Arista Records LLC, et al. v. Lime Group LLC, et al.

In copyright infringement action against distributors of peer-to-peer file sharing program, court grants plaintiff record companies’ motion for summary judgment on their claims of inducement to infringe, common law copyright infringement, and unfair competition.

In August 2000, defendants released LimeWire, a file-sharing program that utilizes peer-to-peer technology. Plaintiff record companies sell and distribute the vast majority of all recorded music in the United States. Plaintiffs allege that they own the copyrights or exclusive rights to more than 3000 sound recordings and that LimeWire users shared and downloaded unauthorized digital copies of the recordings via LimeWire. Plaintiffs raised various federal and state law claims of secondary copyright infringement against Lime Wire LLC and personally against LimeWire’s founder Mark Gorton, including inducement to infringe, contributory copyright infringement, and vicarious copyright infringement. The parties cross-moved for summary judgment. Defendants also submitted a number of motions to exclude evidence submitted by plaintiffs in support of their motion for summary judgment.

The court first considered defendants’ motions challenging the admissibility of evidence submitted by plaintiffs. Except with respect to certain limited issues, the court found that defendants’ evidentiary objections were without merit. In rejecting defendants’ motion to exclude the reports and testimony of two expert witnesses retained by plaintiffs, the court found that Dr. Richard P. Waterman’s study of LimeWire’s unauthorized digital file was not flawed because of his collaboration with plaintiffs. The court also held that Dr. Waterman’s study analyzed appropriate categories of downloaded files and was reliable. Similarly, the court found that Dr. Ellis Horowitz, an expert who provided testimony on how LimeWire functions, did not opine on the parties’ state of mind, but rather provided information on the design and functionality of the LimeWire program. The court further concluded that Dr. Horowitz’s expert opinions were reliable to the extent that they were based upon his observation and collection of relevant information about existing infringement-reducing technologies. The court further declined to strike the declaration of Greg Bildson on the grounds that it (1) arose from improper ex parte communications and (2) contained information subject to the attorney-client privilege. Upon determining that the Bildson declaration did not arise out of improper ex parte communication between Bildson and plaintiffs’ counsel, the court, consistent with the Second Circuit mandate that the attorney-client privilege be applied narrowly, refused to issue a protective order prohibiting plaintiffs from speaking with Bildson.

Regarding plaintiffs’ summary judgment motions for secondary copyright infringement, the court explained that plaintiffs were required to, and did, establish that LimeWire users directly infringed plaintiffs’ copyrights. The evidence in the record, stated the court, clearly established that LimeWire users infringed plaintiffs’ copyrights by sharing unauthorized digital copies of the recordings through LimeWire. In reaching this conclusion, the court emphasized that (1) plaintiffs had proven that they own copyrights in the recordings and (2) both the direct and circumstantial evidence demonstrated that LimeWire users employed LimeWire to share and download the recordings without authorization.

Having found that LimeWire users directly infringed plaintiffs’ copyrights, the court then concluded that defendants, by distributing and maintaining LimeWire, intentionally induced direct infringement by LimeWire users. In concluding that defendants were liable for inducement to infringe, the court determined that defendants engaged in purposeful conduct that fostered infringement and intended to encourage infringement by distributing LimeWire. Taken together, stated the court, (1) defendants’ awareness of substantial infringement by users, (2) efforts to attract infringing users, (3) efforts to enable and assist users to commit infringement, (4) dependence on infringing use for the success of their business, and (5) failure to mitigate infringing activities all establish that defendants intended to encourage infringement.

The court denied the parties’ cross motions for summary judgment on plaintiffs’ claim for contributory infringement based on the Sony-Betamax rule. In Sony Corp. v. Universal City Studios, 464 U.S. 417 (1984), the U.S. Supreme Court held that a defendant who distributes a product that materially contributes to copyright infringement will not be liable for contributory infringement if the product also is “widely used for legitimate, unobjectionable purposes” or is “merely . . . capable of substantial infringing use.” The court emphasized that it could not determine, based on the record, whether LimeWire is capable of substantial non-infringing uses. The court, however, held that the Sony-Betamax rule did not apply in the context of a vicarious infringement claim.

The court also held the individual founder and CEO of the corporate defendant personally liable for inducement to infringe based on evidence that he directed and benefited from many of the activities that gave rise to LimeWire LLC’s liability, and he directed and approved many aspects of LimeWire’s design and development.

The court found that plaintiffs were entitled to summary judgment on both their common law copyright infringement (with respect to pre-1972 sound recordings which are protected by New York state law and are not protected by the U.S. Copyright Act) and unfair competition claims. In doing so, the court rejected defendants’ contention that New York common law prohibits only direct infringement.