RealTime IT News

Will High Court Dodge P2P Decision?

One thing that distinguished the Supreme Court debate Tuesday morning over peer-to-peer (P2P) networks and copyright infringement liability was that the justices meted out tough questions for both sides.

By the end of the one-hour hearing, the tough questions were enough to give both the entertainment and technology industries serious pause as to which way the court will rule.

The justices repeatedly peppered MGM attorney Donald Verrilli with questions about how far Hollywood wanted to move the line on secondary copyright infringement. Far enough to stifle innovation? Far enough to cause inventors to quit innovating over fear of lawsuits?

That line of questioning pleased technology advocates who want the court to uphold the principles laid out in the 1984 Sony Betamax Supreme Court decision. In that decision, on a close 5-4 vote, the court said if a technology had substantial non-infringing uses, it was immunized from lawsuits even if some people use the technology for illegal purposes.

Click on graphic to follow P2P's legal journey.

But P2P pleasure quickly dissipated when the justices accused them of using stolen copyright materials as "seed capital" to build their businesses.

"There were, in short, questions from the court that would provide both comfort and discomfort to both sides. And any prediction about the outcome would be hazardous, indeed," Jeffrey Knowles, a San Francisco intellectual property attorney who attended the hearing, said in an e-mail comment.

That said, Knowles then ventured a prediction: "I think this court is prepared to resolve at least some part of the ongoing debate about the copyright accountability of peer-to-peer file-sharing services -- and in the process add new insight into the Sony Betamax decision's application in the digital era."

Blair Levin, a senior analyst with Legg Mason, was also e-mailing opinions after the hearing.

"The Supreme Court justices were dissatisfied with the implications of the extreme positions each side presented, and we believe they likely will try to develop a way to send the case back to trial on a narrower theory of infringement," Levin wrote.

If they do, it will likely be on the issue of "active inducement." Under current copyright law, companies can be held liable for secondary copyright infringement if they actively encourage users to infringe.

Up to this point, that has not been an issue in MGM vs. Grokster. Both a district court and the 9th Circuit Court of Appeals ruled in favor of Grokster based on the Sony Betamax standard established by the Supreme Court.

But when Verrilli told the court the standard that Hollywood uses when deciding to pursue lawsuits against different types of technology, he said it wasn't the percentage of non-infringing uses, but the business model being developed by a company.

"That's an inducement argument," Justice Antonin Scalia shot back.

"On several occasions, the justices' questions implied that they might be able to resolve the case without reaching the issues of Sony's scope, perhaps on the grounds of active inducement," Knowles, who has represented music interests against P2Ps, wrote. "They noted, however, that this would not go very far in resolving the next case in which, perhaps, the evidence of such inducement might be absent."

Levin said a lower court decision on active inducement "would be a better result for the content industry than a 9th Circuit ruling, but offers less protection than they are seeking at the Supreme Court."

He also noted an active inducement case would represent a "more livable outcome for both the tech and network companies than the test advocated by the content industry and the government."