IMAGE: KEITH NEGLEY

Last summer's anticipation of the U.S. Supreme Court's decision in Metro-Goldwyn-Mayer Studios Inc. et al. v. Grokster Ltd., et al. (MGM v. Grokster) resembled the climax to the original Star Wars movie as the minutes ticked down to when the Death Star could destroy the rebel base. Metro-Goldwyn-Mayer Studios Inc., a movie studio, and 27 other entertainment companies had filed a copyright-infringement suit in 2001 against Grokster Ltd. and Streamcast Networks Inc., makers of peer-to-peer file-sharing services. The entertainment firms alleged that the services not only facilitated but actively encouraged widespread downloading of copyright-protected material over the Internet.

Grokster and Streamcast lost. But while most of the attention focused on the immediate impact on Grokster and similar file-sharing services, a deeper issue was at stake: the balance between the rights of technological innovators and of those who own artistic works.

The disputing parties, in a variety of ways, asked the Supreme Court to answer two persistent questions:

If a company creates an innovative technology clearly designed to help customers make copies of artistic works (songs, films, TV shows) and many customers use it to infringe on copyright, under what circumstances will the company be held liable for such uses?

If a company is at risk of being liable, how can it avert liability?

Much of the anticipation of the Grokster decision resulted from the fact that it had been decades since the Supreme Court had fully addressed such questions in its landmark 1984 decision in Sony Corp. v. Universal City Studios. In that case, movie studios sued Sony, accusing it of copyright infringement for selling videocassette recorders that could be used to record movies shown on television. Sony won.

The doctrine the courts used to decide the Sony case was borrowed from patent law, where it is known as the "staple article of commerce" defense. Transplanted into copyright law, it became known as the Sony doctrine. Under the doctrine, the maker or distributor of an innovative copying technology may, in certain circumstances, qualify for a "safe harbor" from liability when its customers use the technology in ways that infringe on copyrights. If the technology has or could have substantial noninfringing uses, the manufacturer/seller has a substantially higher probability of not being held liable even if some or even many buyers misuse its technology to infringe on copyrights. However, the courts have declined to declare a magic number of substantial noninfringing uses that guarantee immunity from copyright infringement liability.

By not issuing definitive guidelines, the courts leave the creators of technologies with limited guidance on how to avoid liability for contributing to copyright infringement. The courts thereby make it more risky to attempt to circumvent the copyright laws and warn creators of copying technologies to proceed responsibly and with caution.

In the digital era, the contours of the Sony doctrine pose serious challenges to innovators wanting to market their wares without being held liable for infringement, even though they are also motivated by the knowledge that sales may be enhanced by the very opportunity to infringe that their products provide. Thus, what increased the anticipation of a decision in the Grokster case was the expectation that the Supreme Court would offer a clarification of the Sony doctrine.

Something more complicated happened instead. When the Supreme Court released its Grokster decision, it probably disappointed both sides, because it did not agree with either one's interpretation of the Sony doctrine. Moreover, after declaring erroneous the earlier interpretation provided by the Ninth Court of Appeals—that is, provided that a product is capable of substantial lawful use, the producer will never be held contributorily liable for third parties' infringing use of it—the Supreme Court decided to leave "further consideration of the Sony rule for a day when that may be required."

The line drawn in the Sony case that opened the vast possibility of safe harbors for any product "capable of substantial non-infringing uses" had been erased and redrawn, as one discovers by looking closely at the Grokster practices that the Supreme Court condemned.

So, where is that line now? For creators of innovative technologies, the line between liability and being at rest in a safe harbor was moved and remains imprecise. However, the Supreme Court opinion contains substantial guidance, although not expressed as such. The court emphasized that the "record is replete with evidence that from the moment Grokster...began to distribute" its software, it "clearly voiced the objective that recipients use it to download copyrighted works, and...took active steps to encourage infringement."