Thursday, June 30, 2005

Supremes Rule on Grokster, SAG Indie Announces Changes

June 30, 2005

In this newsletter:


The United States Supreme Court released its long anticipated decision in the MGM v. Grokster case debating the question of whether companies in the business of creating file-sharing software can be held liable for the infringing acts of their users. The Supreme Court, in a unanimous decision, held that they could, overturning the general "no secondary liability" principle established in the well-known 1984 "Betamax" case.

Justice Souter wrote "We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by the clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringements by third parties." It is important to note Souter's use of the word "device" rather than of simply saying "software." This holding can technically and broadly be extended to apply to manufacturers of any type of device, including possibly the Ipod, TiVo, Google, etc., that consumers could possibly use to facilitate their own copyright infringing activities.

Where increased litigation is likely to stem from, is how will a company's "intent" be defined and determined by the courts? When does a company intend for its product to be used for the purposes of copyright infringement, and what steps will a company have to take to safely defend itself against such claims? Technology companies and their lawyers will potentially need to employ a wide range of safeguarding tactics, varying from simple disclaimers to more extreme measures like pledging to actively find and prosecute infringing consumers.

Some organizations, such as the Electronic Freedom Foundation (EFF), worry that the ruling will result in harm to American technology companies. American companies will have to spend increased money on safeguards and litigation and possibly hold back on technological innovation, while foreign competitors will not have to sensor their developing technologies for fear of liability. It remains to be seen if such fears will manifest. In the short term, music and entertainment companies will be celebrating the Court's decision as a victory and view the ruling as a step towards the needed increased protection of copyright and other intellectual property rights.

Metro-Gold-Mayer Studios, Inc. v. Grokster, Ltd., S.Ct., 2005 WL 1499402 U.S. 2005.
The complete Supreme Court Opinion can be found here.


Independent filmmakers are getting good news from SAG. Effective July 1, 2005, SAG's new and revised low budget agreements will make it easier to make films with SAG actors. In addition, the SAG Indie Web site has sample contracts and initial paperwork for the signatory process available for download.

A summary of the new and revised agreements can be found at


Mark Litwak & Associates grants newsletter recipients permission to copy and distribute this newsletter and distribute it free of charge, provided that copies are distributed for educational and non-profit use, no changes or revisions are made, all copies clearly attribute the article to its author and include its copyright notice.

DISCLAIMER: While we are careful in preparing this newsletter, readers should consult with a lawyer before relying on any information. Case law and statutes are subject to change, and may not apply in all jurisdictions.

Copyright 2005, Mark Litwak