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The Supreme Court on Monday ruled that the creators of Internet file-sharing programs can be held liable for copyright infringement, siding with the interests of Hollywood over technology companies. The unanimous ruling dealt a blow to online peer-to-peer networks such as the defendants in the case, Grokster Ltd. and StreamCast Networks Inc., which claimed that they weren’t infringing if people used their software to download copyrighted music and movies. For such file-sharing companies, the ruling appears to mean almost certain death. The Court vacated a decision of the 9th U.S. Circuit Court of Appeals stating that Grokster and StreamCast were not responsible for how people used their software. Although the Court delivered a unanimous decision, the justices were divided into three camps, resulting in two concurrences with the main opinion. At issue in MGM Studios v. Grokster, wrote Justice David Souter for the Court, was how Grokster marketed its service, not the simple fact that it provides peer-sharing technology. “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,” wrote Souter. StreamCast went as far as to directly market its product as an alternative to Napster, which the 9th Circuit said in 2001 was partly liable for copyright violations by users who accessed its centralized server offering free music downloads. In making their decision in Grokster based on evidence in the record of the defendants’ intent to infringe on copyrights, the justices sidestepped what many observers said was an important issue at stake: whether the Court’s 21-year-old so-called Sony rule should be revisited. That rule, forged from a dispute involving the use of Sony Corp.’s Betamax VCR, held that if a piece of technology is capable of non-infringing uses, the manufacturer isn’t liable for uses that do infringe. Correcting the 9th Circuit, Souter wrote that Grokster was “significantly different than Sony and reliance on that case to rule in favor of StreamCast and Groskter was error.” In another corner was Justice Stephen Breyer, who wrote a separate opinion, with Justices John Paul Stevens and Sandra Day O’Connor concurring. In his concurrence, Breyer urged that if about 10 percent of a product’s usage doesn’t involve copyright infringement and there are ways to increase that non-infringement usage — including swapping of news broadcasts, digital educational materials, public domain films, and the like — then the product’s makers should be protected from liability under the Sony rule. Technology advocates say that if the Court had gone ahead and adopted Breyer’s rule, online file-swapping and similar services would have been less hamstrung by the Court’s decision. “Breyer’s opinion was consistent with how he has viewed copyright from the beginning — it shouldn’t interfere with the progress of technology,” says William Patry, a partner at Thelen, Reid & Priest in New York and a former copyright counsel for the U.S. House of Representatives. A third concurring opinion, written by Justice Ruth Bader Ginsburg and joined by Chief Justice William Rehnquist and Justice Anthony Kennedy, dealt with evidence presented in the case in support of the defendants’ motion for summary judgment. “It was very clear that they wanted Grokster to lose. It was also very clear that they didn’t want to clarify the Sony rule,” says Eric Goldman, a copyright law professor at Marquette University School of Law. “It wasn’t really a unanimous decision in terms of what the Sony rule means.” The effect on new technology beyond file-sharing isn’t clear, says Bill Rosenblatt, president of New York-based GiantSteps Media Technology Strategies, who has written about peer-to-peer file-sharing and copyright issues. But Rosenblatt suggests the decision is less a repudiation of technology and more a rebuke on how that technology is marketed. “The people in technology companies who have to hire lots of lawyers to scrub anything that they do [are] not the [people in the] research and development department, but the marketing department,” Rosenblatt says. In another technology-related ruling, the Court overturned the 9th Circuit again, siding with the Federal Communications Commission in deciding that cable companies don’t have to share their infrastructure with smaller, competing Internet service providers. In 2000, the 9th Circuit held that cable modem service is a “telecommunications service” and is therefore subject to rules that require telephone networks to grant open access to competitors. The FCC has insisted that the cable operators provided an “information service” and wouldn’t be required to share their lines. The 11th Circuit agreed with the government. Justice Clarence Thomas wrote for the Court in the 6-3 ruling in National Cable & Telecommunications Association v. Brand X Internet Services. In citing the Chevron doctrine and deferring to the authority of the FCC, Thomas wrote: “The Commission is in a far better position to address these questions than we are. Nothing in the Communications Act or the Administrative Procedure Act makes unlawful the Commission’s use of its expert policy judgment to resolve these difficult questions.” Souter and Ginsburg joined Justice Antonin Scalia in his dissent, in which Scalia wrote, “After all is said and done, after all the regulatory cant has been translated, and the smoke of agency expertise blown away, it remains perfectly clear that someone who sells cable-modem service is ‘offering’ telecommunications.”

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