Advanced Copyright Issues on the Internet - Fenwick & West LLP

argued that it did not have the ability to supervise the allegedly infringing activity because it wasimpossible to police the activity of each of its individual users. Napster argued that it couldnever know the use to which a particular file was put on its system, and thus could not controlwhether a use was fair or not. Napster also pointed to Section 512(m) of the DMCA, 1245 whichprovides that a service provider has no affirmative duty to police its users, and cannot beexpected to monitor individual users until put on notice by the copyright holder of particularalleged infringing materials. Napster argued that, were service providers required affirmativelyto identify and exclude all copyrighted materials, there could be no file sharing or, indeed, even aWorld Wide Web. 1246 Napster also argued that it received no direct financial benefit from theinfringing activity, but at most only a generalized financial benefit, since the many noninfringinguses of the Napster system drew many users to its system. 1247The district court rejected these arguments and ruled that Napster was vicariously liable.The court found that Napster’s ability to block users about whom rights holders complain was“tantamount to an admission that defendant can, and sometimes does, police its service.” 1248 Thecourt ruled that a defendant need not exercise its supervisory powers to be deemed capable ofdoing so. The district court also held that the plaintiffs had shown a reasonable likelihood thatNapster had a direct financial interest in the infringing activity, citing documents stating thatNapster would derive revenues directly from increases in its user base and deposition testimonyby Napster’s former President that the Napster service attracted more and more users by offeringan increasing amount of quality music for free. The court found this to be similar to the type ofdirect financial interest that the Ninth Circuit found sufficient for vicarious liability in theFonovisa case. Accordingly, the district court ruled that the plaintiffs had shown a reasonablelikelihood of success on their vicarious infringement claims. 1249The Ninth Circuit’s rulings on appeal in Napster I with respect to the vicarious liabilityissue are some of the most significant holdings in the case. In a very important initial ruling, theNinth Circuit held that the “staple article of commerce” doctrine of Sony has no applicability tovicarious liability. This ruling seems a bit odd, since the Sony opinion uses the phrase“vicarious liability” several times. The Ninth Circuit acknowledged as much, but concluded that“when the Sony Court used the term ‘vicarious liability,’ it did so broadly and outside of atechnical analysis of the doctrine of vicarious copyright infringement.” Under this holding, itappears that the Sony doctrine will not afford any immunity to service providers from vicariousliability.1245 That section provides as follows: “Nothing in this section shall be construed to condition the applicability ofsubsections (a) through (d) [the safe harbors] on – (1) a service provider monitoring its service or affirmativelyseeking facts indicating infringing activity, except to the extent consistent with a standard technical measurecomplying with the provisions of subsection (i).” 17 U.S.C. § 512(m)(1).1246 Napster’s PI Opp. Brief, supra note 1173, at 20-21.1247 Id. at 21.1248 Napster, 114 F. Supp. 2d at 921.1249 Id. at 921-22.- 282 -