WASHINGTON (CNN) -
High-tech reached the nation's high court Tuesday as Supreme Court justices questioned whether online file-sharing networks could be held accountable for copyright infringement.
At issue is whether the entertainment industry can continue aggressively pursuing not only those who illegally download copyrighted songs, movies and photos, but also those who sell file-sharing software and services.
A San Francisco-based federal appeals court in August ruled those file-sharing companies were not responsible, since their products do not directly tell users where they can download protected material.
Metro-Goldwyn-Mayer (MGM) Studios sued the two makers of file-sharing software, Grokster and StreamCast Networks, claiming it has lost billions of dollars in revenue from the illegal distribution of its property, and has had to spend millions more developing anti-theft technology and prosecuting offenders.
For the justices, the debate came down to two competing arguments: whether software companies induce or encourage Internet piracy and profit from it, and whether computer innovation would be stifled under perpetual threat of lawsuit.
Justice Stephen Breyer pointed out Xerox copiers, videocassette recorders, iPod music players, and even the Gutenberg press had the potential of abuse by consumers: "In each case there could be vast numbers of infringement illegal uses," he said, but he added that the benefits to society from those inventions were incalculable.
Justice Antonin Scalia wondered whether innovators would be punished immediately after creating a new product if the entertainment industry had a legal veto. "If I started a business now, how do I know how to proceed?" he asked. "If I'm a new inventor, I'm going to get sued right away."
"There's never the intent to break the law when the guy is in the garage inventing the iPod," added Justice David Souter.
MGM attorney Donald Verrilli pointed out that during an earlier trial in the case, a court agreed that roughly 90 percent of those using the so-called "peer-to-peer" file-sharing software were illegally downloading protected material. "The overall activity is so large, it's mind boggling," he said. The software companies, Verrilli claimed, provide "active encouragement and assistance."
MGM is supported by a large number of entertainment groups, including the recording industry, Major League Baseball, and intellectual property advocates, as well as 40 states fearing lost jobs and tax revenue.
The software companies contend they should not be held responsible for the illegal acts of their customers since their software is used mainly to download and share legal or non-protected files. They note that while some of their users do steal songs, many also use their software to trade public-domain material such as government papers, as well as free songs and movie previews. That, argues the technology industry, meets the legal standard for protection from liability.
On the Supreme Court steps, several artists argued jobs are in jeopardy. "Stop in the name of creativity," said Lamont Dozier, a prolific songwriter and producer at Motown, who penned such hits as "Stop in the Name of Love."
"I thought, if I was back in Detroit, if we had this problem then, in the '60s, there never would have been a Motown, I would have been at Ford's car factory, because I couldn't make a living in the music business."
Back in court, several justices seemed equally troubled over how much leeway technology companies should be given when they benefit directly from trafficking in copyrighted intellectual property.
"Why isn't this a case of willful ignorance?" asked Souter.
Grokster and StreamCast attorney Richard Taranto replied, "There is no 'mother may I' system, no chaperone." He argued his companies do not tell users to download protected music or movies. "It's an autonomous system, there is no centralization."
After intense questioning from some of the justices, Taranto admitted that, in practice, "illegal activity" may have initially helped provide start-up capital for some new technology companies.
"From a legal and business perspective, it seems wrong to me," said Justice Anthony Kennedy.
A variety of civil libertarians are backing Grokster and StreamCast, fearing technological advances could be stifled if software and computer companies become unwilling to develop new products due to worries about copyright violations.
They say the entertainment industry should work with technology innovators to find solutions for the future, and not look back.
"Stop putting the toothpaste back in the tube," said Adam Eisgrau of P2PUnited.org, a group representing the software-sharing industry. "It doesn't work. It's time for them to learn that."
Hundreds of mostly young people gathered on the Supreme Court steps in support of the file-sharing companies, chanting and carrying signs. Some camped out overnight to attend the oral arguments.
Supreme Court precedent dates back to a 1984 ruling that Sony Corp. could not be held liable if consumers used the company's Betamax tape machines to illegally copy movies.
Tuesday's case is MGM Studios v. Grokster (04-0480). A ruling is expected by June.
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