SAN FRANCISCO - Grokster Ltd. and StreamCast Networks Inc. are not liable for the swapping of copyright content through their file-sharing software, a federal appeals court ruled Thursday in a blow to movie studios and record labels.
By David KravetsAmong other things, the San Francisco-based 9th U.S. Circuit Court of Appeals said the suppliers of the free peer-to-peer software, unlike Napster, were not liable for illegally swapped music and movies online because they don't have central servers where computer users can access copyrighted material.
"In the context of this case, the software design is of great import," Judge Sidney R. Thomas wrote for the unanimous three-judge panel, which upheld a lower court ruling that dismissed the bulk of the lawsuit brought by movie studios and record labels.
The panel noted that the software firms simply provided software for individual users to share information over the Internet, regardless of whether that shared information was copyrighted.
"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.
Napster was shut down after the 9th Circuit ruled that its centralized servers, which contained thousands of copyrighted songs, made it legally liable for contributing to copyright infringement.
Thursday's ruling could influence the entertainment companies' case against Sharman Networks Ltd., makers of the Kazaa program, which averages more users than any other file-sharing software.
Sony Betamax ruling key precedent
Attorneys representing a cadre of entertainment companies and copyright holders had argued their appeal in the Grokster-StreamCast case before the panel in February. The lawyers had hoped to persuade the appeals court to overturn an April 2003 decision, in which U.S. District Judge Stephen Wilson in Los Angeles also ruled that Grokster and StreamCast aren't liable when computer users illegally trade content using their software.
Wilson had cited the U.S. Supreme Court's 1984 ruling in the Sony Betamax case. The court said then that Sony wasn't liable when people used its Betamax videocassette recorder to copy movies illegally, since the technology had significant uses that did not violate copyrights.
But the studios and labels argued that while Sony could not control how consumers used their VCRs, Grokster and StreamCast could filter the copyright content from their systems, like they do with computer viruses, but refuse to do so, because the free songs and movies are what draw their users and ultimately generate ad profits.
Fred von Lohmann, a senior intellectual property attorney for San Francisco's Electronic Frontier Foundation, argued on behalf of StreamCast. He said the firms' software is used to swap live music by Pearl Jam, Dave Matthews and Phish -- songs which the artists have allowed to be freely distributed.
During the hearing, Thomas questioned whether forcing the file-sharing firms to filter copyright content would ultimately do enough to quell file-swapping on the Internet.
"Aren't we just chasing the wind?" Thomas asked.
The case is Metro-Goldwyn-Mayer v. Grokster, 03-55894.
