March 1, 2005 2:24 PM PST

P2P companies ask high court for help

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Backed by powerful technology groups and a handful of artists, file-swapping software companies on Tuesday asked the U.S. Supreme Court to reject proposals from the entertainment industry that could put them out of business.

Record labels and Hollywood studios, seeking to overturn lower court rulings shielding file-swapping companies, have asked the court to rule that businesses distributing products "predominately" devoted to copyright infringement should be held legally responsible for that illegal activity.

That prospect has drawn staunch opposition across the technology sector. Intel, trade associations representing consumer electronics and software companies, and consumer groups joined the file-swapping companies on Tuesday, asking the court to avoid creating a new legal test they said might stifle technological innovation.

"The ability to create and innovate is a dynamic process and...not every society has achieved the mechanisms and balance and capability to achieve what we've done," said Ed Black, president of the Computer & Communications Industry Association. "It is that delicate balance that content owners are threatening to throw off."

The Supreme Court case is one of the most closely watched issues across the technology and entertainment realms this year, with both sides saying that an unfavorable outcome could be devastating to their respective industries.

At the heart of the case is the 20-year-old Supreme Court ruling that made Sony's Betamax videocassette recorder legal to distribute without liability, despite its use by consumers to record and save copyright movies and TV shows. In that ruling, the court said that companies were allowed to distribute products that had "substantial commercial noninfringing uses."

That ruling has helped protect the introduction of many different products, from computers that can burn CDs to MP3 players like Apple Computer's iPod.

Record labels and Hollywood studios have said they are not trying to overturn that ruling and have no interest in making the iPod or other legitimate consumer products illegal.

However, they say that unlike Sony or Apple, Grokster and Morpheus parent StreamCast Networks have actively built their file-swapping software businesses by encouraging copyright infringement. In their appeal to the Supreme Court in January, the entertainment companies said that companies that have business models predominately supported by infringement should be held liable for their users' actions.

"The thing that distinguishes the Grokster-type systems is that they have very little use for any purpose that is lawful," Ted Olsen, the former U.S. solicitor general who is supporting the entertainment

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