Tech innovation vs. Hollywood

The San Jose Mercury News previews the Supreme Court hearing Tuesday in MGM v. Grokster, the most important digital rights case to come before the court since Eldred two years ago. Excerpt:

Now the entertainment industry wants to change the rules of the game. It has asked the Supreme Court to revise the Betamax standard so that only companies whose technologies' ``primary use'' is legitimate can be shielded from being hauled into court.

The distinction may sound trivial, but Silicon Valley companies say it could jeopardize their ability to create the next big thing.

That's because no one knows exactly what consumers will do with any new technology. If companies risk being sued for developing, say, the next iPod, they might choose to play it safe, according to Lawrence Lessig, the Stanford University law professor who has written extensively about copyright in the digital age.

``The practical effect of the rule that they're trying to get the court to adopt would be to impose extremely high costs on innovation,'' said Lessig. ...

Venture capital firms have already begun to avoid certain types of investments deemed too legally risky, said Hank Barry, a partner at VC firm Hummer Winblad Venture Partners who served as the CEO of the original Napster.

``Not only at the venture level, but at the entrepreneurial level, what this has done is make people very reluctant to invest in these sorts of technologies,'' said Barry. ``The problem is that when you're in a start-up, even if you're right, it doesn't matter. Because you can't afford to litigate. And if you're an investor, you don't want all your money to go to litigation.'' ...