[Upd-discuss] US ruling threatens file-trading-software makers, New Scientist

[Zapopan Martin Muela-Meza]

US ruling threatens file-trading-software makers
http://www.newscientist.com/article.ns?id=dn7598

    * 18:14 28 June 2005
    * NewScientist.com news service
    * Will Knight

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    * US Supreme Court ruling (pdf)
    * US Supreme Court
    * Grokster
    * Electronic Frontier Foundation
    * Recording Industry Association of America

Companies that make peer-to-peer file-sharing software face the prospect a
legal blitz after a US Supreme Court ruling that they can be held
responsible for copyright infringements by users.

The ruling was welcomed by the entertainment industry as a victory for
copyright holders. But some experts warn that it could discourage
technological innovation and may drive illegal file-trading further
underground.

Peer-to-peer (P2P) software lets users copy music and movie files from
each others’ computers and the entertainment industry says the practice
costs it billions of dollars in lost revenue every year.

Until now, the entertainment industry has pursued legal action against
individual file-traders, but this strategy has not prevented millions of
people continuing to share files and has also generated some negative
publicity. But the way is now clear for them to target the companies
behind the P2P networks instead.
Legitimate uses

The landmark ruling, issued on Monday, stems from legal action brought
against two US software firms, Grokster and StreamCast, in 2001, by 28
entertainment companies, including MGM, Walt Disney, EMI and Time Warner.

Two lower courts had previously ruled that the Grokster and StreamCast
could not be held responsible for copyright infringement carried out using
their software. This was based on a precedent set by another Supreme Court
decision, in 1984, which absolved Sony from liability for copyright
infringement carried out using Betamax video tapes, because the tapes also
had legitimate uses.

Although P2P networks also have legitimate uses, the Supreme Court ruled
that Grokster or StreamCast made no effort to stem illicit use of their
software.
Protecting livelihoods

"There is no evidence that either company made an effort to filter
copyrighted material from users' downloads or otherwise impede the sharing
of copyrighted files," Justice David Souter wrote in the Supreme Court's
majority opinion. "Each company showed itself to be aiming to satisfy a
known source of demand for copyright infringement."

"The Supreme Court has addressed a significant threat to the US economy
and moved to protect the livelihoods of the more than 11 million Americans
employed by the copyright industries," said Mitch Bainwol, chairman of the
Recording Industry Association of America.

Aain Levy, CEO of EMI Music added that his company would "persist in the
aggressive pursuit of businesses and individuals who engage in or
facilitate the mass theft of copyrighted works". And as well as pleasing
entertainment companies, the ruling should also provide a boost for
legitimate music download services, such as iTunes and Napster.
Era of uncertainty

But activists and programmers worry that if the decision results in a
storm of legal suits, it will have a negative impact on commercial
innovation by deterring companies from creating products that might
potentially be used for copyright infringement.

Fred von Lohmann, senior intellectual property attorney at the San
Francisco-based Electronic Frontier Foundation, says the decision will
"fuel a new generation of entertainment industry lawsuits against
technology companies" and consequently "unleash a new era of legal
uncertainty on America's innovators".

Adam Langley, a P2P programmer in the UK, says the ruling will undermine
efforts to gain funding for new ideas. "Your investors are going to need
pretty good assurances about the legality of the venture, and that's very
much up in the air right now," he told New Scientist. "No one knows where
the line is and venture capitalists don't want to be within 100 miles of
anywhere it could come down."

Ian Clarke, the programmer behind an experimental, anonymous file-trading
system called Freenet, agrees that "many new innovations may be killed off
just by the threat of legal action, even if the threat is baseless".

But he adds that new forms of P2P networks will flourish in order to
support demand. "One way or another, this ruling is full of loopholes that
will be used by some innovators to create technologies to replace today's
file sharing networks," Clarke told New Scientist. "The victims will be
tomorrow's innovators."


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