INTEGRACIÓN TEMPORAL

To impose contributory liability on a defendant, it is necessary to show that the defendant knows, or have reason to know, of the direct infringement committed by a third party and has materially contributed to the said infringement.147

In A & M Records, Inc. v Napster, Inc.,148 the defendant was also sued for contributory liability. On the knowledge element required for imposing contributory liability, the court considered the fact that the defendant did have actual knowledge of its users’ infringing activities. The defendant’s knowledge was evidenced by the Recording Industry Association of America’s notice about the infringing files available on the Napster server and the document in which the co-founder of Napster stated that the company needed to stay ignorant of its users’ real names and addresses in view of the infringing activities. The promotion of Napster with screen shots of infringing files also pointed to the defendant’s knowledge of its users’ infringement. In addition, the defendant had the ability to deny suppliers of infringing materials access to its system. However, the

146 _{Supra n 62.}

147 _{See A & M Records, Inc. v Napster, Inc., supra n 7, Gershwin Publ’g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159 (2d Cir. 1971) and}

Fonovisa, Inc. v. Cherry Auction, Inc. 76 F.3d 259 (9th Cir. 1996).

148 _{Supra n 7.}

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defendant had failed to do so. All of these facts constituted sufficient level of knowledge required to impose contributory liability on the defendant.

Turning next to the material contribution element, it was held that the defendant had materially contributed to the direct infringement by its users by offering the sites and facilities. Without its support services, the users could not have easily located and downloaded the music files they were searching for. It follows that the defendant had knowingly encouraged and aided the direct infringement by its users and hence liable for contributory infringement.

Another example that may be referred to is the case of In Re: Aimster Copyright Litigation149 which involved a suit commenced by the copyright owners of music against the defendant for its Aimster internet service, which was similar to the Napster system.150 One of the claims made was with regard to the defendant’s contributory liability for direct infringement committed by its users through the Aimster service. The defendant argued that mere constructive knowledge of infringing uses was insufficient to impose contributory liability.151 In addition, the defendant contended that the encryption feature of its service had precluded it from knowing what files were copied by its users and hence it lacked the knowledge of infringing uses which was necessary for contributory liability. The court held that wilful blindness is knowledge.152 The encryption feature of the Aimster service showed a deliberate effort to avoid guilty knowledge and thus it was enough to establish a guilty state of mind on the part of the defendant.153 The court noted that where there

149 _{Supra n 145.}

150 _{The software was available for download at no costs on the Aimster’s website. The website collected and organized users’ information. Aimster} users downloaded and installed the software on their computers. First-time users were required to register on the system. Thereafter, they could designate other registrants as ‘buddy’. Direct communication between buddies was enabled when they were both connected to the internet. Aimster users listed on their computers the files they intended for sharing. A requesting user could go online and enter his request in ‘Search for’ field. The Aimster server would then search the computers of users who were connected to the system for the particular files. When the file was found, the server would direct the computer on which the file was located, to send the file to the requesting user’s computer via the internet.

151 _{The Betamax defence as developed in Sony Corp. of America v Universal City Studios, Inc., supra n 48, bars the imposition of constructive} knowledge on the part of a distributor if the product distributed is capable of substantial non-infringing uses.

152 _{Supra n 145 at 650.} 153 _Ibid.

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are non-infringing uses of P2P file sharing, especially if the infringing uses are substantial, the P2P operator must show that ‘it would have been disproportionately costly for him to eliminate or at least reduce substantially the infringing uses’ in order to avoid liability as a contributory infringer.154 The court found that the material contribution element was satisfied in view of Aimster’s tutorials on how to use its software. The tutorials gave examples of file sharing of copyrighted music. Aimster allowed its members, for a monthly fee, to download the music most frequently shared by its users, which were copyright music owned by the plaintiffs.155

The court may, however, refuse to impute the requisite level of knowledge for contributory liability if the defence developed in Sony Corp. of America v Universal City Studios, Inc.156 applies. In

Sony, copyright owners sued the manufacturer of Betamax, a videocassette recorder or VCR, for

contributory infringement when users recorded copyrighted programmes. It was claimed that the manufacturer supplied the means to infringe, coupled with constructive knowledge that infringement would take place. The US Supreme Court refused to hold the manufacturer of the VCR liable for contributory infringement solely on the basis of distribution. In reaching the decision, the court imported a modified ‘staple article of commerce doctrine’ from patent law to balance the rights of copyright owners against the rights of others to innovate and engage in commerce.157 _{It was ruled that ‘the sale of copying equipment, like the sale of other articles of}

commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial non- infringing uses.’158

154 _{Supra n 145 at 653.}

155 _{Supra n 145 at 651-652.}

156 _{Supra n 48. The US Supreme Court’s decision may be seen as the equivalent of the House of Lords’ decision in CBS Songs Ltd v Amstrad}

Consumer Electronics Plc, supra n 82.

157 _{Supra n 48 at 442.} 158 _Ibid.

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In other words, no knowledge may be imputed on the part of a distributor of a product which is capable of substantial non-infringing uses. Though a survey showed that only about 9% of all VCR recordings made by users were authorized, the court was satisfied that it was significant.159 As for unauthorized recordings which were mainly made for time-shifting,160 the court found that it constituted a fair use. In addition, the court also took note of ‘the significant potential for future authorized copying.’161 _{As such, the VCR manufacturer was not liable since the product was}

‘capable of commercially significant non-infringing uses’.162 _{It is clear that the Betamax defence}

looks at the capability or potential of a product or technology, which includes its future potentials and not limited to only its current actual non-infringing uses.

The defendant in A & M Records, Inc. v Napster, Inc.163 _{tried to seek shelter under the rule of Sony,}

also known as the Betamax defence, claiming that it should not be held liable simply because its P2P technology could be employed to infringe the plaintiffs’ copyright. The district court held that the defendant failed to show that its system was capable of commercially significant non-infringing uses. However, the Court of Appeals for the Ninth Circuit disagreed as the district court’s analysis was only limited to current uses, overlooking the potentials of the system, viz. current and future non-infringing use.164 Despite the potential of the Napster system for non-infringing uses, it was nonetheless clear that the defendant had actual knowledge of its users’ direct infringement. As such, the Betamax defence did not exempt the defendant from liability.165

159 _{Id at 444. The US Supreme Court referred to the survey commissioned by the District Court, see Universal City Studios, Inc. v Sony Corp. of}

America 480 F. Supp. 429.

160 _{Id at 443-456. VCR enables time-shifting as it allows the recording of a programme for viewing at a later time at the users’ convenience.} 161 _{Id at 444.}

162 _{Id at 442.} 163 _{Supra n 7.} 164 _{Id at para 53.}

165 _{The US Court of Appeals for the Seventh Circuit also held that the Betamax defence has no application at all to vicarious liability. As explained} earlier, the Betamax defence precludes the imputation of knowledge if the product at issue is capable of substantial non-infringing uses while vicarious liability does not require the establishment of knowledge on the part of a defendant: see section 3.5.4.1.

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The Betamax defence in Sony was once again the centre of arguments on contributory liability in

Aimster case.166 _{The defendant’s argument that its system could be utilized for non-infringing uses}

would afford itself a defence was rejected by the court. In Sony, there was no material contribution by Sony to the infringing uses by its consumers;167 while in Aimster, the defendant’s active assistance and participation in its users’ infringementspoint to the knowledge of infringing uses as required for contributory infringement.168 The court also found that the defendant had showed no evidence that its server had ever been used for lawful and legitimate purposes.169 _{Even assuming}

there were non-infringing uses, the court required the service provider to show that it would have been disproportionately onerous for him to eliminate, or at least, reduce substantially the infringing uses, which the defendant had failed to show.170 The burden placed on the defendant to show actual non-infringing use seems to depart from the Betamax defence which exempts liability if a technology is capable of substantial non-infringing uses. In other words, the Betamax defence considers a technology’s potential legitimate uses which may not necessarily be actual lawful uses. In the case of Metro-Goldwyn-Mayer Studios, Inc. v Grokster, Ltd171 the respondents, namely, Grokster Ltd and StreamCast Networks, Inc., distributed software products which enabled P2P file sharing.172 The Court of Appeals found that the respondents’ software were capable of substantial lawful uses and thus on the basis of Sony would not be subject to contributory liability, except where the distributor possessed actual knowledge of specific infringing acts and failed to act on

166 _{Supra n 145.}

167 _{Sony did not in its advertising encourage the infringing uses of its Betamax recorders. In addition, the Betamax recorders were used mainly for} time shifting which was held as a fair use. By contrast, Aimster had failed to show evidence of any actual non-infringing use made of its service, much less evidence on the frequency of such non-infringing uses: see Aimster, Id at 651.

168 _{Id at 650-651.} 169 _{Id at 651.} 170 _{Id at 653.} 171 _{545 US 913.}

172 _{Grokster software adopted FastTrack technology while Streamcast’s Morpheus software used Gnutella technology. Both FastTrack and} Gnutella worked in mostly similar ways.

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that knowledge.173 Since the respondents’ software were decentralized and capable of substantial non-infringing uses, the respondents were not liable.174 _{The Court of Appeals also found no}

material contribution by the respondents to users’ infringing conduct in view of the fact that the users committed the acts with no participation by the respondents beyond supplying the software.175

On appeal, the Supreme Court found that the Court of Appeals’ broad reading of Sony was flawed.176 _{According to the rule of Sony, intent to cause infringement should not be presumed only}

and simply from the design or distribution of a product which is capable of substantial lawful use. This is so even where the distributor knows it is actually used for infringement.177However, it does not mean that it is impossible to impose contributory liability on the distributor whenever a product is capable of substantial non-infringing uses unless it may be proved that the distributor has knowledge of specific infringing uses.178 Sony does not bar liability in circumstances where there is evidence of actual intent to promote infringement, which is separate from the design and distribution of the product or the knowledge that the product may be used for infringing uses.179 Ginsburg J, with whom Kennedy J concurred, distinguished Grokster from Sony referring to the fact that there was no finding of fair use and sufficient proof of lawful uses of the respondents’ software in Grokster,180 _{unlike the case of Sony. The evidence in Grokster did not justify the Court}

173 _{The district court had earlier held that users of the respondents’ software infringed the claimants’ copyright when they downloaded copyrighted} media files. However, the district court granted judgement in favour of the respondents on the basis that the use of the software did not clothe the distributors with actual knowledge of specific infringing acts: 259 F. Supp. 2d 1029 (CD Cal. 2003) at 1033. The Court of Appeals affirmed the District Court’s decision: supra n 14 at 1162.

174 _{Supra n 14 at 1162.}

175 _{Id at 1163-1164. On the vicarious liability, the Court of Appeals did not find that the respondents had monitored or controlled the use of the} software. Neither did the respondents have right or ability to supervise the use of the software: Id at 1164-1167.

176 _{Supra n 171 at 933.} 177 _Ibid.

178 _{Id at 934.} 179 _{Id at 934-935.}

180 _{Id at 945. The evidence of non-infringing uses referred to the declarations submitted by the respondents which included assertions about} authorization from some copyright owners for the distribution of their works and that some public domain materials were transmitted through P2P file sharing via the respondents’ software.

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of Appeals’ holding in light of the ‘overwhelming use of Grokster’s and StreamCast’s software for infringement.’181 _{The copyright owners in Sony held below 10% of copyrighted television}

programmes182 while the copyright owners in Grokster owned 70% - 75% of the copyrighted material being exchanged.183 It was also pointed out that both the district court and the Court of Appeals did not sufficiently differentiate between uses of the respondents’ software and uses of P2P technology in general. Ginsburg J stressed on the evidence that the respondents’ products were in fact substantially used for infringing purposes which earned them revenue and felt that the evidence did not adequately demonstrate beyond doubt ‘a reasonable prospect that substantial or commercially significant non-infringing uses were likely to develop over time.’184