Supreme Court-Part 3 Decision of the court

"The Court has made clear in its decision that services whose clear intent is to foster infringement are liable for the illegal behavior of third parties using their software. As the Court stated, 'The unlawful objective is unmistakable.'"BMI has been at the forefront of licensing music for digital transmission, and this ruling today will strengthen the environment for legitimate businesses.On June 27, the US Supreme Court handed down its decision in a precedent setting case concerning peer to peer file sharing. The Court overturned the ruling of the Ninth Circuit Court of Appeals, and held in favor of the plaintiffs in the case of MGM, et al. v. Grokster, Ltd. The Court ruled that services whose clear intent is to foster infringement are liable for the illegal behavior of third parties using their software.The primary issue was whether Grokster intentionally induced infringement. The unanimous decision (9-0) of the Court was that distributors of peer-to-peer file sharing software may be liable for inducing copyright infringement even if the software is capable of substantial non-infringing uses, which was the test set forth in the Sony Betamax case. The Court stated that .one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties. After explaining that the defendants Grokster and StreamCast Networks, Inc. distribute free software products that allow computer users to share electronic files through peer-to peer networks, the court stated that MGM brought suit, alleging that the defendants should be held responsible for the copyright infringement of their users, because they knowingly enabled the users to infringe.Grokster and StreamCast conceded the infringement in most downloads, and there was considerable evidence that they advised recipients to download copyrighted works and encouraged infringement. Nevertheless, the District Court held that the distribution of the software didnt give rise to any liability because the use of the software did not provide the defendants with actual knowledge of specific acts of infringement. The Court of Appeals came to the same conclusion, saying that a defendant would be liable as a contributory infringer when it had knowledge of direct infringement and materially contributed to the infringement. Furthermore, they were not liable under the theory of vicarious liability either, because the defendants did not monitor or control the use of the software, had no agreed-upon right or current ability to supervise its use, and had no independent duty to police infringement.The Court explained that there was clearly a tension between supporting creative pursuits through copyright protection, and promoting innovation. But the court recognized that the argument for imposing indirect liability in this case is, however, a powerful one, given the number of infringing downloads that occur every day using StreamCasts and Groksters software. When a widely shared service or product is used to commit infringement, it may be impossible to enforce rights in the protected work effectively against all direct infringers, the only practical alternative being to go against the distributor of the copying device for secondary liability on a theory of contributory or vicarious infringement.http://www.bmi.com/news/entry/234484

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.

Supreme Court-Part 1 Facts of the case

Respondent companies distribute free software that allows computer users to share electronic files through peer-to-peer networks, so called because the computers communicate directly with each other, not through central servers. Although such networks can be used to share any type of digital file, recipients of respondents’ software have mostly used them to share copyrighted music and video files without authorization. Seeking damages and an injunction, a group of movie studios and other copyright holders (hereinafter MGM) sued respondents for their users’ copyright infringements, alleging that respondents knowingly and intentionally distributed their software to enable users to infringe copyrighted works in violation of the Copyright Act.

Discovery revealed that billions of files are shared across peer-to-peer networks each month. Respondents are aware that users employ their software primarily to download copyrighted files, although the decentralized networks do not reveal which files are copied, and when. Respondents have sometimes learned about the infringement directly when users have e-mailed questions regarding copyrighted works, and respondents have replied with guidance. Respondents are not merely passive recipients of information about infringement. The record is replete with evidence that when they began to distribute their free software, each of them clearly voiced the objective that recipients use the software to download copyrighted works and took active steps to encourage infringement. After the notorious file-sharing service, Napster, was sued by copyright holders for facilitating copyright infringement, both respondents promoted and marketed themselves as Napster alternatives. They receive no revenue from users, but, instead, generate income by selling advertising space, then streaming the advertising to their users. As the number of users increases, advertising opportunities are worth more. There is no evidence that either respondent made an effort to filter copyrighted material from users’ downloads or otherwise to impede the sharing of copyrighted files.