Judge rules file swapping software legal

The music/ movie industry is not happy with this, long live file- swapping.

Judge: File-swapping tools are legal

By John Borland
CNET News.com
April 25, 2003, 12:46 PM PT

A federal judge in Los Angeles has handed a stunning court victory to file-swapping services Streamcast Networks and Grokster, dismissing much of the record industry and movie studios' lawsuit against the two companies.
In an almost complete reversal of previous victories for the record labels and movie studios, federal court Judge Stephen Wilson ruled that Streamcast--parent of the Morpheus software--and Grokster were not liable for copyright infringements that took place using their software. The ruling does not directly affect Kazaa, software distributed by Sharman Networks, which has also been targeted by the entertainment industry.
"Defendants distribute and support software, the users of which can and do choose to employ it for both lawful and unlawful ends," Wilson wrote in his opinion, released Friday. "Grokster and StreamCast are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are used to infringe copyrights."
The ruling is the second major setback to date to the entertainment industry's efforts to keep a tight rein on online file-swapping, following a similiar decision in the Netherlands last year that found that Kazaa was not liable for its users' copyright infringements. If upheld, the decision could lead artists, record labels and movie studios to cast new legal strategies that they have until now been reluctant to try, including bringing lawsuits against individuals who copy unauthorized works over Napster-like networks.
According to the major record labels, file-swapping is a major contributor to declines in music sales over the past few years, a trend that has thrown the industry into disarray. Debt-ridden media conglomerates are now considering sales of their music divisions even as they begin to test paid online music services intended to compete with free file-swapping networks and turn the tide.
Attorneys called the ruling a blow for entertainment and record companies trying to stop the networks used to swap unauthorized copies of their works.
"This is a very serious setback for the record industry and other content industries, because they've uniformly won these cases in the U.S.," Mark Radcliffe, an intellectual property attorney at Gray Cary Ware & Freidenrich said.
While the ruling in no way validates the legality of downloading copyrighted music online, it would shield companies providing decentralized file-swapping software such as Gnutella from liability for the actions of people using their products.
As such, it could provide new leverage for file-swapping companies such as Grokster, Streamcast and Sharman in negotiations with record companies and other copyright holders to license works legitimately. Since Napster's $1 billion settlement offer with the record industry in 2001, file-swapping companies have repeatedly sought an amicable settlement with copyright holders but have been almost universally rebuffed.
The court's ruling applies only to existing versions of the Morpheus and Grokster software. Earlier versions of the software, which functioned slightly differently, could potentially leave the companies open to liability.
A spokeswoman for the Motion Picture Association of America (MPAA) said the copyright holders were deeply disappointed in the decision and would certainly appeal.
"We feel strongly that those who encourage, facilitate and profit from piracy should be held accountable for actions," MPAA spokeswoman Marta Grutka said. "We're hoping that people aren't taking this as an invitation to continue along the path of what is clearly illegal activity."
Recording industry officials said they saw some good in the ruling, but that they too would immediately appeal to the 9th Circuit Court of Appeals.
"We are pleased with the Court's affirmation that individual users are accountable for illegally uploading and downloading copyrighted works off of publicly accessible peer-to-peer networks," said Recording Industry Association of America (RIAA) chief executive officer Hilary Rosen in a statement. "(But) businesses that intentionally facilitate massive piracy should not be able to evade responsibility for their actions."
Wilson's decision comes in the most closely watched Net copyright case since Napster's demise.
The two pieces of file-swapping software affected by Friday's ruling remain among the most popular downloads on the Net, although they operate deep in the shadow of market leader Kazaa. Morpheus--once the undisputed leader--has fallen to about 120,000 downloads per week, according to Download.com, a software aggregation site operated by News.com publisher CNET Networks. Kazaa, by contrast, was downloaded more than 2.7 million times during the past week.
The RIAA and the MPAA sued Streamcast, Grokster, and the original parent company of Kazaa's software in October 2001, and the case has been making its way slowly through court since that time.
In late 2002, both sides asked the judge for summary judgment, or a quick ruling in their favor before going to a full trial. Wilson's decision in favor of the file-swapping companies Friday was tied to that months-old series of requests.
The decision does not directly affect Kazaa, at least not immediately. At the time that Grokster and Streamcast were arguing for summary judgment, Wilson had not yet ruled that the Australia-based Sharman Networks could be sued in the United States.
Sharman is scheduled to meet with RIAA and MPAA attorneys in court on Monday, to argue over whether its counterclaim against the record labels and movie studios should be dismissed. Friday's ruling, however, could change the direction of that hearing.
The judge's surprise ruling marked the first validation of an argument that file-swapping supporters have been making since Napster's first controversial arrival. Peer-to-peer file-trading is a technology that can be used for activities well beyond copyright infringement, and the technology should not be blocked altogether to stop solely its illegal uses, these backers have said.
In making that argument, the judge looked back to the landmark 1984 Supreme Court ruling that upheld the legality of Sony's Betamax videocassette recorder (VCR). That decision helped establish the doctrine of "substantial noninfringing use," which protects technology providers that distribute products--like the VCR or photocopier--that can be used for both legal and illegal purposes.
"We are absolutely very proud of this judge for having the unusual capacity to be able to grasp the technology and its future benefit to taxpayers and shareholders around the world," said Wayne Rosso, president of Grokster. "Technology is usually way ahead of courts and legislature. The fact that judge was able to acutely comprehend (this technology) is a credit to the legal system."

Not like Napster
Much of Wilson's ruling hung on the technological differences between Napster and the newer, decentralized file-swapping services.
Napster's service opened itself to liability for its users' actions by actively playing a role in connecting people who were downloading and uploading songs--a little like a physical swap meet provides the facilities for people exchanging illegal material, the judge said. By contrast, Grokster and Streamcast distributed software to people and had no control over what their users did afterwards, Wilson said.
When users search for and initiate transfers of files using the Grokster client, they do so without any information being transmitted to or through any computers owned or controlled by Grokster," Wilson wrote. "Neither Grokster nor StreamCast provides the site and facilities" for direct infringement. "If either defendant closed their doors and deactivated all computers within their control, users of their products could continue sharing files with little or no interruption."
It didn't matter that the companies were aware generally of copyright infringement happening using their software, Wilson added--they would have to know of specific instances of infringement and be able to do something about it, to be liable for those users' actions.
That stands in stark contrast to an earlier ruling against file-swapping company Aimster, in which the judge explicitly said the file-trading company did not need to know about individual acts of copyright infringement as they were happening to be held liable for the illegal activity.
Friday's decision is likely to send shock waves throughout the copyright and technology communities, which have adjusted slowly over the last year to the notion that file-trading services such as these were mostly likely illegal. Technology companies have complained that the repeated lawsuits have stifled innovation, but many also have begun to move forward in alliances with authorized music--and film-distribution services.
The case will certainly be appealed. Because different courts have come to very different conclusions about the law, the issue could go as high as the U.S. Supreme Court, a process that would likely take years.
"This is far from over," said Fred von Lohmann, an Electronic Frontier Foundation attorney who has represented Streamcast in the case. "This is not the end, but it sends a very strong message to the technology community that the court understands the risk to innovation."
In the interim, the ruling is likely to produce another round of interest in legislation affecting copyright issue on the Net--an outcome that Wilson himself foresaw.
Policy, "as well as history, supports our consistent deference to Congress when major technological innovations alter the market for copyrighted materials," Wilson wrote. "Congress has the constitutional authority and the institutional ability to accommodate fully the raised permutations of competing interests that are inevitably implicated by such new technology...Additional legislative guidance may be well-counseled."

 

You must have missed the press release for Ashcroft's "Operation Pipe Dreams". They busted around 54 pipe makers including Tommy Chong... true story. I think it happened last week

 

Thats basically what I got out of it, the music/ movie industry will have to go after individual users (which they have already done).

 

They're here...


Music Industry Sends Warning to Song Swappers
29 minutes ago Add Entertainment - Reuters to My Yahoo!


By Sue Zeidler

LOS ANGELES (Reuters) - The record industry opened a new front in its war against online piracy on Tuesday by surprising hundreds of thousands of Internet song swappers with an instant message warning that they could be "easily" identified and face "legal penalties."
About 200,000 users of the Grokster and Kazaa file-sharing services initially received the warning notice on Tuesday and millions more will get notices in coming weeks.
"We're expecting to send at least a million messages or more per week because these users are offering to distribute music on Kazaa or Grokster," said Cary Sherman, president of the Recording Industry Association of America (news - web sites).
The move comes days after a federal judge delivered a stunning setback to its efforts to shut down song-swapping services, and a day after Apple Computer Inc. unveiled the latest industry-endorsed commercial service aimed at wooing users from the free networks.
U.S. District Court Judge Stephen Wilson on Friday ruled that the Grokster and Morpheus services should not be shut down because they cannot control what is traded over their systems.
While recording and movie officials said they will appeal the ruling, they at least found solace in the judge's opinion that the users themselves are violating copyrights.
Sherman said the messaging effort was planned long ago, but that the timing was fortunate because users may misinterpret Wilson's ruling to think copyright infringement is legal.
Others agreed. "The industry needed to step up their campaign after the unfavorable ruling last week, but at the same time its a natural extension of their efforts to educate consumers on copyright violations," said Lee Black, analyst with Jupiter Research.
Its not the first time the industry has targeted individual users. In April, the RIAA sued four students who were operating networks on three college campuses where it claims the networks were being used to illegally trade copies of music files.
The warning on Tuesday was sent by the RIAA on behalf of the world's big record labels owned by AOL Time Warner Inc. , EMI Group Plc (news - web sites), Bertelsmann AG (news - web sites),Vivendi Universal . and Sony Corp (news - web sites).


DON'T STEAL MUSIC

The message said in part: "It appears that you are offering copyrighted music to others from your computer. ...When you break the law, you risk legal penalties. There is a simple way to avoid that risk: DON'T STEAL MUSIC, either by offering it to others to copy or downloading it on a 'file-sharing' system like this. When you offer music on these systems, you are not anonymous and you can easily be identified."
Sherman described the move as educational, aimed at informing users that offering copyrighted music on peer-to-peer networks is illegal and that they face consequences when they participate in this illegal activity.
The message was designed by a third party who utilized the existing capability of the peer-to-peer networks' instant message systems. The RIAA said by using song titles, it was identifying users who were posting songs for others to download as targets for the message.
"We have a designated list of major copyrighted works and we're sending (them) to designated users to let them know that we know they are offering these songs on these networks and that they are not anonymous," he said.
Sherman said there was no plan to take further action against these users for now. "There is no next step. We are just letting them know it's illegal and they are not anonymous," said Sherman.
"The (our) computers will maintain a list of who it went to, but it's unrelated to any other program," he said.
"We're not going to change behavior overnight. The only way we can measure this is to see if fewer people are offering files on Grokster and Kazaa," he said.
Some experts doubted its effectiveness. "I think a small number of users will be deterred by this effort. It's not going to come as a surprise to them the RIAA finds it unlawful," said Jonathan Band, a copyright lawyer for Morrison & Foerster.

 

I wonder how long it will take before there is a way to mask your identity while swapping files. It will probably be out in a day or so...