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Good ship P2P burns to the waterline

Pirates abandon ship

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In the space of one week, many of the P2P filesharing networks are on the verge of exiting the business either to offer a legal version with paid downloads, or selling up or simply closing up shop.

If none of them have the stomach for a doomed legal fight, then by the end of the year millions of youngsters all over the world could be shut out from free music and the world order in piracy may be restored. It is unlikely that the public will be grateful for the outcome and it is yet to become clear just what effect, if any this will have on the fortunes of the recording labels and the films studios. A huge wave of resentment may hit them as the world’s youth are reluctant to return to traditional retail music channels.

But if the Recording Industry Association of America (RIAA) wasn’t going to use the US Supreme Court ruling on P2P companies then what would have been the point of the Court going to the trouble of making the ruling. The US Supreme Court said that P2P companies are in breach of existing laws by encouraging the infringement of copyright.

We said back in June that the Courts already had at their mercy both Grokster and Morpheus, but they still continue to trade, and this week the RIAA has finally slipped into gear after a long summer break and issued cease and desist notices to seven P2P operations, asking them to halt alleged “encouragement to illegally distribute copyrighted material”.

The US Supreme Court basically said that existing laws on “encouragement” were sufficient to make a case against virtually all P2P operations. Crucially, because what the Supreme Court decision was not based on a law change, any behavior that was seen as encouraging people to breach copyright laws in the past, can still be raised retrospectively.

The key fact at issue will be just what constitutes proof of “encouragement” and whether or not that is open and shut. Lower courts are likely to grant injunctions if they are asked, which shut the sites down, and worry about proof later.

Although the RIAA did not name the seven, the top target must be eDonkey which is suddenly the most fashionable P2P and operations such as LimeWire, Kazaa, i2Hub, BitTorrent, WinMX and BearShare and their owners and authors, may all be hit similarly.

Cease-and-desist

CNET managed to get a copy of the letter which said “We demand that you immediately cease-and-desist from enabling and inducing the infringement of RIAA member sound recordings. If you wish to discuss pre-litigation resolution of these claims against you, please contact us immediately.”

Almost immediately there are reports of hurried talks among the P2P community of how to continue. Many are thought to be considering conceding the point and turning themselves into paid download services, but this is likely to be fruitless, since the main benefit most of them offer are that they purvey their goods, whether music or film, completely free of charge, and it is likely that their customers will simply move on to any service that remains free, and largely illegal.

Our guess is that some will go legit and others will now begin a merry-go round of moving offshore, being blocked from US viewing and then suing to be unblocked, which is likely to take up the next two years.

Grokster is believed to be in advanced discussion with the RIAA over clearing its name and starting life as a legitimate service, and will now fall into the waiting arms of Mashboxx which will acquire the business as part of its own legal file-sharing service. Mashboxx and rival iMesh, both want to become the legal havens for ex-P2P filesharers and have made overtures to most of the other P2P companies.

Mashboxx is understood to be paying a token amount for Grokster plus a share in future revenue from the sale of legitimate downloads and more similar deals are definitely under consideration. Both iMesh and Mashboxx will use technology that scans downloaded files and compares them with copyrighted files provided by record companies.

If a user is trying to download a copyrighted file, the download will either be blocked or the user will be asked to pay for it. Mashboxx will let users download low-quality files for free, several times before making them pay, and iMesh is considering trying various models of free trials on a subscription service. It is clear that none of them will take over a P2P organization for very much money and not at all if an RIAA settlement is not pre-signed.

Copyright © 2005, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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