The LimeWire Decision & The End of Entrepreneurial P2P.

May 14, 2010 By Leave a Comment

For a dozen years, Internet entrepreneurs have launched business after business attempting to capitalize on the concept of file-sharing.  Napster was sued in 1999, a preliminary injunction against it was granted in 2000 and it was found guilty of copyright infringement in 2001.

Grokster and Kazaa (both of which used the FastTrack protocol) and StreamCast Networks (creator of the P2P application, Morpheus) were next. Although the complaints against them were dismissed in 2003, and the dismissal upheld on appeal, in 2005 the Supreme Court found Grokster guilty. As Justice Souter wrote for the majority: “We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.”

The Grokster decision was unanimous and the Supreme Court remanded the case to the District Court for further proceedings consistent with that decision. Seeing the writing on the wall, Grokster and Kazaa entered into settlement agreements with the plaintiffs, while Streamcast, which refused to give up, was summarily found guilty for copyright infringement. In the meantime, in December 2004, AIMster (subsequently renamed Madster) was shut down by preliminary injunction which eventually became permanent.

Throughout this period, LimeWire (which uses the Gnutella network) continued to distribute and sell its software, which became one of the most popular programs for P2P sharing. Some 58% of P2P music sharing is said to be done via LimeWire. In the wake of the Grokster decision, LimeWire maintained its innocence on the grounds that it merely provided software to be used for legitimate means. Accordingly, it amended its end-user agreement to require intended users of its software to warrant that they “will not use LimeWire for copyright infringement.”

The tactic provided LimeWire with no protection at all. LimeWire was sued in 2006. On Tuesday, May 11th, the United States District Court in Manhattan found LimeWire and its founder, Mark Gorton, guilty of copyright infringement and unfair competition. [1]

There is nothing ground-breaking about the District Court’s decision. LimeWire was damned by the facts. Among other things, the court found that:

  • 93% of the music files actually downloaded via LimeWire are under copyright;
  • LimeWire knew that the primary use of its software was to share copyrighted music;
  • LimeWire advertised itself as a replacement for Napster, Kazaa and Morpheus, thereby promoting LimeWire’s infringing capabilities;
  • LimeWire provided search functionality permitting users to search for categories such as “Top 40″ which, inevitably, are protected by copyright law;
  • LimeWire employees occasionally offered users technical information about obtaining music files which the employees knew were under copyright; and
  • LimeWire took no steps to mitigate users’ infringing activities.

And if that didn’t show guilty knowledge enough, LimeWire founder Gorton had taken steps to shield his assets should his company be adjudged guilty.

Although there are other P2P programs currently in use such as BitTorrent, eMule and BitComet, the decision is probably the death knell of entrepreneurial efforts to capitalize on P2P file sharing. This doesn’t mean that file sharing is dead. Far from it. Not only are P2P networks likely to continue to exist (albeit on a level not likely to attract big money investors), but there are also some 3,000,000 music blogs offering free downloads via external links to such file storage sites as Rapidshare, MegaUpload, Hotfile, FileServe, FileSonic, Zshare, narod.ru, Badongo, Mediafire and Deposit Files.  Nearly all of these sites respond to DMCA takedown notices (i.e., notices of removal pursuant to the U.S.’s Digital Millennium Copyright Act), but for days, weeks, months or years the music — virtually anything one might want to download — will be there. (If something isn’t there yet, it will be. Just wait.) And when something is taken down, it will eventually re-appear. It’s a game of whack-a-mole.

In fact, the  magnitude of infringement suggests that the music industry should explore different business models, ones that reconsider pricing and apply globally, not to mention satisfy consumer demand for better quality downloads than companies like iTunes or Amazon offer. P2P file sharing companies were easy enough targets because they were huge businesses. However, the P2P lawsuits simply made file sharing more efficient and more difficult to stop.

Footnote

[1] Because sound recordings made prior to 1972 are not protected under federal copyright law, claims of infringement on such recordings must be made under state anti-piracy and unfair competition laws, as well as federal unfair competition laws. Musical compositions contained on pre-1972 sound recording, however, are protected under federal copyright law.

Filed Under: Case Analysis, Copyright Infringement, Injunctive Relief, Internet Tagged With:

Does a likelihood of irreparable injury standard make the availability of injunctive relief in trademark cases more difficult?

July 22, 2009 By Leave a Comment

The Supreme Court in Winter v. Natural Resources Defense Council, — U.S. —-, 129 S.Ct. 365, 374 (2008) held that that the Ninth Circuit’s “possibility” standard in granting preliminary injunctions is too lenient reiterating the standard requires plaintiffs seeking preliminary relief to demonstrate irreparable injury is likely in the absence of an injunction. In the Ninth Circuit, to obtain injunctive relief, a plaintiff must establish (1) a likelihood of success on the merits, (2) a likelihood of irreparable harm absent a preliminary injunction, (3) that the balance of equities tips in favor of issuing an injunction and (4) that an injunction is in the public interest. In the Winter case, the Supreme Court ultimately weighed the public interest factor in favor of the Navy, lifting the limitations imposed on use of “mid-frequency active” sonar during integrated training exercises in the waters off southern California.

Previously in trademark cases, a plaintiff was entitled to a presumption of irreparable harm upon showing a probable success on the merits. See GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1204-05 (9th Cir.2000). However, in Winter, the Supreme Court held that “[i]ssuing a preliminary injunction based only on a possibility of irreparable harm is inconsistent with our characterization of injunctive relief as an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Winter, at 375-76 (emphasis added). A plaintiff is no longer entitled to a presumption of irreparable harm on the ground that it has shown a likelihood of success on the merits. Rather, plaintiff must demonstrate that in the absence of a preliminary injunction, the applicant is likely to suffer irreparable harm before a decision on the merits can be rendered. The mere possibility of some remote future injury would be insufficient under this new test enunciated by the Supreme Court.

A preliminary injunction is an extraordinary remedy never awarded as of right. The court must always balance the competing claims of injury and consider the effect on each party of the granting or withholding of the requested relief. Here, the court has expanded its emphasis upon the public consequences in employing the extraordinary remedy of injunction. Interestingly, the court deemed the Navy’s concerns about the preliminary injunction “speculative” because the Navy had not operated under similar procedures before noting that this is almost always the case when a plaintiff seeks injunctive relief to alter a defendant’s conduct.

It is unclear if the Winter decision overrules the Second Circuit alternative test that a party may obtain injunctive relief if it shows that (1) there are questions so serious, substantial, difficult, and doubtful as to make them fair ground for litigation and thus more deliberate investigation; and (2) the harm that it would suffer is ‘decidedly’ greater than the harm that its adversary would suffer is still valid law. See, Buffalo Courier-Express, Inc. v. Buffalo Evening News, Inc., 601 F.2d 48, 58 (2d Cir.1979).

Since the Winter decision there have been a number of district court and appellate court decisions that have considered this “heightened” standard. It appears that the courts are giving the public interest factor additional attention, but with little change in result. If anything, it would seem that the courts will be careful to more fully address this public interest factor in the future and accordingly it should be addressed in a motion for preliminary relief. Because the very essence of trademark law is to protect the consumer from being confused, there is an inherent public interest in every trademark case to prevent a likelihood of consumer confusion.

Filed Under: Case Analysis, Injunctive Relief, Trademark Infringement Tagged With: