Every month thousands of people are sued for allegedly sharing copyrighted material on BitTorrent. Many of the accused claim to be innocent, and point their finger at someone else who may have used their Internet connection to share the file. But does this mean they're off the hook? Lawyer Nicholas Ranallo believes so.

Today we publish two opinion pieces from copyright lawyers who are familiar with the mass-lawsuits against alleged BitTorrent users in the U.S.

Both lawyers discuss whether someone can be held liable for the copyright infringements committed by others on their Internet connection.

The opinion below comes from Nicholas Ranallo, who is a licensed attorney in California and New York. He currently resides in Boulder Creek, California and is building a solo practice handling emerging issues in Intellectual Property, Internet law and e-commerce.

Ranallo’s opinion focuses on the question of whether people are liable for the copyright infringements of others, which may occur when they operate an open WiFi network or when they share their internet access with roommates or employees.

The other post in this series, which argues the opposite of Ranallo (but focusing on the open WiFi angle only), can be found here. We thank both Ranallo and Randazza for their contribution.

—

Liability for 3rd Party Copyright Infringement: A Lawyer’s Take on Misleading Legal Claims by Pre-Settlement Trolls

The continuing adventures of the copyright trolls have been covered widely on this blog and others, so I will limit my thoughts today to one particular aspect of the scheme: Copyright trolls’ claims regarding your responsibility for someone else’s infringement of copyrighted works.

Or in other words, are you liable for the infringements of other people when you choose to leave (parts of) your wiFi network open to friends, family or even complete strangers. In the press many of the attorneys representing copyright holders claim you are. Some even have a dedicated section on the topic included in with their settlement letters.

Lawyer John Steele for example, uses the following description, which he has ironically enough pirated from a FAQ that competitor copyrightsettlements.com hosts on its website.

“If you are unfamiliar with the copyright protected file or content, we normally find that the infringement was the result of a spouse, child, roommate, employee, or business associate uploading, downloading or otherwise sharing or displaying the copyright protected material over your Internet connection. Infringements can also result from an unsecured wireless network. In any of these scenarios the Internet Service Provider (ISP) account holder is still legally responsible for the infringement(s) and settlement(s) fees.”

This statement needs to be deconstructed and examined. There is a lot of (mis)information in there, with many startling claims about copyright liability.

As a whole, the trolls’ statement of your potential defenses reminds me a lot of the mob’s policy on similar issues in Goodfellas : Your roommate downloaded this? F__k you, pay me. Your child downloaded this? F__k you, pay me. Your ‘business associate’ or someone you’ve never met downloaded this? You get the idea.

Perhaps it’s not surprising that the flow chart at copyrightsettlements.com always ends up at “you are guilty,” however THIS IS NOT THE LAW. In fact, their claims are legally incorrect in a fun assortment of ways. I’m going to focus only on the ways that it’s incorrect under existing copyright law in this article.

Third-Party Liability for Infringement under Existing (Real) Copyright Law

It’s important to focus on the concept of third-party liability under copyright law because the copyright trolls’ entire scheme is built on one particular aspect of copyright law – statutory damages. Normally, a plaintiff’s recovery is limited to actual damages, or the monetary measure of the actual harm done. The copyright law, however, imposes statutory minimum and maximum penalties that are grossly disproportionate to the value of an actual work (i.e. one copy of a song or video), up to $150,000 for the most egregious infringements. Perhaps not surprisingly, this $150,000 figure gets cited a lot by copyright trolls as the amount to which they will be entitled if they sue you.

Courts have articulated three basic ways that a person can be held liable for infringing another’s copyright: direct liability, contributory liability, and vicarious liability. Direct liability means, quite simply, that you infringed the copyright yourself. This is first-party liability and is probably not surprising to anyone. The other two are the focus of this article, and the ultimate rebuttal to the misstatements in the FAQ.

A. Contributory Infringement

In MGM v. Grokster 545 U.S. 913, 930 (2005) the United States Supreme Court (USSC) described liability under the doctrine of contributory infringement as follows: “One infringes contributorily by intentionally inducing or encouraging direct infringement.” The USSC approvingly cites Gershwin Publishing Corp. v. Columbia Artists Mgmt., Inc., the 2nd Circuit Court of Appeals adopted the following test for contributory infringement.

“One who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may also be held liable for the infringement. 443 F2d 1159, 1162 (2nd Circuit 1971).

The Gershwin test has been widely adopted by courts, including in the 9th Circuit, home to copyrightsettlements.com. As you can see, this test is far narrower than the F__k you, pay me test adopted by copyrightsettlements.com. The Gershwin test specifically requires:

1) Knowledge of the infringing activity

2) Intent

3) Inducing, causing, or materially contributing to the infringing conduct of another.

The 9th Circuit had a chance to revisit the issue of contributory infringement in the wake of the USSC ruling in Grokster, described above, and elaborated further on the requirements for contributory infringement in the digital realm in Perfect 10, Inc. v. Amazon.com, Inc., 508 F. 3d 1146(9th Circuit, 2007). Perfect 10 held that:

“a computer system operator can be held contributorily liable if it ‘has actual knowledge that specific infringing material is available using its system and can “take simple measures to prevent further damage’ to copyrighted works, yet continues to provide access to infringing works.”

Notably, the italics in this sentence were the court’s own, and emphasized ACTUAL knowledge of SPECIFIC infringing material. This is certainly not the test described by CEG.

B. Vicarious Infringement

The USSC also described vicarious infringement in MGM. The Court stated that one “infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it.” Grokster, 545 U.S. at 930, 125 S.Ct. 2764.

Like contributory liability, above, this definition has multiple elements, BOTH of which need to be shown to before imposing liability.

1) Profit from direct infringement

2) A right (and ability) to stop or limit the infringement

This test has two distinct elements, BOTH of which need to be shown to impose liability. I cannot think of a good faith argument that any of the parties described by the core claim actually profit from infringing activities, especially when the work that is claimed to be infringed is porn. An employer profits from an employee downloading porn? Really? You profit when someone downloads porn via your unsecured connection? Profit? This stretches all bounds of credulity.

It almost seems unnecessary to go into the second element, the right and ability to control, when the first element cannot reasonably be shown. But this prong also raises a host of issues, especially in cases involving spouses, “business associates”, or roommates. I need only recall the look of my college kitchen to conclude that we never really had sufficient right or ability to control each others’ activities in any way.

C: Inducement?

The USSC discussed a third potential avenue for third-party liability in MGM under the broader rubric of contributory liability, but this route is equally unhelpful for the core claim. In MGM the Court recognized that one could be liable if they “induced” the infringement of another. The Court 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.” MGM at 936-37.

Although this could conceivably apply to an unsecured router, the court is quick to extinguish this possibility for the situations described in the core claim. The court specifically states that:

“Accordingly, just as Sony did not find intentional inducement despite the knowledge of the VCR manufacturer that its device could be used to infringe, 464 U. S., at 439, n. 19, mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability… The inducement rule, instead, premises liability on purposeful, culpable expression and conduct…”.

Notably, the FAQ page emphasizes repeatedly that purposeful, culpable expression and conduct is not at all necessary. It does emphasize, however, that you are still liable.

The Takeaway

The copyright troll’s core claim regarding third-party liability is extremely misleading regarding the present state of third-party liability under copyright law. As each misstatement works to the benefit of the trolls, I can only assume that this misrepresentation is intentional. One can only wonder whether they will face claims of fraud and misrepresentation from those who were misled by these statements.

(Disclaimer: The legal analysis and opinion expressed herein are solely those of the author. Nothing herein is to be construed as legal advice and is not meant to replace the advice of an attorney with knowledge of the specific facts of your case. No attorney-client relationship is created, and you should not send me confidential information. Please just don’t try to sue me for offering my thoughts. Thank you.)