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Digital media analyst Phil Leigh has held a WebEx seminar on the ramifications of the Grokster ruling. The seminar is with copyright attorneys Geoff Beauchamp and Scott Patterson. WebEx here.

From his summary:

At least one of our (copyright attorney) guests today believes that the Supreme Court decision to send the case back to the District Court was essentially a directive to accept the concept of “inducement” and to hold the defendant responsible for copyright infringement.

In the future it appears that defendants accused of “inducement” will be required to show that their product is capable of “commercially significant non-infringing uses”. Unfortunately, it is unclear just what standard shall be applied to determine “commercially significant.”

Justices Breyer, Stevens and O’Connor believe that absent evidence of “active inducement” a product or service is entitled to the Sony safe harbor unless it is used “almost exclusively” to infringe copyrights. Conversely, Justices Ginsberg, Rehnquist and Kennedy regarded such a standard as providing inadequate protection for copyright owners and suggested that a more searching evidentiary inquiry be made into the actual capabilities and uses of a product or service.

Presumably the other justices stand somewhere in between. Nobody knows how Rehnquist’s replacement, Roberts, might decide and the same applies to the as yet undetermined replacement for O’Connor.

As a result, we conclude that until a “commercially significant” standard is established, the law shall pragmatically be on the side of those with the largest legal war-chest. Thus, as a practical matter, it will favor the established companies who will be able to rain lawyers on the innovative start-ups like the Biblical plagues of Egypt.

Consider, for example, that many tend to equate the term P2P as synonymous with the illegal practice of trading copyrighted files. However, it is actually a network architecture that has proven to have commercially significant non-infringing uses. For example, Skype uses P2P software to facilitate Internet Telephony. It has been wildly successful and was recently sold to eBay in a (presumably) “commercially significant” transaction valued at $2.6 billion. What is less well known is that the founders of Skype are the very same individuals who created – and later broke their connection with – the KaZaa software that ultimately became a popular P2P vehicle for trading copyrighted files. 

Thus, it is important to recognize that the first applications of a new technology may not ultimately become the dominant ones. To strangle in the cradle a newborn technology that may eventually have considerable legitimate applications merely because the first users have been “bad guys” is contrary to the public interest (my emphasis).

I skimmed through the Supreme Court ruling and it was clear that the Justices were primarily opposed to Grokster’s apparent support of piracy — it was not an attack on p2p technology.  Nevertheless, the point is very well made.  If vibrant and exciting p2p applications are not released because of fear of litigation from the luddite crowd, it puts a chilling effect on vital technology innovation.

As always, I wish to make it clear that I am not a supporter of piracy and condemn it.  My concern is that the technology industry as a whole has benefited from relatively unfettered and dynamic growth, and that the specter of further litigation may cast a shadow over future innovation.  When we get to the point where the biggest legal war chests can win over the brightest minds, we are in trouble. 

Alex Eckelberry


Related SunbeltBlog posts:

Supreme court rules against Grokster
Grumbling about Grokster
Round 1: Luddites 0, Mothers 1
Another take on the Grokster ruling
So they aren’t all luddites?