Dutch Supreme Court rules Kazaa is legal

In a fresh blow to the entertainment industry, the Supreme Court of the Netherlands on Friday upheld a lower court's ruling that the creators of Kazaa can't be held liable for the copyright-infringing actions of users of the popular file-sharing application.

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Dutch music rights body Buma/Stemra took its case against Kazaa BV to the high court last year, arguing that the Amsterdam Appeals Court in March 2002 wrongly found that Kazaa is not responsible for the unauthorized downloading of copyright-protected music using the software it developed and brought to market.

The Supreme Court of the Netherlands is the highest European body yet to rule on file-sharing software. In its decision, the court cites international rulings including the 1984 U.S. Supreme Court ruling that said device makers, a VCR maker in that case, can't be held liable for user infringement.

The decision also refers to the April 25, 2003, dismissal by a Los Angeles federal judge of a lawsuit against file-sharing services Grokster Ltd. and StreamCast Networks Inc. U.S. District Court Judge Stephen Wilson decided the two companies could not be held culpable for illegal file trading done over their networks.

Kazaa lawyer Christiaan Alberdingk Thijm expects the Dutch decision to have an impact internationally, not only in the European Union where copyright laws have been aligned, he said.

"This is a great ruling," Alberdingk Thijm said. "What is important is that this ruling does not only set a precedent in the Netherlands, but also worldwide."

Buma/Stemra in a statement Friday said it regrets that by the Dutch Supreme Court's decision, Kazaa has transferred responsibility to its users.

The International Federation of the Phonographic Industry (IFPI) issued a statement Friday calling the Dutch ruling "a flawed judgment" based on a "one-side presentation of the facts." The IFPI believes the ruling is of "minor importance" as it will "almost certainly be overtaken by future decisions based on a full airing of the facts."

IFPI believes Kazaa is able to control and filter usage of its service and thus should be held responsible for infringing by its users, according to the statement.

The Dutch ruling does not discuss whether individual file sharers can be held liable. Alberdingk Thijm expects the Dutch entertainment industry to sue users of file-sharing software, just as the Recording Industry Association of America (RIAA) has been doing in the U.S.

The IFPI in its statement also notes that the Dutch judgment "leaves no doubt that the vast majority of people who are using file-swapping services like Kazaa are acting illegally - whatever country they are in."

The RIAA for its part was dealt a blow in its effort to battle piracy on Friday when the U.S. Court of Appeals for the District of Columbia ruled that the organization does not have the authority under U.S. law to subpoena the names of alleged file traders from ISPs (Internet service providers).

Kazaa is peer-to-peer software that allows users to search the hard drives of other users for files they want, and to download them. Kazaa, which is used by millions of people worldwide, doesn't require a central server to work, unlike the old Napster Inc., which was successfully shuttered as a result of legal action by the recording industry in the U.S.

In its defense, Kazaa distinguished itself from Napster by stressing that it can't shut down its network because it is not centralized like Napster. After Napster was shut down, the brand was bought by Roxio Inc., which used the name for a legitimate online music service that was launched in October.

The Dutch court ruling came too late for Kazaa BV. The Amsterdam software company that introduced Kazaa sold most of its assets to Sharman Networks Ltd. incorporated in the South Pacific island nation of Vanuatu because it faced hefty fines it could not afford after a District Court ruling against it.