Indirect Copyright Liability and Technological Innovation

Over the past decade, numerous scholars and commentators have asserted that the indirect copyright liability standards applied in the Napster, Aimster, and Grokster decisions, among others, significantly chill technological innovation. This article examines this critical conjecture and offers both a broader framework for assessing the relationship between indirect copyright liability and technological innovation and some suggestive empirical results. The conceptual analysis demonstrates that the question of whether indirect copyright liability chills technological innovation inherently requires consideration of a broader range of social balances, market mechanisms, and roles for mediating institutions. Several countervailing forces, such as the relatively modest capital requirements associated with the technology at issue, the nature of the many established research environments, the philosophical and cultural orientation of many digital technology researchers, various liability-insulating institutions, the ability of investors and technology companies to manage risk, and the importance of technological advance in fields unaffected by copyright liability, suggest that the effects of indirect copyright liability on innovation in replication and distribution technologies will be less dire and more complex than the conjecture suggests. Moreover, the Chilled Innovation conjecture downplays the beneficial effects of indirect copyright liability on the development of balanced technologies (those that tend to balance incentives to create copyrighted works with advances in information dissemination) while ignoring the adverse effects of broad immunity, which fosters deployment of parasitic technologies that tend to drive out balanced technologies. To the extent that the Chilled Innovation conjecture has force, it is not at the basic research and development stages of the innovation pipeline, but rather at the commercialization stage – which is where in the innovation process such effects are most appropriately focused. This limits the effects of choking innovation in its infancy. The article also offers a partial test of the chilled innovation conjecture by examining academic research and patent data. The findings indicate that the Napster-Aimster-Grokster trilogy does not appear to have derailed technological innovation in the peer-to-peer field