Indirect Liability and Grokster

Originally posted 2005-03-30 21:10:00. Republished by Blog Post Promoter

This post on the Marginal Revolution blog (where this blog once advertised) links to (or tries to link to) an amicus brief filed by… a bunch of guys — namely Kenneth J. Arrow, Ian Ayres, Gary Becker, William M. Landes, Steven Levitt, Douglas Lichtman, Kevin Murphy, Randal Picker, Andrew Rosenfield, and Steven Shavell. Their self-described interest as amici?

Amici are professors and scholars who teach and write on economic issues and, in particular, on the economics of innovation, the economics of intellectual property, and the economics of both deterrence and enforcement. . . . Amici file solely as individuals and not on behalf of the institutions with which they are affiliated. Amici represent neither party in this action, and write solely to offer an economic perspective on the important social issues at stake in this dispute.

Nice work if you can get it. All but two of them are University of Chicago (i.e., “law and economics”) professors; the other two are Ian Ayres of Yale (formerly a Northwestern prof, which is why his name jumped out at me) and the other is from Stanford Law.

So what do they say? Their focus in the brief is on the usefulness of the doctrine of indirect or secondary liability in intellectual property. That’s a topic of great interest to us around here, but we have always focused on trademark, where the issues can be quite different. But regarding copyright, here is the conception of the problem by these learned men (yes, all men), per their own brief:

In this dispute, the Court is being asked to clarify the conditions under which those conventional remedies should be supplemented by an additional cause of action: liability that would hold responsible a firm whose product or service facilitates copyright infringement. The argument in favor of this sort of “indirect” liability is that in certain circumstances it will be the only practical way to maintain the efficacy of copyright markets. That is, direct liability is so costly in certain situations that, without indirect liability, authors would in those settings no longer have a meaningful right to prevent unauthorized use of their work. The argument against indirect liability is that, because the products and services at issue here have both legal and illegal uses, any legal intervention must be cautious or else risk inadvertently interfering unreasonably with legitimate activity.

And here is their conclusion, based (Cliff’s Notes-like) on their legal argument headings and the summary at the end of the argument section:

Indirect liability is routinely imposed in instances, like the one at issue here, where direct deterrence is unlikely to be effective because of the high costs associated with identifying and pursuing individual violators. Indirect liability should not be excused simply because a product is potentially capable of non-infringing use. The rule adopted by the courts below gives manufacturers no incentive to deter infringement even when deterrence could be accomplished at low cost and without any significant interference with non-infringing uses. This rule mistakenly considers non-infringing uses in isolation, rather than evaluating them in light of substitute mechanisms already available to accomplish the same ends.

Economic analysis of this dispute reinforces what common sense also suggests: the case was resolved prematurely, before key questions were asked and key facts considered. Can copyright rights be sufficiently enforced through direct liability such that indirect liability is unnecessary online? Did the accused firms in good faith consider improving their technologies in ways that would reduce infringement but not significantly interfere with non-infringing use? Are there non-infringing uses of this technology that still appear substantial even when this technology is compared to currently available substitute mechanisms? These are central questions from an economic perspective. The courts below failed to ask any of them.

No, I didn’t read all the briefs. But I doubt that one would do a better job of matching my own predilections on this topic than this one.

UPDATE:  See the graphic at the top of the post.

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Author:Ron Coleman

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