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Wed, Nov 09, 2005 - Page 12 News List

Grokster stops its file-swapping service, pays fine

`NEW BEGINNING' After losing a US Supreme Court case, the company settled for a US$50 million fine and indicated it will soon launch legal downloading


Grokster Ltd, which came out on the losing end of a US Supreme Court decision, has agreed to shut down its file-swapping service and pay US$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.

Legal service

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 licen-sing 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.

Site changed

Grokster's Web site was changed on 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."

Piracy lawsuit

Grokster lost an important Supreme Court ruling in June when justices ruled that the entertainment industry can file pir-acy 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, signif-icantly weakened lawsuit protections for companies that had blamed illegal behavior on their customers rather than the technology that made such behavior possible.


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

The movie and recording industry plaintiffs in the case are expected to file a motion for summary judgment by early next year against the remaining defendants.

US District Judge Stephen Wilson has provisionally sched-uled a hearing on the matter for March 27.

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

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


Grokster lawyer Michael Page said outside the court on Monday that he believed 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 US$50 million in damages required under the agreement.

Grokster's decision was not expected to immediately affect 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.

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