Judge to Decide on KaZaa Suit

By Robert Menta 11/27/02

Earlier this year a US court ruled that foreign countries could not regulate the content that appears on Yahoo. This was in response to a German court ruling against Yahoo that said the company violated German law by allowing its citizens access to Nazi related material found on their auction site. Possessing Nazi memorabilia is illegal in Germany.

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Gemany tried to claim jurisdiction on any content that appears from this and other sites on the basic grounds that its citizens could access it. A higher German court eventually reversed that order too, but over the coming years every country will attempt to claim some sovereignty over the Net.

The point is, the Net has transcended international borders and as companies and nations sue to erect new ones, it puts the court systems of countries into conflict with each other.

The case of KaZaa against the motion picture and the record industries is the latest example. KaZaa has already stated that if these industries want to sue them, they are more than welcome to file suit in Australia where the company's headquarters are based (the core of the actual business is located on the safe-haven island of Vanuatu).

But the media industries don't want to do that. As the Australian courts may not be as sympathetic to their side as a court in downtown Hollywood they want to be able to press their suit in the US. So the record and movie conglomerates have gone to the California courts asking them to claim jusidiction.

This week U.S. District Judge Stephen Wilson heard arguments on whether Sharman Networks Ltd., which owns KaZaa, is subject to U.S. copyright laws. Judge Wilson has stated that "It is a difficult question, but it has to be resolved," hinting at the complexity of the case.

But according to Associated Press reported Sandra Marquez the judge may have already tipped his hand.

"I find the argument about providing the service to so many California residents compelling," Wilson said, referring to the plaintiffs' claims that Kazaa provides free access to copyrighted music and films to some 21 million users in the United States.

Immediately one may see a contradiction in that statement with the earlier court ruling in favor of Yahoo. Judge Wilson's reasoning for jurisdiction is the same as the German courts. Of course, the way the law is parsed the nitty-gritty of these two cases are probably quite distinct and different in the eyes of the court. The biggest difference is one is a US business on foreign shores and the other is a foreign business on US shores.

The key here in terms of domestic law is this question - does KaZaa do significant business here in the US to qualify for US jurisdiction. KaZaa has no direct business partners in this country (though I am sure a number of indirect) and none of the American users of its P2P service pay for the privilege to trade files. With no direct revenue KaZaa is claiming it is a foreign company operating with no ties inside the US.

But the judge may already feel that because millions of Californians use the program that in itself may constitute business ties, whether there is revenue or not. That's what the media industries are betting on.

Here is another point. Users who run KaZaa at work are just as burdened with KaZaa's partner Brilliant Digital Entertainment's Altnet program as those who use KaZaa at home. That program taps into the unused processing power on every KaZaa user's machine - without compensation - and sells it to other companies. Since the user doesn't actually own his or her work PC and since processing power is monetized in the corporate world, that processing power may constitute revenue.

Maybe. If anything it does give you a sense of just some of the complexities in this case.

What is most important about this case is that while on the outset it will test the international reach of US copyright law abroad, it is actually something bigger - world jurisdiction. This is something that is a lot harder to achieve in practical terms.

KaZaa may lose this case and be forced to defend itself in US court. It then may lose the larger trial based on the precedent set in the Napster trial. Then the media industries still have to take their win to the Australian courts to see if they will honor and enforce the US decision.

At any point KaZaa can again move its corporate headquarters to the island of Vanuatu or to any country that has no reciprocal trade agreements with the US like Cuba. In other words be a moving target, because even if it only delays the inevitable there is profit in every day of that delay.

Despite how big and powerful the US media conglomerates may seem this is an uphill battle for them. Don't worry though, they have the money to pay for it.

That's why you have been overpaying for their products in these last few decades, to finance bad business decisions. The worst of these decisions was choosing several years back to fight all Net based music entities rather than embrace them, sending them overseas in the first place.


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New P2P News Site Goes Online
Trade Files? The US Attorney General May Be Coming After YOU.

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