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Court Rules in Favor of P2P File-Sharing Networks

19 Aug, 2004 By: Holly J. Wagner

In a setback for content suppliers, the 9th U.S. Circuit Court has ruled that peer-to-peer (P2P) file-sharing networks are protected from liability because they have substantial uses that do not infringe copyrights.

“The software distributors have not only shown that their products are capable of substantial noninfringing uses, but that the uses have commercial viability,” wrote Judge Sidney R. Thomas. The decision concludes, in part, that “the technology has numerous other uses, significantly reducing the distribution costs of public domain and permissively shared art and speech, as well as reducing the centralized control of that distribution,” Thomas wrote. “Especially in light of the fact that liability for contributory copyright infringement does not require proof of any direct financial gain from the infringement, we decline to expand contributory copyright liability in the manner that the copyright owners request.”

Music companies and movie studios brought the lawsuits against P2P service Grokster and its corporate parent, Streamcast Networks, contending the services are liable for damages either for contributing to users' infringement or under the theory of “vicarious” liability for facilitating illegal file trades. In a unanimous decision, the court disagreed.

“We agree with the district court's well-reasoned analysis that the software distributors current activities do not give rise to liability under either theory,” said the opinion.

Movie industry trade groups were quick to denounce the ruling.

“There can be no doubt that the primary purpose of peer-to-peer file-swapping services, such as Grokster and Morpheus, is to enable the theft of copyrighted movies and music over the Internet,” said Bo Andersen, president of the Video Software Dealers Association (VSDA). “If the Ninth Circuit is correct that ‘applicable precedent' prevents it from holding Grokster and Morpheus liable for the theft they enable, then the law must be changed. Congress should accept the court's invitation and quickly legislate a solution that will stop the courts from turning a blind eye to theft accomplished through peer-to-peer networks. We must hold the makers and distributors of Grokster, Morpheus and their ilk accountable for the stealing they promote.”

The decision comes as a handful of legislators, including Sen. Orrin Hatch (R-Utah), are seeking help from the Registrar of Copyrights in trying to pass their Inducing Infringement of Copyrights Act, which would create civil liability for “whoever intentionally induces any violation” of copyrights. The bill's cosponsors include Senate Majority Leader Bill Frist, Minority Leader Tom Daschle, Sen. Bob Graham and Sen. Barbara Boxer.

The court's decision seemed to indicate some direction for possible future legislation.

“The copyright owners urge a re-examination of the law in light of what they believe to be proper public policy, expanding exponentially the reach of the doctrines of contributory or vicarious copyright infringement,” Thomas wrote. “Not only would such renovation conflict with binding precedent, it would be unwise. Doubtless, taking that step would satisfy the copyright owners' immediate economic aims. However, it would also alter general copyright law in profound ways with unknown ultimate consequences outside the present context.”

The Motion Picture Association of America (MPAA) noted that infringement is still illegal, even though the industry's challenge has so far failed to take down the P2P software distributors.

“The Ninth Circuit Court of Appeals reiterated that users of file-copying networks that illegally traffic in copyrighted music, motion pictures and television programs are not ‘sharing,' they are stealing,” said president Jack Valenti. “The court concludes that this decision ‘does not end the case,' and we are carefully reviewing our next steps. We remain committed to fighting piracy by educating parents, students and consumers; by pursuing legislation such as the Induce Act, the ART act and H.R. 4077; and by working hand-in-hand with technology companies to create exciting new ways for movie fans to watch films. Our direction and conviction will not falter, and we will continue to pursue all avenues in our power to fight those who illicitly profit from our members' valuable property.”

Not everyone found the Ninth Circuit's decision distressing.

“Today's ruling will ultimately be viewed as a victory for copyright owners. As the court recognized today, the entertainment industry has been fighting new technologies for a century, only to learn again and again that these new technologies create new markets and opportunities,” said EFF senior intellectual property attorney Fred von Lohmann. “There is no reason to think that file sharing will be any different.”

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