Having said that, the imprecise and all-encompassing jurisdictional principles articulated by the District Court in the Grokster case would, if applied on a worldwide basis, be a disaster for U.S. companies precisely because they are most active in their presence on, and utilization of, the Internet. Dow Jones, the parent company of the Wall Street Journal, is currently challenging the jurisdictional validity of a libel suit brought in Australia, brought under standards less protective than our First Amendment, because of a news item made available from a U.S. server to a handful of online subscribers "down under". U.S. firms can hardly expect to escape unpredictable liability under legal standards at variance with our own merely because their websites can be viewed abroad if a small, Australia-based software distributor like Sharman Networks, with no employees or facilities in the United States, can be dragged into federal court here. Ultimately, the resolution of the Internet jurisdiction challenge cannot be accomplished by any one nation but will require multilateral negotiations and agreements.

It must also be noted that plaintiffs in the Grokster case are seeking to accomplish by judicial fiat what they have not been able to accomplish with the Hollings bill. Their court filings take the position that the Betamax standard applies only to single purpose analog devices, and has no application to multi-function digital technology. If they succeed - if any provider of digital hardware or software can be convicted of contributory copyright infringement even where their products have substantial non-infringing uses - the practical effect will be to oblige them to adopt copy control technologies designated by major copyright holders as an obligatory legal defense, regardless of their cost to or impact on their own customers. Such a result would be a disaster for Silicon Valley's worldwide technology leadership. But the reality is that fear of entertainment sector litigation is already stifling innovation and investment in the Valley. Just last week, the bankruptcy of Sonicblue provided a sobering object lesson. That company, which successfully defended its Rio MP3 player in the late 1990s against an RIAA attempt to bar its manufacture and sale, fell victim to the substantial and ongoing litigation costs incurred in defense of its ReplayTV personal video recorder (PVR) against the movie studios.

Another major case being watched is that of RIAA v. Verizon. On Jan. 21, 2003 the U.S. District Court for the District of Columbia ruled that section 512(h) of the DMCA required Verizon to comply with a subpoena demanding that it reveal the identity of the user of its Internet services who the RIAA alleged had made about 600 copyrighted song files available to other users of Kazaa P2P software. Section 512(h) provides a means by which a copyright holder can obtain a subpoena simply by filing infringement allegations with the clerk of the court, absent any judicial review. Verizon contends that this expedited procedure is only available where infringing material is stored on its own servers, and that the RIAA should proceed by filing a "John Doe" subpoena request for review by a judge. However, the court ruled that this expedited process for obtaining a subpoena was available against any subscriber connected to an Internet service provider (ISP), raising the prospect that major
copyright holders using automated "bots" to seek out the Internet protocol addresses of P2P software users could deluge ISPs with hundreds or even thousands of user identification subpoenas. This has raised major concerns among ISPs regarding potentially crushing administrative costs and damaged customer relations over breach of privacy. Verizon has appealed the District Court ruling, and asked that the order to reveal the subscriber identity be stayed painting its outcome. Meanwhile, the RIAA has issued two more such subpoenas to Verizon, which Verizon has moved to quash. Regardless of the outcome of this case, and the next hearing is scheduled for April 1st, Verizon and other telecommunications firms and ISPs will reportedly seek Congressional clarification of the scope of this section 512(h) subpoena power. The RIAA has also stated that it may seek legislative redress if the case goes against it on appeal.