WASHINGTON — Grokster Ltd., which lost a Supreme Court fight over file-sharing software used 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.”
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.
Grokster’s brand will survive. The new fee-based version of its software will be available within 60 days, according to one executive involved in the deal. This executive spoke only on condition of anonymity because the sale of Grokster’s assets is pending.
Grokster’s decision was not expected to affect Internet users who already run the company’s file-sharing software to download music and movies online, nor was it expected to affect users of rival downloading services, such as eDonkey, Kazaa, BitTorrent and others.
Glickman said Grokster will send anti-piracy messages to existing users, and the company is forbidden from maintaining its software or network.