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Supreme Court Rules on Internet File

On the Supreme Court's last day before a three-month break, the justices made a series of decisions, including a ruling against file-sharing networks, the rejection of two reporters' appeal in a CIA leak case and the other impacting high-speed Internet access over cable lines. Two lawyers debate the court's ruling.

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  • GWEN IFILL:

    The court also weighed in today on Internet file sharing, press freedoms, and restraining orders. But perhaps the most highly anticipated decision failed to materialize.

    For more, we go back to Jan Crawford Greenburg. The story that didn't happen: The anticipated retirement of Justice William Rehnquist.

  • JAN CRAWFORD GREENBURG:

    That's right. As you said, today was the last day the Justices took their seats on the bench before wrapping things up and going away for their summer. Chief Justice, who is 80 years old and suffering from thyroid cancer, if he were going to announce publicly from the bench that he was going to retire, we would have heard that today, so there was great anticipation in the courtroom and throughout Washington.

    The scene outside the court was packed, television cameras, and tourists and people just curious about what was going on. There was great anxiety in the courtroom waiting to see if the Chief Justice at the end of announcing all of the opinions would reveal his plans for the future.

  • GWEN IFILL:

    You've been doing a lot of the reporting on this in the last week or so and people in the White House and other places around town have told you what the preparations have been. What's the latest intelligence on where everybody stands?

  • JAN CRAWFORD GREENBURG:

    The White House has completed its background work on potential nominees. It has interviewed leading candidates who would take or could take the Chief Justice place should he retire. It is not formally ranked or narrowed that dramatically down because, as I was told by an administration official, it is serious about being respectful to the Chief Justice. He's had a long and distinguished career: 33 years on the court, 19 of them as Chief Justice.

    So, the White House now is waiting for word, like everyone is, on what the Chief Justice plans are. I was told last week that it had not gotten word from the Chief Justice about whether he was going to retire, but many people who know the Chief Justice and who I've spoken with in recent days caution me that I should not accept an announcement from the Chief Justice today. They said that's just not his style; he is not going to make this a dramatic an announcement. You know, just wait a day or two; and we may get a written statement from him announcing that he's retiring, so everyone is still waiting.

  • GWEN IFILL:

    Well, it certainly would have overshadowed everything else that happened at the court today. Let's talk about some of the other things that did happen. There was a ruling in the (Judith) Miller – (Matthew) Cooper news source protection case, I guess —

  • JAN CRAWFORD GREENBURG:

    That's right.

  • GWEN IFILL:

    Better than the way I just did it.

  • JAN CRAWFORD GREENBURG:

    It's a very important case, very important case for the press, freedom of the press and these two reporters had asked the Supreme Court to take up their case, to step in and review a federal appeals court ruling that said that they did in fact have to testify before a grand jury and reveal their sources as part of a federal investigation into the leak of a CIA operative (Valerie Plame).

    So they had lost in the appeals court and the appeals court declined to find that they had any kind of privilege that they were protected and didn't have to disclose their sources. They then turned to the Supreme Court and today the Supreme Court, without explanation, said it would not take up their case, paving the way now for the two reporters possibly to be jailed.

  • GWEN IFILL:

    Do they go right to jail? Is there another avenue of appeal for them?

  • JAN CRAWFORD GREENBURG:

    They'll go back to the lower courts; lawyers for Matthew Cooper, the Time Magazine reporter, had several other arguments that they planned to make this week, but the federal prosecutor (Patrick Fitzgerald) who is handling this has said that he expects this case to move forward pretty quickly.

  • GWEN IFILL:

    Let's talk about another case you and I have actually talked about in the studio, which is the case of a woman who had taken out a restraining order against her husband. It was violated; he kidnapped their daughters and ultimately killed them. And she was bringing a case basically saying her constitutional rights have been violated.

  • JAN CRAWFORD GREENBURG:

    Yes. I mean, the facts of this case, as you said, are just, just horrendous. She spent an entire night begging the police to find her husband and return her children back to her because she had this order of protection against him. The police did nothing. She sued, arguing that she had a constitutional right to the enforcement of that order and that the police should be liable for violating her constitutional rights. But in a 7-2 decision today written by Justice (Antonin) Scalia, the Supreme Court said she did not have a federal constitutional right to the enforcement of that restraining order.

    Two of the Justices dissented: Justice (John Paul) Stevens and Justice (Ruth Bader) Ginsberg; they said that this callous behavior on the part of the police surely gave grounds for her to have a constitutional violation, but the majority said it wasn't a federal issue. It said that she could look to the states and that other states would be free to pass laws, that people would have this kind of state law issue, that it just was not in the federal Constitution.

  • GWEN IFILL:

    Unlike these very narrow five-to-four decisions we've been talking about or unlike a case that was just turned down without comment, there is actually some record of what the individual Justices thought about this case. What were they saying about why this is not a constitutional issue?

  • JAN CRAWFORD GREENBURG:

    Well, in this case today Justice Scalia simply said that the federal Constitution doesn't provide this kind of cause of action. She argued that she had due process interest, a property interest in the enforcement of this restraining order. And the court just rejected those arguments by a seven-to-two decision so this one was not a close call.

  • GWEN IFILL:

    Another one that was perhaps not as close a call as one would have thought, Grokster, which is most — grownups don't know what Grokster is. But teenagers understand this is how you share and video and music files on the Internet or using the Internet. And the court ruled in favor of the entertainment industry?

  • JAN CRAWFORD GREENBURG:

    Yes. This was a big victory for the entertainment industry, which has long argued that file sharing services like Grokster and Streamcast, the other company at the center of t his litigation, have cost them, you know, billions of dollars because people steal their songs and movies, instead of having to go out and buy it, by using these file-sharing services.

    They had sued Grokster and Streamcast; a lower court sided with the software companies. It said that they could not be held liable. But today the Supreme Court in a unanimous decision set that ruling aside and said, in fact, that Grokster and Streamcast could, in fact, be held liable. And they sent the issue back down to the lower courts for a trial on whether or not there should be liability.

    This was a big win for the entertainment industry, which contends that this issue has cost it untold amounts of money. And the court today in its opinion recognized that the violations here, that the copyright violations that people have done have been staggering. The issue here and why this was also such a significant case was that the industry is trying to hold Grokster and Streamcast liable for copyright infringement for the actions of third parties, the teenager sitting at home or the college student in their dorm, who download – use their software to download these files – which violates copyright.

    The companies argued that they had done nothing wrong. They weren't violating copyright; they weren't even — they didn't have any centralized server and that there were many other legitimate uses for their product.

  • GWEN IFILL:

    But this wasn't even close. When was the last time you saw a unanimous court decision?

  • JAN CRAWFORD GREENBURG:

    Well, on the last day of the term, you don't see them often because the last day of the term and as things progress, those are always the most controversial, contentious decisions, the ones that so bitterly divide the court, the ones that have all the dissenting opinions and the concurring opinions.

    For example, in the Ten Commandments case that we just talked about, those two cases produced ten separate opinions from the Justices. So you don't often see it on the last day. And of course the court will not have – this isn't the last word — this goes back now to the lower courts to decide if these companies will be liable.

  • GWEN IFILL:

    And it was the last day, but we may still be hearing more from the court –

  • JAN CRAWFORD GREENBURG:

    That's right.

  • GWEN IFILL:

    So we'll be keeping our ear to the ground. Thanks a lot, Jan.

  • JAN CRAWFORD GREENBURG:

    You're welcome.

  • GWEN IFILL:

    For more on the battle between Hollywood and the technology companies, we turn to Terence Smith.

  • TERENCE SMITH:

    Joining us to discuss the implications of today's decision in the MGM-Grokster case is Fred Von Lohmann, co-counsel for Streamcast Networks, a co-defendant with Grokster, and Don Verrilli, counsel to both the Motion Picture Association of America and the Recording Industry Association of America. Welcome to you both.

    Don Verrilli, as Jan was just making the point, this unanimous decision, tell us in favor of your clients, tell us what your fundamental argument was.

  • DON VERRILLI:

    Well, there are three critical points that we took to the court and the court accepted all the three of them and accepted them unanimously.

    The first one is this: That the downloading of songs and movies from services like Grokster, and Morpheus, Streamcast, Kazaa is illegal and wrong, plain and simple.

    Justice (Stephen) Breyer, in his concurring opinion, described it as garden variety theft. That's really important because as these industries have shown, there's really a devastating impact here from the billions and billions of unlawful downloads that occur every month. The royalties for songwriters are drying up. There's been thousands of layoffs in the record industry and the motion picture industry and recording companies are forced to slash their roster of artists because their revenues have taken such a hit from this. So it's really important message from the court on that question that this is unlawful activity.

    The second important point is what the court said is that if you go out and build a business based on promoting that unlawful activity, then you are going to be on the hook. You are going to be responsible for the unlawful actions and the harms that your promoting activity cause.

  • TERENCE SMITH:

    Promoting being the key word.

  • DON VERRILLI:

    Promoting being the key word. And that's the key reason why the court held and held unanimously that companies like Grokster and Streamcast can be on the hook for the activity of the users who use that software.

    And the third point that's critical is that what the court did here was accept our call for balance. The right answer in the law here is one that achieves a balance, protecting the rights of copyright owners and providing real, effective protection and providing real breathing space for legitimate innovation.

    And what the court said is if you are out there running a legitimate business like the Apple iPod and iTunes business, you have nothing to worry about. But if you are out there building a business based on the promotion of infringement, then you are on hook for the consequences of your actions.

  • TERENCE SMITH:

    Fred von Lohmann, what's your reaction to this decision?

  • FRED VON LOHMANN:

    Well, as you might imagine, I have a slightly different view than Mr. Verrilli does. I think what the Supreme Court has done here is really open a new era of uncertainty for not just companies involved in peer-to-peer file sharing but, in fact, for all of America's technology industries.

    So all of the parties went to the Supreme Court asking the court to clarify the existing doctrines around copyright law, which addressed a central question: When will a technology company be held responsible for what its end users, what the customers, what the person sitting in the dorm room, to use the earlier phrase, might be up to?

    Now, that's obviously not important just to the file sharing companies; it's also important to people that make CD burners, personal computers, people who provide broadband Internet service. All of these technology companies depend on a clear answer to that question.

    Unfortunately, the Supreme Court really declined to give us a clear answer. Instead of clarifying the existing law, they instead created a new form of liability, the so-called "inducement liability," as you pointed out, premised on a notion of promoting infringement.

    In that, we think the Supreme Court really missed a crucial opportunity here. In the wake of this ruling, I think peer-to-peer file sharing will continue unabated. There are obviously hundreds of millions of people around the world who are using file sharing applications.

    I don't think this ruling is going to magically change that. What it is going to do is make America's technology companies have to look over their shoulder and ask: well, what is this new promotion liability?

    If I say the wrong thing in a marketing meeting or if a company like Apple, for example, says rip, mix, burn in its ad campaign as it did a few years ago, will that be the kind of thing that gives rise to liability? Or will I have to redesign my product, which is something that was always a serious threat for the technology industry here.

    So the Supreme Court frankly, I think, has opened more questions than they've answered today.

  • TERENCE SMITH:

    All right. Don Verrilli, what about Fred von Lohmann's point that peer-to-peer sharing of files is not going to go away and it is universally spread, or so widely spread, that as function it is not going to go away. How does the industry deal with that?

  • DON VERRILLI:

    You know, I think that – you know, it may not go away entirely, but I think this is an important step to changing the dynamic from this sphere from the unlawful, illegal downloading where you take without paying the artists, and the creators there do, and shifting to a legal model of downloading where you get on iTunes, you pay the modest price to get what you want in a lawful legitimate way, so I guess I disagree with that.

    I think that this is going to be a really important moment to move the center of gravity from the unlawful activity to the lawful activity and the court has sent a powerful signal that it is unlawful here, but if you build a lawful business model over here, you are going to be just fine.

    That's what we want. That's what my clients are aiming to do. We think that there's enormous potential in the digital area for efficient, positive, user-friendly distribution of songs and movies, but in a lawful way that respects copyrights.

    And we think that we're going to migrate from the unlawful universe to a lawful universe. Will we squelch this entirely? No, but I think we'll make a major migration in the right direction.

  • TERENCE SMITH:

    Fred von Lohmann, what happens now with your case? Do you have to go back to the lower courts and argue particularly this point about whether or not you promoted – or your clients, rather, promoted an illegal use?

  • FRED VON LOHMANN:

    That's right. That's at least part of what we'll have to address. Unfortunately, there are other theories of liability that are still at issue in the case. So, for example, Mr. Verrilli's clients have argued from the beginning that my client – the maker of Morpheus, the maker of Grokster – they should be held responsible based on a so-called "contributory infringement" theory, which is really sort of an aiding and abetting kind of theory.

    And, unfortunately, the Supreme Court today has told us nothing about how the court is going have to deem with that claim. There's also another claim that Mr. Verrilli's clients have made from the beginning that there should be liability because this software could have been designed differently in a manner that would have satisfied the entertainment industries more than the way it was in fact designed.

    So the district court will have to look at all these theories and frankly isn't going to have very much guidance in the Supreme Court ruling regarding the two other theories I mentioned or, for that matter, a clear road map even as to this new theory of inducement.

    Now, the court has really left a lot of questions open, and I predict not just in this case, but in other cases, lawyers will have to go through expensive litigation before we have the clear line that I mentioned at the beginning our technology industry needs so that they can understand: what can they build; when do they have to spend money on lawyers; when can they spend money on engineers?

  • DON VERRILLI:

    Can I just make a — say a word about that? I really think with all due respect, Fred, that that's fear mongering. It's not hard to see the commonsense difference between running a legitimate business where you tell people when they buy your product, don't steal music and running a business like Grokster and Streamcast where they help you find top 40 hits.

    And the court was drawing a commonsense distinction. That's been in the law for a century as Justice (David) Souter recognized in his opinion. So I really think that the uncertainty that you're talking about is really an overblown fear; it's not a concern at all.

  • TERENCE SMITH:

    Okay. Just a final word quickly if you will, Fred von Lohmann.

  • FRED VON LOHMANN:

    Well, frankly, I wish I could rely on Mr. Verrilli's assurance that my concerns are just fear mongering. We've seen the entertainment industry sue every new technology for a century: starting with the player piano, the VCR, the first MP3 player, Replay TV, PBR's.

    These are companies that are perfectly legitimate, not bad actors, as Mr. Verrilli suggests, and in an environment where entertainment companies have this track record of suing a whole variety of technology companies for making technologies they disapprove of, I think it's more than just fear mongering.

  • TERENCE SMITH:

    Okay. Thank you both. Obviously it's going to be argued further in the lower courts. But thank you both very much.

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