Broadly, peer-to-peer (“P2P”) is a communications architecture whereby each electronic device or “node” has equal capabilities and functions as both a “client” and a “server”, thus effectively enabling communication and other uses such as file sharing between the nodes.
A peer-to-peer network differs to a client-server model in that the latter involves communication through a central server. In a typical client-server model, data requests are sent from the client software to a connected server which processes and returns the requested information to the client. In contrast, a P2P network contains nodes or devices which act as both a client and server, as each have equivalent status and responsibilities.
P2P structures have in recent years been used by file sharing networks such as Napster and Gnutella. Since their inception, these networks have grown in popularity and have been the focus of much legal controversy arising from the sharing and distribution of files subject to copyright and other restrictions. As a result of the increasing activity on these networks, record companies and the music industry generally have resorted to taking legal action against individuals and the file sharing programs for copyright infringement. For example, see Universal Music v Sharman at http://www.austlii.edu.au/au/cases/cth/federal_ct/2005/1242.html.
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The Ninth Circuit held that the District was not in error in holding that Napster users were likely engaged in direct copyright infringement of the works cataloged by Napster and that Napster was unlikely to succeed in establishing that Napsters’ users had a “fair use” defense. In other words, Napster users were likely guilty of copyright infringement and without a valid defense.
The Ninth Circuit held that if a computer system operator learns of infringement and fails to purge the infringing materials from its system, it is liable for contributory infringement. The court also held that a computer system operator cannot be held liable merely because its system may be used for infringement. Finally, the court held that in Napster’s case, Napster was likely to be guilkty of contributory infringement since the facts showed that Napster had knowledge of the infringing activity and its system contributed to the infringing activity.
The court held that Napster had a financial interest in the infringing activities, had the ability to block user’s use of its system which was proof of its ability to supervise or control users, and its failure to police its system gave rise to vicarioius liability.
EFF defended StreamCast Networks, the company behind the Morpheus peer-to-peer (P2P) file-sharing software, in an important case decided by the Supreme Court of the United States on June 23, 2005. Though the Court set aside the Ninth Circuit’s ruling in favor of Streamcast, it also declined giving Hollywood what it truly wanted—a veto over technological innovation.
Twenty-eight of the world’s largest entertainment companies brought the lawsuit against the makers of the Morpheus, Grokster, and KaZaA software products, aiming to set a precedent to use against other technology companies (P2P and otherwise). As we noted in our arguments before the Court, the case raises a fundamental question at the border between copyright and innovation: When should the distributor of a multi-purpose tool be held liable for the infringements that may be committed by end-users of the tool?
The Supreme Court’s landmark decision in Sony Corporation of America v. Universal City Studios, Inc. (a.k.a. the “Sony Betamax ruling”) found that a distributor cannot be held liable for users’ infringement so long as the tool is capable of substantial noninfringing uses. This standard has served innovators, copyright industries, and the public for more than 20 years. Relying on this precedent, the Ninth Circuit ruled that the distributors of Grokster and Morpheus P2P file-sharing software cannot be held liable for users’ copyright violations.
The Supreme Court set aside the Ninth Circuit ruling, but it refused to overturn the Betamax doctrine or to force technology companies to redesign multipurpose technologies. Hollywood’s main objective thus went unfulfilled.
But rather than clarify the rules for technology innovators, the Supreme Court instead punted on the hard questions by crafting a new doctrine of copyright infringement liability called “inducement.” In the wake of the ruling, innovators now have three uncertain copyright doctrines to worry about: inducement, contributory and vicarious (for more on these doctrines, see EFF’s white paper, “What P2P Developers Need to Know About Copyright”). This uncertainty will chill innovators, deter investors, and act as a brake on economic growth.