Peer-to-Peer File Distribution: An Analysis of Design, Liability, Litigation, and Potential Solutions

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I. PURPOSE

This Note will present an analysis of peer-to-peer litigation and it will discuss the United States Supreme Court's holding in MGM v. Grokster.1 Through this analysis, the Note will give the reader a comprehensive understanding of peer-to-peer file-sharing software technology and the importance of its related litigation. Also, by examining legal and business model solutions, this Note will suggest approaches that may help alleviate problems between digital technology developers and copyright owners.

II. THE BACKDROP

Tales of file-sharing and its accompanying litigation can be heard in the news, on college campuses, and even at the dinner table. New digital technologies have enabled anyone with a compact disc, a computer, a broadband internet connection, and a few minutes of time to share copyrighted songs. The entertainment industry has taken notice of this practice that has been embraced by consumers on a wide scale. File-sharing technology has been available and popular for about a decade, and in 2004, approximately "13 billion songs were available for unauthorized free trading on online swap networks . . . according to Internet measurement service Big Champagne."2 In short, the programs enable the non-technically savvy to easily download and upload copyrighted content. In December 2004, about 7.6 million people were logged on to these networks at any given time, and every month, more than a billion files are traded.3 Most of the songs traded are chart-toppers of the day that, if sold legally on compact disc, would fetch a premium price.4 Even when the number of units of music products rose two percent in 2004, the entertainment industry's overall sales decreased.5 The entertainment industry believes that the illegal downloading of music is to blame for this decrease in revenue. As a result, music and movie copyright owners have launched a full-scale attack on the services that allow people to engage in copyright infringement.

After the public relations nightmare of the industry targeting individual infringers, the industry changed its legal strategy to target the software developers and distributors. In addition to litigation, copyright holders have used guerilla tactics such as spreading viruses and disseminating truncated or corrupt files over peer-to-peer (P2P) networks.6 The industry and copyright holders employed such covert tactics to reduce transaction costs, go to the source of the problem, and rebuild the industry's image with the public.

A. Who is Involved in the Latest P2P Fight?

In Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd.,7 almost the entire film and audio entertainment world sued two peerto-peer firms. All the major record labels and movie studios, and some smaller entertainment production houses hoped pursuing the Grokster litigation would result in an injunction and final Supreme Court ruling holding the StreamCast and Sharman Networks ultimately liable for the users' copyright infringement.8

Besides the main players in Grokster, the case attracted the involvement of other parties with an interest in the Court's decision. These secondary players' involvement included filing amicus curiae briefs and speaking out to try and garner support in the court of public opinion.

On the copyright holders' side, the Christian Coalition, musicians, attorneys general, Napster, and some professional sports leagues raised their voices. The religious right believed Grokster was a key battle in the war against pornography.9 Jim Backlin, Vice President of Legislative Affairs for the Christian Coalition admitted that Hollywood was a strange bedfellow, but stood by the industry nonetheless because they sought the same result.10 Attorneys general for thirty-nine states and Guam were concerned about pornography being readily available to children.11 Popular musicians Don Henley and the Eagles, the Dixie Chicks, Sheryl Crow, Bonnie Raitt, Stevie Nicks, Brian Wilson, and Avril Lavigne were some of the musicians who filed amicus curiae briefs claiming P2P networks have harmed their income streams. …