MGM V. GROKSTER HITS THE BIGS

The Supreme Court will turn its attention today to a case formally known as Metro-Goldwyn-Mayer Studios v. Grokster, 04-480. It’s the first step toward resolving an issue that will have far-reaching implications for the music, film and technology industries. If the court rules in the plaintiffs’ favor, the RIAA will be free to focus its litigious strategy on the manufacturers of file-sharing software, who assert that such a ruling will negatively impact technological progress.

RIAA head Mitch Bainwol disputes the assertion that the music business is trying to stifle technological progress. "We are doing all the things we should be doing to move into this digital age,” he told the AP. “That is true no matter what the outcome."

But technological entrepreneur and Dallas Mavericks owner Mark Cuban, who’s funding the P2P’s court battle through the Electronic Frontier Foundation, argued in his blog that the case is “about our ability to use future innovations to compete vs [the entertainment industry’s] ability to use the courts to shut down our ability to compete. It’s that simple.”

Lower-court decisions have favored Grokster and StreamCast Networks, basing their decisions on the 1984 Supreme Court "Betamax" case, which concluded that Sony Corp. couldn't be sued for copyright infringement just because some VCR owners make illegal copies of movies. But the music and movie consortium argues that the P2Ps, who are taking in millions in ad dollars from advertisers who are well aware of the illegal traffic on the services, shouldn’t have blanket protection from copyright lawsuits. A trial judge and U.S. Court of Appeals for the 9th Circuit (the very same court that effectively shut down Napster in 2001) based their decisions on the Betamax ruling, quoting the language used by the Supreme Court regarding the use of P2P software for "substantial" legal purposes.

The ruling against Napster was predicated on the original P2P service’s technology, which relied on a central file index. The second-generation P2Ps, by contrast, operate in a decentralized way, simply making the software available to anyone who chooses to download it.

In a commentary posted Monday night, Washingtonpost.Newsweek Interactive columnist Cliff Sloan wrote, “In the end, the key to this case—and what distinguishes it from the Sony case—may well be the alleged efforts by the file-sharing services to encourage copyright violations. In part because it was not at issue in the Sony case, this feature of the case received surprisingly little attention in the lower courts’ decisions. The current Supreme Court often wants to understand the underlying reality in a case—what is really going on, and what is at stake? The movie and music industries point to evidence of Grokster and StreamCast marketing themselves as ‘the No. 1 Alternative to Napster’ and making pitches to Napster’s users to continue their activities on the new file-sharing services. This case should turn on whether the file-sharing services actively encouraged unlawful conduct—a legal doctrine that is technically known as ‘inducement.’ Relying on “inducement” liability would not totally satisfy either side… but the difficult balance between protecting creative rights and fostering technological developments would be well served by such a resolution.”

The Supreme Court is expected to decide the case before July.