The Fall of the Last Giant in File-Sharing?

By Kyu Hee Chu

Reviewed by Cynthia Amis 

I.  Introduction

Millions of people have used file-sharing programs that allow for downloading of all sorts of files from others over the Internet, but how many of them realize that the files that they are sharing are copyright protected, and that there are consequences to such sharing?

II.  Previous Cases Regarding File-Sharing Programs

A few major companies such as Napster and Grokster own and maintain file-sharing programs and have already been called out for allowing and promoting such unauthorized file-sharing activity.  MGM Studios, Inc. v. Grokster, Ltd. was a United States Supreme Court case that led to settlements of several other companies such as BearShare and eDonkey.[1] The monumental Grokster case was decided on an inducement theory, and Justice Souter held that “one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.”[2]

III.  Arista Records LLC v. Lime Group LLC 

In Arista Records LLC v. Lime Group LLC, the court ruled in favor of the plaintiffs on their claims for inducement of copyright infringement, common law copyright infringement, and unfair competition against Gorton and Lime Group, who owns Limewire.[3]

The plaintiffs’ claims against Lime Group were based on secondary liability for copyright infringement, which is imposed on a party that played a major role in third parties’ committing direct infringement, but has not itself directly infringed.  The rationale is that since it is extremely difficult, if not impossible to enforce copyright protection against all direct infringers, the practical solution is to punish the distributor.

To make a secondary liability claim, a plaintiff must first prove that Limewire users (third parties) directly committed infringement of plaintiffs’ copyrights.  To prove direct infringement, a plaintiff must show that 1) the plaintiff is the owner of the infringed copyright and 2) the third party committed an infringement of the copyrights by unauthorized copying or distribution.  On this matter, the court found that the plaintiffs had established direct infringement.

a)   On the plaintiffs’ claim of inducement of copyright infringement, the court found that Limewire did partake in purposeful conduct that encouraged infringement with the intent to encourage such infringement, which can be evidenced by observing the totality of the following factors:

First, the plaintiffs were able to prove that Limewire was aware of copyright infringement being committed by its users by presenting Limewire’s email correspondence with its users, articles that its employees possessed, and news articles about people who use Limewire for copyright infringing activities.

Second, the plaintiffs showed evidence of how Limewire attempted to attract copyright- infringing users.  For example, when Napster was shut down in 2001, Limewire planned to bring in previous Napster users.

Third, the plaintiffs established that Limewire helped its users to commit infringement through various methods.  For example, Limewire made its search functions easier for its users to search for specific artists, songs, and genres.

Fourth, the plaintiffs were able to establish that Limewire’s revenue was mainly created by selling advertising space and software distribution and that this depended on Limewire’s huge copyright-infringing user population.

Finally, the plaintiffs showed that Limewire did not meaningfully use its technology to prevent copyright infringement. Court noted that failure to use existing technology to prevent infringement is strong evidence of intent to encourage infringement.

b)   On the plaintiffs’ claim of contributory copyright infringement, the court said that Limewire did materially contribute to the infringement by distributing and maintaining the program, but since there is an issue of material fact as to whether Limewire has significant non-infringing uses such that it should not be subject to liability according to the Sony–Betamax rule, court did not award the plaintiffs summary judgment.

c)   On the plaintiffs’ claim of vicarious copyright infringement, the court denied the defendants’ motion for summary judgment because it found that the plaintiffs had successfully established that Limewire 1) did have the right and ability to supervise and control Limewire users’ infringing activities, and 2) did possess a direct financial interest in such infringing activity.

d)   Finally, on the plaintiffs’ claims of common law copyright infringement and unfair competition, the court said that the elements of a common law claim of inducement are the same as those of a federal inducement claim and that the evidence shows that Limewire users directly infringed on the plaintiffs’ copyrights, and that Limewire did partake in purposeful conduct intended to encourage that infringement.  Therefore, the court found in favor of the plaintiffs on the claim of common law copyright infringement.  In order to establish a claim for unfair competition, a plaintiff must show 1) unauthorized reproduction and distribution of the plaintiff’s work and 2) the existence of competition in the marketplace.  The court found that Limewire did encourage its users to commit infringements on the plaintiffs’ work, and that free distribution through Limewire competes with the plaintiffs’ sales of their work.  Therefore, the court also found in favor of the plaintiffs on the unfair competition claim.

Probably as a result of the outcome of this court’s ruling, in March of 2011 Limewire settled with music publishers of an undisclosed amount[4] and in May of 2011 Limewire settled with record labels for $105 million.[5]

IV.  The Future of File-Sharing?

So what does this mean for Limewire?  For other file-sharing programs?  Limewire was a huge player on the file-sharing arena.  Do these rulings and settlements mean that Limewire will be pushed aside and forgotten, as other companies with new file-sharing programs pop up and try to claim Limewire’s users?  According to Billboard.biz, the lawsuit against Limewire seems to have led to a decrease in file-sharing.  However, it also seems that most Limewire users sought out other programs to continue their file-sharing.[6]  This begs the question of whether these lawsuits against large companies that own file-sharing programs are only a temporary remedy as new companies just seem to take their place until they too are sued.

 


[1] Anthony Bruno, RIAA Wins Big In LimeWire Lawsuit, Billboard.biz (May 12, 2010),  http://www.billboard.biz/bbbiz/content_display/industry/news/e3ibff1f88d055b04efe98de355192960da.

[2] MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005)).

[3] Arista Records LLC v. Lime Group LLC, No. 06 CV 5936, 2011 WL 1742029 (S.D.N.Y. May 2, 2011).

[4] LimeWire Settles With Music Publishers, Labels Next?, Billboard.biz (Mar. 8, 2011), http://www.billboard.biz/bbbiz/others/limewire-settles-with-music-publishers-labels-1005061952.story.

[5] LimeWire, Labels Settle Lawsuit for $105 Million, Billboard.biz (May 12, 2011), http://www.billboard.biz/bbbiz/industry/digital-and-mobile/limewire-labels-settle-lawsuit-for-105-million-1005182142.story.

[6] Anthony Bruno, LimeWire Closure Leads To Drop in Music Piracy, Billboard.biz (Mar. 23, 2011), http://www.billboard.biz/bbbiz/others/limewire-closure-leads-to-drop-in-music-1005086882.story


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