via SCOTUS Blog

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.

The decision when it appears. Unanimously. That's harsh.

UPDATE 0810PT
And here's the decision (from the AP): No. 04-480, MGM Studios v. Grokster, reversed 9-0, in an opinion by Justice Souter [24-page PDF]. Justice Ginsburg concurred [8-page PDF], joined by the Chief Justice and Justice Kennedy; and Justice Breyer concurred [18-page PDF], joined by Justices Stevens and O'Connor.

From the opinion:

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.

Active inducement it is.

Perhaps not so bad from the AP via Yahoo News! (Court: File-Sharing Services May Be Sued):

Internet file-sharing services will be held responsible if they intend for their customers to use software primarily to swap songs and movies illegally, the Supreme Court ruled Monday, rejecting warnings that the lawsuits will stunt growth of cool tech gadgets such as the next iPod.

The unanimous decision sends the case back to lower court, which had ruled in favor of file-sharing services Grokster Ltd. and StreamCast Networks Inc. on the grounds that the companies couldn't be sued. The justices said there was enough evidence of unlawful intent for the case to go to trial.....

"We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by the clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties," Justice David H. Souter wrote for the court. ...

But in Monday's ruling, Souter said lower courts could find the file-sharing services responsible by examining factors such as how companies marketed the product or whether they took easily available steps to reduce infringing uses.

"There is substantial evidence in MGM's favor on all elements of inducement," Souter wrote.

Sounds like an inducement test. How strong is it? We will have to wait for the decision to see.

UPDATED - Links to Discussion Continuously, throughout the day

For masochists: Slashdot: Your Rights Online: Supreme Court Rules against Grokster

Public Knowledge statement from their president Gigi Sohn:

Today's Court decision in the Grokster case underscores a principle Public Knowledge has long promoted -- punish infringers, not technology. The Court has sent the case back to the trial court so that the trial process can determine whether the defendant companies intentionally encouraged infringement. What this means is, to the extent that providers of P2P technology do not intentionally encourage infringement, they are exempt from secondary liability under our copyright law. The Court also acknowledged, importantly, that there are lawful uses for peer-to-peer technology, including distribution of electronic files 'by universities, government agencies, corporations, and libraries, among others.'

The Court is clearly aware that any technology-based rule would have chilled technological innovation. That is why their decision today re-emphasized and preserved the core principle of Sony v. Universal City Studios -- that technology alone can't be the basis of copyright liability -- and focused clearly and unambiguously on whether defendants engaged in intentional acts of encouraging infringement. The Court held expressly that liability for providing a technological tool such as the Grokster file-sharing client depends on 'clear expression or other affirmative steps taken to foster infringement.' What this means is, in the absence of such clear expression or other affirmative acts fostering infringement, a company that provides peer-to-peer technology is not going to be secondarily liable under the Copyright Act.

Douglas Lichtman: Lichtman: Hollow Victory in Grokster.
He is disappointed that the Court didn't follow the liability rule that he supported, inducement can be difficult to prove.

Larry Solum makes an excellent point about the concurrences and their two very different takes on the Sony standard (Solum: The Grokster Concurrences).

More Solum: Solum: A Legal Engineering Failure.

Each of the important P2P filesharing cases has involved a failure of "legal engineering"--the legal design of the P2P business. In the Napster case, the failures were the most egregious--with "smoking gun" memos indicating that the purpose of Napster was to faciliate copyright infringement. In Grokster, the failures were almost as bad.

C.E. Petit extends Solum's point and responds to Susan Crawford: Balanced or Evasive?.

Lior Strahilevitz: Grokster and Bongs. 'nuff said.

Me, from the Wall Street Journal Grokster Roundtable

I would like to pose some questions. Imagine that Sony had been a nefarious group of active inducers when they brought out their Betamax. Suppose that there was ample evidence that Sony fully intended and explicitly encouraged Betamax users to infringe copyright with their videotape recorder (ads, internal emails, business plans). Consequently, under this standard, sales of the Betamax were shut down. What happens when VHS comes along? What will the makers of VHS have to do in order to avoid liability thanks to the bad actions of Sony? In this decision, the Court emphasizes that StreamCast and Grokster followed in the wake of Napster and wanted to capture Napster's users. But, heck, iTunes wants to capture Napster's users as well. What would StreamCast and Grokster have to have done in order to avoid liability for following in the footsteps of bad actor Napster? What will the next developer of P2P have to do if Grokster and StreamCast are found liable in the lower court?

Ed Felten, Freedom to Tinker: Business Model as Evidence of Intent and Legality of Design Decisions, and Footnote 12 in Grokster.

More attention for footnote 12 from Randy Picker: The Lurking Design Issue in Grokster.

Kathleen Sullivan has a good summary on SCOTUS Blog: Hollywood Beats Grokster But Not Silicon Valley

EFF press release: Supreme Court Ruling Will Chill Technology Innovation.

"Today the Supreme Court has unleashed a new era of legal uncertainty on America's innovators," said Fred von Lohmann, EFF's senior intellectual property attorney. "The newly announced inducement theory of copyright liability will fuel a new generation of entertainment industry lawsuits against technology companies. Perhaps more important, the threat of legal costs may lead technology companies to modify their products to please Hollywood instead of consumers."

William Patry : The Court Punts. Must reading, of course.

I need as most do, more time to sort through this, but my first read through is negative. We have two very different visions, Ginsburg's camp, which focuse more on what the hard evidence is now, and Breyer's, which focuses on the promise of technology, with three votes uncommitted to either camp. Regardless of whose side you favor, that kind of split is not helpful.

Indeed.

Hilary Rosen in the Huffington Post: The Wisdom of the Court , Part 2.

But knowing we were right legally really still isn't the same thing as being right in the real world. We had that euphoria with the first Napster decision. I hope my former colleagues remember that.

Derek Slater on DeepLinks: What is Inducement?.

Indeed, the Court harped on the companies' mere decision to market to Napster users. Because some Napster users infringed, advertising themselves as new Napsters indicated "a principal, if not exclusive, intent on the part of each [company] to bring about infringement." Even use of the -ster suffix drew the Court's ire. (Friendster, you're on notice.)

Yeah, this is a real problem. You have to remember that the technology in Grokster is substantially dissimilar. Yet, by aiming for the same market as the original Napster, they get in trouble. What of the new Napster, which even retains the same name?

Rebecca Tushnet on SCOTUS Blog: More Questions than Answers.

This leads into my big questions: What would this opinion really have meant for the VCR? Would “See any TV show you want to, anytime you want to see it” or “build a library” count as enough obvious encouragement of librarying – which was not found to be fair use – to justify a finding of contributory infringement? (I’m still looking for a copy of the “build a library” ad, unfortunately.) What about “any TV show” in the context of pay cable, which again was not analyzed as fair use when the Court looked at time-shifting free broadcast TV?

See the question I asked above, as well. Tushnet is more concerned about this decision than I am. I don't think SourceForge needs to worry too much. But there are others who will.

Eric Goldman has an excellent summary: Grokster Supreme Court Ruling. Really good stuff.

Fred von Lohmann discusses points he made before the decision and how they apply after the decision: Supreme Court Sows Uncertainty.