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The technology world — from multibillion-dollar computer companies to garage tinkerers — faces new and potentially costly uncertainties with the Supreme Court’s ruling that inventors can be held liable if third parties use their products to infringe on copyrights. Though Monday’s ruling specifically addressed the activities of file-sharing companies Grokster Ltd. and StreamCast Networks Inc., it could invite lawsuits against others whose products or services are deemed as encouraging infringement. That leaves a broad gray area yet to be defined, critics said. “It’s fair to say that with the decision the legal clarity has decreased and the risk of litigation has increased,” said Michael Petricone, technology policy vice president at the Consumer Electronics Association trade group. “From a competitive standpoint, that is just not a good thing.” Examples of technology that can be used to swap songs and movies are everywhere, though it’s not clear how many of those companies can be said to have “induced” piracy to the extent of Grokster and StreamCast. Apple Computer Inc. once advertised the joys of ripping, burning and mixing CDs on a Macintosh computer. In the PC world, Intel Corp. microprocessors, Microsoft Corp.’s Windows operating system and countless other inventions — such as the DVD burner — all make copyright infringement easy. Might a broadband provider’s claim of “faster downloads” be perceived as an inducement to steal copyrighted material? Will innovative startups have to hire legal teams to review every aspect of a business before it even incorporates? Still, the decision could have been far worse from the innovator’s perspective. The court did not alter its landmark 1984 ruling that protected Sony Corp. from liability even though some of its VCRs were used to infringe on copyrights. That “safe harbor” continues to protect innovators whose products have non-infringing purposes, though Monday’s decision added a new test: the developer’s intent. The Supreme Court’s written opinion went to lengths to outline actions Grokster and StreamCast took to build their businesses by offering copyright materials rather than public domain materials. Both gave away their software in an effort to boost advertising revenues. “Users seeking Top 40 songs … are certain to be far more numerous than those seeking a free Decameron, and Grokster and StreamCast translated that demand into dollars,” the court’s opinion reads. The decision seems to maintain the balance between innovation and copyright protection, said Pamela Samuelson, a law professor at the University of California. “By preserving a safe harbor for technologies with substantial lawful uses, it adopted a far more moderate rule than (copyright holders) had recommended,” she said. “An order for further proceedings on theory that Grokster actively induced copyright infringement did not come as a big surprise.” In fact, most major technology companies declined comment, either saying they were studying the decision or did not see how it applied to their businesses. Intel spokeswoman Jennifer Greeson said the world’s largest chip maker was pleased that the court did not alter the Sony ruling. She declined to discuss the case further as the company was still reviewing the decision. Among tech companies that welcomed the ruling were those that rely on the so-called peer-to-peer (P2P) networking technology that underlies StreamCast and Grokster’s products but have sought to work with the recording industry. “It’s a fantastic boost for us,” said Wayne Rosso, chief executive for the Virginia Beach, Va.-based Mashboxx, which is among a new crop of P2P-based services slated to launch this year to offer music download sales and, in some cases, swapping of tracks that are not under copyright restrictions. “I think you’ll see the investment community suddenly rush in to support the licensed P2P model,” suggested Rosso, who once headed the company behind the Grokster file-swapping software. Gregory Kerber, chairman and chief executive of Saratoga Springs, N.Y.-based Wurld Media, was also optimistic about the impact the file-sharing decision will have for its P2P-based music service, Peer Impact. “The ruling removes a roadblock that has hampered the widespread development of legitimate online music models,” said Kerber. Apple and RealNetworks Inc., which operate industry-sanctioned online music stores, also praised the ruling while touting their respective services. “Today the Supreme Court reaffirmed an important basic principle: thou shalt not steal,” RealNetworks CEO Rob Glaser said. But Cindy Cohn, legal director at the Electronic Frontier Foundation, which represented StreamCast, said the ruling will do more to hamper innovation given the uncertainty it has created. “We went to the Supreme Court hoping to get a clarity about a bright line rule that innovators can live with and copyright infringers could live with,” she said. “And instead we got sent back a murky, multifactored test that’s going to result in more litigation for years to come.” AP Business Writer Alex Veiga contributed to this report from Los Angeles. Copyright 2005 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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