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

Both the District Court of California and the Ninth Circuit Court of Appeals ruled in favour of Grokster, much to MGM’s immense disappointment. It was held in both courts that Grokster escaped liability for a number of reasons:

• Grokster did not have constructive, adequate knowledge of the infringements.
• The software distributed by Grokster was capable of substantial non-infringing uses.
• There was no central server, thus Grokster could only obtain information of the infringement after it had already happened (i.e. they could not block or prevent copyright infringement because they were not able to directly supervise file transfers).
• Grokster could not be found responsible for materially contributing to any copyright infringement.
• Grokster did not directly earn money from this software, as it is free for people to download. Instead, they earned money through advertisements on their website.
• Grokster was unable to change the software to control user access due to the fact that  the software resided on the users’ computers and not on a centralised server.

However, in the United States Supreme Court, the ruling of the appeal favoured MGM. The unanimous ruling was that “one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.” Under these conditions, P2P file-sharing companies could now be sued for copyright infringements. This case has been dubbed by many as the most important intellectual property case in decades.

Due to the extent of disagreement which arose as to whether Grokster is protected under the Sony Betamax case, a new test has been developed to determine whether the software in question is protected by the ruling in the Betamax case. The test assesses whether or not the distributors of the software have promoted it as a means of copyright infringement. If such intentions were found, then the ruling of the Betamax case could not be used as precedent.

As long as new innovations do not affect existing copyrights, then this ruling should not affect them. It is seen by the Supreme Court as a fair balance between the benefits gained by allowing and promoting technological innovation and the need to respect the intellectual property rights of artists. However, critics do not quite view it in the same light: they are sceptical that the test will work in their favour due to it’s inherent ambiguity.

There are major concerns, however, that despite the good intentions of the court to strike a fair balance between innovation and copyrights, many investors may be put off. If there is a slight chance that a potential project is at risk from this ruling, then ideas are likely to go no further than the drawing board. This could have huge significance, especially regarding the creation of new digital technologies: Any threat of liability, and the idea dies.

Many argue that file-sharing is not the problem which needs to be addressed here, it is the issue of the individuals that abuse it. On the other hand, trying to hold millions of downloaders responsible for their (numerous) actions would be logistically impossible, and so a more preventative approach has instead been used.