October 3, 2001 12:30 PM PDT

Suit hits popular post-Napster network

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  Morpheus sets itself apart from Napster
Steve Griffin, chairman, Music City (8/1/01)
Adding a new challenge to their list of legal attacks, the record industry and Hollywood studios have joined forces to sue MusicCity, Kazaa and Grokster, which together form one of the most popular file-trading networks to spring up in Napster's wake.

The suit marks the fourth major legal action the copyright holders have filed in their attempt to restrain millions of people from trading copies of songs and movies online. So far they have been successful, shutting down Scour, stopping trades on Napster, and putting smaller outfit Aimster on the financial ropes.

But the new lawsuit marks the first overseas defendants, as well as the first legal test of a new generation of technology, which may prove a harder beast to pen than have the previous file-swapping services. Unlike Napster, the file-swapping services sued Tuesday don't require a central company to create an index of downloadable files. The companies involved have said that even if they disappear, the network of file swapping can survive as people continue to distribute the software unofficially.

That's not stopping the Recording Industry Association of America (RIAA) and the Motion Picture Association of America (MPAA) from targeting the network, dubbing it a "21st century piratical bazaar."

"We cannot sit idly by while these services continue to operate illegally, especially at a time when new legitimate services are being launched," RIAA Chief Executive Hilary Rosen said in a statement.

The big music labels themselves are on the verge of launching online music subscription plans this fall and are leery of seeing competition from free services like MusicCity.

Perhaps more than any previous legal action, the latest lawsuit will test the ability of courts and one nation's system of law to reach across international borders for an online issue--and over technological hurdles that many techno-libertarians have deemed all but impassable.


Rick Dube, senior analyst for Webnoize, says the rise of commercial swapping services will lead to more lawsuits to silence illegal sharing sites. (3:02)

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The source of the software for all three services is a company alternately called FastTrack or Consumer Empowerment, based in Amsterdam. A self-described "virtual organization" of programmers from Sweden, Denmark and the Netherlands, the company has licensed its file-swapping software to MusicCity--incorporated in Oregon, but headquartered in Tennessee--and the Nevis, West Indies-based Grokster. FastTrack CEO Niklas Zennström also manages Kazaa.

The lawsuit targets just these companies. But the RIAA also said that it isn't ruling out action against Timberline Venture Partners, a venture capital firm associated with Draper Fisher Jurvetson, which funded MusicCity, also known as StreamCast Networks.

"It's obviously something we are considering," said Matt Oppenheimer, vice president for business and legal affairs for the RIAA. The music labels have not previously sued financial backers of peer-to-peer services, such as venture firm Hummer Winblad in Napster's case, or Hollywood investor Michael Ovitz in Scour's.

Timberline Venture declined comment on the suit. MusicCity Chairman Steve Griffin said that the VC firm does not play an active role in directing the company.

Attracting a crowd
Though MusicCity, Grokster and Kazaa give their own brands to their services, their underlying software is virtually identical and a file trader using any of them taps into the same loose network of computers. MusicCity's Morpheus and the Kazaa Media Desktop have been among the most popular downloads on the Internet. In recent months, more than 34 million versions of the programs have been downloaded from CNET Download.com, which serves as one popular distribution point for the software and is part of CNET Networks, publisher of News.com. Grokster has trailed the others, nearing 200,000 downloads.

The software reports how many computers can be accessed at any given time. The number of people reported by the network has held steady around 600,000 people online simultaneously in recent weeks.

Collectively, these and other rivals have kept file swapping alive and well in Napster's absence. Analysis company Webnoize estimated that 3.05 billion files were downloaded using the FastTrack-based network, Audiogalaxy, iMesh and the Gnutella network during August. That compared with a similar estimate of 2.79 billion files downloaded through Napster in February 2001, the peak of that service's popularity.

The FastTrack software is a second-generation peer-to-peer service, which some analysts have said will be much harder to control than Napster and its early rivals.

Napster, Scour and similar services allowed people to swap files by connecting into central servers that created a constantly updated index of files available for download on people's hard drives. To download a file, a direct link would be established between two computers. No files actually flowed through the companies' central servers, but without them no index could be created.

The FastTrack-based network, like the open-source Gnutella technology, instead allows searches to ripple through individual computers in the network without ever going through a central company server. Each company maintains Web pages, advertising streams and bulletin boards that show up through the software, but these bits of information are irrelevant to the process of searching and file swapping.

The upshot of all this, peer-to-peer boosters have said, is that the companies could be sued out of existence, but the file-swapping network could remain. The new lawsuit will finally put that theory to the test.

Some in the open-source programming community say the network may not be quite as attack-proof as it appears, however.

A group of Linux programmers has been working on an open-source version of the FastTrack software, which was able to tap into the Kazaa network until late last month. But a "security" update to the Kazaa software has blocked them from the network--apparently by forcing the software to do a quick check-in to central servers.

Napster's central servers "lead to its death, giving musicians and record companies a way to shut it down and haul them to court," wrote the programmers on the Generic Interface for FastTrack (GIFT) Web site, just a few days ago. "FastTrack has now opened themselves up to the same possible vulnerability...If the copyright groups were to discover this, they might pounce a lot faster."

Ongoing battle
The RIAA and MusicCity, at least, already have a history of discussions. The recording industry contacted the company earlier this year after winning an appeals court victory over Napster, notifying executives that they were running a file-swapping service that was likely in violation of the law. MusicCity was using different software at that time and shortly afterward switched to the FastTrack-based Morpheus.

MusicCity's Griffin said his company had not yet seen the lawsuit but was "obviously very disappointed." The RIAA and MPAA had not officially contacted the company since it released the Morpheus software, he said.

"We're not surprised," Griffin said. The history of peer-to-peer companies has repeatedly seen copyright holders "litigate and try to overwhelm them, in order to acquire their assets."

In recent days, MusicCity has begun touting itself as an underground media distribution outlet. "Many important pictorial as well as audio and video news events are never allowed to reach television or print media," the company says on its Web site, which is displayed inside the application. "With Morpheus, you can create and share the real news as you see it around the world."

The move appeared to be one attempt to establish that the software has "substantial non-infringing uses," a legal term of art that can protect whole technologies from being ruled illegal. The VCR, for example, was protected by the courts in a suit by movie studios because it can be used for many things other than making copies of copyrighted movies.

In the case against Napster, judges so far have been unconvinced that non-infringing uses, such as promoting unsigned bands, were enough to allow unrestricted file-trading on its network to go on without check. That decision has not yet come to a full trial, however.

Napster has settled part of its ongoing lawsuit, agreeing to pay music publishers $26 million in return for that group dropping its copyright infringement claims. Record companies continue to pursue Napster in court, however.

The FastTrack-based system will present a slightly different calculus for courts if it goes that far, since music, software and video can be traded. This was the case for Scour as well, but that company went bankrupt before its case came to court.

The case was filed late Tuesday in a federal court in Los Angeles.

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