File traders, studios spar in court

Attorneys for the record industry and the movie studios sparred with lawyers for file-swapping services Morpheus and Grokster in federal court Monday, as each side sought a quick resolution to a pending copyright suit against the popular Internet companies.

Both sides are seeking a so-called summary judgment, or pretrial ruling, in their own favor. If federal Judge Stephen Wilson rules in favor of the file-swapping companies, it could enable them to avoid going to trial altogether, or shield them from parts of copyright infringement claims that could end up costing tens or hundreds of millions of dollars in damages.

Wilson showed little inclination to rule immediately on either side's request, saying that before making an actual ruling, he'd likely release a "speaking order" that outlines his thoughts on the case--a process one attorney likened to completing a "rough draft" of an actual decision.

"That would give me certainty that I hadn't missed something," Wilson told the assembled attorneys. "Some of the things said here were provocative. I'll have to go back and rethink some of my impressions."

The ultimate outcome of Monday's hearing carries considerable weight in the file-swapping world. If Wilson decides in favor of the record companies and movie studios, he could order Grokster and StreamCast Networks, the parent company of Morpheus, to stop distributing the file-trading software for those services, or he could order the services to try to block trades of copyrighted material though their file-swapping networks. The same decision could also be applied to the more popular Kazaa service, child of Sharman Networks, although that company was not part of Monday's hearing.

The movie studios and record companies argue that the new file-swapping companies are no different than Napster, which shut down after a federal court ordered it to block trades of copyrighted material on its service. In their court arguments, they cited numerous examples in which company executives compared their own services to Napster, or indicated they were well aware of the existence of music or movie piracy on the networks.

"This is Napster," said Russell Frackman, the lead attorney for the record companies. "What they provide is exactly what the 9th Circuit Court described" in the Napster lawsuit.

Attorneys for the file-swapping companies sought to distance themselves from Napster, noting that they had far less control over what actually happens on their networks than that company did.

Though Wilson gave slim indication as to how he might ultimately rule in the case, both sides showed cautious optimism.

"I was very encouraged," said Streamcast Networks CEO Steve Griffin. "I was most impressed with Wilson's grasp of the issues."

The "rough draft" decision--or a final decision, if Wilson changes his mind and decides to make a more definitive ruling--could come at any time, although lawyers said it might take a month or more. Wilson is also deciding whether the record labels and studios can add Sharman Networks, which is incorporated in the Pacific Island nation of Vanuatu and headquartered in Australia, to the U.S. federal case.