Supreme Court Rules P2P Networks Are Liable

Favoring the long-held argument of the movie and music industries that P2P providers were enabling copyright infringement on their file-sharing networks, the unanimous court ruling in MGM vs. Grokster determined that distributors of a multi-purpose “tool” or software should be held liable for infringements committed by end-users of that product.

The Supreme Court ruled that there was sufficient evidence to demonstrate unlawful intent on the part of file-sharing services. The case now will find its way back to the lower courts where file-sharing services across the board can be sued for their contributory involvement in infringement cases.

Today’s decision marks the end of a three-year legal battle between the technology and entertainment industries that was originally struck down by the Ninth Circuit Court of Appeals using the Sony Betamax case, which determined that a new technology’s ability to enable infringement should not outweigh its importance for other, non-infringing uses.

But the music and movie industries took the case all the way to the Supreme Court where Justice David Souter determined that the earlier court decision had misinterpreted the 1984 Sony ruling as saying that any non-infringing use, no matter how minimal, was enough to relieve a company of liability for copyright infringement.

“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,” Souter said in the court’s opinion.

Defendants Grokster and Streamcast Networks (parent company of P2P program Morpheus) claimed in their arguments that while many P2P companies are aware that users employ their software primarily to download copyrighted files, the nature of their decentralized networks do not reveal which files are copied and when.

"Today the Supreme Court has unleashed a new era of legal uncertainty on America's innovators," Fred von Lohmann, of the Electronic Frontier Foundation, said, adding that the decision means that inventors and entrepreneurs will not only bear the costs of bringing new products to market, but also the costs of lawsuits if consumers start using their products for illegal purposes.

The Supreme Court ruling will provide a boost to litigation filed on behalf of movie and record studios against alleged infringers and could even provide legal precedent for any number of cases involving free downloaded music files that compete with pay-and-play services like Apple’s iTunes and other types of digital content delivery.

"Speaking on behalf of the over 27,000 music publishers and songwriters that were represented by the National Music Publishers' Association, we are tremendously gratified by the Court's unanimous decision that peer-to-peer services which promote piracy can be sued,” David Israelite, NMPA president and CEO, said. “Grokster and Streamcast knowingly facilitated piracy on a massive scale.”