Kazaa owner suing US entertainment industry

Out-Law News | 26 Jan 2004 | 12:00 am | 2 min. read

Sharman Networks, the company behind file-sharing service Kazaa, was given the judicial go-ahead on Friday to sue the major music labels and Hollywood studios, accusing them of anti-competitive behaviour and unfair business practices.

Kazaa is the most popular of the file-sharing services, which allow users to download free peer-to-peer software and use it to access the music, images and movie files stored in other users' computers.

Its owner, Sharman Networks, brought the action against members of the Recording Industry Association of America (RIAA) and the Motion Picture Association of America (MPAA) in January last year, in response to a copyright infringement lawsuit filed against the original owner of Kazaa and the companies behind two other file sharing services, Grokster and Morpheus.

Grokster and Morpheus successfully defended the copyright action in April last year, but that case is being appealed.

The RIAA and MPAA sought to have the Sharman's countersuit dismissed, but on Friday Federal Court Judge Stephen Wilson ruled that the action should largely continue.

This means that Sharman Networks may pursue its claims that major players in the entertainment industry have infringed Sharman's copyrights. Sharman is also alleging that the industry breached the End User License Agreement (EULA) for the Kazaa software by:

Using the Kazaa software to transmit and download spoofed or corrupted files.

Violating state and federal personal privacy laws and the rights of individual computer users by hacking and exploring files located on their computers.

Using the Kazaa Software's instant messenger functionality to send threatening messages to other users of Kazaa software.

With regard to the anti-trust element of the case, the court has requested briefs from the parties as to whether those claims should be stayed pending resolution of the appeal against Grokster and Morpheus.

Sharman alleges that the entertainment industry colluded to keep Sharman, its partner Altnet, and peer-to-peer technology out of the market for licensed digital content distribution.

The filing details specific instances where Sharman and/or Altnet met with senior level individual industry executives at Universal, Warner Brothers Music and Interscope Music, among others, holding a number of positive and productive discussions.

These discussions, says Sharman, were later stymied by the concerted actions of the industry plaintiffs despite the fact that these relationships were robust, and preliminary understandings had been reached.

The counterclaim also alleges:

Collusion of the plaintiffs to apply pressure to advertisers, ISPs and business partners of Sharman and/or Altnet.

Public smear campaigns to undermine Sharman, Altnet and peer-to-peer technology.

Restrictive anti-peer-to-peer licensing practices by plaintiffs - "Dead End Licenses" – designed to exclude peer-to-peer distribution.

According to Sharman Networks CEO, Nikki Hemming:

"We have said from the beginning that we take little pleasure in using the judicial system to place the spotlight on the entertainment industry's behaviour, but we have no choice. The entertainment industry has lost its way, choosing a path of endless litigation rather than accepting a solution to copyright infringement that is available now, and a technology that is inexorable."

Talking about the anti-trust allegations, an RIAA spokesman told Reuters, "the court does not appear to want these claims to proceed at this point. If they ever proceed, Sharman will have a very difficult time providing evidence to support their allegations."