The makers of two leading file-sharing programs are not legally liable for the songs, movies and other copyright works swapped online by their users, a federal appeals court ruled Thursday in a stinging blow to the entertainment industry.
Among other reasons, the 9th U.S. Circuit Court of Appeals said Grokster Ltd. and StreamCast Networks Inc., unlike the original Napster, were not liable because they don’t have central servers pointing users to copyright material.
“In the context of this case, the software design is of great import,” Judge Sidney Thomas wrote for the unanimous three-judge panel, which upheld a lower court ruling that dismissed the bulk of the lawsuit brought by movie studios and music labels.
The panel noted that the firms simply provide software that lets individual users share information, regardless of whether that shared information is copyrighted.
“The technology has numerous other uses, significantly reducing the distribution costs of public domain and permissively shared art and speech, as well as reducing the centralized control of that distribution,” Thomas wrote.
The entertainment industry could appeal to the U.S. Supreme Court.
“We are carefully reviewing our next steps,” said Jack Valenti, president of the Motion Picture Association of America.A ruling against the file-sharing services could have made them unavailable for legitimate uses, analogous to banning VCRs to watch a school play because they also could record and play copyright TV shows.
Civil libertarians also had warned a defeat for Grokster and StreamCast could have forced technology companies such as Microsoft Corp. to delay or kill innovative products that give consumers more control.
Thursday’s ruling puts additional pressure on the entertainment industry to take the more costly and less popular route of going directly after online file-swappers. Recording companies already have sued more than 3,400 such users; at least 600 of the cases were settled for roughly $3,000 each.
Napster was shut down after the 9th Circuit ruled its centralized servers, which contained directories to thousands of copyright songs, made it legally liable for contributing to copyright infringement.
But in the wake of that ruling, peer-to-peer technology developed that avoided the need for a central hub, arguably limiting the liability of the companies involved.
Fred von Lohmann, who represented StreamCast, said the ruling follows “the same principle that people who make crowbars are not responsible for the robberies that may be committed with those crowbars.”
