Do “peer-to-peer” file-sharing systems have a future, stabilizing computing platforms and allowing the free, decentralized exchange of ideas and data? Or are they merely tools—like a burglar's lock-pick—designed to facilitate massive and unlawful infringement of copyrights on movies and songs? The Supreme Court will decide.

On March 29, the U.S. Supreme Court heard arguments in MGM v. Grokster, a case that raises the question of whether companies that make file-sharing technology—widely used by some consumers to illegally download music and other copyrighted material—should be held liable for copyright infringement. The Ninth Circuit Court of Appeals in California held that the file-sharing networks were not liable because their services were “capable of substantial noninfringing uses” based on the Supreme Court’s 1984 decision in the “Betamax” case (Sony Corp. v. Universal City Studios Inc., 464 U.S. 417, 1984).

Led by MGM, the entertainment industry argued that liability should be imposed when the primary use of the product or service is illegal or when the provider induces or refuses to take steps to try to stem potential piracy. The entertainment industry asked the court to focus on the business aspect, arguing that the file-sharing companies profit from the high volume of infringing activity.

The file-sharing companies argued that the court should uphold the lower courts’ application of the “capable of substantial noninfringing uses” test, arguing that the technology is used extensively for legal swapping of files and that companies have no way of knowing when their users use the software illegally. Supporters of the technology argue that file sharing is a useful means of expanding knowledge through the inexpensive transmission and Internet archiving of lawful material in the public domain.

According to news sources, the justices paid attention to warnings that a broad definition of copyright infringement could curtail innovation. Several justices questioned whether holding the software makers liable could chill inventors developing new technologies out of fear they would face lawsuits if their products or services were used for illegal purposes. But the justices also expressed some reservations about the inequity of imposing no liability on the file-sharing companies.

Some of the justices’ questions also raised the possibility of sending the case back to the lower courts for a trial on whether the file-sharing companies deliberately induced users to use the software to download copyrighted material on a large scale, an issue which the lower courts did not address and which would be illegal under existing copyright law. The court’s decision is expected this summer.