The Supreme Court ruled unanimously that developers of software violate federal copyright law when they provide computer users with the means to share music and movie files downloaded from the Internet, at least when the software companies take "affirmative steps to foster infringement."Anyway, from a cursory perusal of the opinion, things aren't really all that bad. First of all, SCOTUS appears to agree that p2p networks are capable of "substantial, non-infringing use" and therefore the Betamax ruling applies, which basically says that if a product is capable of "substantial non-infringing use", the device is legal even if it has potential to illegally copy material.
In a decision announced by Justice David H. Souter, the Court said: "We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties" -- that is, computer users using free downloading software.
A sweeping victory for music recording companies and movie studios, the ruling set the stage for a major legal assault on rampant file-sharing of copyrighted works by attacking the software designers -- a much more promising legal avenue than suing infringing users directly.
However, this case differs from Betamax in a few fundamental ways. The most important is that the court ruled against Grokster/Streamcast because they actively promoted piracy through use of their product in an attempt to gain market share from the masses who wanted free music after Napster was shut down. Basically they were touting the illegal benefits of using their software. That's a no-no.
This is also somewhat easy to assert, as neither p2p network gained any revenue at all from end-users, but only from advertisers, making membership base a key component of their business model. Grokster also did nothing to filter potentially infringing files (largely due to the nature of p2p - no centralized server = no records of activity).
Another important aspect of Betamax (the earlier ruling) was that the new technology being introduced was the concept of "time-shifting" - recording something to be used later, which SCOTUS ruled fell within the bounds of fair use. This case has no similar "fair use" aspect, though the benefits of p2p (anonymity, less bandwidth, no central server) were acknowledged in the opinion and again, are not inherently unlawful.
Anyway, that's just my quick 2 cents...maybe I'll write more after I read the entire opinion...probably nothing until tomorrow, though.
EDIT: Okay, so while I was writing this, plenty of stuff about it got posted...first up are notes from the pro-Grokster press conference (these are NOT verbatim):
Richard Taranto, Farr and Taranto, argued the case before the Supreme CourtAnd as long as you crank up that filter, the slashdot crowd will provide plenty of insight.
A few words, two different aspects to think about this case. What this means for the future of this litigation and how Grokster and Streamcast will fair under the remand directive. The decision is multi-faceted and the evidence burden is unclear so that it We think we will have the evidence to dispell the inference that the entertainment companies have the right to prove that there is sufficient evidence for liability. We were not in the Supreme Court of the unavailability of a theory of inducement for copyright liability.
The second and much more important aspect of what the courts did today was to write a set of standards, the most notable feature of which is the lack of clarity. Promoting infringement and knowledge of how technology will be used. The Court has provided a very difficult roadmap to follow. We have a multi-factored standard that you can't be sure how will be applied to you. The immediate impact for technology industry will be a ... one?
Fred von Lohmann, Senior Staff Attorney for EFF, with Cindy Cohn
Will unleash an era of legal uncertainty for America's innovators. When we see the evidence in District Court, Streamcast will not be held liable. There is a new theory of copyright liability. Didn't clarify Betamax, didn't clarify vicarious liability. It will take courts some time to clarify this. By focusing on intent, the Supreme Court has opened the door to see the notes of engineering meetings, marketing plans, emails of executives. This is a high burden for technology companies.