Tuesday, June 28, 2005
Supreme Court Rules Against P2P Networks
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A unanimous U.S. Supreme Court ruled on Monday that Internet file-trading networks like Grokster and Morpheus can be held liable when their users copy music, movies and other protected works without permission.
In a decision hailed by the recording and movie industries, the justices set aside a
U.S. appeals court ruling that the peer-to-peer networks cannot be held liable for
copyright infringement because the networks can be used for legitimate purposes as
The case, a suit by major film and music companies against Grokster and Morpheus
parent StreamCast, will now go back to the district court for trial.
"We hold that one who distributes a device with the object of promoting its use to
infringe copyright ... is liable for the resulting acts of infringement by third
parties," Justice David Souter wrote for the court.
Online networks like Grokster and Morpheus allow millions of computer users to copy
music and movies for free from each others' hard drives. Entertainment firms, led by
studio Metro-Goldwyn-Mayer, sued to hold the networks accountable for the trading in
Souter said Grokster and StreamCast never blocked anyone from using their software to
share copyrighted files.
"The argument for imposing indirect liability in this case is ... a powerful one,
given the number of infringing downloads that occur every day using StreamCast's and
Grokster's software," Souter wrote.
The case had been closely watched by the entertainment and technology industries as a
test of copyright law in the computer era. It was considered the most important
copyright case to reach the Supreme Court in more than two decades.
"Today's unanimous ruling is an historic victory for intellectual property in the
digital age, and is good news for consumers, artists, innovation and lawful Internet
businesses," said Dan Glickman, president of the Motion Picture Association of
"With this unanimous decision, the Supreme Court has addressed a significant threat
to the U.S. economy and moved to protect the livelihoods of the more than 11 million
Americans employed by the copyright industries. The Supreme Court has helped to power
the digital future for legitimate online businesses ? including legal file sharing
networks ? by holding accountable those who promote and profit from theft. This
decision lays the groundwork for the dawn of a new day ? an opportunity that will
bring the entertainment and technology communities even closer together, with music
fans reaping the rewards," said Mitch Bainwol, Chairman and CEO of RIAA.
Recording labels and movie studios said copying has hurt their sales. Revenues in the
recording industry have plunged by about 25 percent since file-sharing networks
emerged in 1999, though the industry posted a slight sales increase last year.
Lawyers representing Grokster and StreamCast said they were disappointed in the
ruling and said the decision would just spark a series of lawsuits.
"I think today's Supreme Court decision is going to unleash a new era of legal
uncertainty on America's innovators," said Fred von Lohmann of the Electronic
StreamCast chief executive Michael Weiss said the company would fight at the district
court level. "We are confident it will be proven that Morpheus does not promote or
encourage copyright infringement."
The entertainment industry managed to shut down the first file-trading network,
Napster. The appeals court said Grokster differed from Napster because its software
permits users to share files with one another directly rather than going through a
central computer server.
Industry experts said the decision could have broader implications in the technology
industry and technology companies may appeal to Capitol Hill for more clarification.
Sen. Arlen Specter, the Republican leader of the Senate Judiciary Committee, said the
committee would examine the ruling and its impact on copyright law and innovation.