Commentary

Grokster... Supremely Sane? You Be the Judge

"It's not about content versus technology, it's about what's right versus what's wrong," said Andy Lack, CEO of Sony BMG. He was referring to the June 27, 2005 Supreme Court decision which makes technology companies liable for how their technology is used. This is viewed as a big win for content creators and rights holders as this excerpt from a memo issued to members of the National Academy of Recording Arts & Sciences by chairman of the board, Terry Lickona, illustrates nicely: "We are pleased that this morning, the court agreed with the opinion of the academy and the numerous music organizations and musicians who signed onto our brief, as they ruled against Grokster for encouragement of copyright infringement of our members' music. The decision protects your right to compensation for your creative output and at the same time allows the legitimate online music marketplace to flourish."

Then there's the other side of the coin, "The impact is clear. All one has to do is think of where Bush, Rehnquist, Scalia, and their friends are taking the country, and this decision is completely consistent with that direction," says Ray Beckerman of Beldock Levine & Hoffman LLP. "It will help the major media conglomerates. It will devastate small, up and coming innovators and entrepreneurs. It will harm consumers."

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That may be a bit harsh, but then there's the smoking your own... I mean, optimistic interpretation from Distributed Computing Industry Association CEO, Martin C. Lafferty, "This immediately removes an obstacle to commercial development of the P2P distribution channel -- that obstacle having been uncertainty as to what the ruling would be. Major labels can stop suing consumers now and work with DCIA members to license their works for authorized file sharing. Longer term, as the lower courts provide more clarity, this will help even more."

Who's right? Well, if you read the Supreme Court decision - and you should - you will find it extremely hard to argue against. I'm not a lawyer, but I think the decision is cogent, thoughtful, and absolutely right. There's only one problem... it's irrelevant.

As I have said for over a decade, you can't put the toothpaste back into the tube. What this decision does not take into consideration (or more accurately, cannot consider because it is outside the scope of the case) is that business rules and value chains that are based on archaic form factors perish. Technology has advanced more in the past 100 years than it has for the previous 3,500 years combined. Is there any scalable, profitable business on Earth using manufacturing techniques, materials, and tools from 100 years ago? Many immensely creative businesses have gone extinct as technology has evolved. To use the cliché, the world is now moving at Internet time, so how can we expect 50-year-old form factors and methodologies to stand? Why should content be exempt from having to adapt?

These questions are all rhetorical. It simply won't matter what I say here or even what you think. The simple truth is that the world of file sharing is an ecosystem that will continue to evolve on its own, completely out of anyone's control. You can make all the laws you want, this arms race can't be won. The P2P ecosystem will find equilibrium in the redistribution of wealth (sad news for some, great news for others) and the revision of workable value chains and business models that allow the technology to be harnessed, not litigated or legislated against.

As if the situation were not complicated enough, companies who would most benefit from experimentation and testing are the very ones whose legal departments can't (or won't) let them get in the game. I wonder how the lawsuit business looks on paper? It doesn't sound like a sustainable business model to me. Maybe there's a better way?

You probably have some solutions, as I do. There are dozens of new ways to make money, and there will be hundreds more sooner or later. That being said, according to this decision, mostly everyone is now engaging in some sort of criminal behavior -- so the battle lines are drawn and we find ourselves in a conundrum. Be careful downloading over the next few months... it's open season!

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