RealTime IT News

Judge Rules In Favor of File-Swapping Sites

Hollywood and the music industry's quest to eliminate copyright infringement on file-sharing networks hit a major pothole Friday when a federal judge in Los Angeles ruled that two popular P2P networks could not be held liable for piracy by third-party users.

The stunning judgment frees the Grokster and Morpheus networks from being sued by a slew of big-name media companies, including AOL Time Warner, Vivendi Universal, Sony Corp., Viacom Inc., News Corp. and Walt Disney Co.

The ruling, handed down by U.S. District Judge Stephen Wilson, landed like a bombshell Friday in an industry that so far has become used to a string of successful court orders to shut down file-sharing programs.

U.S. District Court Judge Stephen Wilson argued Grokster and Morpheus can not control how people use their software, which could also have legitimate applications. The court cited the famous Sony Betamax case of 1984, where the Hollywood studies tried to outlaw VCRs but ran into a Supreme Court ruling that use of new technology to infringe copyrights did not justify an outright ban on that technology.

"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," Judge Wilson wrote, noting that Friday's ruling only affected Streamcast's Morpheus and the Grokster software.

The ruling does not cover the defendant's liability for damages from past versions of the software or from other past activities. It also does not cover Sharman Networks' Kazaa Media Desktop, which is also being sued by the Recording Industry Association of America (RIAA) and the Motion Picture Association of America (MPAA).

"It is undisputed that there are substantial noninfringing uses for the (Grokster and Morpheus) software - e.g., distributing movie trailers, free songs or other non-copyrighted works; using the software in countries where it is legal; or sharing the works of Shakespeare," Judge Wilson wrote.

The court found that Streamcast's Morpheus produced evidence that its P2P network was used to search for public domain materials, government documents and authorized media content.

"Liability for contributory infringement accrues where a defendant has actual - not merely constructive - knowledge of the infringement at a time during which the defendant materially contributes to that infringement," he added.

In order for Grokster and Morpheus to be liable under a theory of "contributory infringement," the court ruled that they must have "actual knowledge" of the infringement at a time when they can actually use that knowledge to stop the infringement.

The Electronic Frontier Foundation (EFF), which represented Streamcast in the case, applauded the ruling. "We believe the Morpheus case is about technology, not piracy, and today the court agreed, making it clear that technology companies are not responsible for every misuse of the tools they make," EFF attorney Fred von Lohmann declared.

"Hollywood sought to control what innovators can make available to consumers. This ruling makes clear that technology companies can provide general purpose tools without fear of copyright liability."

The ruling was a setback to the RIAA, which appeared to be gaining momentum in its ongoing war against file-sharing networks. On Thursday, a federal judge ruled in favor of RIAA's bid to force Verizon to reveal the names of customers suspected of illegally downloading music from file-sharing networks.

On Friday, the RIAA promised to immediately appeal the case to the 9th Circuit Court of Appeals.

RIAA chief executive Hilary Rosen said businesses that "intentionally facilitate massive piracy should not be able to evade responsibility for their actions.

"We disagree with the District Court's decision that these services are not liable for the massive illegal piracy that their systems encourage," Rosen said in a statement issued late Friday.

She said there were sections of Wilson's ruling that were encouraging. "We are pleased with the Court's affirmation that individual users are accountable for illegally uploading and downloading copyrighted works off of publicly accessible peer-to-peer networks. This is precisely the issue we have been seeking to focus the public's attention on, and yesterday's decision in the Verizon matter makes clear that individual infringers cannot expect to remain anonymous when they engage in this illegal activity," Rosen said.

She also pointed to the court's recognition that Grokster "may have intentionally structured their businesses to avoid secondary liability for copyright infringement, while benefitting financially from the illicit draw of their wares."