The recent history of intermediary liability decisions in copyright and trademark law reflects a notable resistance to rules that might constrain judicial discretion to ferret out bad guys. The Supreme Court in Grokster suggested such resistance, by limiting the Sony safe harbor to defendants with squeaky-clean intentions. In the trademark context, recent decisions have shown great solicitude toward good-faith actors, while reserving the option to condemn those who act with the apparent design to sow confusion. Indeed, a dichotomy appears to be emerging between two types of defendants: those who want infringement to happen and those who do not. The former group faces almost certain liability, while the latter receives broad immunity, even when its services facilitate widespread infringement. The Sony safe harbor and its trademark analog, in other words, are available only to intermediaries that appear to be acting in good faith and with ultimately non-infringing objectives.
So far, so good, perhaps—after all, who wants to discourage courts from ferreting out bad guys? And it may be that the courts are muddling their way toward the right outcomes. The problem is that much of what seems to implicitly motivate courts’ decisions fails to find its way into the doctrine, leaving less-than-satisfying guidance to future courts and parties. Intermediary liability analysis often looks like the Supreme Court’s approach to obscenity: we know it when we see it. On the one hand, the Supreme Court has crafted a new doctrine of inducement that turns more on evidence of parties’ motivations and technological design choices than on their active encouragement of infringement by third parties. At the other extreme, courts like the Second Circuit in Tiffany (NJ) Inc. v. eBay Inc. state a broad rule of immunity for parties that lack actual knowledge of specific instances of infringement, while spending a curious amount of time belaboring purportedly irrelevant matters like the extra efforts the defendant took to affirmatively root out the wrongdoing in that case.
In the end, what matters most in these cases is whether the court believes in the defendant’s essential legitimacy and good faith. In both copyright and trademark cases, courts are developing two distinct sets of rules to deal with two different classes of intermediaries. Good-faith intermediaries—those with a core business model unrelated to infringement—have an obligation to address infringement upon notice, but need not go out of their way to root it out; a reactive approach will suffice to protect them from liability. Bad-faith intermediaries, on the other hand—those who not only benefit from infringement, but intend it to happen—face certain liability, without regard to specific notice of particular acts of infringement.
The trick, of course, lies in understanding how to differentiate between good and bad faith actors. Doctrinally, copyright courts are turning to inducement to do the sorting. Inducers, as bad actors, get none of the protections afforded to other infringement-enabling intermediaries. So what makes someone an inducer? We don’t yet have much case law in trademark law, but copyright gives us some clues. Despite its name, copyright inducement has little to do with exhorting infringement, and everything to do with economic incentive and system design. Inducers are those whose business model depends, at its core, on infringement. Indeed, I believe that this factor largely explain the outcome in suits against intermediaries. And far from defying Sony, I view this development as fully consistent with the normative goal laid out by the Supreme Court in defending the staple article of commerce doctrine: “[t]he staple article of commerce doctrine must strike a balance between a copyright holder’s legitimate demand for effective—not merely symbolic—protection of the statutory monopoly, and the rights of others freely to engage in substantially unrelated areas of commerce.” I will come back to explain why I think this language lies at the heart of today’s intermediary liability rules; but first let me step back and sketch out some of my more preliminary claims.