Supreme Court Justices Question Peer-to-Peer Lawsuits

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WASHINGTON -- Technology companies may shy away from inventing new products that could be used to violate copyright laws if the U.S. entertainment industry can sue the distributors of the Grokster and Morpheus peer-to-peer (P-to-P) software packages for their users' actions, some U.S. Supreme Court justices argued today.

During oral arguments in the MGM vs. Grokster case, justices peppered a lawyer for the entertainment industry with questions, saying a move away from a 21-year-old standard on technology and copyright could have major effects on the U.S. technology industry. The Grokster case was the first of two technology-related cases argued before the Supreme Court Tuesday, with the court also examining federal regulation of Internet cable modem service.

Donald Verrilli Jr., representing the music and movie industries in the case, told justices that Grokster and Morpheus distributor StreamCast Networks built their business plans around copyright violations, and the vast majority of files traded with the Grokster and Morpheus software violate copyright law. The Supreme Court's 1984 Sony Betamax ruling exempts makers of technology from secondary copyright liability lawsuits when their technology has "substantial noninfringing uses," but Grokster supporters can point to just a few hundred thousand legal files among the 2.6 billion traded with P-to-P software each month, he said.

"That's the whole business," Verrilli said. "What they're talking about as lawful is a tiny, teeny little fraction."

As Guilty as IPod?

Verrilli called Grokster and Morpheus a "gigantic infringement machine that was built on inducement" of copyright violations.

But Justice Stephen Breyer questioned how the court could draw the line between Verrilli's assertion that P-to-P software enabled "substantial" infringements and the Betamax ruling. If the court recognized a new standard penalizing technologies enabling substantial copyright violations, the copying machine, the VCR, and the Gutenberg printing press might not be legal, Breyer said.

Using the same logic, the entertainment industry could argue that Apple Computer's IPod also encourages copyright violations, added Justice David Souter. "If I can get music to the IPod without buying the CD, I'm not going to buy the CD," he said. "How do we know in advance on your test anything that gives the inventor or...the developer the confidence to go ahead?"

The 9th Circuit Court of Appeals erred in rejecting the entertainment industry's case because it "basically adopted a test of theoretical noninfringing uses," answered Paul Clement, acting solicitor general of the U.S. Department of Justice, which is siding with plaintiffs the Motion Picture Association of America, the National Music Publisher's Association of America, and the Recording Industry Association of America in the Grokster case.

But a tougher definition of secondary liability would open up technology companies to many more lawsuits, said Justice Antonin Scalia. "I'm going to get sued right away before I get a chance to do business," he said.

File Sharers Grilled Also

Justices didn't spare P-to-P lawyer Richard Taranto from tough questioning. Justice Ruth Bader Ginsburg noted that the Sony Betamax decision continued on for 13 pages after establishing that the Betamax VCR technology was capable of substantial noninfringing uses. The Supreme Court in 1984 recognized that the VCR's primary commercial use was for "time shifting" television programs by recording them and watching them later, a legal use, she said.

Justice Anthony Kennedy questioned why the Supreme Court should stick to the Betamax standard when most commercial uses of P-to-P are related to copyright violations. Taranto told justices that the Grokster case focused only on the current actions of the P-to-P vendors, not past actions that may have encouraged users to violate copyright law, but Kennedy questioned how Taranto could separate past actions from the current business plans.

"What you want to say is unlawfully appropriated property can be used for [a business's] startup capital," Kennedy told Taranto.

Ginsburg also questioned how the distributors of Grokster and Morpheus could shield themselves from charges of willful ignorance of their users' copyright violations. Justices noted the 9th Circuit Court, in 2001, ruled against file-trading service Napster.

Unlike the old Napster service, which operated centralized servers, Grokster and StreamCast Networks don't know what's being traded by users of their software, Taranto said. Their decision to offer decentralized file-trading software went beyond avoiding Napster's fate, he said; P-to-P technology also frees the vendors from the cost of operating central servers.

A Supreme Court decision is expected in about three months.

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