On June 27, 2005, the Supreme Court decided Metro-ColdwynMayer Studios, Inc. v. Grokster, Ltd. and dealt another blow to online copyright infringement.1 From the early days of electronic bulletin boards to today's world of decentralized peer-to-peer services, the Internet has been used to infringe copyrights.2 As infringement has increased, copyright holders have successfully fought to protect their works through the courts, seeking judgments against not only the primary infringers (the individuals who have illegally downloaded these works), but also the service providers who make these works available. Judgments extending secondary liability to these Internet services have protected copyrights and forced services to adapt to a changing legal landscape either by changing their technology or, more recently, by moving overseas and out of the reach of U.S. courts.
The original model for a copyright infringing service was Napster. Through Napster, users were able to search for the files of other users through a directory located on Napster's servers.3 If a match was found, Napster supplied the requesting user with the address of the computer containing the file, from which the requesting user was then able to download the file.4 As such, Napster had a central server, containing the names of the files available on its system. The plaintiffs in A & M Records, Inc. v. Napster, Inc. used evidence of this central server to show that Napster had actual knowledge of the infringing files on its system and the right and ability to supervise the infringing activity.5 After the plaintiffs had demonstrated a likelihood of success on the merits of both contributory and vicarious liability claims, the Ninth Circuit upheld a preliminary injunction against Napster.6 The ruling eventually resulted in Napster's closure and the emergence of new file-sharing services.7
The Ninth Circuit's holding in Napster indicated to other services that courts would not hesitate to apply secondary liability to file-sharing services. As a result, services adopted new technologies in an effort to avoid Napster's fate. What had hurt Napster so greatly was its centralized server. When the company owns and operates a server, it is difficult to argue that it does not know what occurs on that server or that it has no control over what occurs on it. New services therefore opted for decentralized systems. Most notable of this new crop of file-sharing services was Grokster.
Once a user downloaded and installed the Grokster software, he could request and download files directly from other users, thereby avoiding the need for a central server.8 As such, in subsequent lawsuits, Grokster argued against the imposition of vicarious liability because it had no control over its system.9 Further, Grokster argued that the Court's ruling in Sony Corp. of America v. Universal City Studios, Inc.,10 coupled with the available non-infringing uses of its system,11 prevented the imposition of contributory liability. In deciding Grokster, the Supreme Court did not reach either the issue of contributory or vicarious liability, but instead focused on the inducement of copyright infringement.12 The Court held "that 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 of third parties."13
Following Grokster, file-sharing services may now be subject to contributory liability, vicarious liability, or liability for inducing infringement. As a result, it has become quite difficult to operate a copyright infringing file-sharing service in the United States without the risk of some form of liability. Rather than finding new ways to avoid liability in the United States, sites are springing up in foreign countries.14 Operating in foreign locales keeps services out of the reach of U. …