Web file-sharing sites may be sued, justices rule
Decision OKs lawsuits if service encourages illegal swapping


Updated: 10:37 a.m. ET June 27, 2005

WASHINGTON - Internet file-sharing services will be held responsible if they intend for their customers to use software primarily to swap songs and movies illegally, the Supreme Court ruled Monday, rejecting warnings that the lawsuits will stunt growth of cool tech gadgets such as the next iPod.

The unanimous decision sends the case back to lower court, which had ruled in favor of file-sharing services Grokster Ltd. and StreamCast Networks Inc. on the grounds that the companies couldn't be sued. The justices said there was enough evidence of unlawful intent for the case to go to trial.

File-sharing services shouldn't get a free pass on bad behavior, justices said.

When the justices heard oral arguments in the case last March, they puzzled over the repercussions of granting the entertainment industry authority to sue technology manufacturers over consumers who use their products to steal music and movies online.

Justices wondered aloud whether lawsuits against manufacturers might have discouraged past inventions like copy machines and VCRs as well as newer innovations like iPod music players. All can be used to make illegal copies of documents, films and songs.

Justice Antonin Scalia said a ruling against Grokster Ltd., a developer of leading file-sharing software, could mean that if “I’m a new inventor, I’m going to get sued right away.”

Scalia, 69, referred to the company as “Grakster, whatever this outfit is called,” eliciting chuckles from the packed courtroom. INTERACTIVE

The entertainment industry’s lawyer, Donald Verrilli Jr., said his clients have no interest in suing inventors who take steps to block customers from stealing. But Grokster and other file-sharing services actively encourage consumers to steal, Verrilli said.

Verrilli called Grokster’s software “a gigantic engine of infringement” that thieves use to steal 2.6 billion songs, movies and other digital files each month.

“The scale of the whole thing is mind-boggling,” Verrilli said.

Supporters of file-sharing technology countered that a ruling against the software companies could effectively give the entertainment industry a legal veto over up-and-coming gadgets, and feared the threat of expensive lawsuits could hamper development of new devices.

The case had star power on both sides.

Don Henley, Sheryl Crow, the Dixie Chicks and other musicians backed the major recording labels, saying their livelihoods are threatened if millions of people can obtain their songs for nothing.

About 20 independent recording artists, including musician and producer Brian Eno, rockers Heart and rapper-activist Chuck D, support the file-sharing technology. They say it allows greater distribution of their music and limits the power of huge record companies.

The entertainment industry is eager to use the Internet to sell more music and movies, and points to the stunning popularity of Apple Computer’s iPod, which can be used to play songs purchased online.

But Justice David Souter noted that even iPod users can play music downloaded illegally. “I know perfectly well if I can get music on my iPod without paying, that’s what I’m going to do,” said Souter, 65.

Souter questioned why the industry wouldn’t also sue Apple on the same grounds as Grokster. Verrilli said that, unlike Grokster, Apple took reasonable steps to discourage piracy.

Justice Anthony Kennedy, 68, pressed Grokster’s lawyer, Richard Taranto, on whether profits from trafficking in stolen property can rightfully be used to help finance a young technology business. “That seems wrong to me,” Kennedy said.

Two lower courts previously sided with Grokster. A trial judge and a U.S. appeals court in California each based their decisions on the 1984 Supreme Court ruling that Sony Corp. could not be sued over consumers who used its VCRs to make illegal copies of movies.

The lower courts ruled that, like VCRs, the file-sharing software can be used for “substantial” legal purposes, such as giving away free songs, free software or government documents. The lower courts reasoned that the legitimate uses for such software gave companies like Grokster protection from copyright lawsuits based on acts by their customers.

Justice John Paul Stevens, wrote the 5-4 Sony decision. Only two other justices from 1984 remain on the court: Sandra Day O’Connor, who sided with Stevens, and Chief Justice William Rehnquist, who dissented.

The case is Metro-Goldwyn-Mayer Studios v. Grokster, 04-480.

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