In 2003, MGM and twenty-three other entertainment companies sought damages against Grokster for copyright infringement, accusing Grokster of the distributing software that enabled users to breach copyright restrictions. They insisted that the majority of data transferred using peer-to-peer software was compromised of copyrighted materials, costing them millions of dollars in lost revenues. The United States District Court for the Central District of California originally ruled in favor of Grokster, claiming the software was “not significantly different from companies that sell home video recorders or copy machines, both of which [had the potential of] infringe copyrights” (Borland). The precedent from an earlier case, Sony vs. Universal studios, upheld the legality of video-recorders, even though there existed a chance of misuse by owners. Through strict interpretation of the First Admendment, an outright ban on video-recorders could not be justified, because of their substantial non-infringing uses involving freedom of speech. In August, the Ninth Circuit Court of Appeals, a higher court, upheld the lower court's decision after also acknowledging that peer-to-peer software had legitimate and legal uses.
However, MGM and the other entertainment companies were not satisfied with the rulings of the two courts and appealed to the Supreme Court. They argued that the Constitution gave the United States Congress the power “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries” (US Const. art. 1, sec. 8). The protection of copyright was, therefore, in accordance with author's benefits, an entitlement directly derived from natural rights. Such copyright also promoted “the progress of…useful arts by securing…to authors the exclusive right to their respective writings…” (Canadian Content). Furthermore, the Copyright Act of 1976 granted six exclusive rights to copyright holders: “the right to reproduce, the right to create derivative works of the original work, the right to sell, lease, or rent copies of the work to the public, the right to perform the work publicly, the right to display the work publicly , and the right to perform a sound recording by means of digital audio” (Hollaar). Through such evidence, MGM and the other companies stoutly continued to support their defense for copyrights granted to media artists, a sentiment tracing back to the emergence of artists receiving credit for their artistic talents. The British scholar, Blackstone, noted, “when a man by the exertion of his rational powers has produced an original work, he has clearly a right to dispose of that identical work as he pleases, and any attempt to take it from him, or vary the disposition he has made of it, is an invasion of his right of property” (Blackstone). Grokster’s file-sharing interfered with the profits that MGM and the other entertainment companies would have received from apparently interested viewers and therefore, violated their property rights. MGM also maintained that such illegal downloading was proving detrimental to media industries, as it provided less motivation for artists.
Fundamentally, the problem is the clash between intellectual property rights and technological inventions. With file-sharing programs such as Grokster, it has become all too easy for anyone with internet access to download the latest movie or song. As a result, the entertainment industry is losing billions of dollars in revenue. CD sales peaked in 2000 and have been on a decline ever since. As for the cinematic industry, recent films such as “Star Wars—Episode III: Revenge of the Sith” have made new box office records, rolling in millions of dollars from opening day midnight screenings to their final day in theatres months later. However, when adjusted for the inflation of movie ticket prices, predecessors such as 1977’s “Star Wars” have much higher grosses, and MGM’s 1939 masterpiece “Gone With the Wind” has the highest adjusted gross of all. File-sharing devices have taken a severe toll on the film industry, leading to lack of motivation and, therefore, the stagnation of ideas, which is at heart the downfall of film. Yet, if all file-sharing programs were to be eliminated, many other technologies could be affected, such as MP3 players, CD players, CD burners, external hard-drives, and even e-mail. They all can be used as some form of illegal file-sharing, even through simple transitions such as sending a song to a friend through e-mail. Computer networks are fundamentally file-sharing systems and would therefore be illegal. Clearly, the banning of file-sharing programs could prove to be quite chaotic, bringing drastic changes to both the leisure and work of many individuals. The fine line is between legality and copyright infringement requires further definition as file-sharing acquires an increasingly greater impact upon society.
The Supreme Court ultimately unanimously concurred that Grokster could be liable for inducing copyright infringement. The majority opinion rejected the Ninth Circuit’s interpretation of Sony v. Universal Studios, because unlike Sony, Grokster had a number of areas that suggested the inducement of copyright infringement. The Court stated that a company is liable for contributory infringement if they intend to bring about infringement, distribute a device suitable for infringing use, and whether or not actual infringement occurred. Because Grokster had publicly advertised and the majority of users used the software for illegal activities, the Court focused on whether or not Grokster encouraged its users to commit copyright infringement. Through further evidence, the Court declared that Grokster was not merely a passive recipient of information about infringing use. It voiced the objective that its use was for downloading copyrighted works, and because Grokster had made no attempt to use filtering technology to help discourage copyright infringement, it was also guilty of taking active steps to encourage infringement. Finally, a ninety-percent majority of Grokster users were using the software to commit copyright infringement, and Grokster was found to be profiting from its users infringement through advertisement. The program had “translated demand for copyrighted materials into dollars”(Reed). Based on all this evidence the Court held that Grokster’s unlawful objective was unmistakable.
On November 7, 2005 Grokster announced that its peer-to-peer file sharing serve was no longer going to be offered. The notice on their web site said, “ The United States Supreme Court unanimously confirmed that using this service to trade copyrighted material is illegal. Copying copyrighted motion picture and music files using unauthorized peer-to-peer services is illegal and is prosecuted by copyright owners” (Grokster). As part of a lawsuit permitted by the MGM Studios v. Grokster Supreme Court decision, paid $50 million to the music and recording industries. Through analysis of their decision, it is evident that 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, while respecting the rights of artists and ensuring creativity in the entertainment field.
The Supreme Court tries to insure a fair balance between the benefits gained by
allowing and promoting technological innovation and the need to respect the
intellectual property rights of artists. The final decision for MGM vs. Grokster
adhered to both the First Admendment and various copyright laws by defining what
makes a company liable for copyright infringement. U.S. technology developers
will probably 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.
However, as long as new innovations do not trespass unto existing copyrights,
then this ruling should not affect them. File-sharing softwares that maintain
control over the flow of media through their servers and filter out potentially
illegal downloads would be the utopian plan, and court cases such as MGM vs.
Grokster are heading technological advances in that direction.
