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The Stevens Papers: A Peek Behind the Scenes at the Making of Lotus, Eldred, and Grokster

The recently released files of the late Associate Supreme Court Justice John Paul Stevens reveal interesting details concerning some of the Court’s significant copyright decisions, but leave important questions unanswered. Justice Stevens (1920-2019) left his papers to the Library of Congress, which opened them to the public in May 2023. (See here for a blog post on Justice Stevens’ important decisions relating to information technology.) While the papers to do not provide additional information about Justice Stevens’ pivotal role in the shaping of the Sony v. Universal (“Betamax”) decision, revealed by Justice Thurgood Marshall’s files, they do increase our knowledge about Lotus v. Borland, MGM v. Grokster, and Eldred v. Ashcroft.

Lotus v. Borland

The First Circuit ruled in 1994 that Borland did not infringe Lotus’ copyright when it copied the Lotus 1-2-3 command structure in its competing spreadsheet program because the command structure was an unprotectable method of operation under 17 U.S.C. § 102(b). The Supreme Court granted certiorari in 1995 and heard oral arguments in 1996. Soon thereafter, the Court issued a short per curiam decision, stating that the First Circuit’s judgment was affirmed by an equally divided court, and that Justice Stevens took no part in the consideration or decision of the case.

Justice Stevens’ files confirm the reason Justice Stevens recused himself. As stated in a memo from an unidentified clerk, “In light of your policy of disqualifying yourself from cases in which IBM is a party, my recommendation is that you DISQUALIFY.” IBM had purchased Lotus in early 1995, and Justice Stevens appeared to have owned IBM stock. 

The cover sheet for the case file indicates that Justice Stevens was “out,” that Justices Rehnquist, O’Connor, Scalia, Ginsburg, and Breyer had voted in favor of cert., and Justices Kennedy, Souter, and Thomas voted against cert. Ginsburg had voted “J-3,” that is, she would join in favor of cert. if three other Justices supported cert. (cert. is granted if four Justices vote in favor). Unfortunately, the cover sheet does not indicate how each Justice voted on the merits—that is, how a 5-3 vote in support of cert. became a 4-4 tie. Nothing else in the file does either. One can speculate that Justice Breyer may have supported cert. because of his interest in the subject matter, but then voted against reversal. Perhaps the papers of Justices Scalia and Ginsburg, if they are made public, will disclose the voting on the merits.

The clerk’s memo, which discussed the case for Justice Stevens’ information notwithstanding the recommendation that he disqualify himself, contained interesting commentary. The issue raised by the case is described as “difficult and interesting.” The clerk advised that “you might find the [petition] interesting reading, even if you disqualify yourself.” After discussing the facts and the holdings below, the clerk remarks that the petition “touches on one aspect of the extremely difficult problem of applying copyright law to computer programs. Unsurprisingly, the issue has attracted top lawyers ([petitioner’s] lawyers include Charles Fried and Arthur Miller) and several amicus briefs.”

The issue raised by Lotus v. Borland was indeed “difficult and interesting,” and it wasn’t resolved for 27 years until Google v. Oracle.

Eldred v. Ashcroft

The D.C. Circuit in 2001 upheld the constitutionality of the Sonny Bono Copyright Term Extension Act (CTEA) against a challenge brought by Eric Eldred, a publisher of public domain works. In 2002, the Supreme Court granted Eldred’s cert. petition. In 2003, in a decision authored by Justice Ruth Bader Ginsburg, the Supreme Court affirmed the D.C. Circuit’s decision by a 7-2 vote. Justices Stevens and Breyer wrote separate dissents.  

Documents in Justice Stevens’ files suggest that initially not enough Justices supported cert., but that Justice Breyer persuaded the Court to take the case. First, Justice Breyer wrote a draft dissenting opinion from a denial of the cert. petition, which he circulated to his colleagues on January 16, 2002. The draft states that the Petitioners’ argument concerning the unconstitutionality of the CTEA “is an important one, implicating the nature of copyright itself.” The draft foreshadows many themes that Justice Breyer later included in his dissenting opinion on the merits. The draft explained that the CTEA “stretches copyright’s term beyond the ‘limited Times’ that the Constitution foresees,” and that the First Amendment “required reading the [Copyright] Clause as imposing a significant temporal restriction.” On this basis, Justice Breyer wrote that he dissented “from the Court’s decision to deny the petition.”

Second, the cover sheet for the case file indicates that initially, only Justice Breyer and Stevens supported cert., with Sandra Day O’Connor voting J-3. Justice Breyer requested that the case be relisted for consideration three times, on January 4, 11, and 18, 2002. On January 16, 2002, Justice O’Connor sent Justice Breyer a letter stating that “I agree with you that we should grant certiorari in this case and change my vote from a ‘join-3’ to a grant.” Presumably she switched her from join-3 to grant after reading Justice Breyer’s draft dissent. But that still wasn’t enough. Ultimately, by the February 19, 2002, conference, Justices Scalia and Souter changed their vote from deny to grant, and the Court granted cert. Although Justices O’Connor, Scalia, and Souter were sufficiently persuaded by Justice Breyer to support cert., they still joined Justice Ginsburg’s opinion affirming the D.C. Circuit.

Justice Stevens’ papers indicate that Section III of Justice Ginsburg’s opinion, which described fair use and the idea expression dichotomy as “built-in First Amendment accommodations,” remained virtually unchanged throughout the eleven drafts she circulated to her colleagues. Thus, the section’s analysis was all Justice Ginsburg’s. The only substantive change to the section was supplied by Justice Thomas. In a December 12, 2002, letter to Justice Ginsburg, Justice Thomas stated that while he agreed with her analysis of the First Amendment question, “we should make clear that the D.C. Circuit’s conclusion that copyright laws are ‘categorically immune’ from First Amendment scrutiny is incorrect.” He then proposed language to implement this point. In a letter to Justice Thomas the following day, Justice Ginsburg said that “you rightly point out that the D.C. Circuit overstated when it declared copyrights ‘categorically immune’ from First Amendment protection.” She added that she would incorporate his suggested language “almost verbatim,” which she did.

MGM v. Grokster

In 2004, the Ninth Circuit found that the peer-to-peer file sharing company Grokster was not contributorily liable for the infringing activity of its users because its software was capable of substantial noninfringing uses, the safe harbor from contributory infringement set forth in Betamax. MGM and other copyright owners petitioned for cert., which the Supreme Court granted. In 2005, the Supreme Court reversed in a unanimous decision. The opinion for Court, written by Justice Souter, adopted an inducement rule, holding 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.” 

Justice Stevens’ file for Grokster is relatively thin. The case file cover sheet indicates that all nine Justices supported the grant of cert. The file contains a fascinating exchange on June 6, 2005, between Justices Scalia and Souter concerning the “inducement” theory Justice Souter articulated in his draft opinion. This exchange is worth reproducing in full to capture how the Justices wrestled both with the analytical coherence and the real-world implications of the decision.

Justice Scalia began the exchange by writing that he could not “go along with the theory of liability” Justice Souter set forth. Justice Scalia first questioned Justice Souter’s terminology. 

Though you put it forward as an aspect of the inducement theory, I think it is not that. The inducement theory requires (as the name suggests) inducement–which is an objective act that can be proven or disproven. Absence of proof of inducement is (as you say) the reason what you call the “classic” theory will not fly here. You then go on to say that the only function of the objective inducement in the classic theory is to show unlawful intent–so if you can prove unlawful intent in some other fashion you are still using, in effect, an inducement theory. I don’t think that follows. 

Justice Scalia then asserted that 

Terminology aside, the problem with the new “wrongful intent” approach is that, since it does not demand the presence of any particular fact, it is dangerously unpredictable. I cannot imagine greater disincentive to technological innovation than the notion that, if a jury finds you had bad intent, you are financially liable. What does wrongful intent consist of? If I launch a new technology that I know for certain will be used 10% of the time for infringement, do I not “intend” that that infringement occur? Or what if I launch a new technology that I know for certain will initially be used 90% of the time for infringement–infringement on which I make a profit that is essential to the start-up of my business–though I expect that percentage to decline rapidly, leaving me ultimately with a profitable, noninfringing, business? Do I not intend that infringement?

In short, I think you may be correct to say that “the function of the message in the theory of inducement is to prove unlawful intent” but it is to prove it through objective action of a specific sort that the innovator can avoid. The same cannot be said of a wrongful-intent theory, which is an open invitation to harassing litigation against innovators.

To eliminate the uncertainty inherent in Justice Souter’s approach, Justice Scalia proposed an alternative rule:

I would tie the decision of this case to specific facts whose existence the innovator can know of and can avoid. I would say that the innovator is liable as a contributory infringer when he launches a new technology (1) whose initial use is overwhelmingly infringing, (2) which infringement is the overwhelming source of the innovator’s profit, and (3) with no realistic prospect that, over time, the infringing use will significantly decline as a source of the innovator’s profit, and (4) the innovator made no reasonable effort to filter out any infringing uses. If a majority of the Court agrees with your new “inducement-without inducement” theory, I will have to write separately.

Justice Souter responded to Justice Scalia’s memorandum by stating that 

I think we are in closer agreement than your recent memo to me would indicate. I agree fully that the theory of inducement set out in my draft must require objective action of a specific sort that the innovator can avoid. In this case, the objective action includes promoting the Morpheus and Grokster software to fill the void for free music left open by Napster to a particular group of computer users known to use file-sharing software for infringement. I further agree with you that knowledge of infringing uses, even to the point of certainty, cannot form the basis for liability or a finding of intentional inducement. I have revised the draft to make this point clearer; originally I’d thought that specific intent based on evidence apart from design and mere distribution would suffice, but you (and Steve [Breyer]) don’t think so. I have also accentuated the positive in highlighting the evidence of actual communication, which is enough to survive summary judgment, even if one places greater emphasis on the fact of a communicated message than I think necessary.

While Justice Souter refined the opinion to address some of Justice Scalia’s concerns, he rejected Justice Scalia’s alternate rule. 

You also suggest that we should craft a rule that makes an innovator liable for overwhelmingly infringing uses unless the infringing uses will likely decline over time or the innovator makes reasonable effort to stop them. I am sympathetic and said so in the conference discussion. After living with this case for a couple of months, however, I believe a test described in those terms would scare the innovators and discourage new work. Copyright holders would not be willing to take the chance that infringing use would decline over time; they would sue the minute they saw third-party infringement on the horizon. I am also afraid the need to show a likely course of declining infringement in the future would guarantee extended litigation of the cases that would be brought early in the course of distributing a new product. I am convinced that the inducement theory provides a much more obvious basis for liability in this case, and also avoids placing courts in the position of making technology policy, such as by deciding what filtering efforts are reasonable or which uses of a technology promise to decline significantly in the future. Courts will get the message to resolve these cases on inducement where they can.

Although Justice Souter rejected Justice Scalia’s alternate rule, he did take

the further step of making explicit one ground on which the Ninth Circuit misread and misapplied Sony. I know that still leaves your “overwhelming infringement” open, but I hope you will be able to join me as far as I go, even if you write separately.

On June 13, 2005, Justice Scalia replied to Justice Souter’s memorandum. 

Your memo persuades me that the existence of overwhelmingly infringing uses plus no prospect of decline is too uncertain a test for innovators. And the changes you have made to the opinion satisfy my other concerns. I would be pleased to join.

The Court issued its decision two weeks later, on June 27, 2005, with all Justices joining Justice Souter’s opinion. Justice Ginsburg wrote a concurring opinion, which Chief Justice Rehnquist and Justice Kennedy joined. Justice Breyer wrote a separate concurring opinion, which Justices Stevens and O’Connor joined. Justice Stevens’ files did not contain any discussion of the two concurring opinions. 

What Influences Decisions

The case file for Grokster also contains a memo that reveals what influences the Court’s decisions, apart from the merits of the case. A memo from a clerk to Justice Stevens on the question of the cert.-worthiness of the case provides this reason, among others, to grant cert.: 

The lawyering in this case is excellent. On petr’s brief alone are Donald Verrilli (Jenner), Kenneth Starr (Kirkland), David Kendall (Williams & Connolly), and others. As I’ve stated above, there is an impressive lineup of amici, many of whom are represented by very high quality counsel, and all of which have concluded that review by this Court is needed to settle an area of law that has been (at least perceptually) unsettled as a result of the decision below. 40 states are urging this Court to grant review. As a result, it seems certain that the argument and the briefing will help this Court reach a well-reasoned decision. 

This indicates that name-brand lawyers might be worth what they charge in cases before the Supreme Court.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.