Mp3’s, Liability & the Future of File Sharing

MP3s, Liability and the

Future of File-Sharing:

The Grokster Case and its Impact

TABLE OF AUTHORITIES

Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 259 F.Supp. 2d 1029 (2001)

Sony Corporation of America v. Universal City Studios, Inc., 464 US 417 (1984)

A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001)

So. Mississippi Planning & Development District, Inc. v. Robertson, 660 F.Supp. 1057 (S.D.Miss. 1986)

Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304 (2d Cir. 1963)

Fonovisa, Inc. v. Cherry Auction, Inc. 76 F.3d 254 (9th Cir. 1996)

PAPER BEGINS HERE

On March 29, the Supreme Court of the United States heard oral arguments in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. (No. 04-480), accepted on Oct. 10, 2004 after Metro-Goldwyn-Mayer Studios (MGM) lost its case against Grokster in the United States Court of Appeals for the 9th Circuit.1 MGM sued Grokster, a company that provides peer-to-peer file sharing software to consumers over the internet, alleging that Grokster is liable for contributory and vicarious copyright infringement due to the illegal uses of its software. This Supreme Court’s opinion in this case will decide the liability of peer-to-peer sharing companies whose service is used by the public largely for file sharing that violates United States copyright laws. The major relevant precedent that will occupy the justices comes from Sony v. Universal (466 U.S. 417) 1984, in which the court ruled that because the Sony Betamax VHS player/recorder had many legitimate uses, the makers of the VCR could not be held liable for either contributory or vicarious copyright infringement simply because some owners of the Betamax recorder had used the VCR to illegally record television programs. The Supreme Court is likely to extend this precedent, known as Betamax, to include file-sharing software providers, such as Grokster, when it issues its opinion in MGM v. Grokster.

History of File-Sharing Legal Battles

The decision in MGM v. Grokster will set legal precedent and end file-sharing legal battles that have been raging for the last five years. On Oct. 2, 2001 as millions of people logged on to peer-to-peer sites such as Morpheus and Grokster, 28 of the entertainment industry’s elite sued StreamCast Networks Inc., (hereinafter referred to as “StreamCast”) developer of the file-sharing program Morpheus, and Grokster, Ltd. (hereinafter referred to as “Grokster”) for allowing its users to illegally download copyrighted material. While this may have been the official start of the case, the stage for the legal battle over file-sharing started years earlier when file-sharing giant Napster lost its case in the 9th Circuit Court of Appeals in early 2001 and was dismantled. It was only a matter of time before the music and movie companies came knocking on the doors of other makers of file-sharing software. These newer peer-to-peer programs, such as Grokster, allow user computers to connect with other computers to share and copy each other’s files. The reason this new generation of software is different from Napster lies in the technology.

Napster ran everything off a central server, meaning that search queries went through a centralized Napster server and the best possible matches were displayed. Napster was found liable for the infringements taking place over their networks because “without the support services [Napster] provides, Napster users could not find and download the music they want with the ease of which [Napster] boasts.”2 Grokster, on the other hand was “deliberately designed to be decentralized,”3 to the extent that users never actually interact with a Grokster server, but merely with each other. It is because of this removed relationship that Grokster has with its users that has kept the software company from being found liable for the infringements committed by its users.

In 2001, MGM brought suit against StreamCast and Grokster alleging vicarious and contributory copyright infringement for distributing peer-to-peer file-sharing software. According to MGM, over 90% of the material exchanged using Grokster’s file-sharing software is copyrighted and therefore, copyright infringement occurs each time users exchange such data. MGM allaged that Grokster contributes to the infringement because it makes the software available to the public. Contributory infringement requires that the alleged infringer have knowledge of the infringement of