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News Massive: Grokster and Morpheus Not Liable

This just in:

    In a case that could turn the tide on online piracy, a Los Angeles judge ruled Friday in favor of online file-sharing services Grokster and Morpheus, saying the two companies are not liable for online piracy by users of their service. The follow-on services to Napster — which was forced to give up sharing of music files — were sued by several major entertainment companies who sought to take the firms to trial. But U.S. District Court Judge Stephen Wilson ruled in favor of the two firms. A third online file sharing service, Kazaa, is not affected by the ruling.

    Wilson said that Grokster and Streamcast were no different from the cases in which Sony developed videotaping that could precipitate illegal copying of films. Sony was sued by Hollywood studios in 1984.

    Wilson wrote that in the Sony case, “sales of videocassette recorders did not subject Sony to contributory copyright liability, even though Sony knew as a general matter that the machines could be used, and were being used, to infringe the plaintiffs’ copyrighted works.” [CBS Marketwatch]

Background on the case here, here, here, here, and here.

What an odd 24 hour period: two huge copyright cases, two seemingly contradictory rulings.

MORE
From CNET:

    “Defendants distribute and support software, the users of which can and do choose to employ it for both lawful and unlawful ends,” Wilson wrote in his opinion, released Friday. “Grokster and Streamcast are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are used to infringe copyrights.”

    ….the ruling appeared to state clearly that decentralized peer-to-peer software such as Gnutella is legal, in much the same way that the Sony videocasette recorder is protected by law.

    Representatives of the Recording Industry Association of America and the Motion Picture Association of America could not immediately be reached for comment. They are expected to appeal immediately, however.

    “This is far from over,” said Fred von Lohmann, an Electronic Frontier Foundation attorney who has represented Streamcast in the case. “This is not the end, but it sends a very strong message to the technology community that the court understands the risk to innovation.”

Here is the ruling:

    CONCLUSION
    The Court is not blind to the possibility that Defendants may have intentionally structured their businesses to avoid secondary liability for copyright infringement, while benefitting financially from the illicit draw of their wares. While the Court need not decide whether steps could be taken to reduce the susceptibility of such software to unlawful use, assuming such steps could be taken additional legislative guidance may be well-counseled. To justify a judicial remedy, however, Plaintiffs invite this Court to expand. existing copyright law beyond its well-drawn boundaries. As the Supreme Court has observed, courts must tread lightly in circumstances such as these:

      The judiciary’ s reluctance to expand the protections afforded by the copyright without explicit legislative guidance is a recurring theme. Bound policy, as well as history, supports our consistent deference to Congress when major technological innovations alter the market for copyrighted materials. Congress has the constitutional authority and the institutional ability to accommodate fully the raised permutations of competing interests that are inevitably implicated by such new technology.

      In a case like this, in which Congress has not plainly marked our course, we must be circumspect construing the scope of rights created by a legislative enactment which never calculated such a calculus of interests, Sony, 464 U. S. at 431 (citations omitted); accord Teleprompter Corp. v. Columbia Broadcastinq System. Inc. , 4l5 U. S. 394, 414, 94 S. Ct. 1129 (1974).

    Therefore , for the reasons stated, the Court HEREBY GRANTS the following Motions:
    1. Defendant Grokster, Ltd. s Motion for Summary Judgment (132-1)
    2. Defendant StreamCast Networks , Inc, ‘ s Motion for Partial Summary Judgment Re: Contributory Infringement (140- 1J; and
    3. Defendant StreamCast Networks l Ine. ‘ s Motion for Partial Summary Judgment Re: Vicarious Infringement (142- 1).

    The Court HEREBY DENIES Plaintiffs’ Motion for Summary Judgment
    (146- 1) wi th respect Networks r Inc. only.
    Defendant streamCast to Defendants Grokster, Ltd. and StreamCast
    In addition, the Court HEREBY DENIES AS MOOT Networks, Inc. ‘ s Rule 56 (f) Motion (322-1).

    IT IS SO ORDERED.

UPDATE
Grokster and RIAA speak on case:

    Grokster President Wayne Rosso said he was surprised by the decision because it showed that the judge understood the technology. Peer-to-peer services could be used to enable the Pentagon to better share information, among other uses, he said, and the recording industry should try to work with such services rather than driving them out of business.

    “Grokster doesn’t and hasn’t ever condoned copyright infringement,” Rosso said. “We hope this sends a clear signal to the rights owners in this case to come to the table and sit down with us.”

    The Recording Industry Association of America said it was disappointed with the decision.

    “Businesses that intentionally facilitate massive piracy should not be able to evade responsibility for their actions,” RIAA CEO Hilary Rosen said in a statement.

    Rosen highlighted two portions of the 34-page decision she found favorable: first, that individuals are accountable for copyright violations; and second, Wilson’s statement that Grokster and Morpheus “may have intentionally structured their businesses to avoid secondary liability for copyright infringement, while benefiting financially from the illicit draw of their wares.” [Reuters]

UPDATE (special thanks to John Parres for the new roundup)
The NY Times weighs in on the decision:

    Philip Leigh, a digital media analyst with Raymond James & Associates, an investment banking firm in St. Petersburg, Fla., said that the decision was a clear signal that the industry must fundamentally change, and provide inexpensive, easy-to-access music in a way that consumers have grown accustomed to on services like Napster and Morpheus.

    “The music business will transform,” he said. “Prices of online music will get cheaper, and consumer user rules will be liberalized.”

Washington Post:

    U.S. District Judge Stephen V. Wilson’s decision yesterday “is significant in part because it breaks the wave of copyright holders prevailing in their claims on new mass-media types of infringement,” said Megan E. Gray, a Washington lawyer who specializes in intellectual property. “Upon scrutiny, the [plaintiffs’] case breaks down in several places and they cannot prevail.”

    ….Gray and Stanford University law professor Lawrence Lessig said the ruling probably will hold up. Further, Lessig pointed out, Wilson’s ruling put the ball back in the hands of lawmakers, which Lessig applauded.

    “When technology changes the way content is distributed, it is up to Congress and not the courts” to make the laws, Lessig said.

    “Hollywood sought to control what innovators can make available to consumers,” said Cindy Cohn, legal director for the Electronic Frontier Foundation, which represents Morpheus. “This ruling makes clear that technology companies can provide general purpose tools without fear of copyright liability.”

    ….Morpheus and Grokster differ from Napster in that Napster used a centralized server and song-index system, which meant it could be held directly accountable for the actions of its users. Since Napster’s demise, file-sharing systems such as Morpheus have moved to decentralized servers, which removes their liability, the judge ruled. If Napster was a song warehouse, Morpheus is a bloodhound: Users ask for songs, and Morpheus shows where those songs are stored on other users’ computers.

LA Times:

    Faced with those difficulties, the music industry ought to focus instead on making fee-based online alternatives appealing enough to wean the public from free sites, some analysts said Friday. The fledgling music and movie services supported by the industry have only a small fraction of the audience that the file-sharing networks do, in part because of the restrictions the labels and studios impose in the name of deterring piracy.

    Wilson’s ruling could end up boosting the sanctioned entertainment services by triggering more promotional efforts and more user-friendly features.

    Grokster attorney Michael Page predicted that two services wholly or partially owned by the major labels, MusicNet and Pressplay, would “get serious about distributing a wider range of content at a reasonable price.” The services also will come under pressure to develop anti-piracy measures that work without driving users away, he said.

    ….the ruling could invite more entrepreneurs to launch and promote free file-sharing systems, which haveoperated largely in the Internet underground. And by giving Morpheus and Grokster the court’s stamp of legitimacy, it could make both more attractive to the blue-chip advertisers that had avoided them.

    The file-sharing networks still pulled in considerable money from advertising, according to the ruling. For example, StreamCast Networks Inc., which distributes the Morpheus software, expected to collect $5.7 million in ad revenue last year.

    ….”This may be the best thing that ever happened to the labels,” said Napster co-founder Sean Parker, now president of Internet start-up Plaxo Inc. “It could signal an end to the hubris that has led them down their self-imposed path to destruction, and I’m optimistic that it may spur a genuine effort to find a constructive resolution to the file-sharing problem.”

Will they now sue individuals in earnest? Jack Russell says no:

    The RIAA knows (or seems to) that targeting individuals is the fastest way to suicide there is. The fact is, the average file swapper doesn’t see himself or herself as a thief in the same way that a shoplifter is a thief (even if they know what they are doing is stealing). Furthermore there are precious few Americans willing to sanction seven digit awards to the music industry from the pockets of people who copied a few songs. Should the RIAA choose to begin attacking consumers in earnest it would likely find the backlash to be catastrophic. Since that, in turn, is not acceptable, we have the current situation where the RIAA will sue everyone BUT the actual thieves.

    Consumers are a funny lot. Individually, we’re powerless against a large corporation – but when the sleeping dragon is awakened, companies rise and fall based on its whims. Its like being bound to the will of a bratty, drowsy four-year-old who has the complete capability to shatter your business if it ever decides it wants to do so – but most of the time is too sleepy / bored to make the effort. [The Inquirer]

UPDATE
Iraqi Information Minister now working for recording industry?

About Eric Olsen

Career media professional and serial entrepreneur Eric Olsen flung himself into the paranormal world in 2012, creating the America's Most Haunted brand and co-authoring the award-winning America's Most Haunted book, published by Berkley/Penguin in Sept, 2014.Olsen is co-host of the nationally syndicated broadcast and Internet radio talk show After Hours AM; his entertaining and informative America's Most Haunted website and social media outlets are must-reads: [email protected], Facebook.com/amhaunted, Pinterest America's Most Haunted.Olsen is also guitarist/singer for popular and wildly eclectic Cleveland cover band The Props.

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