File-sharing networks infight in sight?

In a first step, the Brilliant Digital Entertainment subsidiary Altnet on Thursday licensed its TrueNames patent to its biggest partner, Sharman Networks, owner of Kazaa Media Desktop. Kazaa is one of the most popular file-sharing communities on the Net.

Altnet acquired rights to a 1999 patent that the company says covers the technique of identifying files on peer-to-peer networks using a "hash," or digital fingerprint based on the contents of the file. The company plans to approach virtually all other peer-to-peer services to seek license rights.

"Altnet is very focused on the infringement of the TrueNames patent and we believe that many of today's active peer-to-peer applications may be in direct violation," Altnet CEO Kevin Bermeister said in a statement.

"We're very focused on preserving the integrity of the patent and realizing the potential it offers peer-to-peer applications and content owners."

But the scope and enforceability of patents are notoriously difficult to evaluate barring actual court rulings on their validity.

Nevertheless, there is a growing sentiment in technology circles that many patents granted by the U.S. Patent and Trademark Office are most likely seriously flawed. Among other things, the agency has granted patents for side-to-side swinging on a swing set and for making a peanut butter and jelly sandwich without a crust.

Technology patents have drawn some of the harshest criticisms and have been at the heart of some of the most closely watched patent battles in years, especially so-called business method patents such as Amazon.com's one-click checkout system. Last year, the online retail giant settled claims against Barnes & Noble involving the patent.

Patent number 5,978,791, which Altnet licensed Thursday, has been litigated at least once before, when content delivery services provider Digital Island used it in a dispute with rival Akamai. A jury rejected Digital Island's claims in December 2001, according to a statement published on Akamai's Web site.

Earlier this month, Kazaa and Altnet jointly released a bundle of file-swapping software that includes components of a new high-security peer-to-peer network and a program that will pay users to be a part of it. The network essentially harnesses the computing resources of the tens of millions of Kazaa users to distribute authorized files such as games, songs and movies.

The companies believe that by giving people an incentive to host and trade paid files it could create a powerful medium for distributing authorized content and could diminish file-trading networks' role as hubs of online piracy.

But as Altnet launches its ambitious new service, parent Brilliant Digital faces financial troubles. In a federal securities document filed in late May, the company said it had "negative working capital of approximately $4,165" and that there were substantial doubts about its survival. However, the filing said Brilliant Digital expects another round of financing to boost operations soon. The company aims to augment earnings by licensing its patent.

News.com's John Borland contributed to this report.