June 27, 2005 10:09 AM PDT

The Supreme Court's ruling against P2P

On Monday morning, the Supreme Court ruled that peer-to-peer companies could be held liable for the widespread copyright infringement of their users. It's bad news for file-swapping services and, maybe, for the broader technology industry.

Here's a rundown of the key points and of what it means to consumers and Silicon Valley.

What did the court say?
Peer-to-peer companies such as Grokster and Morpheus parent StreamCast Networks can be sued and held legally liable for the copyright infringement of the people using their software, if the companies actively encourage that infringement.

Who was involved?
The suit was originally brought by movie studios (represented by the Motion Picture Association of America), record labels (represented by the Recording Industry Association of America) and music publishers and songwriters.

The defendants were StreamCast Networks, which distributes the Morpheus software, and Grokster.

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What happens now?
The case will go back to the Los Angeles trial court, where the judge will be bound by the Supreme Court's analysis of the issues. StreamCast Networks executives say they still expect to be able to win the case in a full trial, however.

Are other file-swapping companies in danger?
Yes. The court made it clear that any company that jumped into the role that Napster once filled, knowingly providing a home for widespread copyright infringement, is at risk of being held liable. The test will be whether they actively and knowingly encouraged that piracy, however.

What about programs like instant messaging and e-mail? People use those to trade copyright files.
While it's true that e-mail and IM can be used and often are used for illegal purposes, Microsoft, AOL and other mainstream companies that produce this type of product tend to bend over backward to avoid any hint of encouraging copyright infringement. Under this ruling, there is no immediate sign that they should be at risk.

Any company that markets its instant-messaging service as a way to "exchange free music," or something similar, might want to think twice, however.

What about other technology companies? Is Apple Computer's iPod still legal?
The court made it clear that they were most concerned about companies that actively encourage copyright infringement. What that means isn't yet clear.

Some analysts say that companies that don't go as far as peer-to-peer providers in enabling piracy should be fine. But some consumer electronics companies say the decision does raise the possibility of having to defend their new technologies against expensive litigation.

What does the ruling mean for me?
If you're an average computer user, not much in the short run. Courts have generally said that swapping copyrighted works is not legal. Record labels and movie studios have been suing individual computer users for copyright infringement for more than a year now, and they're unlikely to stop anytime soon. If you're making copyrighted movies or music available for download online, you're still at risk of drawing a lawsuit.

The decision could drive many of the existing commercial file-swapping companies out of business, however.

Wasn't Kazaa part of this case at some point?
Yes, the Kazaa software was part of the original lawsuit, which was filed in late 2001. That software was sold in early 2002 to Australia-based Sharman Networks. The copyright holders brought Sharman into the case later, but because of jurisdictional disputes, the Kazaa portion was left in the lower court.

Will they (Kazaa, eDonkey, BitTorrent and so on) still be legal to download?
Downloading the software itself isn't illegal. As long as the companies want to distribute the software, there's nothing in the court ruling that says consumers themselves can't download it. However, using the software to trade copyrighted songs, movies or software remains illegal in the United States.

All can be used for noninfringing uses, such as distributing open-source software or noncopyrighted works. BitTorrent, in particular, has been widely used for distribution of open-source software.

That said, today's court decision may ultimately make it more difficult to get some file-swapping software.

Why is this so important to me? I don't download movies or music online.
Grokster wasn't just about file swapping, and this ruling was viewed by some as one of the most critical technological decisions in the last 20 years. That's because it threatened to undo a Supreme Court balance struck in 1984, which allowed the Sony Betamax videocassette recorder to be sold without liability, even though it could be used to make copies of copyrighted works.

That case was grounded by the idea of "substantial noninfringing use," which essentially said that any technological product that could be used for legal purposes could be sold, even if it could also be used to infringe copyright. That's protected a huge range of digital products, from the CD burner to the iPod to the personal computer itself.

Intel and other companies argued that new companies and products could be severely undermined if the Betamax decision was changed substantially.

So is the Betamax approach a thing of the past?
Not at all. The court said that the "substantial noninfringing use" standard was still in place--but that a company could lose its protection if it actively encourages copyright infringement.

Can Congress do anything to change the result?
In theory, yes. The Supreme Court based its opinion on a reading of previous law and existing copyright statutes. Congress could change the laws if it wanted to have a substantially different outcome. Technology lobbyists say they are still digesting the ruling and will likely wait to see how lower courts interpret this decision before seeking any new legislation.

Do you have questions that haven't been answered? Send them to us, and we'll try to add the ones we can answer to this list.

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Protocol needed for communicationg permissions
What is needed is a protocol that allows the user to obtain information on allowed use of files. So for instance, if a file is allowed to be redistributed by a GPL or Creative Commons type license, then the user would be able to obtain the info by, say, looking at the file properties in the serach results on a P2P client, or perhaps request the permisions by right clicking a link to the file on the web.

Such a protocol would allow P2P applications and search engines to provide additional filtering options in searches so users can limit searches in advance to things that are legal to copy or to redistribute etc. Then the vendors would be able to show that they are not encouraging copyright infringement, but rather encourage users to look for legal files and provide the tools.

Other info that can be provided through such a protocol is copyright owner's contact info, which would allow copyright owners who don't wish to make their stuff freely redistributable to benefit from wider access to their work, and would reduce the costs of obtaining licenses for reusing copyright works by enablinging those who need to use such work to limit their searches to works whose owner's can be contacted.

Of course existing authentication protocols can be used to authenticate the person giving the permisions.

Of course it is possible to place an illegal copy for download with forged license, but then this is risking not just a few thousand bucks for settling it with the RIAA/MPAA, but also a few years in jail...

The greatest benefit of such a protocol would be that if the public learns to search for stuff with permisions, creators would be encouraged to release some of their stuff with such permisions so they can be included in search results.
Posted by hadaso (468 comments )
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