The Legal Infrastructure of Business: A pirate's accomplice?

In the April of 2009, a Swedish court convicted four individuals associated with the Pirate Bay (three founders and their financier) of aiding copyright infringement and sentenced them to a year in prison in addition to ordering them to pay around USD 3.6 million in damages.

The Pirate Bay provides its users with an ?indexing and search function for torrent files[1]?, enabling them to locate and download those files, which often comprise of music, video and other copyrighted content, faster and easier. It is the nature of this service, that of a map to content, rather than a host of it, that makes the case interesting from a legal and business standpoint.

Copyright law and precedent are fairly clear regarding the restrictions on publication of copyrighted material ? as long as a work is protected by copyright, one cannot publish and distribute it without the permission of the rights holder. But, as the Pirate Bay argued, it did not publish the copyrighted content, nor even store them on its servers. It merely helped the downloaders of the content to locate the material, and it was these downloaders who infringed on the copyright[2].

However, the court held that the Pirate Bay was responsible for aiding said infringement, since the prosecution was able to marshal evidence to indicate that the website knew, or should have been expected to know, that its indexes pointed to copyrighted material and its services aided in that process as well as pointing out that the site benefitted from the advertisement revenues that was driven by its large user base, many of whom committed copyright infringement. Thus, the Pirate Bay was effectively an accomplice to those who committed copyright infringement by downloading content.

The interesting implication of this ruling is that entities cannot dodge responsibility for copyright infringement claiming that they, personally, did not commit it, especially if the service they provide enables such infringement, and they stand to benefit from it. This line of thinking raises interesting questions and concerns for businesses today, especially those in the digital economy. Should, for instance, developers of peer-to-peer technology such as file sharing be obliged to ensure that their products carry safeguards to ensure they cannot be used for copyright violations? What is the extent of liability of other service providers, such as ISPs, for the copyright violations of their users?

As a practical matter, companies whose products have the scope to be abused for copyright violations may seek to pre-empt legal action by actively co-operating with the rights holders to minimize the occurrence for such abuses. Youtube, for instance, takes down videos whose posting violates copyright at the request of the rights holder. Such pre-emption may even be legally mandated. In the wake of the Pirate Bay case, for instance, the UK High Court ordered that British ISPs block access to the website.

However, the underlying issue here is the extent to which the courts will hold businesses responsible for the use that their products and services are put to, even after the product or service has been sold or otherwise handed over to the customer. Businesses will thus have to plan for liability over the entire lifetime of the product, rather than assuming that their responsibility ends with handing over a safe, functional product to the customer.

This change in the business and legal dynamic can throw up interesting opportunities as well as challenges. Of particular interest would be how companies handle the issue of liability sharing. The End User License Agreement (EULA) of most software products already prohibits the use of said software for illegal purposes. It will be interesting to see if such agreements are further structured to explicitly transfer liability (especially for damages) for copyright infringement and detail explicit monetary penalties.?

However, there is a limit to which contracts can be used to check infringement and that limit is the ease and cost of enforcement. It may very well be that content providers and software developers conclude that the threat of the whip will never be real enough to check pirates and turn to changes in the design of their systems instead. For example, many video games now require a live and continuous internet connection to the publisher?s studios to be played, which helps keep the number of unauthorized games in check. The rise of cloud computing and remote storage may be the saviour of content publishers. If all content is stored online on the publisher?s servers, and streamed (not downloaded) as and when it is paid for, peer-to-peer file sharing may cease to be a major threat. Thus a business model threatened by one technology might yet find its salvation in another.

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[1] A.M. Ploman, ?Copyright in the future and the implications of file sharing services such as The Pirate Bay?

[2] Mikko Manner, Topi Siniketo and Ulrika Polland: The Pirate Bay ruling: [2009] Ent. L.R.

Other sources:

i) The New York Times: http://www.nytimes.com/2009/04/18/business/global/18pirate.html?_r=0

ii) The BBC News: http://www.bbc.com/news/technology-17894176

Source: http://picker.typepad.com/legalinfrastructure/2012/10/a-pirates-accomplice.html

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