• by Wendy Davis  @wendyndavis, March 25, 2005

Twentieth Century Fox Film Corp., currently suing Grokster and Morpheus for alleged copyright violations enabled by their peer-to-peer technology, apparently advertises through software bundled with Grokster, according to adware researcher Eric Howes.

Howes reported Thursday afternoon that he was served a full-screen trailer for the DVD of the 20th Century Fox movie "Fat Albert," after downloading all of the software bundled with Grokster--eight separate adware programs.

Representatives from Grokster and 20th Century Fox representatives didn't return OnlineMediaDaily phone calls.

The discovery of the "Fat Albert" ad comes as movie studios and peer-to-peer companies prepare for Tuesday's argument in the U.S. Supreme Court in the MGM v. Grokster lawsuit. In many ways, the news that a film company in the middle of litigation against Grokster also advertises through software downloaded on the site highlights just how entangled business relationships on the Web have become. The "Fat Albert" ad also raises the question of whether advertisers know what they're getting into when they use adware to market their products.

Many adware companies, including Claria and WhenU, bundle their software with peer-to-peer programs. For instance, consumers who download Kazaa for free agree to accept Claria's ad-serving software. In other words, the companies that use Claria's advertisers are subsidizing the peer-to-peer companies now under fire.

In the controversial Grokster lawsuit, a coalition of movie studios argue that they should be able to sue peer-to-peer companies for copyright infringement when consumers use file-sharing technology to illegally download films. Last year, the Ninth Circuit Court of Appeals ruled against the studios. "We live in a quicksilver technological environment with courts ill-suited to fix the flow of Internet innovation," wrote the court. "The introduction of new technology is always disruptive to old markets, and particularly to those copyright owners whose works are sold through well-established distribution mechanisms."

The movie studios appealed to the Supreme Court, which will hear oral argument on Tuesday. Dozens of organizations on both sides of the issue have weighed in with "friend of the court" briefs. Those in favor of Grokster argue that holding technology companies responsible for possibly illegitimate uses of their product will stifle innovation. But the movie studios argue that companies such as Grokster should be liable for making it possible for consumers to pirate films.

When the Supreme Court issues a decision, theoretically it could not only shut down the peer-to-peer companies, but could also deal a blow to adware companies that do business with them.

"It could significantly crimp them, depending on the specifics of the decision," said Howes, a graduate student at the University of Illinois, Urbana-Champaign. He estimates that two-thirds of the adware currently installed was originally downloaded as part of a bundled software program. But, he said, even a decision in the movie studios' favor isn't likely to permanently cripple adware companies. "They are enormously resourceful in coming up with new installation," he said.