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No One’s Happy With Grokster Case Ruling

Over the last several years, I’ve been assigned to cover a number of panel discussions involving then-current and pending copyright issues. Why me? I’ve come to the conclusion that it’s because our beloved editor in chief wanted to give his full-time staffers the more important assignments.

Now don’t get me wrong. The overall copyright issue is one of critical importance in an industry that depends highly for success on such recording and copying devices as PCs, DVRs, MP3 players, digital tape and disc camcorders, and DVD and CD recorders, not to mention VCRs and audio cassettes.

It’s just that CE manufacturers and the entertainment industry have essentially run out of things to debate. They agree that casual copying by consumers is pretty much harmless and that wholesale copying, either by or for public consumption, is wrong and should be stopped.

Most recently, both sides had been biting their nails awaiting a Supreme Court decision on the so-called Grokster case involving a suit by MGM against Grokster and Stream Cast Networks, each of which gives away free software and a service that allows participating PC owners to search for and download files from each others PCs. Well, the verdict is out. Both sides won, and neither is happy.

At the heart of the case was the court’s 1983 Sony’s Betamax ruling that VCRs were legal because while they could be used to record copyrighted material, they also had non-infringing uses. At the federal district and appeals court levels, Grokster successfully argued that the software could be used to retrieve any type of material and so fell under the Sony finding.

But the Supreme Court overturned prior rulings on its finding of strong evidence that Grokster and Stream Cast clearly voiced the objective that recipients use the software to download copyrighted works. “Each took active steps to encourage infringement” said Justice Souter in the opinion he wrote for the full court. Their actions, he said, were well over the “fair use” line. He also cited an MGM study showing that 90 percent of the material being copied was, or likely was, copyrighted.

But both Justice Souter and, in a concurring opinion, Justice Ginsburg pointed out that in this case the contributory infringement was so blatant that possible ambiguities in the Sony case were never considered. Said Souter: “It is enough to note that the Ninth Circuit’s judgment rested on an erroneous understanding of Sony and to leave further consideration of the Sony rule for a day when that may be required.”

Said Justice Ginsburg in her concurring opinion: “If, on remand, the case is not resolved on summary judgment in favor of MGM based on Grokster and Stream Cast actively inducing infringement, the Court of Appeals, I would emphasize, should reconsider, on a fuller record, its interpretation of Sony’s product distribution holding.”

Those statements clearly leave the door open for a more direct challenge to the Sony decision, making lawyers happy and hardware makers very nervous.

But Justice Breyer, who was on the court that ruled for Sony back in 1983, wrote that but for their encouragement of infringement, the defendants would have clearly met the Sony case standard. “The real question here” he said, “is whether we should modify the Sony standard, as MGM requests, or interpret Sony more strictly.”

He then said the Sony rule assures entrepreneurs “they will be shielded from copyright liability as they bring valuable new technologies to market,” while deterring distribution of products “that have no other real function than, or that are specifically intended for, copyright infringement, deterrence that the Court’s holding today reinforces.”

So Steve, if you are reading this, I’m ready to cover the next copyright debate.