RealTime IT News

P2P War Takes Bad Turn for Hollywood

Since peer-to-peer (P2P) exploded on the scene in the late 1990's, the entertainment industry has waged legal war against the distributive technology that sparked the greatest raid on copyrighted music in history.

Hollywood drove the first Napster out of business and flooded other P2P companies with expensive litigation. The industry threatened lawsuits against corporations that permitted employees to install the file-swapping software. Last year, the media moguls began suing individuals who download copyrighted material through P2P networks.

Thursday, though, the legal war took a calamitous turn for Hollywood.

Upholding a lower court decision issued in April of 2003, the U.S. 9th Circuit Court of Appeals ruled P2P technology is legal even if the software itself is used for illegal purposes.

"The technology has numerous other uses, significantly reducing the distribution costs of public domain and permissively shared art and speech, as well as reducing the centralized control of that distribution," Judge Sidney R. Thomas wrote in a unanimous opinion.

The three-judge panel acknowledged that copyright violations do occur on the decentralized P2P networks, but the companies owning and distributing the enabling software cannot be held liable for the infringements.

"We live in a quicksilver technological environment with courts ill-suited to fix the flow of Internet innovation," Thomas wrote. "The introduction of new technology is always disruptive to old markets, and particularly to those copyright owners whose works are sold through well-established distribution mechanisms."

As legal precedent, the court cited the landmark Sony Betamax case video recorder case of 20 years ago, in which Hollywood studios tried to make Sony responsible for the copyright infringements of Betamax owners who videotaped programming off their televisions. Ultimately, the U.S. Supreme Court said the use of new technology to infringe copyrights did not justify an outright ban on that technology.

A significant key to the decision was the court's distinction between Napster's original service and the P2P software now offered by Grokster and Morpheus, the principal defendants in the case.

In Napster's case, an index of material available for file-swapping was maintained on a central server. Neither Grokster nor Morpheus use central servers. In that situation, the court said, the two file-sharing software distributors have no control over the actions of their customers.

"The district court found that unlike Napster, Grokster and StreamCast [the owner of Morpheus] do not operate and design an 'integrated service which they monitor and control. We agree," Thomas wrote. "The nature of the relationship between Grokster and StreamCast and their users is significantly different [than] prior versions of Napster and its users, since Grokster and StreamCast are more truly decentralized, peer-to-peer file-sharing networks."

Both the Motion Picture Association of America (MPAA) and the Recording Industry Association of America (RIAA) issued statements late Thursday saying they were reviewing the decision and considering a Supreme Court appeal.

"Irrespective of what any court says, a debate has crystallized: it's legitimate versus illegitimate," the RIAA's CEO Mitch Bainwol in a statement. "It's whether or not digital music will be enjoyed in a fashion that supports the creative process or one that robs it of its future. That's the online future of music."

The MPAA's Jack Valenti said the decision "should not be viewed as a green light for companies or individuals seeking to build businesses that prey on copyright holders' intellectual property. Businesses that ignore their responsibilities as corporate citizens profoundly undermine innovation in both the creative and technological arenas."

Not surprisingly, the P2P industry was excited about the decision.

Michael Weiss, head of Streamcast Networks, issued a statement saying, "As CEO, I am proud that Morpheus has become the first American P2P company to successfully win its fight for the right to continue to develop innovative new distributed communications technologies.

Adam Eisgrau, the executive director of P2P United, a trade group whose members include Grokster and Morpheus, called the decision a "complete and utter rejection of the entertainment industries' attempts to warp long-standing, pro-innovation copyright law into a weapon against peer-to-peer technology."

He hailed the P2P win as a "profound and major victory for the American consumer and our economy. Critically, the court cut through and rejected Hollywood's and Big Music's propaganda about peer-to-peer software and the P2P United member companies sued in this case to find the truth."