Court held that
One who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, going beyond mere distribution with knowledge of third-party action, is liable for the resulting acts of infringement by third parties using the device, regardless of the devices lawful uses.
While acknowledging that the standard for contributory infringement is set forth in Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 , 104 S Ct. 774, 78 L. Ed. 2d 574, 220 USPQ 665 (U.S. 1984), reh’g denied, 224 USPQ 736 (U.S. March 19, 1984), the Supreme Court that the exception applies only to extent do not market software can be used for infringement. In essence, where active inducement is found such as where a device is marketed as useful for infringement, there is no fair use defense for the resulting infringement and no defense for distribution of the device based upon substantial non-infringing uses.
From this holding, the Supreme Court held that inducement to infringe copyright can be found, but only in limited circumstances where the following elements are shown:
- Infringed copyright;
- Must be distributing a device allowing infringement; and
- Distribution must be with the object of promoting the device in the context of infringing copyrights by clear expression or affirmative steps.