US Supreme Court rules against file swapping

Changed landscape for digital content?
The decision isn't likely to eliminate file swapping. Many of the most popular services are decentralised enough that they can exist even if a parent company disappears. Many peer-to-peer services also are based outside the United States or have been created by overseas programmers.

US courts have shown their willingness to reach overseas companies in some cases, however. Already, a Los Angeles court has ruled that Kazaa parent Sharman Networks, based in Australia, maintains enough business connections in the United States to be sued in American courts.

If the decision -- and subsequent lower court actions -- pushes file-swapping services further underground, it can only help companies such as Apple that are selling music and movies online, music service executives said.

"I think the Supreme Court did the right thing, in a lucid way," said Rob Glaser, CEO of RealNetworks. "I think it will make a difference in the long slog to convert the industry over to legitimacy, by not allowing businesses to do this kind of nudge-nudge wink-wink marketing."

Apple, Napster and other digital music services also hailed the ruling as a vindication of their business models.

The decision could also be a boost for companies such as Shawn Fanning's Snocap or Audible Magic, which offer technology for filtering copyrighted files out of peer-to-peer swaps, or turning those swaps into transactions. Today that available filtering technology focuses only on music files, but tools are being developed to identify and block movie downloads.

"To the P2P operators, the LimeWires and the eDonkeys: We want to work with you," said Mitch Bainwol, chief executive officer of the Recording Industry Association of America. "This is time to come forward and start filtering. We can build a better digital age together."

Although the decision technically leaves the file-swapping companies' fate to the lower court, it could hold the seeds of a quick decision in favor of Hollywood and the record labels. Souter's ruling noted that the original trial judge granted summary judgment to Grokster, but said the lower court should instead immediately reconsider the copyright companies' request for summary judgment.

Souter was supported unanimously in his decision by all nine justices, a rare level of agreement on controversial cases. Justice Ruth Bader Ginsburg wrote one concurring decision that was joined by Justices Anthony Kennedy and William Rehnquist. Justice Stephen Breyer wrote a second concurrence, joined by Justices John Paul Stevens and Sandra Day O'Connor.

CNET's Declan McCullagh and Anne Broache contributed to this report.

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