Morpheus loses, but not badly

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The twisting path of MGM vs. Grokster (the entertainment industry’s lawsuit against the companies behind the Grokster, Kazaa and Morpheus file-sharing programs) took another fascinating turn today. As only fanatical followers of this case may know, two of the three sets of defendants -- the companies connected to Grokster and Kazaa -- settled with the movie studios, record companies and music publishers not long after the Supreme Court ruled that p2p software companies could be held liable for inducing infringement. But StreamCast Networks, which distributes Morpheus, couldn’t strike a deal with the labels and studios, so it fell to U.S. District Judge Stephen V. Wilson to apply the justices’ opinion to that portion of the case. He did so a year ago, finding that StreamCast was, in fact, liable. But he did not immediately grant the plaintiffs’ request for a permanent injunction, wondering aloud at a hearing how to craft an injunction that did not block non-infringing uses of Morpheus. Today, Wilson finally granted the injunction (Download the pdf here), but with caveats that will keep StreamCast in the game at least temporarily.

Predictably, Wilson required StreamCast to add filters that block Morpheus users from downloading copyrighted works, and to encourage users of older versions to switch to the filtered edition. But he stopped short of granting the plaintiffs’ request that StreamCast use ‘all technologically feasible means’ to prevent infringement, and that it be barred from distributing any Morpheus software until it demonstrated its ability ‘exhaustively’ to protect copyrights. Such a move, Wilson said, would give the entertainment industry the power to determine whether a file-sharing product with non-infringing uses got distributed at all, which he said runs against the Supreme Court’s Grokster decision. Instead, he said he would appoint a special master to help him pick a filtering approach that was most effective in reducing piracy while preserving non-infringing uses.

In addition, Wilson ruled that the Morpheus filters would have to block only the works specifically claimed by the plaintiffs, who must also submit proof to StreamCast that they own the titles in question. This approach is consistent with the 9th Circuit’s initial opinion in the Napster case, when it required the song-swapping service to block infringements only of the songs identified by the record labels and music publishers. But it’s a blow to the music and movie industries, whose lawyers have long argued that p2p networks should bear the burden of policing themselves.

StreamCast added filters of its own design to Morpheus months ago, although it hasn’t been able to persuade most users to switch to this version of the program. With today’s ruling, StreamCast can stay in business for at least a bit longer. It has deals with some indie labels to sell or give away selected tracks, and it may pursue a hybrid business model built around music sales and advertiser-supported content. Of course, no one has shown yet that there’s much money to be made in filtered p2p, so even Wilson’s forbearance may not be enough for StreamCast in the long run.