WASHINGTON (AP) — Grokster Ltd., which lost a Supreme Court fight over file-sharing software popular for stealing songs and movies online, agreed Monday to shut down and pay $50 million to settle piracy complaints by Hollywood and the music industry.
The surprise settlement permanently bans Grokster from participating, directly or indirectly, in the theft of copyrighted files and requires the company to stop giving away its software, according to court papers.
Executives indicated plans to launch a legal, fee-based "Grokster 3G" service before year's end under a new parent company, believed to be Mashboxx of Virginia Beach, Va. Mashboxx, headed in part by former Grokster president Wayne Rosso, already has signed a licensing agreement with Sony BMG Music Entertainment.
"It is time for a new beginning," Grokster said in a statement issued from its corporate headquarters in the West Indies.
Grokster's Web site was changed Monday to say its existing 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."
In Los Angeles on Monday, U.S. District Court Judge Stephen Wilson reviewed the settlement but did not comment on it. A lawyer for Grokster, Michael Page, said he believed the company would have prevailed at trial but could not afford a protracted legal battle.
The head of the Recording Industry Association of America, Mitch Bainwol, described the settlement as "a chapter that ends on a high note for the recording industry, the tech community and music fans and consumers everywhere."
It was unclear whether Grokster can afford to pay the $50 million in damages required under the agreement. The head of the Motion Picture Association of America, Dan Glickman, said the entertainment industry will demand full payment unless Grokster satisfies all its obligations under the settlement.