Sharman can't squeeze antitrust claim

Sharman Networks, the company behind the popular Kazaa file-swapping software, cannot pursue a suit accusing record labels and movie studios of antitrust violations, a federal judge has ruled.

In the ruling, dated July 2, U.S. District Judge Stephen Wilson dismissed Sharman's argument that major entertainment companies have colluded to drive potential online rivals out of business, saying the company lacks any standing to make such a claim. Sharman does not provide movies and music online but rather distributes software that allows individuals to swap digital files, the judge said.

"Sharman is neither a competitor nor customer in the restrained market, and because its industry is incidental, and not integral, to the alleged anticompetitive scheme," Wilson wrote in the ruling.

The entertainment industry last year dragged Sharman into the same kind of legal battle that enveloped and humbled Napster. Movie studios and record labels filed suit charging Sharman violated their copyrights by allowing Kazaa users to download music and movie files without permission.

Sharman countersued in February, alleging that the entertainment industry violated the Sherman Act by conspiring to prevent the company from providing protected versions of digital media over the Kazaa network. The suit claimed that Sharman and its partner Altnet tried repeatedly to win licenses for copy-protected content to distribute these online but were repeatedly rebuffed by different labels and studios, which presented a single front. Altnet, a content distribution service that is a subsidiary of Brilliant Digital Entertainment, is not party to the Sharman suit.

"Altnet, not Sharman, is the primary target of the conduct alleged and would suffer the principal injury," concluded the judge in last week's ruling. "Accordingly, Altnet has the greatest motivation to enforce the antitrust laws in the form of a private claim, thereby further diminishing any justification for allowing Sharman to do so."

Sharman, which is based in Australia, could not be reached for comment.