SCOTUS Blog is first out of the gate with a report from today's Supreme Court hearing in MGM v. Grokster:

Several members of the Court -- but especially Justices Antonin Scalia, Stephen G. Breyer and David H. Souter -- seemed troubled about the potential impact of a tightening of copyright law on small inventors -- "the guy in the garage," as Souter put it. One of several members of the Court who seemed concerned about potentially shutting down invention of new software if the copyright owners prevail in the Court, Breyer wondered whether a lawyer for a software designer -- for example, the inventor of the iPod -- could assure his client that they could continue to develop new products without fear of being held liable for the illegal uses to which their products might be used by some.

Update: John Borland files his report for ZDNet: "In their questions, the justices were critical of the entertainment industry's proposal, which would hold companies 'predominantly' supported by piracy liable for copyright infringement. However, they showed little sympathy for the file-swapping companies' business model.

'What you are suggesting is unlawful expropriation of property as a kind of start-up capital,' said Justice Anthony Kennedy. 'From an economic standpoint and legal standpoint, that sounds wrong.'"

Update #2: As does Ted Bridis for the AP: "During a lively argument, justices wondered aloud whether such lawsuits might have discouraged past inventions like copy machines, videocassette recorders and iPod portable music players -- all of which can be used to make illegal duplications of copyrighted documents, movies and songs."

Update #3: And David McGuire for the Washington Post [audio clip]: "The justices were very active in their questioning...they didn't actually give a hint as to which side they were favoring."

Update #4: EFF lawyers Wendy Seltzer and Jason Schultz provide first impressions over @ EFF's Deep Links:

Seltzer: "The entire bench was engaged with argument from both sides. Three key points stood out:

• In at least some questions, the Court seemed concerned that movement from a clear "capability of substantial noninfringing use" standard would cloud future innovation.
  
• Similarly, some justices seemed concerned that an "active inducement" standard could chill innovation, from Xerox through the iPod.
  
• The Court also engaged jurisdictional questions of what acts were before the Court, and how it could separate past from current conduct.
  

Schultz: "At the oral arguments in MGM v. Grokster before the Supreme Court today, it was hard to tell which side a majority of the justices fell on. But one thing was clear: they were asking the right questions."