This was called-in to UPI immediately after the hearing. It ran in the Washington Times, World Peace Herald, Linux Insider and various online outlets.

WASHINGTON, March 29 (UPI) — File-sharing services, such as music and video swap
Internet sites, should be liable for billions of dollars on copyright infringements, music
and film industry representatives told the U.S. Supreme Court Tuesday.

Copyright owners argued that the services knowingly promote large-scale copyright
infringement to draw customers and advertisers. Services like Grokster and Streamcast
share millions of copyrighted works every day causing the entertainment industry to lose
billions of dollars, a group of producer corporations and individuals, headed by Metro-
Goldwyn-Mayer Studios, claimed.

The case before the court was to determine whether the Internet sites are guilty of
copyright infringements. If the services are found liable then the entertainment industry
could sue for billions of dollars in reparations. The decision could crush peer-to-peer
Internet sharing of movies, music and other creative works.

Donald B. Verrilli, representing MGM Studios, said that when more than half of the files
shared are under copyright protection there is a clear misuse. Services that attract
customers and advertisers with illegally distributed copyrighted materials are also at fault,
he argued.

“It’s not just that they use the whole value of our copyrighted works as a seed for their
business, but it is their business,” Verrilli said. “I think that when you have a vast
majority of infringement use, you should be on the hook.”

Because more than 90 percent of material distributed over Grokster is copyrighted, the
company must know this and is liable, Verrilli said. According to the study conducted by
MGM, 70 percent of the files available to be shared were clearly violations and 15
percent were very likely violations. Justice Stephen Breyer pointed out that this study
only looked at song distribution.

Both parties pointed at 1984’s, Sony vs. Universal City Studios that found that the
videocassette recorder is not illegal because home taping so that a person could watch a
show later was a fair use and that there was a value of the technology to the public.
MGM Studios said that the California courts misapplied this case when they ruled in
favor of Grokster because the majority of files traded on Grokster are not covered by fair
use and that the service was expressly made to distribute copyrighted material.
Acting Solicitor General Paul D. Clement also argued for supporting petitioners that if a
service was mainly used illegally, it was liable.

Liberal justices David Souter, Ruth Bader Ginsburg, Breyer and conservative Justice
Antonin Scalia voiced concerns over whether Verrelli’s majority test and interpretation of
the Sony case would stifle innovation because inventors could be held liable for even
creating a distribution system that might be used illegally.

“What I worry about are lawsuits right out of the box,” Scalia said.

Many creators of current devices that can be hosts for illegally copied material could also
be held liable, Breyer said.

“Are you sure if you were the counselor of Sony you would recommend the use of the
VCR? Or how about Apple with the iPod?” Breyer asked. “Would you stop Gutenberg?”
Artists are less likely to want to create if people are going to steal their copyrighted
material though, Verrilli argued.

During his argument Richard G. Taranto, representing Grokster, listed file-sharing
services that distribute copyrighted works for free that benefit the entertainment industry
and services that hold works online for the public good.

“Altnet has hundreds of thousands of songs, video games and movie trailers that lead to
authorized sales. The Internet Archive now lists some 20,000 live recordings that are put
out,” Taranto said. “The world of legal music, video games, trailers and text, which is
small but growing, make great use the technology.”

If the Supreme Court does not uphold the California court decision it will shut down
these groups, Taranto said.

The courts should give Congress the chance to legislate how and what materials should
be distributed, Taranto said. Otherwise there is a dangerous precedent that makers of any
products, including iPods, modems and Internet service providers, could all be held liable
for people using their products to illegally obtain material.

Apple and Microsoft could not be held liable because the majority of their use is not to
illegally copy materials, Verrilli said.

Breyer, Souter and Ginsburg seemed to suggest it was a slippery slope.
While a majority of the justices seemed concerned that MGM Studio’s tests would stop
inventors they were also concerned about whether Grokster purposefully uses
decentralization to get around the court systems “inducement” and “willful knowledge”
laws.

Streamcast Networks used money from Napster to help start Grokster and other file-
sharing services, Chief Justice William Rehnquist said.

If services switched to the decentralized systems to get around the Ninth Circuit ruling
that Napster had actual knowledge that its users were distributing copyrighted material
then they show willful ignorance currently, Scalia said.

Taranto argued that file-sharing services are decentralized because it is cost-effective, not
to get around the courts. Because people use the services’ software to distribute material
directly to each other, the services do not have to pay expensive server or bandwidth
bills.

“There are other reasons to decentralize, you don’t have to have the servers. With Napster
we had 10 servers and they quickly started crashing and our bandwidth bills were
doubling, tripling, quadrupling,” Taranto said. “Now it’s all on personal computers.”

The services must know what is on their systems though, Ginsburg said.

“Willful ignorance is about having information in front of you and refusing to look at it,”
Taranto said. “We work because we don’t play ‘Mother-May-I.'”
The court should announce its decision before it adjourns this summer in late June or
early July.

(No. 04-480, MGM Studios v. Grokster.)

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