## Facts

- Metro-Goldwyn-Mayer Studios Inc. and other copyright holders sued Grokster, Ltd. and StreamCast Networks, Inc. for secondary copyright infringement arising from distribution of peer-to-peer (P2P) file-sharing software.
- Respondents’ software enabled users to share digital files over decentralized networks without a central server controlling or monitoring exchanges.
- Evidence indicated users predominantly used the software to share copyrighted music and video files without authorization, and respondents were aware of widespread infringing use.
- The record contained evidence that respondents promoted their products as alternatives to Napster after Napster faced infringement litigation and sought to attract former Napster users.
- Respondents generated revenue from advertising tied to user volume, giving them an economic incentive to expand the user base.
- Respondents did not implement filtering tools or other measures to reduce infringement and, at times, responded to users’ infringement-related communications with guidance.

## Issues

1. Under what circumstances is a distributor of a product capable of both lawful and unlawful use secondarily liable for copyright infringement committed by third-party users?
2. Whether distributors of P2P software may be liable for contributory or vicarious infringement notwithstanding the software’s potential substantial noninfringing uses recognized in *Sony*.
3. Whether evidence of purposeful encouragement of infringement supports a distinct inducement theory of secondary liability.

## Decision

- The Supreme Court unanimously vacated the Ninth Circuit’s judgment and remanded.
- The Court held that a distributor that promotes use of its product to infringe copyright, shown by clear expression or other affirmative steps encouraging infringement, is liable for resulting third-party infringement.
- The Court concluded the evidence was sufficient for a reasonable jury to find respondents intended to foster infringement; therefore, summary judgment for respondents was improper.
- The Court reaffirmed *Sony*’s protection for distribution of products capable of substantial noninfringing uses in the absence of fault, but held *Sony* does not bar liability where there is inducement.

## Legal Principles

- One who distributes a device with the object of promoting its use to infringe copyright, shown by affirmative steps encouraging infringement, is liable for the resulting acts of infringement by third parties.
- *Sony* protects distributors of products capable of substantial noninfringing uses from contributory liability absent fault-based conduct; it does not foreclose other secondary-liability theories grounded in culpable intent.
- Inducement may be proved by evidence such as marketing an infringing use, instructing users on infringing use, targeting a known infringing market, and other purposeful conduct supporting an intent to cause infringement.
- Mere distribution of a dual-use technology with knowledge that some users infringe is insufficient, standing alone, to impose liability without evidence of purposeful encouragement.

## Conclusion

The Court recognized inducement as a basis for secondary copyright liability and held that distributors of dual-use file-sharing software may be liable when they intentionally encourage infringement through affirmative conduct, even though the technology may have substantial lawful uses under *Sony*.


MGM Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005)