Original URL: http://www.theregister.co.uk/2007/10/18/morpheus_permanent_injunction/

US court demands stronger copyright filters for Morpheus

Grist to the Viacom-YouTube mill?

By OUT-LAW.COM

Posted in Law, 18th October 2007 01:31 GMT

A permanent injunction has been imposed on the distributor of the Morpheus file-sharing software. A US court ruled yesterday that StreamCast Inc. must use "the most effective means available to reduce the infringing capabilities of the system."

The ruling comes less than a week after Google announced the launch of its own filter to block copyright-infringing material from its YouTube video-sharing site. Yesterday's 83-page judgment could prove influential in Viacom's $1bn lawsuit against Google, which accuses YouTube and its parent company of inducing infringement by users.

StreamCast Networks Inc. and peer-to-peer (P2P) rival Grokster Ltd. were first sued by MGM Studios and others in a California district court in 2001. Their software allowed millions of users to share music, software and movies over the internet. In a landmark ruling in 2005, the US Supreme Court concluded that StreamCast and Grokster induced copyright infringement and could be held liable for infringement committed by the users of their software. The case was sent back to the district court to consider MGM's motion for summary judgment.

StreamCast is the only defendant remaining in the case. Yesterday, US District Judge Stephen V Wilson rejected MGM's request for a permanent injunction that would ban the distribution of the Morpheus software; but he agreed to impose one that could have the same effect.

The court has previously ruled that StreamCast distributed Morpheus "with the intent to induce copyright infringement." Its business targeted "a known community of infringers – former Napster users," noted Judge Wilson, and its business model "depended on massive infringing use".

In November 2006, StreamCast implemented what it called "a robust filtering mechanism" to block copyrighted works that are not authorised for free downloading. It populated its list of works with the names of artists from the website of music industry body the RIAA.

'Hopelessly ineffective' filter

The nature of the Morpheus system is such that only new users and those who choose to upgrade their software are subjected to the copyright filters. (It is a de-centralised P2P system, unlike Napster, so users do not conduct searches via the Morpheus website.) In December 2006, StreamCast began sending messages to users of legacy versions of Morpheus. These messages "strongly recommended" that they upgrade. But in December 2006 and January 2007 only about one-third of the downloading was from software that used the filter.

MGM and the other plaintiffs described StreamCast's system as a "homemade filter" that is "hopelessly ineffective." They submitted evidence that popular audio and video files were still easy to download. An expert for the plaintiffs told the court that StreamCast filters only by artist, not by title name; it does not filter common misspellings or variations; and its movie filters do not capture TV shows or certain file types. He also claimed it was technologically outdated because it does not incorporate digital fingerprinting.

MGM said StreamCast should make an effort to encourage legacy users to upgrade. "StreamCast should insert aggressive 'pop-ups' that would make it difficult (or at least very annoying) for users to continue with the unfiltered versions of the Morpheus software," said the plaintiffs, according to the judgment.

The plaintiffs also argued that infringements resulting from StreamCast's inducement would cause irreparable harm. "StreamCast has and will continue to induce far more infringement than it could ever possibly redress with damages," they said. The court agreed. Judge Wilson added, "it is highly likely that the award of statutory damages that ultimately befalls StreamCast in this case will be enormous … and would far outstrip the amount of revenue the company has garnered in recent years."

StreamCast argued that file-sharing has not harmed music sales. Judge Wilson said that was irrelevant. "It would also make no difference if StreamCast's inducement was demonstrated to increase Plaintiffs' sales," he wrote, pointing out that as copyright owners, "Plaintiffs have the exclusive right to decide when and how their material should be reproduced and/or distributed, regardless of whether their decisions make good business sense."

He also noted that "Morpheus users have the continued ability to pillage a tremendous quantity of Plaintiffs' intellectual property, and to spread this capacity elsewhere with additional file sharing."

"The only realistic method for remedying such future harm resulting from StreamCast's inducement is by way of a permanent injunction," he wrote.

However, Judge Wilson said that MGM's proposed injunction went too far, describing its language as "unacceptable." It asked that StreamCast be permanently banned from "directly or indirectly enabling, facilitating, permitting, assisting, soliciting, encouraging, authorizing, inducing or knowingly materially contributing to" another's infringement through Morpheus.

He pointed out that StreamCast had been found liable for "inducing" infringement, not for "contributory infringement" – so the reference to "knowingly materially contributing to" was inappropriate. He also took issue with the words "enabling" and "permitting".

He concluded that "inducement is the only form of liability that is relevant to the permanent injunction."

StreamCast argued that a 1984 Supreme Court ruling on Sony's Betamax video recorder protects it. In that case, Sony was accused of infringing copyrights. But Sony won because the machine had significant non-infringing uses. Judge Wilson said that case "provides no immunity where a staple's distribution is sufficiently connected to the promotion/encouragement of infringement."

"There is a distinction between forbidding distribution of a technology capable of substantial noninfringing uses and simply requiring sufficient efforts to minimize the prospective infringement that would otherwise be induced through the staple's distribution," he wrote. "StreamCast would still be allowed to distribute Morpheus so long as it undertook sufficient measures to mitigate end-user capacity for infringement."

Referring to the Napster litigation, Judge Wilson said, "products capable of substantial noninfringing use can be filtered if the failure to do so would constitute either continued contributory infringement … or vicarious infringement. It would therefore be anomalous if such filtering were always unavailable where a defendant has only been held liable for inducement."

'The bell cannot be unrung'

The court also had concerns about the continuing harm, pointing out that distribution after the encouragement of infringement ends, can by itself constitute inducement. "StreamCast has etched its niche in the market for infringement," he wrote.

He added: "neither the simple passage of time nor the entry of judgment in this case can remedy StreamCast's past promotion as the 'next Napster.' The fact that a permanent injunction is imposed also does not leave Morpheus magically reborn as a product safe for unfiltered distribution under [the Sony case]."

"The bell cannot be unrung," he wrote. "Accordingly, Morpheus's connection to the past promotion of infringement means that StreamCast's continued distribution of Morpheus alone constitutes inducement."

But he stopped short of barring its distribution completely, saying that "could constitute an inappropriate extension of Plaintiffs' copyrights. Plaintiffs should not lightly be given total control over a product capable of substantial noninfringing uses."

The language proposed for the injunction by MGM would shut down StreamCast until it installed a "perfect" filter that would prevent any infringement. Judge Wilson said that no such mechanism exists, nor is it technologically feasible. He also doubted that an immediate shutdown order "would most effectively stop further infringement." He saw it as beneficial to the plaintiffs' rights to allow StreamCast to distribute filtering software and take steps to encourage end-users into accepting an upgrade.

"A permanent injunction will issue requiring StreamCast to reduce Morpheus's infringing capabilities, while preserving its core noninfringing functionality, as effectively as possible," he wrote. Its steps will include encouraging end-users to upgrade from non-filtered legacy software.

StreamCast objected to MGM's demand for 'state of the art' filtering, saying it was cost prohibitive. Judge Wilson was unsympathetic, though. "Cost is not likely to be a controlling factor, as the injunction will be designed primarily to protect Plaintiffs' copyrights," he wrote.

Judge Wilson appointed a 'special master' to select "the most effective means available" to reduce the infringing capabilities of Morpheus "while preserving its noninfringing uses as feasible."

He also ordered the Plaintiffs to provide details of copyrighted works to StreamCast, something it has hitherto refused to do. This should include artist and title, a certification of ownership, and some evidence that one or more files containing each work is available on the Morpheus system.

Comment

David Woods, a litigator with Pinsent Masons, the law firm behind OUT-LAW.COM, described it as a clever ruling.

"Although the permanent injunction that MGM requested for was not granted, the effect of the ruling could well be the same," said Woods. "It seems from the ruling that 'once an infringer, always an infringer', and although StreamCast is still allowed to use its software, it now faces a potentially insurmountable hurdle. It's more of a financial one than a technological one, though."

Woods said the Judge is demanding a filter that is more effective than StreamCast's current system.

"The judge accepts that perfect filters are not realistic. But he is also saying that the company has to pay for the most effective solution that the market can offer. He's unmoved by StreamCast's claim that it can't afford these third party systems," he said.

"In any event, StreamCast's demise could well be sealed by the damages award, which has still to come," said Woods.

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