Many of us heard about last year's Supreme Court decision on "Grokster." -- But, what exactly was the case all about and what does the decision mean for us as digital music fans?

Since Grokster and other peer-to-peer (P2P) networks like it entered the scene, entertainment companies have been concerned with how easy the software makes it for music fans to swap digital files without filtering - meaning copyrighted songs, movies, and software can be copied and shared by billions without permission from the copyright holders.

Grokster and the other networks have taken the position that they simply provide the technology, and cannot be held responsible for how people choose to use it. In other words, the P2P companies do not think they should be held liable if people choose to use their networks to infringe on copyright protected work.

The entertainment companies argue that it is Grokster's responsibility to filter copyrighted materials, and that if they don't decide to filter or take other preventative measures, they should be held liable for illegal file-sharing activities taking place on their networks.

The argument culminated on Tuesday, March 29, 2005, when the U.S. Supreme Court began hearing the landmark case, officially called "Metro-Goldwyn-Mayer Studios Inc. v. Grokster Ltd." The lower courts had already ruled that the P2P service networks (Grokster and StreamCast Networks, in this case) couldn't be held responsible for what their users chose to do with the software, even if they were using it to illegally download copyrighted songs, films and software products.

The basis for the lower courts' decision tied back to the 1984 “Betamax” decision by the Supreme Court¹. However, on June 27, 2005, the Supreme Court came to the unanimous decision that P2P file-sharing services like Grokster could be held liable if they encourage people to use their services to download music, movies and other copyrighted works free of charge.

What does this decision mean? Well for file-sharing services that are still enabling illegal sharing of copyrighted materials, they are going to have to change their business practices and go legal or look forward to spending a lot of time in court! In Grokster's case, the site was closed on November 7, 2005, siting the Supreme Court decision, and stating that while there are legal downloading services available, Grokster was not one of them.

For the entertainment industry, this decision is another big step in its ongoing battle against piracy. The decision made by the Supreme Court to uphold the rights of the content creators and hold file-sharing services responsible for their actions will allow legal file-sharing services to prosper, and artists to get compensated fairly for their work.

Here's what Neil Portnow, President of The National Academy of Recording Arts & Sciences, Inc. has to say about the decision:

"Today is a good day for music fans and the 17,000 musicians, composers, artists, engineers, producers and songwriters that are the members of the Recording Academy. By unanimously upholding the rights of creators, the Supreme Court has defended an environment for legal online music services to thrive.

As the National Academy of Recording Arts AND Sciences, our membership embraces new technologies that deliver their music to fans in innovative ways. The court is forging the way for the legal digital services — those that compensate the creative professionals — to enable music fans to hear their favorite artists wherever, whenever and however they want.

The unanimous Supreme Court opinion sends a clear message to those who use technology to encourage copyright infringement, while recognizing the importance of honest, legitimate innovation that fosters protection of the rights of creators of music.

Previously The Recording Academy submitted an amicus brief on behalf of the creative community, which depends on sales of its works to earn a living. We thank the Court for its insight into this important case and for the protection of music makers. The Academy will continue to defend its members' rights wherever and whenever necessary.”

What does this mean for us, the music fans? Well, in one sense, nothing has changed. Downloading copyrighted materials for free is still illegal. But with file-sharing services and the entertainment industry working together to find the best solutions for all parties, we will have more high-quality music options at our fingertips then ever before!

¹The lower courts' decision to uphold the legality of Grokster and other P2P Internet services rested on the 1984 Sony Betamax case, where the Supreme Court ruled 5-4 to reject the movie industry's efforts to effectively knock the home video recorder off of store shelves. Hollywood argued that the Sony Betamax, an early VCR, allowed users to infringe on copyrighted works. The justices ultimately decided that because the device had substantial legitimate uses, Sony wasn't contributing to copyright infringement by selling it, even though the company knew that some consumers were using the product illegally.