In the MGM vs. Grokster case, judges voted unanimously that software companies will be held liable when consumers use the service to illegally download music and movies, overturning an earlier ruling that sheltered peer-to-peer services from legal action.
"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," Justice David Souter wrote in the majority opinion.
The transcript shows that the judges based the ruling on the fact that Grokster knew its users were downloading copyrighted materials and that Grokster sought to capture the market of former Napster users.
"Grokster launched its own OpenNap system called Swaptor and inserted digital codes onto its Web site so that computer users using Web search engines to look for Napster or [f]ree filesharing would be directed to the Grokster Web site, where they could download the Grokster software," Souter wrote.
The decision also overturns a precedent set by the seminal 1984 Sony vs. Universal, or the "Betamax," case, in which the high court ruled that recording hardware manufacturers could not be held responsible for how individuals use their products.
Todays ruling is considered a big blow to the technology industry, and experts predict that it will serve as a major bottleneck for electronic innovation.
On the other side, entertainment industry leaders say that illegal downloading of films and music has caused such a drastic financial impact that they were forced to pursue legal action to protect their interests.
"Protecting intellectual property rights and aggressively combating copyright theft will keep an engine of economic growth and job creation thriving; promote innovation; strengthen legitimate businesses that unite technology and content in innovative and legal ways; and ensure a future of quality and choice for consumers in the United States and around the world," said Motion Picture Association of America President and CEO Dan Glickman in a statement.
The ruling doesnt mean the battle is over yet. Now, the case will return to the lower courts, where Grokster and Streamcast can be tried for copyright infringement.
Editors Note: This story was updated to include additional information about the ruling.