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FL: What do the supporters of this bill hope to achieve?
Supporters of the bill appear to be mainly targeting the use of peer-to-peer to technology. As such, it is designed to hold peer-to-peer companies liable for "intentionally inducing" others to violate copyright law. In introducing the bill, Senator Hatch referred to the Grokster decision, in which the Court acknowledged that there was the possibility that the "Defendants may have intentionally structured their businesses to avoid secondary liability for copyright infringement, while benefiting financially from the illicit draw of their wares." From the comments made when the bill was introduced, it appears that the supporters of the bill hope to prevent companies that intentionally design their businesses to avoid secondary liability - for instance by not maintaining control over the infringing material - from otherwise benefiting from the illegal activity that the company "induces."
FL: What was the holding in Grokster that Senator Hatch found problematic that led him to introduce this bill?
In Grokster, the Court determined that the providers of software that enabled its users to exchange copyrighted material over the Internet were not liable for copyright infringement due to the way the software operated and the software providers’ role in the exchange of materials. In that case, the court determined that because software providers did not have the ability to supervise or control the use of the software, they were not liable for copyright infringement. According to comments made by Senator Hatch when he introduced the bill, he believes that secondary liability should focus on intent, rather than control. In other words, he believes that one should not be able to design a technology that avoids the control necessary for a finding of secondary liability, while at the same time encouraging use of the technology for infringing purposes.
FL: How will the bill affect the scope of the fair use doctrine and other traditional defenses to copyright infringement?
The bill does not appear to affect the scope of the fair use doctrine or other traditional defenses to copyright infringement.
FL: How will the bill affect current DVR services such as Tivo and ReplayTV?
It is difficult to say how the bill will affect DVR services. Given that the Supreme Court in the Sony decision determined that authorized, as well as unauthorized time-shifting in the home, was fair use, whether DVR services will be adversely affected will likely depend on the nature of the services offered. For instance, if the services begin to offer features that induce uses not falling in the realm of "fair use," the companies could be at risk. However, in any event, whether DVR services would be adversely affected by the bill would depend on the court’s determination of what constitutes "intentional inducement."
FL: Some critics of the bill contend that the Induce Act would overrule the Sony decision and make all recording devices such as VCR's and tape recorders illegal or force them to pay a royalty to content providers. How credible is this contention?
The bill would likely not overrule the Sony decision. Specifically, the bill allows for liability of those who intentionally induce copyright infringement. As such, it does not appear that the bill was designed to target any device that may be used for infringing purposes. Rather, the bill targets only those who actively induce others to use such devices to in fact engage in infringing activity. Thus, while the bill would likely not overrule the Sony decision, it may be possible to find the maker of a device that could be used for both infringing and non-infringing purposes liable if the manufacturer were found to intentionally induce infringing activity, as defined by the bill. However, the types of activity that will be considered to amount "intentional inducement" will ultimately be determined by the courts.
FL: Some critics of the bill contend that the bill's proposed changes could outlaw all electronic recording devices such as audio tape recorders and VCR's. How valid is this criticism?
Depending on the facts of a specific case, it may be possible that a broad interpretation of the bill could lead a Court to determine that a manufacturer of an electronic recording device, such as a VCR, was "intentionally inducing" others to violate the copyrights of others. However, in reality, it seems that it is unlikely the bill would "outlaw" all electronic recording devices.
FL: Who will be the most effected by the bill and what can they do to limit any adverse effects from the bill?
Those that will be most affected by the bill will be those companies that actually encourage copyright infringement. The main legal question that the bill will present to courts is determining the definition of "intentional inducement." If the Copyright Act is amended as proposed, then it will be for the courts to determine what acts actually constitutes "intentional inducement." Until that is done, what acts could amount to actionable inducement would be a great uncertainty.
FL: What are the possible interpretations of "intentional inducement" that courts are likely to consider and how can companies reduce potential liability under the various interpretations?
Whether a company is engaging in "intentional inducement" will depend on the facts of the given situation. The bill provides that intent should be based on the "reasonable person standard," meaning that a court will look to whether a reasonable person would find intent to induce infringement based on the facts. The bill also provides that one factor that may be considered is whether the activity "relies on infringement for its commercial viability." Notably, Senator Hatch believes that certain peer-to-peer technology providers are currently engaged in activity that would amount to liability under the proposed bill. For instance, he noted one peer-to-peer technology company that promoted and endorsed illegal file sharing. Until a court helps to define the types of acts which amount to intentional inducement, one simple way to reduce potential liability is to not promote or endorse infringing activity.
FL: Are there any possible amendments to this bill that might clear up any ambiguity and still achieve the purposes of the bill and if so, what might they be?
The purpose of the bill is to hold liable those who actively induce copyright infringement. However, despite this purpose it is possible that the current language could be broadly interpreted to go beyond the intended scope. One way to amend the bill would be to tailor its language to explain that its purpose is to target technology providers who deliberately and/or actively facilitate the copying, reproduction, or distribution of protected materials. Such an amendment would help to narrow the applicability of the bill, and prevent an overbroad interpretation.
 | John Hughes is a partner at Townsend and Townsend and Crew LLP’s San Francisco office. His practice focuses upon trademark and copyright law for both domestic and foreign clients. |
| Jennifer M. Rich is an associate at Townsend and Townsend and Crew LLP’s San Francisco office. Her practice includes trademark and copyright counseling, prosecution, technology licensing, and litigation. | |