Streamcast Networks, which is responsible for the file-sharing program Morpheus, has decided to take its chances in court, breaking off settlement negotiations with record labels and movie studios. The RIAA and MPAA had informed Streamcast along with seven other companies of their intent to file suit against them in the wake of the MGM v. Grokster ruling last summer.

4/9/2006 6:08:47 PM, by Eric Bangeman

As part of their strategy to crack down on users of P2P file-sharing software, the RIAA and MPAA also went after the makers of the file-sharing apps. They saw their greatest success in the MGM v. Grokster case, in which the Supreme Court of the United States ruled that Grokster could be held liable for the copyright-infringing use of its software and network and sent the case back to a lower court.

Streamcast Networks, which is responsible for the file-sharing program Morpheus, has decided to take its chances in court, breaking off settlement negotiations with record labels and movie studios. The RIAA and MPAA had informed Streamcast along with seven other companies of their intent to file suit against them in the wake of the MGM v. Grokster ruling last summer.

Streamcast's decision to fight it out in court marks a change of heart for the company, which prevously said it planned to settle the case. In a statement, Streamcast CEO Michael Weiss noted his disappointment that the company couldn't come to an agreement with the labels and studios and said that Streamcast wants its "day in court."

One aspect of the negotiations between Streamcast and the plaintiffs had revolved around legitimizing the P2P service, perhaps in a fashion similar to iMesh. However, Weiss said that the negotiations soured when the talks turned from "a full-on partnership into a one-sided, unworkable deal." He laid further blame at the feet of one of the law firms involved in the case, saying that it was out for "revenge, retaliation, and retribution."

What makes Streamcast think its case will turn out any differently than Grokster's? Part of its reasoning can be found in the Supreme Court's decision. Lower courts have held that there are legitimate uses for P2P applications and that companies can exert little control over how thier applications are used once they are in the hands of consumers. However, when a company "promotes" and "encourages" infringement by the users of its products, that's when the trouble comes.

Streamcast hopes to demonstrate in court that it neither promotes nor encourages infringement by its users. If it manages to convince a jury of that, it could walk away from the lawsuit with its business model intact and the recording and movie industries on the hook for legal costs. On the other hand, if Streamcast fails, it may very well end up meeting the same fate as Grokster.

http://arstechnica.com/news.ars/post/20060409-6557.html