NEXT STOP, KAZAAKHSTAN?:
The Legal Globe-trotting Of Kazaa The Post-napster Filing Sharing Company

Founded originally in the Netherlands by Niklas Zennstrom, a Swede, and Janis Friis, KaZaA's software is now distributed from computers in Denmark, by a company that is managed from Australia but incorporated in Vanuatu, a South Pacific island.

In short, KaZaA may be more globe-trotting than 007. And like him, it's threatened by many adversaries.

Kazaa's Origins: The Idea of Becoming Napster, and More

KaZaA was originally established in the Netherlands to distribute a new type of file-sharing software. Napster had pioneered the sharing of music files known as "MP3s," allowing users to upload music to their computers and share it with other people connected to the network. KaZaA went a step further, allowing users to also share documents, videos, and even full-length movies.

KaZaA quickly became popular the world over; its technology was licensed by the Oregon company MusicCity, and the West Indies company Grokster. Soon millions across the globe became part of a world-wide file-sharing network - swapping music, videos, writings, and movies with each other.

Unfortunately for KaZaA, a good bit of that sharing is unauthorized--the copyright holders often do not want their work to be freely uploaded and downloaded via the Internet. Movie and record studios have responded by "spoofing" the system--uploading fake Britney Spears songs and fake "Spiderman" movies that make it difficult to identify the real material for which users are searching. And studios have done what copyright owners everywhere have done in response to new developments in cyberspace--they have sued.

Round One: The Holland Litigation At the Trial Level

Round One was in Dutch court. The Dutch copyright licensing group argued that KaZaA should be shut down because it was distributing software that allowed people to make illicit copies of copyrighted work.

KaZaA's defense was that it was not doing the copying. If there was any wrongdoing, KaZaA argued, it was on the part of some of its users, who were copying other people's works.

But KaZaA offers a truer "peer-to-peer" system than Napster. Napster's system had relied on that company's computers to help users find songs on other people's computers. In contrast, KaZaA's software allows users to dispense with a central computer entirely. (In this way, as some readers will recognize, it is a descendant of the Gnutella protocol, the improbable creation of an AOL subsidiary.)

Last November, the Dutch trial court sided with the copyright industry, holding that KaZaA could stop the copyright infringing by "taking its website off the air."

But by this time, the KaZaA software had already skipped town--to Australia. Sharman Networks, a Vanuatu company managed from Australia, had purchased the right to distribute the software from its Dutch owners.

The result was that users worldwide could continue to download the software--now, from a company on the other side of the world--regardless of what the Dutch court had held.

KaZaA's response demonstrates the difficulty of enforcing laws in a globalized world connected via the Internet. It does not matter to KaZaA's users where the company is incorporated, where it is managed, or even where its computers are. Users do not care if KaZaA is in Azerbaijan or Zimbabwe. As long as the software remains on the Internet, it can still be downloaded anywhere.

Round Two: The Holland Litigation on Appeal

But KaZaA may have yielded Dutch territory too soon. In March of this year, a Dutch appeals court reversed the trial court.

The appeals court held that KaZaA's software had substantial legitimate uses, singling out freelance photographers, real estate agents, and "citizens who want to publish things." It even observed that "the exchange of jokes is also very popular among KaZaA users." (Presumably, joke-trading does not violate copyrights.) In other words, the appeals court refused to throw the baby out with the bathwater - refusing to shut down KaZaA because some, but not all, of its uses were unauthorized.

KaZaA's peer-to-peer nature served it well. The appeals court reasoned that if the KaZaA company were to be enjoined from distributing the KaZaA software, the software--already downloaded by millions--would continue to operate. Unlike Napster, the KaZaA software does not need a central computer in order to share files successfully.

Even a Dutch victory and KaZaA's exotic locales, however, do not necessarily protect KaZaA from the long arm of American law. Last October, MGM and other Hollywood studios, as well as the big music labels, sued KaZaA, and its affiliates Grokster and MusicCity.

Represented by David Kendall, the terrific lawyer who defended President Clinton in the Monica Lewinsky affair, the movie and music industry has brought the battle to its home turf. But does the Los Angeles court in which suit has been filed have jurisdiction? According to recent reports, KaZaA's distributor, Sharman Networks - which says it has no assets in the U.S. - argues that the answer is no.

Because KaZaA's users span the globe, any decision of a Los Angeles court would affect people worldwide, not only in the U.S. - a fact that Sharman argues also cuts against allowing U.S. jurisdiction.

Is Cyberspace Its Own Separate Realm? Not Exactly.

Sharman's argument boils down to the odd claim, "because we're everywhere, we're nowhere." Because any national ruling would have international effects far beyond that nation, the argument goes, no national ruling can be made.

But cyberspace is not some kingdom floating in the ether. When it affects real people in real territories, the laws of those territories must be respected. Here, there seems to be sufficient purposeful contacts with California users to justify intervention by a Los Angeles court.

But, in reaching its ultimate decision, the court should carefully consider the ruling of the Dutch court. And it should endeavor to structure its judgment to not unduly interfere with rights respected in other countries.

Pirate's Bazaar or Family Swap Meet: What Is Kazaa's True Character?

On the merits of the case, MGM contends that KaZaA has created "a 21^st century piratical bazaar." Unauthorized uses, according to MGM, abound.

KaZaA also notes that it can be used to transfer data in the public domain, "such as the Bible, Shakespeare plays or NASA's photos of Mars."

Finally, KaZaA goes a major step further - comparing itself to the World Wide Web itself. KaZaA likens itself to "http," the language of the web, and to the email protocol. Both http and the email protocol allow users to transmit illicit material, but also material that is perfectly legitimate.

KaZaA's basic argument is that it is a tool, used sometimes for good and sometimes for bad. The way KaZaA sees its role, it should no more be banned than hammers - which can used both to build and to destroy - ought to be.

The difficult question for law--a question not addressed directly by the federal courts in Napster--is when we need to outlaw the tool itself. Where we draw the line reflects how important something is. (In an earlier piece, I compare law's response to tools used for intellectual property theft with guns--the former are outlawed, and the latter generally permitted.)

The Need for a Creative Compromise

Even if the Los Angeles court holds that KaZaA contributes to copyright infringement, that should not necessarily mean that KaZaA's service must end.

In a ruling last year in a case of copyright infringement by the New York Times, the Supreme Court suggested that the trial court could consider creative solutions to protecting intellectual property while respecting the public interest. This judicial suggestion might have helped Napster - as I noted in an earlier piece - and could still help KaZaA.

The founders of KaZaA originally named their company "Consumer Empowerment." As anyone who has used KaZaA can tell you, it is a very powerful system for sharing material.

But its true power remains unrecognized and untapped. KaZaA can be used to share more than photos and music. It can share information itself. It helps eliminate the need for a middleman that acts as a storehouse of information supplied by dispersed consumers. The Dutch court suggested one example: Users could share real estate listings. This would empower consumers by eliminating the fees collected by a middleman "multiple-listing service." KaZaA's peer-to-peer system allows consumers to communicate directly with each other, bypassing expensive middlemen.