On the Other Hand

Supreme Court rules against file swapping

Y’all bet­ter learn to use BitTorrent!

The Supreme Court has hand­ed movie stu­dios and record labels a sweep­ing vic­to­ry against file swap­ping, rul­ing that peer-to-peer com­pa­nies such as Grokster could be held respon­si­ble for the copy­right pira­cy on their networks.

In a unan­i­mous deci­sion issued Mon­day, the nine jus­tices said com­pa­nies that build busi­ness­es with the active intent of encour­ag­ing copy­right infringe­ment should be held liable for their cus­tomers’ ille­gal actions.

“We hold 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,” Jus­tice David Souter wrote in the major­i­ty opinion.

The deci­sion comes as a sur­pris­ing­ly strong vic­to­ry for copy­right com­pa­nies and stands to reshape an Inter­net land­scape in which file swap­ping has become commonplace.

The rul­ing will give the record­ing indus­try and Hol­ly­wood imme­di­ate ammu­ni­tion to file law­suits against oth­er file-trad­ing com­pa­nies. It could also be a boon for legal music ser­vices such as Apple Com­put­er’s iTunes, which could see their strongest competitor–freely down­load­able songs–driven fur­ther underground.

It won’t imme­di­ate­ly shut down access to the trad­ing net­works, how­ev­er. The court’s rul­ing sends the case back to the low­er courts, which will review the evi­dence against Grokster and co-defen­dant Stream­Cast in the light of Mon­day’s decision.

Record labels and movie stu­dios imme­di­ate­ly hailed the deci­sion as an unam­bigu­ous victory.

“The most impor­tant mes­sage from today’s his­toric deci­sion is that progress and inno­va­tion do not have to come at the expense of record­ing artists, song­writ­ers and the peo­ple who make their liv­ing in the enter­tain­ment indus­try,” Warn­er Music Group CEO Edgar Bronf­man said in a state­ment. “This impor­tant deci­sion will allow artists and the cre­ative com­mu­ni­ty to pros­per side by side with the tech­nol­o­gy industry.”

The peer-to-peer com­pa­nies involved warned that the high court had opened the flood­gates to lit­i­ga­tion against a wide vari­ety of tech­nol­o­gy com­pa­nies, but said that they would con­tin­ue to dis­trib­ute their soft­ware and that they expect­ed to be cleared of any wrongdoing.

“We are con­fi­dent that it will be proven that Mor­pheus does not pro­mote or encour­age copy­right infringe­ment,” said Stream­Cast Chief Exec­u­tive Offi­cer Michael Weiss. “We’re stay­ing in this for the fight. We’re going to con­tin­ue to inno­vate and come out with new products.”

Cloud over Sil­i­con Valley?
The jus­tices were review­ing a pair of low­er-court deci­sions in which both courts said that file-swap­ping com­pa­nies such as Grokster were not liable for the copy­right infringe­ment of peo­ple using their soft­ware. The nation’s top court heard oral argu­ments on the case in late March.

With the poten­tial to rewrite the Supreme Court’s 1984 Sony Beta­max rul­ing that made VCRs–and by exten­sion any tech­nol­o­gy with “sub­stan­tial non­in­fring­ing use”–legal to sell, the deci­sion has been close­ly watched across Sil­i­con Valley.

Tech­nol­o­gy com­pa­nies have feared that a new copy­right-focused stan­dard aimed at con­trol­ling peer-to-peer net­works might result in a rise in law­suits aimed at block­ing new prod­ucts. The Beta­max rul­ing had pro­tect­ed gen­er­a­tions of prod­ucts, rang­ing from CD burn­ers to Apple’s iPod to per­son­al computers.

In its major­i­ty rul­ing Mon­day, the court did not make any detailed changes or clar­i­fi­ca­tions to that 1984 deci­sion. How­ev­er, Souter did write that the Beta­max deci­sion had not been meant as a shield for com­pa­nies that active­ly induced or encour­aged their cus­tomers to infringe copy­rights. The peer-to-peer com­pa­nies appeared to fall into that cat­e­go­ry, he wrote.

“There is no evi­dence that either com­pa­ny (Grokster or Stream­Cast) made an effort to fil­ter copy­right­ed mate­r­i­al from users’ down­loads or oth­er­wise impede the shar­ing of copy­right­ed files,” Souter wrote. “Each com­pa­ny showed itself to be aim­ing to sat­is­fy a known source of demand for copy­right infringe­ment, the mar­ket com­pris­ing for­mer Nap­ster users.”

Essen­tial­ly that means the Beta­max rul­ing’s pro­tec­tions still will apply in most cas­es, lawyers said. How­ev­er, the rul­ing does dis­pel the most expan­sive inter­pre­ta­tion of that deci­sion, under which any prod­uct with any legal use, no mat­ter how min­i­mal, was viewed as nec­es­sar­i­ly legal, said The­len Reid & Priest attor­ney Michael Elkin.

“I don’t think the Sony Beta­max deci­sion ever gave a get-out-of-jail-free pass to any­one,” Elkin said.

Crit­ics of the rul­ing said that the court pro­vid­ed no clear stan­dard or test to define induce­ment, aside from not­ing sev­er­al instances in which the peer-to-peer com­pa­nies appeared to cross the line.

Some in the tech­nol­o­gy world said the result could lead to more lit­i­ga­tion against young com­pa­nies with new technologies.

“This is a very dan­ger­ous deci­sion for tech­nol­o­gy and inno­va­tion,” said Ed Black, chief exec­u­tive offi­cer of the Com­put­er and Com­mu­ni­ca­tions Indus­try Asso­ci­a­tion. “If you think of the Sony deci­sion as a shield or an umbrel­la, we’re afraid some holes have been punc­tured in that umbrella.”

Added Michael Pet­ri­cone, vice pres­i­dent of tech­nol­o­gy pol­i­cy for the Con­sumer Elec­tron­ics Asso­ci­a­tion: “It is a real con­cern for the entire indus­try. We are faced with com­peti­tors in Chi­na and India who do not face the same lit­i­ga­tion bur­den that com­pa­nies will with this decision.”

Not every­one in Sil­i­con Val­ley took a bleak view of the rul­ing, how­ev­er. An Intel spokes­woman said the com­pa­ny was still study­ing the rul­ing, but not­ed that the court seemed to have upheld the most impor­tant aspects of the Beta­max decision.

Changed land­scape for dig­i­tal content?
The deci­sion isn’t like­ly to elim­i­nate file swap­ping. Many of the most pop­u­lar ser­vices are decen­tral­ized enough that they can exist even if a par­ent com­pa­ny dis­ap­pears. Many peer-to-peer ser­vices also are based out­side the Unit­ed States or have been cre­at­ed by over­seas programmers.

U.S. courts have shown their will­ing­ness to reach over­seas com­pa­nies in some cas­es, how­ev­er. Already, a Los Ange­les court has ruled that Kazaa par­ent Shar­man Net­works, based in Aus­tralia, main­tains enough busi­ness con­nec­tions in the Unit­ed States to be sued in Amer­i­can courts.

If the decision–and sub­se­quent low­er court actions–pushes file-swap­ping ser­vices fur­ther under­ground, it can only help com­pa­nies such as Apple that are sell­ing music and movies online, music ser­vice exec­u­tives said.

“I think the Supreme Court did the right thing, in a lucid way,” said Rob Glaser, CEO of Real­Net­works. “I think it will make a dif­fer­ence in the long slog to con­vert the indus­try over to legit­i­ma­cy, by not allow­ing busi­ness­es to do this kind of nudge-nudge wink-wink marketing.”

Apple, Nap­ster and oth­er dig­i­tal music ser­vices also hailed the rul­ing as a vin­di­ca­tion of their busi­ness models.

The deci­sion could also be a boost for com­pa­nies such as Shawn Fan­ning’s Sno­cap or Audi­ble Mag­ic, which offer tech­nol­o­gy for fil­ter­ing copy­right­ed files out of peer-to-peer swaps, or turn­ing those swaps into trans­ac­tions. Today that avail­able fil­ter­ing tech­nol­o­gy focus­es only on music files, but tools are being devel­oped to iden­ti­fy and block movie downloads.

“To the P2P oper­a­tors, the LimeWires and the eDon­keys: We want to work with you,” said Mitch Bain­wol, chief exec­u­tive offi­cer of the Record­ing Indus­try Asso­ci­a­tion of Amer­i­ca. “This is time to come for­ward and start fil­ter­ing. We can build a bet­ter dig­i­tal age together.”

Although the deci­sion tech­ni­cal­ly leaves the file-swap­ping com­pa­nies’ fate to the low­er court, it could hold the seeds of a quick deci­sion in favor of Hol­ly­wood and the record labels. Souter’s rul­ing not­ed that the orig­i­nal tri­al judge grant­ed sum­ma­ry judg­ment to Grokster, but said the low­er court should instead imme­di­ate­ly recon­sid­er the copy­right com­pa­nies’ request for sum­ma­ry judgment.

Souter was sup­port­ed unan­i­mous­ly in his deci­sion by all nine jus­tices, a rare lev­el of agree­ment on con­tro­ver­sial cas­es. Jus­tice Ruth Bad­er Gins­burg wrote one con­cur­ring deci­sion that was joined by Jus­tices Antho­ny Kennedy and William Rehn­quist. Jus­tice Stephen Brey­er wrote a sec­ond con­cur­rence, joined by Jus­tices John Paul Stevens and San­dra Day O’Connor.

CNET News.com’s Declan McCul­lagh and Anne Broache con­tributed to this report.

Cyn is a proud Mommy & Mémé, professional geek, avid reader, fledgling coder, enthusiastic gamer (TTRPGs), occasional singer, and devoted stitcher.
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