MGM Studios, Inc. v. Grokster, Ltd.

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When it comes to copyright law, MGM Studios, Inc. v. Grokster, Ltd. (2005) established the rule that P2P software companies can be held liable for copyright infringement by third party users.

The facts of MGM Studios, Inc. v. Grokster, Ltd. are simple to understand. Grokster was a case about copyright infringement. Basically, Grokster, a software company, made P2P software and profited off advertising. Users of Grokster software copied music and shared it; thus, they committed copyright infringement. MGM and 28 other companies sued Grokster for facilitating copyright infringement.

The decision in the case was unanimous. The decision included Chief Justice William Rehnquist, John P. Stevens, Sandra Day O’Connor, Antonin Scalia, Anthony Kennedy, David Souter, Clarence Thomas, Ruth Bader Ginsburg, and Stephen Breyer. Justice David Souter delivered the majority opinion.

Here’s the issue involved in MGM Studios, Inc. v. Grokster, Ltd. before the US Supreme Court. Can a software company that makes P2P software for users be held liable for copyright infringement by those users?

This case established the following rule: When a P2P software company creates software that users can use to copyright infringe, the software company can be held liable for third party users.

The Supreme Court delivered their holding of the case. They ruled: “Producers of technology who promote the ease of infringing on copyrights can be sued for inducing copyright infringement committed by their users. Ninth Circuit Court of Appeals vacated and remanded.”

Moreover, the Supreme Court said Grokster committed contributory and inducement infringement. Contributory infringement occurs when someone participates in, or contributes to, the infringing acts of another person. Inducement infringement happens when a person actively induces infringement of a patent. Grokster was a contributory and inducement infringer and vicariously liable for their actions.

In the end, this decision impacted P2P software companies. The court ordered Grokster to pay 50 million; moreover, Grokster shutdown it’s website and stopped offering P2P software downloads. Because of this case, later, courts issued injunctions against companies like Streamcast and LimeWire to stop P2P software downloads.

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