- The Washington Times - Wednesday, January 29, 2003

A company accused of promoting online music piracy is turning the tables on the movie and music industries.
Sharman Networks Ltd., which owns file-sharing service Kazaa, filed a counterclaim against the Recording Industry Association of America and the Motion Picture Association of America late Monday in U.S. District Court in Los Angeles, arguing that the trade groups are conspiring to protect digital movie and music files.
Sharman Networks is being sued with file-sharing services Grokster and Morpheus. They are accused of copyright infringement. The music industry says file-sharing is responsible for allowing billions of illegal downloads of song files each month and the practice has gutted sales of recorded music, which fell 10 percent last year.
In the counterclaim, attorneys for Sharman Networks accuse the movie and music industries of unlawfully protecting the digital distribution of copyrighted movies and recordings. The company's lawyers also said the movie and music industries want to eliminate peer-to-peer technology, used by Kazaa to support file-sharing, because they view it as a threat.
The industries should embrace peer-to-peer technology, Sharman Networks Chief Executive Nikki Hemming said in a statement.
The Recording Industry Association of America and the Motion Picture Association of America (MPAA) dismissed the filing as a ploy to delay legal action against the company.
"The MPAA views this as yet another tactic to divert attention from the underlying issue of the ongoing pirate activity," said Marta Grutka, West Coast director of public affairs for the Motion Picture Association of America.
The countersuit by Sharman Networks follows a judge's ruling earlier this month that allows the recording industry to sue the company, even though it is incorporated in Vanuatu, a South Pacific nation. The judge allowed the suit because the company has users in the United States.
Sharman Networks' attorneys requested a jury trial, damages, attorney fees and a permanent injunction against the entertainment industry to prevent it from enforcing its copyrights.
Sharman Networks said the entertainment companies are behind the times and don't realize that consumers need not buy CDs, DVDs or videotapes to enjoy music or films.
Record labels say they are embracing digital distribution of music by starting online music subscription sites to offer a legal alternative to file-sharing.
Lawyers for Sharman Networks stressed that the company has tried to do business with the movie and music industries to accommodate digital distribution of movies and song files.
The company's business plan for Kazaa included converting file-sharers to "paying purchasers of copyrighted works," they wrote.
Instead of partnering with Kazaa, the movie and recording industries have "obscenely over-reached and engaged in a concerted and organized pattern of wrongful conduct. Plaintiffs have indiscriminately attempted to criminalize and eliminate new technologies and the new companies that provide file-sharing software," according to the lawsuit.
But Sharman Networks is unable to provide any evidence that movie studios or record labels conspired against them, said Matthew Oppenheim, senior vice president at the Recording Industry Association of America.
In addition, it is unfathomable that the movie and music industries would team with Sharman Networks to distribute digital files, Mr. Oppenheim said.
"It's no great surprise that a movie studio or record company would not do a deal with a company that's been ripping them off for years," he said.
The recording industry association's Web site remained off-line yesterday, the target of an apparent attack by hackers. The Web site www.riaa.org has been a frequent target since the trade group that represents record labels began aggressively trying to shut file-sharing networks.
The Web site has been unusable since Friday.
The FBI and U.S. Secret Service are investigating the attack.

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