Record labels settle with Israeli P2P company

Israeli file-swapping company says it will move to new, label-friendly business model.

The Recording Industry Association of America said Tuesday that it had settled its lawsuit against Israeli file-swapping company iMesh, for damages of $4.1 million.

The organization had sued iMesh last September , charging--as it has in a half-dozen lawsuits against rival peer-to-peer software developers--that the company was contributing to copyright infringement on a massive scale. As a part of the deal, iMesh has agreed to move to a business model that "abides by U.S. copyright laws," the RIAA said.

"Peer-to-peer technologies hold real promise," RIAA Chief Executive Mitch Bainwol said in a statement. "This settlement with iMesh is an opportunity to demonstrate that promise in the legitimate marketplace."

The deal is a sign of the increasing pressure being put on file-trading companies, as the RIAA and other copyright holders seek new legislation in Congress that could hold companies like iMesh or Kazaa parent Sharman Networks more directly liable for copyright infringement.

In the most recent court ruling on the issue, a federal judge said file-swapping companies using the decentralized technology now typical of most networks are not liable for their users' illegal actions . In a partial response to that decision, the RIAA has shifted much of its recent legal activity toward suing individual file traders rather than peer-to-peer companies.

The RIAA-backed bill is scheduled to come up for a hearing later this week.

Details on exactly how iMesh will transition to a different business model remain slim. A company spokeswoman said the service would continue to operate as is, without shutting down, until a "new technology platform" is put in place later this summer. Currently, iMesh software connects to the FastTrack network, which is the same technology used by Kazaa, as well as a handful of other file-swapping services.

"Entering into this agreement with key players within the entertainment industry to put the lawsuit behind us will allow us the opportunity to migrate to a business model that will continue to provide users with the P2P experience that they have come to expect from iMesh," Ofer Shabtai, iMesh's chief operating officer, said in a statement.

The label group previously settled with Audiogalaxy, which ultimately distributed Rhapsody , RealNetworks' subscription-based music service.

iMesh was the fifth most popular piece of software last week on Download.com, a software aggregation site owned by News.com publisher CNET Networks. The software has been downloaded more than 76 million times, according to the site's records.

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