At risk in the case is the Sony Betamax decision, the landmark decision that established that companies whose technologies had "substantial noninfringing uses" were not liable for the infringing behavior of some users. In a powerful blow to Hollywood interests, two courts found that Grokster passes the Betamax test in that the system boasts substantial legal filesharing activity. In addition, because Grokster does not control the machines hosting the service, the courts ruled that they couldn't be held responsible for users' behavior.

With the Supreme Court taking the case, technology advocates fear the Betamax decision itself is at risk, and that companies who can't afford a legal battle with music or movie companies simply won't be able to bring technology to market.

Cuban notes that: "It doesn't matter that the RIAA has been wrong about innovations, and their perceived threat to their industry, EVERY SINGLE TIME. It just matters that they can spend more than everyone else on lawyers."

In an interview I did earlier this month, Creative Commons founder Lawrence Lessig argued that Betamax has protected tech companies from having to defend their inventions in the courts. Losing that protection would put a freezing chill over technology innovation.

[C]ourts are extraordinarily expensive places to adjudicate these questions. And the best example of that is the case of ReplayTV. They produced what looks like a modern version of the VCR and they spent two years in litigation with content owners who claimed that they were producing a technology that people used to create copyright infringement; and that they should be held responsible for it. Two years of litigation is enough to sap out all the resources of a startup company, and they were eventually forced into bankruptcy.

I think the case stands for the obvious points that the Sony Betamax case was trying to make--if you can pull somebody into court under some vague standard of liability just because the tools are being used by people to create copyright infringement, that's a very good way to block new innovation that might change the way copyright material gets distributed. So it's a strategic opportunity to exercise control over the future of content development and distribution, and not so much as a way of protecting copyrights.

Now again, in that case, as in the VCR case, as in the peer-to-peer case, it's open for the copyright holder--which, of course, is one of the most powerful lobbies in America--to go to Congress and get them to address the specific problem that they complain about. ... [B]ut if you make the courts the arbiter of whether a technology should be allowed or not, then the courts become a tool, a weapon to be used in the marketplace. And they will stifle new innovation and new creativity, because manufacturers are afraid of losing their money to lawyers.