Update: U.S. Supreme Court rules against Grokster

Grokster and StreamCast Networks can be held liable for copyright infringements committed by users of their peer-to-peer file-sharing software, the U.S. Supreme Court ruled on Monday. The decision in the case Grokster v. MGM is a major win for the motion picture and recording industries, which took the case to the nation's highest court after losses in lower courts.

Lawyers for the plaintiffs -- the Motion Picture Association of America (MPAA), the National Music Publisher's Association of America and the Recording Industry Association of America (RIAA) -- asked the court to recognize that the Grokster and StreamCast's Morpheus P-to-P (peer-to-peer) software packages were created primarily to encourage users to illegally trade copyright songs and movies. They argued that while users are responsible for copyright violations, P-to-P vendors share a secondary liability.

The issue before the Supreme Court focused on a relatively narrow question: whether movie and music companies should be able to sue the P-to-P distributors for the copyright violations committed by their users.

The Supreme Court ruling thus gives movie and music companies the ability to sue P-to-P distributors and sends the case back to a lower court.

Those who supported Grokster argued the case has broader implications, saying if copyright owners are able to sue inventors of new technologies for the sins of their users, few technology companies will be safe.

The case centers around the Supreme Court's 1984 Sony Betamax ruling, in which judges rejected claims of a movie studio brought against Sony Corp., maker of the Betamax VCR. The court ruled against Universal City Studios, saying that makers of technologies with significant uses other than infringing copyrights were not liable for their users' copyright violations.

The entertainment industry had lost its previous attempts to sue Grokster and StreamCast Networks. The 9th U.S. Circuit Court of Appeals, citing the 1984 Betamax decision, ruled in August that the P-to-P vendors were not liable for their users' copyright violations.

In a unanimous decision, the Supreme Court on Monday left the landmark Sony decision untouched, but found that Grokster and StreamCast are at fault for promoting copyright infringement among users of their products. The Sony decision doesn't provide shelter for promoters of copyright infringement, the Supreme Court found.

Grokster and StreamCast are both aware that users employ their software primarily to download copyright files and that when they began distributing their software each company actively encouraged their users to use their products to download copyright works.

"Sony's rule limits imputing culpable intent as a matter of law from the characteristics or uses of a distributed product. But nothing in Sony requires courts to ignore evidence of intent if there is such evidence, and the case was never meant to foreclose rules of fault-based liability derived from the common law," wrote Justice David Souter, who penned the decision.

"The record is replete with evidence that from the moment Grokster and StreamCast began to distribute their free software, each one clearly voiced the objective that recipients use it to download copyrighted works, and each took active steps to encourage infringement," Souter wrote.