intellectual property & copyrights research paper

Intellectual Property & Copyrights Research Paper

Covering Cases:

Metro-Goldwyn-Mayer Studios, Inc. vs. Grokster, Ltd.

A&M Records, Inc. vs. Napster, Inc.

Christopher Pappas

Business Ethics, Law and Communication

Wednesday, October 29, 2008

© 2008

Christopher Pappas

TABLEOFCONTENTSINTRODUCTION ..................................................................................................................................................... 2

CASESTUDYI:A&MRECORDS,INC.VS.NAPSTER,INC. ............................................................................... 5

INTRODUCTION ..........................................................................................................................................................................5

NAPSTER’SOPERATION ...........................................................................................................................................................6

LEGALISSUES .............................................................................................................................................................................8

CONCLUSION............................................................................................................................................................................ 12

CASESTUDYII:METRO‐GOLDWYN‐MAYERSTUDIOS,INC.VS.GROKSTER,LTD ................................13

INTRODUCTION ....................................................................................................................................................................... 13

GROKSTER’SOPERATIONS.................................................................................................................................................... 13

LEGALISSUES .......................................................................................................................................................................... 14

CONCLUSION............................................................................................................................................................................ 16

ETHICALISSUES ..................................................................................................................................................17

REFERENCES ........................................................................................................................................................20

APPENDIXA............................................................................................................................................................................. 24

APPENDIXB............................................................................................................................................................................. 28

APPENDIXC............................................................................................................................................................................. 29

IntellectualProperty&Copyrights,ResearchPaper,2

INTRODUCTION

In1883,theimportanceofintellectualpropertywasrecognizedforfirsttimeinthe

ParisConventionfortheProtectionofIndustrialPropertyfollowedbytheBerne

ConventionfortheProtectionofLiteraryandArtisticWorksin1886.Nowadays,the

UniversalDeclarationofHumanRights,andtobemorespecificArticle27,protectsthe

intellectualpropertyrightsthatacreatororanownerofapatentorcopyrighthason

his/herownworkorinvestment(“Whatisintellectualproperty?”n.d.).

Itistruetosaythatcountriesrealizedthatintellectualpropertyisapowerfultool

foreconomicdevelopmentandsocialandculturalwelfare.Furthermore,countrieswanted

topromotecreativityandinventionespeciallywhentheinterestsoftheinnovatorarethe

sameasthoseofthepublicinterest.Asaresult,countriescreatedlawstoprotect

intellectualproperty.

Moreover,eachofusshouldpromoteintellectualpropertyrightsbecauseofthe

benefitswejoin.Forexample,withthepatentsystemaninventorofanewandhighly

effectivedrugforcancerwillcontinuehis/herresearchinordertoproduceabetterand

moreefficientproduct.Theresultsofthisinventionwillbenefitthemembersofthesociety

withseveralways.Patientswillhavemorepossibilitiesofbeingcuredandtheinventorwill

berewardedforhiscreativity.

Intellectualpropertyreferstotheintangibleproperty,suchaspatents,copyrights,

trademarks,andtradedress,whichbelongtoapersonoracompany.Tobemorespecific,it

referstothecreationsofthemindlike:symbols,inventions,artisticworks,literary,and

images(“Introductiontointellectualproperty:theoryandpractice”(1997).


Generalspeaking,intellectualpropertyisdividedintotwocategories:

1. Patentorindustrialproperty,whichincludestrademarks,inventions,industrial

designs,andgeographicindicationsofsource;and

2. Copyright,whichincludesliteraryandartisticworks,suchaspoems,paintings,

plays,films,musicalworks,novels,drawings,photographs,architecturaldesigns,

andsculptures(“Whatisintellectualproperty”n.d.).

Moreover,apatentforaninventionisanexclusiverightgrantedtotheinventor,

issuedbytheUnitedStatesPatentandTrademarkOffice.Apatentprovidesprotectionfor

theinventiontotheownerofthepatentforalimitedperiod,generally20yearsfromthe

datetheapplicationforthepatentwasfiledintheUnitedStatesandthemaintenancefees

werepaid.Moreover,U.S.patentgrantsareeffectiveonlywithintheUnitedStates,U.S.

territories,andU.S.possessions.Patentprotectionmeansthattheinventioncannotbe

commerciallymade,used,distributed,orsoldwithoutthepatentowner’sconsent.

Furthermore,apatentownercanselltherightoftheinventiontosomeoneelse,whowill

becomethenewownerofthepatent.Whenapatentexpirestheprotectionends,andasa

result,theinventionbecomesavailabletocommercialexploitationbyothers(“Whatisa

patent?”2005).

Also,thereareseveraltypesofpatentsbutthemostcommonarethree:

1. Utilityorfunctionpatents,suchasaprocess,machine,articleofmanufacture,or

compositionofmatter,

2. Designpatents,suchasanew,original,andornamentaldesignforanarticleof

manufacture;and

3. Plantpatents,suchasadistinctandnewvarietyofplant(“Whatispatent?n.d).


Furthermore,thepurposeofcopyrightsistoprotecttheexpressionofideas.In

otherwords,itprotectstherightsoftheauthorsandcreatorsinanyfield,suchasliterary,

dramatic,musical,artistic,andcertainotherintellectualworks,bothpublishedand

unpublished.AsJenningsM.(2006),states:“Acopyrightgivestheholderofthecopyright

theexclusiverighttosell,control,orlicensethecopyrightedwork.”(p.624)

AccordingtotheSection106ofthe1976CopyrightAct,theholderofthecopyright,

orinotherwords,therightsholderhasthetotalcontrolovertheuseofthecopyrighted

work,suchastheexclusiverighttoreproducethecopyrightedwork,topreparederivative

works,todistributecopiesorphonorecordsofthecopyrightedwork(“Whatiscopyright”

2005).

Also,rightsrelatedtocopyrightincludethoseofperformingartistsintheir

performances,producersofphonogramsintheirrecordings,andthoseofbroadcastersin

theirradioandtelevisionprograms.Thesecloselyassociatedfieldofrightsrelatedto

copyrightarecalledrelatedrights.Therelatedrightssometimesaremorelimitedandof

shorterdurationthanthecopyrights(“CopyrightsBasics”2006).Moreover,afterJanuary1,

1978thecreatorholdsthecopyrightfromthedateithasbeencreateduntil70yearsafter

hisdeath(AppendixA).Also,theCopyrightOfficeoftheLibraryofCongressregisters

copyrights(“Whatiscopyright”n.d).

Inaddition,thetermfairuseisrelatedtocopyrights.Fairuse,infact,istherightto

occasionallyandinareasonablemannerusethecopyrightedmaterial(“Fairuse”2006).

Accordingtosections107through118oftheCopyrightAct,“oneofthemostimportant

limitationsisthedoctrineoffairuse.”(AppendixA).Thedoctrinewasnotmentionedin

previouscopyrightlawuntilitwasdevelopedthroughasubstantialnumberofcourt


decisionsovertheyearsandcodifiedinsection107ofthecopyrightlaw(AppendixB).

BasedonSection107,therearefourfactorsthatdetermineofwhetherornotanactivityis

withinfairuse:

1. Thepurposeoftheuse,

2. Thenatureoftheworkbeingused,

3. Theamountoftheworkused,and

4. Theeffectoftheuseonthemarketfororvalueoftheoriginal,copyrighted,work

(“Fairuse”2006).

Inthetwocasesthatwewilldiscussinthispaperwewillexaminethecourt’sanalysisof

thesefourfactors.

CASESTUDYI:A&MRecords,Inc.vs.Napster,Inc.

Introduction

ShawnFanning,a19‐year‐oldstudentatNortheasternUniversity,Boston,createda

peer‐to‐peermusicfilesharingservice.Thepurposeofthisservicewastoenablepeople

copyanddistributeMP3musicfileswitheachother.Shawncooperatedwithhisfriends

andhisuncle.Infact,hisunclewasacofounderandthechairmanofNapster.Hisunclewas

alsothelargestshareholder(Spencer,2000).TheynamedtheserviceNapsterafter

Fanning’snickname.ItistruethatNapsterwasapioneerservicethatwasreleasedinJune

1999andoperatedinthisformatuntilJuly2001.However,Napsterhadtofacelegal

challengesrelatedtointellectualpropertyandcopyrights.Today,Napsteroperatesundera

newpolicyandphilosophy.Beforewefurtheranalyzethiscasestep‐by‐step,itwouldbe

usefultodefinethefollowingkey‐terms:


• MP3:IsthenameofthefileextensionandalsothenameofthetypeoffileforMPEG,

audiolayer3.Layer3isoneofthethreecodingschemesforthecompressionof

audiosignals.Layer3usesperceptualaudiocodingandpsychoacoustic

compressiontoremoveallsuperfluousinformation,especiallytheredundantand

irrelevantpartsofasoundsignal.Also,itaddsaModifiedDiscreteCosineTransform

(MDCT)thatimplementafilterban,increasingthefrequencyresolution18times

higherthanthatoflayer2.Withsimplywords,itmakesanaudiofilesmallerandas

aresulteasytotransferovertheInternet(“MP3”,2001).

• Peer‐to‐Peer(P2P)technology:Isthetechnologythatindividualscanuseinorderto

connectwitheachotherdirectlywithouttheneedofacentralpointofmanagement.

TherearethreedifferenttypesofP2P:

1. PureP2P.Inthefirsttypethereisnocentralserverorrouterandtheusers

functionasbothclientsandserversofthesystem,

2. HybridP2P.InthehybridP2Pthereisacentralserver,butusershavethe

responsibilityforhostinginformation,forsharingfiles,andfordownloading,

andfinally,

3. MixedP2P.Thethirdtypehassomecommoncharacteristicswithboth

systems(Crosseetal.,2003).

NapsterisahybridP2Pnetwork.

Napster’sOperation

Napsterwasapioneerserviceandapowerfultoolforsharinginformationthatwon

anotablesuccessduetoitsnetworkstructureanditscostlessservice.Inthefollowing


paragraphswewillpresenttheoperationofNapsterinordertorealizehowthenetwork

worked.

Fanningcreatedhissoftwarebasedonthefollowingthreeobjectives:

1. AsearchenginethatwasabletofindonlyMP3files,

2. TheMP3searchengineshouldhavetheabilitytotradeMP3filesdirectly,without

theuseofacentralizedserverforstorage,and

3. AneffectivewayofonlineinteractionbetweentheusersoftheMP3searchengine.

ThesethreeobjectiveswerethebasicprinciplesofNapstersoftware.InorderforFanning

tocreatethissoftware,hehadtolearnWindowsprogrammingandUNIXservercode.The

factthatthesoftwarewasallowingcomputeruserstoswapfilesdirectly,reducedserver

problems.Also,onlyNapsterindexanddirectorywereuploadedonNapster’sserver,all

theMP3filesweretransferredacrosstheInternetusingseveralWindowsprotocols

directlyfromoneusertotheother(Giesler&Pohlmann,“Theanthropologyoffilesharing:

ConsumingNapsterasagift,”2003).

TheusersofNapsterhadtoappropriatelyinstallNapster’sfreesoftwareintheir

computer,andthen,theyhadtoconnecttotheInternetinordertoconnectwithNapster’s

centralserver.Next,theyhadtorequestafilefromNapster’ssystem.Then,thesoftware

wassearchingallcomputersthatwereconnectedtotheNapstersystem,locatedthe

requestedfile,andsentallfilesfromalldifferentcomputersthatmatchedtotheuser.Also,

userswereabletoloadfilesintotheircomputersand,byconnectiontotheNapstersystem,

allowanyotheruserinanyplaceoftheworldtoretrievethatfileondemand.Thefactthat

userswereabletoquitesimplyuploadanddownloadseveralfileswithrelativelylittle


effort,madeNapsterreallypopularacrosstheglobe(Giesler&Pohlmann,“Thesocialform

ofNapster:Cultivatingtheparadoxofconsumeremancipation,”2003).

Basedontheabove,itbecomesobviousthatitwasfairlyeasytopeerstousethis

friendlyusernetworksincetheyonlyneededtohavebasiccomputerskillsandanInternet

connection.Moreover,thefactthattheservicewasfree,madeNapsterevenmore

compelling.Napsterclaimedthatoneyearafterthereleaseoftheserviceitsuniqueusers’

accountsweremorethan20millions,makingNapsterthelargestfilesharingcommunity

(“Napster:20millionusers,”2000).Userswereexcitedaboutthequalityandcredibilityof

thisservice.Theywereabletohearanddownloadthemusictheylikedatnocost.However,

peopleinvolvedinthemusicindustrysuchasmusiccompaniesandartists,counter

Napsterabigthreatfortheirintellectualpropertyand,ofcourse,theirprofits.Thereare

examplesoffamoussingersthatopposedtoNapster.Forexample,thefamousheavymetal

bandMetallica,suedNapsterin2000sinceitreleasedtheirsongsevenbeforetheofficial

releaseoftheirCD(Jones,2000).Hence,itwasobviousthatmusicindustryhadtodealwith

numerousproblemsarisingbythisnewreality.

LegalIssues

In2000,A&MRecordsalongwith18otherrecordcompaniessuedNapster.Under

theUSDigitalMillenniumCopyrightAct(DMCA),A&MaccusedNapsterforcontributory

andvicariouscopyrightinfringement(Brannen,2008).Beforewefurtheranalyzethelegal

issuesofthiscase,wewillbrieflydiscussthebasictopicscoveredbytheDMCA.Basedon

theU.S.CopyrightOffice,theDMCAwassignedin1998andconsistsoffivemajortitles.

Thesetitlesare:


1. “WIPOCopyrightandPerformancesandPhonogramsTreatiesImplementationAct

of1998.”

2. “OnlineCopyrightInfringementLiabilityLimitationAct.”

3. “ComputerMaintenanceCompetitionAssuranceAct.”

4. Titlefourconsistsofsixmiscellaneousprovisions.Theseprovisionsregardissues

suchasCopyright’sOfficeoperationsanddistanceeducation.

5. “VesselHullDesignProtectionAct.”(“TheDigitalMillenniumCopyrightActof

1998”,1998).

UnderDMCAAct,A&MaccusedNapsterforthreemajorinfringements:

1. Itsusersweredirectlyinfringingplaintiff’scopyright

2. Napsterwasliableforcontributoryinfringementofplaintiff’scopyright,and

3. Napsterwasalsoliableforvicariousinfringementofplaintiff’scopyright(Brannen,

2008).

WithsimplywordsA&MaccusedNapsternotofviolatingcopyrightitself,butof

contributingtoandfacilitatingotherpeople’sinfringement.

Ontheotherhand,Napsterdefineditselfasasearchengineandclaimedthatmany

peersuseditinordertohearsamplemusicbeforetheybuytheactualCD.Furthermore,the

defenseofNapsterwasbasedonthefollowingthreemajorpoints:

1. TheAudioHomeRecordingActof1992,

2. TheDigitalMillenniumCopyrightAct(DMCA)of1998,and

3. Misuseofcopyrightandimpliedlicense.

Tobemorespecific,NapsterusedtheAudioHomeRecordingActthatprotectsusers

onthegroundsofnon‐commercialuse,andespeciallythecaseofSonyvs.Universal


Studios,whichisbestknownastheBetamaxcase.Napsterstatedthatitwasaservicetobe

usedfor“spaceshifting”ofsoundrecordingsandNapsterreferredtothecaseofSonyvs.

UniversalStudioswheretelevisionshowswererecordedtobeviewedatalatertime

(“SonyCorp.ofAmericavs.UniversalCityStudiosInc.”,1984).However,Napsterdidnot

onlymovecontentintoamoreusableformat,butalsoheldcopiessothatfilescouldbe

sharedamongNapster’susers.

Moreover,basedontheDMCAthatprotectsInternetServiceProviders(ISPs)onthe

groundsof“safeharbor”provisions,Napsterstatedthatiswasusedasaserviceforusers

tosamplemusicbeforetheypurchasedanentirealbum.Although,theDistrictCourtstated

thatifNapsterwasusedonlytosamplemusicfilesitwouldonlyneedtorequirelimited

usageofsongsandnottheentiresongoralbumgivingthecapabilitytousersdownloadthe

MP3files(“A&MRecords,Inc.vs.Napster,Inc.,”2001).

Furthermore,NapsterstatedthatsincethelaunchofNapster,musicsaleswere

increased.Though,theDistrictCourtstatedthatNapsterdidnotprovideenoughevidence

tosupportthatnotionandthattheplaintiff’spresentedanincredibleamountofevidence

thatNapsteractuallycausedharmtooverallmusicsales(Crews,2001).

However,inJulyof2000,theDistrictCourtfortheNorthernDistrictofCalifornia

decidedthatNapsterwasguiltyfortheabovethreeinfringements.Napsterwasnot

satisfiedwiththisoutcome,hence,itappealedtotheU.S.A.CourtofAppealsfortheNinth

Circuit,whichonFebruary12,2001,confirmedtheDistrict’sCourtdecision(“A&M

Records,Inc.vs.Napster,Inc.,”2001).

Tobemorespecific,theNinthCircuitCourtofAppealsconfirmedthatNapsterwas

liableforrepeatedinfringementsofcopyrightlawsincetheusersuploadedand


downloadedcopyrightedmusic.Inotherwords,Napsterprovidedtousersthechanceto

listenandtransfermusicwithoutpayinganyroyaltiestomusicindustry,whichisillegal

andisbeyondthemeansoffairuse.Regardingthepurposeofuse,theCourtdecidedthat

theuseofmusicwasnottransformative.Toillustrate,songswereintheiroriginalformnot,

forinstance,aparody(“A&MRecords,Inc.vs.NapsterInc.,”2001).

Moreover,peerswereusingNapsterfortheircommercialbenefit.TheCourt

justifiedthisdecisionnotbasedonthefactthatpeerswouldsellthesongs,butbasedon

thefactthatthey“repeatedandexploitativecopying,”andhence,theysavedmoneyfrom

payingroyaltiestothemusicindustry.Further,regardingtheamountofworkused,the

CourtfoundthatNapsterwasliablefor“wholesalecopying”whichisagainstfairuse.

Anotherfactoroffairuse,asthesearespecifiedinSection107oftheCopyrightAct,isthe

effectonthemarket.OnthisissuetheCourtconcludedthatNapsternegativelyaffected

musicindustrysincemusicindustrylostsales(Crews,2001).

In2001,theNapstercasewassettled,thus,Napsterhadtopay$26millionto

creatorsandcopyrightersforusingtheirmusicwithoutauthorizationandanother$10

millionforfuturelicensingroyalties.Inthefollowingyear,Napsterhadtodealwithsevere

financialdifficulties.Inthespringof2002,Napstertriedtoconvertitsfreeservicetoa

subscriptionservicewhereuserswouldpay$4.95amonth.However,Napsterhad

significanttroubleobtaininglicensestodistributemajor‐labelmusic.InAprilofthesame

year,theassetsofNapsterwereabout$8million,whileitsliabilitieswereslightlyover

$100million(“Swansong:BankruptcyforNapster,”2002).InMay2002,Napster

announcedthatBertelsmann,aGermanmediafirm,boughtitfor$85million.InJuneofthe

sameyear,NapsterfiledforChapter11bankruptcyinordertobeprotectedbythetake


overfromBertelsmann.InSeptember2002,anAmericanbankruptcyjudgeblockedthesale

toBertelsmannandforcedNapstertoliquidateitsassetsunderChapter7oftheU.S.

bankruptcylaws(“Napster’shighandlownote”,2000).

Conclusion

Napsterstillexists,butitoperatesunderanewstructureandanewpolicy.Today

Napster’soperationsarebothlegalandethical.AtNapster’sofficialwebpage,underterms

andconditions,membersmustsignalegalcontact,whichstatesthestandardsofusingthis

software.Amongthese,onecanseetheagerequirements.Also,atthedescriptionofservice

itisclearlystated,thattheserviceisonlyforpersonal,non‐commercialandnon‐

transferableuse.Moreover,permanentdownloadisonlyavailablewhenmembershave

purchasedthesong(“Napstersubscriptionserviceandmusicstoretermsand

conditions,"2008).OnSeptember15,2008,NapsterInc.andBestBuyCo.informedthe

publicthattheyagreedtomerge(“BestbuytoacquireNapster”,2008).

Toconclude,webelievethatFanning’sideaforcreatingthissoftwarewas

innovativeandhighlycreative.However,itlackedthelegalandethicalbaseitshouldhave

inordertosuccessfullyprotectintellectualpropertyrightsofcreators.Infact,thestructure

ofthesoftwaremadeitinevitabletoprotecttheserights,aspeerswerefreetodownload

andextensivelyusemusicfileswithoutpayingroyaltiestothemusicindustry.Finally,we

considerthatNapster,asitfunctionstoday,notonlyproteststheserights,butalso

promotesmusicitselfandmusicindustrysinceitgivesthechancetouserstolisten

numerousmusicsampleswhich,later,theycanbuy.Atthesametime,theycanhaveaccess

toolderorraresongsthatcannotbeeasilyfound.Butmostimportantly,intellectual

propertyrightsofcreatorsarerespectedandprotectedbyallmeans,astheyshould.


CASESTUDYII:Metro‐Goldwyn‐MayerStudios,Inc.vs.Grokster,Ltd

Introduction

LedbyMetro‐Goldwyn‐MayerStudios,Inc.(MGM),28majorentertainment

companiessuedGrokster,aP2Pfilesharingserviceformusicandmovies,forintellectual

propertyandcopyrightsinfringements.ThoughitseemsthatMetro‐Goldwyn‐MayerInc.

(MGM)vs.Grokster,LTDcasehasmanysimilaritieswiththepreviouscase,aswewill

discuss,theyhavesignificantdifferences.Infact,Grokster’soperationsaredifferentin

structurethanNapster’s,leadingjusticestoadilemmaonwhetherGrokster’soperations

wereillegalornot.Thiscase,likeA&MRecords,Inc.vs.Napster,Inc.,wenttotheCourtof

Appealsandfinally,totheSupremeCourtwhichdecidedthatGroksterwasliablefor

copyrightinfringements.Inthenextsessions,wewilldiscussGrokster’soperations,the

legalissues,andfinallyourconclusions.

Grokster’sOperations

Grokster’soperations,incontrastwithNapster,didnotuseacentralizedfile‐sharing

network,infact;Groksterwasmoresophisticatedsoftware.Themaincharacteristicsof

Groksterarethat:

1. Itdoesnothaveaccesstothesourcecodefortheapplication,

2. ItusesFastTracknetworkingtechnology,whichGroksterdoesnotown.

3. AtthestartpageusersseeadvertisementsthatareretrievedbyGrokster’sclient

software.

TobetterillustrateGrokster’soperations,weshouldexplaintheFastTrack

networkingtechnology.FastTrackismoredynamicthanP2P.Thisnetworktechnology

consistsofnodesandsupernodes.Nodeis“anendpointontheinternet,typicallyauser’s


computer,”whilesupernode“isanodethathasaheightenedfunction,accumulating

informationfromnumerousothernodes”(UnitedStatesDistrictCourt,2003).The

individualnodeisfreetoselectitssupernodestatus.Forexample,basedonitsownneeds

andthenetwork’savailability,thenodecouldchangefromnodetosupernode,andvice

versa.Theone‐nodesaregatheredtogetheraroundasupernode.Theuserhastoconnect

toarootsupernode,whichthenwilldirecttheusertosupernodes.Onceusersare

connectedtothesupernode,theycansearch,locate,andfinallydownloadthedesiredfile,

fromotherusers’computer.AsSamsonmentions,“Manyofthe"rootsupernodes"are,

however,operatedbyKazaaBV/Sherman,whichlicensesitsKazaasoftwaretoGrokster”

(Samson,2004).

Moreover,userscantransferfilesusingGrokster,butinfact,Groksterhasneither

ownershipnorcontroloverthesefiles.Theprocedureoflocatingandconnectingtoa

supernodeistotallyindependentfromGrokster.InAppendixC,thereisagraphical

representationofGrokster,andacomparisonwithNapster.

LegalIssues

InOctober2001,Metro‐Goldwyn‐MayerStudios,Inc.alongwithseveralmajor

musicandmoviefirmssuedGroksterwiththeaccusationofcontributoryandvicarious

copyrightinfringement.ThecompaniescomplainedthatGroksterwasactingillegallyand

thatmusicandmovieindustrywerelosingsignificantprofitsduetoGrokster’soperations

(Samson,2004).Ontheotherhand,defensesupporteditsargumentsusingtheAudioHome

RecordingAct,andtobemorespecifictheBetamaxcase(SonyvsUniversalStudios).Inthe

MGMvs.Grokstercase,thecourtrejectedtheaccusationofMGM.Thereasoningofthis


decisionwasthat“file‐sharingsoftwarecouldbeusedforlegitimatepurposes,andassuch

wasprotectedunderthe1984Betamaxruling”(“TheBetamaxCase”,n.d.).

Tobemorespecific,intheBetamaxcasethecourtdecided,in1984,thatVCR

manufacturer“wasnotliableforcreatingatechnologythatsomecustomersmayusefor

copyrightinfringingpurposes,solongasthetechnologyiscapableofsubstantialnon‐

infringinguses”(McGuire,2005).Thelogicbehindthisdecisionwassimple:electronic

firmsshouldnotbeaccusediftheirproductscouldbeusedtocommitpiracy.

Moreover,Groksterwasnotliablesincetherewasnocentralserver,andtherefore,

ithadneithertherightnortheabilitytocontroloveritsusers(“MGMv.Grokster,”n.d.).On

theotherhand,entertainmentindustryprovedthat90%ofthedailyillegaldownloading

washappeningthroughGrokster.Also,Groksterwasearningprofitthroughadvertising

becausepeopleusedthissoftwaretoillegallydownloadmusicandmovies.Groksterwasan

“infringementdependent”business,thatitsearningsweredependedoncopyright

infringement.Thoughthebothargumentswerestrongenough,Court’sdecisionwasin

favorofGrokster.Itistruethatthemusicandmoviefirmswerenotsatisfiedbythis

decision,andwenttotheNinthCircuitCourtofAppeals.However,Groksteralsowonthis

caseforthesamereasons.

Furthermore,thecasewenttotheSupremeCourtin2005.TheSupremeCourt

unanimouslydecidedthatGroksterisliableforinducingcopyrightinfringement.Thefinal

decisionoftheCourtwas,“Onewhodistributesadevicewiththeobjectofpromotingits

usetoinfringecopyright,asshownbyclearexpressionorotheraffirmativestepstakento

fosterinfringement,goingbeyondmeredistributionwithknowledgeof3rdpartyaction,is

liablefortheresultingactsofinfringementby3rdpartiesusingthedevice,regardlessof


thedevice’slawfuluses.”(“CaseArchives”,n.d.).Afterthisdecision,Groksterhadtopay

$50milliontotherecordingindustryandwasalsoforcedtoshutdownitsoperation

(“MGMv.Grokster,”2003).TheCourtdidnotreexaminetheBetamaxcase,normadeany

decisionsregardingtechnologycompaniesandtheirproducts.However,itaddedone

doctrine,whichcalled“inducement”andregardscopyrightinfringementliability(“The

Betamaxcase”,n.d.).

Conclusion

Metro‐Goldwyn‐MayerInc.vs.Grokster,Ltdwasacomplicatedcase,sincecourts’

decisionswerecontradictory.Webelievethatthemainissuesinthiscasearetwo.Thefirst

oneiswhetherGroksterwasliableforcopyrightinfringement,andthesecondiswhether

decisionsliketheabove,hurtcreativityandtechnologicalinnovation.Itistruetosaythat

theoutcomeofBetamaxcase,gavethechancetoothercompaniestoproduceCDrecorders,

musicplayers,anddigitalvideorecorders,withoutthefearthattheypromotecopyright

infringement.However,Supreme’sCourtdecisionmadeelectronicindustrytobelievethat

itwillblocktheinnovationofdeviceslikeiPod.Onesolutiontothisunpleasantsituation

wouldbetheintroductionofnewregulationoreventhearrestofindividualpirates.We

supportSupreme’sCourtdecisionbutwesuggestthatfurtherregulationregardingthis

issueshouldbeissuedinordertoprotecttechnologyinnovationandcreativity.


ETHICALISSUES

Thepurposeofthispaperistoexamineintellectualpropertyandcopyrightsby

studyingtwocases.Sofar,wehave,indepth,analyzedthelegalaspectsofbothcases.

However,ourstudywouldbeincompleteifwewouldnotexaminetheethicalaspectsof

thisissue,sincewealreadyknowthatlegalthingsarenotalwaysethicalandviceversa.

Theethicalaspectswillbediscussedinthefollowingparagraphs.

Downloadingmusicandmoviefilesusingthemethodsdescribedinthispaperisnot

onlyillegal,butalsounethical.Itistruetosaythatcreatorshavespenteffort,time,and

moneyinordertocreatesomethingvaluabletooursociety.Then,theypublishtheirpiece

ofartinordertogetcreditsfortheirwork,andofcoursetoearnmoney.Users,byillegally

downloading,neithergivecreditstotheartistsnormoney.Inouropinion,illegal

downloadingequalstheft.Wewouldnotexaggerateifwefurthercompareitwithslavery,

meaningthatcreatorsworkforus,butwedonotrewardthem.Itistotallyunacceptablein

ourcivilizedsocietytotakeadvantageofotherpeople’seffortandcreativity.

Moreover,itisunethicalbecauseillegaldownloadingdoesnothurtonlyartists,but

theglobaleconomyaswell.Manypeopledownloadfilesbecausetheybelievethatfamous

artistsarealreadyrichenough,hence,theydonotneedmoremoney.Unfortunately,they

donotconsideremployeesintheindustrysuchasworkers,technicians,andeconomists.

Theirsalaryandtheircareeraretotallydependingonsales.Sinceillegaldownloading

decreasessales,entertainment’sindustryprofitsdeclineand,hence,peoplelosetheirjobs.

Inotherwords,peoplelosetheirjobsandsociety’swelfaresuffers,justbecausesome

peopleprefertoenjoyotherpeople’sworkwithoutpayingthecost.


Furthermore,somepeopledownloadillegallymusicandmoviesinorderto

financiallyexploitotherpeople’swork.Toillustrate,somepeopledownloadthe

copyrightedfilesandthen,theysellthematalowerthanthemarket’sprice.Thisiseven

moreunethicalandimmoralsincetheyexploitotherpeople’sworkandcreativitywithout

compensatingthem.Instead,theyillegallymakemoneyforthemselves.Theynotonlysteal

moneyfromtheentertainingindustrybutfromthegovernmentaswellsincetheypayno

taxes.

Toconclude,basedonasurveybytheInstituteforPolicyInnovation(IPI)dueto

piracycopyrightedmaterial,economyoftheU.S.losses$58billioneveryyear,373,375

U.S.’sworkerslosetheirjobs,worker’searningisdecreasedby$16.3billioneveryyear,

andgovernmentlosses$2.6billionintaxrevenuesannually(Fitch,2007).

People,andmostlystudents,committhiscrimeforavarietyofreasons,forinstance:

• Itisfree,

• Itiseasy,

• Itisalowriskcrime,

• Theyareunawareoftheconsequencesinindustryandinthesocietyasawhole,

• Theybelievethateverybodyelsedoesit.

Governmentandentertainments’industryroleistoinformcitizensaboutthe

consequencesofthiscrime.Regardingtheethicalperspectivethereisaguidelinewe

shouldfollowinordertobesurethatweactinanethicalmannerandwillguideustomake

therightchoice,evenifweareunawareofregulationsandlaws.Thesequestionsas

Jenningspresentthemare:

• Isitlegal?Isitbalanced?Howdoesthismakemefeel?(BlanchardandPeale)


• Howwouldareporterdescribemyactiononthefrontpageofanewspaper?(The

Front‐Page‐of–the‐NewspaperTest)

• HowwouldIviewthissituationifIstoodontheotherside?Or,wouldIfeel

comfortabletodiscusswithmyparentsaboutmyaction?(LauraNashand

Perspective)

• Ismyactionincompliancewiththelaw?Whataretheconsequences?(TheWall

StreetJournalModel)(p.45‐47).

Fromourperspective,theabovequestionsshouldleadourpersonaland

professionaldecisions.


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AppendixA


AppendixB


AppendixC

intellectual property & copyrights research paper

Documents