KaZaa Ignores Court Order to Shut Down

By Robert Menta- 12/21/01

There are links to several Kazaa story updates below - editor 11/28/2002

The Amsterdam district court ruled two weeks ago that the KaZaa P2P program is acting unlawfully by making software available that allows users to download music files and must shut down. The court gave the company 14 days to do this or face $40,000 US a day in fines. KaZaa has chosen to ignore the shutdown order.

The company told the court two weeks ago that since the software did not rely on centralized servers, the service could not be shut down. Users had downloaded over 27 million copies of the program and they would be able to continue to trade even if the company folded.

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"Our software can't disappear, it is already out there" said KaZaa's lawyer Christiaan Alberdingk Thijm.

That statement is not totally true, though, as KaZaa has shown that it has the power to disable older versions of its software remotely. But the company is using another tactic that they hope will allow them to remain open.

Thijm is arguing that because KaZaa is in talks with its opponent in the case, Dutch music licensing body Buma/Stemra, it doesn't have to shutdown because it needs to stay open in order to comply with the other order in that case.

The case originally stemmed from a suit by by KaZaA asking the court to force Buma/Stemra to continue negotiations about licensing a streaming music-on-demand service. They won that suit as the court found the copyright holders negotiated in bad faith. The problem came when Buma/Stemra asked for and won the shutdown order of KaZaa in their counter suit. KaZaa is staying open, Thijm argues, to satisfy the order to negotiate.

"We are in talks about a license, its conditions and about what to do with the (outcome of the) countersuit," said Thijm.

Neither KaZaa nor Buma/Stemra have given any insight to how the negotiations are coming, but there is impetus for both sides to settle. With its millions of users, KaZaa offers Buma/Stemra an audience it could use to build its own pay service like the recently opened PressPlay and MusicNet. KaZaa has repeatedly said it is interested in such an arrangement. Meanwhile, closing KaZaa would do nothing more than scatter that audience to other services.

With its back to the wall, KaZaa looks like it may evolve into a streaming music service. The problem is successful negotiations with Buma/Stemra does not mean KaZaa will get the rights to music held by other publishers. There is also the issue of the movie industry who may be less interested in coming to any agreement with the company.

KaZaa is already being sued by the deep-pocketed Recording Industry Association of America (RIAA), The Motion Picture Association of America (MPAA), and the National Music Publishers' Association (NMPA). As MP3.com found out, settling out of court with a few copyright holders only opens up demands and additional lawsuits from others, each seeking their piece of the pie. The court actions also weaken small companies financially, forcing capitulation and compliance.

Unless KaZaa can get that shutdown order rescinded the service will change, both in what content will be allowed to exist on it and how that content is distributed. That's assuming it can stay in business. As long as no individuals in the company are subject to arrest, KaZaa probably has nothing to lose by ignoring the court order. If a shutdown essentially means the end of your company, the fine could be a billion dollars a day, it doesn't matter.

Staying online is the only negotiating power KaZaa has. It will do everything not to give that up. The question is how long will they be able to do that?

Other Stories:
Judge to Decide on KaZaa Suit - 11/27/2002
KaZaa Admits to Morpheus Shutdown? Says Bills Not Paid. - 3/4/2002
Morpheus Still Down. - 2/28/2002

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