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MGM vs. Grokster - An Outright Entertainment Industry Win?
June 28, 2005
Thomas Mennecke
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If one were to read the MPAA's or RIAA's press releases, which responded to yesterday's Supreme Court decision, a layperson would in all likelihood believe these trade organizations had achieved a glorious victory over P2P. Indeed, the entertainment industry's propaganda was strengthened by the media's interpretation of events.

Yet little, if anything, has changed over night. No P2P developer's website has changed, no P2P developer has discontinued their software. Some P2P related websites may have a press release regarding the court's decision, but otherwise it is business as usual.

And why not? As Michael Wiess, CEO of StreamCast Networks points out, the Supreme Court did not over turn the lower courts decision.

"Morpheus and Grokster did NOT LOSE today," Michael Wiess told "The verdict did not get overturned. As a matter of fact 3 justices supported our position, 3 did not and the other 3 were neutral. It goes back to trial at the lower court for the facts to be determined—as opposed to the Summary Judgment in which case there was no opportunity to refute what was said."

With yesterday's ruling, the Supreme Court remanded the case back to the lower courts. In addition, the Supreme Court ruled those who distribute a device with the purpose of infringing on one's intellectual property rights are liable for the actions of a third party.

As the case stirs in the lowers courts, the MPAA and RIAA must still prove P2P developers are responsible for the actions of their users - a task that remains elusive.

The disclarity of the Supreme Court's ruling may not make this job much easier for the entertainment industry either.

To get a better understanding of what happened yesterday and what we can expect in the future, we spoke with Fred von Lohmann, EFF (Electronic Frontier Foundation) attorney who argued on behalf of Grokster and StreamCast.

What benefits, if any, are there in today's ruling for P2P developers?

The Court laid out a clear roadmap for how to avoid inducement liability. The message is simple: avoid anything that can be viewed as encouraging, promoting or inducing copyright infringement. Of course, the irony is that virtually every P2P company has already been taking that advice for years. All the allegations against StreamCast and Grokster that the Court focused on in the opinion were about activity that happened years ago, in the 2001 timeframe.

Should prospective P2P developers who are looking to get into the market be wary from today's ruling?

The disappointing thing is that the Court did not clarify any of the difficult legal questions surrounding contributory and vicarious liability. So P2P developers still don't know how far the Sony Betamax case extends, or whether they can be held liable for failing to include filtering or other design features to reduce infringing uses.

Did the RIAA and MPAA have a clear cut victory?

No. The Court rejected most of the more extreme positions that had been pushed by the entertainment industries. In fact, during the oral argument, the entertainment industry lawyer explicitly said that an inducement theory would not be adequate from their perspective.

What is the significance of the following:

"We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties."

What does this mean for Grokster and StreamCast? What can they expect in the lower courts?

This case now goes back to the trial court, which is put in the difficult position of ruling not only on this new inducement theory, but also the other contributory and vicarious liability theories that have always been in the case. The Supreme Court hasn't given the trial court much guidance about how to apply those two traditional theories, and the inducement discussion leaves lots of questions unanswered.

Is this the end or simply another chapter in what will be a lengthy legal battle?

Unfortunately, it is simply another chapter in the legal saga. The Supreme Court was asked to clarify the lines for technology developers. It chose instead to punt on most of the hard questions. So tech companies will be left guessing and litigating for some time to come.

This story is filed in these Slyck News categories
Legal/Courtroom :: Court Rulings/Decisions

You can read the Supreme Court ruling here.

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