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Kazaa Settles With Entertainment Industry
July 27, 2006
Thomas Mennecke
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It's finally happened. Anyone who used Kazaa during the early days may remember the client's lengthy EULA (End User Licensing Agreement), which contained verbiage regarding its eventual transition to a pay service. In fact, the reason why this FastTrack client had a 128 bitrate limit was to help promote the application as a potential authorized service rather than an absolute piracy tool.

However this bitrate limitation was to be short lived. Any hopes for meaningful negotiations with the entertainment industry faded as Sharman Networks became one of the many P2P firms facing litigation. In addition, its chief FastTrack rival at the time, Morpheus, contained no bitrate restriction. Realizing that freedom of bitrate equated to better quality music, Morpheus became the FastTrack client of choice.

Within a year, Kazaa no longer had the bitrate restriction that inhibited the sharing of higher quality music. Sharman Networks also consolidated its power over the FastTrack network after Morpheus was mysteriously booted from the network - the exact details of which remain unknown.

Kazaa was now the undisputed king of FastTrack and becoming the largest P2P networks in file-sharing history. With millions of individuals online, it was the de facto standard for obtaining information online. However this glory would be short lived, as Sharman Networks became an international target for the entertainment industry's global campaign to root out unauthorized commercial file-sharing development.

In both the United States and its home country of Australia, Sharman Networks has been fighting a two front battle to keep its service online. In the United States, its plight was hindered by the June 2005 Supreme Court ruling, which in a unanimous decision remanded the MGM vs. Grokster to the lower courts - and also ruled that such services could be sued for copyright infringement.

Shaman Networks faired somewhat better in Australia where it battled the ARIA (Australian Recording Industry Association.) Justice Murray Wilcox dismissed five of the seven lawsuit points against Kazaa in September of 2005. However, he did rule "...the respondents authorized users to infringe the applicants’ copyright in their sound recordings." Legal proceedings have since been caught up in appeal, contempt hearings and other lengthy procedure – perhaps in an effort to buy the P2P firm more time.

It appears that time is on the side of Sharman, as the MPAA (Motion Picture Association of America) and the ARIA has announced a $100 million settlement - the most any P2P firm has ever paid. As comparison, BearShare and Grokster paid $30 million to settle, while iMesh got away with only $4 million.

“This is another important victory in this historic case,” said Dan Glickman, MPAA President and CEO. “Since the Supreme Court’s unanimous decision a little more than one year ago, we have seen a surge in new opportunities for consumers. Today’s settlement announcement represents yet another milestone in the progress the content and online communities have made in coming together to meet consumer demands while still respecting the rights of content creators.”

As part of the settlement and transition to a "legal" service, Sharman Networks must prohibit sharing of copyrighted material, install "robust" filtering technology, introduce a legitimate business model, and pay the substantial sum of $100 million.

Music Industry Piracy Investigations (MIPI) Director Mr. Stephen Peach said, “Kazaa’s operators have accepted responsibility for their illegal activities and have paid the price for the harm caused to artists and labels. This historic outcome justifies action taken by Australian and international record labels to fight internet music piracy. This very successful result sends a powerful message that copyright infringement will not be tolerated.”

There's little doubt the entertainment industry has reined in a P2P network that at one time was the largest file-sharing community with over 4.5 million users. Yet since that time, Kazaa and the FastTrack network has degraded. The lack of meaningful updates to the protocol and the application has allowed other more sophisticated technologies to surpass this network. FastTrack's population has been cut in half in reaction to the RIAA's lawsuit campaign and because of the application's inherent inadequacies. What's left is a shell of a P2P network, and a remaining population that will likely not react well to filtered content. While the entertainment industry champion's this ruling, at best this may be a Pyrrhic victory as the P2P world have long left Kazaa and FastTrack behind.

This story is filed in these Slyck News categories
Legal/Courtroom :: Developer Lawsuits
P2P Clients :: FastTrack

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