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Settlement Shutters Grokster

TSC Staff

Grokster, developer of Internet file-sharing software popular for stealing songs and movies online, agreed to a permanent ban from participating directly or indirectly in the theft of copyrighted files, the AP reports. The deal requires the company to stop giving away its software, according to people familiar with the agreement.

Grokster's Web site was changed to display a message that its file-sharing service was illegal and no longer available. "There are legal services for downloading music and movies," the message said. "This service is not one of them."

The case was brought by MGM and was widely supported by the media industry, which claimed that services like Grokster were used entirely for theft. Grokster makes no money from sharing but did have online advertising. Media companies said it and other file-sharing services abetted illegal use of files and should be held liable.

The news comes after June's Supreme Court ruling dealt a blow to users who want a dedicated application to exchange media content for free. Grokster and other outfits like it stood to be held liable if consumers illegally exchange songs and movies using their technology.

In a decision with major implications for the entertainment industry, the Supreme Court ruled unanimously June 27 that online file-sharing service Grokster can be held liable if consumers illegally exchange songs and movies using its technology.

The ruling was a major victory for companies like Time Warner (TWX Quote), Viacom (VIA Quote) and Warner Music (WMG Quote), which have been battling intellectual-property piracy for the past several years.

Speaking on CNBC after June's high court ruling, former Grokster CEO Wayne Rosso said that the ruling would eventually shut down the service.

On Monday, Time Warner rose 4 cents to $17.65, Warner Music added 40 cents to $16.45 and Viacom rose 62 cents to $32.40.