Recording Industry v. Deep, John ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-4125
IN RE: AIMSTER COPYRIGHT LITIGATION.
APPEAL OF: JOHN DEEP,
Defendant.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 01 C 8933—Marvin E. Aspen, Judge.
____________
ARGUED JUNE 4, 2003—DECIDED JUNE 30, 2003
____________
Before POSNER, RIPPLE, and WILLIAMS, Circuit Judges.
POSNER, Circuit Judge. Owners of copyrighted popular
music filed a number of closely related suits, which were
consolidated and transferred to the Northern District of
Illinois by the Multidistrict Litigation Panel, against John
Deep and corporations that are controlled by him and
need not be discussed separately. The numerous plaintiffs,
who among them appear to own most subsisting copy-
rights on American popular music, claim that Deep’s
“Aimster” Internet service (recently renamed “Madster”) is
a contributory and vicarious infringer of these copyrights.
The district judge entered a broad preliminary injunction,
which had the effect of shutting down the Aimster ser-
vice until the merits of the suit are finally resolved, from
which Deep appeals. Aimster is one of a number of enter-
2 No. 02-4125
prises (the former Napster is the best known) that have
been sued for facilitating the swapping of digital copies
of popular music, most of it copyrighted, over the Inter-
net. (For an illuminating discussion, see Tim Wu, “When
Code Isn’t Law,” 89 Va. L. Rev. 679 (2003), esp. 723-41; and
with special reference to Aimster, see Alec Klein, “Going
Napster One Better; Aimster Says Its File-Sharing Software
Skirts Legal Quagmire,” Wash. Post, Feb. 25, 2001, p. A1.) To
simplify exposition, we refer to the appellant as “Aimster”
and to the appellees (the plaintiffs) as the recording in-
dustry.
Teenagers and young adults who have access to the
Internet like to swap computer files containing popular
music. If the music is copyrighted, such swapping, which
involves making and transmitting a digital copy of the
music, infringes copyright. The swappers, who are
ignorant or more commonly disdainful of copyright and
in any event discount the likelihood of being sued or
prosecuted for copyright infringement, are the direct
infringers. But firms that facilitate their infringement,
even if they are not themselves infringers because they
are not making copies of the music that is shared, may be
liable to the copyright owners as contributory infringers.
Recognizing the impracticability or futility of a copyright
owner’s suing a multitude of individual infringers (“chas-
ing individual consumers is time consuming and is a
teaspoon solution to an ocean problem,” Randal C. Picker,
“Copyright as Entry Policy: The Case of Digital Distribu-
tion,” 47 Antitrust Bull. 423, 442 (2002)), the law allows a
copyright holder to sue a contributor to the infringement
instead, in effect as an aider and abettor. Another analogy
is to the tort of intentional interference with contract, that
is, inducing a breach of contract. See, e.g., Sufrin v. Hosier,
128 F.3d 594, 597 (7th Cir. 1997). If a breach of contract
(and a copyright license is just a type of contract) can be
prevented most effectively by actions taken by a third party,
No. 02-4125 3
it makes sense to have a legal mechanism for placing
liability for the consequences of the breach on him as well
as on the party that broke the contract.
The district judge ruled that the recording industry
had demonstrated a likelihood of prevailing on the
merits should the case proceed to trial. He so ruled
with respect to vicarious as well as contributory infringe-
ment; we begin with the latter, the more familiar charge.
The Aimster system has the following essential compo-
nents: proprietary software that can be downloaded free
of charge from Aimster’s Web site; Aimster’s server (a
server is a computer that provides services to other com-
puters, in this case personal computers owned or accessed
by Aimster’s users, over a network), which hosts the
Web site and collects and organizes information ob-
tained from the users but does not make copies of the
swapped files themselves and that also provides the
matching service described below; computerized tutorials
instructing users of the software on how to use it for
swapping computer files; and “Club Aimster,” a related
Internet service owned by Deep that users of Aimster’s
software can join for a fee and use to download the “top
40” popular-music files more easily than by using the
basic, free service. The “AIM” in “Aimster” stands for
AOL instant-messaging service. Aimster is available only
to users of such services (of which AOL’s is the most
popular) because Aimster users can swap files only when
both are online and connected in a chat room enabled by an
instant-messaging service.
Someone who wants to use Aimster’s basic service for
the first time to swap files downloads the software from
Aimster’s Web site and then registers on the system by
entering a user name (it doesn’t have to be his real name)
and a password at the Web site. Having done so, he can
4 No. 02-4125
designate any other registrant as a “buddy” and can
communicate directly with all his buddies when he and
they are online, attaching to his communications (which
are really just emails) any files that he wants to share
with the buddies. All communications back and forth
are encrypted by the sender by means of encryption soft-
ware furnished by Aimster as part of the software pack-
age downloadable at no charge from the Web site, and
are decrypted by the recipient using the same Aimster-
furnished software package. If the user does not designate
a buddy or buddies, then all the users of the Aimster
system become his buddies; that is, he can send or receive
from any of them.
Users list on their computers the computer files they
are willing to share. (They needn’t list them separately,
but can merely designate a folder in their computer that
contains the files they are willing to share.) A user who
wants to make a copy of a file goes online and types the
name of the file he wants in his “Search For” field. Aimster’s
server searches the computers of those users of its soft-
ware who are online and so are available to be searched
for files they are willing to share, and if it finds the file
that has been requested it instructs the computer in which
it is housed to transmit the file to the recipient via the
Internet for him to download into his computer. Once
he has done this he can if he wants make the file avail-
able for sharing with other users of the Aimster system
by listing it as explained above. In principle, therefore,
the purchase of a single CD could be levered into the
distribution within days or even hours of millions of
identical, near-perfect (depending on the compression
format used) copies of the music recorded on the
CD—hence the recording industry’s anxiety about file-
sharing services oriented toward consumers of popular
music. But because copies of the songs reside on the com-
No. 02-4125 5
puters of the users and not on Aimster’s own server,
Aimster is not a direct infringer of the copyrights on
those songs. Its function is similar to that of a stock ex-
change, which is a facility for matching offers rather than
a repository of the things being exchanged (shares of
stock). But unlike transactions on a stock exchange, the
consummated “transaction” in music files does not take
place in the facility, that is, in Aimster’s server.
What we have described so far is a type of Internet file-
sharing system that might be created for innocuous pur-
poses such as the expeditious exchange of confidential
business data among employees of a business firm. See
Daniel Nasaw, “Instant Messages Are Popping Up All
Over,” Wall St. J., June 12, 2003, p. B4; David A. Vise, “AOL
Makes Instant-Messaging Deal,” Wash. Post, June 12,
2003, p. E5. The fact that copyrighted materials might
sometimes be shared between users of such a system
without the authorization of the copyright owner or a fair-
use privilege would not make the firm a contributory
infringer. Otherwise AOL’s instant-messaging system,
which Aimster piggybacks on, might be deemed a con-
tributory infringer. For there is no doubt that some
of the attachments that AOL’s multitudinous subscribers
transfer are copyrighted, and such distribution is an in-
fringement unless authorized by the owner of the copy-
right. The Supreme Court made clear in the Sony deci-
sion that the producer of a product that has substantial
noninfringing uses is not a contributory infringer merely
because some of the uses actually made of the product
(in that case a machine, the predecessor of today’s video-
cassette recorders, for recording television programs on
tape) are infringing. Sony Corp. of America, Inc. v. Universal
City Studios, Inc., 464 U.S. 417 (1984); see also Vault Corp.
v. Quaid Software Ltd., 847 F.2d 255, 262-67 (5th Cir. 1988).
How much more the Court held is the principal issue
6 No. 02-4125
that divides the parties; and let us try to resolve it, recogniz-
ing of course that the Court must have the last word.
Sony’s Betamax video recorder was used for three princi-
pal purposes, as Sony was well aware (a fourth, playing
home movies, involved no copying). The first, which the
majority opinion emphasized, was time shifting, that is,
recording a television program that was being shown at
a time inconvenient for the owner of the Betamax for
later watching at a convenient time. The second was “library
building,” that is, making copies of programs to retain
permanently. The third was skipping commercials by
taping a program before watching it and then, while
watching the tape, using the fast-forward button on the
recorder to skip over the commercials. The first use the
Court held was a fair use (and hence not infringing) be-
cause it enlarged the audience for the program. The copy-
ing involved in the second and third uses was unquestion-
ably infringing to the extent that the programs copied
were under copyright and the taping of them was not
authorized by the copyright owners—but not all fell in
either category. Subject to this qualification, building a
library of taped programs was infringing because it was
the equivalent of borrowing a copyrighted book from
a public library, making a copy of it for one’s personal
library, then returning the original to the public library.
The third use, commercial-skipping, amounted to creat-
ing an unauthorized derivative work, see WGN Continental
Broadcasting Co. v. United Video, Inc., 693 F.2d 622, 625
(7th Cir. 1982); Gilliam v. American Broadcasting Cos., 538
F.2d 14, 17-19, 23 (2d Cir. 1976); cf. Ty, Inc. v. GMA Accesso-
ries, Inc., 132 F.3d 1167, 1173 (7th Cir. 1997), namely a
commercial-free copy that would reduce the copyright
owner’s income from his original program, since “free”
television programs are financed by the purchase of com-
mercials by advertisers.
No. 02-4125 7
Thus the video recorder was being used for a mixture
of infringing and noninfringing uses and the Court thought
that Sony could not demix them because once Sony sold
the recorder it lost all control over its use. Sony Corp. of
America, Inc. v. Universal City Studios, Inc., supra, 464 U.S
at 438. The court ruled that “the sale of copying equip-
ment, like the sale of other articles of commerce, does
not constitute contributory infringement if the product is
widely used for legitimate, unobjectionable purposes. In-
deed, it need merely be capable of substantial noninfringing
uses. The question is thus whether the Betamax is capable
of commercially significant noninfringing uses. In order
to resolve that question, we need not explore all the differ-
ent potential uses of the machine and determine whether
or not they would constitute infringement. Rather, we
need only consider whether on the basis of the facts as
found by the district court a significant number of them
would be non-infringing. Moreover, in order to resolve
this case we need not give precise content to the question
of how much use is commercially significant. For one
potential use of the Betamax plainly satisfies this standard,
however it is understood: private, noncommercial time-
shifting in the home.” Id. at 441.
In our case the recording industry, emphasizing the
reference to “articles of commerce” in the passage just
quoted and elsewhere in the Court’s opinion (see id. at
440; cf. 35 U.S.C. § 271(c)), and emphasizing as well the
Court’s evident concern that the copyright holders were
trying to lever their copyright monopolies into a monopoly
over video recorders, Sony Corp. of America, Inc. v.
Universal City Studios, Inc., supra, 464 U.S at 441-42 and
n. 21, and also remarking Sony’s helplessness to prevent
infringing uses of its recorders once it sold them, argues
that Sony is inapplicable to services. With regard to ser-
vices, the industry argues, the test is merely whether the
8 No. 02-4125
provider knows it’s being used to infringe copyright. The
industry points out that the provider of a service, unlike
the seller of a product, has a continuing relation with
its customers and therefore should be able to prevent, or
at least limit, their infringing copyright by monitoring
their use of the service and terminating them when it is
discovered that they are infringing. Although Sony could
have engineered its video recorder in a way that would
have reduced the likelihood of infringement, as by eliminat-
ing the fast-forward capability, or, as suggested by the
dissent, id. at 494, by enabling broadcasters by scrambling
their signal to disable the Betamax from recording their
programs (for that matter, it could have been engineered
to have only a play, not a recording, capability), the
majority did not discuss these possibilities and we agree
with the recording industry that the ability of a service
provider to prevent its customers from infringing is a
factor to be considered in determining whether the pro-
vider is a contributory infringer. Congress so recognized
in the Digital Millennium Copyright Act, which we dis-
cuss later in this opinion.
It is not necessarily a controlling factor, however, as the
recording industry believes. If a service facilitates both
infringing and noninfringing uses, as in the case of AOL’s
instant-messaging service, and the detection and preven-
tion of the infringing uses would be highly burdensome,
the rule for which the recording industry is contending
could result in the shutting down of the service or its
annexation by the copyright owners (contrary to the clear
import of the Sony decision), because the provider might
find it impossible to estimate its potential damages liability
to the copyright holders and would anyway face the risk
of being enjoined. The fact that the recording industry’s
argument if accepted might endanger AOL’s instant-
messaging service (though the service might find shelter
No. 02-4125 9
under the Digital Millennium Copyright Act—a question
complicated, however, by AOL’s intention, of which
more later, of offering an encryption option to the visitors
to its chat rooms) is not only alarming; it is paradoxical,
since subsidiaries of AOL’s parent company (AOL Time
Warner), such as Warner Brothers Records and Atlantic
Recording Corporation, are among the plaintiffs in this
case and music chat rooms are among the facilities of-
fered by AOL’s instant-messaging service.
We also reject the industry’s argument that Sony pro-
vides no defense to a charge of contributory infringe-
ment when, in the words of the industry’s brief, there
is anything “more than a mere showing that a product
may be used for infringing purposes.” Although the fact
was downplayed in the majority opinion, it was apparent
that the Betamax was being used for infringing as well
as noninfringing purposes—even the majority acknowl-
edged that 25 percent of Betamax users were fast forward-
ing through commercials, id. at 452 n. 36—yet Sony was
held not to be a contributory infringer. The Court was
unwilling to allow copyright holders to prevent infringe-
ment effectuated by means of a new technology at the
price of possibly denying noninfringing consumers the
benefit of the technology. We therefore agree with Profes-
sor Goldstein that the Ninth Circuit erred in A&M Records,
Inc. v. Napster, Inc., 239 F.3d 1004, 1020 (9th Cir. 2001),
in suggesting that actual knowledge of specific infringing
uses is a sufficient condition for deeming a facilitator
a contributory infringer. 2 Paul Goldstein, Copyright § 6.1.2,
p. 6:12-1 (2d ed. 2003)
The recording industry’s hostility to the Sony decision
is both understandable, given the amount of Internet-
enabled infringement of music copyrights, and mani-
fest—the industry in its brief offers five reasons for con-
10 No. 02-4125
fining its holding to its specific facts. But it is being articu-
lated in the wrong forum.
Equally, however, we reject Aimster’s argument that
to prevail the recording industry must prove it has ac-
tually lost money as a result of the copying that its service
facilitates. It is true that the Court in Sony emphasized
that the plaintiffs had failed to show that they had sus-
tained substantial harm from the Betamax. Id. at 450-54,
456. But the Court did so in the context of assessing the
argument that time shifting of television programs was
fair use rather than infringement. One reason time shift-
ing was fair use, the Court believed, was that it wasn’t
hurting the copyright owners because it was enlarging
the audience for their programs. But a copyright owner
who can prove infringement need not show that the in-
fringement caused him a financial loss. Granted, without
such a showing he cannot obtain compensatory damages;
but he can obtain statutory damages, or an injunction,
just as the owner of physical property can obtain an in-
junction against a trespasser without proving that the
trespass has caused him a financial loss.
What is true is that when a supplier is offering a prod-
uct or service that has noninfringing as well as infring-
ing uses, some estimate of the respective magnitudes
of these uses is necessary for a finding of contributory
infringement. The Court’s action in striking the cost-
benefit tradeoff in favor of Sony came to seem prescient
when it later turned out that the principal use of video
recorders was to allow people to watch at home movies
that they bought or rented rather than to tape television
programs. (In 1984, when Sony was decided, the industry
was unsure how great the demand would be for prere-
corded tapes compared to time shifting. The original
Betamax played one-hour tapes, long enough for most
No. 02-4125 11
television broadcasts but too short for a feature film. Sony’s
competitors used the VHS format, which came to market
later but with a longer playing time; this contributed
to VHS’s eventual displacement of Betamax.) An enor-
mous new market thus opened for the movie indus-
try—which by the way gives point to the Court’s empha-
sis on potential as well as actual noninfringing uses. But
the balancing of costs and benefits is necessary only in
a case in which substantial noninfringing uses, present or
prospective, are demonstrated.
We also reject Aimster’s argument that because the
Court said in Sony that mere “constructive knowledge”
of infringing uses is not enough for contributory infringe-
ment, 464 U.S. at 439, and the encryption feature of
Aimster’s service prevented Deep from knowing what
songs were being copied by the users of his system, he
lacked the knowledge of infringing uses that liability for
contributory infringement requires. Willful blindness is
knowledge, in copyright law (where indeed it may be
enough that the defendant should have known of the
direct infringement, Casella v. Morris, 820 F.2d 362, 365
(11th Cir. 1987); 2 Goldstein, supra, § 6.1, p. 6:6), as it is
in the law generally. See, e.g., Louis Vuitton S.A. v. Lee,
875 F.2d 584, 590 (7th Cir. 1989) (contributory trademark
infringement). One who, knowing or strongly suspecting
that he is involved in shady dealings, takes steps to
make sure that he does not acquire full or exact knowl-
edge of the nature and extent of those dealings is held
to have a criminal intent, United States v. Giovannetti,
919 F.2d 1223, 1228 (7th Cir. 1990), because a deliberate
effort to avoid guilty knowledge is all that the law re-
quires to establish a guilty state of mind. United States
v. Josefik, 753 F.2d 585, 589 (7th Cir. 1985); AMPAT/Midwest,
Inc. v. Illinois Tool Works Inc., 896 F.2d 1035, 1042 (7th Cir.
1990) (“to know, and to want not to know because one
12 No. 02-4125
suspects, may be, if not the same state of mind, the same
degree of fault).” In United States v. Diaz, 864 F.2d 544, 550
(7th Cir. 1988), the defendant, a drug trafficker, sought
“to insulate himself from the actual drug transaction so
that he could deny knowledge of it,” which he did some-
times by absenting himself from the scene of the actual
delivery and sometimes by pretending to be fussing
under the hood of his car. He did not escape liability by
this maneuver; no more can Deep by using encryption
software to prevent himself from learning what surely he
strongly suspects to be the case: that the users of his
service—maybe all the users of his service—are copyright
infringers.
This is not to say that the provider of an encrypted
instant-messaging service or encryption software is ipso
factor a contributory infringer should his buyers use
the service to infringe copyright, merely because encryp-
tion, like secrecy generally, facilitates unlawful trans-
actions. (“Encryption” comes from the Greek word for
concealment.) Encryption fosters privacy, and privacy is
a social benefit though also a source of social costs. “AOL
has begun testing an encrypted version of AIM [AOL
Instant Messaging]. Encryption is considered critical for
widespread adoption of IM in some industries and fed-
eral agencies.” Vise, supra. Our point is only that a service
provider that would otherwise be a contributory infringer
does not obtain immunity by using encryption to
shield itself from actual knowledge of the unlawful pur-
poses for which the service is being used.
We also do not buy Aimster’s argument that since
the Supreme Court distinguished, in the long passage
from the Sony opinion that we quoted earlier, between
actual and potential noninfringing uses, all Aimster has
to show in order to escape liability for contributory in-
No. 02-4125 13
fringement is that its file-sharing system could be used
in noninfringing ways, which obviously it could be.
Were that the law, the seller of a product or service
used solely to facilitate copyright infringement, though
it was capable in principle of noninfringing uses, would
be immune from liability for contributory infringement.
That would be an extreme result, and one not envisaged
by the Sony majority. Otherwise its opinion would have
had no occasion to emphasize the fact (at least the ma-
jority thought it a fact—the dissent disagreed, 464 U.S.
at 458-59) that Sony had not in its advertising en-
couraged the use of the Betamax to infringe copyright. Id.
at 438. Nor would the Court have thought it important
to say that the Betamax was used “principally” for time
shifting, id. at 421; see also id. at 423, which as we recall
the Court deemed a fair use, or to remark that the plain-
tiffs owned only a small percentage of the total amount
of copyrighted television programming and it was unclear
how many of the other owners objected to home taping.
Id. at 443; see also id. at 446.
There are analogies in the law of aiding and abetting,
the criminal counterpart to contributory infringement. A
retailer of slinky dresses is not guilty of aiding and abet-
ting prostitution even if he knows that some of his custom-
ers are prostitutes—he may even know which ones are.
See United States v. Giovannetti, supra, 919 F.2d at 1227;
People v. Lauria, 59 Cal. Rptr. 628 (App. 1967); Rollin M.
Perkins & Ronald N. Boyce, Criminal Law 746-47 (3d ed.
1982). The extent to which his activities and those of
similar sellers actually promote prostitution is likely to be
slight relative to the social costs of imposing a risk of
prosecution on him. But the owner of a massage parlor
who employs women who are capable of giving mas-
sages, but in fact as he knows sell only sex and never
massages to their customers, is an aider and abettor of
14 No. 02-4125
prostitution (as well as being guilty of pimping or operat-
ing a brothel). See United States v. Sigalow, 812 F.2d 783,
784, 785 (2d Cir. 1987); State v. Carpenter, 701 N.E.2d 10, 13,
18-19 (Ohio App. 1997); cf. United States v. Luciano-Mosquera,
63 F.3d 1142, 1149-50 (1st Cir. 1995). The slinky-dress
case corresponds to Sony, and, like Sony, is not inconsis-
tent with imposing liability on the seller of a product or
service that, as in the massage-parlor case, is capable
of noninfringing uses but in fact is used only to infringe. To
the recording industry, a single known infringing use
brands the facilitator as a contributory infringer. To the
Aimsters of this world, a single noninfringing use pro-
vides complete immunity from liability. Neither is correct.
To situate Aimster’s service between these unacceptable
poles, we need to say just a bit more about it. In explain-
ing how to use the Aimster software, the tutorial gives as
its only examples of file sharing the sharing of copyrighted
music, including copyrighted music that the recording
industry had notified Aimster was being infringed by
Aimster’s users. The tutorial is the invitation to infringe-
ment that the Supreme Court found was missing in Sony.
In addition, membership in Club Aimster enables the
member for a fee of $4.95 a month to download with a
single click the music most often shared by Aimster users,
which turns out to be music copyrighted by the plain-
tiffs. Because Aimster’s software is made available free
of charge and Aimster does not sell paid advertising on
its Web site, Club Aimster’s monthly fee is the only means
by which Aimster is financed and so the club cannot be
separated from the provision of the free software. When
a member of the club clicks on “play” next to the name of
a song on the club’s Web site, Aimster’s server searches
through the computers of the Aimster users who are
online until it finds one who has listed the song as avail-
able for sharing, and it then effects the transmission of
No. 02-4125 15
the file to the computer of the club member who selected
it. Club Aimster lists only the 40 songs that are currently
most popular among its members; invariably these are
under copyright.
The evidence that we have summarized does not ex-
clude the possibility of substantial noninfringing uses of
the Aimster system, but the evidence is sufficient, especial-
ly in a preliminary-injunction proceeding, which is sum-
mary in character, to shift the burden of production to
Aimster to demonstrate that its service has substantial
noninfringing uses. (On burden-shifting in preliminary-
injunction proceedings, see FTC v. University Health, Inc.,
938 F.2d 1206, 1218-19 (11th Cir. 1991); cf. Johnson v. Cam-
bridge Industries, Inc., 325 F.3d 892, 897 (7th Cir. 2003);
SEC v. Lipson, 278 F.3d 656, 661 (7th Cir. 2002); Liu v.
T & H Machine, Inc., 191 F.3d 790, 795 (7th Cir. 1999).) As it
might:
1. Not all popular music is copyrighted. Apart from
music on which the copyright has expired (not much
of which, however, is of interest to the teenagers
and young adults interested in swapping music), start-
up bands and performers may waive copyright in the
hope that it will encourage the playing of their music
and create a following that they can convert to cus-
tomers of their subsequent works.
2. A music file-swapping service might increase the
value of a recording by enabling it to be used as cur-
rency in the music-sharing community, since some-
one who only downloads and never uploads, thus
acting as a pure free rider, will not be very popular.
3. Users of Aimster’s software might form select (as
distinct from all-comers) “buddy” groups to exchange
noncopyrighted information about popular music,
16 No. 02-4125
or for that matter to exchange ideas and opinions
about wholly unrelated matters as the buddies became
friendlier. Some of the chat-room messages that ac-
company the listing of music files offered or re-
quested contain information or opinions concerning
the music; to that extent, though unremarked by the
parties, some noninfringing use is made of Aimster’s
service, though it is incidental to the infringement.
4. Aimster’s users might appreciate the encryption
feature because as their friendship deepened they
might decide that they wanted to exchange off-color,
but not copyrighted, photographs, or dirty jokes, or
other forms of expression that people like to keep
private, rather than just copyrighted music.
5. Someone might own a popular-music CD that he
was particularly fond of, but he had not downloaded
it into his computer and now he finds himself out
of town but with his laptop and he wants to listen to
the CD, so he uses Aimster’s service to download a
copy. This might be a fair use rather than a copyright
infringement, by analogy to the time shifting ap-
proved as fair use in the Sony case. Recording Industry
Ass’n of America v. Diamond Multimedia Systems, Inc.,
180 F.3d 1072, 1079 (9th Cir. 1999); cf. Vault Corp. v.
Quaid Software Ltd., supra, 847 F.2d at 266-67. The
analogy was sidestepped in A&M Records, Inc. v.
Napster, Inc., supra, 239 F.3d at 1019, because Napster’s
system did not limit downloading to music on CDs
owned by the downloader. The analogy was rejected
in UMG Recordings v. MP3.com, Inc., 92 F. Supp. 2d
349 (S.D.N.Y. 2000), on the ground that the copy on
the defendant’s server was an unauthorized deriva-
tive work; a solider ground, in light of Sony’s rejection
of the parallel argument with respect to time shifting,
No. 02-4125 17
would have been that the defendant’s method for
requiring that its customers “prove” that they owned
the CDs containing the music they wanted to down-
load was too lax.
All five of our examples of actually or arguably
noninfringing uses of Aimster’s service are possibilities,
but as should be evident from our earlier discussion
the question is how probable they are. It is not enough,
as we have said, that a product or service be physically
capable, as it were, of a noninfringing use. Aimster has
failed to produce any evidence that its service has ever
been used for a noninfringing use, let alone evidence
concerning the frequency of such uses. In the words of
the district judge, “defendants here have provided no
evidence whatsoever (besides the unsupported declara-
tion of Deep) that Aimster is actually used for any of the
stated non-infringing purposes. Absent is any indication
from real-life Aimster users that their primary use of the
system is to transfer non-copyrighted files to their friends
or identify users of similar interests and share informa-
tion. Absent is any indication that even a single business
without a network administrator uses Aimster to ex-
change business records as Deep suggests.” In re Aimster
Copyright Litigation, 252 F. Supp. 2d 634, 653 (N.D. Ill.
2002) (emphasis in original). We have to assume for pur-
poses of deciding this appeal that no such evidence
exists; its absence, in combination with the evidence pre-
sented by the recording industry, justified the district
judge in concluding that the industry would be likely to
prevail in a full trial on the issue of contributory infringe-
ment. Because Aimster failed to show that its service is
ever used for any purpose other than to infringe the plain-
tiffs’ copyrights, the question (as yet unsettled, see Wu,
supra, at 708 and nn. 95 and 98) of the net effect of
Napsterlike services on the music industry’s income is
18 No. 02-4125
irrelevant to this case. If the only effect of a service chal-
lenged as contributory infringement is to enable copy-
rights to be infringed, the magnitude of the resulting
loss, even whether there is a net loss, becomes irrelevant
to liability.
Even when there are noninfringing uses of an Internet
file-sharing service, moreover, if the infringing uses are
substantial then to avoid liability as a contributory infringer
the provider of the service must show that it would
have been disproportionately costly for him to eliminate
or at least reduce substantially the infringing uses. Aimster
failed to make that showing too, by failing to present
evidence that the provision of an encryption capability
effective against the service provider itself added important
value to the service or saved significant cost. Aimster
blinded itself in the hope that by doing so it might come
within the rule of the Sony decision.
It complains about the district judge’s refusal to hold
an evidentiary hearing. But his refusal was consistent
with our decision in Ty, Inc. v. GMA Accessories, Inc., supra,
132 F.3d at 1171 (citations omitted), where we explained
that “if genuine issues of material fact are created by the
response to a motion for a preliminary injunction, an
evidentiary hearing is indeed required. But as in any case
in which a party seeks an evidentiary hearing, he must be
able to persuade the court that the issue is indeed gen-
uine and material and so a hearing would be produc-
tive—he must show in other words that he has and in-
tends to introduce evidence that if believed will so weaken
the moving party’s case as to affect the judge’s decision
on whether to issue an injunction.” Aimster hampered
its search for evidence by providing encryption. It must
take responsibility for that self-inflicted wound.
No. 02-4125 19
Turning to the second issue presented by the appeal, we
are less confident than the district judge was that the
recording industry would also be likely to prevail on the
issue of vicarious infringement should the case be
tried, though we shall not have to resolve our doubts
in order to decide the appeal. “Vicarious liability” gen-
erally refers to the liability of a principal, such as an em-
ployer, for the torts committed by his agent, an employ-
ee for example, in the course of the agent’s employment.
The teenagers and young adults who use Aimster’s
system to infringe copyright are of course not Aimster’s
agents. But one of the principal rationales of vicarious
liability, namely the difficulty of obtaining effective relief
against an agent, who is likely to be impecunious, Alan O.
Sykes, “The Economics of Vicarious Liability,” 93 Yale L.J.
1231, 1241-42, 1272 (1984), has been extended in the copy-
right area to cases in which the only effective relief is
obtainable from someone who bears a relation to the
direct infringers that is analogous to the relation of a
principal to an agent. See 2 Goldstein, supra, § 6.2, pp. 6:17
to 6:18. The canonical illustration is the owner of a dance
hall who hires dance bands that sometimes play copy-
righted music without authorization. The bands are not
the dance hall’s agents, but it may be impossible as a
practical matter for the copyright holders to identify and
obtain a legal remedy against the infringing bands yet
quite feasible for the dance hall to prevent or at least limit
infringing performances. And so the dance hall that fails
to make reasonable efforts to do this is liable as a
vicarious infringer. Dreamland Ball Room v. Shapiro, Bern-
stein & Co., 36 F.2d 354, 355 (7th Cir. 1929), and other
cases cited in Sony Corp. of America, Inc. v. Universal City
Studios, Inc., supra, 464 U.S. at 437 n. 18; 2 Goldstein, supra,
§ 6.2, pp. 6:18 to 6:20. The dance hall could perhaps be
described as a contributory infringer. But one thinks of a
20 No. 02-4125
contributory infringer as someone who benefits directly
from the infringement that he encourages, and that does
not seem an apt description of the dance hall, though it
does benefit to the extent that competition will force
the dance band to charge the dance hall a smaller fee
for performing if the band doesn’t pay copyright roy-
alties and so has lower costs than it would otherwise have.
How far the doctrine of vicarious liability extends is
uncertain. It could conceivably have been applied in
the Sony case itself, on the theory that while it was in-
feasible for the producers of copyrighted television fare
to sue the viewers who used the fast-forward button
on Sony’s video recorder to delete the commercials and
thus reduce the copyright holders’ income, Sony could
have reduced the likelihood of infringement, as we
noted earlier, by a design change. But the Court, treat-
ing vicarious and contributory infringement interchange-
ably, see id. at 435 and n. 17, held that Sony was not a
vicarious infringer either. By eliminating the encryp-
tion feature and monitoring the use being made of its
system, Aimster could like Sony have limited the amount
of infringement. Whether failure to do so made it a
vicarious infringer notwithstanding the outcome in Sony
is academic, however; its ostrich-like refusal to discover
the extent to which its system was being used to in-
fringe copyright is merely another piece of evidence that
it was a contributory infringer.
We turn now to Aimster’s defenses under the Online
Copyright Infringement Liability Limitation Act, Title II
of the Digital Millennium Copyright Act (DMCA), 17
U.S.C. § 512; see 2 Goldstein, supra, § 6.3. The DMCA is
an attempt to deal with special problems created by the
so-called digital revolution. One of these is the vulner-
ability of Internet service providers such as AOL to liability
No. 02-4125 21
for copyright infringement as a result of file swapping
among their subscribers. Although the Act was not passed
with Napster-type services in mind, the definition of
Internet service provider is broad (“a provider of online
services or network access, or the operator of facilities
therefor,” 17 U.S.C. § 512(k)(1)(B)), and, as the district judge
ruled, Aimster fits it. See 2 Goldstein, supra, § 6.3.1, p. 6:27.
The Act provides a series of safe harbors for Internet ser-
vice providers and related entities, but none in which
Aimster can moor. The Act does not abolish contributory
infringement. The common element of its safe harbors
is that the service provider must do what it can rea-
sonably be asked to do to prevent the use of its service
by “repeat infringers.” 17 U.S.C. § 512(i)(1)(A). Far from
doing anything to discourage repeat infringers of the
plaintiffs’ copyrights, Aimster invited them to do so,
showed them how they could do so with ease using its
system, and by teaching its users how to encrypt their
unlawful distribution of copyrighted materials disabled
itself from doing anything to prevent infringement.
This completes our discussion of the merits of Aimster’s
appeal. But the fact that the recording industry is likely
to win this case if it is ever tried is not by itself a suffi-
cient basis for the issuance of a preliminary injunction. A
court asked to issue such an injunction must also con-
sider which party will suffer the greater harm as a result
of a ruling for or against issuance. Aimster points out
that the preliminary injunction has put it out of business;
the recording industry ripostes that until it was put out
of business Aimster, with an estimated 2 to 3 million
users, undoubtedly was facilitating a substantial infringe-
ment of music copyrights—and remember that Aimster
has presented no evidence of offsetting noninfringing
uses. On this record, therefore, the harm to Aimster from
the grant of the injunction must be reckoned comparable
22 No. 02-4125
to the harm that the recording industry would suffer
from denial of the preliminary injunction.
The only harm that is relevant to the decision to grant
a preliminary injunction is irreparable harm, since if it is
reparable by an award of damages at the end of trial
there is no need for preliminary relief. The recording
industry’s harm should the preliminary injunction be
dissolved would undoubtedly be irreparable. The industry’s
damages from Aimster’s contributory infringement can-
not be reliably estimated and Aimster would in any event
be unlikely ever to have the resources to pay them.
Aimster’s irreparable harm from the grant of the injunc-
tion is, if anything, less, because of the injunction bond
of $500,000 that the industry was required to post and
that Aimster does not contend is inadequate. (Even with-
out the bond, the recording industry would undoubtedly
be good for any damages that Aimster may have sus-
tained from being temporarily shut down, though, bond
or no bond, there is still the measurement problem.) Even
if the irreparable harms are deemed the same, since the
plaintiffs have a stronger case on the merits than Aimster
does the judge was right to grant the injunction.
Aimster objects to the injunction’s breadth. But hav-
ing failed to suggest alternative language either in the
district court or in this court, it has waived the objection.
We cannot find a case that makes this point expressly, but
it is implicit in the general principle that arguments
made but not developed do not preserve issues for appel-
late review. E.g., Jones Motor Co. v. Holtkamp, Liese, 197
F.3d 1190, 1192 (7th Cir. 1999). We are not impressed by
Aimster’s argument that the district court had an independ-
ent duty, rooted in the free-speech clause of the First
Amendment, to make sure that the impact of the injunc-
tion on communications over the Internet is no greater
No. 02-4125 23
than is absolutely necessary to provide the recording in-
dustry with the legal protection to which it is entitled while
the case wends its way to a conclusion. Copyright law
and the principles of equitable relief are quite com-
plicated enough without the superimposition of First
Amendment case law on them; and we have been told
recently by the Supreme Court not only that “copyright
law contains built-in First Amendment accommodations”
but also that, in any event, the First Amendment “bears
less heavily when speakers assert the right to make
other people’s speeches.” Eldred v. Ashcroft, 123 S. Ct. 769,
788-89 (2003). Or, we add, to copy, or enable the copying
of, other people’s music.
AFFIRMED.
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—6-30-03