Peer-to-Peer Site Surrenders in Court

It looks like the renegades of the digital age are being mauled by a paper tiger. Kazaa BV, creator of the technology behind the popular Kazaa, Grokster, and early Morpheus peer-to-peer file-sharing programs, told a U.S. district court that it can no longer afford to fight a lawsuit filed by the music and motion picture industries because of the multitude of motions, pleadings, and letters landing on its doorstep.

"Plaintiffs' tactics appear to be designed not to achieve substantial justice or answer the important question of copyright law presented by this case, but rather to put its opponents out of business by sheer weight of paper," Kazaa's lawyers wrote in a filing recently submitted to the U.S. District Court for the Central District of California.

Netherlands-based Kazaa, along with fellow file-swapping services Morpheus and Grokster, have been busy battling a lawsuit from the U.S. music and motion picture industries over copyright infringement charges related to the content swapped over the peer-to-peer networks.

But while the case was set to go to jury trial October 1, Kazaa said that it can no longer afford to fight the charges.

"Kazaa has asked plaintiffs for their terms of surrender," the filing states. "Simply put, plaintiffs have run Kazaa out of business."

The company, which currently consists of two unpaid directors, said that it will accept a default judgment, which could potentially entail millions of dollars in damages.

The incident marks a setback for peer-to-peer defendants who hoped that Kazaa could potentially legitimize the technology in U.S. courts. Recently a Dutch court ruled that the company was not responsible for copyright infringement done by people using its technology.

Another Venture

But even while Kazaa receives a paper lashing from the powerful industry groups that have taken it to task, the company has managed to license its technology, called FastTrack, through another venture started by Kazaa founders. The new company, Blastoise, also operating under the name Joltid, recently licensed the technology to Brilliant Digital Media subsidiary Altnet, which launched a search engine on the Kazaa network earlier this week.

The Kazaa Web site, brand, logo, and license to the FastTrack technology is no longer a property of Kazaa BV, however, as it was sold to Australia's Sharman Networks earlier this year.

Still, the company's maneuvering has raised the ire of the entertainment industry groups that are fighting against the infringement of their copyright-protected works.

"Kazaa BV is running an international shell game," Matt Oppenheim, senior vice president of business and legal affairs at the Recording Industry Association of America said in a statement. "They have restated over and over their legal rights, and now they are running scared from having a court decide the matter because they realize that so much of what they have said in the past is simply not accurate."

Conflicting Reports

Kazaa got another pillar of defense kicked out from underneath it recently when millions of Morpheus users were blocked from the network in what the company later explained was a denial-of-service attack. One of Kazaa's main defenses all along was that, unlike Napster, it had no central servers and no way to control the network. The shutdown of Morpheus implied, however, that the peer-to-peer networks could be controlled.

After the shutdown, Morpheus switched to the open-source Gnutella technology, although it is still waging its court battle along with Kazaa and Grokster. But Morpheus is also facing financial troubles due to the suit. Executives from the company confirmed Thursday that they had to let go of their high-powered attorney because he was too costly to retain.

With the peer-to-peer defendants caught in a cash crunch, it remains to be seen how they fare against the deep-pocketed U.S. entertainment industry, and whether they will ultimately get clawed off the Net by a paper tiger.