Canada: US Court Finds LimeWire Liable for Inducing Copyright Infringement

The recording industry recently won a major victory in its copyright piracy lawsuit against LimeWire, one of the most popular remaining peer-to-peer (P2P) music-file-sharing services in the US. A US District Court granted summary judgment in favour of several record companies on their claims against LimeWire for inducement of copyright infringement, common law copyright infringement, and unfair competition.

The evidence in the case established that 93 per cent of files in a random sample of files made available over LimeWire were protected or highly likely to be protected by copyright, and thus not authorized for free distribution through LimeWire. Extrapolating from these results, the plaintiffs' expert estimated that 98.8 per cent of the files requested for download through LimeWire were copyright-protected or highly likely to be copyright-protected.

In granting summary judgment on the inducement claim, the court noted that there was "overwhelming evidence that [LimeWire] engaged in purposeful conduct that fostered infringement." According to the court, the evidence showed that LimeWire "has engaged in purposeful conduct that fostered infringement, with the intent to foster such infringement." The court found that LimeWire distributed its software and:

  • was aware that LimeWire's users commit a substantial amount of copyright infringement;
  • marketed LimeWire to users predisposed to committing infringement;
  • ensured that LimeWire features enabled infringement and assisted users committing infringement;
  • relied on the fact that LimeWire enabled infringement for the success of its business; and
  • had not taken meaningful steps to mitigate infringement.

The evidence showed that LimeWire was making substantial revenues from the infringements it fostered. From 2004 to 2006, LimeWire's annual revenue "grew from nearly $6 million to an estimated $20 million." This growth "depended greatly on LimeWire users' ability to commit infringement through LimeWire." LimeWire claimed that, by 2003, around two million users accessed the program every month.

The evidence revealed that LimeWire "had not implemented in a meaningful way any of the technological barriers and design choices that are available to diminish infringement through file-sharing programs, such as hash-based filtering, acoustic fingerprinting, filtering based on other digital metadata, and aggressive user education." The court held, following the US Supreme Court decision in Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., that "Failure to utilize existing technology to create meaningful barriers against infringement is a strong indicator of intent to foster infringement." The court went on to cite the District Court's remand decision in Grokster: although a defendant "is not required to prevent all the harm that is facilitated by the technology, it must at least make a good faith attempt to mitigate the massive infringement facilitated by its technology."

The court granted the record companies' motion for summary judgment on the claims of common law copyright infringement, since the evidence established that the LimeWire users had directly infringed the record companies' copyrights and that LimeWire had engaged in a purposeful conduct intended to foster that infringement. The court also granted summary judgment in favour of the record companies on the unfair competition claim, observing that the free unauthorized distribution of the copyrighted recordings through LimeWire competed with the record companies' sales.

The court also found LimeWire's former CEO and sole director liable for LimeWire's inducement of infringement, but denied the record companies' summary motion on the claim of contributory copyright infringement. To be liable for contributory copyright infringement, a defendant must have materially contributed to the infringement committed by others. The court concluded that a trial was necessary to determine whether LimeWire was capable of substantial non-infringing use, such that it might avoid liability under that claim.

LimeWire sought summary judgment motion on the record companies' vicarious copyright infringement claims, which the court denied. It found that LimeWire "(1) had the right and ability to supervise and control LimeWire users' infringing activities, and (2) possessed a direct financial interest in the infringing activity."

The record companies are now seeking injunctive relief, including a freezing order. Since this decision, eight music publishing organizations, under the umbrella of the National Music Publishers' Association, have reportedly sued LimeWire for copyright infringement.

McCarthy Tétrault Notes

The case is significant for a number of reasons:

  1. LimeWire is one of the biggest remaining P2P networks still operating in the US. Others were either shut down after litigation or, like BearShare and eDonkey, went out of business after reaching settlements with copyright owners.
  2. The case demonstrates the effectiveness of US law in being able to shut down sites and services that are used predominantly for infringing purposes. The case follows other similar US rulings including rulings in the Napster, Aimster, Grokster, and Isohunt cases.
  3. The court's ruling on the need for file-sharing sites to take meaningful steps to mitigate infringement facilitated by its technology shows that courts are moving in lockstep with many governments in pushing online service providers to cooperate and act in good faith to reduce infringements facilitated by their sites, services, or technologies.
  4. By piercing the corporate veil and finding LimeWire's former CEO and director liable for inducing copyright infringement, the court has sent a strong message to directors and officers — that if they benefit from infringing activity on their website and fail to take steps to mitigate that activity, they may be held personally responsible.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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