7th Circuit Holds Downloading Copyrighted Music with P2P Software is Not Fair Use

December 9, 2005. The U.S. Court of Appeals (7thCir) issued its opinion [9 pages in PDF] in BMG Music v. Gonzalez, a copyright infringement case brought by BMG against an individual who downloaded music with the Grokster peer to peer (P2P) software. The Court of Appeals affirmed the District Court's summary judgment for BMG.

The Supreme Court wrote on June 27, 2005 in its opinion [55 pages in PDF] in MGM v. Grokster 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 by third parties." See, story titled "Supreme Court Rules in MGM v. Grokster" in TLJ Daily E-Mail Alert No. 1,163, June 28, 2005.

However, that case was a dispute between copyright holders (such as record companies) and P2P services. None of the individuals who downloaded copyrighted music were parties to that case. The Supreme Court held that the P2P services could be held vicariously liable for the direct infringement by others. The District Court held that individuals who use the Grokster software to download copyrighted files directly infringe copyrights. However, this holding was not an appeal issue before the Court of Appeals or the Supreme Court.

The present case, BMG Music v. Gonzalez does squarely address whether an individual's downloading of copyright music files with the Grokster software is infringement. The Court of Appeals wrote that it unequivocally is infringement.

The Court of Appeals wrote that Gonzalez downloaded "more than 1,370 copyrighted songs during a few weeks and kept them on her computer until she was caught".

BMG filed a complaint in U.S. District Court (NDIll) against Gonzalez alleging direct copyright infringement in violation of 17 U.S.C. § 501. She asserted the affirmative defense of fair use, which is codified at 17 U.S.C. § 107.

The Court of Appeals granted summary judgment to BMG, and awarded it about $30,000 in statutory damages.

The Court of Appeals affirmed. It rejected the fair use defense, and Gonzalez's assertion that this case is analogous to Sony Corp. of America v. Universal City Studios, Inc. (also known as the Betamax case), which is reported at 464 U.S. 417.

The Court of Appeals wrote that "A copy downloaded, played, and retained on one's hard drive for future use is a direct substitute for a purchased copy -- and without the benefit of the license fee paid to the broadcaster. The premise of Betamax is that the broadcast was licensed for one transmission and thus one viewing. Betamax held that shifting the time of this single viewing is fair use. The files that Gonzalez obtained, by contrast, were posted in violation of copyright law; there was no license covering a single transmission or hearing -- and, to repeat, Gonzalez kept the copies. Time-shifting by an authorized recipient this is not."

The Court of Appeals also rejected Gonzalez's argument that her "try-before-you-buy basis is good advertising for copyright proprietors, expanding the value of their inventory." The Court wrote that "The Supreme Court thought otherwise in Grokster, with considerable empirical support. As file sharing has increased over the last four years, the sales of recorded music have dropped by approximately 30%."

The Court continued at some length on ways in which P2P downloaded does harm copyright holders.

The Court also concluded that "Copyright law lets authors make their own decisions about how best to promote their works; copiers such as Gonzalez cannot ask courts (and juries) to second-guess the market and call wholesale copying “fair use” if they think that authors err in understanding their own economic interests or that Congress erred in granting authors the rights in the copyright statute."

Gonzalez asserted that it was pertinent that she asserted that she already owned copies of some of the songs that she downloaded. The Court of Appeals cited as authority the 2000 opinion [10 pages in PDF] of the U.S. District Court (SDNY) in UMG Recordings, Inc. v. MP3.com, Inc., which is reported at 92 F. Supp. 2d 349. The Court of Appeals wrote that it held that "downloads are not fair use even if the downloader already owns one purchased copy".

It may also be significant that in the copyright infringement actions brought by the Authors' Guild and by major book publishers against Google, the plaintiffs are likely to rely heavily upon UMG v. MP3.com.

The present case is BMG Music, Inc. v. Celilia Gonzalez, U.S. Court of Appeals for the 7th Circuit, App. Ct. No. 05-1314, an appeal from the U.S. District Court for the Northern District of Illinois, Eastern Division, D.C. No. 03 C 6276, Judge Blanche Manning presiding. Judge Frank Easterbrook wrote the opinion of the Court of Appeals, in which Judges Evans and Williams joined.