Kazaa wanted 'business appropriate ' file sharing

NOTE: This story and its headlines were revised and updated at 11:25 am PT

Sharman Networks, owners of the Kazaa p2p app, was working behind the scenes with Universal Music, Warner Brothers Records, Warner Music and Interscope Music to re-organize so users were downloading 'authorized' music files instead of those uploaded by file sharers.

The revelation came in an amended counterclaim Sharman has filed which it says 'lifts the veil' on anticompetitive behavior and unfair business practices employed by US entertainment industry players against Sharman Networks, its joint enterprise partner Altnet, and p2p technolog

Similar to those it filed at the beginning of the year, the charges allege "conspiratorial" behaviour and specify instances where Sharman and/or Altnet met with senior level individual industry executives at Universal, Warner Brothers Music and Interscope Music, among others, "holding a number of positive and productive discussions, which were later stymied by industry body directives, despite the fact that these relationships were robust, and preliminary agreements had been reached".

They, "significantly bolsters Sharman Networks' antitrust case against the US entertainment industry," says the company.

The counterclaim also details the nature of Sharman and Altnet's joint enterprise agreement which, "demonstrates that both Sharman and Altnet are equally affected by the anticompetitive behavior of entertainment industry plaintiffs" and alleges:

Unfair business practices on behalf of the plaintiffs including breach of Sharman Networks' copyright and privacy provisions to covertly gather information about users of Kazaa.

"[...] the industry has lost its way, choosing a path of endless litigation rather than accepting a solution to copyright infringement that is available now, and a technology that is inexorable," says Sharman ceo Nikki Hemming.

"We've spoken to record company executives who recognize that P2Pprovides the most efficient means to profitably distribute licensed music and movie content for a fee over the Internet. It's time for these executives to take their business back from their lawyers and steer it into the future of digitaldistribution.

"We remain steadfast in our desire to work with the industry to distribute their content securely using our peer-to-peer technology. Thousands of content providers across the music, movie, games and software industries have already profited from working with us."

A September 23 CNET News story here says, "By relegating non-(copy protected) files to a subordinate and comparatively unattractive access location ... Sharman intended to promote and encourage only business appropriate file sharing and to share the net payments for (copy protected) works lawfully exchanged by users of the (Kazaa) software with Altnet," says

"In April, Wilson dismissed copyright charges against Sharman rivals Grokster and StreamCast Networks, saying distributing their peer-to-peer software packages did not make them liable for copyright infringement by people using the software," it adds. "The judge compared the companies to Xerox or Sony, which are not held responsible for people making illegal copies of works using photocopiers or videocassette recorders.

"Sharman, which is part of the same overall lawsuit, has not yet been dismissed, in part because of legal procedural delays specific to that company's case. The recording industry and movie studios are appealing Wilson's earlier ruling on Grokster, saying the judge misapplied copyright law."