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Grokster agrees to pull the plug

$50 million to settle piracy complaints. Executives plan legal, fee-based downloading service before end of year under new parent company

Grokster Ltd., which lost a U.S. Supreme Court fight over file-sharing software used for stealing songs and movies online, agreed yesterday to shut down and pay $50 million to settle piracy complaints by Hollywood and the music industry.

The surprise settlement permanently bans Grokster from participating, directly or indirectly, in the theft of copyrighted files and requires the company to stop giving away its software, according to court papers.

"It is time for a new beginning," Grokster said in a statement issued from its corporate headquarters in the West Indies.

Grokster's website was changed yesterday to say its existing file-sharing service was illegal and no longer available. "There are legal services for downloading music and movies," the message said. "This service is not one of them."

The head of the Recording Industry Association of America, Mitch Bainwol, described the settlement as "a chapter that ends on a high note for the recording industry, the tech community and music fans and consumers everywhere."

It was unclear whether Grokster can afford to pay the $50 million in damages required under the agreement. The head of the Motion Picture Association of America, Dan Glickman, said the entertainment industry will demand full payment unless Grokster satisfies all its obligations under the settlement.

The decision, which gave a green light for the federal case to advance in Los Angeles, significantly weakened lawsuit protections for companies that had blamed illegal behaviour on their own customers rather than the technology that made such behaviour possible.

The court said Grokster and another firm, Streamcast Networks Inc., can be sued because they deliberately encouraged customers to download copyrighted files illegally so they could build a larger audience and sell more advertising. Writing for the court, Justice David H. Souter said the companies' "unlawful objective is unmistakable."

The Supreme Court noted as evidence of bad conduct that Grokster and Streamcast made no effort to block illegal downloads, which the companies maintained wasn't possible.

Resource: Canada

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