Grokster and the Future of P2P

As many readers will have heard, the U.S. Supreme Court issued its decision in Grokster earlier today (Souter opinion, Ginsburg concurrence, Breyer concurrence).

I'm participating in a discussion of the decision at the Wall Street Journal online (free access for roundtable). My initial take and posting is:

Grokster certainly didn't win this case, but more importantly, P2P technology didn't lose. As many predicted, the court was clearly (and unanimously) uncomfortable with Grokster and what it viewed as intentionally profiting from copyright infringement. By seeking to retain Sony but build in active inducement, it is trying to navigate a difficult fine line. The Souter money quote calls for an inducement rule premised on "purposeful culpable expression and conduct." It will be up to future courts to determine how tough a standard this creates, but by excluding actual knowledge of infringement, I think this presents a fairly high threshold.

While we will look on with great interest at what happens on remand, a potential future action against BitTorrent seems to me to be much more interesting. BitTorrent may well have far less evidence of purposeful culpable expression, even with knowledge of infringement. Moreover, if the market evolves in the manner described by Breyer, I believe that future P2P services will have even less evidence as they legitimately develop services that build on the interest in non-infringing sharing despite the knowledge that their systems support infringing activities.

Though not core to the decision, I find Breyer's willingness to question the economic impact of P2P on the recording industry noteworthy. Over the past three weeks, the OECD, FTC, and now the U.S. Supreme Court have all cast doubt on the linkage between P2P and declining music sales. That makes for a strong trio and should help move the debate beyond unsubstantiated claims of a direct correlation between file sharing and the recording industry's bottom line.

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