Panel Talks Life, Post-Grokster

The debate rages: Will the Grokster decision stifle innovation? Tech and entertainment leaders exchange views at the Jupiter Research DRM 2005 conference.

NEW YORK—In June, the Supreme Court ruled in favor of the entertainment industry in the seminal MGM vs. Grokster case. Even though the case has been settled in the highest court in the land, both sides still debate the implications of the ruling.

That disagreement came to life on Thursday at a panel discussion at the Jupiter Research DRM 2005 conference, as advocates on both sides of the argument talked about the ongoing effects on technology innovation and copyright protection, first brought to the limelight in the seminal Sony Betamax case in the 80s.

Both sides argued that the Supreme Court made a decision that all justices could agree with, but Fred von Lohman, senior intellectual property attorney for the Electronic Frontier Foundation, said that in doing so, the court failed to answer the hard questions, and left the interpretation so open that no technology innovator is exactly safe from the long arm of the law.

"Frankly, I think more trouble for tech companies is what the court didnt say," von Lohman said. "The reason we have 9-0 decision is because the Supreme Court chose to punt the hard questions presented in this case."

He stressed the fact that the Supreme Court decision was based on whether a technology actively "induced" or encouraged copyright infringement and ignored the concept of "contributory infringement" and "vicarious liability." Those principles were laid down in the Betamax case, stating that technology creators who do not actively encourage users to do something illegal cannot be held responsible if that product is used by someone else for pirating content or some other illegal activity.

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von Lohman said that since the court did not address those two aspects of the Grokster dispute, it left expansive gray areas open to interpretation—a situation that could prove detrimental to technology innovation.

Edward Hernstat, partner at Frankfurt Kurnit Klein & Selz, who has represented both entertainment and technology companies in the past, agreed with vonLohman about the ambiguities left by the Grokster decision.

"Theres going to be lots of happy lawyers," Hernstat said, "because of the courts refusal to address vicarious liability and contributed liability is going to cause lots of problems."

He said the decision, while it will promote the progress of DRM (digital rights management) will not quell all Grokster-like companies. Instead, companies will head offshore, where they cant be touched by the Supreme Court ruling. "Its not going to be a magic bullet," Hernstat said.

Another effect of the decision, he said, will be that technology companies will start thinking about advertising and promotion. Since the real clincher in the Grokster decision was that Groksters advertising actively promoted illegal file sharing by comparing it to the first-generation Napster, companies will have to take a closer look at how they promote their services.

Hernstadt mentioned several instances. iTunes says users can rip and burn CDs. TiVo says you can burn copies that can be watched anywhere. Digital video recorder ads say users can make perfect digital copies that can be played on other DVD players, etc.

"Take a movie, rip it, edit the way you want to rip it and burn it — is this the type of advertising that will get electronic companies in trouble?" Hernstat said. "Now in the post-Grokster world, its a greater concern."

Next Page: Debating the long-term effects of the Grokster ruling.