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Court expresses concerns over stifling innovation in file-sharing case

WASHINGTON—In the most important copyright case in two decades, the Supreme Court appeared skeptical Tuesday of letting entertainment companies sue distributors of the software that allows people to illegally download copyrighted songs and movies for free over the Internet.

Four of the nine justices expressed specific concerns during Tuesday's arguments that such suits could stifle technological innovation.

Justice Stephen Breyer cited the printing press, the Xerox machine and the videocassette recorder as initially controversial technologies whose later revolutionary impacts might never have been realized if inventors had faced lawsuits over possible illegal uses. Justices Anthony Kennedy, David Souter and Antonin Scalia worried about a chilling effect on innovators if the court allowed companies like Grokster, which provides such software, to be sued for how others used their inventions.

"What I worry about is the suit that just comes right out of the box as soon as a company starts," Scalia said.

The closely watched case, MGM v. Grokster, pits the titans of Hollywood against Silicon Valley and the high-tech industry. The Supreme Court's decision, which probably won't come until the end of June, could have broad implications for both sectors.

The entertainment industry argued it is losing billions of dollars as sites like Grokster surge in popularity as technological advances allow thousands of songs to be stored on portable players such as Apple's iPod. The industry said that at least 90 percent of Grokster's downloads—approximately 2.6 billion a month—are of copyrighted songs and movies, which users obtain illegally for free. Donald Verrilli Jr., the attorney representing the entertainment industry, called the software "an intentionally built infringement machine."

Several justices on Tuesday questioned the entertainment industry's arguments and five specifically raised the possibility of sending the case back to a lower court for trial on the core issues. There has been no trial yet as both sides sought to have judges resolve the case based on court filings.

The companies—Grokster and StreamCast Networks—dispute the industry's statistics and argue there is enough legal use of their services to allow them to continue operating. Their attorney, Richard Taranto, asked the justices why peer-to-peer file sharing should be singled out when personal computers, modems and other technologies also facilitate the illegal duplication of copyrighted songs and movies. The entertainment industry is backed in the case by the federal government and the attorneys general of 39 states.

Tech firms such as Intel, their trade associations and groups of computer scientists, venture capitalists and intellectual property experts have weighed in on the side of Grokster and StreamCast, saying that suits against file-sharing software distributors would discourage inventors.

They warned the court against altering guidelines it set in a narrowly decided 1984 case, Sony v. Universal City Studios, about the liability developers have for the potential misuse of their products. Those rules have become known as "the Magna Carta of the technology age" because they laid the legal groundwork for the technology boom that began in the 1990s.

Lower courts in California have absolved Grokster and StreamCast, which feature the Morpheus file-sharing software, of liability when people use their software to download copyrighted music or movies from the computers of other people. The lower courts made a distinction between Grokster and StreamCast and the services offered by Napster, which was effectively shut down by the courts in 2001 for copyright infringement.

Napster, the pioneering file-sharing service, controlled a central index of songs available for downloading and knew that copyrighted material was available for free downloading, the court ruled. Grokster and StreamCast operate a decentralized system that simply connects people and their computers, with no "substantial" participation in any illegal downloading.

The lower court rulings relied in part on the Supreme Court's 1984 ruling, which found that Sony, the maker of the Betamax VCR, was not liable if its product was used to violate copyrights if it also was "capable of substantial non-infringing uses."

Grokster and StreamCast have based their case in good part on that earlier ruling. Breyer suggested Tuesday the 1984 ruling was a good one.

"The country seems to have survived that standard," Breyer said. "This is innovation."

But Justice Ruth Bader Ginsburg said the 1984 decision was not as clear as Grokster said it was. And Scalia said the court would not decide the case based on past precedent.

Souter asked Taranto, the attorney for Grokster and StreamCast, "Why isn't this a case of willful ignorance?" when the companies argue they don't know what files are being shared by its users.


(Puzzanghera reports for the San Jose Mercury News.)


(c) 2005, Knight Ridder/Tribune Information Services.

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