Is it another Betamax or another Napster?
That was the question Tuesday before the 9th U.S. Circuit Court of Appeals in Pasadena, as attorneys for the film and music industry argued that the legal decision that ultimately shut down Napster applied in the industry's case against peer-to-peer networks
Grokster and
Streamcast Networks.
Reps for the companies behind those technologies said it was more similar to the 20-year-old Sony Betamax case, in which the U.S. Supreme Court ruled that VCRs were legal despite their potential use for copyright infringement.
Oral arguments were part of an appeal by the MPAA, RIAA and National Music Publishers Association of America against an April ruling by U.S. District Court in favor of Grokster and Streamcast.
At stake is nothing less than the anti-piracy strategies of the entertainment biz for years to come, as movies soon join music in mass online piracy. If the court rules that Grokster and Streamcast, maker of the popular Morpheus P2P software, can be forced to either filter out copyrighted materials or else shut down, copyright owners will be able to go directly after the networks that enable piracy.
However, if the District Court ruling is upheld, the MPAA and RIAA may find their only legal recourse against online piracy is to continue the latter's strategy of suing individual downloaders, which does not appear to have put a dent in piracy statistics.
The three-judge 9th Circuit panel showed some skepticism about the entertainment companies' arguments from the beginning. Judge John Noonan interrupted Russell Frackman, who repped the MPAA and RIAA, within less than a minute of his initial comments to state, "When I hear your arguments, the one word that comes to my mind is Sony."
Frackman and Cary Ramos, attorney for the NMPA, countered that the Sony ruling does not apply because the copyright infringement in this case can be prevented by fixing the software and that the P2P companies need merely "flip the switch." They added that Grokster and Streamcast make money from ongoing piracy by advertising to users while they are on the network.
They also cited a study done by the studios and labels that found 90 percent of the content on Grokster and Morpheus was copyrighted, while the rest was indeterminate. They said they were unable to find a single example of content that was in the public domain or that copyright owners had agreed to put online.
But Fred Von Lohman, an attorney with cyberliberties group Electronic Frontier Foundation who was repping Streamcast, immediately noted examples of legal content on his client's network, including videogames and musicvideos put on by their owners and text from the Bible, Koran and Communist Manifesto.
Von Lohman and Michael Page, repping Grokster, argued that the amount of copyrighted material on their networks was immaterial because their clients, unlike Napster, do not have the ability to monitor or prevent activity on their networks. The only way to implement a fix like the one the industry wants, they said, is to redesign the programs from the ground up.
"This would expand the rule of vicarious liability without limit," Page told the court. "If it's just a question of who could build a tool to prevent piracy, Microsoft would be liable, ISPs would be liable, the makers of CD burners would be liable."
P2P reps tried to ultimately frame the case as a question of whether the courts should try to stop a new technology in its infancy or let the market adapt to it, as happened with the VCR. Industry attorneys countered that it was a specific question of two companies violating copyright and that peer-to-peer systems could continue to be used for legal purposes.
It was clear throughout that the judges were more skeptical of the industry's case, questioning Frackman and Ramos much more than they did von Lohman and Page.
At one point, Judge Sydney Thomas pushed Frackman on whether his argument would lead to Xerox being held responsible if it was informed that users of its copiers were engaging in massive copyright infringement. Frackman admitted that this interpretation was "possible" before noting that Xerox does not have an ongoing relationship with its users the way Grokster and Streamcast do.
Decision in the case might not come for months and could then be appealed to the U.S. Supreme Court, but the defendants are not backing down in the meantime. Streamcast today released a new version of its Morpheus software that connects to every major P2P network and contains advanced capabilities to hide users' IP addresses, which the RIAA has used to identify lawsuit targets.
A rep for Grokster said his company will release an updated version of its application this week as well.
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