Split Decision on File-Sharing

The Supreme Court’s June 27 decision in MGM v. Grokster is not quite as bad as the tech companies feared it would be, and not nearly as good as the content companies hoped it would be. Unfortunately, the decision also lacks the clarity that the rest of us hoped it would have. As a result, we can reasonably expect more litigation for some time to come.

In Grokster, the Court reversed lower courts’ summary judgment on the issue of whether the current software offered by defendants Grokster and Streamcast was lawful, and then went on to adopt a new theory for liability–the intentional “inducement of infringement.”

The new rule marks a departure from the two-decade old “bright line” test of Sony Corp. v. Universal City Studios, which held that a technology is lawful if it is “capable of substantial noninfringing use,” even when that technology is widely used for infringement. Post-Grokster, a technology-providing defendant will have to prove it didn’t create or distribute tools that can be used for copyright infringement with the intent of causing such infringement.

Proving a negative is hard in any situation, and for a defendant in this type of case, it probably means turning over just about all records to whoever is suing you, so that the plaintiff can dig for incriminating e-mails and memos about what the defendants knew and when they knew it.

It’s clear the Supreme Court was trying to preserve the fundamental effect of the Sony rule, which has given breathing space for the development of new consumer technologies from the iPod to TiVo. Still, the Grokster case likely means that U.S. technology developers will be thinking a lot harder in the future over whether the next iPod or TiVo is going to trigger litigation, and about how they describe the features of new technologies, both in public statements and in private communications. Whether this means a “chill” on product innovation in the long term is still up for grabs, but the tech community–including companies that disapprove of the file-sharing tech providers like Grokster–is fearing the worst.

What probably won’t be affected, however, is the willingness of ordinary Americans to share their cultural enthusiasms–music, TV, movies, and everything else–in the online world. That impulse has accompanied every era of recording technology–it’s why our fathers and grandfathers hooked up reel-to-reel tape recorders to their hi-fi equipment. Regardless of the outcome of the Grokster case and the cases that are sure to come, file-sharing won’t be going away anytime soon. It’s up to the content creators and our culture at large to adapt to a new world.