The much-watched proceeding, testing the robustness of copyright in the digital age, has taken yet another twist. In Capital Records Inc. v. Thomas, a federal judge in Minnesota has nullified the jury’s $222,000 judgment against a woman who “made available” downloads of copyrighted music in the share folder of her computer via the peer-to-peer (P2P) file-sharing application Kazaa. The jury had found that the woman wilfully infringed 24 of the plaintiffs’ sound recordings and awarded them $9,250 for each wilful infringement.

On his own motion, US District Court Judge Michael Davis ruled that he had made a manifest error of law in his instructions to the jury. He had told the jurors that “the act of making copyrighted sound recordings available for electronic distribution on a peer-to-peer network, without license from the copyright owners, violates the copyright owners’ exclusive right of distribution, regardless of whether actual distribution has been shown” (our emphasis).

On a reassessment of the law, the judge concluded that the US Copyright Act required proof of an “actual dissemination” to ground distribution liability. In light of his error, the judge vacated the judgment and ordered a new trial.

McCarthy Tétrault Notes:

On its face, this decision is a defeat for the plaintiff copyright owners. However, this ruling has at least three significant silver linings for Canadian rights-holders seeking to enforce their rights against parties who upload unauthorized copies of works to shared folders for dissemination through P2P networks:

1. The ruling does not affect the possibility of plaintiffs to assert the reproduction right against individuals who copy files to shared folders for the purpose of distributing them.

2. The judge concluded that copyright holders can prove an actual dissemination by having investigative firms capture and chronicle downloads as users on P2P networks. This conclusion scuttled the attempt of defendant’s counsel and amici curiae (friends of the court) to argue that the investigators’ downloads were in fact “authorized” uses. In so ruling, the judge drew on case law deeming the investigator’s assignment to be part of the copyright owner’s attempt to stop infringement, and found that the act of placing copyrighted materials on a network specifically designed for easy, unauthorized copying substantially assisted an infringing act.

3. The judge left the door open to circumstantial proof of an actual dissemination of copyrighted work over a network. This suggests that plaintiffs will be able to identify facts or circumstances that would indicate a likelihood that an unauthorized distribution occurred by reason of making a file available on a shared public folder. Such facts or circumstances might include expert technical reports or statistical studies, long-standing use of a P2P network, examination of log files or other forensic evidence, or the intentional removal of such evidence from a personal computer. As case law develops, these categories will likely expand.

While Capital Records Inc. v. Thomas is limited to claims of infringement against a single uploader, these findings may also aid in creating a foundation for broader-based authorization or joint or contributory liability theories in order to stem more systemic acts of Internet-based piracy.