Trademark, Copyright & IP

Advertising Tells the Tale

July 2005

The much-ballyhooed file sharing case, MGM Studios, Inc. v. Grokster, Ltd., has been decided by the U. S. Supreme Court, not, as most commentators expected, on the question of whether or not the act of distributing file sharing technology itself is sufficient to incur liability for contributory infringement. Instead, the Court pointed to advertisements by the defendant software distributors, encouraging users of their technology to copy and exchange copyrighted works freely without permission of the copyright owners, and held that such promotional messages coupled with distribution of the technology amounts to contributory infringement.

The Court’s majority opinion, authored by Justice Souter, relied upon evidence adduced at the district court level showing that the defendant software distributors, Grokster and StreamCast, advertised their technology by publicly identifying it as an alternative to the notorious Napster music file sharing service, ultimately shut down by court order. About such evidence, the Court stated:

“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 SteamCast’s OpenNap program were offered software to perform the same services, which a factfinder could conclude would readily have been understood in the Napster market as the ability to download copyrighted music files. Grokster distributed an electronic newsletter containing links to articles promoting its software’s ability to access popular copyrighted music.”

The opinion cited precedent holding that liability for contributory infringement may be based upon evidence of advertising and promotional messages encouraging others to directly infringe. According to the Court, such public messages “overcome. . .the law’s reluctance to find liability when a defendant merely sells [or distributes] a commercial product” that has the potential to be used in either a lawful or unlawful manner.

The Court’s opinion provides a cautionary tale for advertisers and their legal counsel: turning a blind eye to direct infringement by one’s consumer base will not absolve a defendant of liability if the defendant has induced the unlawful act in its own promotional materials. Moreover, the Court emphasized that the important aspect of such evidence is that the infringing message was “sent out,” not that it was actually communicated to consumers, i.e., received and interpreted as inducement to infringe by consumers. The Court’s point is that evidence of advertising messages goes to the defendants’ intent and evidence of how those messages were received by consumers, while it might shed light on intent, is not required in order to identify defendants’ intent as unlawful.

* Susan Richey, Of Counsel, is admitted in California.

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