The phone call came, as it always does, at 2 AM. It was Justice Souter again and he was drunk... again. I don't want to say the SCOTUS crowd likes to party but, between us, sending in a case of beer with your appeal doesn't hurt in getting cert granted. "Listen, Soot," I said, "It's going to be ok. I know you're worried about a potential chilling effect on technology. Just make sure you affirm Betamax. Hey, did I steer you wrong when I told you not to drink from any Coke cans that Clarence Thomas had lying around? All right then. Get some sleep and give Ginzie my best."
It was a good thing Dave listened. Of all the potential outcomes of MGM vs. Grokster, few thought that the decision would be lauded by both content and technology camps. Device manufacturers feared of a repeal of Sony vs. Universal, the "Betamax" case in which the justices found that devices that enabled copyright infringement were legal as long as they were capable of commercially significant non-infringing use.
Indeed, Grokster and other peer-to-peer networks support such use, but the Supreme Court noted that the networks� primary reason for being was to court users of the original Napster software that were interested in finding infringing material. The decision highlighted proposed advertisements that positioned the services as Napster alternatives and noted that the services profited only from increased usage of their software for which primarily copyrighted songs were the main draw. In a more dubious distinction, it also noted that the name �Grokster� was even modeled after the name �Napster.� So, it was the active encouragement of infringement that resulted in the unanimous decision against the network operators.
What about that �chilling effect�, though? The Electronic Frontier Foundation maintains an �Endangered Gizmos� Web site that shows an iPod as such a device under siege. Yet things seemed anything but chilly in Cupertino after the Grokster decision. In fact, Apple hailed the verdict, noting the success of the iTunes Music Store.
Today, services like Morpheus are Apple�s competition, but it wasn�t always the case. Unlike peer-to-peer networks, Apple certainly did not encourage users to infringe despite probably reaping benefit from that infringement in the iPod�s early years. Also, in a move that was mocked as naive when it first occurred, it famously put a �Don�t steal music.� sticker on its device. Furthermore, the iPod as shipped does not allow uploading of its music to another computer. For all these reasons, it would probably be safe by the Grokster standard.
However, there is some room for doubt. The most troubling part of the evidence that the Court used for determining that the networks encouraged infringement was that they did nothing to try to stop it. Apple has never done anything to curb the transfer of infringing music to the iPod and has not vigorously pursued software developers who enable access to MP3 files on the device. It will be up to other courts and cases to determine how much is enough to avoid liability by dissuading infringement.
The upshot is that, even though most consumer electronics products should be in the clear, the Grokster case will likely remind manufacturers to play it safe by ensuring that the advertising and primary appeal around their products is not designed around fostering infringement. Prepare for more devices that prevent further copying or use some kind of authentication to ensure that content is being consumed either by one person or within one home such as TiVo-to-Go or online services focused around sharing content with a small group of friends of family, such as Orb, Yahoo! 360 or iMeem. This has been the direction that most of the industry has been moving in since the demise of Napster anyway.
As Gigi Sohn, president of public advocacy group Public Knowledge has astutely observed, this was a case about business models, not technology. The Court narrowly focused its disdain for the practices of companies that try to replicate the original Napster�s usage. Indeed, others have noted that the Grokster case may be a Pyrrhic victory for Hollywood as the Court has practically created a roadmap for peer-to-peer services to avoid liability. For now, though, companies interested in simply building products that support fair-use rights can breathe a little easier. That the Grokster case left the so-called Betamax principles intact amounted to dodging a bullet.
If you use or have an idea for a valuable and legitimate service or device that wouldn�t survive the Grokster decision, e-mail me.
Ross Rubin is director of industry analysis at NPD Techworld, a division of market research and analysis provider The NPD Group. Views expressed in Switched On, however, are his own. Feedback is welcome at email@example.com.