Last week, the U.S. Supreme Court handed down two decisions that we believe will clear up some questions on how converged services are offered but will open the door to other questions. Today, we’ll highlight the case of MGM vs. Grokster and StreamCast.

MGM had sued Grokster and StreamCast for copyright violation because the defendants offered content distribution (including content copyrighted by MGM) using peer-to-peer software. Grokster maintained that it was merely a distributor of information, and a lower court had sided with Grokster. The lower court reasoned that the peer-to-peer software used by the distribution companies was similar to a home video recorder or copy machine, so any copyright violation was the liability of the users and not the liability of the software manufacturer.

The Supreme Court disagreed, and in ruling for MGM found that Grokster and StreamCast were aware of the violations and even encouraged their users to violate the copyright law. The court did not, however, overturn a previous ruling that permits copying content or distributing content. Rather, the court focused on the intent of software manufacturers.

So while the ruling may force companies to assure they don’t encourage illegal copyright violations by copying and distributing content, it does not stop either practice altogether.

This case is important to applications convergence for two reasons. First, it doesn’t ban the practice of sharing content across a peer-to-peer environment - so the peer-to-peer model still has the potential to be very disruptive to content providers who want to charge for content distribution. And second, it seems clear that the court has not abandoned the need to protect intellectual property and copyrighted materials - so innovation in creating content is still going to be a profitable business.

Next time, we’ll take a look at the Supreme Court ruling on information services access across cable television networks.

Steve Taylor is president of Distributed Networking Associates and publisher/editor-in-chief of Webtorials. Larry Hettick is a principal analyst at Current Analysis.