The Supreme court decided that file sharing and creating a software that enables you to do so is not illegal. Although, if your software allows you to do so then you must issue out a warning stating that downloading music and motion pictures is in fact illegal and can and will be prosecuted. Even though Grokster tried to hide behind the ruling of the Sony case which protected VCR manufacturers from liability for copyright infringement , the courts still sought out Grokster for meeting those violations due to the simple fact that Groksters software did not issue any copyright warning or any illegal use of the software that enables file sharing.
“Grokster came before the Supreme Court having already won in two previous courts. The United States District Court for the Central District of California originally dismissed the case in 2003, citing the Betamax decision. Then a higher court, the Ninth Circuit Court of Appeals, upheld the lower court's decision after acknowledging that P2P software has legitimate and legal uses. Sharman Networks' Kazaa file sharing program was originally amongst the defendants, but was dropped because the company is based in Vanuatu.”
http://en.wikipedia.org/wiki/MGM_Studios,_Inc._v._Grokster,_Ltd.#The_Court.27s_decision
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