Napster's revenge, or how courts boost P2P

The Ninth Circuit Court of Appeal said today that file-sharing software is legal, as long as the developer doesn't have any control over the trades like Napster did. That's terrible news for record companies and movie studios, which still see millions of songs and movies traded every day.

But it might be welcome news for broadband companies and subscribers. If you talk to ISPs, they'll privately tell you that most of the traffic that flows over their networks (by volume) is still peer to peer swaps. And a lot of porn, but that's another story. The use of services like Apple's iTunes store is still relatively low.

File-swapping companies want to go legit – not just technically legal – by finding a way to let record companies sell their work over the P2P networks. Some proposals include creating what is essentially a toll gate at the ISP level, so if I downloaded a song from a P2P network, the gateway would see what it was and charge me a dime or something for it. The record companies hate this, but this decision could help spark more interest in those kinds of models.

Labels and studios are first going to concentrate on passing new legislation that overturns today's decision, though.