During opening arguments yesterday, Supreme Court justices yesterday voiced their concerns that should the entertainment industry get its way, technology companies may stop innovating.

The entertainment industry wants to sue the distributors of the Grokster and Morpheus peer-to-peer (P2P) software packages for their users' actions.

During oral arguments in the MGM vs. Grokster case, justices peppered a lawyer for the entertainment industry with questions, saying a move away from a 21-year-old standard on technology and copyright could have major effects on the technology industry.

Ents industry wants control

Donald Verrilli Jr., representing the music and movie industries in the case, told justices that Grokster and Morpheus distributor StreamCast Networks built their business plans around copyright violations, and the vast majority of files traded with the Grokster and Morpheus software violate copyright law. The Supreme Court's 1984 Sony Betamax ruling exempts makers of technology from secondary copyright liability lawsuits when their technology has "substantial noninfringing uses," but Grokster supporters can point to just a few hundred thousand legal files among the 2.6 billion traded with P2P software each month, he said.

"That's the whole business," Verrilli said. "What they're talking about as lawful is a tiny, teeny little fraction."

Verrilli called Grokster and Morpheus a "gigantic infringement machine that was built on inducement" of copyright violations.

Control versus innovation

But Justice Stephen Breyer questioned how the court could draw the line between Verrilli's assertion that P2P software enabled "substantial" infringements and the Betamax ruling. If the court recognized a new standard penalizing technologies enabling substantial copyright violations, the copying machine, the VCR and the Gutenberg printing press might not be legal, Breyer said.

Using the same logic, the entertainment industry could argue that Apple’s iPod also encourages copyright violations, added Justice David Souter. "If I can get music to the iPod without buying the CD, I'm not going to buy the CD," he said. "How do we know in advance on your test anything that gives the inventor or the developer the confidence to go ahead?"

The 9th Circuit Court of Appeals erred in rejecting the entertainment industry's case because it "basically adopted a test of theoretical noninfringing uses," answered Paul Clement, acting solicitor general of the Bush administration's Department of Justice, which is siding with plaintiffs Motion Picture Association of America, the National Music Publisher's Association of America and the Recording Industry Association of America in the case.

Technology under threat

But a tougher definition of secondary liability would open up technology companies to many more lawsuits, said Justice Antonin Scalia: "I'm going to get sued right away before I get a chance to do business," he said.

Justices didn't spare P2P lawyer Richard Taranto from tough questioning. Justice Ruth Bader Ginsburg noted that the Sony Betamax decision continued on for 13 pages after establishing that the Betamax VCR technology was capable of substantial noninfringing uses. The Supreme Court in 1984 recognized that the VCR's primary commercial use was for "time shifting" television programs by recording them and watching them later, a legal use, she said.

Justice Anthony Kennedy questioned why the Supreme Court should stick to the Betamax standard when most commercial uses of P2P are related to copyright violations. Taranto told justices that the Grokster case focused only on the current actions of the P2P vendors, not past actions that may have encouraged users to violate copyright law, but Kennedy questioned how Taranto could separate past actions from the current business plans.

"What you want to say is unlawfully appropriated property can be used for (a business') startup capital," Kennedy told Taranto.

Ginsburg also questioned how the distributors of Grokster and Morpheus could shield themselves from charges of willful ignorance of their users' copyright violations. Justices noted the 9th Circuit Court, in 2001, ruled against file-trading service Napster.

Not Napster

Unlike the old Napster service, which operated centralized servers, Grokster and StreamCast Networks don't know what's being traded by users of their software, Taranto said. Their decision to offer decentralized file-trading software went beyond avoiding Napster's fate, he said; P-to-P technology also frees the vendors from the cost of operating central servers.

Outside the courtroom, advocates for the Grokster side wore T-shirts saying, "Save Betamax." Some slept over night outside the court.

Grokster supporters said they were encouraged by the justice's questions during the hearing. "I thought the justices asked exactly the right questions," said Fred von Lohmann, senior staff attorney at the Electronic Frontier Foundation and lawyer for StreamCast Networks in this case. "Is it right that the entertainment industry should be in charge of the nation's technology sector?"

A Supreme Court decision is expected in about three months.