Supreme Court may redefine file swapping

Justices voice concern for future innovation, while showing interest in holding file-swap companies responsible for piracy. FAQ: Betamax--tech's favorite ruling Photos: Making noise at P2P hearings

WASHINGTON--Supreme Court justices cast a critical eye Tuesday on entertainment industry proposals for quashing file swapping, while making clear they had little sympathy for ongoing piracy on peer-to-peer networks.

Attorneys for the major record labels and Hollywood studios argued in front of the court in one of the most closely watched copyright cases in decades, which many observers say could help set the ground rules in the entertainment and technology industries for years to come.

The justices were clear that they were concerned about the effect of their ruling on the ability of technology companies to create future products like Apple Computer's iPod. However, several appeared to seek a way of holding file-swapping companies responsible for the piracy on their networks without endangering other technology companies.

Allowing companies to issue products with no concern for copyright infringement would amount to "unlawful expropriation of property as a kind of start-up capital," said Justice Anthony Kennedy. "From an economic standpoint and legal standpoint, that sounds wrong."

The case, which pits big labels and studios against file-trading software companies Grokster and StreamCast Networks, is the culmination of five years of legal battles against the peer-to-peer networks that entertainment companies believe are undermining the viability of copyrights.

Two federal courts have already ruled in favor of the file-swapping companies, saying that the software should be compared to a photocopying machine or a VCR--that it has enough legal uses to protect the file-swapping companies.

As influential as the case is likely to be, few believe the issue will end with the Supreme Court, whose decision is expected in June. Many observers expect the losing side to take its case to Congress after the court rules.

Throughout much of the hour-long hearing, several of the justices appeared concerned about the implications of the entertainment industry's proposal, backed by the U.S. Solicitor General's Office, that companies whose business is supported "predominantly" by copyright infringement be held liable for the piracy.

Technology companies such as Intel have argued that this standard could freeze innovation, as developers begin to fear the threats of lawsuits based on unforeseen or unauthorized uses of their products.

Justice Stephen Breyer focused heavily on the iPod music player, which he noted was probably used by many people to hold songs downloaded for free. The MP3 player, the Xerox machine, and even Gutenberg's press all had "vast numbers of infringing uses that would be foreseeable" at the time of the product's release, he said.

Harm for start-ups?
Justice Antonin Scalia asked the government's attorney, who argued in alliance with the entertainment companies, how long a start-up venture would probably have before facing lawsuits.

"What I worry about is a suit that comes right out of the box," Scalia said.

Despite this concern about establishing new copyright rules, several of the justices sought information on alternative ways to hold Grokster and StreamCast responsible for the widespread piracy.

Record labels and movie studios have long argued that Grokster and StreamCast, the parent of the Morpheus service, have deliberately built their businesses on the existence of

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