Peer-to-peer downloading suffered a blow when the High Court ruled that manufactures of the software enabling this type of file-swapping can be held liable for copyright infringement. While filmmakers and musicians hail the ruling as a victory, P2P software companies fear being slapped with hundreds of piracy lawsuits.
After Napster, the original P2P pioneer, was shut down in 2001, companies like Grokster, LimeWire, and eDonkey quickly developed and marketed new file-swapping technology. According to BigChampaigne, a site that keeps tally on P2P transactions, the vast majority of file sharing involves unauthorized distribution of MP3 music files.
In their unanimous decision, the justices held that P2P companies build their business with the intent of promoting and encouraging copyright infringement. Therefore, Justice David Souter wrote, these companies are "liable for the resulting acts of infringement."
The lawsuit began when MGM sued Grokster and StreamCast for copyright piracy. After lower courts ruled that P2P companies could not be held liable for infringement, MGM appealed to the High Court. The ruling sent the case back to the lower courts for review, but in order to win, Grokster and StreamCast will have to prove they did not take "affirmative steps" to "foster infringement." That will be an up-hill battle.
"There is no evidence," Souter wrote, "that either company made an effort to ... impede the sharing of copyrighted files. Each company showed itself to be aiming to satisfy a known source of demand for copyright infringement, the market compromising of former Napster users."
But Grokster and StreamCast users respond that the ruling will not slow them down. Experts agree that significant advancements in P2P technology might allow illegal sharing to continue for some time. Unlike Napster, StreamCast Networks software "operates in a decentralized way," according to Wendy Seltzer, attorney at the Electronic Frontier Foundation. Seltzer said that this type of software "doesn't need to call into a home base; it doesn't need product updates from any place. What's out there continues to function and can continue to work on a completely distributed basis." The nature of the software itself makes it difficult to shut down.
The increase in P2P file sharing since Napster's demise is evidence that attacking it only makes it stronger. According to BigChampaigne, the average number of people swapping files simultaneously has more than doubled since 2003, from nearly 3 million to more than 6 million.
With the advent of online music stores such as Apple Computer's iTunes and RealNetworks' Rhapsody, the rate of increase in unauthorized file sharing has begun to slow. Legal music services like these welcome the ruling, hoping it will all but eliminate their competition, and the entertainment industry agrees. "This important decision will allow artists and the creative community to prosper side by side with the technology industry."
Critics of the ruling see trouble since it lacks clear standards or concrete tests. While the justices cited examples of ways in which the companies fostered copyright infringement, the lower courts are left to determine whether P2P networks crossed the line or not. New technology will likely prompt new arguments and more litigation.
A similar case came before the court in 1984, with the advent of the VCR. In Sony Corp. v. Universal City Studios, the court ruled that any technology which promotes "substantial noninfringing use" can legally be sold. This ruling has protected advancements in technology for over twenty years, from CD burners to PCs. Some legal experts consider the Grokster ruling a contradiction to the 1984 case, and although there was some speculation the justices might revise that ruling, they did not.
Congress is pleased with the ruling, particularly because it makes the proposed "Induce Act" unnecessary. The Induce Act was introduced last year in response to the lower courts ruling in favor of the P2P networks, after the entertainment industry lobbied for tougher copyright protection laws.
But although Justice Stephen Breyer wrote in a concurring opinion that "the legislative option remains available," Congress has adopted a "wait-and-see" attitude: "Prudence and respect for the role of the courts suggest Congress wait until it becomes clear how today's decision will play out in the lower courts before there is a rush to legislate," said Senator Orrin Hatch (R-Utah). The Bush administration expressed support for the ruling in a statement delivered by Attorney General Alberto Gonzales.
Will any more Napster-sized companies be shut down, or will only smaller software companies be targeted? How will the current case ultimately play out, now that it has been sent back to lower courts? According to BigChampaigne's Eric Garland, "The only thing we can say for certain is that there will be more confusion, more litigation, more and more copyright infringement online and a long road ahead."
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