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The beat(down) goes on

Morpheus_logo_1 The landmark MGM v Grokster case lives on, although the end might actually be in sight. Today, U.S. District Judge Stephen V. Wilson in Los Angeles rejected the entertainment companies' proposal for a permanent injunction against StreamCast, the sole remaining defendant in the case (the others have all settled with the major record companies, music publishers and Hollywood studios). Wilson said an injunction would be appropriate -- after all, he ruled last September that StreamCast Networks (the company behind the Morpheus P2P network) was liable because it induced users to copy songs and movies without the copyright owners' permission -- but the terms and scope need to be more, well, nuanced than the entertainment industry's lawyers sought.

StreamCast will probably be required to use the same kind of technology that competitors iMesh and Kazaa do to identify copyrighted material and control downloads. There are at least three other issues still to be hashed out, though, and all of them have implications for the industry's battles with other infringement-laden sites. First, today's filtering mechanisms are imperfect. Will copyright holders simply have to accept that, or can they use the shortcomings of the technology to force StreamCast to shut down (as they did with the original Napster)? Second, how far will StreamCast have to go to convert users to the new, filtered version of its software? Attorney Donald Verrilli Jr., speaking for the music and movie industries, urged Wilson to require Streamcast to use "all technologically feasible means" to impel a switch to the new software. For example, he said, they could force the old versions of the software to display a barrage of pop-up ads or other annoyances. StreamCast attorney Charles Baker said some of the previous versions won't display pop-ups, while others display pop-ups controlled by third parties. In other words, while it's in StreamCast's interests to persuade people to use the new software, there's only so much the company can do to make that happen. Finally, Verrilli asked Wilson to stop StreamCast from collecting ad revenue from previous, piracy-inducing versions of the software. But StreamCast's attorneys said afterward that the company couldn't simply stop those ads; it didn't have that much control over the various versions of the software.

Noting a key ruling on inducement in patent law, Wilson said he didn't believe the plaintiffs should have exclusive control over StreamCast's software given that it was capable of substantial non-infringing uses. That's one reason he rejected the injunction terms proposed by Verrilli. "I don't think this is necessarily that easy a question," he said as he dismissed the hearing, promising to issue a tentative order in a week that will seek comment from both sides on various approaches.

The entertainment industry has already won this case, but the worst outcome from its perspective is having StreamCast join Grokster in the dustbin of history. Instead, it needs more file-sharing companies developing ways to monetize the enormous global audience for these networks. Obviously, iMesh and Kazaa haven't found the magic formula that transforms millions free downloaders into paying customers. That's why the industry needs to find a way to keep StreamCast in the game.


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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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