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Sunday, March 27, 2005
Supreme Court case pits tech innovation vs. Hollywood's rights

Silicon Valley and Hollywood face off before the Supreme Court on Tuesday in a closely watched case that could determine if technologies like TiVo and the iPod are developed in the future.

At issue in MGM vs. Grokster is whether the makers of file-sharing software should be held liable when people use their products to illegally download copyrighted music and movies.

The court ruled in a 1984 case involving the Sony Betamax videocassette recorder that as long as a technology has a substantial legitimate use, manufacturers cannot be found liable for copyright violations committed by people who use their products. As music, movies and other entertainment became so many 1s and 0s easily reproduced at the touch of a button, the Betamax standard allowed companies to develop CD burners, DVD players and other technologies without fear of being sued every time a customer makes copies of a song or TV show.

Now the entertainment industry wants to change the rules of the game. It has asked the Supreme Court to revise the Betamax standard so that only companies whose technologies' ``primary use'' is legitimate can be shielded from being hauled into court.

The distinction may sound trivial, but Silicon Valley companies say it could jeopardize their ability to create the next big thing.

That's because no one knows exactly what consumers will do with any new technology. If companies risk being sued for developing, say, the next iPod, they might choose to play it safe, according to Lawrence Lessig, the Stanford University law professor who has written extensively about copyright in the digital age.

``The practical effect of the rule that they're trying to get the court to adopt would be to impose extremely high costs on innovation,'' said Lessig.

Jason Krikorian, co-founder of San Mateo's Sling Media, agreed.

``It's very difficult to guess how consumers are going to use the product. People are very creative. I just think it's an undue burden on entrepreneurs,'' said Krikorian, whose company is making a device that lets consumers watch television programs from anywhere with an Internet connection.

With the Grokster case hanging over their heads, small companies like Kaleidescape in Mountain View now have their lawyers peer over their engineers' shoulders.

Kaleidescape Chief Executive Michael Malcolm said the company's attorneys advised changing the design of its home entertainment computer server, which stores thousands of movies, so that it would be impossible to copy rented or borrowed DVDs.

``My fear is if a company is faced with having to carry on a long litigation just to demonstrate that it has done everything it can to prevent infringing uses, it's going to kill most companies that would be innovating,'' said Malcolm.

Venture capital firms have already begun to avoid certain types of investments deemed too legally risky, said Hank Barry, a partner at VC firm Hummer Winblad Venture Partners who served as the CEO of the original Napster.

``Not only at the venture level, but at the entrepreneurial level, what this has done is make people very reluctant to invest in these sorts of technologies,'' said Barry. ``The problem is that when you're in a start-up, even if you're right, it doesn't matter. Because you can't afford to litigate. And if you're an investor, you don't want all your money to go to litigation.''

The entertainment industry rejects the idea that it is trying to quash innovation, saying it just wants to hold responsible file-sharing services whose main business is to profit from the illegal downloading of other people's music and movies.

``What we are trying to do here, we're trying to set some standards that encourage responsible behavior of citizens in a responsible society,'' said Dan Glickman, president and chief executive of the Motion Picture Association of America. ``You can't get something for nothing.''

Entertainment-industry attorneys also note tech companies could avoid liability by taking technological measures to halt piracy.

But Donald M. Whiteside, Intel's director of technology policy, worries that other companies could be sued for enabling copyright infringement through file-sharing services.

``We know that everyone who's a peer-to-peer user is using a PC,'' said Whiteside. ``Sixty million people aren't accessing it through teleportation. That's what really brings this home for us.''

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