This post is part of a series of posts entitled A Legal Guide to the Internet. For a comprehensive list of articles contained in this series, click here

Since the personal computer was developed, computer owners have traded files amongst themselves through a variety of means. With the advent of hard disk technology capable of downloading and storing large files, music files such as MP3s became one of the most popular subjects of file sharing. File sharing technology, of course, allows easy transfer and replication of all files in the MP3 format, including those comprised of copyrighted material.

Napster File Sharing Software

In the first file sharing case to reach a court of appeals, the Ninth Circuit found music sharing pioneer Napster liable for contributory and vicarious copyright liability as well as for assisting online users to download copyrighted music, A&M Records v. Napster, 239 F.3d 1004 (9th Cir. 2001). Napster was developed as a software program that ran on a central server as well as on individual computers. Users who downloaded the software were able to search music files on others’ computers, transfer those copies, and store exact copies on their hard drives.

In MGM Studios, Inc. v. Grokster Ltd., 380 F. 3rd 1154, 1160, (9th Cir. 2004) the Court concluded that, unlike Napster, these peer to peer file sharing services could not control activities of users and therefore were not liable. The Court also found that the Grolester service was capable of substantial non-infringing uses.

On June 27, 2005 the United States Supreme Court issued a long awaited ruling concerning the peer-to-peer networks that allowed millions of individuals to download copyrighted music via the Internet. In MGM v. Grokster 544U.S.903 (2005) the Supreme Court found that manufacturers and providers of software or technology that allows others to copy songs may be held liable for the infringing acts of others who use their software for such infringing activities. The Supreme Court determined that it was not sufficient for the provider of the peer-to-peer network technology to demonstrate that the software was capable of non-infringing use. Even if capable of non-infringing uses defendants who operate such peer-to-peer networks can now be held liable for the infringing acts of individual end-users if the defendants acted with the intention or objective of promoting use of the technology to infringe copyright. The Court found evidence in this case that Grokster had taken steps to actively induce and encourage copyright infringement and was therefore liable for infringement. It remains an open issue as to whether a peer-to-peer network with substantial non-infringing uses and that is not actively promoted as a way to pursue infringing activities will be deemed a legitimate and legal program.

The Napster and Grokster cases provide guidance to businesses that are using file-sharing technology on the Internet. Software should not be designed primarily for infringing purposes. Businesses must also recognize that they have some duty in protecting a copyright holder’s rights. These steps will legitimize file sharing and will allow companies the ability to share and exchange ideas in real-time. Neither of these cases suggest that the actions of individuals who download and copy music or film are not infringers and the recording industry has more aggressively gone after individuals.

If you are facing copyright infringement charges, please read our post, Copyright Infringement Tips for Illegal Movie & Music Download Cases.

This and the following posts have been copied or adopted from A Legal Guide To The INTERNET – Sixth Edition, published through a collaborative effort by the Minnesota Department of Employment & Economic Development and Merchant & Gould.