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by Tyler Hamilton
The Toronto Star
Nov 8, 2005
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Grokster Ltd., a leading developer of Internet
file-sharing software popular for stealing songs and movies online,
has agreed to shut down operations to settle a landmark piracy case
filed by Hollywood and the music industry.
The surprise settlement yesterday permanently bans Grokster from participating
directly or indirectly in the theft of copyrighted files and requires
the company to stop giving away its software. The settlement with the
Recording Industry Association of America comes four months after the
United States Supreme Court unanimously ruled that Grokster and other
"peer-to-peer" networks could be held liable if they induced
users to violate copyright laws.
The decentralized nature of most peer-to-peer software makes it uncontrollable
once it is released over the Internet. However, shutting off sites where
users first download the software may strangle the flow of new users.
Grokster's website was changed to display a message that the site's
file-sharing service was illegal and no longer available.
"There are legal services for downloading music and movies,"
the message said. "This service is not one of them."
Grokster's decision was not expected to affect Internet users who already
run the company's file-sharing software to download music and movies
online; nor to affect users of rival downloading services.
Kaan Yigit, president of Solutions Research Group, a Toronto-based technology
and entertainment research firm, said the shutdown of Grokster is unlikely
to have much impact on Canadian Internet users.
"Grokster was never a big player," said Yigit, pointing out
that the vast majority of file traders in Canada use Limewire, Kazaa
and an emerging technology called Bit Torrent.
He said an increasing number of Internet users are using instant messaging,
through services such as MSN Messenger, to trade files directly with
each other in smaller social groupings.
Still, the shutdown of Grokster is being viewed as a major symbolic
victory for the entertainment industry.
Grokster's software allowed as many as 60 million users to swap music
and movie files posted by other subscribers to the Internet service.
The music and movie industries say 85 million songs and 400,000 movies
are downloaded illegally each day, robbing companies, performers and
songwriters of income.
Grokster's brand will survive. A new fee-based version of the software,
which will permit only legal downloads, will be available within 60
days from a new parent organization, according to one executive involved
in the deal. Grokster, based on the West Indies island of Nevis, is
set to be bought by Mashboxx LLC, which aims to establish an industry-sanctioned
peer-to-peer company to compete with such online music stores as Apple
Computer Inc.'s iTunes.
The recording industry argues that the rampant online song copying enabled
by Grokster and other peer-to-peer networks is largely responsible for
a five-year slide in CD sales, and has sued more 7,000 individuals for
copying songs over the Internet.
Two other popular peer-to-peer services, WinMX.com and eDonkey, shut
down in September after receiving cease-and-desist letters from the
Recording Industry Association of America.
"This is a chapter that ends on a high note for the recording industry,
the tech community and music fans and consumers everywhere," said
Mitch Bainwol, head of the association.
The entertainment industry has fought free movie and music file sharing
for five years, saying it loses billions of dollars annually. Napster
Inc. shut down in the wake of an industry lawsuit in 2000 and now operates
as a paid service.
"Ever since the doors darkened at Napster, there has been a `whack
them all' aspect to fighting file sharing," said James Gibson,
a University of Richmond law professor who specializes in intellectual
property and computer law. "This can't be viewed as anything but
a victory for the motion picture and music industry."
Yigit, who says file-sharers in Canada aren't being deterred, called
it a victory in a war that's difficult, if not impossible, to win.
"Most people who are downloading content see it in the order of
jaywalking in terms of seriousness," he said.
"I've been getting calls about this stuff since late 1999, and
six years later, we're still talking about the same thing," he
added. "It's flourished."
Grokster and StreamCast Networks Inc., another file-sharing network
provider, arose in the aftermath of the court-ordered shutdown of Napster.
The sites offered different technology from Napster's, based on peer-to-peer
software that allowed users to swap music without a central directory
of titles residing on the companies' computer servers.
The U.S. Supreme Court ruled in June the entertainment industry can
file piracy lawsuits against technology companies caught encouraging
customers to steal music and movies over the Internet. The decision,
which gave a green light for the federal case to advance in Los Angeles,
weakened protections for companies that had blamed illegal behaviour
on their own customers rather than the technology that made the behaviour
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