Grokster Settles With Music Industry, Vows To Go Legit

Company is now effectively out of business, but plans to relaunch soon.

Grokster is going legit — or at least it's going to stop being illegitimate.

Four months after the Supreme Court ruled that the peer-to-peer file sharing service could be held liable for the infringing actions of its users (see "File-Sharing Networks Can Be Liable For Copyright Infringements, Supreme Court Rules"), the company has agreed to a settlement that puts it out of business immediately.

According to the Recording Industry Association of America, Grokster has agreed to a permanent injunction prohibiting direct or indirect infringement of any copyrighted works from the plaintiffs in the landmark MGM vs. Grokster case (which included major record companies, movie studios and the National Music Publishers Association, among others).

The settlement also calls for Grokster to immediately stop offering and supporting its software, effectively turning off the tap on one of the most popular P2P services on the Internet. The terms of the settlement still have to be approved by the judge in the case, which an RIAA spokesperson said is expected to happen later Monday (November 7) in Los Angeles.

"This settlement brings to a close an incredibly significant chapter in the story of digital music," RIAA Chairman and CEO Mitch Bainwol said in a statement. "This is a chapter that ends on a high note for the recording industry, the tech community and music fans and consumers everywhere. At the end of the day, this is about our ability to invest in new music. An online marketplace populated by legitimate services allows us to do just that."

In a statement posted on its Web site, Grokster said, "The United States Supreme Court unanimously confirmed that using this service to trade copyrighted material is illegal. Copying copyrighted motion-picture and music files using unauthorized peer-to-peer services is illegal and is prosecuted by copyright owners."

The note further states that "there are legal services for downloading music and movies. This service is not one of them. Grokster hopes to have a safe and legal service available soon" (see "Grokster, Other P2Ps Reportedly In Talks To Go Legit With Paid Downloads"). A link to a new site, Grokster 3G, says the new service is coming soon and promises, "a safe, secure & legal P2P experience — no adware, no spyware, no bundles!, no viruses, no hassle ... just the best of what P2P has to offer."

In a unanimous decision in June, the Supreme Court ruled that Grokster could be held liable for the infringing actions of its users. Bainwol said Monday's announcement reinforces the court's ruling.

"The owners and operators of Grokster, like numerous other online services all across the globe, heard nine U.S. Supreme Court justices speak in a unanimous voice — a voice that was heard loud and clear," Bainwol said. "As the Court articulated in no uncertain terms, there is a right way and a wrong way to conduct a business. This settlement makes clear that businesses are well aware when they are operating on the wrong side of that line. Record companies have demonstrated a strong desire to work with a variety of legitimate online enterprises that respect the rights of creators and provide high-quality music to fans. The technology is available, and others are already paving the way."

The Wall Street Journal has reported that Grokster is in talks to be acquired by a new Sony/BMG Music-based legal P2P service called Mashboxx, but a spokesperson for Grokster would not comment on those reports or on the settlement for this story.