Supreme Court justices question P-to-P lawsuits

WASHINGTON -- Technology companies may shy away from inventing new products that could be used to violate copyright laws if the U.S. entertainment industry can sue the distributors of the Grokster and Morpheus P-to-P (peer-to-peer) software packages for their users' actions, some U.S. Supreme Court justices argued Tuesday.

During oral arguments in the MGM vs. Grokster case, justices peppered a lawyer for the entertainment industry with questions, saying a move away from a 21-year-old standard on technology and copyright could have major effects on the U.S. technology industry. The Grokster case was the first of two technology-related cases argued before the Supreme Court Tuesday, with the court also examining federal regulation of Internet cable modem service.

Donald Verrilli Jr., representing the music and movie industries in the case, told justices that Grokster Ltd. and Morpheus distributor StreamCast Networks Inc. built their business plans around copyright violations, and the vast majority of files traded with the Grokster and Morpheus software violate copyright law. The Supreme Court's 1984 Sony Betamax ruling exempts makers of technology from secondary copyright liability lawsuits when their technology has "substantial noninfringing uses," but Grokster supporters can point to just a few hundred thousand legal files among the 2.6 billion traded with P-to-P software each month, he said.

"That's the whole business," Verrilli said. "What they're talking about as lawful is a tiny, teeny little fraction."

Verrilli called Grokster and Morpheus a "gigantic infringement machine that was built on inducement" of copyright violations.

But Justice Stephen Breyer questioned how the court could draw the line between Verrilli's assertion that P-to-P software enabled "substantial" infringements and the Betamax ruling. If the court recognized a new standard penalizing technologies enabling substantial copyright violations, the copying machine, the VCR and the Gutenberg printing press might not be legal, Breyer said.

Using the same logic, the entertainment industry could argue that Apple Computer Inc.’s iPod also encourages copyright violations, added Justice David Souter. "If I can get music to the iPod without buying the CD, I'm not going to buy the CD," he said. "How do we know in advance on your test anything that gives the inventor or ... the developer the confidence to go ahead?"

The 9th Circuit Court of Appeals erred in rejecting the entertainment industry's case because it "basically adopted a test of theoretical noninfringing uses," answered Paul Clement, acting solicitor general of the U.S. Department of Justice, which is siding with plaintiffs Motion Picture Association of America, the National Music Publisher's Association of America and the Recording Industry Association of America in the Grokster case.

But a tougher definition of secondary liability would open up technology companies to many more lawsuits, said Justice Antonin Scalia. "I'm going to get sued right away before I get a chance to do business," he said.