Editors Note: Caroline Horton Rockafellow is a member of the Research Triangle Park law firm of Daniels Daniels & Verdonik, P.A. TechLaw is a regular feature in Local Tech Wire.
_______________________________________________________________________________________In the last few weeks, the technology, entertainment and legal communities have been consumed with the Supreme Court decision in MGM v. Grokster. This case held that Grokster and StreamCast Networks can be found liable for copyright infringement committed by those using its software and technology for the purpose of downloading copyrighted music and movies.

The Grokster case did not turn on whether uploading or downloading of copyrighted music and movies was illegal, since this practice is clearly an infringement of copyright if done without the express permission of the copyright owner. Rather, the issue in this case was whether the provider of a technology that permits, or more specifically encourages, such copying can be held liable for copying done by the end-users of the technology.

Some Background

There is precedent to indicate that those who make technology available are not liable for the resulting infringing activities undertaken by the end-users. As far back as 1984, in Sony v. Universal City Studios, the Supreme Court held that manufactures of video cassette recorders (VCRs) were not liable for copyright infringement by the end-users of such machines. This case relied on the finding that these machines were “capable of substantial noninfringing uses.”

Now, more than 20 years later, it would appear that the Sony decision was clearly the right decision. VCR’s are in common use throughout American households and, in most cases, they are used for time shifting and playing commercial copies of video tapes. They do not appear to have caused any great harm to copyright holders, and in fact, have allowed the creation of a useful revenue stream for such copyright owners and related parties. Ask any parent how much they have spent on children’s video tapes, and they can attest to the value the VCR has had for copyright holders.

Entire businesses and large franchises were created solely for the purpose of renting commercial video tapes. The VCR has generated an entire industry and has clearly been more of a benefit than a detriment to copyright holders.

The Grokster case was viewed by many as parallel to Sony. Grokster uses a peer-to-peer file sharing technology capable of being used for both legal and non-legal purposes. The Grokster technology allows users to easily and quickly transfer high quality copies of digital and electronic media, which is ideal for users that are trying to distribute materials in high volume to a large audience, but not so ideal for copyright holders trying to restrict illegal distribution.

The key difference between Sony and Grokster is that Grokster actively promoted the non-legal use of its technology. As noted in the Supreme Court holding, “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.” Accordingly, the act of actively inducing infringers was found to be even more relevant in determining liability than the capabilities of the technology itself.

What Does This Really Mean?

Grokster, Sony and the earlier Napster case will continue to be discussed, analyzed and reviewed by the legal community for some time. It is also likely that additional cases related to new and evolving technologies will appear on the Supreme Court’s calendar within the next few years.

Unfortunately, what we really should be focusing on as a society is not the new technologies and the extent to which such technologies induce illegal activities, but rather the shift in our collective understanding of the distinction between right and wrong when it comes to infringement of copyright.

For the most part, in the United States, we are fortunate to live in a law-abiding society. The majority of our citizens understand that it is wrong to walk into someone’s home or retail establishment and take something that belongs to someone else. When it comes to tangible items, we have a clear understanding of what constitutes theft and a clear understanding that theft is wrong. We teach our children not to steal and work hard to teach the difference between right and wrong.

Theft Is Theft

Ask any kindergartener and they will tell you that stealing is wrong. They get it. So, why do adults have such a problem when it comes to electronic and digital media?

The problem with current technology is that as a society, we do not yet truly comprehend the delineation between right and wrong and what constitutes theft. The same people who would never think of walking into a store and slipping a CD under their shirt, think nothing of downloading that same music or movie off the Internet.

In most cases, that individual who would not steal from the store does not refrain from this activity because of a fear of being caught, but rather because of an understanding that such activity is fundamentally wrong.

As a society, we need to do a better job of educating our communities that taking copyrighted material from a store or from the Internet is the same thing. It is theft and is wrong, and it should be just that simple. Whether it is Grokster or Napster or the next great technology that comes along and makes it easier for us to take files and technology without reimbursing the copyright holder, the real issue is that we must do a better job of defining theft and educating our public.

The Grokster case came about because copyright holders had little success in going after the direct infringers. The individual infringers taking the materials were too numerous and enforcement of such a large number of individuals too difficult, that economics forced the copyright holders to go after a larger target.

If our society as a whole were better able to recognize and respect copyright interests, then the Grokster case never would have made it to our nation’s highest court because the illegal use of the technology would have been minimized. Regardless of the holding in Grokster, it does not change the fact that the end users are guilty of theft. We are a society of teenagers, parents and grandmothers stealing everyday, and as a society, we do not generally recognize that these actions are wrong.

This lack of understanding does not apply to all forms of copyrighted materials. In most cases, individuals understand that if you have a single copy of a popular novel, it would not be appropriate to photocopy the entire book and then start distributing the copied text. Cost may be part of the reason that this is not a problem, but there also seems to be a general understanding that this is not appropriate. The same cannot be said of copyrighted material stored in electronic format.

For example, if one individual had a copy of the new Harry Potter book and gave it to a friend, the two individuals could not simultaneously use the book in two different locations. If both of these individuals need to read the book at the same time in two different places, they will need to buy two copies. If, however, the book were in electronic form, the first user could copy it onto his computer, and then give the disk to his colleague, who then copies it and gives it to another colleague and another, and then multiple people have copies, but only one copy was purchased. This is done all the time, but it is theft just in the same way as it would be if the individuals walked into the store and took several copies of that same book or CD.

Why Should We Care?

Why all the fuss over controlling distribution of electronic media? If it is so difficult to control illegal copying and distribution, and if every time a new technology is shut down another technology will come along, why do we try so hard to control and limit the copyright infringement? It comes down to money.

Most people who create and develop copyrighted works do so because there is a financial reward on the back end. Money is a great motivator and allows people to spend the necessary time and energy creating such materials. If a programmer knew that the end result of years of effort in developing a new software program would result in the sale of a single CD, which CD would then be distributed to hundreds and thousands of end-users without any compensation to the developer, it is unlikely that such developer would have the desire or financial resources to continue his work. Making sure that copyright owners are fairly compensated for each copy of their work distributed helps to ensure that creativity and development will continue.

In the short term, it is useful and necessary for a legal solution to control copyright infringement. Grokster, Napster and the like go a long way to help with the initial solution to this problem.

However, in the long term, the real solution is a re-education of our public so that as individuals, we all have a clear definition and understanding of what constitutes theft in the evolving electronic and digital world. We will always have to deal with those who violate the law, but in the end most of our citizens are law abiding and will comply with the law, once we are able to do a sufficient job of educating them.

Kindergarteners understand that theft is wrong. Now we just need to get the adults to understand that copyright infringement is theft -and it is wrong.

Daniels Daniels & Verdonik, P.A. has been serving the legal needs of entrepreneurial and high technology clients for more than 20 years. Caroline Horton Rockafellow is a licensed patent attorney who works primarily in the areas of technology deals and licensing. Questions or Comments can be sent to crockafellow@d2vlaw.com