The case of MGM (backed by MPAA and RIAA) versus the peer-to peer file sharing Grokster is one of the most important copyright infringement cases in recent times.  The case came about because MGM thought that both Grokster.com and StreamCast.com were liable for copyright damages due to their supposed encouragement of illegally sharing movies.  Both Grokster and StreamCast were actively marketing particular software that aided in the downloading of both pirated movie and songs.  The two sites targeted the earlier ruling in the Supreme Court 1985 Betamax as their defense.  The Betamax ruling asserted that VCR manufacturers are not responsible for a VCR users who copy movies illegally.  The Supreme Court ended up ruling against Grokster and StremCast, saying that they could not hide behind a the 1985 Betamax ruling because unlike the VCR companies, they were actively promoting file sharing.  The fact that the Supreme Court wholly disregarded a past copyright ruling is poignant, because previous rulings on copyright legislature are often factored heavily into new decisions.  Two other points make this case specifically interesting.  Firstly, the Supreme Court highlighted the fact that although file sharing tools have the ability to be used illegally, the file sharing software itself and the activity of file sharing is not considered to be illegal.  Secondly, they state that the manufacturers of the specific file sharing products cannot be held responsible for how users choose to proceed once they have access to the software.  The one exception is when the manufacturer actively promotes or encourages infringement.  Ironically, it seems that although Hollywood thought that they scored hugely in this case, file sharers actually profited from this case as, ultimately, it was decided that file sharing itself is not illegal.

Mark Cuban, creator of Broadcast.com and outspoken opponent of Youtube, directly compares Youtube to the original Napster website in this blog entry. He attributes Youtube’s quick success to two specific sources: “Free Hosting from any 3rd Party Site” and “Copyrighted music and video.” He goes on to make direct comparisons between Grokster, Napster, and Youtube. Napster was “the first to tell you it [pirating] wasn’t illegal.” He argues that the only reason Youtube hasn’t been brought to court multiple times already is that the studios are not sure what having so many clips available illegally means for them financially. Similarly to Napster, once the lawsuits begin, they will not stop until the service is forced to shut down. He observes that Youtube is remarkably similar to Napster, because users can simply open as many Youtube pages containing copyrighted songs as they want, and then listen to the songs as they would on Napster. Youtube will be hurt not just by lawsuits, but also by the wide availability of copyrighted content in legal online channels, such as NBC making clips available on its own site. Cuban states that as soon as Youtube is sued by copyright holders, it will be forced to find and remove all infringing content. This will leave the site, he argues, devoid of most appealing content.

While Cuban is correct in noting that there is a large amount of copyrighted material available on Youtube, he fails to take into account several key details. First, he states that Youtube will be sued for inducing others to commit infringement, just as Napster and Grokster were sued. Unlike Youtube, however, Napster and Youtube advertised themselves as sites which allowed users to download any music they wanted. They actually did induce users to visit the site for the purpose of downloading infringing material, whereas Youtube encourages users to visit its site to host user-generated content, evident from its slogan of “Broadcast Yourself.” Cuban also suggests that after copyrighted material such as TV shows is widely available in other locations and once copyright holders begin ordering their content to be removed, Youtube would be devoid of any content to set it apart from competitors. However, sites like Hulu, Joost, and services run by major Television studios have been online for over a year and Youtube is as popular as ever. This debunks the argument that Youtube would be unappealing once its copyright material was removed and other legal video-viewing services were established. Rather, users still visit the site for non-copyrighted material, and it continues to thrive, having just signed several deals itself with major content creators and TV Studios. Cuban’s main oversight is in the DMCA. He completely fails to take into account the fact that the DMCA Safe Harbor law removes Youtube from direct liability for any infringing videos that are posted on its service, so long as it removes them upon request of the copyright holder.

The most recent Supreme Court ruling on this controversial issue was in the case of MGM v. Grokster.  Reversing the opinions of both the district court and the Third Circuit, the Supreme Court found that, though the software could be used for both infringing and non-infringing purposes, the companies “induced” its users to infringe copyright.  Even though the software may have had substantial non-infringing uses and may thus have passed the Sony test, the court unanimously felt that the software was created with the intention of allowing users to infringe copyright for the profit of the company .  While these file-sharing networks were shut down as a result of the ruling, the government did not seek prosecution of users, many of whom had shared less than $1000 dollars worth of copyrighted works and were thus not criminally liable under the current U.S. code.  And while the government may have had a shot at prosecuting the creators and marketers of the software itself, as their product had been found to induce copyright infringement, with damages likely totaling thousands of dollars, a federal case was never made of it.  Grokster was shut down, and numerous file-sharing networks popped up in its place, while legal digital distribution networks gained popularity as well, filling the gap left by the popular illegal networs.  The war on piracy continued despite this dramatic ruling, and the complaining on behalf of the record companies has yet to cease.