Advanced Copyright Issues on the Internet - Fenwick & West LLP

court noted that its order applied only to the then current versions of Grokster’s andStreamCast’s products and services, and did not reach the question of whether either defendantwas liable for damages from prior versions of their software or from other past activities. 1392With respect to the issue of contributory liability, the court first noted that it wasundisputed that at least some of the individuals using the defendants’ software were engaged indirect copyright infringement. 1393 The court then turned to an analysis of the two prongs ofcontributory liability for such direct infringements, knowledge of the infringing activity andmaterial contribution thereto.In one of the most significant aspects of the ruling, the court held that mere constructiveknowledge is not sufficient for contributory liability, but rather the defendant must have actualknowledge of specific infringing acts at the time the infringement occurs. Citing the NinthCircuit’s decision in the Napster case, the court ruled that “defendants are liable for contributoryinfringement only if they (1) have specific knowledge of infringement at a time at which theycontribute to the infringement, and (2) fail to act upon that information.” 1394 This requirement ofspecific, actual knowledge seems contrary to the courts’ rulings in the Aimster case, discussed inSection III.C.2(c)(3) above, and in the Ellison and Perfect 10 v. Cybernet Ventures cases,discussed in Sections III.C.2(e) and (f) below, that constructive knowledge is sufficient forcontributory infringement on the part of a service provider. In addition, the Ninth Circuit’sruling in Napster requiring actual knowledge of specific infringing files, invoked by the NinthCircuit in its ruling on appeal of the district court’s decision in this case, was repudiated by theSupreme Court in its Grokster decision, analyzed in detail below in Section III.C.2(c)(5) below.The plaintiffs argued that the StreamCast and Grokster defendants had knowledge of theinfringing acts because the plaintiffs had sent the defendants thousands of notices regardingalleged infringement. The court held, however, that “notices of infringing conduct are irrelevantif they arrive when Defendants do nothing to facilitate, and cannot do anything to stop, thealleged infringement,” as was the case here since the infringing activity took place only after thedefendants had distributed their software and, as elaborated under the material contributionprong, they were not in a position to stop the infringing activity. 1395Citing to the Supreme Court’s Sony case, the court further ruled that mere distribution ofa device that the defendants had general knowledge could be used to commit infringement wasinsufficient to impose contributory liability, so long as the device was capable of substantialnoninfringing uses. The court noted several substantial noninfringing uses for the defendants’software, including distributing movie trailers, free songs or other non-copyrighted work, sharingthe works of Shakespeare, and sharing other content for which distribution is authorized. 13961392 Grokster, 259 F. Supp. 2d at 1033. The defendant Sharman Networks was not a party to the motions.1393 Id. at 1034.1394 Id. at 1036 (citing A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1021 (9th Cir. 2001)).1395 Grokster, 259 F. Supp. 2d at 1037.1396 Id. at 1035.- 310 -