The US Supreme Court on Monday handed an important victory to entertainment companies fighting online piracy, while also giving technology companies a powerful tool to defend themselves against copyright lawsuits.
In what legal experts said was the most important case of the internet age, the justices unanimously ruled that internet file-sharing services can be held legally responsible if they distribute products that permit illegal downloads.
But the court stressed that “peer-to-peer” file-sharing which permits millions of people around the globe to exchange music, films and other forms of digital information can be legal if the intent of the distributor is not to encourage illegality.
“We hold that one who distributes a device with the object of promoting its use to infringe copyright . . . is liable for the resulting acts of infringement by third parties,” Justice David Souter wrote for the court. The ruling sends the closely watched case of MGM v Grokster back to the lower court, which had ruled in favour of file-sharing services Grokster and StreamCast.
The lower court based its decision on the 1984 Supreme Court ruling that Sony could not be sued over consumers who used its video recorders to make illegal copies of films, because the machines could also be used for lawful purposes. At issue in the Grokster case was whether the file-sharing services should be held liable even if they have no control over what millions of online users do with the software they provide for free. As much as 90 per cent of songs and films copied on file-sharing networks are downloaded illegally, according to music industry filings.
Alex Yemenidjian, the former chairman and chief executive of MGM, the studio, who authorised the 4½-year legal pursuit of Grokster, said the ruling would make it “easier to shut down Grokster in the way the music industry shut down Napster”.
Mitch Bainwol of the Recording Industry Association of America said: “The Supreme Court has helped to power the digital future for legitimate online businesses including legal file sharing networks by holding accountable those who promote and profit from theft.”
The court tried to strike a balance between protecting copyright and allowing innovation, but the subtle ruling could create legal uncertainty for new technology companies, according to Fred von Lohmann, of the Electronic Frontier Foundation, an online civil liberties group. He said it would be hard for innovators to prove in court that their intent was not unlawful. A key US Senate committee said on Monday it would review the ruling for “its impact on copyright law and innovation”.