When the United States Supreme Court hears Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. (04-480) on March 29th, it has an opportunity to consider for the first time, the rights, responsibilities and liabilities of p2p network creators and their users, the content industry, and ISPs. Over 25 of the world’s largest entertainment conglomerates joined together in petitioning the Supreme Court for a grant of certiorari.1 Petitioners characterize this case as “one of the most important copyright cases ever to reach this Court. Resolution of the question presented here will largely determine the value, indeed the very significance, of copyright in the digital era.”2 Respondents agree that the stakes are considerable, observing that this “case raises a question of critical importance at the border between copyright and innovation: when should distributors of p2p software—a multi-purpose tool—be held liable for infringements that may be committed by end-users of the tool?”3


This case will review the Ninth Circuit ruling that p2p software providers do not have secondary liability for those copyright infringements possibly committed by actual direct users of the p2p software.4 The Ninth Circuit followed the paradigm set forth in Sony Corp. of America v. Universal City Studios, Inc.,5 which drew on the staple article of commerce doctrine from patent law.6 Under this rule, it is “sufficient to defeat a claim of contributory copyright infringement if the defendants showed that the product was capable of substantial or commercially significant noninfringing uses [and thus was a fair use].”7 The Ninth Circuit first followed this rule in the Napster cases.8 The court reasserted the Sony/(Betamax) rule in Grokster, concluding that since the p2p software was capable of substantial or commercially significant noninfringing uses, the copyright owners must show the software distributors had reasonable knowledge of specific infringing files.9 Relying on this, it found that since Respondents merely offer for download distributed file-sharing software (p2p software) that is capable of a myriad of uses, including downloading infringing and noninfringing content, no liability could attach as they (1) lacked knowledge of the infringing activity; and (2) did not materially contribute to the infringing conduct.10 Respondents offered nothing more than executable distributed file-sharing software; they provided neither support, nor storage, nor directory services that would have created a basis for secondary liability.11


Margo E. K. Reder*