High Court Keelhauls Grokster On P2P Piracy

    June 27, 2005

The Supreme Court of the United States (SCOTUS) handed down a unanimous ruling in favor of MGM in MGM V Grokster Inc. (Case #04-480). The movie and recording industries surely rejoice as the decision makes P2P sharing networks liable for file swapping of copyrighted materials.

The decision rocks the world of the peer to peer file sharing as many companies will be forced to police their own networks or face lawsuits of epic proportions from the MPAA, the RIAA and various companies tied to the industry. Companies like defendants Grokster Inc. and Streamcast Networks Inc. will likely pay a heavy price for the actions of people who make use of their utilities.

High Court Keelhauls Grokster On P2P Piracy

According to the primary opinion of the court, the main issue is based on whether or not Grokster Inc. and Streamcast Networks Inc. knew, when they produced their P2P software, whether or not the primary usage of their software would be the sharing of copyrighted material. The court held that billions of files, most of which are copyrighted were shared every month.

Writing the majority opinion, Justice David Souter stated, “As the account of the facts indicates, there is evidence of infringement on a gigantic scale, and there is no serious issue of the adequacy of MGM.s showing on this point in order to survive the companies.”

The court said that Streamcast built its business around customer who previously used Napster before it was stopped based on illegal file sharing. They said Streamcast and Grokster built their marketing and advertising on cashing in on free file swapping and had every intention of allowing and encouraging this behavior knowing full well it was illegal.

The two companies, Grokster and Streamcast, had based their arguments on a 1984 ruling Sony Corp. of America V Universal City Studios. The court held at the time that Betamax recorders were ok because those recorders didn’t have the sole purpose of pirating copyrighted product. The recorders had other legitimate uses. The court determined in the current case, the primary purpose of the software was to swap protected material.

Souter continued in his opinion, “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 by third parties” — that is, computer users using free downloading software.”

Representative Mary Bono (R- CA), wife of the late musician and representative Sonny Bono, quickly issued a press release. She’s expressed hubris against the illegal file swapping habits of many Americans. She was quite pleased with today’s decision.

“We are extremely pleased that the Supreme Court’s (9-0) decision in the Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. case protects the innovative and copyrighted works of our nation’s creative community. This decision supports our U.S. industries that employ more than five million Americans and produce one of our top exports: intellectual property, including motion pictures and music. Furthermore, it is a strong repudiation of the rapid proliferation of copyright piracy on the Internet.

Critics weren’t quite so enthusiastic. They still maintain it’s not fair to punish a company because people misuse their product. They claim they are no different than someone who uses a VCR or some other media-recording device to tape a show and then gives it to a friend.

Something else to consider for the future will be wireless P2P swapping. As more mobile phone/computers come out, many allow P2P swapping from one phone to another at absolutely no charge. This is just one more hole the industries will have to look in.

While this decision certainly goes in favor of the recording and movie industries, many industry experts would say this war is far from over. The decision will only affect businesses based in the U.S. P2P software companies in other countries can ignore this ruling. The court also said in their decision that billions of files are swapped every month.

Even if Grokster and Streamcast are shut down, the law of supply and demand will be applicable. If there is a demand, then someone will provide the supply. That’s probably the law the recording and motion picture industries should really be worried about.

John Stith is a staff writer for WebProNews covering technology and business.