The Kazaa Case in Australia

A Contrast With the U.S. Supreme Court's Decision in MGM v. Grokster
[P2P]

On September 5, 2005, after an 18-month trial, the Federal Court of Australia ruled that Kazaa violated Australian copyright law by authorizing users to infringe music companies' copyright in recordings. The case was brought by the Australian unit of Universal Music Group, part of Vivendi Universal SA, and other music-industry plaintiffs against Sharman Networks Ltd., which controls Kazaa, and other defendants. The Court ruled that Kazaa infringed the copyrights in the labels’ recordings by “authorizing the doing in Australia by Kazaa users of the infringing acts; in each case, without the license of the applicant who is the relevant copyright owner.”

"Despite the fact that the Kazaa website contains warnings against the sharing of copyright files, and an end-user license agreement under which users are made to agree not to infringe copyright, it has long been obvious that those measures are ineffective to prevent, or even substantially to curtail, copyright infringements by users,'' Judge Wilcox said in a summary of the decision. The court focused on the fact that Kazaa “had power … to prevent, or at least substantially reduce, the incidence of copyright file-sharing.” (Para. 411).

The court ordered the company to install filters to prevent future violations. Specifically, Judge Wilcox ordered that future versions of Kazaa software must have filters that exclude copyrighted works, and that Kazaa apply ``maximum pressure'' on existing users to upgrade to the filtered system, the summary said. Sharman Networks reported in a statement that they are “obviously disappointed with the decision.'' “We will appeal this decision vigorously and are confident that we will win on appeal.''

Contrast With U.S. Supreme Court Case

As reported in Digitalmusicnews and my previous blogs, on June 27, 2005, the Supreme Court, in a unanimous decision, ruled against Grokster and Streamcast Networks, two widely distributed P2P services. "We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by the clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties," Justice David H. Souter opined. Although the decision was a victory for the major record companies, and seriously threatens the existence of certain P2P companies including Grokster, it also confirmed that in the United States P2P services appear to be legal so long as not marketed and promoted in such a way as to encourage copyright infringement. The Opinion ruled that peer-to-peer services are liable but only if they actively promote the unlawful trading of files.

Under the U.S. Supreme Court’s reasoning, the ruling in Australia may have been different because the Kazaa website contained warnings against the sharing of copyright files, and an end-user license agreement under which users were made to agree not to infringe copyright. Therefore, it is not clear that Kazza manifested, in the U.S. Supreme Court’s language, a “clear expression or other affirmative steps taken to foster infringement.”

More importantly, the Australian court found copyright infringement based on the their finding that Kazaa “authorized” copying of copyrighted files by their users because it facilitated copying with knowledge that their subscriber were doing so without taking affirmative steps to stop it. The Australian court went far beyond the Supreme Court’s decision the U.S. The Supreme Court limited a P2P’s liability by creating a test that they cannot actively promote copying. The Australian court found that merely facilitating copying of unauthorized recordings was sufficient to establish liability.