The Future of File Sharing

By Martin Leatherman,

People reading last week’s headlines regarding MGM’s victory over Grokster and Streamcast in the U.S. Supreme Court may have thought that file-sharing services were doomed.

Not so fast, some say.

An article in Computer World said the coverage of the Supreme Court ruling was off-base. The ruling wasn’t against file sharing software, or even file-sharers themselves. Grokster and Streamcast lost the lawsuit because they openly supported piracy.

A CNET article also noted that Grokster and Streamcast lost their cases because they promoted illegal downloading and didn’t take steps to stop large-scale copyright infringement.

Both companies’ advertising-based business plans relied on the heavy traffic created by file sharing.

The case created a new “active inducement” standard, finding that companies can be held liable if there’s evidence that they promote and actively encourage direct copyright infringement, according to PC World.

What remains is the 1984 Sony V. Universal Studios decision, which protects companies from being sued for a user’s copyright infringement if the product is designed for legal uses.

That decision was known for favoring technological innovation over its possible abuses.

In the Grokster decision the Supreme Court reiterated the need for innovators to develop products without being burdened by threats of litigation.

But the Consumer Electronic Association criticized the ruling, saying it creates “massive uncertainty and the likelihood of massive legal bills.”

This, they fear, will affect innovators, who will have to sort through complex new rules and increased legal fees before bringing a product to market, according to a report on

An article in Business Week warned that venture capitalists may stay away from digital media companies for liability issues due to uncertainty in the new inducement standard.

File sharing itself has diverse benefits.

A report by the FTC said that peer-to-peer file sharing enables fast file transfers, bandwidth conservation, and reduced storage needs, according to Information Week.

For the music industry, however, the benefits of file sharing are a matter of perspective.

The founders of Seattle-based Sub Pop Records and Chicago’s Thrill Jockey say P2P sharing creates a buzz for independent bands in highly restricted markets.

As a smaller label, Sub Pop has noticed greater success of frequently shared music, according to Reuters.

Larger record labels are much less supportive.

From 1999 to 2004 the total value of the U.S. recording industry fell $2.4 billion — a decline the industry blames on file-sharing, according to ABC News.

The Recording Artist’s Coalition, headed by Don Henley and Sheryl Crow, is a vocal opponent of P2P sharing services.

In an op-ed piece the RAC website (PDF), Crow said that the whole music industry, not simply rich artists, rely on the music being sold for income.

She argued that the Supreme Court should uphold copyright protections.

“If we take away that protection, we take away all incentive to create and ultimately the public-at-large will be substantially injured, as there will be fewer artists signed, fewer records produced and less musical choices for the public to access,” Crow said.

Andy Gershon, president of V2 records, thinks that it’s pointless to fight file sharing.

He said it’s better to focus on creating fans of his music, according to ABC News.

Rob Kasunic, a law professor at the American University in Washington, D.C., wrote on Stanford’s Fair Use Web site that the recording industry must ultimately win its battles by competing effectively with the illegal marketplace.

Techies are questioning which technologies will end up in court next.

Some think Bittorrent, a program that allows quick downloads by breaking files into small pieces and sharing them among many users, could be the next target.

The Motion Picture Association of America and the RIAA succeeded in getting several Bittorrent sites shut down after they allowed massive illegal downloads of the most recent Star Wars movie.

However, some think that Bittorrent may win on the “inducement” standard because the creators have counseled users against using the technology for illegal downloads, according to Australian IT News.

In a press release, the American Civil Liberties Union said free speech was threatened by the Grokster ruling, because it raised the specter of increased regulation of the Internet, and flawed determinations of what amounts of “inducement” to illegally share files.

One group, P2P United, said they’ll fight “until the last bell” for their technology.

In a complex analysis of the issue, Doc Searles, senior editor of Linux Journal, wrote that the Grokster case will merely spur innovation that sidesteps legal efforts to stifle file sharing.

As an example, he cited the development of cheap and easy podcasting as an answer to the RIAA’s successful imposition of high fees on streaming audio on the Web.

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Keyword search: file sharing
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Keyword search: peer to peer
Google News, Yahoo News

Keyword search: P2P
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Keyword search: Grokster
Google News, Yahoo News

“Pirate justice”
Computer World, July 4, 2005

“Peer-to-peer file sharing comes with risks, says FTC”
Information Week, June 23, 2005

“File sharing and the Supreme Court: the fallout”
PC World, July 7, 2005

“For smaller labels, file-sharing isn’t all bad”
Reuters, July 2, 2005

“CEA responds to Grokster ruling”
Designtechnica, June 27, 2005

“Keeping with the Grokster theme”
Business Week, June 29, 2005

“File sharing case worries indie artists”
ABC News, March 24, 2005

“Solving the P2P problem”
Stanford Copyright and Fair Use Web site

“Grokster and the wisdom of Solomon”
CNET News, July 5, 2005

“Crow pecks away at Grokster” (PDF)
April 1, 2005 Recording Artists Coalition

“Recording Artists Coalition hails unanimous Supreme Court decision in favor of the entertainment industry”
RAC Press Release, June 27, 2005

“Sony V. Universal Studios, 1984”
Electronic Frontier Foundation

“BitTorrent next as Grokster shut down”
Australian IT News, July 6, 2005

“ACLU vows to press fight to preserve free Internet as Supreme Court decides two cases”
ACLU, June 27, 2005

“P2P United to pursue file-sharing fight ‘until the last bell'”
P2P United , June 27, 2005

“Re-grokking Grokster”
Linux Journal, July 7, 2005

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