US piracy ruling stings music biz

A US federal appeals court has delivered a stinging setback to the music and movie industries by ruling that online file-sharing software companies are not liable for copyright infringement.

The movie studios and record companies had joined forces to try to put the firms such as Grokster, Sharman Networks and Streamcast out of business for what they say is facilitating piracy of their products.

But the Circuit Court of Appeals disagreed, saying any action against Grokster and others would amount to an overhaul of existing copyright standards - a course the court ruled was 'unwise'.

The three judges had little sympathy for the industry arguments, saying that history had proven that markets have a way of correcting themselves after the introduction of new technology.

'Thus, it is prudent for the courts to exercise caution before restructuring liability theories for the purpose of addressing specific market abuses,' the judges said.

The court equated banning the online file-sharing servicesto outlawing video cassette-recorders - a battle the movie studios lost in the 1980s.

The music industry and the studios say that millions of dollars in revenue are at stake because of illegal copying.

The Motion Picture Association of America (MPAA) claims illegal copying of videotapes costs moviemakers $3.5bn (£1.9bn) a year and is concerned that digital piracy will do far more harm. Critics say the industry is greedy and wants to maintain the high mark-ups on CDs rather than deliver music and video the way a growing number of people want it - digitally online.

Movie studios and music companies have lately begun exploring how they might offer legitimate downloadable products online. The industry reacted angrily to the judgment, saying that it opened the way for a disaster.

'Today's decision should not be viewed as a green light for companies or individuals seeking to build businesses that prey on copyright holders' intellectual property,' MPAA chief executive Jack Valenti said.

Mitch Bainwol, head of the Recording Industry Association of America, said the decision 'does nothing to absolve these businessesî from addressing the illegal use of their networks.

Groups on the other side of the argument were jubilant. 'While the court acknowledged that only Congress can make radical changes in copyright law, it also clearly indicated that having the power to make change does not mean that change should be made,' P2P United said.