That ruling, made by a Los Angeles federal court judge, Stephen Wilson, came as a sharp blow to copyright holders' strategy of suing peer-to-peer network operators and software developers in order to curb the explosive growth of file trading. Starting with a ruling against Napster, all previous court rulings had been in favour of the record companies and movie studios.
"(Wilson's decision) was wrong," Recording Industry Association of America (RIAA) president Cary Sherman said in a statement on Tuesday. "These are businesses that were built for the exclusive reason of illegally exchanging copyrighted works, and they make money hand over fist from it. The Court of Appeals should hold them accountable."
The surprise April decision revitalised a peer-to-peer world that had been labouring under the pressure of repeated lawsuits and unfavourable court rulings, resulting in the closure of services such as Napster, Aimster and Scour.
Unlike any other judge before him, Wilson ruled that companies that distributed software were not responsible for the misdeeds of their users, even when it was clear that millions of people were using the software to break copyright laws. He compared the software to the VCR or a Xerox copy machine.
"Grokster and Streamcast are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are used to infringe copyrights," Wilson wrote.
The RIAA subsequently turned to its well-publicised campaign of suing individuals for copyright infringement, a strategy it had largely avoided before Wilson's decision. The group has spent the last month and a half sending subpoenas to Internet service providers, seeking the identities of alleged file swappers, and has said it will file what could be hundreds of lawsuits by the end of this month or early September.
The RIAA, which was joined by the Motion Picture Association of America (MPAA) and the National Music Publishers Association (NMPA) in its appeal, said that Wilson had failed to follow the example of the 9th US Circuit Court of Appeal's ruling against Napster. In that case, judges laid down a framework under which Napster was likely to have been held liable for the copyright infringement of its users, although the issue never came to a full trial.
"The district court incredibly equated (Streamcast) and Grokster to Xerox, rather than the more analogous comparison to the illegitimate Napster service," wrote attorneys for the NMPA in their brief. "Comparing Xerox to (Streamcast) and Grokster is like comparing a farmer who sells chickens to a promoter and organiser of cockfights."
Grokster attorney Michael Page said the copyright holders' trade associations were misreading the April decision.
"The RIAA would like the world to believe that Wilson was a renegade judge who ignored Napster, but he was anything but that," Page said. "He followed Napster carefully and we won."
The April decision granted summary judgment to Grokster and Streamcast Networks, essentially closing the case against them unless the appeals court rules differently. Wilson has not yet ruled the same way for Sharman Networks, which operates the hugely popular Kazaa file-swapping service and is being sued in the same court.
The copyright holders have long said they would appeal, but procedural issues complicating the case had held up the action until now.
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they'll never stop file traders