[opendtv] News: Studios Win Big in Grokster Case

http://www.broadcastingcable.com/article/CA621561.html?display=Breaking+News&referral=SUPP
 


Studios Win Big in Grokster Case

By John Eggerton -- Broadcasting & Cable, 6/27/2005 10:59:00 AM

A unanimous Supreme Court dealt a blow to Grokster and fair-use 
advocates Monday, ruling that companies that create the technology 
for sharing movies, TV shows, and other digital content over the 
Internet may be liable for the illegal content piracy those 
technologies make possible.

"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," the court 
wrote.

It was a big victory for studios and broadcasters. They argued that 
the vast majority of the digital file sharing over peer-to-peer 
computer networks that Grokester makes possible is illegal and 
threatens their business models and survival in the digital age.

Calling it a big win for consumers, Motion Picture Association of 
America Dan Glickman said the case was "a reaffirmation of common law 
in the digital age."

Glickman said that if the court can come to a unanimous decision, the 
movie and tech industries can "come together to power the digital 
age."

California Democratic Congresswoman Diane Watson praised Hollywood's 
win:, adding "I hope today's decision will send a message to all 
pirates that winking and nodding at digital theft will not be 
tolerated any more than theft itself. I am confident that the lower 
courts will carefully apply this well-reasoned opinion in finding 
Grokster and other similar companies liable for actively inducing 
their customers into illegal use of their products."

Mitch Bainwol, chairman of the Recording Industry Association of 
America, said the decision was about "Thou Shalt Not Steal"-citing 
the 10 Commandments decision also handed down by the court--and he 
advised parents to talk to their children about the right way and the 
wrong way to share digital files.

Studios have been pushing for a bill in Congress that would make 
copyright inducers liable. Although the Supreme Court decision seemed 
to mute that effort, the group said it would let the decision 
percolate before deciding how and whether to proceed with that effort.

On the other side of that 9-0 decision, fair use fans, who initially 
characterized the decision as "bad news," were taking some solace in 
the fact that the court sent the case back for a finding of whether 
Grokster had indeed actively induced the infringement.

Gigi Sohn, of fair use advocate Public Knowledge said:

"Today's Court decision in the Grokster case underscores a principle 
Public Knowledge has long promoted -- punish infringers, not 
technology. The Court has sent the case back to the trial court so 
that the trial process can determine whether the defendant companies 
intentionally encouraged infringement.
 
"What this means is, to the extent that providers of P2P technology 
do not intentionally encourage infringement, they are exempt from 
secondary liability under our copyright law.

"The Court also acknowledged, importantly, that there are lawful uses 
for peer-to-peer technology, including distribution of electronic 
files 'by universities, government agencies, corporations, and 
libraries, among others.'

The threat to those noninfringing uses was the same argument Public 
Knowledge used in arguing to get the FCC's broadcast flag rules 
thrown out--also unanimously--by an appeals court earlier this year, 
though that ruling hinged on the fact that the flag--a security 
device to prevent illegal digital file sharing--was a 
post-transmission technology over which the FCC had no jurisdiction.

Peter Jaszi, the lawyer for Public Knowledge and others in their 
brief on the case, argued Monday that the key principle of the Sony 
Betamax case, survived unscathed despite the 9-0 decision.

That principle is that, so long as their technology has a 
noninfringing use, manufactures and distributors are not liable just 
because they make the technology available and are aware that some 
people use it to infringe.

What the Supreme Court said in the Grokster decision, Jaszi asserted, 
was that bad actors would have some level of liability for a 
"purposeful, culpable expression of conduct," (according to Justice 
David Souter's opinion), but not simply for distributing the software 
or knowing it might be used to illegally distribute.

That "purposeful, culpable" standard will now be applied to the facts 
in the case, and as precedent to other cases and "will permit the 
innovation sector to continue to develop and bring to market 
technologies that benefit the consumer," he said.

Consumer Electronics Association President Gary Shapiro saw the 
decision as a clear path to massive legal bills, but an uncertain 
future for technological innovation.

"With this ruling," he said, "the Supreme Court has handed a powerful 
new tool to litigious content creators to stop innovation. Innovators 
must now consider new murky legal rules and potentially overwhelming 
legal costs before bringing their product to market - or even moving 
forward with an innovative idea. It is essentially a 'full employment 
act' for plaintiff's attorneys and a guarantee for further lawsuits."

A federal-appeals court in San Francisco had ruled in August that 
Grokster itself was doing nothing wrong because its file-sharing 
system has legitimate, non-infringing, uses and it was not storing 
illegal files on its own servers. Instead, the system allows swappers 
to trade files stored on their own computers.

Saying broadcasters have to pay for their copyrighted material, NAB, 
which sided with the studios, had argued that shielding companies 
like Grokster threaten broadcasters' ability to offer geographic 
exclusivity for programming.

In a report essentially teeing up this decision, MAGNA Global USA 
media analyst Brian Wieser argued that content providers, even if 
they won, should not just protect their old models of distribution 
through lawsuits and other purely defensive tactics.

Instead, Wieser said, studios should start thinking creatively about 
product distribution for "the day when producers and/or networks are 
forced to provide their content in online, on-demand environments.

Even if the networks don't start looking at new models, he says, 
marketers will need to start thinking of ways to reach the audience 
that will co-opt that model themselves.

If the court agreed with the studios, as it did, that Grokster and 
similar software does violate copyright, it would slow, but not stop, 
the movement toward new tech TV content sharing, said Wieser, and 
"push P2P (peer-to-Peer) file trading further underground toward 
services that are literally and figuratively beyond the reach of the 
law," says the report.

If the court agreed with Grokster, P2P could become a distribution 
mechanism to rival other broadband entrants, like Verizon's VCast 
wireless mobile network or online media portals like Yahoo, said 
Weiser.

Either way, he concluded, marketers need to start planning for the 
"contextual" advertising--think product placement and integrated 
marketing--and direct response models, to reach the younger audience 
that will migrate to new tech TV.
 
 
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