The Shadow of 1984

Déjà vu all over again. In the end of June, the United States Supreme Court made its decision in the peer-to-peer (P2P) file-sharing case known as Metro-Goldwyn Mayer Studios v. Grokster (MGM v. Grokster). However, this time the court ruled unanimously that two P2P file-sharing ventures, Grokster and Streamcast, can be liable if they contribute to the copyright infringement by encouraging their users into illegally sharing copyrighted products.

The case is seen by many experts as one of the most important decisions of the court’s current term. The impact on the new technologies is comparable to the 1984 decision, which did not see VCRs as contributing to copyright infringement. The so-called Sony-Betamax case has set an important precedent on which the lower courts have also relied in their rulings regarding MGM v. Grokster. Behind MGM are all major Hollywood film-makers and American record labels. The Motion Picture Association of America (MPAA) and Recording Industry Association of America (RIAA) are involved in the dispute as P2P file-sharing software threatens the viability of their members’ business models. Ironically, Sony is now on the other side of the table as a shareholder of MGM.

Previous decisions by the US District Court of Central District in California and the US Ninth Circuit Court of Appeals have ruled favorably to the P2P ventures by pointing out that the distribution of technology that makes illegal file-sharing possible does not make them liable for copyright infringements committed by users of this technology. The interpretation of 21-year old Sony-Betamax case was in the center of oral arguments heard in the current file-sharing case.


Extralegal v. legal

However, the Sony-Betamax and other previous rulings do not just provide precedents on which to base the current decision.  They are indicators of past behavior of the Supreme Court judges and the values these judges consider important. Indeed, the court’s decision-making in the case where the law is unclear can hardly be seen as objective and free of personal values. The file-sharing decision of the Supreme Court is not to be understood only in pure legal terms but extralegal terms, as well.

During the last decades, vast public law literature has emerged, incorporating extralegal factors into the understanding of Supreme Court decisions. Ultimately, such an approach questions the traditional legal model, which attributes explanatory power to precedent, interpretation of United States constitution, the intent of the framers and the balance of social interests.  In their book The Supreme Court and the Attitudinal Model, public law scholars Jeffrey Segal and Harold Spaeth write: "If various aspects of the legal model can support either side of any given dispute that comes before the Court, then the legal model hardly satisfies as an explanation of Supreme Court decisions. By being able to explain everything, in the end it explains nothing."

According to Segal and Spaeth, the Supreme Court decides on the basis of "the ideological attitudes and values of justices." "Simply put, Rehnquist votes the way he does because he is extremely conservative,” write Segal and Spaeth.

Although, the behavioral research has primarily been based on the decision-making of Supreme Court on the civil rights and liberties, while economic issues have received less attention. This is crucial for the file-sharing case, since the issue can be classified primarily as “economic.” In many such decisions justices do not vote on clear liberal, moderate and conservative lines, unlike in many civil rights and liberties decisions.


For God and Country

Nevertheless, the extralegal factors do affect these economic cases, particularly when the precedent is not clear. Former Solicitor General of the United States Theodore Olson confirmed the importance of extralegal factors in MGM v. Grokster in his speech given at Georgetown Law Center in Washington D.C. on February 22 this year. Olson, who filed an amicus curiaebrief in the support of MGM, utilized his address at the ceremony where he was presented the life-time achievement award of the Federalist Society to speak entirely about the file-sharing case. Ironically for a lawyer, very few of his arguments were based on legal nuance.

Olson’s attempts to link the file-sharing case to credit card fraud, pornography, the decline of Christian values and, simply, to theft are not worth going into, but his point about the importance of copyrighted products in the US economy revealed a crucial extralegal factor influencing the decision. The introduction of new technologies such as VCRs some decades ago or P2P file-sharing technologies now leads to the transformation where existing business models for distribution of music, movies and other copyrighted material have to be changed. As change is always difficult to undertake and brings uncertainty, it is obvious why commercial interests who have benefited from the existing model are eager to protect their business models with all possible means.    

Certainly, as the case is between many large multinationals and small software companies, the court’s decision has a strong distributional impact that goes beyond U.S. borders. Even more importantly, the U.S. is the net exporter of intellectual property products and services, the decision has strong implications for the US film and recording industry in the world. The ruling can be utilized the entertainment industry to bring law suits against companies and organizations based outside of the United States but with services accessible in the United States. Such extraterritorial aspects of case are also revealed by the fact that the case has an important link to Kazaa, most popular P2P file-sharing technology in the world developed by Estonian programmers under Scandinavian management team.


Napster...What Napster?

Originally, the case now known as MGM v. Grokster was brought forth in the Federal District Court for Central District of California by record labels and film-makers against three software companies, Grokster, Kazaa and Streamcast, in October 2001. The entertainment industry argued that these companies are basically involved in copyright violations; thus, they were seen as a new Napster. After having shut down Napster for illegal copyright infringement over its network, the case seemed straightforward and favorable to the entertainment industry. But, at the same time, these P2P technologies are completely different from that utilized by Napster. Napster maintained a centralized website where users came to download files and so materially contributed to copyright infringement. Kazaa, StreamCast and Grokster utilize a decentralized model and distribute only software that allows sharing files. Thus the copyright violation in the strict sense is committed by millions of people around the world who share files.


Politics, politics, politics

As the Supreme Court is the highest level any case can reach in the United States, then its decisions guide decisions of all US courts in the years to come. The 1984 Sony-Betamax ruling was encouraging to the new technology companies. With its final decision in the Grokster v. MGM case, the court went to opposite way. Even if the court did not do exactly what the entertainment companies wanted and did not rule against P2P technology as such, it represents a significant step in the interests of large entertainment companies. As James Porter and Martine Courant Rife of Michigan State University write in their analysis the court ”did broaden the meaning of  ” inducement” of copyright infringement.” Porter and Rife warn that record and film industry are likely to interpret broadly the ruling and to use it against other filesharing intermediaries.

Copyrights are not absolute, and setting the exact balance between interests of users and interest of producers is a political question. This relates directly to the issue of how far the court  goes with its law-making powers – particularly in the extraterritorial context. California courts considered the plaintiffs’ (MGM) arguments too broad of an interpretation of copyright law and saw the reasoning of the plaintiffs in bringing the lawsuit against the defendants (Grokster) as going beyond the boundaries of existing copyright law.  Hence, the decision is also related to the issue of so-called judicial activism and whether or not judges should exercise such broad discretion in their interpretation of laws and precedents or should they stick to a more minimalist approach.

The shadow of past rulings and the current decision does point out the US Supreme Court does not rule only on the basis of legal grounds. The ruling in MGM v. Grokster was a political decision, just as the Sony-Betamax decision was in 1984. As the Internet knows no national borders, the recent decision has impact beyond the territory of United States. The decision will lead to a significant increase of litigation by the film and recording industry and filesharing intermediaries outside of the United States may very well be find themselves in the muddle of lawsuits if their services are accessed in the United States. 

*Meelis Kitsing is a PhD Candidate in Political Science at the University of Massachusetts Amherst. He has a MA in Law and Diplomacy from the Fletcher School of Tufts University in Boston and a MSc from the London School of Economics.