Australian Court rules that Kazaa file swapping software is illegal

October 2005

Record Labels, Music Publishers, Internet
Australian Court rules that Kazaa file swapping software is illegal: Universal Music of Australia Pty Ltd vs Sharman License Holdings (2005) whilst other P2P companies review strategies in light of the Grokster decision

The Federal Court of Australia has ruled that the internet peer-to-peer operator Kazaa is illegal and the IFPI has called on similar networks throughout the world to stop infringing copyright or face the legal consequences. The judgment, coming just ten weeks after the US Supreme Court ruling against the ‘file-sharing’ operator Grokster, concludes the 18-month trial of the best-known international file-swapping service and helps to lay down the law for the new generation of unauthorised peer-to-peer operators. The Court ruled that Kazaa – until recently the world’s biggest single internet piracy operation with 2.4 million users worldwide – is an illegal business that is liable for copyright infringement. The move is part of a global trend clarifying the rules around internet music distribution. A court ruling in Korea last month required the peer-to-peer service Soribada to stop unauthorised file-swapping on its network or shut down. IFPI Chairman and CEO John Kennedy said: “Within the space of ten weeks, three courts in three different continents have given a huge boost to the efforts by music and technology companies to forge a legal online music business …. today’s judgement shows that Kazaa – one of the biggest engines of copyright theft and the biggest brand name in music piracy worldwide – is illegal. This is a milestone in the fight against internet piracy worldwide and a resounding signal to other unauthorised file-swapping networks: they should adapt their systems and go legitimate now”. Justice Murray Wilcox ruled today that companies and individuals associated with Kazaa knowingly facilitated and profited from copyright infringement, and failed to take any measures to stop it and must now start to filter its infringing recordings within two months or face closure. Justice Wilcox made findings of liability against Sharman Networks, LEF Interactive Pty Ltd, Altnet Inc, and Brilliant Digital Entertainment Inc, along with executives Nicola Hemming and Kevin Bermeister. He concluded that:


  • Sharman had power to prevent, or at least substantially reduce, the incidence of copyright file-sharing. Yet Sharman did nothing; even when it introduced KMD v3 [the latest version of the software] one week before commencement of the trial of this proceedings
  • Sharman always knew users were likely to share files that were subject to copyright. Sharman, through Ms Hemming (CEO) and Mr Morle (Chief Technical Officer), have been aware this was a major, even the predominant, use of the Kazaa system
  • Having regard to the whole of the relevant evidence, it should be held that Sharman infringed the applicants’ copyright … by authorising Kazaa users to make copies [of those sound recordings] and to communicate [those recordings] to the public

This analysis is taken from an article by Clare McCurley and published in e-tips (a publication of Deeth Williams Wall LLC) edited by Richard Potter QC.

On September 5, 2005, Australian Federal Court Judge Murray Wilcox ruled that Kazaa’s popular file-sharing service violated Australia’s copyright law by authorizing users to infringe music companies’ copyright in sound recordings. The judgment does not go so far as to make file-swapping illegal. It does, however, conclude that Sharman Networks Ltd, and five other respondents associated with the Kazaa software, violated section 101 of the Australian Copyright Act. Under this section, copyright is infringed when a person who does not own the copyright and who does not have a licence from the copyright owner, authorizes another person to do an infringing act. The judge found that the warnings on Kazaa’s website urging users not to exchange copyright materials were not enough to discourage illegal file sharing. The six respondents found to have authorized the infringement were ordered to pay 90 per cent of the record industry’s costs in the case. They have been given two months to modify the software to include a filter so that only licensed music can be accessed. Sharman says that it will appeal the ruling.


See also the story that the RIAA has issued seven ‘cease and desist’ letters against US P2P websites including eDonkey, LImeWire, WinMX and BearShare It also appears that Mashboxx is in talks to acquire Grokster and turn it into a full legal service and it emerges that a number of other file-sharing companies are moving to cross over to the ‘legal side of the street’, driven in part by the Supreme Court’s June ruling on Grokster. Mashboxx was said to have also approached eDonkey, Morpheus and LimeWire but no serious talks had taken place. iMesh – which settled with the music industry last year and went legal – is also said to have approached other file-sharing companies with a view to acquiring them and making them legal. At the time of writing, industry magazine FiveEight suggested that it is possible that a number of operators will close down.

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