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:

Collusion of the plaintiffs to apply pressure to advertisers, ISPs and business partners of Sharman and/or Altnet;

Public smear campaigns to undermine Sharman, Altnet and peer-to-peer technology;

Restrictive anti-P2P licensing practices by plaintiffs - "Dead End Licenses"- designed to exclude P2P distribution;

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."

Guys I need your help. I know this is off topic, but please forgive me; it involves spreading our word. I need to know some off-line resources to gather information for a paper my cousin is writing. He is on our side and I want to direct him to some information off-line because he needs several different resources. Thanks!

I am absolutely SO fed up with all of this! No matter what ANY company ever comes up with to buy music, I will NEVER do it! This is all so damn stupid! I am, and will forever be a FORMER CD buyer! The 1300+ songs on my computer will do me just fine for the rest of my life!

play with sharks and expect to get bit

This was an oprotunity for the industry to make P2P legit. They want the who ball of wax, but wait. Didn't Carey Sue and Hillary Rosen say that Kaza or any other P2P network never aproached them with the offer. Aw shucks who to believe hummmmmmmmm.

I agree svengali. I intuitively knew that Kazaa wasn't supporting the consumer's rights or this boycott, etc; because they had to be involved in some kind of dealings with the major record companies...or at least, trying to lure them. I'm highly cynical, but Kazaa got exactly what they deserve. Heh, people who still fileshare should stop using Kazaa period.

Kazaa is a business and their software is no longer much better. Their only advantage over gnutella now is that their network has more users. That will probably soon change. The ability to download a file from multiple sources is what made Kazaa great but now many other programs do the same. It was a mistake to allow the entire shared directory to be viewed at once. It was fun but it allowed the RIAA to gather evidence much too easily. Kazaalite made the progam tolerable. It's best to use open source programs like Gnucleus to connect to the gnutella network.

The simple fact that Kazaa was in "secret" negotiations turns me off immediately. They are no better than the RIAA if they aren't up front about what they are doing and are trying to "deal" with the Big 5. Screw Kazaa too!

All of the major p2p's have tried to cut deals with the majors. They want to make money, just like any business.

They make their money from advertising now, but they realize correctly that their business model is very shaky. Even Senator Coleman, who is very critical of the RIAA, said Kaaza is "predicated on illegal trading." When your supporters say something like that, you know you've got problems.

The p2p's are not trying to help anyone and are not engaged in a noble effort. They are trying to make money. Welcome to America.

And Australia and Israel and wherever else these companies are based. LOL

The reason majors don't want to cut deals with the p2p's - they want to control distribution on their own terms, the same as any company.

In addition, they realize that if they cut deals with Kaaza, Grokster, etc. then another p2p predicated on illegal trading will pop up to replace them. And the beat goes on.

Can someone please help me out with my question above? I am trying to spread our word and educate people.

What kind of information are you looking for? The best thing to do is go to your local library and speak with the reference librarian.

true enough meryl....too bad that all that "free" music that kaza was extolling comes at such a high price in the end....

I was hoping maybe you guys knew of some books, and newspaper or magazine articles I could refer him to as sources for his paper.

There have been a number of stories about file sharing and RIAA lawsuits on the major newswires (AP, AFP, Reuters, Knight-Ridder) over the summer. It is short, pre digested, slightly biased information though. However if you are simply looking for extra filler for a bibliography it probably would suffice.

~Quote~
Heh, people who still fileshare should stop using Kazaa period.
~Quote~

Use BitTorrent. It takes out the middleman. And you can't get sued if there is no middleman. So claims one of my classmates.

Some of you are missing the point. BECAUSE they attempted to negotiate with the labels, Kazaa has a powerful weapon against the RIAA.

Collusion of copyrights to refuse to negotiate is a solid basis for a successful antitrust suit.

The myth about monopoly is that there has to be only one company. However, when several companies get together and agree to do the same anti-competitive action in tandem, they act as one and are, therefore, a monopoly.

This is the basis of several successful antitrust suits for price fixing against the labels by the FTC and the DOJ.

Not one of the labels has, by itself, the power to control the market for recorded music. This is why they always act in tandem with each other, whether it be price-fixing, deciding to drastically reduce the number of releases or glut the market with new ones, format changes, dropping formats (CD single), copy protecting, etc.

None of them could institute the market-wide changes by themselves. As David Boies, the attorney who represented the US against Microsoft and also represented Napster against the RIAA, pointed out, "The monopoly power of the RIAA comes purely from collusion."

Kazaa made a wise move by attempting to negotiate with the labels, as it was a given that they would refuse to do anything that benefitted the consumer and would only agree to measures which were anti-competitive and placed themselves in a position of total market dominance.

The same thing is true of the Webcaster Alliance antitrust case, which is based on the RIAA's elimination of anyone's ability to negotiate royalty rates other than themselves. There was an attempt by the Webcasters to participate in the negotiations, only to be systematically blocked from doing so as a result of the RIAA's internal pre-negotiation to prevent any other voices from being heard.

The RIAA is a blatant and obvious example of antitrust. It merely requires one good attorney to see the niche in the armor and exploit it in court. It is not a question of whether the RIAA will be broken up as a result of the antitrust laws, only a question of when.

I was wondering why Kazaa hadn't sued the RIAA over breaking it's licensing agreement. Now I know. And should have figured that all along, especially when they started using heavy advertising and those special "gold" files. Those file are Kazaa's attempt at a stable business model. They may be free now, but in the future, I'll bet the plan is for some kind of payment scheme. It seems that there are no businesses you can trust.

~goingnova

I don't think anyone on this forum is Niave enought to believe Kaza was doing this not to make money. No one I know of ever sang about the virtues of P2P as a Robin Hood. It's a tool some who fight the RIAA uses. pure and simple

No one ever questioned Kazaa's desire to make money. However, they are making more money off of the advertisements than the recording industry can make off the content.

That's what really annoys the RIAA, because they can't figure out how to do the same thing.

there's an alternative to kazaa that i've been using for a while. maybe some of you heard of it, it's called e-mule, http://www.emule-project.net , and the main reason for me starting using it was the larger variety of files and the smaller amount of fakes, plus the feature that it can connect to hundreds of sources for one file. since it's open source, there's a variety of clients able to connect to the network (like gnutella) and it's at least as populated as kazaa.

why is kazaalite based in a tk. domain? i know that it's some cheesy little island country in the middle of no where with about 1000 people... I take it companies can get away with what ever they want without being touched if they put their servers here? just wondering.. in that case we should chip in and put a server there with 10 million songs on a centralized huge server and download like crazy..

Agreed gdZ-this is great news for our cause. Anything that gives the riaa a black eye, at this point is a good thing.
This is a PR war, and many that DONT download are gonna reconsider opinions already formed as more and more mud sticks to cary-sue and co.
"Oh cary-suuuuueeeeee i love you, cary-sueeeeeeee"
I love to see someone spoof that, but it would prolly result in gulag for theft, anarchy, piracy, sodomy, and sharing the mic with a cable-acces show in east butt tussle PA with a cleft palate and a speech impediment.
oh well...

~time flies~

KaZaA, ZaZaA, KaZaA, geeze, i rather talk about the new AMD Athlon 64 processor than KaZaA, and the Fondeling it is doing with the record industry and spyware vendors. yuck, yuck, yuck!

Sorry if i got off topic.

-mtekk