Saying that enough evidence of unlawful intent existed to let the case go to trial, the U.S. Supreme Court sent MGM v. Grokster, StreamCast back to a lower court today. The unanimous ruling held that peer-to-peer file-swapping networks can be sued if the networks are used for infringement and if they intend for themselves to be used that way.
"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," wrote Justice David H. Souter for a unanimous court.
The high court rejected arguments that suing P2P companies for copyright infringement would stifle the growth of new entertainment technologies such as iPod and other portable digital music and movie players. The justices also rejected another critical argument on Grokster's behalf: the precedent of the so-called Betamax ruling, Sony v. Universal, that found that manufacturers were not liable for how consumers used their products.
Souter's opinion shot down the 9th U.S. Circuit Court of Appeals, which ruled for Grokster and upheld a lower court last August, in a case in which Hollywood sued Grokster and StreamCast, the parent of P2P network Morpheus, for copyright infringement.
"It is enough to note that the 9th Circuit's judgment rested on an erroneous understanding of Sony," Souter wrote. "But nothing in Sonyrequires courts to ignore evidence of intent if there is such evidence, and the case was never meant to foreclose rules of fault-based liability derived from the common law."
Titan Media counsel Gill Sperlein, whose company has fought a quiet behind-the-scenes battle to stop its gay adult videos and films from widespread distribution on P2P networks, said the Supreme Court "did a good job" with the Grokster ruling.
"Rather than blindly following the earlier [Sony v. Universal] ruling," Sperlein said, "they looked at the practical aspects of this and saw that the facts make it different from Sony, the sheer mass of infringement going on, and the peer-to-peer companies profiting from it.
"The court also saw there's no practical way to go after the direct infringers in order to stop this kind of infringement which could create serious problems with the artistic and creative development," he continued. "It's certainly not going to inspire people to produce. I think [the high court] looked at it practically and came up with a solution that works."
Sperlein said the ruling would not change Titan's strategy, in which they approach an infringer's Internet service provider and try to convince the ISP to deal with the individual infringers quietly, without the kind of loud court filings the Recording Industry Association of America has become infamous for pursuing.
He also said the ruling could end up provoking talks and common solutions between the entertainment industry and the P2P world that might forestall a full trial on the matter. "If this ruling has the practical final solution of the P2P companies implementing some sort of measures to prevent or reduce infringement, then we're certainly going to benefit from that," he said. "And if that'll require input from producers, we'll be ready with that. If it's going to continue to exist, I don't see how they can limit infringement without the producers being involved at some level."
"I think this is a horrible decision on technology and innovators," said Cindy Cohn, an attorney with Electronic Frontier Foundation, which represents StreamCast in this case. "It's a multifactor, murky [decision] that will require looking into every single email you ever sent, every single design decision you ever made, for every new innovation you do, if somebody decides to sue you for it. I think that's going to create a very chilling effect on innovation."
Perhaps unsurprisingly, the music and film industries reacted promptly and affirmatively to the Court ruling. "The most important message from today's historic decision is that progress and innovation do not have to come at the expense of recording artists, songwriters, and the people who make their living in the entertainment industry," said Warner Music Group chief executive Edgar Bronfman in a formal statement.
In a concurring opinion, Justice Joseph Ginsburg, joined by Chief Justice William Rehnquist and Justice Anthony Kennedy, said that even if a large number of files swapped on Grokster and other P2P networks were noninfringing files, that didn't mean the P2P networks were immune to liability for infringing files swapped over those networks.
Justice Stephen Breyer, joined by Justices John Paul Stevens and Sandra Day O'Connor, wrote in another concurring opinion that there is still a "significant future" for noninfringing uses of P2P networks.
"Such software permits the exchange of any sort of digital file, whether that file does, or does not, contain copyrighted material," Breyer wrote. "As more and more uncopyrighted information is stored in swappable form, it seems a likely inference that lawful peer-to-peer sharing will become increasingly prevalent."
Indeed, at least one digital liberties group saw something short of a so-called doomsday scenario many feared if the P2P companies did not prevail. Public Knowledge, the Washington-based digital liberties group, said the Court acknowledged technology alone cannot be the basis of copyright liability, keeping their eye "clearly and unambiguously" on whether the P2P networks intentionally encouraged infringement.
Cohn said StreamCast was still likely to survive back in the lower court, particularly because the Supreme Court may have leaned almost entirely on an old P2P technology, OpenNap, rather than looking extensively at newer P2P-driving technologies that have succeeded it.
Cohn also said the ruling could provoke "a bonanza for litigation lawyers" but it could also help clarify the Court ruling in ways helpful to technology innovators—especially if Congress decides to get involved. "The problem is that it creates a mess that's going to take years to sort out,” unless Congress intervenes, she said.
