class 16 copyright, winter, 2010 third-party liability randal c. picker leffmann professor of...

Class 16Copyright, Winter, 2010

Third-Party Liability

Randal C. PickerLeffmann Professor of Commercial Law

The Law School

The University of Chicago

773.702.0864/[email protected] © 2005-10 Randal C. Picker. All Rights Reserved.

April 20, 2023 Copyright © 2005-10 Randal C. Picker 2

Third Party Liability Relevant Law

Two Step Process Establish primary liability Establish secondary liability of third party

Copyright Act does not explicitly render anyone liable for infringements committed by another Contrast to Patent Act, which does Common Law in the Copyright Context


Evaluating Different Uses

Time Shifting Private home copying: watch and re-record

Librarying Private home copying for repeated viewing

Copying Business Copy off the air and rent/sell tapes for home

consumption


Consent to Use

How should we evaluate consent to use in this case? Mr. Rogers: “You are an important person

just the way you are. You can make healthy decisions.”


Evaluating Fair Use

Doing the four factors: 1. The purpose and character, including

whether the use is commercial 2. Nature of the copyrighted work 3. Amount of the work used in relation to the

copyrighted work as a whole 4. The effect on the potential market for or

value of the copyrighted work


Evaluating Fair Use

Across the Three Cases Factors 2 and 3 will be unchanging 1 and 4 may change from case to case

Understanding Commercial Use An effort to make money vs. a transaction

that substitutes for a commercial transaction


Evaluating Fair Use

The Potential Market Value of the Copyrighted Work The Broadcast TV Market

Fast-forwarding over commercials? Repeats and syndication after first broadcast

The Video Rental and Sales Market Doesn’t copying substitute directly for this

market?


Allocating Liability

The Role of Third-Party Liability When should we add third-party liability to

first-party liability? Does that depend on how we enforce first-

party liability?


Two Theories

Vicarious Liability When one party has control over another

and also enjoys a direct financial benefit from infringement

No knowledge required. Flea market (control: kick them out; benefit:

patronage)


Contributory Copyright Infringement

Statement of Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir. 1971): “[O]ne who, with knowledge of the infringing

activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a ‘contributory’ infringer.”


35 USC 271

(a) Except as otherwise provided in this title,

whoever without authority makes, uses or sells any patented invention, within the United States during the term of the patent therefor, infringes the patent.


35 USC 271

(b) Whoever actively induces infringement of a

patent shall be liable as an infringer.


35 USC 271 (c)

Whoever sells a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.

The Sony Test

Says the Court “Accordingly, 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 noninfringing uses.”



In Sony: Two Key Issues

Third party liability, either vicarious or contributory Premised on underlying violation by

consumers No underlying violation, as consumers

engaged in fair use


Design Incentives

Hypo Suppose Sony could have spent $10 to

eliminate all infringing uses of the VCR Under Sony, would it have an incentive to

do so?


The Design of the VCR

Consider the design choices for the VCR: Recorder rather than just pre-recorded tape

player Fast forward button No capability for recognizing “jamming”

signals to prevent recording Should Sony have been liable for these

design choices?


Design Incentives

Hypo Suppose product generates $10 million in

beneficial noninfringing uses and $1000 in infringing uses

Suppose producer could spend $5 to eliminate $1000 in infringing uses

How would we revise Sony to address this?


Use and Design

Weak Relationship between Use-Based Tests and Design Incentives Sony: Substantial noninfringing uses

So long as you have those, extent of infringing uses irrelevant

No incentive to redesign to eliminate infringing uses


Use and Design

Primary Use Test Suppose no third-party copyright liability so

long as primary use of product is noninfringing

What incentives for design to eliminate infringing uses?

• Only at margin


Use and Design

Bottom Line? Address design duties separately from use


Limits of the Decision

Justice Blackmun’s Second Footnote “This case involves on the home recording

for home use of televisions broadcast free over the airwaves. No issue is raised concerning cable or pay television, or the sharing or trading of tapes.”

What turns on the fact the broadcasts are free?


Implementing Consent

Should we implement a consent regime for copying? for redistribution?

Blackmun Again “Sony may be able, for example, to build a

VTR that enables broadcasters to scramble the signal of individual programs and ‘jam’ the unauthorized recording of them”


Grokster in the Sup Ct

Two Cuts Grokster loses 9-0 on an inducement theory We get a 3-3-3 decision on Sony

Souter, Thomas & Scalia: 9th Cir wrong on Sony and no more

Ginsberg, The Chief Justice & Kennedy: Liable under Sony

Breyer, Stevens & O’Connor: Not liable under Sony


Consumer Electronics Ass’n

“The Betamax standard is the foundation of America’s explosive technological growth over the past twenty years. Betamax has made possible an unprecedented transformation in the way that Americans express themselves, communicate, create and experience the world.

For two decades, Betamax has brought about enormous new revenues for innovators and the content community, contributed billions of dollars to the U.S. economy, and generated enormous benefits to society.”

Grokster

Key Questions How does Grokster relate to Sony? What does it take to avoid liability under Grokster?



Three Pieces of Evidence

1. Satisfying known demand for copyright infringement Trying to get Napster users

2. Business model driven by advertising Turns on infringing high-volume use


Three Pieces of Evidence 3. Didn’t try to filter out infringing uses

“Underscores … intentional facilitation of their users’ infringement”

But See Footnote 12 “Of course, in the absence of other evidence of

intent, a court would be unable to find contributory infringement liability merely based on a failure to take affirmative steps to prevent infringement, if the device otherwise was capable of substantial noninfringing uses. Such a holding would tread too close to the Sony safe harbor.”

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