At a Glance: MGM v. Grokster
Monday, June 27, 2005; 12:37 PM
The case of Metro-Goldwyn-Mayer Studios Inc. v. Grokster Ltd. is the latest step in a series of legal battles to determine whether the technology that millions of people use to share music, movies and software should be ruled illegal, or whether the people who misuse it are the ones at fault.
Here's a look at how the case was born and how it got to where it is today:
File-sharing networks gained prominence after the U.S. Supreme Court effectively shut down Napster, the first widespread music-swapping network. Those companies evaded Napster's fate by distributing software online that people could use to share material without sending it through a central server. That way, the companies could say that they did not know how people used their networks.
In October 2001, several music and movie companies sued anyway, accusing the file-sharing companies Grokster and StreamCast for distributing software used to illegally share millions of movie and music files.
Record companies said they have tracked billion-dollar declines in compact disc sales since the emergence of Napster in the late 1990s, most of it due to illegal copying and distribution in physical locations and on the Internet.
The defendants relied on the 1984 "Betamax" case, in which Hollywood unsuccessfully argued that Sony Corp.'s Betamax VCR allowed users to record movies and TV programming without permission. The justices ruled that the VCR was legal because people used it for legal reasons as well.
The Consumer Electronics Association, which represents companies such as electronics manufacturers Dell, Sony and Phillips, supported Grokster and Streamcast. They argued that supporting the entertainment companies would overturn the Betamax decision, making many popular electronics devices illegal to own. That would hurt innovation and their bottom lines, they said.
The plaintiffs countered that the Betamax case determined that the VCR could be used for legal purposes, such as taping a TV program to watch it later. There is no parallel in the peer-to-peer world, they said.
In 2003, a federal judge in California rejected the entertainment companies' arguments. The U.S. Court of Appeals for the 9th Circuit upheld that ruling in August 2004. In December the Supreme Court announced it would hear the case.
The justices heard oral arguments on March 29, 2005. Entertainment industry attorney Donald Verrilli Jr. argued that file-sharing companies shouldn't be able to claim the same legal protection afforded to devices such as the VCR, iPod and TiVo. Arguing on behalf of Grokster, Richard Taranto countered that ruling file-sharing networks illegal would hurt innovation by making inventors ask copyright owners for permission every time they came up with a new device.
On June 27, 2005, the Supreme Court ruled that file-sharing networks can be sued if they intend for their customers to use the software illegally. The case will return to a lower court where MGM and the other plaintiffs will try to prove their case anew.
Metro-Goldwyn-Mayer Studios Inc. v. Grokster Ltd. Case History
The ink wasn't dry on the Napster decision before a clutch of fledging companies in the United States and abroad emerged to take Napster's place. What separated this second generation of file-swapping services from Napster was a technological tweak that had major legal implications.
Napster allowed users to browse each other's computers and "share" copyrighted songs with one another, but it routed all of those transactions through its own internal servers, maintaining a modicum of control over how people used its network. That control was Napster's undoing. A judge ruled that since Napster could prevent copyright infringement, it had a responsibility to do so.
The founders of the new services -- including Morpheus and Kazaa -- learned from Napster's mistake. Their software abandoned centralized servers, allowing users to connect directly with each other. The companies made their money by bundling software that served up advertisements with their product, but maintained no control over what people did with it.
In October 2001, the major music and movie companies sued Grokster and StreamCast (which distributes Morpheus) for contributing to the theft of millions of copyrighted music and movie titles. In 2003, a federal judge in California rejected the entertainment companies' arguments, concluding that file-sharing software could be used for legitimate purposes, and as such was protected under the 1984 Betamax ruling.
The U.S. Court of Appeals for the 9th Circuit upheld that ruling last August, and in December the Supreme Court announced it would hear the case.
The Supreme Court is the final court of appeal for the entertainment companies; and even before the court agreed to hear the case, copyright owners were considering other options. The Recording Industry Association of America and Motion Picture Association of America last year threw their weight behind a bill intended to drive file-swapping networks out of business. The bill died at the end of 2004, but could be introduced again this year.