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Posted 1/2/2006 6:10 PM

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File-sharing barons face day of reckoning

By Alex Veiga, Associated Press

LOS ANGELES -- Weeks before the original Napster shut down for good in 2001, Internet users were flocking to alternative song-swapping programs. Nearly 20 million people used Morpheus in its first four months, for example, to trade music and other files for free online. But the man behind Morpheus was worried. Michael Weiss figured popularity could bring its own perils.

Wayne Rosso used to head up Grokster, an illegal online file swapping service. He has since gone straight and now steers MashBoxx.com.

By Gary C. Knapp, AP

As he feared, the notoriety led Hollywood studios and recording companies to sue Weiss' StreamCast or copyright infringement. It was part of the entertainment industry's wider effort to contain Morpheus and other Napster clones such as Kazaa and Grokster from taking up where Napster left off.

Now, like Napster founder Shawn Fanning before them, Weiss and other file-sharing barons are facing their own day of reckoning after a landmark U.S. Supreme Court decision last summer.

Over the last four months, several Napster heirs have shut down and others are contemplating what they once couldn't abide -- doing business by the entertainment industry's rules to survive.

"We can take a look at another four years of legal battles and spending millions of dollars on both sides, (but) is that where I want to spend the next four years of my life?" said Weiss, 53. "It's better to focus the company's energy on creating new technologies."

StreamCast hasn't shut down Morpheus, but the company recently approached the entertainment industry to pursue talks about settling a lawsuit against the company, according to court documents.

Wayne Rosso, who built a reputation criticizing the recording industry as head of Grokster Ltd., is also pursuing a decidedly more cordial relationship with music labels as he prepares to launch a copyright-friendly file-sharing service.

"It's pretty clear who won," Rosso said. "We always knew that this free trading of all this copyright material couldn't go on. It just wouldn't work."

Such capitulation was once unheard of among the file-sharing operators who lobbied against Hollywood and the recording industry. They billed themselves as defenders of technological innovation who shouldn't be held liable because some people used their software for piracy.

But the high court's ruling in June opened file-sharing operators to potential liability -- something the entertainment industry underscored when it sent notices to seven file-sharing software operators in September warning them to shut down or prepare for court.

Companies behind once-popular file-swapping programs like i2hub and WinMX shut down after receiving the notice. LimeWire, BearShare and others also put on notice have yet to make their decisions public.

Separately, an Australian court ordered Sharman Networks Ltd., which distributes Kazaa, to ensure that new versions of the software filter out unlicensed copyright material.

Still, the amount of file-sharing has continued to increase since the days of Napster, and that's not likely to change much, said Eric Garland, chief executive of BigChampagne LLC, which tracks activity on file-sharing networks.

"These websites and these businesses were shut down but it doesn't shut down the software, it doesn't shut down the (file-sharing) networks," Garland said. "The open-source community will continue to build new, uncensored versions."

Mitch Bainwol, head of the music industry trade group Recording Industry