Tech Trends: Online file sharing takes right hook
The entertainment industry won a landmark lawsuit that may make life more difficult for the millions of consumers who swap digital files online. In a unanimous decision, the Supreme Court ruled yesterday that providers of file-sharing technology may be held liable for their users' actions, deciding in favor of Metro-Goldwyn-Mayer Studios in its case against Grokster Ltd. The plaintiffs included 27 major movie and recording studios in addition to MGM.
Hollywood and the music industry have fought a bitter battle against the peer-to-peer networks (P2P), which enable the widespreadand illegal sharing of songs and movies over the Internet. Grokster and codefendant StreamCast allow users to share files directly from each other without creating a centralized location for the files, as Napster did before its service was shut down in 2001. The Motion Picture Association of America and the Recording Industry Association of America have sued thousands of individual users of these services; the ruling allows them to sue the providers of file-sharing services, a less costly and cumbersome road to justice.
Illegal downloading is pervasive. In March, according to market research firm NPD Group, 243 million songs were downloaded illegally, while 26 million songs were purchased online. MGM argued that nearly 90 percent ofthe activity on some P2P services is illegal. Grokster and StreamCast say they make every effort to deter such use of their technology. The ruling returns this case to the lower courts and opens the doors to aflood of litigation. "This David versus Goliath matter will continue," said StreamCast CEO Michael Weiss. For now, he said, it will be "business as usual" while Grokster and StreamCast prepare to fight in the lower courts.
Consumers who steal digital media are still liable and can still be sued. But it is unclear whether the ruling will do anything to change the behavior of individuals who illegally download music and videos, especially since international companies that offer file sharing technology will not be subject to the same legal hurdles as those in the U.S.
The bigger implication may be for the next cool gadget. Many in the high-technology industry worry that the ruling will stifle innovation. Software and hardware developers can't always foresee how their technology will be used, and with the fear of litigation now looming, the next iPod or Tivo may not make it to market. "This is a very dangerous decision for technology and innovation," said Edward Black, president and CEO of the Computer and Communications Industry Association. "It's a victory for lawyers."
In a separate ruling, the Supreme Court ruled that cable companies are not required to share their networks with independent Internet service providers.