New York Law Journal "Infringement in the Cloud: SDNY Addresses Digital Storage Lockers" by Stephen M. Kramarsky

November 24, 2015

A few weeks ago, Sony announced that it would end production of Betamax videocassettes in March 2016, 40 years after their introduction. In the tech press, the announcement was reported as a curiosity—like an obituary for a faded star everyone thought was already dead. Today, Betamax is mostly discussed (when discussed at all) as an example of a highly restricted, closed system that lost out in the market to VHS, a technically inferior, but more open, rival. But intellectual properly lawyers know Betamax for a different reason. In 1984, the U.S. Supreme Court decidedSony Corp. of America v. Universal City Studios, also known as the "Betamax" case. That case held that the home recording of television shows for purposes of "time shifting" was a "fair use," not a violation of the copyright laws, and that Sony was therefore not engaging in contributory infringement by selling Betamax recorders, because those machines were capable of "substantial noninfringing uses."

 

The Sony standard is very broad on its face. Almost any technology has at least some substantial noninfringing use (leaving aside how it is actually used in the real world), so an expansive reading of Sony would sharply limit the scope of contributory infringement. For some time that was exactly how the case was interpreted, but subsequent developments in copyright law (including the passage of the DMCA) and changes in the business and technology landscape (including the rise of file sharing sites like Napster and Grokster) eventually caused the pendulum to swing the other way. Twenty years later, in 2005, the Supreme Court returned to the issue in Metro-Goldwyn-Mayer Studios v. Grokster, to decide "under what circumstances the distributor of a product capable of both lawful and unlawful use is liable for acts of copyright infringement by third parties using the product."

 

By 2005, the term "file sharing" had become largely synonymous (at least in the public imagination) with "music piracy," and although Grokster and others had successfully defended their services in some lower courts under the Sony standard, the Supreme Court reversed those wins. The court held that a file sharing service could be held liable for contributory infringement where its product was "overwhelmingly used to infringe" and it encouraged and profited from that infringement. Interestingly, the fragmented Grokster court split over whether its decision required or implied a reconsideration of the Sony doctrine, and that question remains alive today, as the pendulum continues to swing.

 

A decade later, the delivery and discovery of media over the Internet has left the hackers and pirates behind and become part of the licensed distribution chain, just as videotape did. The term "file sharing" is now more likely to describe a multi-billion dollar, cloud-based collaboration platform (like Dropbox or Microsoft's OneDrive) than a piracy site. And courts are beginning to examine the law of contributory infringement in that complex new context, as U.S. District Judge Andrew Carter did recently in Smith v. BarnesandNoble.com.


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