Online music case rests on VCR ruling

When internet file-sharing services and the entertainment industry square off in the US Supreme Court on Tuesday, the outcome will likely rest on a nearly obsolete technology -- the video cassette recorder.

Backers of "peer to peer" networks like Grokster will argue that the software makers deserve the same protections as VCR manufacturers, because both can be used for good or ill.

Record labels and movie studios will argue that Grokster should be held responsible when its millions of users illegally copy movies and music directly from each others' computers.

Both sides will agree one one thing -- the court could harm their ability to produce innovative new products if it doesn't rule in their favour.

"If nothing is changed and these services continue to operate, it will have an impact on the creative process. For the movie industry, it will mean less risk will be taken in terms of the creation of new material," said Dan Glickman, president of the Motion Picture Association of America.

"The way new technology is created and funded is it's a high-risk affair. It's not going to get funded if there's a sword of litigation hanging over it," said Gary Shapiro, president of the Consumer Electronics Association, which supports Grokster.

The Supreme Court in 1984 ruled that Sony Corp. couldn't be held responsible if users of its Betamax VCR copied television shows without permission, because it also could be used for legitimate purposes such as taping a show to watch later.

Lower courts have said that ruling applies to Grokster as well.

The Betamax ruling has allowed consumer-electronics makers to develop products without getting permission from Hollywood first -- a key to the industry's success that could be upset if the court rules against Grokster, backers say.

"Every technology from the CD burner to the personal computer to the iPod has emerged in part because of the clarity of the (Betamax) rule," said Fred von Lohmann, a senior attorney with the Electronic Frontier Foundation who is representing Morpheus.

Grokster backers point out that the entertainment industry has a long history of initially opposing new technology, from the player piano to the VCR, that has ultimately benefited it in the long run.

But that doesn't change the fact that Grokster makes its money almost entirely by encouraging people to illegally copy music and movies, the entertainment industry argues.

Using that logic, a single instance of "legitimate" use can justify millions of illegal transactions, they say.

"Nobody would suggest that the iPod is a business based on infringement," said Cary Sherman, president of the Recording Industry Association of America. "Grokster, on the other hand, was conceived for the very purpose of encouraging and profiting from infringement. "

Though the vast majority of traffic over peer-to-peer networks involves copyrighted material, legitimate uses have begun to emerge in recent years.

Independent artists like Steve Winwood have released their music over peer-to-peer networks, while scientists and government bureaucrats have used peer-to-peer technology to distribute information cheaply without central server computers.

Record labels have begun to licensing their music to a new breed of peer-to-peer networks like Mashboxx that will let copyright owners exert some control over their material.

The court will also hear arguments about whether cable companies should have to allow rival internet service providers to use their high-speed pipeline.

- REUTERS