Justices wrestle with file-swap issues

WASHINGTON -- The US Supreme Court yesterday joined the battle in the Internet file-swapping wars, as it heard a case that could decide whether makers of file-swapping software will be driven out of business by movie and music industry lawsuits. In a second important case, the high court debated whether cable television companies that offer broadband Internet services should be compelled to open their networks to competing Internet providers.

Every member of the court except Justice Clarence Thomas took part in the discussion, asking pointed and sometimes humorous questions that demonstrated considerable knowledge of the Internet, file-swapping, and popular high-tech gadgets like Apple Computer's iPod music player. Intense questions were directed at all of the parties, giving few hints as to how the justices might rule.

The day's first and better-known case involved Grokster and Morpheus, two popular file-sharing programs that are used by millions of people to download music and movies over the Internet without paying for them. Movie and music recording companies filed suit against the companies that distribute the software.

But federal judges in California held that the software makers could not be held liable for illegal uses of their products, as long as the products also had legitimate uses. The ruling was based on the Supreme Court's 1984 Betamax ruling. In that case, the Supreme Court said that even though Sony Betamax home videocassette recorders could be used to make illegal recordings, the technology also had legitimate uses and therefore could not be banned.

Yesterday, the music and movie industries hoped to persuade the high court to modify the Betamax ruling, to permit action against companies whose product is used primarily for illegal purposes. Attorney Donald Verrilli told the justices that the illegal uses of Grokster and Morpheus aren't just incidental, but are the programs' main reason for existence.

''Copyright infringement is the only significant use of the Grokster service," said Verrilli, ''and that is no accident." Verrilli asserted that over 90 percent of the files swapped using the programs involved illegal exchanges of copyrighted data, and that the software makers could not evade responsibility by pointing to a small number of cases where the programs were used legally.

Several of the justices noted that the Betamax standard has enabled technology companies to develop a variety of products that could be used illegally, but which have brought great benefit to the public. Justice Stephen Breyer wondered if the Xerox photocopying machine or the Apple iPod would have been brought to market if Verrilli's standard prevailed, because both products are frequently used for illegal purposes. He suggested that the 1984 ruling was a good one.

''The country seems to have survived that standard," Breyer said. ''This is innovation."

Justice Antonin Scalia imagined that if ''I'm a new inventor, I'm going to get sued right away." Scalia said, ''What I worry about is a suit that comes at the company right out of the box," stifling a product before it finds a legitimate market.

Arguing for Grokster and Morpheus, attorney Richard Taranto admitted that some people use file-swapping software for illegitimate ends, but that the significant legitimate uses of the software should protect its producers. That argument didn't seem to impress Justice Ruth Bader Ginsburg. She noted that the standard applied by Taranto is based on a single sentence of the Betamax ruling.

''I don't think you can take from this rather long opinion one sentence, and say, 'Aha, we have our rule,' " Ginsburg said.

Justice David Souter also pointedly asked the attorney for Grokster and StreamCast, ''Why isn't this a case of willful ignorance?" when the companies argue they don't know what files are being shared by its users.

Matthew Neco, general counsel for StreamCast Networks, which distributes Morpheus, said after the hearing that he was impressed by the justices' technological savvy.

''I thought that it was absolutely astounding that there was mention of an iPod from the bench," said Neco. ''The iPod is an invention that is there because of the clear standards enunciated in the Sony Betamax case."

In the second case, Brand X Internet LLC, a small Net provider in Santa Monica, Calif., challenged a decision by the Federal Communications Commission. The FCC held that cable TV companies that provide broadband Internet access are offering an ''information service," not a ''telecommunications service." An information service is not subject to the same kinds of regulations as telephone companies. As a result, cable Internet providers do not have to allow competing Net companies equal access to their cable networks. A company such as cable provider Comcast Inc. need not allow a rival like Brand X to sell services over the Comcast cable.

The decision could spell doom for Brand X and other small Internet providers that can't afford to build their own broadband networks. It could also result in less competition and higher prices for broadband Net services. But cable TV industry groups say they're spending billions on setting up broadband networks, and should not be forced to share the benefits.

Justice Scalia attacked the cable companies' view that Internet access is not a telecommunications service.

''Information is useless unless it can be conveyed," Scalia said. ''If you do the same operation over a telephone line, you say they do offer a communication service. "

Arguing in support of the FCC ruling, Deputy Solicitor General Thomas Hungar replied that phone companies have always been regulated that way, while cable companies have not. In addition, he said the FCC has tentatively decided to treat broadband services offered by phone companies as information services, just like cable Internet service.

Rulings in the two cases are expected sometime during the current court term, which ends in late June or early July.

Hiawatha Bray can be reached at bray@globe.com.