This months Anti-Napster appellate court ruling struck a sour note for many businesses interested in new technologies.
The legal precedent will affect the ability of consumer electronics companies to innovate and the need for service providers to police their subscribers activities, experts said. Users of various technologies may suffer if new products are limited and costs rise for service providers.
The courts decision creates uncertainty that will have "a chilling effect" on the consumer electronics industry, said Michael Petricone, vice president of technology policy at the Consumer Electronics Association.
Some of the experts concern stems from a landmark Supreme Court decision in 1984, involving Sony Betamax. The court ruled that VCRs have substantial legitimate uses and thus shouldnt be effectively banned out of concern that they would enable copyright infringement. Many legal experts believe the essence of the Sony decision holds that the benefits of new technologies tend to outweigh their risks to intellectual property owners.
The recent appeals court decision distinguished Napster as a service, rather than a product, Petricone said. But those lines are blurring: "Our concern is the line between a service and a product is not particularly distinct."
A digital video recorder, such as the ones offered by TiVo, combine a VCR-like product and an ongoing service, Petricone noted. The fuzziness of the decision is already chilling some ambitions. "A couple of companies have already come to us and said, We have products wed like to bring to market, but were not sure what the liabilities are, " he said.
Several industry trade groups, unhappy with the district court decision in the Napster case last summer, filed briefs on some broader policy issues with the 9th U.S. Circuit Court of Appeals.
While the 9th Circuit judges did "grind the rougher edges off the district courts decision, much of whats in there is still problematic," said Jason Mahler, vice president and counsel at the Computer and Communications Industry Association.
Portals and Internet service providers worry that the recent decision gives them more responsibility to police their networks.
The 1998 Digital Millennium Copyright Act (DMCA) includes a "safe harbor" provision that says service providers, broadly defined, dont have to monitor everything on their networks. Rather, they need merely respond to notices, provided by the copyright holders, of infringements.
The appeals court suggested that the DMCA was less cut and dried on the issue than service providers have assumed.
"We were disappointed that the court didnt pay more attention to the [safe harbor] provision," said David McClure, president and chief executive at the U.S. Internet Industry Association.