Metro-Goldwyn-Mayer Studios, Inc. v. Grokster

• Decision Date: 16 October 2007
• Docket Number: No. CV 01-9923 SVW (FMOx).,No. CV 01-8541 SVW (FMOx).,CV 01-8541 SVW (FMOx).,CV 01-9923 SVW (FMOx).
• Citation: 518 F.Supp.2d 1197
• Court: U.S. District Court — Central District of California
• Parties: METRO-GOLDWYN-MAYER STUDIOS, INC., et al., Plaintiffs, v. GROKSTER, LTD. et al., Defendants. Jerry Leiber, et al., Plaintiffs, v. Consumer Empowerment BV, et al., Defendants. And Related Counterclaims.

518 F.Supp.2d 1197

METRO-GOLDWYN-MAYER STUDIOS, INC., et al., Plaintiffs, v. GROKSTER, LTD. et al., Defendants.

Jerry Leiber, et al., Plaintiffs, v. Consumer Empowerment BV, et al., Defendants. And Related Counterclaims.

No. CV 01-8541 SVW (FMOx).

No. CV 01-9923 SVW (FMOx).

United States District Court, C.D. California.

October 16, 2007.

[518 F.Supp.2d 1200]

Ana C. Reyes, Beth A. Levene, David E. Kendall, Joseph Marshall Terry, Kevin

[518 F.Supp.2d 1201]

Hardy, Nicholas J. Boyle, Robert J. Shaughnessy, Thomas G. Hentoff, Williams & Connolly, Donald B. Verrilli, Jr, Steven B. Fabrizio, Victoria H. Jueds, Jenner and Block, Washington, DC, Dean Garfield, Gregory Paul Goeckner, Motion Picture Association of America Inc, Encino, CA, Jan B. Norman, Jan B. Norman Law Offices, Russell J. Frackman, George M. Borkowski, Mitchell Silberberg and Knupp, Los Angeles, CA, for Plaintiffs.

Rochelle A. Herzog, Zimmerman Rosenfeld Gersh & Leeds, Beverly Hills, CA, for Defendants.

ORDER GRANTING IN PART PLAINTIFFS' MOTION FOR A PERMANENT INJUNCTION [01-8541: 1215]; ORDER DENYING WITHOUT PREJUDICE STREAMCAST'S MOTION FOR A STAY OF THE PERMANENT INJUNCTION'S ENFORCEMENT PENDING APPEAL [01-8541: 1259]

STEPHEN V. WILSON, District Judge.

I. INTRODUCTION

On September 27, 2006, this Court granted Plaintiffs'¹ motion for summary judgment on the question of liability as against StreamCast Networks, Inc. ("StreamCast"). In that Order, the Court recounted this case's procedural history, and engaged in a detailed analysis of the factual record pertaining to StreamCast's inducement of copyright infringement. See Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 454 F.Supp.2d 966, 971, 975-92 (C.D.Cal.2006). StreamCast is the only defendant remaining in this case. As the parties are well aware, StreamCast operates and distributes the Morpheus System and Software.

Presently before this Court is Plaintiffs' motion for a permanent injunction against StreamCast. StreamCast has vigorously opposed the imposition of a permanent injunction. StreamCast also asks for an evidentiary hearing, additional discovery, or at least a stay of the permanent injunction's enforcement pending appeal.

An initial hearing was held before this Court on February 12, 2007. During the hearing, the Court espoused its concern regarding the specificity and scope of Plaintiffs' proposed permanent injunction. Subsequently, this Court issued an order requiring further briefing, in which it detailed specific questions for the parties to answer. [Docket No. 1234.] On the technology front, the parties were asked to expand on their discussion of filtering technology and StreamCast's ability to coax end-users away from legacy (non-filtered) versions of Morpheus Software. On the legal front, the parties were ordered to analyze exhaustively the history of permanent injunctive relief in the context of patent inducement. This briefing has since been received, and the Court has evaluated the pertinent issues. The Court's analysis and conclusions are specified as follows.

II. BACKGROUND2²

A. The Proposed Permanent Injunction

Plaintiffs' proposed permanent injunction is composed of several parts. Under § 1(a)(I) and § 1(a)(ii), StreamCast would be enjoined from directly or indirectly infringing Plaintiffs' copyrighted works in any manner, which also includes StreamCast's "enabling, facilitating, permitting assisting, soliciting, encouraging, authorizing, inducing, or knowingly materially contributing to" such infringement. Pursuant to § 1(b), StreamCast would be barred from operating the Morpheus System and Software, or any other similar peer-to-peer or file-trading system, until there is a "robust and secure means exhaustively to" stop infringement. According to § 1(c), StreamCast would be required to "use all technologically feasible means to prevent or inhibit" the infringement of Plaintiffs' copyrights by end-users through any version of the Morpheus Software in existence.

Until StreamCast is able to "exhaustively" stop all infringement, it would also be barred from displaying advertising on all Morpheus Software versions.³ StreamCast must give notice to all of StreamCast's agents and employees, as well as to any entity interested in a transfer of StreamCast's ownership interest in the Morpheus System and Software, and all successors or those acting in concert with them. Any successor in interest to any part of StreamCast's business must also submit to this Court's jurisdiction and venue, and agree to be bound by the injunction. StreamCast could be held in contempt for any violation of the permanent injunction.

B. StreamCast's Claimed Initial Filtering Efforts

In the September 27, 2006 Order granting Plaintiffs' motion for summary judgment, this Court held that StreamCast distributed the Morpheus Software with the intent to induce copyright infringement. Grokster, 454 F.Supp.2d at 992 ("[N]o reasonable factfinder can conclude that StreamCast provided OpenNap services and distributed Morpheus without the intent to induce infringement."). In support of this conclusion, the record revealed numerous undisputed facts: (1) StreamCast's software was used overwhelmingly for infringing purposes; (2) StreamCast targeted a known community of infringers — former Napster users; (3) StreamCast provided technical assistance to aid users in their enjoyment of illegally downloaded content; (4) StreamCast thwarted enforcement efforts by copyright holders; (5) StreamCast's business model depended on massive infringing use; and (6) StreamCast took no meaningful steps to prevent infringement. Id. at 985-92. The Court concluded that "evidence of StreamCast's objective of promoting infringement is overwhelming." Id. at 992.

After receiving this Court's Order, StreamCast claims that it decided "to the best of its abilities, it should develop and integrate a robust filtering mechanism ... so that copyrighted works that are not authorized by copyright holders for free downloading or distribution utilizing Morpheus would not be able to be downloaded by Morpheus users." (Weiss Decl. ¶ 4.)⁴ Yet, despite taking steps to implement a filter, "StreamCast ... maintains that any requirement to filter is improper and not required under the law. Accordingly, StreamCast reserves the right to cease distribution of a filtered version." (StreamCast Supp. Opp. at 18 n. 2.)

Plaintiffs have reportedly refused to turn over a list of artists that they wish to have filtered. (Weiss Decl. ¶ 6.) Thus, in order to meet its self-imposed deadline of implementing its filtering mechanism by November 17, 2006, StreamCast's CEO (Weiss) instructed its Director of Technology (Kassis) to copy the names of all artists on the RIAA website. (Id.) StreamCast asserts that its homemade filter would be even more effective if it were given the "hash values" of files on Morpheus' network that contain Plaintiffs' copyrighted material. (Id. ¶¶ 8-9.) Beginning on November 17 and 20, 2006, StreamCast began distributing its new filtering software to Morpheus users. (Id. ¶ 7.)⁵ On December 15, 2006, StreamCast started sending screenshots to users of "legacy versions" of the Morpheus software stating that it was "strongly recommended" that they click "ok" to accept a software upgrade — this upgrade allegedly contained a filter. (Kassis Decl. ¶ 7.) StreamCast asserts that 92.5% of copyrighted audio and video files were blocked by the filtering versions of the Morpheus Software as of January 14, 2007. (Id. ¶ 11.) However, the new filtering software has not replaced all "legacy versions." In fact, StreamCast admits that only about one-third of the downloading sessions in December 2006 and January 2007 were from software that contained this new filter. (Id. ¶ 8-9.)

In order to develop a list of hash values known to contain infringing content, StreamCast initially ran a "batch process" four times per day. (Id. ¶ 16.) These values are derived from the search results generated by end-users. (Id.) "Using each artist name as a search term keyword, the batch process scan the P2P networks accessed by Morpheus users and saves all audio and video file hash values obtained from the search results. The hash values are then stored on a hash database server that StreamCast created and maintains." (Id. ¶ 19.) When an end-user attempts to download an audio or music video file containing a hash value found in StreamCast's database, the download is "blocked." (Id. ¶ 21.) This filtering mechanism is also performed during the uploading process for audio and music video files. (Id. ¶ 23.) For TV shows and motion pictures, StreamCast allows the download of any file with DRM protection. (Id. ¶ 26.) All other such files are blocked if they either exceed fifteen (15) minutes in running-time (if known) or the file exceeds 100 MB in size. (Id. ¶ 27.) All filtering versions of the Morpheus Software are capable of being automatically updated at the end of an individual user's session. (Id. ¶ 31.)

During this timeframe, StreamCast also contacted various companies regarding acoustical fingerprinting technology. SNOCAP informed StreamCast that it would be "difficult to determine" the total number of "artist-title pairs" in its collection. Audible Magic allegedly claimed that it could not identify the total number of artist-title pairs in its database. (Weiss Decl. ¶¶ 10-11.) Weiss believes that these two options would, regardless, be "cost-prohibitive." (Id. ¶¶ 12.) StreamCast has also contacted other companies, such as allmusic.com, NARM, MUZE, and Gracenote. (Id. ¶ 13.) It is not clear from these contacts whether such companies would either be willing to license their information to StreamCast, or if it would be comprehensive enough to cover all copyrighted works owned by Plaintiffs. (Id. ¶ 14.)

StreamCast also posts warnings on its websites and within the Morpheus System and Software that end-users should download the new filtering software; they are also...