Guest Post: One glass of Lime (-wire) juice? That will be 75 trillion, please

We are pleased to bring to our readers a post by Tarun Krishnakumar, a first year student of NLSIU on copyright infringement claims against file sharing application owning companies, in specific – Limewire. This post is part of a series of posts on the topic.

Not twelve billion dollars, not twelve million, not twelve thousand but TWELVE is the number of zeroes in the dollar figure, one which is incidentally five times the US Gross Domestic Product, claimed by the Recording Industry Association of America (RIAA) as damages from Lime Wire LLC for its facilitation of the infringement of its copyrighted works. Absurd? Thankfully, the federal judge dealing with the matter thought so too.

This series of posts, apart from giving a skeleton legal analysis of the Lime Wire summary judgement and subsequent permanent injunction, seeks to provide an insight into the latest developments, namely the claim for damages, in what can only be classified as the sad and unbefitting end of an era.

This first post looks at the summary judgement itself and analyses the counts on which the court held Limewire liable. It also looks at why the Betamax rule/doctrine was not applied in this case apart from analysing the implications of the decision.

The second aims to, cover in a similar fashion, the permanent injunction which led to the discontinuation of Limewire as we know it.

The third looks at the latest developments (March 2011) in the saga, namely, the mammoth claim for damages.

The trial (Arista Records LLC vs. Limewire LLC 715 F. Supp. 2d 481)

It all began (or ended, depending on your affiliations) on May 11, 2010 when a United States District Court in New York granted summary judgement in favour of Arista Records against Limewire (at the time, the leading Peer-to-peer Gnutella client), holding the latter liable for inducing copyright infringement, common law copyright infringement and unfair competition.

Secondary Liability

Arista, similar to the approach taken by the RIAA in Grokster, proceeded against Limewire on the basis of secondary liability for copyright infringement. Secondary liability allowed parties to proceed against those facilitating the infringement of (say) copyrights in situations where such facilitation was on such a large scale that proceeding against individual infringers would be, if not impossible, highly impractical.

The court, with Justice Kimba wood presiding, held Limewire accountable on the following three counts:

1. Inducement to commit copyright infringement.

Inducement to copyright infringement became a “direct cause of action” after Grokster (MGM Studios, Inc. v. Grokster, Ltd. 545 U.S. 913 (2005)[United States Supreme Court]). It is said to occur when a party takes affirmative steps to foster copyright infringement by others.

In the instant case, Limewire was found to be liable on this count based on the following observations:

i) Limewire’s awareness of substantial infringement by its users.

The judge agreed with evidence presented by the plaintiff that purportedly showed that LimeWire was aware that the “overwhelming majority of download requests” were for copyrighted material.

The judge also held against LimeWire the fact that the latter had developed plans (which were never implemented) to legitimise its business by shifting to a music store model where users paid for copyrighted content.

ii) Efforts to attract infringing users

The judge found that that Limewire’s specific plans to attract users of Kazaa and Napster (both of which were earlier held to be liable for facilitating copyright infringement in various forms) pointed to the fact that it was taking affirmative steps to attract infringing users.

The fact that Limewire had also engaged in an extensive marketing strategy, a result of which a Google search of terms like “napster replacement” and “kazaa” would link to Limewire, was held against it.

iii) Efforts to enable and assist users to commit infringement.

In this regard, the judge opined that features like an extensive search function which allowed users to search for material based on parameters like “Music genre” and “Artist” (and which “would inevitably guide users to copyrighted recordings” in the learned judge’s opinion) facilitated the finding of copyrighted works and hence amounted to “assisting users to commit infringement”.

iv) Dependence on infringing use for the success of its business

The judge held that “Limewire’s commercial success is, therefore, mostly derived largely from the high-volume use of Limewire, most of which is infringing.” She reasoned that since most of Limewire’s 4-million (per day) users used it to commit infringement, Limewire’s marketing of ad space (on the Limewire site as well as on the software interface itself) and bundling of software (eg. the toolbar) with releases were, in effect, taking advantage of such uses to Limewire’s commercial gain.

v) Its failure to mitigate infringing activities.

Of the various forms of technological barriers to infringement available to curb infringement, Limewire employed only one (a hash-based content filter) and even that, in a half-hearted fashion as evidenced by the fact that by default it was turned “off”. The judge rejected the defendant’s contentions that this default “off” mode was for user flexibility.

An interesting point in this regard is that the judge (following a similar conclusion regarding emails warning users about infringement from Grokster) rejected Limewire’s electronic notice and statement of intent as “not constituting meaningful effort to mitigate infringement.” Before being allowed to download LimeWire a user had to declare his intent, i.e. whether he intended he intended to use the software to commit copyright infringement or not. Only if a user attested to the latter, would he be allowed to download the software.

2. Common law copyright infringement

Before the Sound Recording Amendment Act of 1971, which extended federal copyrights to recordings made on or after February 15, 1972, sound recordings in the US were protected only at the State level through a multitude of statutes and torts. The Act inter alia provided that existing sound-recordings (including the likes of the Beatles) would continue to be protected under common law copyright.

It was under this provision that the court held Limewire liable. Enough evidence existed to show that numerous pre-1972 copyrighted works had been available for download (and had been downloaded) on Limewire.

3. Unfair Competition

In light of the finding that Limewire induced users to commit infringement and as a logical consequence of finding Limewire liable for common law copyright infringement, the court held that Limewire’s free distribution of copyrighted works competed unfairly with the Plaintiff’s legitimate sale of the same works.

It is important to note that claims of unfair competition arose from the infringement of recordings made prior to 197 2 (enactment of federal copyright law).

But what about the Betamax doctrine?

The Betamax doctrine (evolved first in Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984) ) provided that a manufacturer of a product is not liable for contributory infringement if the product was capable of “substantial non-infringing uses”. For example in Sony, the Betamax VCRs were held to have the substantial non-infringing use of time-shifting (the recording of TV to be watched at a more convenient time for users).

So, if Limewire could also be used to share public domain works, why wasn’t this doctrine applied in its case? The simple answer was because the court felt that there wasn’t enough evidence to conclusively prove that Limewire was capable of such non-infringing uses and hence declined to take up the issue for summary judgement (It is important to note here that summary judgement, in a simplistic sense, only covers issues where there is no dispute as to material facts and where sufficient evidence exists to make a ruling).

In light of Limewire’s evidence that some types of non-infringing content that users share including:

“(1)electronic copies of books that are in the public domain or authorised for online distribution.

(2)historical documents, archival films and other public domain works; and

(3)digital music recordings produced by musicians seeking to promote their work through free online distribution

the Court held that it “could not determine, as a matter of law, whether Limewire is capable of substantial non-infringing uses. The record before the Court is insufficient to permit the Court to assess the “technological feasibility or commercial viability” of Limewire’s potential non-infringing uses.”

Implications of the decision in Arista.

Arista, was only the second major secondary liability case after the epic that was MGM-Grokster. If nothing else, Arista, reinforced the belief that for file-sharing applications, it was only a matter of time before each was hunted down and dispensed with. In an interview soon after Grokster’s completion, Limewire itself considered shutting its service down/converting to a music-store business model for fear of being hunted down ala Grokster.

However, with the litigation still on going, only time will tell if the Court decides to apply the Betamax rule to file-sharing applications. If it does so, it could serve as a “Get out of Jail Card” for P2P applications, at least as far as contributory infringement is concerned.

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