Justices will review a lower ruling in favor of Grokster Ltd. and StreamCast Networks Inc., which came as a blow to recording companies and movie studios seeking to stop the illegal distribution of their works.
The file-sharing is "inflicting catastrophic, multibillion dollar harm on petitioners that cannot be redressed through lawsuits against the millions of direct infringers using those services," the appeal by Metro-Goldwyn-Mayer Studios and other entertainment companies says.
Grokster and StreamCast, in their filings, disagree: "Once the software has been downloaded by users, (we) have no involvement in, nor ability to control, what it is used for."
The 9th U.S. Circuit Court of Appeals in San Francisco ruled in August that file-sharing services were not responsible because they don't have central servers pointing users to copyright material.
It reasoned that the firms simply provide software that lets individual users share information over the Internet, regardless of whether that shared information is copyrighted.
The big-money fight has drawn the support of dozens of companies in the entertainment industry as well as attorneys general in 40 states, who fear the file-sharing software will encourage illegal activity, stem the growth of small artists and lead to lost jobs and sales tax revenue.
Civil libertarians, meanwhile, have warned a defeat for Grokster and StreamCast could force technology companies such as Microsoft Corp. to delay or kill innovative products that give consumers more control.
"History has shown that time and market forces often provide equilibrium in balancing interests, whether the new technology be a player piano, a copier, a tape recorder, a video recorder, a personal computer, a karaoke machine, or an MP3 player," the 9th Circuit stated. "Thus, it is prudent for courts to exercise caution."
If the lower ruling is upheld, the entertainment industry would have to take the more costly and less popular route of going directly after millions of online file-swappers believed to distribute songs and movies illegally.
Recording companies have already sued more than 3,400 such users; at least 600 of the cases were eventually settled for roughly $3,000 each.
The case is Metro-Goldwyn-Mayer Studios v. Grokster, 04-480. Arguments are expected in the spring, with a ruling by July.