September 5, 2005 2:50 AM PDT

Australian court rules against Kazaa

SYDNEY--An Australian court on Monday ruled that the managers of peer-to-peer software Kazaa had authorized users to infringe on music copyrights and directed them to modify the application to reduce the practice.

Justice Murray Wilcox of Australia's Federal Court ruled largely in favor of music labels, including Universal, Sony, Warner and Festival Mushroom, which had argued that the Kazaa software--owned by Australian-based Sharman Networks--was used to undertake copyright infringement on a massive scale. The labels had also targeted United States-based Altnet, which provides a search technology for Kazaa and is a close partner of Sharman.

Wilcox also ordered respondents Sharman Networks, LEF Interactive, Sharman CEO Nicole Hemming, Altnet and Brilliant Digital Entertainment boss Kevin Bermeister to pay 90 percent of the music industry's court costs.

The judge dismissed the music industry's claims the Kazaa parties had contravened Australia's Trade Practices Act and engaged in conspiracy, as well as dismissing as "overstated" the industry's allegation that Kazaa's managers were engaged in copyright-infringing behaviour themselves. "The more realistic claim is that the respondents authorized users to infringe the applicants' copyright in their sound recordings," he said.

Kazaa can remain in operation, Wilcox said, if the software maker meets either of two conditions. First, "non-optional key-word filter technology" would need to be included in current versions of the software received by new users and in future versions of the software and if "maximum pressure" was exerted on existing users to upgrade to a new version containing the technology. The other option was that the Altnet search software--called TopSearch--be restricted to providing lists of non-copyright-infringing works.

Proceedings were dismissed against respondents Sharman License Holdings, Sharman Chief Technology Officer Philip Morle, Brilliant Digital Entertainment and Altnet CTO Anthony Rose.

A separate hearing is to be held for the music industry's claims for damages against the respondents.

The Recording Industry Association of America, which has been a driving force against illegal sharing of music files, responded enthusiastically to Wilcox's ruling.

"This judgment is first and foremost a global victory for legitimate online music services, the creative community that gives those businesses life and the fans who look forward to a constant array of new music," RIAA Chief Executive Mitch Bainwol said in a statement.

"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. 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 said.

The Australian decision comes a little more than two months after the U.S. Supreme Court ruled unanimously that peer-to-peer companies--most notably Grokster--could be held liable for copyright piracy that occurred over their networks. As part of that ruling, the justices returned the case to a lower court for further action.

In the Kazaa case, Wilcox said the applicants had refused to implement technical measures that could curtail, though "probably not totally...prevent" the sharing of copyright files, as to do so would not be in their financial interest.

"Far from taking steps that are likely to effectively curtail copyright file-sharing, Sharman Networks and Altnet have included on the Kazaa Web site exhortations to users to increase their file sharing and a Web page headed 'Join the Revolution' that criticizes record companies for opposing peer-to-peer file sharing," he said. "They also sponsored a 'Kazaa Revolution' campaign attacking the record companies.

"The revolutionary material does not expressly advocate the sharing of copyright files," he said. "However, to a young audience--and it seems that Kazaa users are predominantly young people--the effect of this Web page would be to encourage visitors to think it 'cool' to defy the record companies by ignoring copyright constraints."

Long legal battle
Sharman Networks, associated companies and major record labels have been at loggerheads over Kazaa for more than three years.

In 2002, Kazaa was the most popular file-sharing software on the Internet. The record labels alleged millions of copyright infringements were occurring each day on the network.

The battle began in earnest in Australia in February 2004. Music Industry Piracy Investigations (MIPI), a division of the Australian Recording Industry Association (ARIA), seized hard drive images and other documents from the Sydney offices of Sharman, associated company Altnet and the homes of executives Hemming and Bermeister under a court-sanctioned civil search order.

The seized materials were crucial to the record labels' evidence against Sharman in the subsequent Federal Court action, which began in November 2004.

The labels alleged Sharman and Altnet had conspired to attract thousands of copyright infringers to Kazaa, and profited from advertising revenue. Altnet operates a search system within the Kazaa Media Desktop.

Sharman argued that it was unable to filter copyright materials involved in the Kazaa software, while the labels said Sharman encouraged users to infringe copyright through the design of the peer-to-peer software, and by promoting it with terms like "free music."

Lawyers for Sharman argued the company had never authorized copyright infringement. Users received copyright notices as part of Kazaa, according to Sharman, and the decentralized nature of the peer-to-peer application made controlling and monitoring users almost impossible.

The company called several academic witnesses during the trial who testified that filters would be ineffective in preventing copyright-infringement, as users would soon find ways to circumvent them. The academics also testified that peer-to-peer applications, such as Kazaa, were capable of substantial non-infringing use.

The record labels also attacked the ownership structure of Sharman, which is registered in Vanuatu for "tax reasons."

Both Hemming and Bermeister declined to take the witness stand during the trial.

Lawyers for the record labels claimed Sharman was controlled largely by Altnet's Bermeister. The two companies operate under Bermeister's command to exploit the traffic on Kazaa for the advertisements seen via the TopSearch facility, the labels allege.

Sharman claims the two companies are business partners only.

Sharman purchased the Kazaa software from Dutch company, Kazaa BV, in 2002.

Steven Deare reported for ZDNet Australia from Sydney.

See more CNET content tagged:
Sharman Networks Ltd., Altnet, Kazaa, Brilliant Digital Entertainment, respondent

18 comments

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And the result would be...
And the result would be that users would learn to to edit ID3 tags and remove copyright notices, change filenames etc., and use other software where there's noone to sue.

Another result of filtering would be that some creators who actually want to share their work would find that their works are blocked from sharing unless they are OKed by the music distribution cartel, that has no interest in their competition. I wonder if they can then sue anyone for unfair practices by operators of sharing networks that do what their court-appointed "bosses" from the music "industry" tell them to do.

BTW, notice that Kazaa was not found to be infringing on copyright. But they "authorize" users to do it. Kind of like a knife manufacturer whose knife is used to kill people is not responsible for the killing, but if they advertise their knives as made for killing and not for cutting steaks then they are partially responsible. You may sell knives in a supermarket. But if you are calling it a dagger then you better be careful about you sell it and to whom...
Posted by hadaso (468 comments )
Reply Link Flag
You almost got it
<<Kind of like a knife manufacturer whose knife is used to kill people is not responsible for the killing, but if they advertise their knives as made for killing and not for cutting steaks then they are partially responsible.>>

Actually, knives, like guns, can be advertised for "killing" because killing is not illegal 100% of the time. Consider self defense. The key, is that the product is marketed or positioned to promote violation of the law.
Posted by David Arbogast (1709 comments )
Link Flag
And the result would be...
And the result would be that users would learn to to edit ID3 tags and remove copyright notices, change filenames etc., and use other software where there's noone to sue.

Another result of filtering would be that some creators who actually want to share their work would find that their works are blocked from sharing unless they are OKed by the music distribution cartel, that has no interest in their competition. I wonder if they can then sue anyone for unfair practices by operators of sharing networks that do what their court-appointed "bosses" from the music "industry" tell them to do.

BTW, notice that Kazaa was not found to be infringing on copyright. But they "authorize" users to do it. Kind of like a knife manufacturer whose knife is used to kill people is not responsible for the killing, but if they advertise their knives as made for killing and not for cutting steaks then they are partially responsible. You may sell knives in a supermarket. But if you are calling it a dagger then you better be careful about you sell it and to whom...
Posted by hadaso (468 comments )
Reply Link Flag
You almost got it
<<Kind of like a knife manufacturer whose knife is used to kill people is not responsible for the killing, but if they advertise their knives as made for killing and not for cutting steaks then they are partially responsible.>>

Actually, knives, like guns, can be advertised for "killing" because killing is not illegal 100% of the time. Consider self defense. The key, is that the product is marketed or positioned to promote violation of the law.
Posted by David Arbogast (1709 comments )
Link Flag
I didn't know...
that people actually still use Kazaa! Gosh, you're talking 5 years ago here. Move on kids. Much better stuff out there.
Posted by City_Of_LA (118 comments )
Reply Link Flag
I didn't know...
that people actually still use Kazaa! Gosh, you're talking 5 years ago here. Move on kids. Much better stuff out there.
Posted by City_Of_LA (118 comments )
Reply Link Flag
Sorry it's a judgement on an obsolete law!
This judgement is irrelevant,for it is a judgement on a copyright act that no longer exists! For here in Australia, since our dear unloved primeminster little johnny howard has signed the north american(/australia) free trade agreement, we gained a very new DMCA style law(was required as part of the loser trade agreement,in which lost tens times to what we gained) which automatically rendered the past Australian Copyright act obsolete. So any judgement on past obsolete laws become irrelevant. Oh well, such is life!
Posted by heystoopid (691 comments )
Reply Link Flag
Sorry it's a judgement on an obsolete law!
This judgement is irrelevant,for it is a judgement on a copyright act that no longer exists! For here in Australia, since our dear unloved primeminster little johnny howard has signed the north american(/australia) free trade agreement, we gained a very new DMCA style law(was required as part of the loser trade agreement,in which lost tens times to what we gained) which automatically rendered the past Australian Copyright act obsolete. So any judgement on past obsolete laws become irrelevant. Oh well, such is life!
Posted by heystoopid (691 comments )
Reply Link Flag
And they can't slightly shift the blame?
This ruling borders on the farsical. It is not the owners of Kazaa that are to blame and neither are they accountable for the copyright infringements purported to be enabled through the use of their system and software. To illustrate this point, they could comply with the ruling by trying to force users to use a new, censored version of their software but they could make this client use standard HTTP requests so that the user could see the request that isn't blocked and possibly modify this request manually (and lets face it, most Kazaa and other share network users are quite internet savvy, plus it enables other opensource/independant clients to be created).

They would then have satified the authorities that their GUI doesn't allow direct copyright infringement and yet their network infrastructure does if the request comes from a modified (hacked) request and they can't be held responsible for their system being hacked, ie: used for something it was not originally designed...
Posted by (2 comments )
Reply Link Flag
And they can't slightly shift the blame?
This ruling borders on the farsical. It is not the owners of Kazaa that are to blame and neither are they accountable for the copyright infringements purported to be enabled through the use of their system and software. To illustrate this point, they could comply with the ruling by trying to force users to use a new, censored version of their software but they could make this client use standard HTTP requests so that the user could see the request that isn't blocked and possibly modify this request manually (and lets face it, most Kazaa and other share network users are quite internet savvy, plus it enables other opensource/independant clients to be created).

They would then have satified the authorities that their GUI doesn't allow direct copyright infringement and yet their network infrastructure does if the request comes from a modified (hacked) request and they can't be held responsible for their system being hacked, ie: used for something it was not originally designed...
Posted by (2 comments )
Reply Link Flag
oh those poor poor record companies
As south park so cleverly pointed out.. Those artists are going to have to settle for a gold toilet instead of a platinum one. Those poor souls are going to have to settle for 4 $80,000+ cars instead of 5. We should all be saddened by their poor loss. So it's a damn good thing they're doin' this then huh?
Posted by mentorkyrom (13 comments )
Reply Link Flag
Poor has nothing to do with it
The amount of money made by artists and record companies has absolutely no influence upon the legal protections that are guaranteed to all U.S. citizens. If you held a copyright, you would be entitled to the same protections. This is not class warfare. Nobody deserves fewer rights under the law because they have worked themselves into a financially advantageous position.
Posted by David Arbogast (1709 comments )
Link Flag
oh those poor poor record companies
As south park so cleverly pointed out.. Those artists are going to have to settle for a gold toilet instead of a platinum one. Those poor souls are going to have to settle for 4 $80,000+ cars instead of 5. We should all be saddened by their poor loss. So it's a damn good thing they're doin' this then huh?
Posted by mentorkyrom (13 comments )
Reply Link Flag
Poor has nothing to do with it
The amount of money made by artists and record companies has absolutely no influence upon the legal protections that are guaranteed to all U.S. citizens. If you held a copyright, you would be entitled to the same protections. This is not class warfare. Nobody deserves fewer rights under the law because they have worked themselves into a financially advantageous position.
Posted by David Arbogast (1709 comments )
Link Flag
 

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