SINGAPORE, Sept. 5 - An Australian court ruled on Monday that the popular file-sharing network Kazaa violated Australian music copyrights and ordered the company to modify its software to help prevent it.
"The respondents authorized users to infringe the applicants' copyright in their sound recording," Murray R. Wilcox, a federal judge in Sydney, wrote in a summary of his judgment. "The respondents have long known that the Kazaa system is widely used for the sharing of copyright files."
The ruling culminates an 18-month legal battle between the recording industry and the Australian-based owners of Kazaa, who said they planned to appeal. The ruling also complemented a United States Supreme Court ruling in June that Internet file-sharing companies like Kazaa could be held liable for copyright piracy.
The Australian ruling was broadly consistent with a ruling by the United States Supreme Court in June that the makers of the file-sharing services Grokster and Morpheus could be held liable for contributing to the infringement of copyrights. The Supreme Court also rejected the argument that file-sharing services should be protected if they have some legitimate uses and sent the case back for trial to look at whether they encouraged users to steal copyrighted material.
The practical effect of both rulings is to increase pressure on the makers of file-sharing software, who at best face escalating legal fees to stay in business and at worst may face debilitating judgments for damages.
In the face of these pressures, some file-sharing services are looking for deals with the record industry through which they will charge fees for copyrighted songs. But such a move might prompt some users to turn to public noncommercial file-sharing software programs already freely available on the Web, which have no proprietors who could be sued.
The Recording Industry Association of America praised the Australian ruling. "This decision reflects a growing, international chorus: those who promote theft can be held accountable no matter how they may attempt to escape responsibility," the association wrote in a statement. "A corrupt business strategy of attempting to hide offshore is not off limits to the enforcement of rights by creators or law enforcement."
The suit, led by the Australian unit of the Universal Music Group, sued Kazaa's owners, Sydney-based Sharman Networks, and nine other parties including Sharman's chief executive, Nicola A. Hemming, saying the site enabled users to commit millions of copyright violations daily and cost the industry millions of dollars. Damages will be determined at a later hearing, the court said in Monday's ruling.
Kazaa was the popular successor to Napster, the file-sharing network that in 1999 began allowing users to trade files over a central computer server. Introduced in early 2001 in the Netherlands, Kazaa kept on going when lawsuits forced Napster to shut down in July that year. By 2004, Kazaa said that 317 million people had downloaded its software.
Kazaa's software is free; the company makes money by selling advertisements that appear when the software is used. Unlike Napster users, Kazaa users connect to each other directly without going through a central server, a so-called peer-to-peer connection. They can then download files from other users and can opt to share files on their own computer with other Kazaa users. The company encourages users to share their own files by offering reward points that can be traded for music files or used to enter contests.
Faced with legal action in early 2002, Kazaa shut down and was bought by privately held Sharman, which revived the service from its new home in Australia.
After its successful attack on Napster, the recording industry pursued another file-sharing service, Grokster, culminating in June's Supreme Court ruling that the company was liable because, as part of its business, it offered advice to customers on how to engage in illegal file-sharing.
Kazaa's lawyers argued that the company's software was no different in function from a photocopier and that Kazaa bore no responsibility for how its software was used by those who downloaded it.
Kazaa's Web site does not specifically advise users on how to share copyrighted music, and avoids referring directly to music files at all. Kazaa users can share any type of files, music or otherwise. On the contrary, the site admonishes users in an end-user license agreement not to violate copyrights.
But in a summary of the case explaining his ruling, Judge Wilcox said that most of the files swapped using Kazaa were copyrighted music and that Kazaa was aware of it but had done too little to discourage it.
The company's boilerplate admonitions were inadequate, he said, and Kazaa had failed to undertake technical measures to curtail copyright violations using its software. Instead, it had declared on its Web site a "Kazaa Revolution" against the record companies. And while stopping short of advocating copyright piracy, Judge Wilcox said, "the effect of this Web page would be to encourage visitors to think it 'cool' to defy the record companies by ignoring copyright constraints."
While he conceded that it would most likely be impossible for Kazaa to completely prevent copyright violations by its users, Judge Wilcox ordered Kazaa to alter its software so that its search function would not display files with names matching a list of copyrighted music to be supplied by the industry. He rejected allegations by the industry that Kazaa had itself violated copyright laws or engaged in conspiracy to violate Australian antimonopoly laws.
Denis Handlin, chairman of the Australian Record Industry Association, welcomed the decision. "This decision represents another important step in the industry's commitment towards creating a commercially viable legitimate online music business," he said in a written statement.
Sharman issued a statement after the ruling saying: "In the judgment handed down today, both parties have had a win, although neither side has had a complete victory. Sharman Networks is obviously disappointed that we have not been completely successful. But we will appeal those parts of the decision where we were not successful and are confident of a win on appeal."
