November 7, 2005 12:10 PM PST

Last waltz for Grokster

File-swapping company Grokster has agreed to stop distributing its peer-to-peer software, following a $50 million legal settlement announced Monday with Hollywood studios and record labels.

Along with co-defendant StreamCast Networks, Grokster had been accused by the music and movie industries of contributing to widespread copyright infringement by people who used its software to download songs and films. Monday's settlement comes four months after the U.S. Supreme Court ruled substantially in the entertainment companies' favor.

Under the terms of the agreement, submitted in a Los Angeles federal court Monday, Grokster will immediately stop supporting its file-swapping network, and Grokster's owners will be responsible for paying a total of $50 million in damages to movie studios, record labels and music publishers.

"This settlement brings to a close an incredibly significant chapter in the story of digital music," Mitch Bainwol, CEO of the Recording Industry Association of America, said in a statement. "This is a chapter that ends on a high note for the recording industry, the tech community and music fans and consumers everywhere."

Although a significant step toward bringing the four-year legal case to a close, the lawsuit is not over yet. Grokster's co-defendant, Morpheus parent StreamCast Networks, remains operating, and it has previously indicated that it would continue fighting the case in lower courts.

However, momentum in the legal fight has shifted almost wholly to the entertainment industry's side.

For several years running, lower courts ruled in favor of Grokster and StreamCast, saying the companies were not responsible for their users' actions. The Supreme Court's ruling in June overturned that analysis overnight.

In a surprising unanimous decision, the nation's top court said that companies that deal in file-swapping software--and by extension, any technology company--could be liable for their users' copyright infringement if they had encouraged or "induced" it in any significant way.

"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," Justice David Souter wrote in the court's majority opinion.

That ruling has sent ripples of anxiety throughout the file-swapping world. The distributors of the WinMX software took their program offline a few months later. Executives at Meta Machine, which distributes eDonkey, the most popular file-sharing program, have said they hope to reach a settlement with the music industry, and change their business into a licensed, industry-approved service.

Grokster's future
Grokster's agreement with the entertainment companies could help accelerate that process.

A Grokster attorney declined to provide additional details on the settlement, or specifics on the ultimate future of the company, but said an authorized download service would ultimately emerge.

"The brand will live on," said attorney Michael Page. "It is shut down, but we look forward to launching a licensed, legal new version of Grokster."

A source close to the company said that the file-swapping network's assets would be acquired by Mashboxx, a legal peer-to-peer network supported by the record labels that is close to launching, and which was founded by former Grokster President Wayne Rosso. The new Grokster will essentially be a rebranded version of that Mashboxx service, the source said.

Visitors to Grokster's Web page on Monday were met with a terse explanation of why the software was no longer available, citing June's Supreme Court ruling, and a promise that a new version would come.

"There are legal services for downloading music and movies," the page said. "This service is not one of them."

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Grokster Ltd., StreamCast Networks, file-swapping, file-swapping network, settlement

25 comments

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The RIAA Doesn't Speak For Me
A representative of the RIAA stated that the settlement with Grokster closes a chapter in the history of the recording industry on a high note not only for the recording industry, but for music fans and consumers everywhere. However, the RIAA, and certainly that representative, do not speak for me.

I am a music fan, and I'm a consumer. I even buy CD's and DVD's, because, well, I like having all the packaging and the better quality of sound and video that come with legit products.

However, I do not believe this has ended on any note that I would consider high. The RIAA has been bullying companies and consumers everywhere with the threats of lawsuits, and in thousands of instances, actual lawsuits, often terrifying unwitting defendants into settling their cases by agreeing to pay thousands of dollars for a few dollars' worth of music.

The RIAA represents companies that have, over the past several years, continuously peddled recordings of what I wouldn't even call music. I certainly wouldn't pay money for it, and I haven't. If I don't like it, I sure as heck won't buy it. And, if I did, I wouldn't pay thousands of dollars for it. I am inclined to believe the tactics of the RIAA have been geared more toward trying to make the recording labels SOME money, however little, from products that few if any consumers would actually buy. What's worse is that the artists who were allegedly ripped off by file-sharing aren't getting any of the ill-gotten profits, yet they were the ones who actually created the music the RIAA is coercing people into paying for.

So, when the RIAA says this has ended on a high note for me, they are not speaking for me, and they are committing nothing more than defamation of my character in claiming that I, as a consumer and music fan, agree with and condone their behavior. I am disgusted with them now more than ever, and I hope my bringing this to light will, in whatever way possible, chip away at their credibility, because I believe they aren't credible in the least.
Posted by ljrhodes (9 comments )
Reply Link Flag
RE: The RIAA Doesn't Speak For Me
I totally agree with you. I dont believe that the RIAA has the artists or the consumers best interests in mind. They are out to make a buck and are taking our rights to fair use with it. I believe that this will start a heated debate on Capitol Hill and that maybe someone will finally see what the sleazeballs at the RIAA are really doing.
Posted by whizkidphil2005 (6 comments )
Link Flag
Definitely not for fans
Guess what. When CDs get cheaper than DVDs than I might just
buy a couple. Why does an album cost the same as a movie? Those
four guys in the studio and marketing dept have SO much more
overhead than...say...Harry Potter.

It is amazing that the RIAA is as bad as Big Oil :)
Posted by jeph4e2 (3 comments )
Link Flag
RIAA will spin it, so it looks good
I for one, will never fall for anything the RIAA says.

Anyway, Grokster was crap. I'm not sad to see it go. On with better p2p programs.
Posted by bobby_brady (765 comments )
Link Flag
Stop Stealing...
The RIAA has legitamite claims for everything they do.

Music and Movies are not that expensive everybody has the desire to try and get things as cheap as they can thats normal but when you result to stealing and it is stealing other peoples property and then complaining about it when they persue legal action thats crazy GET A JOB AND BUY THE STUFF!

Im sorry to hear that you are discusted that you STOLE something that you had not intent of paying for.

Are Artisit over paid? Yes, but then again so are football players,basketball plays, baseball players, Congress, the president. CEO's etc, thats just the say way it is.

Sure there are new methods of file sharing coming out all the time but in the end if they are popular enough they will be shut down, as they should be.

Sorry to rant, but its painfully obvious that taking something that you didnt pay for it wrong morally and legally and I know that everyone arguing this point know deep down inside somewhere that they are wrong and there greed is simply overshadowing that morals.

Stealing music/movies is just hurting the people that actually pay for it Ill leave with just one last comment.

Get a life, Get a job, BUY IT!
Posted by jeffosoft (5 comments )
Link Flag
The RIAA will not win this battle.
The RIAA will not win this battle. There will always be another way to share files considering the millions of people that take part in this activity. Already people are using p2l or peer2link (www.peer2link.com) that work using sites such as megaupload.com or yousendit.com. Once the user uploads the file, they receive a link which they can post on peer2link.com. Anyone that visits peer2link.com can download the file with ease. It seems that the RIAA is forgetting that business models DO change, and they need to learn to adapt. Come on, look at how well itunes.com is doing!
Posted by (18 comments )
Reply Link Flag
New Business Model
They are tapping into that new model. Already major record labels have made their music available for downloads. Not all are taking the exact same approach, but most are moving towards the market now.

They did recoil at the initial boom this new market presented them with and they took actions to try to crush it. At this point most of the companies seem to be putting their efforts into promoting this market.

RIAA's purpose is NOT to promote a given market, but to protect the assets and interests of it's member companies. That means they file most of the lawsuits and take on those who are conducting unauthorized and there-for illegal activities.
Posted by zaznet (1138 comments )
Link Flag
Eventually they'll sue Apache
In the end, people would learn how to use HTTP (with search engines) to share files. Then the RIAA/MPAA will sue Apache/Google.
Posted by hadaso (468 comments )
Link Flag
RIAA == STUPID
While the RIAA may think they can win they never will unless they stop treating music buyers as a cash cow. The price of music is rediculous in all formats. I feel no reason to stop DL'ing music. I also have no fear of the RIAA cause the only way they can find my music is to break the law by snooping on my puter and that will get them sued.
Posted by R Me (196 comments )
Reply Link Flag
R Me, Ever Heard of a Search Warrant?
You can't sue for "snooping" when the law comes for you. If the RIAA or its agent gets a search warrant, they cam snoop on your PC, confiscate it and sell it a police auction. Looking forward to the day that people realize that freedom does not mean license to do things that are nothing but selfish.
Posted by pmchefalo (135 comments )
Reply Link Flag
They already won
lol,

They already have and im sure they will thank you for poiting out a new potentinal site to sue.
Posted by jeffosoft (5 comments )
Reply Link Flag
How have they won?
I'm downloading some music right now...
Posted by SoylentJames (4 comments )
Link Flag
Napster-The inside story
I was VP of product development at Napster back in 2000 when the RIAA was trying to shut us down. We pleaded with the RIAA and record labels to do a deal with us and convert our users to a paid subscription model similar to today. We told them about this new technology called Gnutella that required no server and no company to run it, and suggested that it would be better to do a deal with Napster now then to kill us and have Gnutella and its derivatives flourish.

It has taken them 5 years to kill Grokster and they have lost billions in potential revenue in the process. There are still lots of other P2P download systems out there alive and well. Good luck trying to shut them all down.

I wrote a blog on my experiences inside Napster. You can read the inside story at <a class="jive-link-external" href="http://dondodge.typepad.com/the_next_big_thing/2005/10/napster_the_ins.html" target="_newWindow">http://dondodge.typepad.com/the_next_big_thing/2005/10/napster_the_ins.html</a>
Posted by Don_Dodge (64 comments )
Reply Link Flag
The problem with it all
The problem with it all is that the RIAA and the MPAA are the good guys. They are trade groups which represent the companies which hold the copyright to the materials that are currently being pirated using various methods in the internet.

Stealing is wrong, but the music and record companies think that you should pay retail for the same content, regardless of how to acquired it. So, if I download a song with itunes, I pay .99 cents and if I buy the whole album is $12.99. isn't that retail? Where's my jewel case, where's my cover art? Where's my receipt? What if I chance my mind and want something else, how do I return it? Can I return it?

The online shopping experience isn't anything like the real thing. Alot is missing and if they are only providing the raw data and that's it, I shouldn't have to pay retail for it, but since they'll never lower their prices to match the online model, people will continue to pirate their intellectual property.
Posted by thedreaming (573 comments )
Reply Link Flag
What a crock
Do not forget you are paying for a 'lossy' format. The quality is substantially less than a 16bit 44khz POM audio CD. Plus as you say you do not get any case, cover art, inside label details and have no backup. If you lose the file you lose the file. Also it's not easy (If at all possible) to take your song and play it on any other persons audio equipment or computer.

And they want to increase the price? Give me a break. I am all for people staying legal where any actual law is broken. But again people call it stealing when there has been 'no proof' in a court of law yet as to whether it constitues stealing.

When you download a song from P2P or wherever you are making a duplicate of a lossy copy. The argument is that you have 'deprived' the record company and the artists (Cough) of a 'potential' sale.

Who is to say you would have gone down to the record store and purchased it anyhow? Perhaps you wanted to preview the material before deciding. Perhaps you already own the CD, wanted it in MP3 or whatever and were too lazy to rip it (Or did not know how) yourself?

When I record something off the radio am I a copyright 'thief'? I think not.

All these arguments have not played out in an actual court case because the music industry does not wish it to. They would rather sue people who cannot afford to fight and make the pay off to keep it out of court just low enough to discourage people from fighting in an expensive court case and potentially losing against a large faceless corporate machine with deep pockets.

It's easy for them. They do not have to prove anything. Of course we can only hope the recent spate of individuals determined to fight the RIAA in court win and set some precedents.

The RIAA are just a bunch of hired bullies acting on behalf of the major labels who pretend they have nothing to do with it.

And don't even get me going about Sony and their recent hidden DRM 'spyware' and security threat on their recent CD's!

Anyone on the side of the RIAA and the major labels knowsw what side their bread is buttered. I am sorry but anyone who has anything to say that is in their favour I can no longer believe in (Witness previous uneducated poster who seems to think everyone who downloads a copyrighted song from P2P is some jobless bum. I object to being painted with the same brush in that way).
Posted by (2 comments )
Link Flag
Thanks - Industry Shill
Did you print your mantra our of the RIAA manual?
Posted by jimdrim (2 comments )
Reply Link Flag
Shill
Get back in your RIAA box - shill!
Posted by jimdrim (2 comments )
Reply Link Flag
 

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