Analysis of the MGM v. Grokster case

There is an interesting article on Mondaq: a brief analysis of the June 27 Supreme Court verdict in the 'Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd' case. This time content providers had their victory: peer-to-peer file sharing sites like Grokster are 'liable' for illegal use. The earlier verdict of the Ninth Circuit court, that took sides with Grokster, was overturned.

No law suits yet, based on this verdict. And that's not surprising. The ruling is complex and anyone venturing into a legal battle has a lot to prove. What's more, intent to stimulate illegal use is very hard to prove. Furthermore, the Supreme Court was internally divided over the interpretation of the earlier and infamous 'Sony v. Universal' case (see below).

The authors, Castanias en Sokol, point out these things:

1. File sharing is illegal since it constitutes 'copyright infringement'.
2. The Supreme Court tried to balance the interests of the music and film industries (copyright owners) on the one hand and those of software- en hardware vendors on the other (innovators).
3. Whoever offers services that induce copyright infringement, is liable. This is indirect infringement and therefore secondary liability. It formed the basis of the Napster fall (it was bought by Bertelsmann, sold on to Roxxio and relaunched as a legal download service to compete with the likes of Apple's iTunes).
4. The June 27 Supreme Court decision is based to a large extent on the 1984 'Sony Corp. of America v. Universal Studios, Inc.' case. Universal sought to ban the Betanax videorecorder because of indirect infringement, but Sony was let off the hook. Sony wasn't liable, because the videorecorder has extensive legal purposes.
5. The Supreme Court overturned the lower court that had favoured the Grokster position. The 'Sony v. Universal' case had been misinterpreted. Even if legal use of Grokster occurs (sharing of non-copyrighted files), Grokster took actions that Sony did not: it actively stimulated illegal use. The Supreme Court points to a number of specific actions on the side of Grokster: the slogan "When the lights went off at Naster ... where did the users go?"; the use of names such as 'Grokster, 'OpenNap' en 'Swaptor'; Grokster's CFO saying "(our) goal is to get in trouble with the law and get sued. It’s the best way to get in the news."; the dependance of advertising sales on the number of downloads of the Grokster software.