Music authorities face uphill struggle in Kazaa case

AS WE REPORTED last Friday, Sharman Networks, the owners of the Kazaa file-sharing service, were raided by the enforcement arm of the Australian record industry, the Music Industry Piracy Investigations authority (MIPI).

After what is claimed to be six months of investigation, the enforcement authority gained court orders which enabled it to raid Sharman's offices and eleven other organisations including the homes of two executives associated with Sharman, three universities and four Internet Service Providers including the country's largest.

The MIPI said that evidence obtained during the raid would be used in court proceedings.

MIPI general manager Michael Speck went on to claim that Kazaa "authorises" the illegal copying of music and fails to pay any royalties to either the owners or creators of the music.

Jay Berman, the head of the London-based International Federation of Phonographic Industry (IPFI), was pleased with the Australian raids claiming that the corner [sic] was turning in the development of a legitimate online music business worldwide.

Perhaps his statement only refers to a business model that the record companies control because Sharman Networks has offered the pay-for-download business model that it uses for online movies to the record companies on several occasions but it has always been rejected.

Perhaps also the reactions of the RAIA, IFPI and others have been triggered by Kazaa's announcement last October of a method by which emerging and independent artists can promote their products without any involvement of the big record companies.

Sharman Networks is registered in the Pacific island country of Vanuatu but, according to reports, it has recently changed its operations and become an Australian company. As such it is now subject to Australian law in all matters including copyright law.

Australian copyright law has one very significant difference to copyright law in the US, Canada and Europe. Unlike in those jurisdictions, the making copies of music for personal use is regarded as an infringement. Copying from CD to tape or the creation of a compilation of tracks onto a CD from CDs already in your possession is frowned upon. Despite various media having a limited lifetime, it is still an infringement of copyright to make new copies before the original media deteriorates.

That said, it will still be difficult for the MIPI to take legal action against Sharman Networks.

The claim that Kazaa somehow authorises illegal copying will be difficult to prove and even if it were, the extent of complicity of one who authorises an illegal act is rather dubious in law. Either way, it will be difficult to tie Sharman Networks to either direct infringement of copyright, when one actually creates an illegal copy, or the alternative notion of contributing to the copyright infringement of others where some form of peripheral but active role are involved.

The extent to which Australian courts accept record industry claims is also a dubious point.

In November 2003 an Australian court found three university students guilty of making illegal copies of music available for web download. One received 200 hours community service and the other two received suspended 18-month jail sentences which will only be enforced if the persons involved are given another jail sentence in the next three years.

The music industry was not impressed because it estimated the crime had cost it more than $80 million and the MIPI head Michael Speck declared the decision as grossly inadequate. He said "I just wonder how much music you have to steal in Australia before you go to jail."

A contemporary Australian study confirmed the findings in other parts worlds that downloads do not impact music sales as much as the record companies would have us believe and that sampling before buying is a common practice. Whether this study had any influence on the decision is unknown but its general relevance to the arguments of the record companies is undeniable.

A further obstacle to the claims of the MIPI comes from Kazaa's homepage where the warning on copyright infringement is clearly displayed. Using a clearer approach than many web sites where terms and conditions are on another web page, it states: "Sharman Networks Ltd does not condone activities and actions that breach the rights of copyright owners. As a Kazaa Media Desktop user you have agreed to abide by the End User License Agreement and it is your responsibility to obey all laws governing copyright in each country." If the Australian court was to reject this statement as meaningless it would cast doubt on the merit of similar statements on many other web pages around the world.

During 2003 the US court found that Grokster and Morpheus file sharing services have no control over how their product is used and because there are perfectly legitimate uses for the software, there were no charges to answer. In December 2003 a Dutch court found in favour of Kazaa for similar reasons.

Both drew the parallel with video recorders because these can be used for legal purposes as well as the illegal copying of material. In both jurisdictions the making of copies of television programs for personal use is quite valid. In Australia such copying is illegal but fortunately for the millions of Australians who make copies for later viewing it is simply impossible to enforce this law.

The raiding of the eleven other organisations appears to have doubtful merit, save to show that some users may have used Kazaa software to distribute illegal copies. Whether Sharman Networks can somehow be held responsible under Australian law for these actions remains to be seen. If the situation in the USA is anything to go by, the individuals who made the illegal copies will be held responsible for their actions.

In many ways this looks like it will be the last attempt by the record companies to hold the providers of file-sharing software responsible for illegal copying. Australian law is tilted slightly in their favour in comparison to the rest of the world and, having suffered two other major defeats, if they can't make their charges stick in Australia then they have little prospect elsewhere.

On the other hand, if the record companies do somehow manage to be successful with their charges in Australia then in all probability the ownership of Kazaa will simply transfer to jurisdiction that has already cleared the service of being responsible for the action of its users.

Added to all this, there's a current action in the USA in which Sharman Networks is charging the record companies with abusing the terms of the Kazaa software End-User License Agreement (EULA) by using the software to transmit corrupt or spoof files, violating various US state and federal laws in the hacking and examination of users' personal computers and using Kazaa software to send threatening messages to other users. Recent attempts by the record companies to have the charges dismissed have been suspended pending the outcome of an appeal by the record companies over the earlier decision in regard to the use of Grokster and Morpheus peer-to-peer software.

Sharman Networks is also charging the record companies under antitrust laws contending that Sharman and affiliate company Altnet held a number of "positive and productive discussions" with senior level individual industry executives at Universal, Warner Brothers Music and Interscope Music, among others, but that these discussions were later stymied by the concerted actions of the record industry.

The music may not be over in this battle between Kazaa and the record companies but it seems we may have reached the last few tracks. µ

John McLean is an INQUIRER correspondent based in Australia

L'INQ
Kazaa offices busted by copyright cops