In the case of Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., the U.S Supreme Court ruled unanimously in favor of MGM and other copyright holders in 2005. The court held that peer-to-peer file sharing companies could be sued for inducing or encouraging direct copyright infringement by their users who illegally downloaded copyrighted material such as movies and music. Grokster and StreamCast Networks were found to have intentionally facilitated illegal activity by promoting their software's ability to access copyrighted materials while making no significant effort to impede unlawful conduct on their services. This landmark decision expanded liability for indirect copyright infringement beyond previously established boundaries set forth in Sony Corp v Universal City Studios (1984), which had limited it only when a company had actual knowledge of specific instances of infringement.

In the dissenting opinion for Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., it was argued that peer-to-peer file sharing technology itself should not be held liable for copyright infringement committed by its users. The justice emphasized that such technologies have significant non-infringing uses and potential benefits in terms of promoting information exchange and technological innovation. They also pointed out that holding tech companies responsible for how consumers use their products could stifle innovation and deter the development of new digital tools and platforms. Furthermore, they contended that existing laws were sufficient to punish individual infringers without needing to target the technology providers themselves.