Grokster Settles with Music, Movie Studios
Grokster agreed to settle a 3-year-old fight with the music and movie industries only 4 months after a landmark Supreme Court ruling that found peer-to-peer(P2P) networks can be liable for users’ sharing copyrighted files (WID June 28 p1). The parties were expected to present settlement details, which included a $50 million payment to the plaintiffs, at a late Mon. hearing in U.S. Dist. Court-L.A.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
Under the agreement, Grokster immediately will end its operations and stop distributing its client application, systems and software. The firm also will assume a permanent injunction from the court. Grokster attorney Michael Page declined to give more details, telling us only that his client “look[s] forward to launching a new, licensed Grokster soon.”
Court paperwork stipulates that Grokster revoke all 3rd-party distribution of its software and send cease-and- desist notices to known unauthorized 3rd party distributors. If Grokster operators “sell, lease, convey, transfer or assign all or any significant part of the business, equity, operations or assets,” buyers or lessees must file with the court and agree to the settlement.
The RIAA and MPAA hailed the settlement as a milestone in the online market’s transformation. “This settlement brings to a close an incredibly significant chapter in the story of digital music,” RIAA Pres. Mitch Bainwol said: “This is about our ability to invest in new music. An online marketplace populated by legitimate services allows us to do just that.” The Supreme Court decision and the settlement provide the content and technology sectors “a window of opportunity which I think ultimately will greatly benefit consumers,” MPAA Pres. Dan Glickman said.
Grokster’s homepage displayed a warning Mon.: “There are legal services for downloading music and movies. This service is not one of them. Grokster hopes to have a safe and legal service available soon.” The page links to www.grokster3g.com -- a separate site prefiguring the firm’s rebirth as “a safe, secure & legal P2P experience.” The 2nd site promises a legitimate system with no adware, no spyware, no bundles, no viruses and no hassle. Rumors have circulated that Mashboxx, founded by former Grokster CEO Wayne Rosso, is interested in acquiring the battle- scarred company. An industry source told us Mashboxx is “working on a solution that would enable Grokster to reemerge as a legitimate service.”
Since the June Supreme Court ruling, legitimate music sharing services have materialized. Besides legal download services like Rhapsody, Napster and iTunes, firms like iMesh, Mashboxx and Wurld Media have unveiled content-industry friendly P2P business models and moved to seal licensing agreements with record companies.
The settlement is “symbolically, an interesting development in the history of the copyright discussion,” a Center for Democracy & Technology (CDT) spokesman said. Last Jan. CDT joined the Digital Media Assn. (DiMA), NetCoalition, and the Information Technology Assn. of America in a neutral amicus brief in the case. “The Supreme Court set a very good balance by and large in their unanimous decision on Grokster,” CDT said. “This obviously indicates that the decision is clearing the way for copyright owners to seek and obtain redress against bad actors while still hopefully preserving the right of innovators who develop technologies.”
Though Grokster is “joining eDonkey in the graveyard of commercial piracy promoters,” P2P networks will remain active, so legal download and subscription services will continue to compete against free alternatives, DiMA Exec. Dir. Jon Potter said: “In this environment, aggressive pricing and promotion and continuous innovation and are still required to wean consumers to legitimate commercial online music.” Grokster “appears to have collapsed under the weight” of the Supreme Court ruling, Business Software Alliance (BSA) Pres. Robert Holleyman said. He called the site’s shutdown “a welcome victory in our ongoing fight against piracy.”
The deal was no surprise, given the high court’s “9-0 slam dunk,” said Progress & Freedom Foundation Senior Fellow Jim DeLong. “We have taken one more step toward a market in which licensed content is competing with licensed content,” he said. “Consumers have a range of choices and options from subscriptions to pay-per- download, at varying price points. That market is already emerging, but in 5 years we'll have so much legal competition that this settlement won’t even be remembered.”