Grokster Loses in Court

File-sharing sites liable if illegal downloading is their main use

June 27, 2005 12:00 AM ET

In the long-running case of MGM vs. Grokster, the Supreme Court ruled today that a file-sharing site can be held liable when consumers use its service to illegally download music or movies -- if that is the service's primary intended use. Now it is up to a lower court to determine whether services like Grokster have promoted illegal downloading or have taken reasonable steps to dissuade users from copyright infringement.

"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," wrote Justice David H. Souter on behalf of the court.

The question has been whether file-sharing sites are liable for the way in which consumers use them, or if individual users should be targeted -- a far less realistic goal, considering that more than 200 million people worldwide use file-sharing software.

What's at stake is a lot of money. Movie studios, record labels and artists such as the Dixie Chicks, Sheryl Crow and Don Henley are protesting that downloading costs them millions in revenue. On the other hand, the tech sites claim that their being made legally responsible will seriously stifle technological innovation.

Ultimately, today's ruling may not result in the clampdown on downloading and piracy that the industry hopes: Software can still be created abroad and posted online. The decision may, however, lead some consumers to steer clear of peer-to-peer networks in favor of pay services such as iTunes.

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