Supreme Court-Part 2 Issues of the Case

MGM Studios, Inc. v. Grokster, Ltd. 545 U.S. 913 (2005) is a United States Supreme Court decision in which the Court unanimously held that defendant P2P file sharing companies Grokster and Streamcast (maker of Morpheus) could be sued for inducing copyright infringement for acts taken in the course of marketing file sharing software. The plaintiffs were a consortium of 28 of the largest entertainment companies (led by Metro-Goldwyn-Mayer studios).
The case is frequently characterized as a re-examination of the issues in Sony Corp. v. Universal City Studios, 464 U.S. 417 (1984), a case that protected VCR manufacturers from liability for contributory infringement. MGM wants makers of file sharing technology held liable for their users' copyright infringements. In Sony, the court held that technology could not be barred if it was "capable of substantial noninfringing uses."
Grokster came before the Supreme Court having already won in two previous courts. The United States District Court for the Central District of California originally dismissed the case in 2003, citing the Betamax decision. Then a higher court, the Ninth Circuit Court of Appeals, upheld the lower court's decision after acknowledging that P2P software has legitimate and legal uses. Sharman Networks' Kazaa file sharing program was originally amongst the defendants, but was dropped because the company is based in Vanuatu.
Computer and Internet technology companies such as Intel, and trade associations including firms such as Yahoo! and Microsoft, filed amicus curiae briefs in support of the file sharing companies, while the RIAA and MPAA both sided with MGM. A list of briefs filed in the case is available at copyright.gov and eff.org. Billionaire Mark Cuban partially financed Grokster's fight before the Supreme Court.[1]
During oral argument, the Supreme Court justices appeared divided between the need to protect new technologies and the need to provide remedies against copyright infringement. Justice Antonin Scalia expressed concern that inventors would be chilled from entering the market by the threat of immediate lawsuits. Justice David Souter questioned how the interpretation of the law the plaintiffs argued for would affect devices like copy machines or the iPod.
The music industry suggested that iPods have a substantial and legitimate commercial use in contrast to Grokster, to which Souter replied, "I know perfectly well that I can buy a CD and put it on my iPod. But I also know if I can get music without buying it, I'm going to do so."[2] On the other hand, the justices seemed troubled at the prospect of ruling that Grokster's alleged business model of actively inducing infringement and then reaping the commercial benefits was shielded from liability. Grokster argued that affirming the Ninth Circuit would only prevent an injunction against future use of the P2P software, while the plaintiffs would still be free to pursue damages in the district court for alleged past wrongful acts. Much of the Court, however, expressed skepticism that Grokster's continuing enterprise could be severable from the consequences of those prior acts.