File-sharing ruling sends unclear message.

The U.S. Supreme Court ruled in June that file-sharing services may now be sued for copyright infringement, but observers are divided on what impact the ruling will have on the practice. Students have long taken advantage of high-speed university networks to trade songs, movies, and software. The recording and motion picture industries have tried to curb the practice with public service campaigns, written warnings to universities, and lawsuits against individuals who distribute copyrighted works. And, while the ruling may spell the end of Grokster and others, it has also opened the way for new legal challenges that some believe may stifle innovation.

Fred von Lohmann, an attorney with the Electronic Frontier Foundation (www.eff.org), which represented Grokster in the case, says file sharing would continue despite the ruling.

"It's not about P2P. The P2P genie is irreversibly out of the bottle, with the software already installed on hundreds of millions of computers and developers in countries beyond the reach of American laws," he says. Instead, "it's the rest of America's innovation sector that will be living with the Supreme Court's ruling."

Rather than passing down a black-and-white ruling, the court added a confusing twist to the P2P question in the form of "inducement."

Does a particular P2P application do everything it can to avoid inducing infringement? Software developers would have to prove to wary investors and the courts that their applications don't fall afoul of copyright's secondary liability rule.

Mary Dolheimer, assistant professor of business law and business department chair at Elizabethtown College (N.J.), believes the ruling "has muddied the copyright infringement standards even further. The court gave very little guidance on how lower courts should judge whether or not 'inducement' took place," she says. "This is a recipe for disaster, and the court will likely have to give further guidance as federal courts struggle to implement this standard."

For their part, the recording and film industries say they want to encourage services that support a business mode[ for artists to profit from distribution of their works. At a press conference following the ruling, industry representatives argued it would ultimately foster new technology because it clearly spelled out what is right and wrong. Artists will be inspired to new creativity if they no longer have to be concerned that their works would be stolen on the internet, they said.

Ironically, Napster, the service that began the file-sharing craze six years ago, has since re-emerged as a legitimate, subscriber-based music downloading service.

The company has signed deals with several universities to offer legal downloads through discounted subscription rates. Dell, Inc., recently took the idea a step further by teaming with Napster to supply universities with on-site blade servers to store music. The idea, says John Mullen, vice president of Dell's higher education business, is to satisfy students' desire to buy music while alleviating high-traffic demands on the networks. The service essentially "rents" music to users for a monthly fee; once they unsubscribe or stop paying, the songs are no longer playable.

Administrators at the University of Rochester (N.Y.) tried to curb P2P practice by encouraging students to subscribe to Napster at a deep discount. However, a year after the service was launched, students appear to have rejected it in favor of Apple's iTunes Music Store--which doesn't require a subscription--or one of the illegal P2P services.