UNITED STATES COURT OF APPEALS 
                                      FOR THE NINTH CIRCUIT  



                                        Nos. 03-55894 & 03-56236  


                          METRO-GOLDWYN-MAYER STUDIOS INC., et al.,        
                                                                Plaintiffs-Appellants, 
                                                     v.  


                                        GROKSTER LTD., et al.,        
                                                                Defendants-Appellees.  



                                              No. 03-55901  


                      JERRY LEIBER, individually d.b.a. Jerry Leiber-Music, et al.,        
                                                                Plaintiffs-Appellants, 
                                                     v.  


                                        GROKSTER LTD., et al.,        
                                                                Defendants-Appellees.  


                  ON APPEAL FROM THE UNITED STATES DISTRICT COURT 
                           FOR THE CENTRAL DISTRICT OF CALIFORNIA  


                           Case Nos. CV-01-08541-SVW & CV-01-09923-SVW 
                      Honorable Stephen V. Wilson, United States District Court Judge 


            BRIEF AMICI CURIAE OF THE COMPUTER & COMMUNICATIONS 
                         INDUSTRY ASSOCIATION AND NETCOALITION  



        Kevin McGuiness                                      Edward J. Black  
        Markham Erickson                                     Jason M. Mahler* 
        MCGUINESS & HOLCH                                    COMPUTER & COMMUNICATIONS 
        400 North Capitol Street, N.W.                          INDUSTRY ASSOCIATION  
        Suite 585                                            666 Eleventh Street, N.W.  
        Washington, D.C.  20001                              Washington, D.C.  20001 
        (202) 783-5300                                       (202) 783-0070  


        Counsel for NetCoalition                             *Counsel of Record  


        Dated:  September 26, 2003   


  
 
            CORPORATE DISCLOSURE STATEMENT OF AMICI  


        1.  Pursuant to Federal Rule of Appellate Procedure 26.1, amicus 


           Computer & Communications Industry Association ("CCIA") states 


           that it is a non-profit trade association and as such has no parent 


           corporation nor any issued stock or partnership shares of any kind.  A 


           complete list of CCIA's members is publicly available at: 


           .   


        2.  Pursuant to Federal Rule of Appellate Procedure 26.1, amicus 


           NetCoalition states that it is a non-profit trade association and as 


           such has no parent corporation nor any issued stock or partnership 


           shares of any kind.  A complete list of NetCoalition's members is 


           publicly available at:  .      




                                                 ____________________________ 
                                                 Jason M. Mahler 
                                                 COMPUTER & COMMUNICATIONS  
                                                   INDUSTRY ASSOCIATION  


      Dated:  September 26, 2003





                                            i


  
                                            TABLE OF CONTENTS  


                                                                                                                      Page 


      CORPORATE DISCLOSURE STATEMENT  ............................................ i 

      TABLE OF AUTHORITIES ....................................................................... iii 

      INTEREST OF AMICI ................................................................................. 1 

      ARGUMENT ................................................................................................ 3 

      I.     The Rules Advocated By Appellants and Their Amici Would 
             Undermine The Supreme Court's Betamax Decision and Thereby Cause 
             Irreparable Harm to the Information Technology and Internet Industries
             ................................................................................................................ 3 

      II.  Appellants and Their Amici Misrepresent This Court's Ruling in 
             Napster ................................................................................................. 11  


             A. Appellants Misunderstand the Napster Court's Holdings Concerning 
                 Contributory Infringement .............................................................. 12  


             B. Appellants Misunderstand the Napster Court's Holdings Concerning 
                 Vicarious Liability. ......................................................................... 15  


      III.  CONCLUSION .................................................................................... 17 

      CERTIFICATE OF COMPLIANCE ........................................................... 20   





                                                                 ii


  
                                        TABLE OF AUTHORITIES   


                                                       CASES   


      A & M Records, Inc. v. Napster, Inc., 
         239 F.3d 1004 (9th Cir. 2001) ...................................................................... passim  


      A & M Records, Inc. v. Napster, Inc., 
         284 F.3d 1091 (9th Cir. 2002) ..............................................................................15  


      In re Aimster Copyright Litigation, 
         334 F.3d 643 (7th Cir. 2003) ........................................................................5, 6, 15  


      MGM Studios Inc. v. Grokster Ltd., 
         259 F. Supp. 2d 1029 (C.D. Cal. 2003)..........................................................13, 17  


      Sony Corp. of America v. Universal City Studios, 
         464 U.S. 417 (1984) ..................................................................................... passim  


                                                    STATUTES   


      17 U.S.C.  512(i)(2)..................................................................................................9  


      17 U.S.C.  1201(c)(3)...............................................................................................9  


      35 U.S.C.  271(b) ...................................................................................................15  


      35 U.S.C.  271(c)..............................................................................................14, 15  


                                                        BILLS  


      S. 2048 (107th Cong.) ................................................................................................8  


                                         OTHER AUTHORITIES   



      Ahrens, Frank, RIAA's Lawsuits Meets Surprised Targets: Single 
         Mother in Calif., 12 Year-Old Girl in N.Y. Among Defendants, 
         Washington Post, September 10, 2003, at E1 ......................................................18  




                                                            iii


 
     Apple Corporation Press Release, iTune Music Store Hits Five 
       Million Downloads (June 23, 2003).....................................................................18  


     Chen, C.J. Alice and Aaron Burstein, The Law and Technology of 
       Digital Rights Management, 18 Berkeley Tech. L.J. 487 (2003) ........................10  


     Evangelista, Benny, Download Lawsuit Dismissed; RIAA Drops 
       Claim That Grandmother Stole Online Music, San Francisco 
       Chronicle, September 25, 2003, at B1..................................................................18  


     Felten, Edward W., A Skeptical View of DRM and Fair Use, 
       Communications of the ACM (April 2003) .........................................................10  


     Katoh, Masanobu, Intellectual Property and the Internet: A Japanese 
       Perspective, 2002 U. Ill. J. L. Tech. & Policy 333 (2002).....................................8  


     Knauss, Tim, Lawsuits Scare Off CNY Music Downloaders, Syracuse 
       Post Standard, September 14, 2003, at A1 ...........................................................18     





                                                    iv 


  
  
                                                          INTEREST OF AMICI  


                 The Computer & Communications Industry Association ("CCIA") is 


      an association of computer, communications, Internet and technology 


      companies that range from small entrepreneurial firms to some of the largest 


      members of the industry.  CCIA's members include equipment 


      manufacturers, software developers, providers of electronic commerce, 


      networking, telecommunications and online services, resellers, systems 


      integrators, and third-party vendors.  Its member companies employ nearly 


      one million people and generate annual revenues exceeding $200 billion.  


      CCIA's mission is to further the interests of its members, their customers, 


      and the industry at large by serving as the leading industry advocate in 


      promoting open, barrier-free competition in the offering of computer and 


      communications products and services worldwide.1 


                 NetCoalition serves as the public policy voice for some of the world's 


      most innovative Internet companies on the key legislative and administrative 


      proposals affecting the online world.  NetCoalition provides creative and 


      effective solutions to the critical legal and technological issues facing the 


      Internet.  By enabling industry leaders, policymakers, and the public to 





                                                      
        1  StreamCast once was a member of CCIA but no longer is.   

                                                                  1 


  
      engage directly, NetCoalition has helped ensure the integrity, usefulness, 


      and continued expansion of this dynamic new medium. 


            The U.S. Supreme Court in Sony Corp. of America v. Universal City 


      Studios, 464 U.S. 417 (1984) ("Betamax"), and this Court in A & M Records, 


      Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001)("Napster"), created fair 


      and practical rules for secondary copyright liability.  These rules have 


      unleashed the creative powers of the information technology industry and 


      led directly to the growth of the Internet.  Appellants and their amici now 


      seek to change these rules, and replace them with new standards that would 


      as a practical matter give the entertainment industry a veto power over the 


      development of innovative products and services.  Although appellants and 


      their amici claim that the District Court below misunderstood this Court's 


      holdings in Napster, it is they who misread Napster.  This misreading would 


      wreck havoc in the information and technology industries, and would harm 


      users of digital information.   


            We do not condone the infringement that occurs over the Internet in 


      general and peer-to peer networks in particular.  However, the 


      misinterpretation of Betamax and Napster is not the proper solution to this 


      problem.  Accordingly, this Court should resist the misreading of Betamax 


      and Napster urged by appellants and their amici. 



                                             2 


  
              All parties have consented to the filing of this brief.   




                                         ARGUMENT  


      I.      The Rules Advocated By Appellants and Their Amici Would 
              Undermine The Supreme Court's Betamax Decision and Thereby 
              Cause Irreparable Harm to the Information Technology and 
              Internet Industries.   


              This case is about more than the legality of peer-to-peer software.  It 


      is about the future of the information technology ("IT") industry, the 


      Internet, and the fair use of digital works.    


              The legal foundation upon which the IT industry stands is the 


      Supreme Court's decision in Sony Corp. of America v. Universal City 


      Studios, 464 U.S. 417 (1984)("Betamax").  In Betamax, the Supreme Court 


      proclaimed that the manufacturer of a product could not be held secondarily 


      liable for infringing uses of the product so long as the product was capable 


      of substantial noninfringing uses.  That clear standard gave venture 


      capitalists, engineers, and manufacturers the confidence and certainty that 


      they could invest their resources in developing a wide range of consumer IT 


      products without facing copyright liability.  These products include personal 


      computers, laptops, scanners, printers, and the software that enables them to 


      operate.   




                                                3 


  
            Prior to the sale of these products, the investors and manufacturers 


      have known that consumers could use them to infringe the copyrights in 


      computer programs, computer games, sound recordings, motion pictures, 


      and many literary works.  And once the products have been on the market, 


      the investors and manufacturers have known for a certainty that some 


      consumers have in fact used the products for infringing purposes.  The 


      investors and manufacturers likewise have known that government and 


      business employees have used their workplace computers to make infringing 


      copies, although perhaps to a lesser degree than their home computers.  


      Nonetheless, under the Betamax standard, the investors and manufacturers 


      have also known that they were safe from copyright liability because these 


      products were all capable of substantial noninfringing uses.  


            In the nearly twenty years since the Betamax decision, the IT 


      revolution has created millions of jobs in the U.S. and abroad.  It has 


      increased the productivity of businesses, and dramatically enhanced people's 


      ability to access and use information.  Although digital technology has 


      exposed the entertainment industry to copyright infringement, it has also 


      benefited the entertainment industry in numerous ways.  Computer graphics 


      are routinely used in the production of both live action and animated films 


      and television shows to make special effects look more realistic.  Digital 



                                             4  


  
 
      recording technology enables a small number of musicians and technicians 


      to create the sound of an orchestra.  Digital storage media such as compact 


      discs and digital versatile discs ("DVDs") provide consumers with 


      previously unimaginable audio and video quality.  DVDs have created a 


      huge new market for the picture industry -- $ 11.7 billion in 2002 alone.2  


                 In their briefs, appellants and their amici contend that the District 


      Court misapplied this Court's holdings in A&M Records, Inc. v. Napster, 


      Inc., 239 F.3d 1004 (9th Cir. 2001)("Napster"), as well as the Supreme 


      Court's Betamax decision.  But what they really are advocating is for this 


      Court to significantly limit the applicability of Betamax, and to replace this 


      Court's holdings in Napster with those of Judge Posner in In re Aimster 


      Copyright Litigation, 334 F.3d 643 (7th Cir. 2003)("Aimster").  See, e.g., 


      MGM Plaintiff-Appellants' Opening Brief at 42 ("MGM Brief"); Brief in 


      Support of Reversal by Amici Curiae Law Professors and Treatise Authors 


      at 22-23 ("Boorstyn Brief"); Brief of Amici Curiae of FullAudio Corp. et al. 


      at 17-18 ("FullAudio Brief"); Brief of Amici Curiae American Film 


      Marketing Association et al. at 14 ("AFMA Brief").  


                 In Aimster, Judge Posner explicitly disagreed with Napster and 


      implicitly disagreed with Betamax.  Aimster, 334 F.3d at 649.  Judge Posner 


                                                      
        2   Brett Sporich, DVD Boom Continues, Billboard, August 16, 2003, at 42.  

                                                          5 


  
 
      read into Betamax a non-existent cost-benefit test, stating that "when a 


      supplier is offering a product or service that has noninfringing as well as 


      infringing uses, some estimate of the respective magnitudes of these uses is 


      necessary for a finding of contributory infringement."  Id.  Later, Judge 


      Posner articulated the following rule: "Even when there are noninfringing 


      uses of an Internet file-sharing service ... if the infringing uses are substantial 


      then to avoid liability as a contributory infringer the provider of the service 


      must show that it would have been disproportionately costly for him to 


      eliminate or at least reduce substantially the infringing uses."  Id. at 653.  


                 This rule, if adopted nationwide, could cripple the IT industry.3  In 


      order to avoid copyright liability, a company that marketed a product would 


      have to constantly assess: 1) whether the infringing uses were substantial; 


      and 2) if they were substantial, whether the infringements could be reduced 


      or eliminated in a manner that would not be disproportionately costly.  Judge 


      Posner did not define how substantial the infringing uses would have to be, 


      nor how disproportionate the costs of avoiding the infringement.  Judge 


      Posner also did not appreciate how costly and technically difficult it can be 


      for a provider of technology products or services to monitor their use and 


                                                      
        3  Because Judge Posner found that Aimster had not demonstrated any 
      noninfringing uses, this statement is mere dicta.  



                                                          6 


  
      determine whether the use infringed copyright.  Since virtually all IT 


      products have some infringing uses, manufacturers and service providers 


      would operate in a perpetual state of uncertainty and confront unending 


      litigation as copyright owners and courts second guessed every engineering 


      decision the manufacturers made.  


            Equally harmful would be the vicarious liability rule advocated by 


      appellants and their amici.  They contend that the defendants should incur 


      vicarious liability because the defendants had the right and ability to include 


      filters that could limit infringement in the new releases of their software, but 


      elected not to do so.  MGM Brief at 58-62; Boorstyn Brief at 27; AFMA 


      Brief at 31.  But if P2P software distributors have a legal duty to use 


      infringement filters, so too do all other software and hardware firms.  This 


      rule would require Microsoft to redesign Windows to filter out infringing 


      works and prevent the transmission of infringing material over the Internet.  


      Hewlett-Packard would be forced to re-engineer its personal computers to 


      preclude the installation of P2P software.  AOL would be required to 


      reconfigure its email and instant messaging service to inhibit the attachment 


      of files containing infringing works.    


            In other words, appellants are recasting vicarious liability as a means 


      of requiring IT companies to implement digital rights management ("DRM") 



                                              7 


  
 
      systems.  They are trying to get this Court to grant what Congress has 


      already denied. 


                 In March 2002, Senator Ernest Hollings of South Carolina, Chairman 


      of the Senate Commerce Committee, introduced S. 2048, the Consumer 


      Broadband and Digital Television Promotion Act.  The Hollings bill would 


      have given copyright owners, consumer groups, and the manufacturers of 


      digital media devices twelve months to reach an agreement on "security 


      system standards for use in digital media devices...."4  If within those twelve 


      months the parties reached an agreement, the Federal Communications 


      Commission ("FCC") would have adopted those standards as a legally 


      binding regulation.  On the other hand, if the parties did not reach 


      agreement, the FCC would have been required to initiate a rulemaking 


      proceeding to adopt a standard.   


                 The Hollings bill came under sharp attack from the IT industry, which 


      questioned the bill's assumptions and substance.5  Additionally, the bill's 


      requirement that IT companies include DRM systems represented a 


      departure from the legislative compromise of Title I of the Digital 


                                                      
        4  Digital media devices were defined broadly enough to include all 
      computers and consumer electronic devices such as CD and DVD players. 
        5  For a more detailed discussion of the Hollings bill, see Masanobu Katoh, 
      Intellectual Property and the Internet: A Japanese Perspective, 2002 U. Ill. 
      J. L. Tech. & Policy 333, 342-347 (2002). 

                                                          8 


  
      Millennium Copyright Act ("DMCA").  The IT industry had agreed to the 


      DMCA's prohibition on the manufacture of circumvention devices and 


      components only because of the inclusion of the "no mandate clause" in 17 


      U.S.C.  1201(c)(3): "Nothing in this section shall require that the design of, 


      or design and selection of parts and components for, a consumer electronics, 


      telecommunications, or computing product provide for a response to any 


      particular technological measure...."  Notwithstanding this provision, the 


      Hollings bill would have required all digital media devices to respond to the 


      security system standards established pursuant to the legislation. 


            The Hollings bill also departed from the legislative compromise in 


      Title III of the DMCA.  One of the conditions for an Internet service 


      provider to be eligible for the DMCA's safe harbors was that it 


      accommodated and did not interfere with standard technical copyright 


      protection measures that had been developed "pursuant to a broad consensus 


      of copyright owners and service providers in an open, fair, voluntary multi-


      industry standards process."  17 U.S.C.  512(i)(2)(A).  A security system 


      developed and mandated by the FCC obviously differs from a consensus 


      standard developed pursuant to a voluntary multi-industry process.  


            Because of the strong opposition it aroused, the Hollings bill did not 


      progress beyond the Senate Commerce Committee, and it died with the end 



                                             9 


  
 
      of the 107th Congress.  Having failed to convince Congress to reverse its 


      "no mandate" policy judgment in the DMCA, Appellants now request this 


      Court to reach essentially the same result by means of expansive application 


      of the vicarious liability doctrine.    


                 If this Court adopts appellants' position, the entertainment industry 


      will be empowered to dictate to the IT industry how to design its products.  


      To avoid endless cycles of copyright litigation, IT companies will have no 


      choice but to include whatever DRM systems the entertainment industry 


      demands.  These DRM systems could inhibit the functionality of IT products 


      and impede innovation.  Additionally, the DRM systems inevitably will 


      diminish users' ability to make lawful copies.  This is because it is 


      impossible to design a DRM system that can distinguish between fair uses 


      and infringing uses.6  Thus, a DRM system that effectively prevents 


      infringing uses will also prevent some fair uses.  


                 In short, the contributory infringement and vicarious liability 


      standards advocated by appellants and their amici would fundamentally 


      change the character of the IT industry in this country.  Instead of a highly 


                                                      
        6  Edward W. Felten, A Skeptical View of DRM and Fair Use, 
      Communications of the ACM (April 2003) at 57, 58; C.J. Alice Chen and 
      Aaron Burstein, The Law and Technology of Digital Rights Management, 
      18 Berkeley Tech. L.J. 487, 491 (2003).  



                                                          10 


  
      innovative and competitive sector, where new products are rushed to market 


      in an effort to satisfy consumer demand and capture market-share, the IT 


      industry will be regulated by copyright lawyers from the entertainment 


      industry.  These lawyers will second guess every engineering decision made 


      by every IT company, and will insist upon DRM systems that limit the many 


      lawful uses recognized by Congress and the courts.  This result is precisely 


      what the Supreme Court rejected in Betamax: enlargement of "the scope of 


      respondents' statutory monopolies to encompass control over an article of 


      commerce that is not subject to copyright protection." Betamax, 464 U.S. at 


      421. 


      II.   Appellants and Their Amici Misrepresent This Court's Ruling in 
                 Napster.   


                 Appellants and their amici go to great lengths to reinterpret this 


      Court's decision in Napster.  They need to reinterpret Napster because a 


      straightforward application of this Court's holdings to the facts found by the 


      District Court compel the result reached by the District Court.  Napster, 


      however, needs no reinterpretation because this Court got it right the first 


      time.  





                                                 11 


  
             A.  Appellants Misunderstand the Napster Court's Holdings 
                 Concerning Contributory Infringement.   


             In the hundreds of pages appellants and their amici devote to Napster, 


      they conveniently overlook the most important sentence concerning 


      contributory infringement.  This Court stated, "[w]e are compelled to make a 


      clear distinction between the architecture of the Napster system and 


      Napster's conduct in relation to the operational capacity of the system."  


      Napster, 239 F.3d at 1020.  This distinction between architecture and 


      conduct is the key to Napster, to this case, and to contributory infringement 


      analysis in the digital era.  


             This Court explained that the architecture of a product or service must 


      be evaluated in accordance with the Betamax, capable of substantial 


      noninfringing use, standard.  This Court stated that "a computer system 


      operator cannot be liable for contributory infringement merely because the 


      structure of the system allows for the exchange of copyrighted material.  To 


      enjoin simply because a computer network allows for infringing use would, 


      in our opinion, violate Sony and potentially restrict activity unrelated to 


      infringing use."  Id. at 1021 (citations omitted).  Thus, if Shawn Fanning had 


      simply designed the Napster system and left it to others to operate, he would 


      have incurred no contributory infringement liability because the architecture 


      was capable of substantial noninfringing uses. 


                                             12 


  
            But Fanning did not just design the system, he also operated it  his 


      company engaged in ongoing conduct with respect to the architecture.  


      Conduct, as opposed to architecture, is evaluated under the familiar two part 


      standard that imposes liability on a person who 1) knowingly 2) induces, 


      causes, or materially aids the infringing conduct of another person.  In the 


      online context, this two part test is met "if a computer system operator learns 


      of specific infringing material available on his system and fails to purge such 


      material from the system...."  Id.  


            The District Court recognized the distinction between architecture and 


      conduct: "here, the critical question is whether Grokster and StreamCast do 


      anything, aside from distributing software, to actively facilitate  or whether 


      they could do anything to stop  their users' infringing activity."  MGM 


      Studios Inc. v. Grokster Ltd., 259 F. Supp. 2d 1029, 1039 (C.D. Cal. 


      2003)("Grokster").  The District Court concluded that unlike Napster, which 


      operated the site and facilities through which infringing conduct occurred on 


      an ongoing basis, Grokster and StreamCast did not engage in any conduct 


      that materially contributed to infringement.  They simply supplied the 


      architecture.  If the "Defendant[s] closed their doors and deactivated all the 


      computers within their control, users of their products could continue 


      sharing files with little or no interruption."  Id. at 1041.  The District Court 



                                              13  


  
      here found that unlike Napster, Grokster and StreamCast did not maintain 


      systems from which they could purge infringing material.  


            Appellants suggest that Grokster and StreamCast did in fact provide 


      users of their software with a variety of services that maintained the 


      performance and security of the P2P networks.  MGM Brief at 47.  For 


      example, appellants contend that the district court ignored "expert evidence 


      that Defendants' networks would deteriorate and ultimately likely cease if 


      Defendants stopped their continuing contributions."  Id. at 51.  This Court 


      should review any alleged factual errors by the District Court concerning the 


      role Grokster or SteamCast played in maintaining the P2P networks under 


      the appropriate legal standard.  If the Court concludes that Grokster or 


      StreamCast played such a substantial role in the continuing operation of the 


      networks that they in effect controlled their use, their conduct starts to look 


      more like Napster's.  See also Betamax, 464 U.S. at 437.  


            Significantly, this Court's architecture/conduct distinction bears a 


      striking resemblance to contributory infringement under the patent laws.  


      The Supreme Court derived its Betamax standard from 35 U.S.C.  271(c), 


      where a seller or importer of a component of a patented machine, or a 


      material used in the practice of a patented invention, did not contribute to 


      infringement if the component or material was "a staple article or 



                                             14 


  
      commodity of commerce suitable for substantial noninfringing use...."  But 


      35 U.S.C.  271(c) is just part of the equation.  Under 35 U.S.C.  271(b), 


      the seller of the staple article of commerce could still infringe a patent if he 


      "actively induces infringement of a patent...."  


            Thus, the architecture of a product or service is evaluated under the 


      Betamax test, which derives from Section 271(c) of the Patent Act.  But a 


      person's "conduct in relation to the operational capacity" of that product or 


      service can still trigger liability if it induces infringement, as under Section 


      271(b).  Examples of inducement would include advertising that the product 


      could be used to infringe, or providing demonstrations of how to use the 


      product to infringe.  See Aimster, 334 F.3d at 651. (Aimster's tutorial 


      demonstrating the sharing of copyrighted music "is the invitation to 


      infringement that the Supreme Court found was missing in Sony.") 


            B.  Appellants Misunderstand the Napster Court's Holdings 
                 Concerning Vicarious Liability.   


            Appellants argue that Grokster's and StreamCast's technical ability to 


      include filters in new releases of their software satisfies the "ability to 


      supervise the infringing activity" requirement for vicarious liability.  MGM 


      Brief at 58-62.  As support, appellants cite this court's second Napster 


      decision, A & M Records, Inc. v. Napster, Inc., 284 F.3d 1091 (9th Cir. 


      2002)("Napster II").  See MGM Brief at 60, 62; Boorstyn Brief at 27.  To be 


                                              15 


  
      sure, in Napster II this Court found that Napster could be required to 


      implement a filtering system based on audio fingerprinting technology.  


      However, this requirement was part of the remedy ordered by the district 


      court after finding Napster vicariously liable.  It had nothing to do with 


      establishing Napster's liability in the first place.    


             In its vicarious liability determination in its first Napster decision, this 


      Court made no mention of filters or Napster reconfiguring its service.  To 


      the contrary, this Court noted that "the boundaries of the premises that 


      Napster `controls and patrols' are limited."  Napster, 239 F.3d at 1023.  This 


      Court went on to state that "Napster's reserved `right and ability' to police is 


      cabined by the system's current architecture."  Id. at 1024 (emphasis 


      supplied).  Thus, this Court held that a firm's theoretical ability to redesign 


      its product or service to prevent infringement did not create a legal duty to 


      do so.    


             The District Court's vicarious liability holding is in complete accord 


      with Napster.  The "current architecture" of FastTrack and Gnutella cabins 


      Grokster's and StreamCast's ability to control infringing conduct.  The 


      infringement occurs after the software has passed to the end user, when 


      neither Grokster nor StreamCast have any control over the user.  The District 


      Court correctly held that "[t]he doctrine of vicarious infringement does not 



                                               16 


  
      contemplate liability based upon the fact that a product could be made such 


      that it is less susceptible to unlawful use...."  Grokster, 259 F. Supp. 2d at 


      1045-46. 


      III.   Conclusion   


             The District Court observed that it was "not blind to the possibility 


      that Defendants may have intentionally structured their businesses to avoid 


      secondary liability for copyright infringement, while benefitting financially 


      from the illicit draw of their wares."  Id. at 1046.  Nonetheless, it correctly 


      recognized that in order to provide the plaintiffs with the relief they sought, 


      it would have "to expand existing copyright law beyond its well drawn 


      boundaries."  Id.    


             We understand appellants' frustration with P2P networks and with the 


      Betamax, Napster, and the district court's decisions.  However, the 


      secondary liability rules appellants advocate would cause irreparable injury 


      to the IT industry, Internet companies, and users.  In the long run, these rules 


      will also harm appellants, who will be denied markets that the IT industry 


      otherwise would have created for them.    


             Appellants claim that the District Court's decision leaves them 


      powerless to combat infringement over P2P networks.  Two recent 


      developments prove the opposite.  First, the Recording Industry Association 



                                              17 


  
 
      of America (RIAA) has begun to sue individual file traders engaged in large 


      scale infringement.  While the RIAA may not have selected all its targets 


      wisely,7 this strategy appears to have caused a decrease in file trading.8  


      Second, legal downloads of sound recordings are finally available in a low 


      cost, user-friendly manner.  In iTunes' first two months of operation, for 


      example, users downloaded over five million songs for 99 cents a piece.9  


      The combination of vigorous enforcement against hard core infringers and 


      attractive business models for legal downloads should solve appellants' 


      problems with P2P networks without crippling the IT industry. 





                                                      
         7  E.g., Frank Ahrens, RIAA's Lawsuits Meets Surprised Targets: Single 
      Mother in Calif., 12 Year-Old Girl in N.Y. Among Defendants, Washington 
      Post, September 10, 2003, at E1; Benny Evangelista, Download Lawsuit 
      Dismissed; RIAA Drops Claim That Grandmother Stole Online Music, San 
      Francisco Chronicle, September 25, 2003, at B1. 
         8  Tim Knauss, Lawsuits Scare Off CNY Music Downloaders, Syracuse Post 
      Standard, September 14, 2003, at A1. 
         9  Press Release, Apple Corporation, iTune Music Store Hits Five Million 
      Downloads (June 23, 2003). 

                                                          18 


  
            Accordingly, this Court should reject the reinterpretation of Betamax 


      and Napster urged by appellants and their amici.       


                                              Respectfully submitted,         




                                              _____________________________ 
      Kevin McGuiness                         Edward J. Black  
      Markham Erickson                        Jason M. Mahler* 
      MCGUINESS & HOLCH                       COMPUTER & COMMUNICATIONS 
      400 North Capitol Street, N.W.             INDUSTRY ASSOCIATION  
      Suite 585                               666 Eleventh Street, NW  
      Washington, D.C.  20001                 Washington, D.C.  20001 
      (202) 783-5300                          (202) 783-0070  


      Counsel for NetCoalition                *Counsel of Record  





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