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The confused state of the law concerning file sharing. Understanding Grokster, Aimster, Napster and the Betamax case.

As it stands now, the law concerning file-sharing technology is anything but clear. Interpreting the same underlying law and precedent, and on similar facts, two different Courts of Appeal have arrived at widely differing results, throwing the media and software industries into chaos. To end users, for the time being, this will have little importance, but to those working in the entertainment industry, whether artists, producers, executives or distributors, the murkiness of the legal framework is making “business as usual” anything but usual.

Readers will recall that several years ago, file-sharing service Napster was shut-down by a Court in California. That case's outcome turned largely on the fact that Napster contained a centralized repository of information, and thus had the right and ability to control and limit its users activities. In the wake of Napster's demise, several next generation software applications came of age, among them Aimster and Grokster.

These programs allow users to identify, locate and download files from other users' computers without the need for any centralized index or directory. Thus, the makers of the Aimster and Grokster programs do not have any way to exert control over the ways in which their software is used.

The precedent having the most significant impact on both the Aimster and Grokster cases is the United States Supreme Court's 1984 decidion in the case of Universal v. Sony, in which it ruled that Sony was not liable for contributory copyright infringement by virtue of its manufacture of the betamax video cassette recorder (a device designed, in part, to permit copying of copyright protected works). In that opinion, the court held that “time-shifting” of programs is a “fair use” under the copyright law, and that because the device had substantial non-infringing uses, (including time shifting), Sony could not be held liable to the studios and television networks for copyright infringement.

In last month's 9th Circuit Court of Appeals opinion in the case of Metro-Goldwyn-Mayer Studios v. Grokster, Ltd, the court held that since the Grokster software is theoretically capable of substantial non-infringing uses, Grokster cannot be held liable for contributory copyright infringement even though its file sharing software is used (90% of the time) for illegal downloading of copyrighted materials.

This decision stands in stark contrast to the 2003 decision in In Re: Aimster Litigation, where the 7th Circuit Court of Appeals held the makers of the Aimster software liable for infringement on very similar facts. There, the court held that mere theoretical capability of substantial non-infringing uses is not dispositive. Under the Aimster Court's analysis, the probablility of such lawful uses must be determined and weighed against the infringing uses in determining the issue of contributory copyright infringement.

Given these two differing interpretations of the Betamax case, the law is anything but clear. Unless another defendant in such a case sees fit to pursue the matter all the way to the Supreme Court, only Congress, through enactment of new legislation, can resolve the matter. Of course, the lawmaking process takes time, so in the meantime, content owners and software makers will just have to guess at the rules of the game.

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