Peer-to-peer Netcos get reprieve

Court rules companies not responsible for user activity

After years of getting pummeled in court by the entertainment biz, Internet file swappers are savoring a morsel of sweet revenge.

In a stunning reversal of recent legal precedent, a federal judge on Friday ruled that peer-to-peer companies Grokster and Morpheus cannot be held liable for any copyright infringement committed by users of their services.

Friday’s decree marks the first major instance that a court has sided with the file-sharing community rather than music and Hollywood heavyweights repped by the Motion Picture Assn. of American and the Recording Industry Assn. of America.

It’s also a victory for the post-Napster model of file-sharing services, which have long argued that their more hands-off approach to the technology renders them suit-proof. Whereas Napster maintained a central hub to direct users to songs, the newer services rely on users themselves to direct traffic.

In his ruling, Judge Stephen Wilson lent significant weight to an argument that the peer-to-peer networks have been touting from the beginning – that their services have substantial non-infringing (a.k.a. legal) uses, and therefore should not be shut down.

Wilson concurred, alluding to a landmark suit involving Sony’s Betamax recorders that enshrined many of the current rules of fair use for copyrighted material.

“Grokster and Streamcast are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are used to infringe copyrights,” Judge Wilson said in his opinion.

Fellow peer-to-peer purveyor Kazaa earlier withdrew from the suit, arguing that its business operations were outside of U.S. jurisdiction. The company is headquartered in the tiny, copyright-less island of Vanuatu, and many of its execs are based in Australia.

Ruling comes just a day after the RIAA won a court victory of its own, enforcing a court order that forces telco Verizon to divulge the name of a heavy file-sharing user on its network, and potentially opening the door for infringement suits against individuals.

The RIAA and MPAA were not immediately available for comment, but they are widely expected to appeal the ruling.

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