MGM 9, GROKSTER 0

The biz is breathing a huge sigh of relief after the Supreme Court ruled unanimously (9-0) that developers of software violate federal copyright law when they provide computer users with the means to share music and movie files downloaded from the Internet.

The MGM v. Grokster ruling is a shock to those who expected the court's ruling to be lacking in decisiveness; on the contrary, it couldn't have been any more unequivocal.

Many in the music biz felt that their best shot was the inducement argument—that the P2P services intended for users to engage in illegal file swapping. As it turns out, they were right. Wrote Justice David H. Souter, "We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by the clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties... There is substantial evidence in MGM's favor on all elements of inducement."

So much for Betamax precedent, which lawyers representing the P2Ps had argued applied to this case as well because these services, like the video recorders in the 1984 ruling, can be seen as having substantial legal uses as well. But, in the Supreme Court’s view, Justice Souter wrote, "This case is significantly different... and reliance on that case to rule in favor of StreamCast and Grokster was in error," referring to a pair of lower-court decisions backing the P2Ps.

The decision bounces the case back to the lower court’s court, so to speak. And in the wake of the high court’s decision—that there’s sufficient evidence of unlawful intent on the part of the services that they can be held liable for the illegal activities of their users—lawsuits to recover alleged billions in lost revenue are inevitable.

Specifically, according to the ruling, P2Ps could be found liable for copyright infringement based on how they market their services or the particular measures they take to discourage copyright infringement on the part of users. Souter: “[O]ne who distributes a device with the object of promoting its use to infringe copyright...is liable for the resulting acts of infringement by third parties."

The first music mogul to weigh in with a statement was EMI Music chief Alain Levy, who asserted that today's decision "will help unlock the enormous potential of the legal online marketplace. The Court's message couldn't have been clearer—businesses based on infringement are not protected under the law. This is a major win for the creative community, for those companies committed to building legitimate businesses and for law-abiding consumers."

Levy added that EMI will continue to support the development of legitimate services and "continue working with the technology industry to push the limits of what's possible for delivering music to consumers in new and exciting ways... In addition to advancing innovative legitimate digital music services, EMI is committed to providing the necessary resources to protect our artists' intellectual property, including the funding of consumer education programs, the deployment of technological measures and the lobbying of government agencies worldwide. The message is clear: There is no justification for stealing music when so many legal choices exist."