Court’s Grokster ruling not so obvious

Despite having just been handed a powerful new tool to prop up a tottering business model, the entertainment industry could wind up the biggest loser

It might be tempting to view the U.S. Supreme Court’s Grokster decision last month as technology’s loss and copyright’s gain, but that analysis is not necessarily the entire picture, reported Wired News in an analysis of the much-anticipated decision.

In fact, despite having just been handed a powerful new tool to prop up a tottering business model, the entertainment industry could well wind up the biggest loser, the report concluded.

The Supreme Court threw out a summary judgment ruling in favor of Grokster and StreamCast Networks, ordering the companies back to trial on charges of so-called “secondary copyright infringement.” That seems like a big win for Metro-Goldwyn-Mayer Studios and other plaintiffs, which now stand a good chance of shutting down both contested services and bringing new lawsuits against other peer-to-peer companies.

However, by helping maintain the status quo, the ruling could further delay the death of the old way of doing things and postpone the birth of new strategies that successfully build on unstoppable peer-to-peer technologies, Wired said.

Grokster and StreamCast had won favorable rulings twice before when lower courts determined that both have substantial legitimate uses in addition to obvious illegitimate ones. Both the trial court and 9th Circuit U.S. Court of Appeals granted them safe harbor from secondary infringement under broad interpretations of a seminal opinion from the 1980s dealing with the liability of VCR makers, known as the Betamax case.

Following the recent decision, Grokster and StreamCast may now be held liable if they can be shown to have distributed a device “with the object of promoting its use to infringe copyright.”

The decision scales back Betamax by offering a lower standard of protection for technology innovators: MGM must merely show the companies intended to woo copyright infringers in order to win. What counts as evidence of wrong intent? The high court mentions advertising as one clear-cut example, but generally leaves this crucial question unanswered.

The high court acted with restraint, resisting calls from the entertainment industry to add tough new restrictions to Betamax. In a concurring opinion, three justices hinted that the court might have to revise the Betamax standard, a position that three other justices challenged in a second concurrence.

Regardless of what eventually happens with Betamax or what standards a trial court crafts in the Grokster case, the court immediately handed the entertainment industry a powerful tool for attacking peer-to-peer networks at the source. The ruling effectively says that peer-to-peer software makers can be found liable for assisting in the infringement that takes place on their networks.

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