I wish I had more time to comment on this issue than I presently do, but I wanted to take a moment to share my thoughts after reading the 9th Circuit decision and some of the briefs submitted to the Supreme Court.
I find the issue of substantial noninfringing use to be a tougher issue than Joe does. In Sony-Betamax, the infringing use was relatively minor in comparison to the lawful use (in that case, the ability of consumers to "time-shift" content was deemed fair use). With respect to the P2P software, the noninfringing use, although real, is very small when sized up against the infringing uses of the software. That forces the Court to evaluate how much noninfringing use is enough--a particularly vexing problem considering the Congress has given the Court no meaningful direction. At the end of the day, I believe the Court will likely conclude that so long as the noninfringing use provides some meaningful benefit, that will be enough. Otherwise, the Court may wind up discouraging innovation and technology, and I am sure they are hesitant to avoid that consequence.
Second, it seems important that the software distributors are still profiting from their programs and that they have released numerous upgrades, each of which have allegedly facilitated infringement rather than attempted to correct it. Because this is case is only at the summary judgment stage, I believe the case will be reversed and remanded if the Court concludes the copyright holders have demonstrated a genuine issue with respect to those issues (the ongoing profits the software distributors receive and the upgrades that have facilitated copyright infringement). I do not know whether these claims are true, but from the briefs of the copyright holders it sure seems likely they will prevail.
I want to give this stuff some more thought, but that is my initial view anyway.