7th Circuit Affirms Preliminary Injunction Shutting Down Aimster

The United States Court of Appeals for the Seventh Circuit this week upheld a preliminary injunction that shut down Aimster, a peer to peer (“P2P”) computer file-swapping service. In re: Aimster Copyright Litigation, Docket No. 02-4125 (7th Cir. June 30, 2003). Significantly, however, Judge Posner’s opinion for the Seventh Circuit reaffirms the viability of the Supreme Court’s “fair use” analysis applied to VCRs in Sony Corp. of America, Inc. v. Universal Studios, Inc., 464 U.S. 417 (1984), rejecting arguments that Sony applies only to products and not services.

In Sony, the Supreme Court held that the manufacturer of a product has no liability for contributory copyright infringement so long as the product is capable of “substantial noninfringing uses.” In this case, however, Aimster failed to produce any evidence that its system was utilized for substantial non-infringing uses. In the absence of such evidence, the Seventh Circuit affirmed the district court’s finding that the recording industry had demonstrated a likelihood of prevailing on its vicarious and contributory infringement claims. The case stands in contrast to the recent decision in MGM Studios, Inc. v. Grokster, Ltd., No. 01-08541, slip op. (C.D. Cal. Apr. 25, 2003), in which the Central District of California granted summary judgment in favor of Grokster and Streamcast, both P2P services.

Judge Posner rejected the recording industry’s arguments that anything “more than a mere showing that a product may be used for infringing purposes” is sufficient to find liability for contributory infringement. In Sony, it was apparent that the Betamax video recorder was being used for infringing purposes. However, the Supreme Court did not want to stifle new technology that also had substantial non-infringing uses. Judge Posner therefore disagreed with the Ninth Circuit’s suggestion in A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1020 (9th Cir. 2001) that actual knowledge of infringing uses is sufficient for a finding of contributory infringement.

On the other hand, the court also rejected Aimster’s argument it only had to show that its file-sharing system “could be used in noninfringing ways.” Rather, Judge Posner noted that Aimster “failed to produce any evidence that its service has ever been used for a noninfringing use, let alone evidence concerning the frequency of such use.”

Judge Posner analogized Aimster’s knowledge to that of a massage parlor owner who employs women that he knows sell only sex and not massages to the patrons (thereby facilitating prostitution), contrasting it with that of a dressmaker who knows that prostitutes buy and wear his dresses (but who would have no liability for prostitution). The court pointed to Aimster’s user tutorial that only utilized copyrighted music as examples; its subscription fee-based “Club Aimster” service that enabled users to easily download the most popular copyrighted songs; and other aspects of its service that demonstrated Aimster’s knowledge that its system was being utilized primarily for purposes of copyright infringement.

Although Aimster’s service utilized an encryption feature that prevented it from having actual knowledge of what music was being copied, the Seventh Circuit rejected Aimster’s argument that constructive knowledge of infringement is insufficient to find liability for contributory infringement. The Seventh Circuit held that “willful blindness” is knowledge and that “a service provider that would otherwise be a contributory infringer does not obtain immunity by using encryption to shield itself from actual knowledge of the unlawful purposes for which the service is being used.”

The Seventh Circuit also addressed Aimster’s defense under the Digital Millenium Copyright Act (“DMCA”). Aimster argued that as an Internet service provider, it was protected from liability for contributory infringement by the safe harbor provisions contained in 17 U.S.C. § 512. The court stated that a requirement of the DMCA’s safe harbor provisions is that “a service provider must do what it can reasonably be asked to do to prevent the use of its service by ‘repeat offenders.’” Judge Posner found that Aimster did nothing to prevent infringement.

By contrast, the California district court in Grokster compared Grokster’s and Streamcast’s P2P services to Napster and concluded they were not liable for their end users’ copyright infringements. (See CRB Update dated April 30, 2003). Arguably, the specific technology utilized by Aimster enables it to exert more supervision and control over its users than that utilized by Grokster or Streamcast, which could account for the different results in these cases. However, Judge Posner made no mention of that case, which is currently on appeal to the Ninth Circuit.

A copy of the Aimster opinion is available at http://www.ca7.uscourts.gov/op3.fwx?submit1=showop&caseno=02-4125.PDF. Please contact us if you would like additional information.