5/18/2006
Flea Market's Theory of Secondary Liability Doesn't Fit, So Court Doesn't Buy
World Copyright Law Report
The US District Court of New Jersey has handed down a verdict in Arista Records Inc v Flea World Inc (DNJ, No 03-2670, 3/31/06) that proves a welcome exception to the adage that "bad facts make bad law". The court reviewed a creative but unsound theory from the defendant, Flea World, but eventually refused to apply defences articulated in the growing Sony v Universal (464 US 417, 220 USPQ) and MGM v Grokster secondary liability tree to wholly unrelated facts. Instead it concluded that a flea market is not the same as a VCR or similar article, and found Flea World liable as a contributory infringer based on vendors' sales of pirated CDs.
As the name suggests, Flea World runs a flea market. The plaintiffs characterized the market as a "pirate bazaar" due to rampant sales of pirated and counterfeit CDs by independent market vendors. Plaintiffs moved for summary judgment, alleging that Flea World was responsible for the vendors' direct infringement because it:
"(a) had knowledge of and materially contributed to the vendors' infringing activity (contributory infringement) or (b) had the ability to supervise and control the direct infringement and financially benefited from it (vicarious liability)." (Arista at 4)
On summary judgment the court found Flea World liable under either theory, as the market had comprehensive rules for vendors and benefited from the direct infringement because the pirated music drew in vendors and customers.
The court was unmoved by Flea Market's attempts to analogize its business to the VCR/Beta type devices at issue in Sony. Under the staple article of commerce doctrine, distributors of copying technology that has both infringing and substantial non-infringing uses are not secondary infringers where they lack control over end uses of the devices. Grokster refined that test by finding liability where there is solid evidence that the distributors promoted infringement, as shown by clear expression or affirmative steps to foster it.
Rationally, those theories bore no relation to the facts of this case. Flea World did not distribute copying technology, it ran a business over which it had and exercised continuous control. Simply put, the:
"holding in Sony or Grokster cannot be applied here to avoid contributory infringement liability because defendants' business is not analogous to a device put into the stream of commerce." (Arista at 44)
Ruling otherwise could have allowed similar businesses to condone and profit from known copyright infringement with impunity.
This article first appeared in World Copyright Law Report on May 18 2006. If you are interested in subscribing please visit www.worldcopyrightlawreport.com.
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