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.”

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