On the morning of June 27, Sam Yagan huddled with his partner, Jed McCaleb, before one of the five computer screens in their dingy, one-room office in Hoboken, N.J. Yagan, chief executive of startup MetaMachine Inc., watched as McCaleb clicked the refresh button on his Web browser again and again. They were waiting for the U.S. Supreme Court to hand down its ruling in the case Metro-Goldwyn-Mayer Studios Inc. v. Grokster Ltd. -- the record and movie industries' lawsuit against a file-sharing service that let people swap pirated copies of music and films.
Yagan and McCaleb weren't defendants. But they marketed their own file-sharing software, called eDonkey, which had roared past Grokster to become the most popular service in the world. In fact, while few people over 30 have heard of eDonkey, file-sharing on its network accounts for more than one-third of the volume of data sent over the Web, estimates researcher CacheLogic. On average, 3 million people are using its software at any one time to share music and movies. If Grokster lost, they were in deep trouble.