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File swapping vs. Hollywood

Movie studios and record labels find unlikely bedfellows in Supreme Court fight against file swapping.

Firing the first shots in a legal battle likely to be felt across the technology industry, Hollywood studios and record labels asked the Supreme Court to give them new ammunition in their fight against file swapping.

Backed by a diverse coalition of influential groups, including the Bush administration's top lawyer and the Christian Coalition, the Recording Industry Association of America and the Motion Picture Association of America on Monday asked the court to overturn previous rulings that have let file-swapping software companies such as Grokster operate with only minimal legal restrictions.

In their briefs, the groups called for a new legal test that could hold companies responsible for their customers' copyright infringement, even if they have no direct control over that activity. Allowing businesses "predominately" devoted to copyright infringement to operate has disrupted a traditional legal balance between technological advance and copyrights, they said.


What's new:
Hollywood studios and record labels are asking the Supreme Court to overturn previous rulings that let P2P companies operate with minimal restrictions.

Bottom line:
The Supreme Court case is widely viewed as one of the most important legal battles of the year across the tech industry and could affect virtually every consumer electronics and computer manufacturer, as well as software and entertainment companies.

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"The Sgt. Schultz defense for Grokster doesn't work," RIAA Chief Executive Mitch Bainwol said at a press conference Tuesday, alluding to the bumbling camp guard from the "Hogan's Heroes" sitcom. "'See nothing, hear nothing,' doesn't apply."

Although focused on the issue of file swapping, the Supreme Court case is viewed across the technology industry as one of the most important legal battles of the year. Legal observers say the outcome of the case could affect virtually every consumer electronics and computer manufacturer, as well as software and entertainment companies.

At the case's heart is the 20-year-old Supreme Court ruling that made Sony Betamax videocassette recorders legal to sell. That ruling said technology that could be used for illegal purposes could still be legal to sell without liability, as long as it had substantial commercial noninfringing uses.

"That protection can't be eroded. If it is, it will affect the future of technology."
--Gary Shapiro, CEO, Consumer Electronics Association

Consumer electronics and computer makers see that ruling as having protected the development and sale of everything from Apple Computer's iPod to an ordinary PC.

"I can't overstate how important this case is," said Gary Shapiro, CEO of the Consumer Electronics Association, which is expected to give substantial support to the peer-to-peer software companies when they file their responses to the entertainment companies' arguments in late February. "That protection can't be eroded. If it is, it will affect the future of technology."

The RIAA and MPAA say they're not trying to overturn that doctrine. But their attorneys have argued that because Grokster and Morpheus parent StreamCast Networks are aware of widespread copyright infringement on their networks, the companies should be held legally liable for that activity.

Two 9th Circuit lower courts have disagreed. Like photocopiers or VCRs, the companies' peer-to-peer software can be, and is, used for legal purposes such as selling music or video games, the courts said. They've interpreted the Sony precedent to mean that file-swapping companies such as Grokster and StreamCast can distribute their peer-to-peer products without legal liability for the widespread copyright infringement of people using the software.

In their brief to the nation's top court, the entertainment companies said those lower courts had misunderstood the balance required by the original Sony decision to protect copyrights as well as technological innovation, however. They charge that at least 90 percent of the activity on Grokster and StreamCast's networks is illegal and that the companies are well aware of that, even if they don't control individual trades.

The groups asked the court to ratify a new legal test, looking at whether a company's business is predominantly devoted to or supported by their customers' copyright infringement, to decide whether or not it should be held legally liable.

"When your business is predominantly devoted to copyright infringement, you're on the hook."
--Donald Verrilli, attorney

"When your business is predominantly devoted to copyright infringement, you're on the hook," said Donald Verrilli, an attorney working with the entertainment companies. "When you protect copyright, you innovate legitimately. It is the illegitimate abuse of technology that we are opposed to."

A handful of diverse organizations joined the entertainment companies in their appeal to the Supreme Court on Monday, occasionally making for some strange bedfellows.

In a lengthy brief, the Office of the Solicitor General agreed with the entertainment companies.

"While P2P technology unquestionably can be employed for a variety of legitimate purposes without giving rise to rampant copyright infringement, the record...suggests that (the file-swapping software companies) have built their particular P2P networks around the 'draw' of massive copyright infringement," the solicitor general's brief read. They "cannot evade liability...merely by pointing to other, legitimate uses of the technology."

In addition to the solicitor general's office, a group of conservative, family and Christian organizations that are often deeply critical of Hollywood and record label releases joined the anti-P2P chorus.

Those groups, which included the Christian Coalition, the Concerned Women for America, Morality in Media and others, wrote that the lower-court decisions relieving file-swapping companies of legal liability could lead to a "proliferation of anonymous, decentralized, unfiltered and untraceable peer-to-peer networks that facilitate crimes against children and that frustrate law enforcement efforts to detect and investigate these crimes."

The Business Software Alliance, the Progress and Freedom Foundation, a large group of state attorneys general, artists including the Eagles and Reba McEntire, and a group of law professors also supported the RIAA and MPAA in their arguments.

A separate group of "neutral" parties also filed arguments on various issues surrounding the case.

U.S. Sens. Patrick Leahy, D-Vt., and Orrin Hatch, R-Utah, took issue with the characterization the file-swapping companies' attorneys made of Congress' role in the recent copyright debates.

A larger group of Internet companies (including CNET Networks, publisher of wrote that it did not approve of copyright infringement on the file-swapping networks but asked the court to retain the Sony decision because it had led to considerable technological innovation over the years.