The ruling comes less than a week after Google
announced the launch of its own filter to block
copyright-infringing material from its YouTube video-sharing site.
Yesterday's 83-page judgment (2.7MB
PDF) could prove influential in Viacom's $1 billion lawsuit against Google which
accuses YouTube and its parent company of inducing infringement by
users.
StreamCast Networks Inc. and peer-to-peer (P2P) rival Grokster
Ltd. were first sued by MGM Studios and others in a California
district court in 2001. Their software allowed millions of users to
share music, software and movies over the internet. In a landmark
ruling in 2005, the US Supreme Court concluded that StreamCast and
Grokster induced copyright infringement and could be held liable
for infringement committed by the users of their software. The case
was sent back to the district court to consider MGM's motion for
summary judgment.
StreamCast is the only defendant remaining in the case.
Yesterday, US District Judge Stephen V Wilson rejected MGM's
request for a permanent injunction that would ban the distribution
of the Morpheus software; but he agreed to impose one that could
have the same effect.
The court has previously ruled that StreamCast distributed
Morpheus "with the intent to induce copyright infringement." Its
business targeted "a known community of infringers – former Napster
users," noted Judge Wilson, and its business model "depended on
massive infringing use".
In November 2006, StreamCast implemented what it called "a
robust filtering mechanism" to block copyrighted works that are not
authorised for free downloading. It populated its list of works
with the names of artists from the website of music industry body
the RIAA.
"Hopelessly ineffective" filter
The nature of the Morpheus system is such that only new users
and those who choose to upgrade their software are subjected to the
copyright filters. (It is a de-centralised P2P system, unlike
Napster, so users do not conduct searches via the Morpheus
website.) In December 2006, StreamCast began sending messages to
users of legacy versions of Morpheus. These messages "strongly
recommended" that they upgrade. But in December 2006 and January
2007 only about one-third of the downloading was from software that
used the filter.
MGM and the other plaintiffs described StreamCast's system as a
"homemade filter" that is "hopelessly ineffective." They submitted
evidence that popular audio and video files were still easy to
download. An expert for the plaintiffs told the court that
StreamCast filters only by artist, not by title name; it does not
filter common misspellings or variations; and its movie filters do
not capture TV shows or certain file types. He also claimed it was
technologically outdated because it does not incorporate digital
fingerprinting.
MGM said StreamCast should make an effort to encourage legacy
users to upgrade. "StreamCast should insert aggressive 'pop-ups'
that would make it difficult (or at least very annoying) for users
to continue with the unfiltered versions of the Morpheus software,"
said the plaintiffs, according to the judgment.
The plaintiffs also argued that infringements resulting from
StreamCast's inducement would cause irreparable harm. "StreamCast
has and will continue to induce far more infringement than it could
ever possibly redress with damages," they said. The court agreed.
Judge Wilson added, "it is highly likely that the award of
statutory damages that ultimately befalls StreamCast in this case
will be enormous … and would far outstrip the amount of revenue the
company has garnered in recent years."
StreamCast argued that file-sharing has not harmed music sales.
Judge Wilson said that was irrelevant. "It would also make no
difference if StreamCast's inducement was demonstrated to increase
Plaintiffs' sales," he wrote, pointing out that as copyright
owners, "Plaintiffs have the exclusive right to decide when and how
their material should be reproduced and/or distributed, regardless
of whether their decisions make good business sense."
He also noted that "Morpheus users have the continued ability to
pillage a tremendous quantity of Plaintiffs' intellectual property,
and to spread this capacity elsewhere with additional file
sharing."
"The only realistic method for remedying such future harm
resulting from StreamCast's inducement is by way of a permanent
injunction," he wrote.
However, Judge Wilson said that MGM's proposed injunction went
too far, describing its language as "unacceptable." It asked that
StreamCast be permanently banned from "directly or indirectly
enabling, facilitating, permitting, assisting, soliciting,
encouraging, authorizing, inducing or knowingly materially
contributing to" another's infringement through Morpheus.
He pointed out that StreamCast had been found liable for
"inducing" infringement, not for "contributory infringement" – so
the reference to "knowingly materially contributing to" was
inappropriate. He also took issue with the words "enabling" and
"permitting".
He concluded that "inducement is the only form of liability that
is relevant to the permanent injunction."
StreamCast argued that a 1984 Supreme Court ruling on Sony's
Betamax video recorder protects it. In that case, Sony was accused
of infringing copyrights. But Sony won because the machine had
significant non-infringing uses. Judge Wilson said that case
"provides no immunity where a staple's distribution is sufficiently
connected to the promotion/encouragement of infringement."
"There is a distinction between forbidding distribution of a
technology capable of substantial noninfringing uses and simply
requiring sufficient efforts to minimize the prospective
infringement that would otherwise be induced through the staple's
distribution," he wrote. "StreamCast would still be allowed to
distribute Morpheus so long as it undertook sufficient measures to
mitigate end-user capacity for infringement."
Referring to the Napster litigation, Judge Wilson said,
"products capable of substantial noninfringing use can be filtered
if the failure to do so would constitute either continued
contributory infringement … or vicarious infringement. It would
therefore be anomalous if such filtering were always unavailable
where a defendant has only been held liable for inducement."
"The bell cannot be unrung"
The court also had concerns about the continuing harm, pointing
out that distribution after the encouragement of infringement ends,
can by itself constitute inducement. "StreamCast has etched its
niche in the market for infringement," he wrote.
He added, "neither the simple passage of time nor the entry of
judgment in this case can remedy StreamCast's past promotion as the
'next Napster.' The fact that a permanent injunction is imposed
also does not leave Morpheus magically reborn as a product safe for
unfiltered distribution under [the Sony case]."
"The bell cannot be unrung," he wrote. "Accordingly, Morpheus's
connection to the past promotion of infringement means that
StreamCast's continued distribution of Morpheus alone constitutes
inducement."
But he stopped short of barring its distribution completely,
saying that "could constitute an inappropriate extension of
Plaintiffs' copyrights. Plaintiffs should not lightly be given
total control over a product capable of substantial noninfringing
uses."
The language proposed for the injunction by MGM would shut down
StreamCast until it installed a "perfect" filter that would prevent
any infringement. Judge Wilson said that no such mechanism exists,
nor is it technologically feasible. He also doubted that an
immediate shutdown order "would most effectively stop further
infringement." He saw it as beneficial to the plaintiffs' rights to
allow StreamCast to distribute filtering software and take steps to
encourage end-users into accepting an upgrade.
"A permanent injunction will issue requiring StreamCast to
reduce Morpheus's infringing capabilities, while preserving its
core noninfringing functionality, as effectively as possible," he
wrote. Its steps will include encouraging end-users to upgrade from
non-filtered legacy software.
StreamCast objected to MGM's demand for 'state of the art'
filtering, saying it was cost prohibitive. Judge Wilson was
unsympathetic, though. "Cost is not likely to be a controlling
factor, as the injunction will be designed primarily to protect
Plaintiffs' copyrights," he wrote.
Judge Wilson appointed a 'special master' to select "the most
effective means available" to reduce the infringing capabilities of
Morpheus "while preserving its noninfringing uses as feasible."
He also ordered the Plaintiffs to provide details of copyrighted
works to StreamCast, something it has hitherto refused to do. This
should include artist and title, a certification of ownership, and
some evidence that one or more files containing each work is
available on the Morpheus system.
Comment
David Woods, a litigator with Pinsent Masons, the law firm
behind OUT-LAW.COM, described it as a clever ruling.
"Although the permanent injunction that MGM requested for was
not granted, the effect of the ruling could well be the same," said
Woods. "It seems from the ruling that 'once an infringer, always an
infringer', and although StreamCast is still allowed to use its
software, it now faces a potentially insurmountable hurdle. It's
more of a financial one than a technological one, though."
Woods said the Judge is demanding a filter that is more
effective than StreamCast's current system.
"The judge accepts that perfect filters are not realistic.
But he is also saying that the company has to pay for the
most effective solution that the market can offer. He's unmoved by
StreamCast's claim that it can't afford these third party systems,"
he said.
"In any event, StreamCast's demise could well be sealed by the
damages award, which has still to come," said Woods.
