Can The Grokster Settlement Close Pandora's Box?

As part of the reported settlement, Grokster admitted monetary liability in the amount of $50 million dollars and agreed to immediately shutter its popular peer-to-peer (P2P) file sharing service. Grokster's Web site was changed the same day to state that its existing file-sharing service was illegal and no longer available. Specifically, the site states that: “There are legal services for downloading music and movies. This service is not one of them.” However, the Web site notes that Grokster hopes to have a “safe and legal” replacement available soon apparently under the proposed name “Grokster3G.”

This settlement comes closely on the heals of the Supreme Court's decision in June, in the highly watched matter of Metro-Goldwyn-Mayer Studios Inc. et al. v. Grokster, LTD., et al. The Supreme Court held that the underlying evidence in the case was sufficient to demonstrate that the defendants' intent of distributing the product was to promote, and or induce, copyright infringement by stepping in where P2P pioneer and early copyright enforcement victim Napster left off. Citing various factors underlying its holding, the Court opined that “one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.” However, the Court did not say that file-sharing itself was a problem, but the way Grokster and StreamCast marketed it, was.