WASHINGTON (AP) - The Supreme Court expressed concerns Tuesday over allowing entertainment companies to sue makers of software that allows Internet users to illegally download music and movies, questioning whether the threat of such legal action might stifle Web innovation.

During a lively argument, justices wondered aloud whether such lawsuits might have discouraged past inventions like copy machines, videocassette recorders and iPod portable music players - all of which can be used to make illegal duplications of copyrighted documents, movies and songs.

Justice Stephen G. Breyer said the same software that can be used to steal copyrighted materials offered at least conceptually "some really excellent uses" that are legal.

Justice Antonin Scalia maintained that a ruling for entertainment companies could mean that if "I'm a new inventor, I'm going to get sued right away."

While seeming leery of allowing lawsuits, the court also appeared deeply troubled by efforts of the companies that manufacture so-called file-sharing software to encourage Internet piracy and profit from it.

Justice Anthony M. Kennedy pressed a software lawyer on the question of whether profits from trafficking in stolen property can rightfully be used to help finance a young technology business. "That seems wrong to me," he said.

Two lower courts have sided with the software makers, Grokster Inc. and StreamCast Networks. How the justices rule could redefine how consumers can watch television shows and films and listen to songs that increasingly are delivered in digital formats.

Supporters of file-sharing technology say a ruling against the software companies could effectively give the entertainment industry a legal veto over up-and-coming gadgets; they fear the threat of expensive lawsuits could hamper development of new devices.

Don Henley, Sheryl Crow, the Dixie Chicks and other musicians are backing the major recording labels, saying their livelihoods are threatened if millions of people can obtain their songs for nothing.

About 20 independent recording artists, including musician and producer Brian Eno, rockers Heart and rapper-activist Chuck D, support the file-sharing technology. They say it allows greater distribution of their music and limits the power of huge record companies.

Regardless of the outcome, it still won't be legal to download copyrighted materials over the Internet without permission, though tens of millions of computer users do so each day. And any ruling won't affect thousands of copyright lawsuits filed individually against Internet users caught sharing music and movies online.

But a victory for the entertainment companies would allow lawsuits that could drive companies that make file-sharing software out of business. It also would effectively overturn rules that have governed technology companies for more than two decades: Manufacturers can't be sued for copyright violations committed by customers using their products illegally.

Dan Glickman, head of the Motion Picture Association of America, said the film industry will keep trying to get consumers to buy legal digital movies. "Consumers want a legal, hassle-free, reasonable-cost way to get their products online," he said in an interview Monday with editors from The Associated Press.

Mitch Bainwol, chief executive of the Recording Industry Association of America, told the AP editors: "We are doing all the things we should be doing to move into this digital age. That is true no matter what the outcome" of the case.

The trial judge and a U.S. appeals court quoted the Supreme Court in ruling the same file-sharing software millions of people use to steal music and movies also can be used for "substantial" legal purposes, such as giving away free songs, free software or government documents. They reasoned that gave the software's manufacturers protection from copyright lawsuits based on acts by their customers.

The trial court in Los Angeles and San Francisco-based U.S. Court of Appeals for the 9th Circuit based their decisions on the 1984 Supreme Court "Betamax" case. The justices ruled Sony Corp. (SNE) couldn't be sued for copyright infringement if some customers used their VCRs to make illegal copies of movies.

Entertainment companies argue the file-sharing companies should not have blanket protection from copyright lawsuits, especially when they know about and profit from wide-scale piracy. Court documents said some file-sharing software companies earned millions of dollars annually from advertisements built into their software, and ad revenues climb as more people use the software.

Mark Cuban to finance Grokster defense

By Steven Musil
http://news.com.com/Mark+Cuban+to+finance+Grokster+defense/2100-1032_3-5641530.html

Story last modified Sun Mar 27 14:30:00 PST 2005

Broadcast.com billionaire Mark Cuban has announced that he will finance Grokster's defense against MGM's peer-to-peer lawsuit, which is expected to be argued in front of the U.S. Supreme Court on Tuesday.

Cuban, who sold Broadcast.com to Yahoo for $5.7 billion and is now president of HDNet, a provider of high-definition TV programming, wrote in a blog entry Saturday that he had agreed to fund software company's defense after the Electronic Frontier Foundation and others approached the billionaire.

b The controversial case centers on whether file-sharing software companies could be held legally responsible for copyright infringement on their networks.

Cuban said a Grokster loss would create a stifling legal situation that would virtually eliminate technological innovation in the United States.

"If Grokster loses, technological innovation might not die, but it will have such a significant price tag associated with it, it will be the domain of the big corporations only," Cuban wrote. "It will be a sad day when American corporations start to hold their U.S. digital innovations and inventions overseas to protect them from the RIAA (Recording Industry Association of America), moving important jobs overseas with them."

Cuban also said his decision was also motivated by the prohibitively high legal costs of lengthy court cases.

"It doesn't matter that the RIAA has been wrong about innovations and the perceived threat to their industry every single time," Cuban wrote. "It just matters that they can spend more then everyone else on lawyers."

The case itself focuses on Morpheus and Grokster, each of which are popular file-swapping applications that are widely used to trade movies, music and software.

Studios and labels sued the companies in 2001, following successful legal campaigns against peer-to-peer trailblazer Napster. Attorneys for the entertainment conglomerates said the newer file-swapping services were, like Napster, building businesses based on copyright infringement.

But Grokster and StreamCast were built around a different technology than Napster. Their services involved a highly decentralized network of individual computers trading files among themselves, rather than a network controlled from a central location.

Lower court judges ultimately said that the companies did not directly control what happens on their networks, and that their software could be used for legal purposes. That shields the companies themselves from legal responsibility for the actions of their users, the lower courts said.

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Let the truth be told…MGM vs Grokster

First, let me define myself as a content owner.

I am not a technology owner. Although I have been involved in the technology business for more than 20 years, the software that I have written is long outdated. The infrastructure and integration processes I have designed and developed may still be in use, but I dont control them.

For the longest time, including when we started Broadcast.com, I saw the content business as a lose lose proposition. Then content went digital.

Thats when my eyes opened up to the ownership of content. When content had to be distributed in analog or a physical format for delivery, all distribution could be controlled by just a few gatekeeper companies. Music Labels and Movie Studios owned distribution. In both industries anyone outside the major companies were called independent , and for a good reason. They were on their own, on the outside looking in.

When content went digital, the floodgates opened. Content could be delivered digitally in thousands of different ways, and the number of methods for distribution would only expand over time. To me this meant the power of the gatekeepers would diminish and the power of independent content creators and owners would increase. With the explosion of the internet and then broadband, not only did households explode with digital content replay devices, but more importantly, consumers became comfortable with the concept of what digital was and what it meant to them. From CDs to DVDs to cellphones to email to cameras to HDTVs, in all cases the move to digital represented an improvement in quality, availability, flexibility, mobility and more. Just as I knew that digital in TV would lead to an explosion in the acceptance of HDTV over time, which is why we started HDNet and HDNet Movies (www.hd.net) the same acceptance would change how consumers bought and used any and all content.

Knowing this, my partner, Todd Wagner and I immediately began to get aggressive in the acquisition of content. Our first move was to buy Rysher Entertainment. Rysher owns among its movie library, Kingpin, Private Parts, Dear God, Hard Eight among others. In the TV world, we own Nash Bridges, Highlander, Star Search,Soldier of Fortune, Lifestyles of the Rich and Famous, Lonesome Dove and shared interests in Hogans Heroes, Ben Casey, Walking Tall, The Great Santini and others.

I then added the Dallas Mavericks as a content play with digital implications.

We then started 2929 Productions, which has shared in various film productions including Criminal, The Jacket and GodSend.

More recently, we started HDNet Films. Our first theatrical release will be Enron, The Smartest Guys in the Room, which will be released in theaters on April 22nd of this year.

We just announced that Cynthia Nixon will be starring in another feature, and are about to announce the release date for Like Blood into Water.

HDNet Productions, the production arm of HDNet, produces in original 1080i format, 15 plus hours per WEEK of content and has been doing so for the last 3 years. Much of this content we sell overseas in addition to showing on HDNet and we have every intention of taking this content and exploiting it through every digital outlet possible.

To add to the mix, we have purchased Landmark Theatres (http://www.landmarktheatres.com/). We just announced a deal with Sony, where we will take the lead in digital projection and begin the rollout of 4k Digital Projectors this summer.

Last but not least, we also own Magnolia Pictures (www.magpictures.com) . Magnolia is a theatrical distribution company that distributes not only our content around the world, but also does a great job of theatrical distribution of others content as well.

We produce in the best means available, which means that for the content we control, we produce in digital, we deliver in digital. In every way shape and form. What makes it all work as a business for today and in the futures, is that the best in digital distribution is yet to come.

There are untold number of new formats on the way. Recent additions include the UMD format on Sony PSPs, HD DVD, Blu Ray and the increasing number of extensions to PC based codecs. There are untold number of new distribution options becoming available. From satellite radio, to P2P, to net download, to hard disk delivery, to pre loading on hard drives, to new and old formats of DVDs, to cell phones, and more that we cant talk about yet. More and more of all will continue to be added, and our goal is to make the best content available in the best possible quality on every platform that becomes available.

We are a digital company that is platform agnostic. Bits are bits. We dont care how they are distributed, just that they are. We want our content to get to the customer in the way the customer wants to receive it, when they want to receive it, at a price that is of value to them. Simple business.

Unless Grokster loses to MGM in front of the Supreme Court. If Grokster loses, technological innovation might not die, but it will have such a significant price tag associated with it, it will be the domain of the big corporations only.

It wont be a good day when high school entrepreneurs have to get a fairness opinion from a technology oriented law firm to confirm that big music or movie studios wont sue you because they can come up with an angle that makes a judge believe the technology might impact the music business. It will be a sad day when American corporations start to hold their US digital innovations and inventions overseas to protect them from the RIAA, moving important jobs overseas with them.

Thats what is ahead of us if Grokster loses. Thats what happens if the RIAA is able to convince the Supreme Court of the USA that rather than the truth, which is , Software doesnt steal content, people steal content, they convince them that if it can impact the music business, it should be outlawed because somehow it will. It doesnt matter that the RIAA has been wrong about innovations and the perceived threat to their industry, EVERY SINGLE TIME. It just matters that they can spend more then everyone else on lawyers. Thats not the way it should be. So , the real reason of this blog. To let everyone know that the EFF and others came to me and asked if I would finance the legal effort against MGM. I said yes. I would provide them the money they need. So now the truth has been told. This isnt the big content companies against the technology companies. This is the big content companies, against me. Mark Cuban and my little content company. Its about our ability to use future innovations to compete vs their ability to use the courts to shut down our ability to compete. its that simple.

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