PC Review Articles Consumer Advice The Legality of File Sharing - MGM vs Grokster

Whether we believe it is right or not, many of us have become accustomed to the fact that a large number people download copyrighted material regularly using Peer-to-Peer file-sharing software. As a result, the entertainment industry is losing billions of dollars in revenue, and is suffering from the infringements of many copyrights. Who should be held responsible for this? Is it the fault of the people who misuse the software, or is it perhaps the fault of the software distributors for allowing this to take place? The recent case of MGM Studios, Inc. v. Grokster, Ltd examined these issues.

Grokster and other P2P software providers: All distribute free software that allows computer users to share electronic files (including digitised music and motion pictures) through P2P networks. This software allows transfer of any digital file, but has been mostly used by customers to share copyrighted files (e.g. music and video)

MGM and other entertainment companies (24 in total): A collection of song-writers, music publishers and motion picture studios who “own or control the vast majority of copyrighted motion pictures and sound recordings in the United States” (their own description). They sought damages and an injunction against respondents (Grokster) for copyright infringement. MGM accused Grokster of distributing software which enabled users to breach copyright restrictions. They insisted that around 90% of data transferred using P2P software was copyrighted, costing them millions of dollars in lost revenues. They also argued that this type of copyright infringement would not occur if Grokster and similar software distributors did not make it possible.

Peer-to-Peer (P2P) File Sharing: Information in Grokster’s peer-to-peer distribution network does not exist in one place (there is no central server holding all the information), rather, every computer in the network holds information available to all other users in the network. Put another way, in a peer-to-peer network each computer is both a server and client. Members need only to download the relevant software, free of charge, and they may participate in this network to exchange files, which are more often than not copyrighted.

• The owners of copyrights believe that the software distributors are liable for copyright infringement of the software users: By providing P2P file-sharing software, MGM believe Grokster should be liable for the actions of the individuals who misuse it.
• A major debate rages over the issue that copyrights, no matter how numerous, do not give the holders a veto over certain advancements in technology.
• The copyright owners rely on the two recognised theories of secondary copyright liability: contributory copyright infringement and explicit copyright infringement. In order for Grokster to be held liable for contributory copyright infringement, it must be proven that direct infringement of copyrights took place by a primary party, that Grokster had full knowledge of the infringements and that they also provided a material contribution to this infringement. For Grokster to be held liable for vicarious (explicit) copyright infringement there must have been direct copyright infringement by a primary party, a direct financial benefit to the defendant (Grokster) and the right and ability of Grokster to supervise those responsible for the infringements.
• Precedent: The Betamax Case (Universal City Studios, Inc. et al. v. Sony Corporation of America Inc. et al. 1979) In this case it was held that video-recorders should not be banned, even though there is a chance they might be misused by the owner. This technology has substantial non-infringing uses, and so an outright ban could not be justified. Betamax technology was developed with the aim of allowing users to record television that they would have otherwise missed: thus, it’s intended and advertised use was not as an infringer of copyrights.

• Billions of files are shared across P2P networks each month - a large proportion of which are illegal. If Grokster was made responsible for their actions, the amount of files transferred would be expected to reduce significantly as tighter regulations are enforced.
• If MGM won, the owners of file-sharing software would be held responsible for copyright infringements of the software users.
• Even though MGM was attacking a certain type of software, many other technologies could be affected if MGM is successful, such as MP3 players, CD burners, external hard-disks, and so on… This would have brought drastic changes to the leisure (and working) time of many individuals.
• A precedent would be set against which similar cases in the future could be examined.
• This is not a new problem, it has been going on for years between the Entertainment Industry and technology which allows copyrighted material to be duplicated.
• The ultimate problem is a trade-off between intellectual property rights and technological innovations.