Kazaa to Continue Court Fight Down Under

Peer-to-peer (P2P) music file-sharing service Kazaa said today it would appeal an Australian federal court ruling condemning the company’s business model as aiding and abetting copyright theft.

On Monday, the court ruled Sydney-based Sharman Networks, owner and operator of Kazaa, knows its customers are swapping copyrighted files and is doing little to stop it. In particular, the court said merely posting a warning about swapping copyrighted files on the Kazaa software download site is inadequate.

“The respondents have long known that the Kazaa system is widely used for the sharing of copyright files,” Judge Murray Wilcox said in his ruling. “Both the user who makes the file available and the user who downloads a copy infringes the owner’s copyright.” Wilcox added, “Despite the fact that the Kazaa Website contains warnings against the sharing of copyright files, and an end user license agreement under which users are made to agree not to infringe copyright, it has long been obvious that those measures are ineffective to prevent, or even substantially to curtail, copyright infringements by users.”

The court gave Kazaa two months to install copyright filters or close its doors. The court also ordered Kazaa to pay 90 percent of the court costs in the long-running litigation between Sharman and the Recording Industry Association of America (RIAA).

A hearing later this year will determine the damages due to the recording companies for Kazaa’s slack enforcement policies. The entertainment industry claims it will ask for more than $1 billion. According to Kazaa, its more than 300 million users swap approximately 3 billion files a year.

For the P2P music industry, the ruling is the second major legal setback this year. In June, the U.S. Supreme Court ruled the Grokster business model illegal on much the same grounds.

The RIAA was quick to hail the decision.

“On the heels of the unanimous Grokster ruling by the U.S. Supreme Court, this decision reflects a growing, international chorus: those who promote theft can be held accountable no matter how they may attempt to escape responsibility,” RIAA Chairman and CEO Mitch Bainwol said in a statement.

Kazaa has long been an elusive legal target for the recording industry. After courts in the Netherlands ruled against Kazaa in 2001, Sharman moved its operations to Australia and the Pacific Island tax haven of Vanuatu. Sharman has been in almost constant litigation since then, as have American-based P2P companies.

“A corrupt business strategy of attempting to hide ‘off-shore’ is not off-limits to the enforcement of rights by creators or law enforcement,” Bainwol added.

Both Kazaa and Grokster grew out of the failure of the first Napster, which U.S. courts held liable for copyright infringement. Unlike Napster, next-generation P2P software does not store files on central servers, a key legal point in the Napster case.

Kazaa was originally developed by Niklas Zennstrom who later sold his interest to Sharman Networks and moved on to develop the P2P Internet telephone service Skype.


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