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Monday, June 27, 2005
Business Models as Evidence of Intent
Grokster | Posted by Edward Felten at 01:16 PM
[Greetings, SCOTUSblog readers. My name is Ed Felten. I'm a professor of computer science and public affairs at Princeton University. That makes me the token technologist in this group. I was one of seventeen computer science professors who filed an amicus brief in Grokster urging affirmance. I blog at freedom-to-tinker.com.]
One interesting aspect of Justice Souter's majority opinion is the criticism of the business models of StreamCast and Grokster (pp. 22-23):
Third, there is a further complement to the direct evidence of unlawful objective. It is useful to recall that StreamCast and Grokster make money by selling advertising space, by directing ads to the screens of computers employing their software. As the record shows, the more the software is used, the more ads are sent out and the greater the advertising revenue becomes. Since the extent of the software's use determines the gain to the distributors, the commercial sense of their enterprise turns on high-volume use, which the record shows is infringing. This evidence alone would not justify an inference of unlawful intent, but viewed in the context of the entire record its import is clear.
It's hard to think of any conceivable business model for a software company under which an increase in use of the product does not lead to an increase in revenue. If you sell software, greater use allows you to increase the price, or to sell more units. Likewise if you sell software by subscription. If you give away the software and make money on auxiliary products or services, you'll still benefit from increased usage.
Certainly Sony's profits would have increased the more people used Betamaxes. The same is true for iPods, TiVos, photocopiers, and many other legitimate products. Profiting from use seems like pretty poor evidence of intent to cause infringement.
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Comments
The key seems to be the link between high-volume use and infringement. The sensible implication would seem to be that sharing a music file with a million people is not fair use. Knowingly compromising a system of exclusion to achieve profits only seems to be illegal when the focal point of the system is revealed to be arguably in legal conflict with copyright law. I wonder what would happen if a case arose in which a group knowingly compromised Hollywood's (MPAA/RIAA) system of exclusion, but didn't market it directly for that purpose? Sony is on both sides of that fence, since Sony's computers are often Internet-connected devices sending all kinds of things freely around the ether. I write about this conflict in a paper, "The Rise and Fall of Hollywood?: Broadband Deployment vs. Controlling the Right to Copy"
Posted by: Reed at June 28, 2005 12:03 AM