Kazaa, the biggest brand name in Internet music piracy, is ruled illegal

IFPI today welcomed a landmark court judgment establishing that the internet peer-to-peer operator Kazaa is illegal, and 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 federal court of Australia today 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. Today there is a resounding signal to other unauthorised file-swapping networks: they should adapt their systems and go legitimate now".

Today's ruling in Sydney by Justice Murray Wilcox is the culmination of legal proceedings which were brought by the Australian recording industry in 2004 against a number of parties involved in Kazaa.

Judge Wilcox today ruled that companies and individuals associated with Kazaa knowingly facilitated and profited from massive copyright infringement, 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.

In his landmark judgment Justice Wilcox concluded:

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. (Wilcox J)

The trial - Universal Music of Australia Pty Ltd vs Sharman License Holdings Ltd - ran for three weeks in December 2004. Final submissions took place on 22-23 March 2005.

A resounding signal to p2p operators

Kennedy continued:

"This ruling shows that Kazaa deliberately broke copyright laws for its own commercial gain. The decision is a boost for the legitimate online music business, and it provides new incentive for those people and technology companies that are trying to convert peer-to-peer into a legitimate business model.

"The Kazaa case has global implications for the music industry. Courts around the world had already declared file-swapping by individuals without permission to be illegal, which had led to over 14,000 lawsuits in recent months. As the Kazaa, Grokster and Soribada cases have established, we now have another option: that of taking further legal actions against the unauthorised services themselves."

Notes to Editors

1. A full copy of the judgment can been see at: https://www.austlii.edu.au/au/cases/cth/federal_ct/2005/1242.html
2. Kazaa was until recently the largest unauthorised 'file-sharing' service, offering hundreds of millions of music tracks and with a peak of 4.7 million users.
3. The legal online music market has been taking off worldwide in the last year. Single track downloads rose to over 180 million in the first half of 2005, up from 57 million in the same period of 2004. There are now over 350 legitimate online music sites globally, up threefold on one year ago.
4. Internet piracy, and in particular illegal 'file-sharing', has caused severe damage to the global music industry. Illegal 'file-sharing' has been a major factor in the fall in CD sales, down 21% in the four years between 2000 and 2004.
5. There are an estimated 900 million infringing music files available on unauthorised peer-to-peer services (June 2005).
6. The record industry started taking legal actions against illegal 'file-sharing' in September 2003, and since then 14,227 actions have been announced in 12 countries. Lawsuits are continuing in Austria, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Japan, the Netherlands, the UK and the US. Thousands of people have paid fines or compensation averaging more than 3,000 Euros each.
7. On July 28 the US Supreme Court, in a long-awaited ruling against peer-to-peer service Grokster, declared that businesses that actively induce or encourage infringement can be held responsible for the illegal acts of their users. The decision was a 9-0 unanimous opinion.
8. On 22 March Justice Wilcox also issued orders to freeze the assets of all of the Sharman companies along with the personal assets of CEO Nicola Hemming, and accepted undertakings from Kevin Bermeister, his wife Beverley Bermeister, Sharman accountant John Myers and the Altnet companies ensuring that their assets remained frozen until a week after the judgment.