June 20, 2005 8:11 AM PDT

Justices to rule on fate of file swapping

Perhaps as soon as this week, the U.S. Supreme Court will rule on the future of file swapping, in one of the most closely watched legal battles of the year.

With implications that could ripple from Hollywood studio gates to executive suites of the biggest Silicon Valley companies, the case has drawn an impressive list of participants. Groups ranging from state attorneys general to the Christian Coalition all have weighed in, promising near-apocalyptic consequences if the court ignores their advice.

At issue is how much responsibility technology companies have for the actions of customers who use products to break copyright laws. Peer-to-peer file swapping is the heart of the issue, but the court is addressing a delicate legal balance between copyright interests and technological progress that has lasted for two decades.

The court did not rule on the issue Monday morning, one of only a few days left in the month during which it is scheduled to release decisions. The next day slated for major rulings is Thursday.

"It's been 21 years since the last case of this nature reached the Supreme Court," said Raymond van Dyke, a Washington, D.C.-based copyright attorney. "It shows the change in technology since then, and is an indication that some new directive may be needed."

Indeed, the case, pitting Hollywood studios and record labels against file-swapping companies Grokster and StreamCast Networks, is widely viewed as one of the most critical moments for technology and copyright-based businesses in years.

At issue is a series of lower court decisions that have enraged studio and label executives by saying that file-swapping companies such as Grokster are not legally liable for the widespread piracy that happens on their networks.

The most fundamental rules of economic fair play are at risk if file-swapping networks are allowed to operate as is, those companies say.

"Shall we keep in place legal protections that promote the free market, or shall we tear down those protections in such a way as to allow the black market to prosper and dominate?" Motion Picture Association of America Chief Executive Officer Dan Glickman asked in a speech on Tuesday. "These (peer-to-peer software) companies exploit content and facilitate infringement on a massive, global scale."

The studios and record labels have proposed a new standard for review, under which any company whose business is "predominantly" devoted to facilitating copyright infringement should be held liable for their customers' actions.

For their part, technology companies well beyond the peer-to-peer world deem this proposal a threat to their businesses.

Intel, venture capitalists, consumer electronics companies and more all say that the 21-year-old Supreme Court ruling on Sony's Betamax, which made VCRs legal to sell, should be maintained. That ruling said that products with "substantial noninfringing uses" could be sold without fear of legal liability.

"It's not a coincidence that the time since then has been a time of really unprecedented growth in technology companies," said Hummer Winblad venture capitalist Hank Barry, who served as chief executive officer at the original Napster for more than a year.

At the one-hour hearing on the issue in March, justices showed some indication that they were sympathetic to both sides' arguments.

Several showed little inclination to make it easier for copyright-based companies to wield influence, in the form of pre-emptive lawsuits, over the direction of technological innovation.

"What I worry about is the suit that just comes right out of the box, as soon as the company starts up," said Justice Antonin Scalia.

Yet the justices also showed little sympathy for arguments that the file-swapping companies should bear no responsibility for the copyright infringement that their products have enabled.

If companies can deliberately turn a blind eye to piracy, then "unlawfully expropriated property can be used...as part of the startup capital for (a) product," said Justice Anthony Kennedy. "From an economic standpoint and a legal standpoint, that sounds wrong to me."

The court is slated to rule by the end of June, but the decision could come on either of the Mondays or Thursdays remaining in the month.

7 comments

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p2p is what computers were build for.
I can see both sides, but I feel that when I buy a record,(or what ever) It's mine & I can do with it ever I want to.
I can let a friend make a copy of it, if I wish.
In a way the movies,& record co. or getting free addvertizement.
Posted by Earl (60 comments )
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I feel I deserve...
Unfortunately your "feelings" don't count for crap in legal arenas.
Certainly you can see the difference between copying a CD for your friend and posting in on the internet where the entire world can copy it. If the latter were "fair use", then each CD would sell only 1 copy before being posted for everyone else to copy for free. Given the costs of producing music that single CD would cost a very large sum of money and nobody would be able to afford it unless they subsequently charged those copying a fee to recoup their outlay cost at which point they would have crossed over into commercial piracy - and no argument can me made for the legitimacy of that model.
All of which has nothing to do with the legality of P2P infrastructure... Though your comments give mucho credence to the entertainment industry's contention that P2P is the problem, not a legitimate tool.
I don't feel that P2P should be outlawed and I do feel the industry is overstepping reasonable use at every step, but we need to be careful we don't do the same if we wish to keep a credible claim for our rights.
Posted by skeptik (590 comments )
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What if HAMMER manufacturers...
What if HAMMER manufacturers could "...turn a blind eye..." to the potential "illegal-uses" of their products..? What CHAOS would ensue..?

Oh, wait... MOST manufacturers CANNOT be held accountable for the "...illegal uses" of their products, ...IF those products also have "legitimate uses".

I guess we will see if the "courts" still, in any way, represent US ("...the people"), or if they really are merely more "yes-men" for the MEGA-MONEY INTERESTS.
Posted by Had_to_be_said (384 comments )
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We have here is.........
greedy RIAA and MPAA not getting their $$$$. It not the P2P servers fault. They only provide the service. How it is used should not rest on them. If we are going to place blame on things like P2P then we need to look at other services out there that are being used unlawfully like the Cellar Phone services. They are used to traffic drug sells so let shut them down for allowing that to happen across their service. Lets shut down the auto manufactory for building transportation devices that are used to transport illegal goods across the country. I hope you see where I going with this. There are answers to most all problems. Maybe groups like the RIAA and the MPAA need to get their customers to lower prices on their products. To start advancing their technology to prevent piracy. So dont blame advanced technology as the problem for piracy. Blame the one that are still in the dark ages. There is still one advantage that the RIAA and the MPAA has is that the quality of their customer products are better than what you can download off these P2P servers.
Posted by (22 comments )
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MPAA in the darkages
I went to the MPAA website and I looked under Anti-Piracy. When I said in my last post about these groups in the darkages. Well here some proof. On the MPAA site it state this. "Anyone with information on suspected video piracy operations is urged to call the MPAA at 1-800-NO-COPYS (1-800-662-6797). Callers who provide information that leads to the arrest and conviction of persons engaged in video piracy may be eligible for a reward. A separate reward will be paid to the first person who provides the location of a pirate video lab. The pirate lab must consist of 30 or more VCRs at one location used to produce unauthorized copies of MPAA member company motion pictures."..... VCRs??? these day finding VCR tapes with movies are getting harder to find. We are in the DVD error now. VCRs is darkage products. There are DVD burners now. This surpport what I said in the last posting.
Posted by (22 comments )
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