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

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

“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.

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