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Further defining copyright law in the digital realm, a Los Angeles federal judge ruled Friday that distributing software that enables consumers to swap copyrighted music and movies over the Internet is not infringement. The court tossed a suit filed by movie studios, record labels and music publishers against three companies — Grokster Ltd., StreamCast Networks Inc. and Kazaa BV — that distribute peer-to-peer file-sharing software. Granting the defendants’ motion for summary judgment, U.S. District Judge Stephen Wilson made a sharp distinction between the software at issue and the services provided by now-defunct Napster Inc. “Plaintiffs appear reluctant to acknowledge a seminal distinction between Grokster/StreamCast and Napster: Neither Grokster nor StreamCast provides the ‘site and facilities” for direct infringement,”Wilson wrote. “In contrast, Naspter indexed the files contained on each user’s computer, and each and every request passed through Napster’s servers.” Wilson said defendants “clearly know that many if not most of those individuals who download their software subsequently use it to infringe copyrights.” And, he said, it is clear defendants benefit financially from the infringing conduct. However, he said that to be liable for contributory infringement, defendants must have actual knowledge of infringement at a specific time so that they can stop it. “Grokster and StreamCast are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are used to infringe copyrights,” Wilson wrote. In its seminal copyright case, Napster unsuccessfully argued that its system was similar to a VCR, citing the Supreme Court’s 1984 decision in Sony Corp. of America v. Universal City Studios Inc., 464 U.S. 417. But U.S. District Judge Marilyn Hall Patel of the Northern District of California rejected the comparison in a preliminary injunction she issued against Napster in July 2000. Attorneys for the defendants cheered Friday’s ruling. “It’s huge,” said Grokster counsel Michael Page, a partner at Keker & Van Nest. “It finally has confirmed that Sony is the law — whether making VCRs or software.” StreamCast’s attorney, Charles Baker, applauded the court for not requiring the defendants to revise their software to prevent copying of copyrighted material. “We were concerned that the court was going to try to set new precedent and have the defendants modify their technology according to the whims” of the studios and record labels, Baker said. A former partner at Brobeck, Phleger & Harrison, Baker is now a partner at Munsch Hardt Kopf & Harr. While Wilson said the copyright law could not be used to block defendants’ software, he suggested that Congress might step in to require some technological fix. The Motion Picture Association of America Inc. said it intended to appeal the decision. The attorneys on the plaintiffs side include O’Melveny & Myers partner Robert Schwartz, who represents AOL Time Warner Inc.’s record labels and motion picture companies; Russell Frackman, a partner at Mitchell Silberberg & Knupp who represents the non-Time Warner record labels; David Kendall, a partner at Williams & Connolly who represents the non-Time Warner movie studios; and Carey Ramos, a partner at Paul, Weiss, Rifkind, Wharton & Garrison who represents the music publishers. The case is Metro-Goldwyn-Mayer Studios Inc. v. Grokster Ltd., 01-8541 and 01-09923.

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