Statement of the Consumer Federation of America, Consumers Union and Free Press on the Supreme Court's Decision in MGM v. Grokster
June 27th, 2005
Washington, DC - The Supreme Court's decision in the Grokster case will pose a significant challenge for consumers, innovators and the economy. Based on today's decision, new innovators would be subject to review of the courts to assess their marketing activities and business models. Meanwhile, the anti-competitive business models of the current copyright owners are shielded from competitive innovation in the market place.
We are heartened to note that the case upholds the fundamental proposition established in the Sony Betamax case that inventors of technologies with substantial legal uses cannot be held liable for copyright infringement by users, although it appears that the innovators would be held to an additional standard of “clear expression or other affirmative steps taken to foster infringement.” The Supreme Court has endeavored to make this test a rigorous examination of overt actions to induce infringement. If the lower courts understand and implement this test as the Supreme Court has articulated, the damage to innovation could be minimized. The freedom to innovate has been a critical ingredient in a quarter of century of dynamic technological progress and any ruling that would limit this freedom is ultimately harmful. Six members of the Court expressed a very firm commitment to that principle.
The recording companies and movie studios have tried to make this a debate about piracy and theft, but it is not. It is about progress. It is about freedom of expression. And, as we showed in our report, entitled Time for The Recording Industry to Face the Music: The Political, Social and Economic Benefits of Peer-to-Peer Communications Networks, it is about the abuse of consumers and artists by a tight, anticompetitive oligopoly of companies.
Contrary to the copyright holder claims that peer-to-peer communications networks are copyright infringement schemes, decentralized, peer-to-peer networks have become the dominant form of Internet communications because they are vastly more efficient. Peer-to-peer technologies eliminate the congestion and cost of central servers and distribute bandwidth requirements throughout the network. In so doing they become a powerful force to expand freedom of expression and the flow of information, stimulate innovation.
This attack from the film and music industry is an attack on competition. By attempting to constrict modes of distribution, the industry is attempting to maintain their near monopolistic control over the prices consumers pay and the choices consumers make. For example, by maintaining artificially inflated prices for compact discs while simultaneously rejecting newer, cheaper distribution technologies, the industry reaps huge financial gains at the expense of consumer and technological progress.
We suspect that the recording industry and movie studios will use this decision to continue to resist adapting their business models to the new technology. Moreover, they are likely to ask Congress to shut these networks down by creating a surveillance society that requires technologies to fingerprint every file, tag every user, and monitor every transaction. The Court has rejected the copyright holders' demands for “vicarious liability,” its desire to make business models the center piece of “secondary liability,” or the inclusion of filtering technologies as a touchstone for intent. Actions against innovators will require clear and convincing evidence of overt acts that promote infringement. This is absolutely not the standard copyright holders are pursuing. Driven by a “piracy panic” the copyright holders demand a “hub and choke” architecture of central servers and lists that the Internet has left behind.
In order to protect their rights as citizens, people, and consumers, the public must become aroused and engaged to balance the immense monetary and political power of the recording companies and movie studios.
CONTACT:
Mark Cooper (301) 807-1623
Director of Research
Consumer Federation of America
Gene Kimmelman (202) 744-4327
Senior Director of Public Policy and Advocacy
Consumers Union
Ben Scott (202) 265-1490
Policy Director
Free Press
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