Grokster Calls It Quits on Sharing Music Files - New York Times
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`Grokster Calls It Quits on
`Sharing Music Files
`
`Advertisement
`
`By JEFF LEEDS
`Published: November 8, 2005
`
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`LOS ANGELES, Nov. 7 - Grokster, a
`developer of file-swapping software
`used to trade copyrighted music and
`movie files, said Monday that it would
`halt distribution of the software and
`cut off support for its associated
`network as part of a landmark
`settlement with the recording industry and Hollywood
`studios.
`
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`The pact comes four months
`after the Supreme Court
`unanimously ruled that
`Grokster could be held liable
`for copyright infringement by
`users of its software, a
`decision that delivered a
`decisive victory for
`entertainment companies,
`particularly music labels,
`which have blamed
`widespread digital piracy for a
`worldwide slump in sales.
`
`The court decision sent the
`case back to a trial court, but
`the settlement - submitted to a
`
`Evolution of a Court Ruling
`
`Message Displayed on
`Grokster.com
`Supreme Court Opinion (June 27,
`2005)
`
`http://www.nytimes.com/2005/11/08/technology/08grokster.html?_r=2&[3/18/2014 2:40:00 PM]
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`
`
`Apple Exhibit 4399
`Apple v Sightsound Technologies
`CBM2013-00023
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`Grokster Calls It Quits on Sharing Music Files - New York Times
`
`federal judge in Los Angeles on Monday - averts further
`legal wrangling for Grokster in the four-year-old lawsuit.
`Grokster also agreed to pay up to $50 million in damages,
`though music executives say they do not expect to collect
`because the software company lacks the resources to pay.
`
`The deal also includes an injunction that bars Grokster from
`directly or indirectly infringing plaintiffs' copyrighted
`material.
`
`While Grokster is disappearing in its original form, the
`underlying case that culminated in the Supreme Court
`showdown may continue. Grokster's co-defendant in the
`case, Streamcast Networks, the promoter of a file-sharing
`network known as Morpheus, has indicated it plans to keep
`battling the movie studios and record labels in court.
`
`And it is a global problem. In Hong Kong on Monday, a man
`was sentenced to three months in jail for using an Internet
`file-sharing system to make three Hollywood movies
`available for free downloading. [Page 4.]
`
`More broadly, the popularity of file-sharing networks shows
`little sign of waning in the wake of the settlement or the
`earlier court decision. An estimated 9.2 million people are
`using various so-called peer-to-peer networks at any one
`time, according to BigChampagne, a data service. The figure
`has edged up from 8.8 million in June.
`
`With Monday's settlement, "I don't think, practically
`speaking, we're expecting to see much impact in the peer-to-
`peer landscape," said Eric Garland, BigChampagne's chief
`executive. "People moved on from tools like Grokster some
`time ago."
`
`The entertainment industry continues to scramble to keep
`pace, taking legal action against file-sharing networks in
`Australia and South Korea. The campaign, spearheaded by
`the Recording Industry Association of America, has also
`aimed at individuals. (The major labels have sued more than
`15,000 people since the effort began two years ago.)
`
`The recording industry has said that its legal campaign is
`intended to gradually deter the entrepreneurs who run many
`of the biggest file-sharing networks and the advertisers that
`support them, all while driving music fans to authorized
`services like iTunes from Apple Computer, which sells songs
`for 99 cents each.
`
`http://www.nytimes.com/2005/11/08/technology/08grokster.html?_r=2&[3/18/2014 2:40:00 PM]
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`Grokster Calls It Quits on Sharing Music Files - New York Times
`
`A result, industry executives say, should be to corral digital
`piracy to the point that it is a tolerable nuisance instead of a
`huge drain.
`
`If the industry can hang on, music executives say, its four
`major record corporations will eventually rejuvenate their
`businesses with new products, including digital downloads,
`ring tones and music videos.
`
`So far this year, sales of downloads at licensed services -
`where consumers are favoring the purchase of cheaper
`individual songs over more expensive full-length albums by
`a wide margin - have risen sharply. But the gains are not
`enough to offset the decline in "physical" album sales, which
`have been dwindling for four of the last five years.
`
`For its part, Grokster has added a new message to its Web
`site: "There are legal services for downloading music and
`movies. This service is not one of them."
`
`The company said it planned to create a "safe and legal"
`service and refer users to a new Web site,
`www.grokster3g.com. Grokster is expected to be absorbed by
`Mashboxx, a new venture run by Wayne Rosso, a former
`Grokster president, who has already struck a deal to license
`music from Sony BMG Music Entertainment, the world's
`second-biggest music company.
`
`Consumers who have already downloaded the Grokster
`software can still use it to trade files, though they risk being
`sued.
`
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` Justices Turn Down a New York Tax Case (November 1, 2005)
`
`http://www.nytimes.com/2005/11/08/technology/08grokster.html?_r=2&[3/18/2014 2:40:00 PM]
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`Grokster Calls It Quits on Sharing Music Files - New York Times
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