Supreme Court: Companies Can Sue File-Sharing Networks

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<p>Supreme Court rules Internet file-sharing services can be held responsible for music theft</p>

<p>Monday, June 27, 2005 </p>

<p>BY HOPE YEN
ASSOCIATED PRESS</p>

<p>WASHINGTON - Internet file-sharing services will be held responsible if they intend for their customers to use software primarily to swap songs and movies illegally, the Supreme Court ruled Monday, rejecting warnings that the lawsuits will stunt growth of cool tech gadgets such as the next iPod. </p>

<p>The unanimous decision sends the case back to lower court, which had ruled in favor of file-sharing services Grokster Ltd. and StreamCast Networks Inc. on the grounds that the companies couldn’t be sued. The justices said there was enough evidence of unlawful intent for the case to go to trial. </p>

<p>File-sharing services shouldn’t get a free pass on bad behavior, justices said. </p>

<p>“We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by the clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties,” Justice David H. Souter wrote for the court. </p>

<p>At issue was whether the file-sharing services should be held liable even if they have no direct control over what millions of online users are doing with the software they provide for free. As much as 90 percent of songs and movies copied on the file-sharing networks are downloaded illegally, according to music industry filings. </p>

<p>The entertainment industry said it needed protection against the billions of dollars in revenue they lose to illegal swapping. Consumer groups worried that expanded liability will stifle the technology revolution of the last two decades that brought video cassette recorders, MP3 players and Apple’s iPod. </p>

<p>Companies will have to pay music and movie artists for up to billions in losses if they are found to have promoted illegal downloading. </p>

<p>Two lower courts previously sided with Grokster without holding a trial. They each based their decisions on the 1984 Supreme Court ruling that Sony Corp. could not be sued over consumers who used its VCRs to make illegal copies of movies. </p>

<p>The lower courts reasoned that, like VCRs, the file-sharing software can be used for “substantial” legal purposes, such as giving away free songs, free software or government documents. They also said the file-sharing services were not legally responsible because they don’t have central servers pointing users to copyright material. </p>

<p>But in Monday’s ruling, Souter said lower courts could find the file-sharing services responsible by examining factors such as how companies marketed the product or whether they took easily available steps to reduce infringing uses. </p>

<p>“There is substantial evidence in MGM’s favor on all elements of inducement,” Souter wrote. </p>

<p>In the closely watched case, supporting the effort to sue the companies were dozens of entertainment industry companies, including musicians Don Henley, Sheryl Crow and the Dixie Chicks, as well as attorneys general in 40 states. </p>

<p>About 20 independent recording artists, including musician and producer Brian Eno, rockers Heart and rapper-activist Chuck D, supported the file-sharing technology to allow for greater distribution of their works. </p>

<p>Monday’s ruling gives the entertainment industry another legal option to the more costly and less popular route of going directly after millions of online file-swappers believed to distribute songs and movies illegally. </p>

<p>It’s unclear how much the decision will actually deter the widespread problem of piracy since software programs created abroad won’t be subject to the tougher U.S. copyright laws. Still, analysts say the court’s stern rebuke should provide a boost to many file-sharing services that offer legal downloading for a fee. </p>

<p>Industry observers have said a ruling against Grokster could also prompt stiffer enforcement from European regulators, who were watching the case for guidance on tackling copyright questions in their countries. </p>

<p>Recording companies in the United States have already sued thousands of individual users; at least 600 of the cases were eventually settled for roughly $3,000 each. </p>

<p>The case is Metro-Goldwyn-Mayer Studios v. Grokster, 04-480.</p>

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<p>It’s about time.</p>

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<p>This is a travesty of a ruling. This effectively overturns the Sony ruling from the mid-80s and will have a chilling effect on technological innovation. Now companies will have to think VERY carefully before introducing products like Ipods, etc… because of the possiblity that the overzealous music industry will sue them and prove in court that they intended to capitalize on illegal activities (which wouldn’t honestly be that hard - eg, 90% of mp3’s are illegal, therefore they designed this player to take advantage of this illegal trade).</p>

<p>I’d rather never have any new music or movies than have Hollywood dictating technological standards so they can extort maximal amounts of money from consumers. I’d rather see everyone in the entertainment industry go unemployed than have them dictate the pace of technological innovations via lawsuits. Speaking strictly for myself, I have stopped buying DVDs/CDs simply because I don’t want any of my money going towards Hollywood’s wrongheaded legal and legislative efforts.</p>

<p>Ironically, this won’t have much, if any, effect, since P2P applications and other forms of file sharing aren’t (comparitively speaking) that hard to code and will always remain online, even if only on overseas servers where there effectively is no law. Not to mention that the file-sharing technology that just got legally nuked was already well past its prime - Bittorent has long been the best and most efficent way to mass distribute content.</p>

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<p>I wonder what the effect will be on technologies like CD burners. In many ways, there is not much value to a digital version of a song - you can only play it on your computer at home (at least pre-ipod) and not in your car or whatever. While college students will turn on the computer for music, a lot of adults will turn on their stereo systems. There is also the concern (esp. with so many computer viruses) about purchasing the music legally (such as through itunes), but then losing it if your computer gets a virus and needs to be reformatted. CD burners, IMO, change all of that. </p>

<p>I don’t support illegal downloading; I think it is vastly different from taping a show or making a tape of a song for your friend. That doesn’t mean I like these rulings or think that there’s a better way to go about the problem. Much of this is simply because most people just don’t want to pay $16.99 for a CD with two good songs and 10 lousy ones. The music industry (and music stores) have helped to create their own downfall by not using the technology to help their businesses.</p>

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[quote]
Much of this is simply because most people just don’t want to pay $16.99 for a CD with two good songs and 10 lousy ones.

[quote]
</p>

<p>This is not a new issue; goes back to the 1950s with the introduction of the LP, especially once the record companies got into the practice of issuing a large number of LPs by popular singers and bands. Back then, singles (45s) of the most popular songs were usually widely available but if you wanted a record of a not-as-popular song, unless you were an electronics nut, there wasn’t much you could do about objecting to the practice, except to avoid buying LPS. Nowadays, however, people who want to get music without having to pay for it have ways to do it, while using the above argument (which isn’t totally without basis) to justify their actions. (And, of course, what’s “good” and what’s “lousy” is open to argument.)</p>

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<p>There are people like me who listen to imported music and movies. Why should I pay $50 (CD + import + shipping/handling) for music that I enjoy when I can just download it from P2P software?</p>

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<p>People can still borrow discs and save them to their computer…this was a bad ruling… my recommendation, get a harmonica and boycott the recording industry for six months.</p>

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<p>DadofSam: completely agree. </p>

<p>As I said though, the music industry has not used the technology to its advantage. I would happily pay for a customized CD at a music store - and I can’t imagine how doing the itunes -> CD thing would be more expensive than the current way of selling CDs in stores. They could reduce the need to stock so many CDs; instead, they could have the more popular ones as they are today and custom-make the others. It would reduce stock and the required square footage of a store… just an idea, but I can’t understand why the music industry never thought to beat downloaders at their own game. There is so much potential to increase the service aspect of music sales and to reduce the need (as stated earlier) for stock & sq. footage… </p>

<p>While I don’t believe that there is moral justification for the wholesale illegal downloading, I do think that the music industry has really lost its right to complain too much. It’s like the Post Office complaining that people aren’t sending as many letters with the advent of email and wanting to tax emails (actually happened, for those of you who don’t remember). Read the writing on the wall, folks. It’s been apparent for years that the internet is quite powerful and will change many businesses.</p>