May 5, 2006 11:38 AM PDT

BearShare P2P service sold following settlement

Free Peers, former operator of the controversial BearShare peer-to-peer software and service, has shut down its operations and sold its BearShare assets to a subsidiary of file-sharing service iMesh.

The acquisition, announced Thursday by iMesh, followed a settlement agreement with Free Peers and four members of the Recording Industry Association of America.

Free Peers, along with BearShare's new owners, iMesh and its MusicLab subsidiary, reached a $30 million proposed judgment with Capital Records, Sony BMG Music Entertainment, UMG Recordings and Warner Music Group. The proposed judgment stipulates the software companies will not infringe on any copyrighted works or sound recordings.

The Free Peers case marks the latest example of a file-swapping operator facing inordinate pressure from the recording industry to abandon file-sharing practices that might involve copyright infringement. The settlement with the RIAA members follows last year's landmark decision by the Supreme Court. The nation's highest court ruled that peer-to-peer operators could be held liable if their users engage in piracy of copyrighted material while accessing their file-swapping network.

"The (Supreme) Court's decision helped pave the way for this exciting and ongoing transformation of the digital music marketplace," Steven Marks, general counsel of the RIAA, said in a statement. "This is another important step in that evolution."

Under the proposed judgment, which still must be approved by the courts, BearShare and the defendants will be prohibited from supporting or assisting any servers or Web sites in the unauthorized distribution of copyrighted material. The parties also agree to monitor and block access to their systems if users attempt to engage in such activity.

"iMesh is committed to transitioning the compelling experience of (peer-to-peer) to an authorized marketplace. Our strategy includes the expansion through acquisition and the purchase of assets through our subsidiary, MusicLab," Robert Summer, iMesh executive chairman, said in a statement.

MusicLab was formed by iMesh to handle the Free Peers acquisition, according to iMesh. The acquisition included BearShare's software, domain and user base.

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