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California's Civil War

March 29, 2005

Today, the U.S. Supreme Court will intervene in California's civil war -- the conflict between Hollywood and Silicon Valley over digital copyright rights.

The case before the court nominally pits MGM and Grokster, a scrappy online "file-sharing" software maker based in the West Indies. But this is really a fight between those who make entertainment content and those who make the gadgets that often encourage the unauthorized use or copying of that content. Hollywood is trying to crack down on digital pirates who use file-sharing programs to trample intellectual property rights and threaten movie studio profits.

Silicon Valley's high-tech titans, for their part, are adamant in defense of their right to freely design and build software and hardware that consumers need to access digital information. You may not have heard of Grokster, but companies such as Intel have filed briefs in the case suggesting the end of civilization if movie studios start having a veto over technological advances.

It's hard to argue with that assessment (if we define civilization rather loosely), though the justices face the unenviable task of balancing it against the need to protect copyright laws. And regardless of how the court rules, rest assured that Congress (and plenty of other tech companies peddling piracy-friendly systems) will still want to join the fray.

So both sides in the dispute ought to give up hope for a total victory in the courts and start talking to each other about ways to make it easier for people to access movies and music online, and pay for it.

Everyone in Hollywood and Silicon Valley has a take on this case, but the opinion that really matters is one that U.S. Supreme Court Justice John Paul Stevens wrote 21 years ago. The 5-4 majority in the Betamax case ended a similarly bitter conflict between Hollywood studios and technology companies over the sale of home video-recording systems.

Hollywood claimed that it would be bankrupted by the new machines and urged that VCR manufacturers be held partially responsible for illegal taping done by their customers. The Supreme Court instead determined that VCR makers were not aiding and abetting the theft of copyrighted material because their machines had "substantial non-infringing uses." The rest is history, as VCRs begat DVDs, Hollywood's mightily profitable distribution channel. The Oscar-winning "Ray" recently generated more in DVD sales ($95 million) in a month than it took in during several months on the big screen.

None of this is to say that peer-to-peer systems like Grokster and Morpheus aren't allowing consumers to shoplift digitally, victimizing creative artists and their corporate distributors. But there are plenty of non- infringing uses for file-sharing systems, and the justices today will probably quibble about how much legitimate copying is enough to save the likes of Grokster. Millions of files, including books, videos and music, can legally be downloaded, and we are fortunate the photocopying machine wasn't banned long ago because it induced criminality. Hollywood claims that at least 90% of the file sharing is little more than blatant theft, but it overlooks the fact that many of the legitimate uses of replicating technologies become apparent only over time.

The court cannot ignore these realities -- or the fact that the tech genie cannot be put back into the bottle -- while addressing the fact that millions of consumers around the world are illegally copying tens of millions of copyrighted files. It's worth noting that the lower courts haven't legalized unauthorized copying of protected materials. They simply applied the Betamax test and distinguished Grokster from Napster, the ill-fated file-sharing service that allowed users to illegally copy music on its own servers.

What the entertainment industry wants is veto power over technology with the potential to be used illegally. That's not in society's best interest. If those creating the peer-to-peer networks could be held liable for illegal activity, where do we draw the line? Why not go after the manufacturers of operating systems, hard drives and CD burners that can also play a role in illegal activity?

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