Investor's Business Daily, March 12th, 2007
Two years after winning the landmark U.S. Supreme Court case MGM vs. Grokster, the entertainment industry is back in court to settle a fight some fear could handcuff technology innovation.
The Supreme Court ruled in June 2005 that the makers of Internet-based file sharing software services could be sued under copyright laws for users' rampant and illegal music swapping.
But the court did not resolve the issue of what file-sharing companies must do to comply with copyright laws. They punted the issue back to U.S. District Court Judge Stephen Wilson, whose original ruling in the Grokster case launched a long trek to the Supreme Court.
In a hearing set for March 26 over the issue, the entertainment industry will once again face StreamCast, maker of the popular file sharing software Morpheus and a co-defendant in the Grokster case.
Barring a settlement, Wilson is poised to mandate what kind of filtering technology companies must use to stop copyright breaches on file-sharing services.
Some tech groups call that a nightmare scenario, contending it will let judges rather than the market decide how software is developed.
"Putting courts in the business of redesigning software is a dangerous precedent to set," said Fred von Lohmann, senior attorney at Electronic Frontier Foundation. "Do we want a world where every new technology gets it own federal judge to sit in judgment over the next software update?"
The digital rights watchdog group represented StreamCast in the Supreme Court case but is not involved in the latest hearings.
A spokesman for The Recording Industry Association of America, which represents music publishers, said "filtering technologies are highly effective in a variety of online settings, including peer-to-peer," but wouldn't comment further.
The issue is another twist in a long saga over file-copying technology.
Even before Supreme Court ruled in its landmark 2005 case, Grokster shut down and later settled with the plaintiffs.
Most other popular file sharing services either folded or added filtering systems designed to stop copyrighted content from being shared without permission.
But StreamCast put up a fight. The company wants Judge Wilson to spell how it must alter its Morpheus software to avoid liability.
"StreamCast stands ready to be part of finding solutions that benefit the consumer, the creative artists and the marketers and distributors of those works," said StreamCast CEO Michael Weiss, in an e-mail statement.
The latest skirmish, which first went before Wilson last month, stems from a ruling the judge made last September. He declared StreamCast a tool "used overwhelmingly for infringement" and granted plaintiffs requests that the file-sharing service either shut down or change its software to block copyright breaches.
Wilson based his ruling on the High Court's Grokster decision, which established a copyright liability standard now known as the "inducement doctrine."
It ruled that anyone who offers a product purposely designed to infringe copyright -- evident in how it's designed or advertised -- is liable for such breaches committed by its users.
But Wilson also agreed to StreamCast's request for a hearing to define what constitutes a violation and what it must do to avoid future lawsuits.
The new round of legal action has focused on what kind of software filtering technology StreamCast should deploy to block copyrighted content from its network.
Lawyers representing 28 of the world's largest entertainment companies contend that StreamCast can use industry standard software filters made by firms such as Audible Magic and Snocap.
Two file-sharing services firms, Kazaa and iMesh, both use such filtering technology.
Attorneys for StreamCast balked at the filtering proposal, arguing that the firm might still be sued if the technology did not "exhaustively" stop illicit copying.
StreamCast has proposed developing its own filtering technology, but wants detailed information from the recording industry on the artists and songs it must filter.
The recording industry says such information is commercially valuable and that it shouldn't have to hand it over for free.
Unless the two sides settle, Judge Wilson will make the choice himself -- a scenario that worries some analysts and bloggers.
"It's important not to let copyright owners dictate the future of technology," said the EFF's von Lohmann. A final ruling could take months, and whoever loses will probably appeal the decision.
The legal ambiguity in the meantime hurts innovation, von Lohmann contends.
"The problem is the rules are still very uncertain," he said. "If you are Apple or Microsoft and are trying to put together an expensive product launch, that uncertainty is not something you enjoy."
Another issue is what to do about the tens of millions of people who have downloaded earlier versions of the Morpheus software, which doesn't block copyrighted files.
That software resides on millions of personal computers and can't be erased or updated unless a user chooses to do so.
Nor can the system be shut down, as was the case with Napster years ago.
Morpheus is a peer-to-peer network, so the music or movies do not reside in a central location.
The digital bits and bytes flow freely from one computer to the next.
StreamCast continues to make money off this legacy software through advertisements that appear on the software's main panel.
Judge Wilson could, as the entertainment industry has asked, force StreamCast to stop all advertising on this older software.
That would give the company a financial incentive to push the upgrades onto users. But it's still not clear how many users would willingly download a version that blocked most copyrighted music.
Copyright 2007 Investor's Business Daily, Inc.
