Online business Toolkit

Grokster, the Supreme Court, and us

John Borland CNET News

Published: 28 Jun 2005 17:20 BST

On Monday morning, the US 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.

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 email? People use those to trade copyright files.
While it's true that email 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.