TERENCE SMITH: Copyright infringement may not sound like a hot topic, but for the generation of Americans born in the Internet age, the ability to download music and films off the Internet has brought the issue front and center, along with confusion, thousands of lawsuits and now a Supreme Court case.
The entertainment industry is suing makers of software that allow computer users to find and download files from each other's computers, not just Web sites.
The question for the Supreme Court: How to protect copyrights without stifling the innovation that has brought new technologies such as MP3 players and TiVo?
MICHAEL WEISS, CEO of StreamCast Networks: If you take a look at the past hundred years of innovation, and we can break it down to old media versus new media, the entertainment industry has always gotten it wrong, going back to the 1880s when the entertainment industry tried to stop player piano rolls.
TERENCE SMITH: Michael Weiss is CEO of StreamCast Networks, one of the defendants in the case. His company makes Morpheus, peer-to-peer, or person-to-person, software that makes it possible for computer users to share files.
He says the potential uses for his product are staggering, assisting those who wish to trade anything from white papers and nursery rhymes to breaking news.
MORPHEUS DEVELOPER: You can look for amateur videos of, you know, recent news events, like if you're looking for videos about the tsunami in South Asia, here's tsunami in Thailand, tsunami, Sri Lanka.
MICHAEL WEISS: There are 60 million users of peer-to-peer software in America alone, over 100 million worldwide. The amount of information storage that are on those computers of over 100 million users dwarfs anything that's available on the Web.
TERENCE SMITH: But the entertainment industry claims the main use of such peer-to-peer software has been to enable computer users to copy entertainment works for free without permission.
They say 13 billion music files were available for downloading last year. And 12 million movies are downloaded every month.
DAN GLICKMAN, CEO of the Motion Picture Association of America: These are business models formed with the inherent purpose of allowing people to take for free copyrighted material illegally.
TERENCE SMITH: Dan Glickman is president and CEO of the Motion Picture Association of America. He says six out of ten movies don't return their investment now, and if free downloading further cuts profit margins, movies and other creative works won't be made.
DAN GLICKMAN: Piracy is really a dagger at the heart of the creative industries in this country. And if we don't try to stop it, it has the potential of dramatically reducing the amount of movies, music, books, software that are available to the public.
TERENCE SMITH: The entertainment industry has stepped up efforts to go after those doing the trading; putting warnings in college newspapers and filing more than 8,500 lawsuits against illegal downloaders.
JIM DAVIS, UCLA: The past couple of years there's been a heightened number of notifications of copyright violations.
TERENCE SMITH: Jim Davis is associate vice chancellor for information technology at UCLA. He says many young people are confused about which downloading violates copyright law.
JIM DAVIS: The students coming in are very computer literate; they're very used to sharing and file sharing of all kinds.
And we find over and over again with some of these notifications that the students really were not aware of what they're doing.
TERENCE SMITH: UCLA has implemented a quarantine program that restricts a student's computer until the owner agrees to stop illegal downloading.
But Davis says the entertainment industry must adapt to the new technologies.
JIM DAVIS: We believe that the business model needs to change and needs to adjust itself to the capabilities of kids, the capabilities of the technology, the capabilities of the fact that this technology is really here to stay.
TERENCE SMITH: Some artists fear a backlash from their fans for prosecution efforts.
And while a number of musicians are promoting legal downloading from authorized fee-based sites, others, such as Bright Eyes, have encouraged free downloading of songs to promote concert dates and merchandise sales.
MICHAEL WEISS: Over 70 percent of the people that buy music online today first sample that music using peer-to-peer software.
TERENCE SMITH: Online services that provide legal works for a fee are growing, but they're dwarfed by free, illegal downloads.
And the plaintiffs say technology manufacturers should not be profiting from the illegal use of their software.
DAN GLICKMAN: The target is the service or the business model that is built on theft, that's built on stealing copyrighted materials, that's built on knowing that you can get something for free that you don't have to pay for it because then what they then do is they sell advertising to those same people and that's where they make their money on the deal.
TERENCE SMITH: The entertainment industry's last big battle with technology was in the 1980s over the use of the videotape machine.
The entertainment industry sued Sony over its Betamax, contending that consumers were using the new technology to illegally tape television shows.
The Supreme Court ruled that since Sony was not doing the copying, the company could not be sued. Home video has since proved to be a boon for the entertainment industry.
MICHAEL WEISS: Does the manufacturer of a product -- in the case of Sony, it was the Betamax; in the case of Morpheus, it's our software -- have to seek permission from the entertainment industry on how their technology works just because some people may use it to infringe on their material?
That's the argument here. Do technology companies have to fear -- the fear of litigation, the fear of massive fines to develop forward-looking innovations?
TERENCE SMITH: But the entertainment industry is arguing that the copyright law has not kept up with the digital world.
David Savage covers the Supreme Court for The Los Angeles Times.
DAVID SAVAGE: They basically made the argument is that you, the Supreme Court, need to decide this case now because if you don't, copyrights are going to have no value in the Internet age.
TERENCE SMITH: He says the Supreme Court will likely take a stand, going where Congress has thus far feared to tread.
DAVID SAVAGE: The really strong argument on the other side is that a lot of times the industry gets all panicked about how this new technology is going to ruin their business.
And with the look of history we can say that was ridiculous; a player piano didn't ruin the music business.
And so it is sort of hard to look into the future and say maybe we ought to be cautious about allowing the industry to stop the development of this new technology.
But I still think they've got a pretty good case right in front of the Supreme Court to say, look, millions of copies of these records are being downloaded every day, and it's the most blatant type of copyright infringement and something needs to be done about it.
TERENCE SMITH: The Supreme Court is scheduled to hear arguments in the case on March 29th.