This issue arises in various other guises. We don't ban the sale of baseball bats, hammers or automobiles--even though they may be used as deadly weapons--because they serve legitimate, socially useful purposes. We do prohibit conduct that employs these instrumentalities for unlawful purposes.
Consistent with this reasoning, in the Betamax case the Supreme Court focused on the device itself. Borrowing from the closest intellectual property analog, the patent law's protection of the sale of articles that are "suitable for substantial noninfringing use," the court held that since VCRs have substantial noninfringing uses, sellers could not be held responsible for the acts of customers who violated the copyright laws by using their recorders for purposes of unlawful copying.
In, the court took great pains to preserve the Betamax principle by declining to revisit that decision and resting its opinion on other grounds. Rather than focus on the legal status of peer-to-peer file-sharing software in light of the extent to which it could be distributed and used for legitimate versus illegitimate purposes, Justice Souter looked to Grokster's and StreamCast's conduct, and this analysis proved to be their downfall.
Thus, looking to the classic, conduct-based law of inducement, the court held that the claims against Grokster and StreamCast were improperly dismissed, and that these companies could be held liable for contributory copyright infringement, because their statements and actions tended to show an intent to encourage infringement with the use of their file-sharing software. These statements and actions fell into three principal categories.
First, in purposefully touting itself as a replacement for, and seeking to lure the former users of, Napster, a notorious facility for the swapping of copyrighted materials. Second, in failing to take any steps to filter or otherwise impede the mass-scale infringement known to occur with the use of their file-sharing systems. And third, in adopting an advertising-based business model built on high-volume levels of usage that could only be sustained by the exchange of commercially valuable, copyrighted materials.
By sidestepping, and thereby preserving, its decision in Betamax and, at the same time invoking a conduct-based standard of contributory copyright infringement liability, the court deftly served the interests of both software and technology developers and copyright content owners, though neither may be entirely satisfied with the end result.
One thing is for certain: Would-be infringers will continue to seek, and unscrupulous developers will continue to promote, new methods and devices by which they can obtain something for nothing, and copyright owners will continue their struggle to find technological, legal and commercial means to keep them in check.