A few months ago I fearlessly predicted that the Supreme Court would side with the entertainment industry plaintiffs, reverse the 9th Circuit, and find Grokster liable for "inducing" copyright infringment (through the distribution of its software). Maybe I've just talked myself into it, but having spent a fair bit of time with the case the last couple of months (I authored an amicus brief, submitted on behalf of the Am. Conservative Union and the Nat'l Taxpayer's Union), siding with the defendants, and just last week I appeared on WHYY's "Radio Times" to present Grokster's side of the argument) I think my initial prediction was wrong.
For some pretty gnarly procedural reasons, I don't think the Court will be able to reach the question of whether Grokster can be liable for "inducement" -- actively encouraging, through advertising or otherwise, others to infringe copyright. That leaves just the question of whether distribution of its software, alone, can be considered "contributory" infringement. On that question, I think the Court's going to get it right -- closely following the "Betamax" case and holding that the distribution of stuff like this can only constitute infringement if it has "no substantial non-infringing uses," and because the Grokster software does have "substantial non-infringing uses," the plaintiffs have to satisfy themselves with going after the actual infringers, not the tool-provider.