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Grokster to shut down free downloading service

Grokster, which lost its case before the Supreme Court decision, has agreed to shut down its file-swapping service and pay $50 million to settle music and movie piracy claims, the Associated Press reported.

Grokster lost an important Supreme Court ruling in June when justices ruled that the entertainment industry can file piracy lawsuits against technology companies caught encouraging customers to steal music and movies over the Internet.

The decision, which gave the green light for the federal case to advance in Los Angeles, significantly weakened lawsuit protections for companies that had blamed illegal behavior on their customers rather than the technology that made such behavior possible.

The settlement reached permanently bans Grokster from participating, directly or indirectly, in the theft of copyrighted files and requires the company to stop giving away its software.

Grokster now plans to launch a legal, subscription-based Grokster 3G service under a new parent company, Mashboxx, of Virginia Beach, VA. Mashboxx, headed by former Grokster President Wayne Rosso, has signed a licensing agreement with Sony BMG Music Entertainment.

Grokster’s settlement does not affect other defendants in the case, including StreamCast Networks, which distributes Morpheus, and Sharman Networks, which distributes Kazaa.

The movie and recording industry plaintiffs in the case are expected to file a motion for summary judgment by early next year against the remaining defendants, and U.S. District Judge Stephen Wilson has scheduled a hearing on the matter for March 27.

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