United States: Entertainment Industry Wins a Major Victory Against Music Downloading

The Supreme Court handed the entertainment industry a major victory last week when it ruled that companies that offer file sharing software may be liable if the software is used to download copyrighted songs and videos. The entertainment industry may have won the battle, but the war against copyright infringement is far from over. The Supreme Court decision leaves the software industry and technology developers uncertain as to the line between legal and illegal activity.

Music fans across the country have filled their computers and MP3 players with copies of songs downloaded from the Internet, using software from Kazaa, Morpheus, Grokster, Napster, and others. The problem is that most of these downloaded songs violate the legal rights of copyright owners.

In response, copyright owners have sued individuals who illegally download copyrighted songs. In May, the Journal Sentinel reported that Dave Bink, a motorcycle salesman from Racine, had been sued by the record industry because his daughter had downloaded more than 600 songs on their home computer using the Kazaa software. Suing individuals, however, is inefficient, so the copyright owners went to what they thought was the real source of the problem – the companies that distribute the software that makes downloading music so easy.

A large group of songwriters, music publishers, and motion picture studios filed lawsuits against Grokster and StreamCast Networks, software distributors that offered "peer-to-peer" software which is used to download music and videos. The copyright owners argued that the peer-to-peer software distributors are liable for the copyright infringement of the software users.

In a unanimous ruling on June 27, the Supreme Court reversed the Ninth Circuit Court of Appeals and held that Grokster and StreamCast Networks may be liable for copyright infringement by users of their software if the software companies promote copyright infringement. This is where the uncertainty comes in. What facts are necessary to promote copyright infringement? What facts are necessary to establish the contrary? The Grokster End User License Agreement required all users to agree that they would "not use Grokster to infringe the intellectual property or other rights of others in any way". Apparently, this was not enough to establish that Grokster was not promoting copyright infringement.

Grokster's and StreamCast's software, which theoretically can be used to share any type of digital file, have been used primarily for sharing copyrighted music and video files without authorization. The Supreme Court noted that the "probable scope of copyright infringement is staggering." The Supreme Court sent the lower court a clear signal of how the Supreme Court viewed the evidence: "The record is replete with evidence that from the moment Grokster and StreamCast began to distribute their free software, each one clearly voiced the objective that recipients use it to download copyrighted works, and each took active steps to encourage infringement." Thus, upon reconsideration, it is likely that Grokster and StreamCast will be found liable.

This case is about more than copyright infringement. It is about the continuing struggle of the law to balance the tension between traditional legal rights, like copyright, and the development of new technologies, like computers and the Internet, which make copying easy and almost undetectable. This has been an age-old struggle. As Justice Stephen Breyer noted at the oral argument of the case, "The monks had a fit" when Johann Gutenberg developed moveable type. The Ninth Circuit Court of Appeals also noted this classic and continuing tension: "From the advent of the player piano, every new means of reproducing sound has struck a dissonant chord with musical copyright owners, often resulting in federal litigation. This appeal is the latest reprise of that recurring conflict …". The last time the Supreme Court dealt with this issue was in 1984, when it found that the distribution of the Sony Betamax VCR used to record TV shows and movies did not create copyright infringement liability unless the distributor had actual knowledge of specific instances of infringement and failed to act on that knowledge.

The technological world has moved far beyond moveable type and the player piano.

The peer-to-peer file sharing software distributed by Grokster and StreamCast Networks is a significant technological development. It provides improved security, cost, and efficiency over a traditional client/server network. Peer-to-peer networks are used by universities, government agencies, corporations, and libraries, among others. If companies are precluded from offering peer-to-peer and other new software because some users may use it improperly, there will be a chilling effect on technological innovation. The Supreme Court's decision is an attempt to reach a compromise solution that protects the rights of copyright owners without inhibiting technological development. To protect themselves, technology companies now need to review advertising and marketing materials to ensure that they are not promoting or inducing their customers to copy protected works.

It has been more than 500 years since the "monks had a fit" over Gutenberg's new technology. There is no reason to think that this recurring conflict is over.

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