Justice Dept. probes for pirates

Federal agents have searched five homes and one Internet service provider in three states, seeking evidence of criminal copyright infringement, according to a Justice Department statement. The investigation--dubbed "Operation Digital Gridlock"--is targeting a specific file-swapping group called the Underground Network.

"The execution of today's warrants disrupted an extensive peer-to-peer network suspected of enabling users to traffic illegally in music, films, software and published works," Attorney General John Ashcroft said in a statement. "The Department of Justice is committed to enforcing intellectual-property laws, and we will pursue those who steal copyrighted materials, even when they try to hide behind the false anonymity of peer-to-peer networks."

Although no charges have yet been filed, the action is a milestone in federal law enforcement's treatment of peer-to-peer technology. It could portend deeper scrutiny of casual online copyright infringement, expanding beyond the tightly organized groups typically targeted by investigators in the past.

Like most high-profile federal actions, Wednesday's searches targeted a group suspected of being high-volume copyright infringers rather than everyday computer users who might use a mainstream program such as Kazaa or eDonkey. But unlike the secretive "warez" groups that have been the focus of earlier FBI investigations, the Underground Network appeared to have had minimal membership requirements and little organization linking its most casual users.

The Justice Department has routinely pursued online copyright infringers in the past, often at the behest of trade associations such as the Recording Industry Association of America, the Motion Picture Association of America and the Business Software Alliance.

The MPAA immediately welcomed news of the enforcement actions.

"The results of 'Operation Digital Gridlock' should send a strong message, to everyone who contemplates stealing movies and distributing them on the Internet, that illegal actions are not without real consequences," MPAA Chief Executive Jack Valenti said in a statement. "This should also puncture the myth that illegal activity on the Internet is 'safe' because it is untraceable."

Getting inside the network
According to documents provided by the Justice Department, the sting operation has been under way since at least March. Undercover FBI agents joined the network by loading two computers with copyrighted material and applying for membership with those machines. Like many other similar groups, the Underground Network required that members be able to provide copyright materials for download by other users instead of simply "leeching" on others.

The network has been based on Direct Connect technology, which enables individual computer users to set up private file-swapping networks similar to the original Napster. With Direct Connect, ordinary PCs serve as "hubs," keeping indexes of what files are available and linking search requests with the computers where files are stored.

Once a part of the network, the FBI agents identified five of the most active "hubs" in the United States and downloaded a total of 72 gigabytes of copyrighted material--including 84 movies, 40 software applications, 13 games and 178 songs, according to the Justice Department documents.

The FBI actions culminated in searches early Wednesday morning of homes of those believed to be associated with the operators of those hubs. According to the Justice Department statement, the investigation is ongoing.

Attorney Robert Andris said the Underground Network hub operators, if ultimately charged with criminal copyright infringement, would face legal tests similar to those seen in the civil cases of Napster and Grokster. However, criminal cases do have a higher standard of proof, he said.

"A court would be looking at essentially the same conduct (as in the civil cases)," said Andris, a partner with Ropers Majeski Kohn & Bentley in Redwood City, Calif. "What it comes down to is the ability to control (swapping activity), and knowledge that it's going on."

In Napster's case, judges made preliminary rulings that the company had enough control over its network to make it potentially liable for its users' actions. In last week's decision on Grokster and StreamCast Networks, a federal appeals court ruled that those companies did not have enough control over the operations of their decentralized networks to make them legally responsible for copyright infringement.

Caught in NET
Until a few years ago, only commercial pirates doing things like selling illegal copies of CDs or DVDs could be prosecuted under a criminal charge, while copyright infringers who weren't doing it for profit had to be sued in civil court. Then, in response to an Internet piracy case involving a Massachusetts Institute of Technology student, Congress enacted a 1997 law called the No Electronic Theft (NET) Act that made nonprofit piracy a federal crime.

The NET Act says that peer-to-peer pirates may be given up to $250,000 in fines and prison terms of up to three years--though people targeted under the law typically agree to plea bargains that carry milder punishments. In general, violations of the NET Act are punishable by one year in prison, if the total value of the pirated files exceeds $1,000. If the value tops $2,500, that term is not more than five years in prison.

Proving that file swappers violated the NET Act is not a trivial task. It requires a prosecutor to demonstrate not only that defendants made the files available, but that they actually made or distributed copies.

That's why the RIAA is lobbying hard for new legislation that would make it easier for federal prosecutors to land convictions under the law. The RIAA is backing the Piracy Deterrence and Education Act (PDEA), which says prosecutors would no longer have to prove that copyrighted materials were downloaded by others. Instead, they would need only to show that those files had been publicly accessible in a shared folder.

RIAA lobbyist Mitch Glazier said in an interview this week that he expects Congress to approve PDEA by the end of the year. On behalf of the industry group, Glazier is also pressing for the passage of a second bill, called the Pirate Act, that permits the Justice Department to hit infringers with civil lawsuits in addition to criminal ones.

At a conference in Aspen, Colo., two years ago, a top Justice Department official indicated that prosecutions under the NET Act would be forthcoming.

A July 2003 letter from members of Congress to Ashcroft complained of "a staggering increase in the amount of intellectual property pirated over the Internet through peer-to-peer systems." Signed by 19 members of Congress, including Sen. Joseph Biden, D-Del., Rep. James Sensenbrenner, R-Wis., and Sen. Dianne Feinstein, D-Ca., the letter urged Ashcroft "to prosecute individuals who intentionally allow mass copying from their computer over peer-to-peer networks."

CNET News.com's Declan McCullagh contributed to this report.