Supreme Court to Hear File-Sharing Dispute

Lawyers for Hollywood studios and record companies argue that they aren't trying to crimp technology: They just want to stop companies that seek to profit from piracy, which they say "is inflicting catastrophic, million-dollar harm" on their businesses. Estimates of lost music sales range from $700 million to several billion dollars a year, they said.

At issue is whether owners of copyrighted works can bar software makers from giving computer users the means to copy those works freely from one another's computers. If the answer is no, then "copyright soon will mean nothing on the Internet," lawyers for the entertainment industry told the high court.

The owners of the Grokster and Morpheus file-sharing networks counter that they are not making illegal copies themselves. Instead, millions of individuals are copying movies and music from one another with the help of their technology.

Just as the maker of a photocopier is not liable if a user illegally runs off thousands of copies of a copyrighted book, the file-sharing companies say they are not liable for the actions of those who use their software for illicit downloading — and they shouldn't be forced to pay billions of dollars in damages.

That argument prevailed before a federal judge in Los Angeles and the U.S. 9th Circuit Court of Appeals after seven major Hollywood studios and four major record companies sued Grokster Ltd. and Morpheus owner StreamCast Networks Inc., alleging they contributed to copyright infringement on a massive scale.

The 9th Circuit acknowledged that "the vast majority of the files are exchanged illegally." But the judges said the makers and distributors of the software could not be held liable for "contributory" or "vicarious" infringements. That's because the companies did not know that its users were making illegal copies until after they had done so and because their software was not built to detect or prevent piracy.

Federal courts in California shut down Napster, the pioneering file-sharing network, because it maintained an index to help users find and download songs stored by other people's computers. By contrast, the StreamCast and Grokster programs enable users to find song files on their own with no help from their companies, and this distinction made all the difference for the 9th Circuit Court.

The appeals court relied heavily on a 1984 Supreme Court ruling that shielded Sony Corp. from copyright infringement charges stemming from one of its most famous inventions: the VCR. Sony's Betamax recorder allowed TV viewers to tape their favorite programs and watch them at their convenience. Hollywood studios sued, alleging that the machines encouraged the making of illegal copies. By a vote of 5 of 4, the high court ruled that VCRs were legal, even if they could be used in illegal ways.

The "time shifting" of programs for later viewing was a fair use of copyrighted programs, Justice John Paul Stevens wrote for the court in Sony Corp. vs. Universal City Studios. In light of the new technology, Congress was free to pass a law forbidding that sort of activity if it chose to do so, said Stevens, now the senior associate justice.

The 9th Circuit echoed those themes in its file-sharing decision in August.

"We live in a quicksilver technological environment with courts ill-suited to fix the flow of Internet innovation," the appeals court judges said. They urged the entertainment industry to take their complaints to Congress and seek a change in copyright law.

Instead, the industry went to the Supreme Court.

By agreeing to take the case, the justices effectively agreed to clarify what the landmark Betamax decision means today.

Some observers surmised that some justices wanted to modify the Betamax ruling. One of the dissenters in that case was William H. Rehnquist, now the chief justice.

Legal experts say there are two main questions for the court to answer.

The first is whether the primary use of a technology has to be legitimate in order for it to be protected from lawsuits. The 9th Circuit said no, but the entertainment industry argues that the answer should be yes.

"Companies such as Grokster and StreamCast that openly profit from the misuse of copyrighted materials while attempting to avoid legal liability should not be protected by the courts," said Dan Glickman, chief executive of the Motion Picture Assn. of America.

Technology companies contend that the market determines how new products will be used, and it's impossible to predict what uses might emerge over time as people adapt to technological innovations.