Software firms win ruling in copyright case

Court rejects appeal by movie studios, record labels

? In a blow to movie studios and record labels, an appeals court ruled Thursday that two suppliers of Internet file-sharing software are not legally responsible for the swapping of music and other files through their programs.

The 9th U.S. Circuit Court of Appeals said Grokster Ltd. and StreamCast Networks do not have central servers where computer users can access copyrighted material, making them different from online music pioneer Napster.

“In the context of this case, the software design is of great import,” Judge Sidney R. Thomas wrote for the unanimous three-judge panel, which upheld a lower court ruling that dismissed the bulk of the lawsuit brought by movie studios and record labels.

The panel noted the software companies simply provided software for individual users to share information over the Internet — regardless of whether that shared information was copyrighted.

“The technology has numerous other uses, significantly reducing the distribution costs of public domain and permissively shared art and speech, as well as reducing the centralized control of that distribution,” Thomas wrote.

Napster was shut down after the 9th Circuit ruled its centralized servers, which contained thousands of copyrighted songs, made it legally liable for contributing to copyright infringement. But in the wake of that ruling, technology developed that avoided the need for a central hub — limiting the liability of the companies involved.

Unless the entertainment industry appeals to the U.S. Supreme Court, Thursday’s ruling basically means the software industry won that argument.

“Today’s ruling makes it clear that people who build the technology cannot be responsible for the infringing activities of the users — the same principle that people who make crowbars are not responsible for the robberies that may be committed with those crowbars,” said Fred von Lohmann, the attorney for Los Angeles-based Streamcast.

Entertainment companies are still free to sue anyone who unlawfully downloads copyrighted movies and music — and about 4,000 such cases have been filed so far, added von Lohmann, an attorney for San Francisco’s Electronic Frontier Foundation.

A spokeswoman for the entertainment industry’s lead attorney in the case said they were not immediately prepared to comment.

Thursday’s ruling also may influence the entertainment companies’ case against Sharman Networks., makers of the Kazaa program, which averages more users than any other file-sharing software.

Sites like Streamcast, Grokster and Kazaa make money via advertising that pops up on users’ screens.

“The biggest thing about this is the court recognized that changing copyright law to whatever new technology comes along is a bad idea,” said Michael Page, the attorney for Grokster, based in Nevis in the Caribbean.