File-sharing software firm Grokster Ltd. shut down its Web site and agreed to pay $50 million to settle all piracy complaints by the motion picture and music industries as part of a legal settlement reached on Monday.


On its Web site, Grokster said: "The United States Supreme Court unanimously confirmed that using this service to trade copyrighted material is illegal. Copying copyrighted motion picture and music files using unauthorized peer-to-peer services is illegal and is prosecuted by copyright owners. There are legal services for downloading music and movies. This service is not one of them."


Executives indicated they would launch a legal version of the defunct company, called "Grokster 3G," before the end of the year, according to the Associated Press. The new site would be owned by Sony Corp.-backed Mashboxx, which was considering acquiring Grokster last month.


On its Web site, Grokster announced it "hopes to have a safe and legal service available soon."


The Motion Picture Association of America, whose members would receive the $50 million payout as plaintiffs in the case, issued a statement about the settlement: "Rather than continue the litigation, Grokster will discontinue its current business operations, effective immediately. Grokster has agreed to have the court enter a judgment and permanent injunction against it and in favor of plaintiffs."


Mitch Bainwol, the Recording Industry Association of America's chairman and chief executive said: "This settlement brings to a close an incredibly significant chapter in the story of digital music. This is a chapter that ends on a high note for the recording industry, the tech community and music fans and consumers everywhere."


In June, the Supreme Court ruled that motion picture studios had the right to sue Grokster and another peer-to-peer file-sharing service, Woodland Hills-based Streamcast Networks Inc., for illegally sharing copyrighted material. The case was sent back to U.S. District Court in Los Angeles for trial, where one of the key issues will be whether StreamCast induces the users of its Morpheus software to share the copyrighted material.


Unlike Grokster, StreamCast made several changes when the Supreme Court decision was released. It had just launched its newest version of Morpheus and had already begun marketing itself as a site with legitimate services.


Charles Baker, a partner at Porter & Hedges LLP who represents StreamCast Networks, said the company is not involved in settlement discussions. "We're going to go forward and get this case ultimately ready for trial."

For reprint and licensing requests for this article, CLICK HERE.