StreamCast Guilty of Active Inducement

By Richard Menta 9/28/06

On Wednesday the federal courts ruled against StreamCast Networks, the parent of P2P application Morpheus, finding that the company was guilty of actively inducing its users to infringe on copyright works. In his ruling U.S. District Judge Stephen V. Wilson stated the the evidence was overwhelming that the company encouraged millions to improperly exchange copyrighted works according to the new standard established in last year's Supreme Court MGM v. Grokster case.

In that case, the court ruled that the file sharing services can be held liable for copyright infringement if they 'actively induce' users to violate copyright. Wilson cited several company emails that to the court clearly demonstrated active inducement, including one from a StreamCast executive that said the "goal is to get in trouble with the law and get sued. It's the best way to get in the news."

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In its defense StreamCast told the court it should be held liable only if it took steps beyond the distribution of it software. The court's response was that Streamcast did not pass its own test as email evidence shows that the company took active steps to assist users in the trading of copyrighted files.

The ruling is a clear victory for the media industries. "No single court ruling solves piracy or can make up for several challenging years for the music community", said RIAA CEO Mitch Bainwol in a statement. "But there's no doubt that that rules of the road for online music are better today than they were yesterday".

With his ruling Judge Wilson, who ruled in favor of the file sharing companies prior to the case going to the Supreme Court, set the first parameters as to what constitutes the active inducement standard. Now that a bar has been set the question is can a commercial P2P service arise that is intentionally designed not violate this active inducement standard, but still allows the free sharing of content?

The court did not rule on damages, which should be substantial. It is not known if StreamCast will appeal the decision.

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