Trends Report – MGM v. Grokster
Once again Google captured headlines this week. However, their new product feature and $300 per share sustained closing price was not enough to command the majority of the internet advertising related media. Something close to the heart of any who “grew up” during the late 1990’s and early 2000’s did instead. After a brief respite, the often beloved, equally hated peer-to-peer file sharing networks were again in the media spotlight. The big news this week involved the Supreme Court’s decision against Grokster in MGM v. Grokster. The ruling states that makers of online file-sharing software, such as Grokster and its co-defendant Streamcast, can be sued if they allow or encourage illegal swapping of copyrighted material. The decision by the Supreme Court now sends back to court MGM to see if they can prove Grokster and the parent company behind Morpheus tried to induce infringement.
Reactions to the ruling were expectedly mixed and largely dependent upon the frame of reference. Articles contained pro-digital protection headlines such as “Theft by any other name” as well as pro-file sharing headlines such as “Grokster Loss Sucks for Tech.” Since Napster’s launch in 1999, file sharing has represented the ultimate freedom for users and the source of all evils for the record and motion picture industries. In August of last year, the 9th U.S. Circuit Court of Appeals ruled that file-sharing companies are not liable for their users’ copyright infringement. That decision upheld an earlier lower-court ruling from April 2003 that said the same. After the second decision favoring the file sharing companies, the entertainment studios petitioned the Supreme Court to hear the case. The rest is the beginning of history.
The appeals court that ruled in favor of Grokster and Streamcast based their decision on a famous case in 1984 that also went to the Supreme Court. Known as the Sony Betamax case, the Supreme Court ruled that Sony’s videotape recorder was a legal device because it was "capable of substantial non-infringing uses," even though it could be used to violate copyrights. It is a ruling that is often credited with providing innovators a benchmark with which they can develop new products as well as directly fueling the abundance of new technologies seen over the past twenty years.
The rapid technological advances along with the digitization of content set the stage for where we are today. And, it’s a reason why many unlikely companies have sided with the defendants. Says Scott Rafer, CEO blog search engine Feedster, "The large content players … are trying to shift the enforcement burden to the tools manufacturers," and that “directly impacts my business.” The other side of the argument includes Fritz Attaway, executive vice president and Washington general counsel for the Motion Picture Association of America as well as William Hart, an attorney who represents the National Academy of Recording Arts & Sciences, both of whom contend that users coming to Grokster and Morpheus’ networks do so with the intent to commit infringement. Were there another intent, such as saving time – a factor in the Betamax case – they might have had less of an issue with the file sharing networks.
The idea that a new technology can allow people to break the law, and deciding who is responsible did not originate with the Grokster case, nor will it end with them. Similarly, the issues of accountability raised in this case have implications outside of file sharing, ones that strike at the core of our industry. This case is important as it paints the legal and economic climate within which other related decisions will be made. Seeing the court’s reaction will only fuel those people who believe that intermediaries should share in the consequences of its users. It’s a topic that this week’s Digital Thoughts addresses as MGM v. Grokster will undoubtedly, albeit unintentionally, impact future adware / spyware litigation and attitudes.
In many ways, the current file sharing battles deal less with copyright infringement and more with a cultural shift that shareware networks helped bring to the surface. As Paul Miller, also known as DJ Spooky said, "Shareware culture is here to stay." In his opinion the entertainment industry has a "neo-medieval mentality.” And, “They need to update their (business models)." Like the 30-second commercial, the entertainment industry as a whole has seen such success over the past century that when faced with a decision to explore new models or fight for the status quo, the decision was an easy one. Exploring new models requires embracing disruptive forces and change. Fighting for the status quo involves no reallocation of existing resources. The resources needed to fight for the status quo are much like an army. They are heard but not felt. Part of the company’s funds goes towards supporting them, but their daily activities have no bearing on ours. Unfortunately, the case of MGM v. Grokster might have happened too early in the cultural change. This is to say that the entertainment industry may have dodged a bullet because the “shareware culture” while popular doesn’t represent enough people. Even though this case will stunt our growth, i.e. delay a better life through improved technologies; society at large remains too far removed from the center of this quake to comprehend the magnitude of the set back.
