Hannah R. Short 1

The Metro-Goldwyn-Mayer Studios v. Grokster decision extended secondary liability for copyright infringement to companies who distribute software that enables its users to commit infringement. The theory of holding Internet-based companies liable for enabling users to violate laws can be applied outside the narrow context of copyright law. A host of websites allow users to scalp tickets via the Internet. Among them is StubHub.com, a particularly successful ticket resale website. Many users of StubHub.com violate state scalping laws. StubHub.com places the responsibility of compliance with scalping laws solely on its users. Attorneys general and local law enforcement agencies may find it difficult to enforce ticket sales laws against individual scalpers who use the Internet to resell tickets. Grokster may offer an approach for holding the operators of ticket resale sites secondarily liable for illegal activity of their users.

Cite as 7 N.C. J.L. & Tech. 181 (2005) | Download PDF

I. Introduction

Websites that encourage or facilitate ticket scalping in violation of state laws may be challenged under Metro-Goldwyn-Mayer Studios v. Grokster (“Grokster”).2 In the spring of 2005, the Supreme Court in Grokster3 decided that companies cannot shield themselves from copyright liability for their customers' infringing acts with the defense that the customer, and not the company, is breaking the law. Currently, various websites offer their customers a forum for buying and selling sports and entertainment tickets from and to other online users. By doing so, many users violate their state's scalping laws. To date, companies that offer services allowing individuals to violate state scalping laws have not been subject to law enforcement actions. Similar to the companies involved in the Grokster decision, these companies have generally claimed they were not breaking the law-their customers were.

This Recent Development argues the United States Supreme Court's decision in Grokster4 can be used by law enforcement agencies to hold liable companies that facilitate ticket scalping in violation of state laws. First, this Recent Development summarizes Grokster and places it within its underpinning legal theory. Second, it provides a brief overview of state scalping laws and explains how companies that provide an online forum for buying and selling tickets also provide an online forum for users to violate state scalping laws. StubHub.com will be used as an illustration. Third, this Recent Development analogizes between the practical and economic reasons for indirect liability for copyright infringement and similar reasons for indirect liability for online ticket scalping. In both instances, it is either more efficient or more practicable to pursue the entity enabling the legal violation, rather than the individuals taking part in the violation. Finally, this Recent Development argues that state law enforcement agencies could use the Grokster decision to prosecute companies that facilitate online ticket scalping. Both situations involve a novel form of technology that facilitates violations of the law.