Peer-to-peer networks are not responsible for the violations of their users, the 9th Circuit Court of Appeals in San Francisco ruled Thursday. The decision upholds a lower court ruling based on the technology neutrality principles established in the 1984 Sony Betamax case.

In a seminal victory for the popular file-sharing networks, the court acknowledged that violations do occur on the P2P networks, but the owners and developers of the enabling software cannot be held liable for the infringements.

"We live in a quicksilver technological environment with courts ill-suited to fix the flow of Internet innovation," Judge Sidney R. Thomas wrote in the unanimous opinion of the three-judge panel. "The introduction of new technology is always disruptive to old markets, and particularly to those owners whose works are sold through well-established distribution mechanisms."

In October 2001, Hollywood studios, record companies and music publishers sued Kazaa, Grokster and StreamCast Networks (owners of Morpheus) for contributory and vicarious infringement. District Court Judge Stephen Wilson ruled in April of last year that Grokster and Morpheus could not control how people use their software, which could also have legitimate applications.

The court cited the landmark Sony Betamax case, where the Hollywood studios tried to outlaw VCRs before running into a Supreme Court ruling saying the use of new technology to infringe s did not justify an outright ban on that technology.

"History has shown that time and market forces often provide equilibrium in balancing interests, whether the new technology be a player piano, a copier, a tape recorder, a video recorder, a personal computer, a karaoke machine or an MP3 player," Wilson wrote. "Thus it is prudent for courts to exercise caution before restructuring liability theories for the purpose of addressing specific market abuses, despite their apparent present magnitude."

A significant key to the decision was the court ruling distinguishing the differences between the P2P networks being sued and the original Napster, which was shut down by the courts in 2000. In Napster's case, an index of material available for file swapping was maintained on a central server. Neither Grokster nor Morpheus use central servers.

He hailed the P2P win as a "profound and major victory for the American consumer and our economy. Critically, the court cut through and rejected Hollywood's and Big Music's propaganda about peer-to-peer software, and the P2P United member companies sued in this case to find the truth."

Michael Weiss, head of StreamCast Networks, issued a statement saying, "As CEO, I am proud that Morpheus has become the first American P2P company to successfully win its fight for the right to continue to develop innovative new distributed communications technologies. In today's ruling, the 9th Circuit Court has affirmed our strong conviction from day one that developing Morpheus was not just legally our right, but morally was the right thing to do."

Neither the Motion Picture Association of America nor the Recording Industry Association of America were immediately available for comment.

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