The Hindu Business Line : Software misuse: What US court ruling means for entertainment cos

THE fat is well and truly in the fire with the United States Court of Appeals for the Ninth Circuit in San Francisco ruling that peer-to-peer (P2P) software cannot be held accountable for its misuse and that Grokster and StreamCast Networks, the suppliers of free peer-to-peer software, are not liable for illegally swapped music and movies online because they do not have central servers where computer users can access copyrighted material.

While US entertainment companies which have been trying to get the courts to shut down outfits running the P2P networks are yet to work out the full implications of the ruling, they know that they have been dealt a body blow.

And they don't have very many shoulders to cry on because they have been ruthless in going after P2P network companies for years and have, in some cases, driven them into bankruptcy by forcing them to run up massive expenses in defending themselves.

While Shaman Networks, parent of Kazaa which is arguably the most widely used P2P network globally and which is facing a parallel lawsuit in Los Angeles federal court, has indicated that it plans to use the ruling to seek the dismissal of the litigation or a ruling in its favour, the Motion Picture Association of America CEO, Mr Jack Valenti, has gone in for a spot of damage control with a statement that copyright violations are still illegal and that the "decision should not be viewed as a green light for companies or individuals seeking to build businesses that prey on copyright holders' intellectual property."

The ruling is an extremely interesting one. Mr Justice Sidney R. Thomas, writing for the unanimous three-judge panel which has upheld a lower court ruling dismissing most of the lawsuits brought by movie studios and record labels against P2P network outfits, has made the observation that that most P2P networks are decentralised by design.

In other words, they are self-propagating, making it almost impossible for the companies running them to control what it shared through them.

It may be recalled in this context that networks run by Napster and some other P2P companies had faced difficulties in court because they had maintained shared file indexes on central servers which could be regulated by them.

In the present instance, the court has proved reluctant, as in the case of copying machines, VCRs, digital recorders and telephones in the past, to find fault with the technology when another option, that of pursuing the copyright violators themselves, is available to the complaining industries and the level of effort required to police activity facilitated by the technology is unreasonable.

Thus, the court, sounding a note of caution with regard to the various restraint-of-technology initiatives currently under way, has said that the goals of the entertainment industry would be better achieved by legislation than litigation.

In the concluding paragraphs of the ruling, Mr Justice Thomas has written: "From the advent of the player piano, every new means of reproducing sound has struck a dissonant chord with musical copyright owners, often resulting in federal litigation. This appeal is the latest reprise of that recurring conflict, and one of a continuing series of lawsuits between the recording industry and distributors of file-sharing computer software."

"... We live in a quicksilver technological environment with courts ill-suited to fix the flow of internet innovation....The introduction of new technology is always disruptive to 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. Thus, 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."

Analysts dealing with intellectual property and copyright policy have pointed out that the ruling does not absolve individual users of potential liability for sharing copyrighted files.

The court has only said that the makers of the software can't be liable.

And then again, they have described the ruling as significant because it makes the point that file-sharing services like Grokster can be used for legitimate purposes.

In a footnote in its ruling, the appellate court has said that even if only 10 per cent 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."

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