Advanced Copyright Issues on the Internet - Fenwick & West LLP

and detailed opportunity to construe some of the more confusing aspects of the Napster I andNapster II cases, as well as to explicate the effect of the Supreme Court’s Grokster decision onthe Ninth Circuit’s rulings and their applicability to Hummer Winblad’s and Bertelsmann’ssecondary liability.In moving for summary judgment, the defendants argued that the Ninth Circuit’s rulingsin Napster I and Napster II limited Napster’s liability to those works of which Napster had actualnotice and which Napster failed to remove from its system. The Plaintiffs disputed thedefendants’ reading of Napster I, and also argued that Judge Patel’s holding in Fonovisa, Inc. v.Napster, Inc. 1538 and the Supreme Court’s Grokster decision firmly established that actual noticeis not required. The defendants argued that the ultimate holding of Napster I, however it mighthave been called into question by the Grokster case, with respect to the degree of Napster’sliability was binding in the instant litigation. 1539 To adjudicate the contentions of the plaintiffsand the defendants, Judge Patel revisited the Napster I, Fonovisa v. Napster, and Groksterdecisions in detail.Turning first to the Napster I decision, the court noted that the Ninth Circuit’s rulingswith respect to the standard of knowledge required – actual versus constructive – wereconfusing. The Ninth Circuit began its opinion by noting that Napster had both actual andconstructive knowledge of direct infringements committed through the Napster system. But thenthe Ninth Circuit’s opinion abruptly shifted when it quoted language from the court’s opinion inthe Netcom case to the effect that evidence of actual knowledge of specific acts of infringementis required to hold a computer system operator liable for contributory copyright infringement. 1540Judge Patel noted that the Ninth Circuit’s discussion of the Netcom case was confusing inseveral respects. First, the Ninth Circuit’s opinion stated at least two formulations of the level ofknowledge required for infringement, suggesting alternately that actual knowledge was requiredand that it was sufficient. Second, the Ninth Circuit’s opinion did not explicitly discussconstructive knowledge as an alternate basis for liability. Judge Patel noted, however, thatfocusing on the Ninth Circuit’s own formulations of the legal standard, and not on the quotefrom the Netcom decision, it would be possible to read the first half of Napster I as upholdingJudge Patel’s findings on both actual and constructive knowledge and affirming liability on bothbases. 1541However, Judge Patel noted that the portion of the Ninth Circuit’s opinion modifying thescope of her preliminary injunction presented a second discontinuity in reasoning. The NinthCircuit set forth a three factor test defining the boundary of Napster’s contributory liability:Napster could be liable to the extent it (1) received reasonable knowledge of specific infringingfiles with copyrighted works, (2) knew or should have known that such files were available onthe Napster system, and (3) failed to act to prevent viral distribution of the works. The1538 2002 U.S. Dist. LEXIS 4270 (N.D. Cal. Jan. 28, 2002).1539 In re Napster, Inc. <strong>Copyright</strong> Litigation, 2002 U.S. Dist. LEXIS 4270 at *13.1540 Id. at *14-16.1541 Id. at *19.- 338 -