Grokster Ltd. was a privately owned software company based in Nevis, West Indies that created the Grokster P2P file-sharing client in 2001 that utilized the FastTrack protocol. Grokster Ltd. was rendered extinct by the United States Supreme Court's decision in MGM Studios, Inc. v. Grokster, Ltd. The court ruled against Grokster's peer-to-peer file sharing program for computers running the Microsoft Windows operating system, effectively forcing the company to cease operations. The product was similar in look and feel to Kazaa which is marketed by Sharman Networks.

A summary of the "piracy" argument

It has been estimated that 90% of files shared on Grokster were downloaded illegally. [] Whether such downloads have substantially affected the retail sales of music, videos, and other works protected by copyright and the intellectual property laws is a matter of debate. [] Grokster claimed they did not violate any copyright laws because no files passed through their computers. They assigned certain user computers as "root supernodes" that acted as music hubs for their company. Thus they were not responsible for controlling any specific file downloads. []

The key issue in the copyright infringement case was the so-called "Sony safe-harbor" principle that was set by the Supreme Court 21 years ago in Sony v. Universal Studios 464 U.S. 417 (1984). The ruling stated that, "…the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial non-infringing uses." (Sony 464 U.S. at 442). Grokster argued that proof of reasonable, actual or potential, non-infringing use, is sufficient to fulfil the ""substantiality"" requirement. The RIAA and MPAA argued that Sony safe-harbor requires proof that the non-infringing use is the primary one; an incidental non-infringing use is not enough.

Among the amicus curiae briefs:
*The U.S. government proposed that a manufacturer of technological device will be protected by Sony safe-harbor only if the non-infringing uses are commercially significant compared to the infringing uses.
*A group of law and economic professors (among them Professors Kenneth J. Arrow, and William M. Landes) argue that the test whether the non-infringing use is substantial, requires an examination of all the existing legal mechanisms for accomplishing the same task. The example given is the distribution of the Bible. This is lawfully available through P2P file sharing software and is therefore a non-infringing use. But many religious websites offer a free copy. Thus, since downloading the Bible through P2P file sharing software is an addition to the list of well-established legitimate methods for obtaining a free Bible, the benefits of this addition are not substantial and the overall use of P2P software should not be considered a non-infringing use.
*The cost-benefit analysis, first introduced by Judge Posner from the 7th Circuit Court of Appeals in the Aimster case, holds that a manufacturer of technological device will enjoy the Sony safe-harbor only if " would have been disproportionately costly for him to eliminate or at least reduce substantially the infringing uses."
*The Creative Commons organization presented a strong argument for non-infringing use in the form of the Creative Commons licence, despite the fact that the architecture of the software did not allow for the licence information to be transferred.

upreme Court decision leads to shutdown

Grokster closed its site on November 7, 2005. A note on its home page cited a United States Supreme Court ruling that copying copyrighted material using "unauthorized peer-to-peer services is illegal" and while legal download services exist, "this service is not one of them." The company has said it hoped to establish a "legal" service soon, referencing a new URL: [] .

The website is now threatening visitors that their actions can get them caught, and they display your IP address.

The screen text reads as follows:cquote|1=The United States Supreme Court unanimously confirmed that using this service to trade copyrighted material is illegal. Copying copyrighted motion picutre and music files using unauthorized peer-to-peer services is illegal and is prosecuted by copyright owners.

There are legal services for downloading music and movies.This service is not one of them.


Don't think you can't get caught. You are not anonymous.|4= [ Grokster site]

The history of the case in the U.S. courts

In April 2003, Los Angeles federal court judge, Stephen Wilson, ruled in favor of Grokster and Streamcast (providers of Morpheus P2P software) against the Recording Industry Association of America and the Motion Picture Industry and held that their file sharing software was not illegal.

On 20 August 2003, the decision was appealed by the RIAA and the MPAA.

On 17 August 2004, the United States Court of Appeals for the Ninth Circuit issued a partial ruling supporting Grokster, holding

This appeal presents the question of whether distributors of peer-to-peer file-sharing computer networking software may be held contributorily or vicariously liable for copyright infringements by users. Under the circumstances presented by this case, we conclude that the defendants are not liable for contributory and vicarious copyright infringement and affirm the district court's partial grant of summary judgment.

In December 2004, the Supreme Court agreed to hear the case. On 25 March 2005, billionaire and former owner Mark Cuban announced he would finance Grokster's [ fight] in the Supreme Court. Oral arguments were held for "MGM v. Grokster" on 29 March, 2005, and in June 2005, the Court unanimously held that Grokster could indeed be sued for infringement for their activities prior to the date of this judgment. But the future impact of the case may only be to require software companies to more carefully advertise their packages to discourage illegal downloading.

Grokster settled with plaintiffs shortly after the Supreme Court's decision. On 14 February 2006, plaintiffs filed motions for summary judgment as to the liability of the remaining defendants, StreamCast and Sharman. Defendant Sharman reached a tentative settlement agreement in August 2006.

On 27 September 2006, Judge Steven Wilson of the United States District Court for the Central District of California granted summary judgment to the Plaintiffs as to StreamCast's liability. The court rejected StreamCast's argument that the Plaintiff need show specific instances of infringement resulting from StreamCast's acts, holding that "Plaintiff need prove only that StreamCast distributed the product with the intent to encourage infringement." [ 2006 U.S. Dist. LEXIS 73714 at *58 ]


External links

* [ MGM v. Grokster case documents]
* [ The Legality of File Sharing - MGM vs Grokster]
* [ MGM v. Grokster Ninth Circuit oral argument transcript]
* [ MGM v. Grokster: Day 1] - March 30, 2005 MP3 Newswire recap of first day of trial
* " [ Legally Speaking: Did MGM Really Win the Grokster Case?] " Pamela Samuelson
* [ Technical Background of Grokster Decision] - Philip Larson's Blog
* [ Legal Background of Grokster Decision] - Philip Larson's Blog
* [ Summary of Supreme Court Decision] - Philip Larson's Blog
* " [ Advanced Peer-Based Technology Business Models] ". Ghosemajumder, Shuman. MIT Sloan School of Management, 2002.
* " [ Music Downloads: Pirates- or Customers?] ". Silverthorne, Sean. Harvard Business School Working Knowledge, 2004.

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