EFF: Breaking News – Supreme Court Ruling Will Chill Technology Innovation

Today the Supreme Court issued a ruling that could impede makers of all kinds of technologies with expensive lawsuits. The long-awaited decision in MGM v. Grokster states that P2P software manufacturers can be held liable for the infringing activities of people who use their software. This decision relies on a new theory of copyright liability that measures whether manufacturers created their wares with the “intent” of inducing consumers to infringe. It means that inventors and entrepreneurs will not only bear the costs of bringing new products to market, but also the costs of lawsuits if consumers start using their products for illegal purposes.

“Today the Supreme Court has unleashed a new era of legal uncertainty on America’s innovators,” said Fred von Lohmann, EFF’s senior intellectual property attorney. “The newly announced inducement theory of copyright liability will fuel a new generation of entertainment industry lawsuits against technology companies. Perhaps more important, the threat of legal costs may lead technology companies to modify their products to please Hollywood instead of consumers.”

The Supreme Court has also ordered the lower court to consider whether peer-to-peer companies Grokster and StreamCast can be held liable under the new standard. StreamCast is confident that it will pass muster under the new, multi-pronged test.

MGM v. Grokster was brought by 28 of the world’s largest entertainment companies against the makers of the Morpheus, Grokster, and KaZaA filesharing software products in 2001. The entertainment companies hoped to obtain a legal precedent that would hold all technology makers responsible for the infringements committed by the users of their products. The Electronic Frontier Foundation (EFF), along with StreamCast counsel Matt Neco and Charles Baker of Porter and Hedges, defended StreamCast Networks, the company behind the Morpheus filesharing software.

The entertainment companies lost their case in District Court, then lost again on appeal to the Ninth Circuit Court of Appeals. The lower court rulings were based on the Supreme Court’s landmark decision in the 1984 Sony Betamax case, which determined that Sony was not liable for copyright violations by users of the Betamax VCR.

This is one of the things that really worries me about this ruling.

This ruling has made our country, the country of the litigators — even more than before (and it was really bad before).

It also will make it very difficult for legitimate programs that do have substantial non-infringing uses, such as programs to help consumers make backup copies of their own DVDs, CDs, etc. even more difficult to come by.

The justices may have been trying to hit a happy medium, but I think with million dollar legal teams, (or would that be billion dollar legal teams now?) for cartels like the MPAA, RIAA, Business Software Alliance, etc., the little consumer, and emerging technologists will be hard pressed to even be given a day in court due to the extreme financial burden….and we all know it would likely be a total waste of time and money for a ‘public defender’ to go up against these overpaid ‘legal teams’ who’s job it will be to win for their client no matter how bad the legal precedent would be for everyone else in the country.

This may be a big day for the MPAA, RIAA, Business Software Alliance … but I can see a number of ways it can also come back to bite everyone … including them.

However, there is still room for optimism in some respects regarding the decision by the justices, Public Knowledge sure seems to think so – and I really hope they are right!

Here’s Public Knowledge’s Press Release:

Public Knowledge Statement Regarding MGM v Grokster

The following statement is from Gigi B. Sohn, president of Public Knowledge, on the Grokster decision today:

“Today’s Court decision in the Grokster case underscores a principle Public Knowledge has long promoted — punish infringers, not technology. The Court has sent the case back to the trial court so that the trial process can determine whether the defendant companies intentionally encouraged infringement. What this means is, to the extent that providers of P2P technology do not intentionally encourage infringement, they are exempt from secondary liability under our copyright law. The Court also acknowledged, importantly, that there are lawful uses for peer-to-peer technology, including distribution of electronic files ‘by universities, government agencies, corporations, and libraries, among others.’

“The Court is clearly aware that any technology-based rule would have chilled technological innovation. That is why their decision today re-emphasized and preserved the core principle of Sony v. Universal City Studios — that technology alone can’t be the basis of copyright liability — and focused clearly and unambiguously on whether defendants engaged in intentional acts of encouraging infringement. The Court held expressly that liability for providing a technological tool such as the Grokster file-sharing client depends on ‘clear expression or other affirmative steps taken to foster infringement.’ What this means is, in the absence of such clear expression or other affirmative acts fostering infringement, a company that provides peer-to-peer technology is not going to be secondarily liable under the Copyright Act.”

Some more links about this:

Hollywood wins Internet piracy battle – CNN Money

Grokster decision: the experts react – CNN Money

EFF.org: IP – P2P – MGM v. Grokster compiled information on the case

Peer-To-Peer File Sharing Comes With Risks, Says FTC – InformationWeek’s article on the FCC Report released 6/23/2005

Direct link to the PDF report

Who’s who in the P2P debates – Tech News on ZDNet

Ruling won’t slow file swapping, experts say – Tech News on ZDNet

Readers: P2P ruling will spark lawsuit rush – Tech News on ZDNet (might want to take their Quick Vote Poll while you are there)

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