Grokster shuts down file-swapping service

Grokster, which came out on the losing end of a Supreme Court decision, has agreed to shut down its internet file-swapping service and pay $50-million to settle music and movie piracy claims.

The surprise settlement announced on Monday permanently bans Grokster from participating, directly or indirectly, in the theft of copyrighted files and requires the company to stop giving away its software.

Grokster executives indicated they plan to launch a legal, fee-based “Grokster 3G” service before year’s end under a new parent company, believed to be Mashboxx of Virginia Beach, Virginia. Mashboxx, headed in part by former Grokster president Wayne Rosso, already has signed a licensing agreement with Sony BMG Music Entertainment.

“It is time for a new beginning,” Grokster said in a statement issued from its corporate headquarters in the West Indies.

Grokster’s website was changed on Monday to say its existing file-sharing service is illegal and no longer available.

“There are legal services for downloading music and movies,” the message said.
“This service is not one of them.”

Grokster lost an important Supreme Court ruling in June when justices ruled that the entertainment industry can file piracy lawsuits against technology companies caught encouraging customers to steal music and movies over the internet.

The decision, which gave the green light for the federal case to advance in Los Angeles, significantly weakened lawsuit protections for companies that had blamed illegal behaviour on their customers rather than the technology that made such behaviour possible.

Grokster’s settlement does not affect other defendants in the case, including StreamCast Networks, which distributes Morpheus, and Sharman Networks, which distributes Kazaa.

The movie and recording industry plaintiffs in the case are expected to file a motion for summary judgement by early next year against the remaining defendants, and United States District Judge Stephen Wilson has scheduled a hearing on the matter for March 27.

Attorneys for Streamcast and Sharman said they will continue to fight the lawsuit.

“We think this is going to a jury,” said Sharman lawyer Charles Baker.

Grokster lawyer Michael Page said outside court on Monday he believes the company would have prevailed at trial but could not afford a protracted legal battle. It was unclear whether Grokster can afford to pay the $50-million in damages required under the agreement.

The head of the Recording Industry Association of America, Mitch Bainwol, described the settlement as “a chapter that ends on a high note for the recording industry, the tech community and music fans and consumers everywhere”.

Grokster’s decision was not expected to affect immediately the ability of people who already run the company’s file-sharing software to download music and movies online, nor was it expected to affect users of rival downloading services, such as eDonkey, Kazaa, BitTorrent and others.

Glickman said Grokster will send anti-piracy messages to existing users, and the company is forbidden from maintaining its software or network.

“Without those services, the system will degrade over time,” Glickman said.—Sapa-AP

Associated Press writer Ted Bridis contributed to this story from Washington, DC

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