The NewStandard ceased publishing on April 27, 2007.

File Sharing Cases Heading Back to Lower Court

by Brendan Coyne
Jessica Azulay contributed to this piece.

In a Supreme Court ruling that critics fear will staunch innovation, companies that enable Internet users to share music and other files may be liable for copyright violations.

June 28, 2005 – The US Supreme Court dealt peer-to-peer file sharing software a serious setback yesterday with a unanimous finding that the makers of such computer programs may be held responsible for copyright violations committed by users of the programs.

In deciding Metro-Goldwyn Mayer et al. v Grokster et al, the Justices agreed with the petitioners’ argument that the makers of the popular file sharing programs known as Grokster, Morpheus and Kazaa encouraged users to utilize the programs to violate copyright law.

Defenders of the file-sharing programs had argued that while some users employed the software to illegally reproduce copyrighted materials, peer-to-peer sharing technologies were also legally utilized to share free recordings and other materials not protected by copyright.

Lower courts had agreed that the technologies had legitimate uses and also found the networks’ technology, which allows decentralized sharing directly between users, does not exercise control over the transactions.

"Defendants distribute and support software, the users of which can and do choose to employ it for both lawful and unlawful ends," wrote federal Judge Stephen Wilson in an April 2003 ruling. "Grokster and StreamCast are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are used to infringe copyrights."

Until yesterday, the legal precedent in the case had been set by the 1984 decision in Sony Corporation of America v. Universal City Studios, in which the high court ruled that VCRs had "substantial noninfringing use[es]" and thus Sony could not be held responsible if individuals chose to break copyright laws using the company’s technology. That landmark ruling is widely credited with paving the legal way for a host of technological innovations leading to compact disc burners, MP3 players, digital video recorders and other electronics.

The Supreme Court in its ruling yesterday, however, said that although the peer-to-peer networks being sued, "can be used to share any type of digital file, recipients of respondents’ software have mostly used them to share copyrighted music and video files without authorization."

The justices ruled that "[o]ne 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, going beyond mere distribution with knowledge of third-party action, is liable for the resulting acts of infringement by third parties using the device, regardless of the device’s lawful uses."

The entertainment industry as well as some musicians applauded the unanimous ruling. Marilyn Bergman, president and chairman of the American Society of Composers, Authors and Publishers (ASCAP), said in a press statement: "It sends a clear message that [peer to peer] enterprises like Grokster and Kazaa cannot use the intellectual property of songwriters, composers and other copyright owners as start-up capital for their businesses. The P2P business model relies on the use of our music, as well as movies and other creative works, without permission or payment to the creators and copyright owners, and therefore is outright theft. On behalf of the over 210,000 songwriter, composer and music publisher members of ASCAP, I hope that the decision will strengthen the public understanding and respect for the rights of America's creators to make a living from their work, which so enriches our nation and the world."

But supporters of peer-to-peer technology immediately warned that yesterday’s ruling might financially cripple some companies and could have ominous consequences for computer technology innovation.

"Today the Supreme Court has unleashed a new era of legal uncertainty on America's innovators," Fred von Lohmann, the Electronic Frontier Foundation's (EFF) senior intellectual property attorney, said in a statement yesterday. "The newly announced inducement theory of copyright liability will fuel a new generation of entertainment industry lawsuits against technology companies. Perhaps more important, the threat of legal costs may lead technology companies to modify their products to please Hollywood instead of consumers."

The Consumer Electronics Association, an industry trade group, told the AP that the ruling provided no clarity, raised the potential for litigation and might stifle competition. A coalition of consumers’ rights groups took the critique even further

In a joint statement released shortly after the ruling, the Consumers Union, Consumer Federation of America and Free Press warned that due to the ruling "new innovators would be subject to review of the courts to assess their marketing activities and business models."

There is still some hope for companies behind file sharing software. The Supreme Court decision sent the case back to a lower court that ruled in favor of the defendants in a summary judgment last August. Sharman Networks, the maker of Kazaa, said they welcomed the remand.

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The NewStandard ceased publishing on April 27, 2007.

Brendan Coyne is a contributing journalist.

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