Contributory Infringement, also called Indirect Infringement, Indirect Liability, and Vicarious Liability, requires (1) knowledge of the infringing activity and (2) a material contribution -- actual assistance or inducement -- to the alleged infringement.
Examples of contributory infringement would be posting access codes from authorized copies of software, serial numbers, or other tools to assist in accessing such software may subject you to liability; providing a forum for uploading and downloading any copyrighted file or code cracking utility.
To succeed on a contributory infringement claim, the copyright owner must show that the party actually knew or should have known of the infringing activity
Contributory infringement is a court-created theory (i.e., not specified in the Copyright Act) designed to hold a company liable for its participation in unlawful copying. The theory is analogous to the getaway driver in a robbery; everyone knows that the person who drives the getaway car will be in trouble, even if he does not rob the store. The imposition of secondary liability is common throughout the law. Those who aid or abet the commission of wrongs, or who benefit from them, are frequently held liable.
For example, someone who sells burglar tools to a burglar is guilty of aiding and abetting if the burglar uses the tools to commit a burglary. And someone who induces a breach of contract is liable to the victim of the breach, even though the victim could just have sued the other party to the contract for breach of contract.
The copyright laws do not expressly provide for secondary liability for copyright infringement. But the courts, in a long series of cases, have imposed liability on those who facilitate or profit from copyright infringement. Thus there are two main strands of secondary liability for copyright infringement: contributory infringement and vicarious liability.
The standard definition for contributory copyright infringement is when the defendant, "with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another." In other words, the record labels must not only show ownership of a valid copyright and unlawful copying but must show that the P2P company 1) had knowledge of the infringing activity and 2) materially contributed to the infringing conduct. Again, this is for the purpose of holding someone other than the infringer liable for copyright infringement.
Vicarious liability is another means of holding someone liable for copyright infringement even when that person or party is not the one who did the infringing. In order to find a defendant liable under the theory of vicarious liability for the actions of an infringer, it must be shown that the defendant 1) has the right and ability to control the infringer's acts, and 2) receives a direct financial benefit from the infringement. Unlike contributory infringement, knowledge is not an element of vicarious liability. However, courts have determined that the combination of the right and ability to control the infringer's acts and the receipt of a direct financial benefit from the infringement suffices to hold a defendant vicariously liable for copyright infringement, even if the defendant had no knowledge of the particular infringement.
The 9th Circuit on vicarious liability : Fonovisa Inc. v. Cherry Auction, 76 F.3d 259 (9th Cir. 1996)
Under 35 U.S.C. § 271(c), one who sells a component of a patented invention or a component used in a patented process is liable for infringement as a contributor if: (1) the component is a material part of the patented invention, (2) the seller knows the component is specifically made or adapted for use in an infringement of the patented invention, and (3) the component is not a staple article of commerce suitable for substantial noninfringing use.
Knowledge that one's activity causes infringement is necessary to establish contributory infringement. Hewlett-Packard Co. v. Bausch & Lomb Inc., 909 F.2d 1464, 1469-70 (Fed. Cir. 1990). Absent proof of direct infringement, there can be no contributory infringement or inducement of infringement. Met-Coil Sys. Corp. v. Korners Unltd., Inc., 803 F.2d 684, 687 (Fed. Cir. 1986).
The concept of vicarious copyright liability was developed in the Second Circuit as an outgrowth of the agency principles of respondeat superior. The landmark case on vicarious liability for sales of counterfeit recordings is Shapiro, Bernstein and Co. v. H. L. Green Co., 316 F.2d 304 (2d Cir. 1963). In Shapiro, the court was faced with a copyright infringement suit against the owner of a chain of department stores where a concessionaire was selling counterfeit recordings. Noting that the normal agency rule of respondeat superior imposes liability on an employer for copyright infringements by an employee, the court endeavored to fashion a principle for enforcing copyrights against a defendant whose economic interests were intertwined with the direct infringer's, but who did not actually employ the direct infringer.
The Shapiro court looked at the two lines of cases it perceived as most clearly relevant. In one line of cases, the landlord-tenant cases, the courts had held that a landlord who lacked knowledge of the infringing acts of its tenant and who exercised no control over the leased premises was not liable for infringing sales by its tenant. See e.g. Deutsch v. Arnold, 98 F.2d 686 (2d Cir. 1938); c.f. Fromott v. Aeolina Co., 254 F.2d 592 (S.D.N.Y. 1918). In the other line of cases, the so-called "dance hall cases," the operator of an entertainment venue was held liable for infringing performances when the operator (1) could control the premises and (2) obtained a direct financial benefit from the audience, who paid to enjoy the infringing performance. See e.g. Buck v. Jewell-LaSalle Realty Co., 238 U.S. 191, 198-199 (1931); Dreamland Ballroom, Inc. v. Shapiro, Bernstein & Co., 36 F.2d 354 (7th Cir. 1929).
From those two lines of cases, the Shapiro court determined that the relationship between the store owner and the concessionaire in the case before it was closer to the dance-hall model than to the landlord-tenant model. It imposed liability even though the defendant was unaware of the infringement. Shapiro deemed the imposition of vicarious liability neither unduly harsh nor unfair because the store proprietor had the power to cease the conduct of the concessionaire, and because the proprietor derived an obvious and direct financial benefit from the infringement. 316 F.2d at 307. The test was more clearly articulated in a later Second Circuit case as follows: "even in the absence of an employer-employee relationship one may be vicariously liable if he has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities." Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir. 1971). See also 3 Melville Nimmer & David Nimmer, Nimmer on Copyright 1204(A), at 1270-72 (1995). A more recent and comprehensive discussion of the evolution of the doctrine of vicarious liability for copyright infringement is contained in Judge Keeton's opinion in Polygram Intern. Pub., Inc. v. Nevada/TIG, Inc., 855 F. Supp. 1314 (D. Mass. 1984).
Articles about contributory infringement:
Here are some excerpts and court statements about contributory infringement: