Two years after an appeals court hammered the final nail in Napster's coffin, a new federal ruling will allow two remaining file-trading platforms to continue operating.
Delivering a significant victory for peer-to-peer networks, a federal judge ruled Friday that two popular file-trading services should not be held liable for copyright infringement committed by their users.
In his decision, Judge Stephen Wilson of U.S. District Court in Los Angeles found that the service operators, Grokster and Streamcast Networks, do not have direct control over the files swapped on their networks. Without evidence of their active and substantial contribution to the infringement, he wrote, the file-trading services cannot be held liable.
"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," Wilson wrote in the summary judgment.
The case stems from lawsuits filed against three of the largest peer-to-peer networks by a group of more than 20 Hollywood studios, led by Metro-Goldwyn-Mayer Studios, and major music labels, led by Arista Records. The music producers and film studios originally filed separate suits, which later were consolidated into a single action.
Notably, neither side contested the facts of the case, with both Grokster and Streamcast, which operates the file-trading site Morpheus, acknowledging that some users did in fact use their services to illegally trade copyright works. The central question was whether the file-trading services should be held liable for contributing to copyright infringement for providing a forum that allowed the illegal activities to occur.
Michael Page, the attorney representing Grokster, said the ruling validated one of his main arguments, which was that a new technology with many useful and legal purposes should not be blocked out of fear it could be used the wrong way.
"It's good to see the court has recognized that you can't ban new technology just because it threatens an old distribution model," Page said.
Groups representing the music and film industries were less pleased with the court's decision.
"Businesses that intentionally facilitate massive piracy should not be able to evade responsibility for their actions," said Hillary Rosen, chairman of the Recording Industry Association of America, in a prepared statement. Rosen said the music labels plan to appeal the ruling.
However, Rosen claimed to draw encouragement from statements in the ruling in which the judge acknowledged that the defendants "may have intentionally structured their businesses to avoid secondary liability for copyright infringement, while benefiting financially from the illicit draw of their wares."
Jack Valenti, president of the Motion Picture Association of America said in a statement that he was "surprised and disappointed" by the court's decision.
In his ruling, Wilson found that Grokster and Streamcast differed from Napster, which actually was held liable for contributory infringement. A federal appeals court concluded two years ago that Napster appeared to violate copyright laws because it could -- but did not -- give the boot to users illegally swapping MP3s.
But in the case of Grokster and Streamcast, Wilson wrote that neither provides the "site and facilities for direct infringement." That is, while Napster maintained an index of files available from its members, Grokster and Streamcast do not.
Grokster, which licenses a platform called FastTrack, does not transmit information from its users on its own computers or servers. FastTrack also is used in the file-trading system of Kazaa, an original defendant in the case. Kazaa was dropped from a later motion after its owners sold the service to another company, Sharman Networks.
Streamcast's Morpheus uses an application known as Gnutella, which allows users' search requests to be passed from user to user until a match is found or the search expires.
Wilson compared the Streamcast case to a well-known suit filed against Sony by Hollywood studios charging that the sale of videocassette recorders constituted contributory copyright liability, since buyers could use them to tape movies and other proprietary content.
The Supreme Court ruled in 1984 that because VCRs were capable of providing "substantial non-infringing uses," Sony should not be held liable merely because some customers might use the product to copy things they shouldn't.
