Recording, movie industries sue Napster progeny

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By Scarlet Pruitt

(IDG) -- Having successfully forced file-sharing rogue Napster Inc. into compliance with copyright laws, the Recording Industry Association of America Inc. (RIAA), along with the major Hollywood studios, is now launching attacks against popular file-swapping services MusicCity, KaZaA, Morpheus and Grokster.

"We cannot sit idly by while these services continue to operate illegally, especially at a time when new legitimate services are being launched," said Hilary Rosen, the RIAA's president and CEO, in a statement.

Yesterday, the RIAA and the Motion Picture Association of America (MPAA) filed suit for copyright infringement against MusicCity.com Inc.; MusicCity Networks Inc., which operates Morpheus; Grokster Ltd.; and Consumer Empowerment BV, also known as FastTrack, operator of the KaZaA service, in the U.S. District Court for the Central District of California.

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None of the defendants was immediately available for comment Wednesday.

Like Napster, the services covered in the suit let users swap content, including copyright-protected music and movies, for free via their networks, the plaintiffs contend.

In their suit, the plaintiffs said the file-sharing networks "created a 21st-century pirate bazaar where the unlawful exchange of protected materials takes place across the vast expanses of the Internet, and where the materials being exchanged include first-run movies currently playing in theaters and hit songs from virtually every major recording artist."

All of the peer-to-peer networks charged in the suit use software from Amsterdam-based FastTrack, which is made up of a loose organization of programmers. FastTrack founder and CEO Niklas Zennstrom manages the KaZaA service, and the company licensed its file-swapping software to Tennessee-based MusicCity and West Indies-based Grokster.

Although each service boasts a different user interface, the file-sharing software that powers them is virtually identical and connects all users to the same network library, the plaintiffs said. Given this, the plaintiffs claim that not only are the services aware that they are enabling the sharing of copyrighted works, but they are also able "to control the activities of their users and the infringing digital files available through their network." This is important because, in order for the defendants to be found guilty, it must be proved that they have both knowledge of and control over illegal activities.

The RIAA has already battled other file-sharing services, such as Napster, on similar grounds, but Tuesday's suit represents the first time the record industry has teamed with the MPAA to present a unified front. Napster has been off-line since July, when a court ordered it to suspend its services until it could prove that its filters were 100% effective in weeding out copyrighted works (see story).

In what has no doubt become a pressing issue for the MPAA, movies still out in theaters are being traded for free over the services, in addition to older titles.

And the services are wildly popular. According to FastTrack, more than 34 million copies of its software have been downloaded in the past six months. What's more, digital entertainment researcher Webnoize Inc. reported that 970 million downloads were done via FastTrack in August, and that number was expected to rise when school began in the U.S. last month.

With the boom in file-swapping and the proliferation of post-Napster progeny, the RIAA and MPAA are seeing their market seriously challenged.

The onslaught of free file-sharing services present a dual threat to the record labels, which are set to launch two separate online music subscription services later this year -- Pressplay and MusicNet. Pressplay was formed by Vivendi Universal SA and Sony Music Entertainment Inc., and MusicNet is backed by Bertelsmann AG, AOL Time Warner Inc., RealNetworks Inc. and EMI Group PLC.

To put the brakes on these free file-swapping sites, the RIAA and MPAA are asking for preliminary injunctions to enjoin the defendants' activities. They are also requesting the defendants' profits and a damage reward decided upon by the court or, alternatively, maximum statutory damages of no less than $150,000 per individual copyright infringement.

What is a more likely scenario, however, is that the cases will be settled out of court, much like Napster chose to do last week with the National Music Publishers' Association. Napster agreed in that case to pay $26 million in damages for past unauthorized use of music and to advance another $10 million for future licensing royalties.

Still, with FastTrack software sitting on millions of computers around the globe, it remains to be seen how difficult it will be for the RIAA and MPAA to pursue foes, some outside of the U.S., that run a network that could possibly survive even if the companies themselves are eliminated.