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File sharing sites not liable for infringement { August 20 2004 } Original Source Link: (May no longer be active)
http://www.nytimes.com/2004/08/20/technology/20digital.htmlhttp://www.nytimes.com/2004/08/20/technology/20digital.html
August 20, 2004
File-Sharing Sites Found Not Liable for Infringement
By MATT RICHTEL
SAN FRANCISCO, Aug. 19 - Affirming a lower court decision, a federal appellate court ruled Thursday that the distributors of software used by millions of people to exchange music files over the Internet cannot be held liable for aiding copyright infringement.
The decision, by a three-judge panel of the United States Court of Appeals for the Ninth Circuit, upholds a ruling issued in April 2003 by a federal judge in Los Angeles. The decision gives distributors of peer-to-peer file-sharing software a significant victory in their long battle with the record and movie industries, legal experts said.
Judge Sidney R. Thomas, writing for the panel, found that the two distributors, Grokster and StreamCast Networks, which offers the Morpheus file-sharing service, are not liable for aiding copyright infringement because they do not have the ability to monitor or control how users of their software exchange files.
"David's won another round," said Wayne Rosso, former president of Grokster, comparing the record industry to Goliath.
The plaintiffs in the case, the music and movie industries, have argued that file-sharing networks are forums for mass copyright piracy. The software of both companies, which can be downloaded over the Internet, allows users to share music, video and other digital files that they store on their computers. Ninety percent of the files shared, according to music and movie industry executives, include copyrighted material.
Mitch Bainwol, chief executive of the Recording Industry Association of America, issued a statement saying the appellate court ruling, "does not absolve these businesses from their responsibility as corporate citizens to address the rampant illegal use of their networks."
Mr. Bainwol said the record industry would continue to seek legal and legislative remedies to address the "ongoing illegal activity." He did not say whether the industry would pursue an appeal.
Critics say the software distributors make money by selling advertisements that appear on computer screens when users exchange files. Thus, they benefit financially when more people exchange files, including those that contain copyrighted material.
The appellate court, however, said it is not up to the courts to adapt copyright law to the effects created by new technologies.
"We live in a quicksilver technological environment with courts ill-suited to fix the flow of Internet innovation," Judge Thomas wrote. "The introduction of new technology is always disruptive of old markets, and particularly to those copyright owners whose works are sold through well-established distribution mechanisms. Yet, history has shown that time and market forces often provide equilibrium in balancing interests, whether the new technology be a player piano, a copier, a tape recorder, a video recorder, a personal computer, a karaoke machine or an MP3 player."
He added that "it is prudent for courts to exercise caution before restructuring liability theories for the purpose of addressing specific market abuses, despite their apparent present magnitude. Indeed, the Supreme Court has admonished us to leave such matters to Congress."
Jonathan Zittrain, an expert in Internet law at Harvard Law School, said the court's ruling might compel copyright holders to focus more energy on lobbying legislators to change the law. The copyright holders, Mr. Zittrain said, "may be reaching the limit of what the federal judiciary is prepared to do to help them in their cause."
The lawsuits against the file-sharing networks are only part of a multipronged attack by the record and movie industries to prevent copyright infringement.
The record industry has also filed lawsuits against some 3,900 individuals, accused by the industry of illegally downloading copyrighted files. In addition, the record and movie industries have pushed hard for legislation to combat file-swapping networks. In June, legislation supported by the industries was introduced in the Senate that would explicitly extend copyright liability to distributors of file-sharing software.
Copyright owners have had success in the courts, dating back to their victory in February 2001 against Napster, the pioneering file-sharing network. The Napster case, which was also decided by the appellate court for the Ninth Circuit, found that network aided copyright violations because it maintained and controlled servers that searched out the location of available files for its users.
By contrast, the court found that Grokster and StreamCast are decentralized and do not have that level of control. Rather, individual users of the software exchange files directly, using the network to find each other over the Internet.
Art Brodsky, the communications director of Public Knowledge, a public interest advocacy group focusing on intellectual property and copyright policy, said Thursday's ruling did not absolve individual users of potential liability for sharing copyrighted files. "It says the makers of the software can't be liable," Mr. Brodsky said. "It doesn't say anything about the individual users."
Mark F. Radcliffe, an expert in intellectual property law at Gray Cary Ware & Freidenrich, a Palo Alto law firm, said the appellate court decision was also significant in that it pointed out that file-sharing services, like Grokster, could be used for legitimate purposes.
In a footnote in its ruling, the appellate court said that even if only 10 percent of the files exchanged were done so with permission of copyright holders, it would mean that there were "hundreds of thousands of legitimate file exchanges."
Mr. Radcliffe said the decision might cause the record industry to intensify its antipiracy efforts against individual file sharers. "They can still sue individual people for copyright infringement," Mr. Radcliffe said. "But that's a long chase for the music industry."
Copyright 2004 The New York Times Company
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