By TED BRIDIS, Associated Press Writer
Grokster Ltd., which lost a Supreme Court fight over file-sharing
software used for stealing songs and movies online, agreed Monday to
shut down and pay $50 million to settle piracy complaints by Hollywood
and the music industry.
The surprise settlement permanently bans Grokster from participating,
directly or indirectly, in the theft of copyrighted files and requires
the company to stop giving away its software, according to court
Executives indicated plans 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, Va. 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 Web site was changed Monday to say its existing file-
sharing service was illegal and no longer available. "There are legal
services for downloading music and movies," the message said. "This
service is not one of them."
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
It was unclear whether Grokster can afford to pay the $50 million in
damages required under the agreement. The head of the Motion Picture
Association of America, Dan Glickman, said the entertainment industry
will demand full payment unless Grokster satisfies all its obligations
under the settlement.
Grokster's brand will survive. The new fee-based version of its
software will be available within 60 days, according to one executive
involved in the deal. This executive spoke only on condition of
anonymity because the sale of Grokster's assets is pending.
Grokster's decision was not expected to affect Internet users 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,"
Grokster lost an important Supreme Court ruling in June. 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 a green light for the federal case to advance
in Los Angeles, significantly weakened lawsuit protections for
companies that had blamed illegal behavior on their own customers
rather than the technology that made such behavior possible.
The court said Grokster and another firm, Streamcast Networks Inc.,
can be sued because they deliberately encouraged customers to download
copyrighted files illegally so they could build a larger audience and
sell more advertising. Writing for the court, Justice David H. Souter
said the companies' "unlawful objective is unmistakable."
"They're out of business," said Charles Baker, a lawyer for
Streamcast. "It's over for them. There was a lack of desire to
continue to fight this thing going forward." Baker said the settlement
does not affect Streamcast, the co-defendant in the entertainment
The Supreme Court noted as evidence of bad conduct that Grokster and
Streamcast made no effort to block illegal downloads, which the
companies maintained wasn't possible.
On the Net:
Grokster Ltd.: http://www.grokster.com
Recording Industry Association of America: http://www.riaa.org
Motion Picture Association of America: http://www.mpaa.org
Copyright 2005 The Associated Press.
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