Music Biz Heads to Australia for Kazaa Trial

Industry eyes are turning toward Oz as more than 50 lawyers begin waging a courtroom battle over Kazaa, the peer-to-peer technology owned by Australia-based Sharman Networks that touts some 60 million users worldwide.

News source: The major labels and 25 other North American, European and Australian record company “applicants” brought the federal court action in Sydney to stop illegal P2P file sharing. They also want to recover compensation for past illicit downloads, estimated by some to be worth billions of dollars.

The suit targets Sharman Networks; LEF Interactive; Altnet, which delivers so-called “piggyback” technology with Kazaa; Altnet-affiliated Brilliant Digital Entertainment; Sharman CEO Nicola Hemming; Altnet CEO Kevin Bermeister; and two technology directors.

The liability phase of the trial begins Monday (Nov. 29). If the labels succeed, they will proceed to the damages phase. If they fail, some fear that Australia could become a haven for P2P distributors.

The action widens the potential net around the tech companies. Unlike pending copyright-infringement cases brought in the United States against Sharman, the suit asserts additional claims for misrepresentation to the public, unconscionable conduct and civil conspiracy to inflict harm.


Sharman has refused to reveal its ownership. Although it has offices in Australia, Sharman was formed in the island state of Vanuatu, a no-tax haven where the secrecy of private companies is sacred, improper disclosure of financial information to others is subject to criminal prosecution and tax information is not shared with any outside jurisdiction.

This makes the trial intriguing to observers who wonder what will be revealed in the evidence seized during the Feb. 6 raids on the tech companies, their key executives, universities and several Internet service providers.

After a six-month inquiry by the Music Industry Piracy Investigation unit of the Australian Record Industry Assn., the labels secured a so-called Anton Piller order permitting a surprise search of offices and homes to avoid any potential loss or destruction of evidence. The information gathered has yet to be revealed to the public.

Also of interest is the bundling of Altnet software with Kazaa and how that software operates. Past reports indicate that the technology in effect forms a new P2P network separate from, but connected to, Kazaa that permits the sharing of advertisements and other digital files. This may mean that the companies can control how files are shared over the P2P networks — including those shared by alleged copyright infringers.

Michael Weiss, CEO at StreamCast, which distributes P2P software Morpheus, says: “Kazaa has, unfortunately, perpetuated the ‘bad actor’ stereotype that Hollywood has attempted to brand all of the P2P developers (with) — but Morpheus doesn’t bundle spyware, or other pernicious software that is nearly impossible for a user to remove — such as the Altnet software.”


Sharman has been mounting a vigorous fight against the entertainment industry in the United States. Sharman and LEF Interactive are also defendants in the U.S. District Court suit brought by film studios, major labels, songwriters and publishers in Los Angeles against Grokster and StreamCast Networks for secondary copyright infringement.

Since that case is still pending, any evidence in the Australian trial establishing Kazaa as a centralized P2P network could affect Sharman’s liability in the U.S. federal court.

Sharman Networks contends that Kazaa is a legitimate technology used legally. An article by Sharman’s Hemming claims that “hundreds of artists … independent record labels and movie studios, as well as software and game developers, are using Kazaa to distribute their products for sale to millions of users worldwide” even though the “vast majority of major labels and studios still won’t adapt.”

Jay Berman, chairman/CEO of the International Federation of the Phonographic Industry, says, “We strongly support these claims (made by the labels) and will be watching the Australian trial with great interest.”


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