[opendtv] News: Justices Reinstate Suits on Internet File Sharing

http://www.nytimes.com/2005/06/28/technology/28grokster.html?th=&emc=th&pagewanted=all

Justices Reinstate Suits on Internet File Sharing

By LINDA GREENHOUSE and LORNE MANLY

Published: June 28, 2005

WASHINGTON, June 27 - The Supreme Court handed a major victory to the 
entertainment and recording industries on Monday by reinstating a 
copyright-infringement suit against two file-sharing services.

In a unanimous opinion, the court strongly suggested that the 
services, Grokster and StreamCast Networks, should be found liable 
for the vast copyright infringement committed by those using their 
software to download music and movies.

Two lower federal courts in California had ruled in favor of the two 
companies, dismissing the lawsuit without a trial on the basis of a 
legal analysis that the Supreme Court found seriously flawed.

In his opinion for the court on Monday, Justice David H. Souter 
suggested that when properly evaluated, the evidence against Grokster 
and StreamCast was, in fact, so strong that the 
entertainment-industry plaintiffs might be entitled to summary 
judgment.

At the least, he said, MGM Studios and the other plaintiffs - 
including the Recording Industry Association of America, the Motion 
Picture Association of America and a class of 27,000 music publishers 
and songwriters - were entitled to a trial to prove their accusations 
that the file-sharing companies were in business primarily to enable 
and induce computer users to find and download copyrighted material.

In the Supreme Court's view, the plaintiffs have effectively made 
that case already. Justice Souter called the record "replete with 
evidence" that the companies "acted with a purpose to cause copyright 
violations by use of software suitable for illegal use." The opinion 
referred to "evidence of infringement on a gigantic scale" and said 
that "the probable scope of copyright infringement is staggering." 
[Excerpts, Page C5.]

The movie and music industries, even armed with a decision affirming 
their legal recourse, have a long way to go to capitalize on it, and 
they plan new efforts to persuade or force those actually doing the 
downloading to desist.

Digital rights advocates, while somewhat relieved that the court did 
not go further, were concerned that the ruling could invite a deluge 
of lawsuits and a risk that they would inhibit innovation.

There is no dispute that individual users violate copyright law when 
they share files of copyrighted material, and the industry has had 
some modest success in seeking fines from college students and 
others. But with millions of users downloading billions of files each 
month, retail prosecution proved inefficient, so the music and 
entertainment industries turned their attention several years ago to 
the commercial services that make the file sharing possible.

That effort led to the Supreme Court's most important copyright case 
since its ruling in 1984 that shielded the manufacturers of the 
videocassette recorder from copyright liability for possibly 
infringing use by home consumers.

The court based its decision then, in  Sony v. Universal City 
Studios, on a finding that the VCR was "capable of substantial 
noninfringing uses," like time-shifting, in which home users simply 
recorded programs for viewing later.

In ruling last year for Grokster and StreamCast, the United States 
Court of Appeals for the Ninth Circuit in San Francisco relied on the 
Sony decision, finding that the file-sharing software had possible 
noninfringing uses. Because the software operates in a decentralized 
way without using a central computer, the appeals court found, 
Grokster and StreamCast could not track users and had no direct 
knowledge of any specific instance of infringement.

The Supreme Court on Monday held that the appeals court had 
misapplied the Sony decision by focusing only on the technology, 
without regard to the business model that the technology served.

"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," Justice Souter wrote.

Movie and music industry executives hailed the decision. "If you 
build a business that aids and abets theft, you will be held 
accountable," said Dan Glickman, chief executive of the Motion 
Picture Association of America, the lobbying organization for the 
major Hollywood studios. BMI, representing more than 300,000 
songwriters and composers, called the decision "good news indeed for 
the creative community whose work has been blatantly infringed."

The movie and music industries had warned that file sharing was 
hurting them financially, and could ultimately inhibit the creation 
of content. The music industry has blamed song-swapping over the 
Internet for its decade-long sales slump.

While movies and television shows are more difficult to trade online 
because of the size of their files, technological advances are making 
that easier and threatening the rich source of cash that DVD sales 
have become for the studios.

  On the other hand, groups including the American Civil Liberties 
Union, Consumers Union, the Consumer Electronics Association and 
other elements of the computer and technology industries warned the 
court that too broad a rule of contributory copyright infringement 
would stifle innovation if there was a possibility that consumers 
might put a product to an infringing use.

It was clear from the opinion,  Metro-Goldwyn-Mayer Studios Inv. v. 
Grokster Ltd., No. 04-480, that the justices had taken note of that 
argument and tried to draw a line that would protect both copyright 
holders and innovators. The court identified the line as "inducement" 
- deliberately urging consumers to make illicit use of the product or 
showing them how it could be done.

"Mere knowledge of infringing potential or of actual infringing uses 
would not be enough here to subject a distributor to liability," 
Justice Souter said. He added: "Nor would ordinary acts incident to 
product distribution, such as offering customers technical support or 
product updates, support liability in themselves. The inducement 
rule, instead, premises liability on purposeful, culpable expression 
and conduct, and thus does nothing to compromise legitimate commerce 
or discourage innovation having a lawful promise."

James Gibson, a professor of intellectual property and computer law 
at the University of Richmond School of Law, applauded what he called 
a balancing act between artistic creators and technological 
innovators.

By putting so much weight on proving companies' bad behavior, he 
said, the decision could create more legal expenses and 
unpredictability for technology companies. At the same time, he 
added, it should provide peace of mind to creators of technology that 
could be used for both legitimate and infringing uses.

But several technology advocates expressed concern, saying innovators 
would now be saddled with the befuddling notion of "intent." Matthew 
Neco, StreamCast's general counsel, said the ruling turned Hollywood 
and the recording industry into "thought police."

Michael Petricone, vice president for technology policy at the 
Consumer Electronics Association, said that without clear guidelines 
from the court on what a company must do to avoid being held liable 
for contributing to copyright infringement, "the legal clarity has 
decreased and the risk of litigation has increased."

  Attorney General Alberto R. Gonzales said he was pleased the court 
had "determined that those who intentionally induce or encourage the 
theft of copyrighted music, movies, software or other protected works 
may be held liable for their actions." The Bush administration joined 
the argument in support of the studios.

While the court's judgment was unanimous, the justices did not share 
the same view of how useful the Sony precedent remained after more 
than 20 years of changing technology. A concurring opinion by Justice 
Ruth Bader Ginsburg, which Chief Justice William H. Rehnquist and 
Justice Anthony M. Kennedy joined, suggested that the Sony case's 
reference to "substantial noninfringing use" was too easily 
misunderstood by lower courts and might have to be tailored for 
different types of technology.

The file-sharing software might be used to swap large numbers of 
noninfringing files, Justice Ginsburg said, but even a big number 
would be "dwarfed by the huge total volume of files shared."

Justice Stephen G. Breyer, in a concurring opinion also signed by 
Justices John Paul Stevens and Sandra Day O'Connor, said the Sony 
decision had basically achieved its "innovation-protecting objective" 
and struck the right balance between protecting copyrights and 
technology. It should be retained, he said.

Linda Greenhouse reported from Washington for this article and Lorne 
Manly from New York. Jeff Leeds and Tom Zeller Jr. contributed 
reporting.
 
 
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