My Day With the Supremes

There are advantages to being a member of the Supreme Court Bar. One is, you get to go and hear the arguments from the Supreme Court Bar section. Guess what I did today! While you will get tons of info from other websites, this is probably the only place you will see someone say that Justice Rehnquist now sounds like a bad combination of Darth Vader and the Emperor from “Return of the Jedi”….

O.K., it’s not nice to make fun of people recovering from thyroid cancer. But it was still funny to hear the Chief Justice of the Supreme Court speak into the microphone with this Darth Vaderish wheeze and say things like “Will our decision release Grokster all over the world?” I swear, he could have thrown in a manical laugh and it would not have been out of place.

Another thing that occurred to me is that if people ever could listen to Supreme Court arguments via streaming or traditional media, it would make very little sense to non-lawyers. For example, you get exchanges like:
Scalia (sarcasticlly): But doesn’t this come to us under summary judgment?
Lawyer: Yes, but under rule 56(b) we are entitled …
Scalia: Surely you aren’t accusing us of applying 12(b)(6)?
[laughter from Supreme Court Bar section, total confusion in regular audience section]

Anyway, today had two critically important cases for the evolution of internet technology. One deals with peer-to-peer technology and the other deals with regulation of broadband.

The first is MGM v. Grokster. Unless you are my mother, you know that Grokster is a peer-to-peer or “P2P” file swapping system that allows you to swap music with others. Much like the free love of the 60s, this makes you feel good by satisfying your natural desires and sticking it to “the man.” At the same time, it lets you download some amazing viruses into your hard drive. Several years ago, the music industry sued Grokster to shut them down. Grokster replied that because P2P has non-infringing uses (you can use it to do legal things, not just steal music), the music industry has no case against Grokster. This relies on a case called Sony v. Universal Studios, also known as the “Betamax case” or the “Sony” case, in which the Supreme Court held that you can’t sue anyone for making something that lets you infringe someone’s copyright if it has non-infringing uses as well. Instead, argued Grokster, the music industry should sue the individuals swapping music, the “p”s, rather than the people providing the “2.”

Much to everyone’s surprise, Grokster won in the district court and in the Ninth Circuit Court of Appeals. Then the Supreme Court agreed to to hear the case. Up for grabs is whether developers of peer-to-peer or other technologies put themselves at risk for major lawsuits.

The second case is FCC v. Brand X Internet Services. I wrote about this last year when we won at the Ninth Circuit. Briefly, the law requires a “telecommunication service” to follow certain rules. Notably, they have to interconnect with networks and not mess with content. Is supplying DSL or cable broadband a “telecommunication service?” If it is, cable will have to open its networks to rival ISPs, just like DSL now does. Or is broadband an “information service”, which would allow the cable or DSL provider to mess with content without telling you? In 2002, the FCC said “information service.” We said wrong and took ’em to court in the Ninth Circuit and won. Annoyingly, the FCC asked the Supreme Court to review that decision, and the Supremes agreed.

So on the same day, the Supremes heard argument on the applications layer and the physical layer of the Internet. Big day, and big crowd. Of course, most folks were there for the Grokster case, including the EFF and open source gang who camped out on the steps all night.

I, OTOH, am a distinguished member of the communications bar and a member in good standing of the Supreme Court Bar because of my rigorous legal and ethical qualifications (i.e., my $100 registration check cleared). So I arrived at 7:30 a.m. hoping to get seats in the section reserved for S.Ct. bar members. Even the line for lawyers was long. We waited until 10 a.m. to get in, and I had to settle for the “lawyers lounge” overflow seating. I guessed, however, that most folks would leave after the Grokster case, so I grimly hung on. Besides, this let me hear the argument even if I couldn’t see it.

Unless you’re press, you can’t take notes at the Supreme Court, so this is all from memory. The day started with an unusual item: the new Attorney General, Alberto Gonzales, submitted his credentials to the Court and was welcomed as the Government’s new chief legal officer. “Welcome,” wheezed Rhenquist, in his Darth Vader/Evil Emperor voice. “I know you will serve Us well. MwaHAHAHAHAHA.” O.K., no evil laugh.

The next item was announcing the opinion in City of Sherill v. Oneida Indian Tribes, in which the Supreme Court held that the Oneida Indian Tribe could not reclaim tribal land by buying their historic land on the open market and then refusing to pay state and local taxes as a matter of sovereignty. I mention this because Tom Goldstien, the lawyer who represented us in the Brand X case, read through the slip opinion and actually cited stuff as precedent during oral argument — much to the amusement of the Court and us lawyers. I gotta admit, this is probably a record for “shortest time between publication of a slip op and citation as authority by counsel in another case.”

Finally, the Court got down to cases, starting with Grokster. Don Virelli led off for the recording industry. He began with the assertion that Grokster’s P2P software has no legitimate uses. The justices reacted skeptically. “Didn’t the court below find lots of legitimate uses, such as distribution of public domain works or distribution of works authorized by the rights holders, even if the vast majority of traffic was arguably infringing?” Virelli stuck to his guns, thus falling prey to the trap that has undermined industry so many times in this fight: they over sell.

Scalia then started in on innovation: “But what about inventors? How will they know what people will use this for? Do they get a free ride for a few years to see if the predominant use is infringing or non-infringing?” Again, Virelli went too far. “In reality, these people don’t get sued just for inventing stuff” he claimed, while the entire bar section rolled its eyes. Again, the Justices weren’t buying. “Inventors need certainty they won’t be sued or they won’t invent,” said Breyer.

The court showed sympathy for one argument however, the idea that Grokster was building its business on illegal activity deliberately. “What should a standard be for ‘active inducement’?” Ginsberg asked. “Should the case go to trial, rather than be decided on summary judgment?” Virelli, of course, argued that the conduct was so blatant the Court could have the Grokster people executed on the spot and their heads mounted on pikes before the Court as a warning to all others.

Then the Grokster folks were up to bat. Unfortunately, I think Richard Taranto, who argued the case, stumbled a bit at the opener. He got bogged down in the procedural posture of the case and what remedies the music people might have for knowing infringement by Grokster. Ultimately, he got back on track to press his key point– peer-to-peer is not just a way to willfully blind Grokster to illegal file-sharing activity. It is an important technological innovation that empowers users to communicate directly.

While the Supremes were all for that, they were still bothered by the fact that Grokster was making money from wholesale violation of the copyright laws. Taranto tried to argue that this was indistinguishable from _Sony_, where Sony made most of its money from the sale of tapes for illegal archiving of shows despite the fact that the legitimate purpose, “time shifting” by recording shows to watch later, did not require the sale of multiple tapes. But the Court clearly did not accept the analogy.

Taranto also tried to argue that the _Sony_ standard was clear that as long as any non-infringing use existed, it didn’t matter if the overwhelming majority of users used the technology to swap copyrighted music. Again, the Court was skeptical. “If our standard was so clear” asked O’connor, “why did we need to go on for 13 pages after we wrote the sentence you site?” (“Because you talk too much, Bitch” was probably the wrong answer here, so good thing I wasn’t arguing.)

Bottom line on Grokster: I think the Court is likely to affirm the basic idea of _Sony_ that you can’t sue a manufacturer or distributor of a technology for copyright infringement if the technology has non-infringing uses. But I also think they will remand and allow the RIAA to pursue a claim for “active inducement” to infringe based on Grokster’s conduct.

Moving on to Brand X. I lost about ten minutes worth of argument as I moved from the lawyer’s lounge to the hearing room. Government was up first, defending its decision in 2002 to declare cable broadband an “information service” rather than a “telecom service.” Justice Scalia turned out to be bothered by the same thing I was: “You guys keep saying why this is a great policy, but that’s not how statutes work. First you need to figure out what the statute says and apply the definition. THEN you get to figure out policy within the limits of what Congress has delegated.” The government and the cable people argued that the FCC had properly applied the definition. “It’s as if the statute regulates the sale of butter, and we are selling cakes,” offered the cable guy. “But the basic service hasn’t changed,” replied Scalia and several of the other justices. “Could cigarette manufacturers evade the regulation of cigarettes by puting cigarettes in dolls and selling them as ‘smokies?’” O’connor also pressed on convergence. “Under your argument, anyone can decide to avoid regulation just by offering email as an addition to the basic telecom service.” Bryer went further. He asked the cable guy to list what made cable broadband different from a telecom service.

“It has a domain name system, without which the user can’t figure out where to go.”
“O.K.,” replied Bryer. “I have a phone. Without the ‘phone numbering system’ it doesn’t know where to go.”
“It takes information from one computer, transforms it, and brings it to your computer, where it transforms it again into a useable form.”
“I call my answering service and get my messages, which the phone retrieves and covnerts at the receiver into sound.”

Tom Goldstien then argued for us, and was brilliant. He masterfully took the justcies through the statutory definitions, explaining how the FCC had blown it.

He did get some push back from Rhenquist and Breyer. Breyer asked “the statute says a telecommunications provider is one who ‘offers’ a telecom service. The cable company only ‘offers’ the bundle. Why can’t the FCC rely on that?” Goldstien replied that, dopey FCC, they had actually neglected to rely on that point in their Order. Too bad the Solicitor General’s office is so much smarter at reading statutes. (Actually what he said was “Chennery” which caused sage nods from the Bar section and a “Wha?” from the regular people.) Even assuming the FCC had relied on this argument, the statute makes it clear that you offer an information service _through_ a telecom service. That cable providers bundle the two and require you to take both does not somehow combine them into something new and unregulated.

“This is all very complicated,” said Rhenquist. “Shouldn’t we just defer to the expert agency?” No, replied Goldstien. Congress was explicit and set limits on what the agency can do. Congress also left a safety valve, in the form of Section 10 of the Act, which allows the FCC to forbear from regulation if it can meet certain statutory criteria.

Bottom line: I think we get an even bigger win here than we did in the Ninth Circuit. Potentially, this will not only require cable to open their broadband systems, it will prevent the FCC from deregulating DSL and reverse the recent decision allowing telcos to bundle DSL with phone service.

Odds are good the Supreme Court will decide neither case until early summer.

As always,
Stay tuned . . . .

This entry was posted in Fighting the IP Mafia, General, Series of Tubes, Tales of the Sausage Factory and tagged , . Bookmark the permalink. Both comments and trackbacks are currently closed.

22 Comments

  1. John says:

    "Because you talk too much, Bitch."

    Words fail me.

    Other than

    Best. TOSF. Evar.

    (Actually, it will be hard to ever do more than tie the "Schmoo post". . .)

  2. Stearns says:

    Thank you, Harold. You won’t hear reporting like that from Nina Totenberg!

  3. Daniel Reitman says:

    The reason I think Grokster will end up going to trial is, as you predict, active inducement. Their business plan looks too much like old Napster’s.

    Also, Harold, I think you’ve developed a tendencey to drop your Es. It’s Oneida and Breyer.

  4. Daniel Reitman says:

    Oops. Forgot to ask why no one seems to be arguing that the FCC is protected by Chevron.

  5. wiseGEEK says:

    Fantastic post, but unfortunately there is at least one homonym spelling error which is, of course, the worst kind!

  6. silvretta says:

    If we are being picky, then surely it is a homophone spelling error, not homonym.

  7. "Unless you’re press, you can’t take notes at the Supreme Court, so this is all from memory."

    A bit off topic, but this is the most in-depth coverage I’ve seen on this case today. Pretty good for not being the "press".

  8. emptythought says:

    "I know you will serve Us well. HAHAHAHAHA."

    actually.. an evil laugh in text is "MUhahahaha…."

    But anyway…

  9. Harold says:

    WARNING! LAW HEAVY POST!

    Daniel, you are right to raise Chevron, but that is the whole point of the case. (For the non-lawyers, Chevron is the case name that stands for the proposition that the courts must defer to administrative agencies). We argue this is the first part of the Chevron Test (so called "Chevron I"). "Where Congress has clearly spoken, the matter is settled." That is pure statutory analysis and the Court will not defer to the agency. Only if the statute is ambiguous or clearly delegates authority to the agency will the Court move on to the more deferential "Chevron II" analysis to see if the agency’s action is arbitrary and capricious.

    This case raised a novel question of Chevron because the Ninth Cir. had held that its opinion in Portland in 2000, made before the expert agency determination, was binding as a matter of stare decisis even after the expert agency came to a different conclusion. But the Supremes did not focus on this. They went right to Chevron I.

  10. ScottGS says:

    Could the "active inducement" argument be sidestepped if an organization was non-profit? That is, does it only apply if the company against which it’s used is making money?

    GREAT reporting.

  11. Wah says:

    Nicely done. Now where can I buy some smokies?

  12. ashusta says:

    And this is why <a href="http://dangillmor.typepad.c… Gilmor</a> is so hot on ‘citizen journalism.’

    That was a great post, fun to read and offered some useful insight into how our legal system works at the highest levels. Also, it’s rare to see the Supreme Court Justices being anthropomorphized and treated as if they were, you know, human.

  13. momo says:

    I believe "MwaHaHaHaHa…" is also acceptible.

  14. J.B. Nicholson-Owens says:

    "Virelli, of course, argued that the conduct was so blatant the Court could have the Grokster people executed on the spot and their heads mounted on pikes before the Court as a warning to all others."

    Ha ha, funny. But really, what did Virelli offer to explain the standard of ‘active inducement’? It is clear that the movie studios want criteria that makes it easier for them to win lawsuits, and substantial non-infringing uses (rightly) covers a lot of programmer’s work. So what, specifically, does "active inducement" mean?

    Knowledge of copyright infringement (who doesn’t know people use file-sharing programs to infringe?)? Unwillingness to act to stop copyright infringement (how would one implement this in a computer program?)? Something else?

    Thanks.

  15. Harold says:

    Virelli’s answer was unsatisfactory, much to the frustration of the court. He really wanted to get them on the Sony standard, and kept steering them back to that. The only thing he offered for "qactive inducement" was an argument that the entire business plan was based on piracy and that they deliberately sought to attract people from NApster when that service closed by offering a similar service.

  16. Bunnie says:

    "That cable providers bundle the two and require you to take both does not somehow combine them into something new and unregulated."

    Too True. It is a cable service, which can easily be required to open up and then the municipalities will stop getting screwed.

    Thanks for the report! Enjoyed it.

  17. Luis says:

    Thank the gods I wasn’t the only one who thought ‘Justice Vader’ as soon as he opened his mouth, such as it is.

  18. "Virelli, of course, argued that the conduct was so blatant the Court could have the Grokster people executed on the spot and their heads mounted on pikes before the Court as a warning to all others."

    On this point, Timothy Armstrong noted ( http://blogs.law.harvard.ed… ):

    "Justice Ginsburg asked whether an inducement theory based on whether a defendant built a business around encouraging infringement of copyright could ever be amenable to resolution on summary judgment, and MGM seemed to say that a trial would be required in every case. This is an extraordinarily low threshold they are asking the Court to establish for getting to a jury, and this is still a Court that generally likes summary judgment, so I wonder whether MGM’s proposed standard will get much traction."

    Maybe that will answer a little more of J.B. Nicholson-Owens’ question.

  19. Dougie says:

    "Unless you’re press, you can’t take notes at the Supreme Court, so this is all from memory."

    Where does this rule come from? Do they really enforce it? Don’t they want people to remember what they said accurately? Unbelievable!

  20. Liza says:

    Great job, Harold! Wish I could have been there. BTW, you sounded good that morning on NPR.

  21. adelantado says:

    What will happen to everyone who has a cd or DVD burner if the Supreme Court says you can’t copy a copyrighted work without the owner’s permission?

    Fortunately, Grokster will give the Supreme Court another opportunity to follow the law of the land, that is to declare that file sharing, downloading from others, copying CD from friends, is legal (not because it is right, but because that is what everyone is doing).

    Lets see how the court will describe it.

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