Top court to hear landmark P2P case Tuesday

Technology companies worry, while Hollywood pushes for revisions on how copyright law affects products. FAQ: Betamax--tech's favorite ruling

Ken Fuhrman's Colorado-based start-up company is a television junkie's dream, making powerful home media servers to hold digitized versions of television shows, movies and music.

But Fuhrman is worried. On Tuesday morning, the Supreme Court will hear arguments on whether file-swapping software companies Grokster and StreamCast Networks should be held responsible for the widespread copyright infringement on their networks, and he's afraid his company, Interact-TV, could be affected too.

Like many other technology entrepreneurs, he owes his business to a 20-year-old court ruling that said the Sony Betamax VCR was legal to sell, even though it could make copies of television shows. Tuesday's file-swapping case is the first time in 20 years that the Supreme Court has revisited that landmark ruling in a substantial way.

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What's new:
On Tuesday, the Supreme Court will hear arguments on whether file-swapping software companies Grokster and StreamCast should be held responsible for the copyright infringement on their networks.

Bottom line:
Tech companies are worried, while Hollywood is pushing for revisions on how copyright law affects products. All court watchers agree that the outcome could set new ground rules for two of the most dynamic industries in the United States.

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If not for Betamax, "we wouldn't have done the products we're doing now," Fuhrman said. "Trying to repeal or modify those rules would strangle innovation on the digital media front."

Furman isn't alone in his anxiety. From the smallest start-up to the executive offices of Intel, the technology world sees Tuesday's Supreme Court review of file swapping as potentially one of the most critical moments in the industry's history. At stake is nothing less than the future of innovation, executives say.

The record companies and Hollywood studios that have brought the case don't exactly disagree--but they say it's artists' ability to earn a living by their work, and therefore artistic innovation itself, that's at stake. Uncontrolled file swapping has led to piracy of music and movies on an unprecedented scale, and must be controlled if copyright-based industries are to survive, they say.

Virtually all court watchers agree that the outcome could set new ground rules for two of the most dynamic industries in the United States.

"This is the most important copyright case to come in front of the Supreme Court, from the perspective of its effect on the economy, since the Sony (VCR) case," said Annette Hurst, a San Francisco copyright attorney with Howard Rice Nemerovski Canady Falk & Rabkin.

The case itself focuses on just two file-swapping companies, Grokster and StreamCast. Hollywood studios and record labels say they, like other Napster successors, have built their business by encouraging millions of people to use their software to trade files illegally online.

Unlike Napster, each company distributes software that lets computer users search for and download files from one another's hard drives without any data going through a central company-controlled point

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