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Supremes Crack Down on File-Sharing

Washington — The U.S. Supreme Court last Monday appeared to take big strides toward plugging rampant piracy of songs and movies on the Internet by holding in the closely watched Grokster case that distributors of file-sharing software can be held indirectly liable for copyright infringement by the software's users.

The case was not about whether those who download copyrighted works break the law; that was a given. Rather, the case was about whether developers of peer-to-peer software can be put out of business for inducing copyright crimes.

Before the Supreme Court took the case at the request of Hollywood copyright owners, two lower courts had shielded P2P developers Grokster Ltd. and StreamCast Networks Inc. from liability based on the 1984 Sony case in which the Supreme Court protected the VCR from copyright liability because the TV-recording machine had substantial noninfringing uses, such as time-shifting.

In a 9-0 ruling, the high court held that Grokster and StreamCast abetted copyright infringement on such a “gigantic scale” that they could be held liable for the actions of millions of third-party downloaders, and that the Sony precedent had been wrongly applied by the lower courts.

“The record is replete with evidence that from the moment Grokster and StreamCast began to distribute their free software, each one clearly voiced the objective that recipients use it to download copyright works, and each took active steps to encourage infringement,” Justice David Souter concluded in Metro-Goldwyn-Mayer Studios Inc. vs. Grokster.

File-sharing proponents viewed the case as a threat to innovation if copyright owners could purge from the market any new technology that had copyright-infringing capabilities.

Although the court seemed to share this concern, Souter wrote that Grokster and StreamCast did not deserve protections outlined in Sony because they had taken multiple affirmative steps to profit financially from copyright infringement.

Souter found that Grokster or StreamCast sold banner ads, marketed the software to former Napster users after courts shut down Napster Inc. for copyright infringement, and took no steps to discourage piracy with their software.

“The argument for imposing indirect liability in this case is … a powerful one, given the number of infringing downloads that occur every day using StreamCast's and Grokster's software,” Souter explained.

The court found that the two companies' software had been downloaded 100 million times to facilitate the file sharing of billions of copyrighted works each month. Souter called the scope of the infringement “staggering.”

The case returns to lower court. Hollywood attorneys claimed Souter provided a clear road map for showing how Grokster and StreamCast induced copyright infringement. But Grokster lawyers said they felt Souter's opinion left them enough room to prove the opposite.

Public Knowledge, a Washington, D.C., think tank that helped defeat the Federal Communications Commission in court over protecting digital-TV content from piracy, said the Grokster decision would likely halt efforts in Congress to pass legislation against inducing copyright infringement until the lower courts rule.