Madster launched in January 2001, providing a service that let its users swap any files stored on their computers with other users. The system was similar to Napster's song-swapping service but, unlike Napster, transfers on Madster were encrypted - making it difficult for copyright owners to know what files are being swapped by users.
Within a few months the music industry, in the form of the Recording Industry Association of America (RIAA), had taken the company to court alleging copyright infringement. By September 2002 they had won the action.
On appeal, founder John Deep and his company argued that Madster had no obligation to block illegal file swaps because the company was unaware of any specific copyright infringement – and added that to identify what was being swapped would necessitate breaking laws that prohibit such interceptions. But the court dismissed these arguments.
In delivering the judgment of the Seventh Circuit Court of Appeals in Chicago Judge Marvin Aspen wrote:
"Willful blindness is knowledge, in copyright law. One who, knowing or strongly suspecting that he is involved in shady dealings, takes steps to make sure that he does not acquire full or exact knowledge of the nature and extent of those dealings is held to have a criminal intent, because a deliberate effort to avoid guilty knowledge is all that the law requires to establish a guilty state of mind."
Accordingly, Judge Aspen reasoned that John Deep's company – which was put out of business by the original court order – should stay out of business, unless it could argue and win its case at trial.
The Supreme Court gave no reason for its refusal to consider the appeal.
The decision gives a boost to the RIAA, which in April lost a similar copyright case against P2P companies Streamcase Networks Inc, the company behind the Morpheus file-sharing software, and Grokster Ltd.
On that occasion, Judge Stephen Wilson said that the P2P companies "are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are used to infringe copyrights."
Oral arguments in the Grokster and Morpheus appeal are expected to begin next month.