Movie, Music Giants Win One, Lose One

No sooner had the Recording Industry Association of America (RIAA) put up headlines on its site touting a major legal victory in its ongoing legal war against file sharing, it had to reverse course and put up a new headline admitting — for the first time in quite awhile — to a rare courtroom defeat.

On Thursday, the RIAA won its latest round in a dispute with Verizon over revealing the names of subscribers who the RIAA suspects of illegally downloading copyrighted songs. A day later, a Los Angeles federal judge dismissed a suit brought by the RIAA and a number of major media companies against popular peer-to-peer networks Grokster and Morpheus.

Of the two decisions, the Los Angeles verdict was the most startling. The RIAA had already prevailed against Verizon and the Thursday decision reinforced the verdict, surprising no one. While the case is expected to eventually land in the Supreme Court, the case involves not whether file swapping is legal, but, rather, an ISP’s responsibilities under the Digital Millennium Copyright Act (DMCA).

The Hollywood forces of music and movies were equally expected to win in the suit against Grokster and Morpheus. After all, the same groups had forced Napster off the Web.

But U.S. District Court Judge Stephen Wilson said Grokster and Morpheus can not control how people use their software, which could also have legitimate applications. The court cited the landmark Sony Betamax case of 1984, where the Hollywood studies tried to outlaw VCRs but ran into a Supreme Court ruling that said 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 peer-to-peer networks’ 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 RIAA and the Motion Picture Association of America MPAA.

Nor did Wilson in any way condone illegal file sharing.

“Just as in Napster, may of those who use (Grokster and Morpheus) software do so to download copyrighted media files, including those owned by the Plaintiffs and thereby infringe Plaintiffs’ rights of reproduction and distribution,” Wilson wrote. “Thus, for purposes of these motions, Plaintiffs have established direct infringement of their copyrighted works by some end-users of Defendants’ software.”

Wilson found that Morpheus produced evidence that its P2P network was used to search for public domain materials, government documents and authorized media content.

“It is undisputed that there are substantial non-infringing 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,” Wilson wrote.

Hilary Rosen, chairman and CEO of the RIAA, which plans to appeal Wilson’s decision, put a positive spin on the ruling, “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.”

Rosen added, “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.”

All of which, is causing heartburn among ISPs and privacy groups.

Verizon’s position, supported by an Electronic Frontier led coalition of 28 consumer and privacy groups, including the Consumers Union, ACLU and the Competitive Enterprise Institute, along with a number of Internet ISPs and ISP organizations that the RIAA is unfairly using the subpoena power provision of the DMCA.

U.S. District Judge John Bates disagreed, ruling that copyright holders can issue subpoenas to ISPs to demand identifying information about any Internet users based upon a mere allegation of infringement, with no notice to the user or judicial review of the claim required.

Bates had already sided with the RIAA in January, ruling Verizon would have to disclose under the subpoena power of the DMCA the name of an Internet customer who allegedly downloaded hundreds of copyrighted songs. The telecom giant was seeking a stay of that decision until its appeal is heard. Bates’ Thursday ruling rejected Verizon’s stay request.

The judge did, however, issue a temporary stay to allow the U.S. Court of Appeals time to consider the issue.

Diane K Reynolds, CEO of Masters Net Internet Solutions of Dayton, Or., a rural ISP, said, “what my subscribers are doing is none of my business.” She noted that her terms of service does prohibit users from “illegal actions” but asked, “who decides if it’s illegal?”

Ken Slaughter, CEO of Active Internet Communications of Springfield, Mo., said that he supported subpoena requirements for the disclosure of private information. “If I have to turn over names, I’m worried if there’s no oversight. We’ll get a complaint in a letter that an IP address was being used for something illegal at a specific time, but their server will be on Pacific Standard Time and our logs are on Central. We could accuse the wrong customer if we’re given the wrong information.”

Many ISPs assign IP addresses dynamically. If any user is online for about one or two hours at a time, incorrect data can point to an innocent customer. If incorrect information harmed an innocent customer, would the RIAA be liable? Would an ISP be liable for participating in a lawsuit by the RIAA that was invalid? Would the disclosure of a user’s identity or their activities be grounds for a lawsuit against an ISP? These questions remain.

Kate Lynch, CEO of New York, NY-based said, “I have not yet read the decision, so I cannot comment on the details, but it does seem to be bad for the industry. At the very least, we will have to re-examine our policies.” The implication was that rewriting policies would require paying for expensive legal advice.

Russ Ferguson, CEO of the American Association of Service Providers (AASP), based in Triangle, Va., said, “of course we have to have copyright laws, but there have to be better ways to enforce them. ISPs are wary of participating in something that may be an invasion of privacy. How, for example, is the RIAA obtaining these IP addresses? Are they doing anything illegal, something perhaps tantamount to spying or wiretapping? Why can’t the music industry create a service for people who want to listen to songs before they buy the album, perhaps charging $1 per song?”

Several CEOs of ISPs said claimed the RIAA cannot distinguish between legal and illegal file trading, and bears no risk when its accusations are wrong. Instead, they continued, the ISPs have to bear any risks to its business as a result of the RIAA’s actions.

One ISP CEO who asked not to be named said that he was considering simply not keeping records. If the law requires that any data the ISP has be turned over, the ISP could comply by not knowing. Librarians in public libraries across the nation are already starting to do this.

Another ISP CEO quipped to, “I’m thinking of moving to New Mexico. I heard they repealed the PATRIOT act there.”

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