US court hands out landmark file-sharing decision

The US Supreme Court has handed movie studios and record labels a sweeping victory against file swapping, ruling that peer-to-peer companies such as Grokster could be held responsible for the copyright piracy on their networks.

In a unanimous decision issued on Monday, the nine justices said companies that build businesses with the active intent of encouraging copyright infringement should be held liable for their customers' illegal actions.

Justice David Souter wrote in the majority opinion: "We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement."

The decision comes as a surprisingly strong victory for copyright companies and stands to reshape an internet landscape in which file swapping has become commonplace.

The ruling will give the recording industry and Hollywood immediate ammunition to file lawsuits against other file-trading companies. It could also be a boon for legal music services such as Apple's iTunes, which could see their strongest competitor - freely downloadable songs - driven further underground.

It won't immediately shut down access to the trading networks, however. The court's ruling sends the case back to the lower courts, which will review the evidence against Grokster and co-defendant StreamCast in the light of Monday's decision.

Record labels and movie studios immediately hailed the decision as an unambiguous victory.

Warner Music Group CEO Edgar Bronfman said in a statement: "The most important message from today's historic decision is that progress and innovation do not have to come at the expense of recording artists, songwriters and the people who make their living in the entertainment industry. This important decision will allow artists and the creative community to prosper side by side with the technology industry."

The peer-to-peer companies involved warned that the high court had opened the floodgates to litigation against a wide variety of technology companies but said they would continue to distribute their software and that they expected to be cleared of any wrongdoing.

StreamCast CEO Michael Weiss said: "We are confident that it will be proven that Morpheus does not promote or encourage copyright infringement. We're staying in this for the fight. We're going to continue to innovate and come out with new products."

John Borland writes for CNET News.com