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Grokster Settles Up, Closes Down

Grokster is no more, the final aftermath of the landmark Supreme Court decision that pitted Hollywood against peer-to-peer (P2P) file-sharers. In June the Supreme Court ruled in favor of content owners who claimed Grokster operated an illegal business model.

In a settlement filed in Los Angeles, Grokster agreed to immediately cease operating the Grokster system and distributing its file-sharing software. In addition, Grokster consented to a permanent injunction prohibiting infringement of any copyrighted works.

"The United States Supreme Court unanimously confirmed that using this service to trade copyrighted material is illegal," the Grokster site stated Monday afternoon. "Copying copyrighted motion picture and music files using unauthorized peer-to-peer services is illegal and is prosecuted by copyright owners."

The site further notes that there are legal services for downloading music and movies. However, the site states, "This service is not one of them. Grokster hopes to have a safe and legal service available soon."

An ecstatic music industry, which claimed the P2P music file-sharing companies cost their industry millions in illegal downloads, hailed the fall of Grokster.

"This settlement brings to a close an incredibly significant chapter in the story of digital music," Mitch Bainwol, chairman and CEO of the Recording Industry Association of America (RIAA), said in a statement.

Bainwol added, "At the end of the day, this is about our ability to invest in new music. An online marketplace populated by legitimate services allows us to do just that."

In its unanimous ruling, the Supreme Court said P2P developers are responsible for the illegal acts of their users and ordered the P2P sites to curb the widespread theft of copyrighted material on their networks or face the legal consequences.

"The owners and operators of Grokster -- like numerous other online services all across the globe -- heard nine U.S. Supreme Court justices speak in a unanimous voice, a voice that was heard loud and clear," Bainwol said. "As the Court articulated in no uncertain terms, there is a right way and a wrong way to conduct a business."

The P2Ps argued that Hollywood's efforts to shut down their businesses violated the principles stated by the justices in the 1984 Sony Betamax decision, which established that technology is neutral even if some used the technology for illegal purposes.

Instead, the justices focused on the business models and behavior of the P2P developers.

"This settlement makes clear that businesses are well aware when they are operating on the wrong side of [the law]," Bainwol said. "Record companies have demonstrated a strong desire to work with a variety of legitimate online enterprises that respect the rights of creators and provide high-quality music to fans. The technology is available, and others are already paving the way."

The RIAA noted that in addition to legal download and subscription services such as Rhapsody, Napster and iTunes, a legal P2P distribution model is emerging in the marketplace.

Wurld Media, PassAlong and Intent Media are already in the legitimate P2P space, while iMesh has announced a legitimate P2P business model and the launch of its newly configured service.

Individual record companies have also announced numerous licensing agreements in recent months with companies such as Mashboxx and Snocap.