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Week in review: Swap away, eh?

File swappers find a little shelter in Canada from the Net's copyright storm, but they may not feel as welcome in other parts of the world. Also: Ballmer and McNealy--best buddies?

As the week wore to a close, it was hard to tell the April Fools' jokes from the actual news, what with Google offering a gigabyte of free e-mail and Sun Microsystems' Steve McNealy chumming around with Microsoft's Steve Ballmer.

File swappers found a little shelter in Canada from the Net's copyright storm, but they may not feel quite as welcome in other parts of the world.

Sharing copyrighted works on peer-to-peer networks is legal in Canada, a federal judge there ruled, handing the record industry a sharp setback in its international fight against file swappers. Canadian record labels had asked the court for authorization to identify 29 alleged file swappers in that country, in preparation for suing them for copyright infringement. But the judge denied that request.

In a far-ranging decision, the court further found that both downloading music and putting it in a shared folder available to other people online appeared to be legal in Canada. The ruling affects only Canada, but it could have wider repercussions, if it stands.

The mood in Europe isn't quite as welcoming. The International Federation of the Phonographic Industry, a worldwide recording industry association based in London, announced an initial round of 247 suits against alleged file sharers. The IFPI said it plans to bring additional lawsuits in other countries over the coming months, after filing criminal complaints in Italy and Germany, and civil litigation in Denmark and Canada.

The industry group said it decided to file the suits, because it sees the Recording Industry Association of America's efforts in the United States as successful.

The RIAA continues to pile on lawsuits against U.S. citizens, filing new litigation against another 532 anonymous individuals last week. The British Phonographic Industry also announced recently that it plans to begin sending warnings to prolific file sharers.

Interestingly, a study of file sharing's effects on music sales says online music trading appears to have played little part in the recent slide in CD sales. Researchers at Harvard University and the University of North Carolina tracked music downloads over 17 weeks in 2002, matching data on file transfers with actual market performance of the songs and albums being downloaded.

Even high levels of file swapping seemed to translate into an effect on album sales that was "statistically indistinguishable from zero," they wrote. "We find that file sharing has only had a limited effect on record sales. While downloads occur on a vast scale, most users are likely individuals who would not have bought the album even in the absence of file sharing."

Peace offering
At the crack of dawn Friday, Sun announced that it has moved to a new phase of legal and technical cooperation with longtime foe Microsoft that will involve a payment of $1.95 billion to Sun. Later in the morning, CEOs Scott McNealy and Steve Ballmer were flashing broad smiles at a San Francisco press conference.

Sun also said Friday that it plans to cut 3,300 jobs after it issued an earnings warning. The company now sees deeper-than-expected losses for the quarter that just ended.

Shrinking sales, more layoffs and a bevy of competitive pressures are all bearing down on the Mountain View, Calif.-based company. To top it off, Sun is in the midst of a transition from deriving most of its revenue from servers to selling software licenses, a kind of shift that very few companies have ever achieved.

For Microsoft, the deal with Sun is the latest settlement it has struck with a key rival. Last May, the company inked a $750 million deal with America Online to drop pending litigation, share technology and jointly distribute software. And in 1997, the software maker and Apple Computer agreed to settle their differences.

Google gets personal
Search giant Google is setting its sights on free e-mail by offering a mammoth 1GB storage capacity. Like Yahoo Mail and MSN Hotmail, Gmail will let people search through their e-mail. Unlike those competitors, though, Google will offer enough storage so that the average e-mail account holder will never have to delete messages.

Google plans to make money from the service by inserting advertisements into messages based in part on their content, effectively extending to e-mail its AdWords program for presenting contextual ads in Web pages.

The company also hopes that making a personal connection with its visitors will give it an edge in the search engine wars. The company launched a test version of its personalized search engine as part of its effort to tailor its search results to users' preferences. Google also plans to e-mail registered users of personalized search with the results of their queries.

The testing tools for its Personalized Web Search and Web Alerts are available at Google Labs, its public developmental playground. Google said the forthcoming search option will let people more quickly access preferred results.

Google hopes that these tools keep it on top of the search charts. In a snapshot of search engine use on the Internet, market researcher WebSideStory found that Google has reached an all-time high in search referrals in the United States. On March 23, it accounted for 41 percent of all referrals, up from 36 percent for a similar day in March 2003.

Yahoo took second place at 27 percent, down from 31 percent a year earlier, while Microsoft's MSN placed third at just under 20 percent, up slightly from the earlier recording period. The Yahoo figures, however, do not include referrals from the Overture Services network, which Yahoo now owns.

Microsoft's MSN Web portal has its work cut out, in its efforts to catch up to Google. MSN recently launched MSN Video and MSN Premium Internet access and has plans to incorporate a next-generation search engine, a music download application service similar to Apple's iTunes and a social-networking service.

Yusuf Mehdi, the Microsoft executive in charge of figuring out the company's portal strategy, doesn't see the company as a rival to Google but said MSN will compete. CNET News.com recently caught up with Mehdi at an advertising summit on the company's Redmond, Wash., campus to discuss his plans for the portal.

Linux on the line
IBM is seeking a judicial ruling to absolve it from any claims of copyright infringement against Linux antagonist SCO Group. The request appears in an amended counterclaim Big Blue filed in its legal battle with SCO, whose main claims allege that IBM violated contract provisions by distributing Linux products that illegally incorporate Unix code that SCO controls.

The filing includes a new counterclaim, in which IBM seeks a declaratory judgment ruling that "IBM does not infringe, induce the infringement of or contribute to the infringement of any SCO copyright through its Linux activities, including its use, reproduction and improvement of Linux, and that some or all of SCO's purported copyrights in Unix are invalid and unenforceable."

The intensifying legal scrutiny of Linux and other open-source programs has some new companies smelling gold. Open Source Risk Management plans to charge $495 for seminars aimed at filling educational gaps for companies that use or contribute to open-source programming projects.

Off base with offshoring?
Dell admits that it has "learned its lesson," after being forced to drop its Indian call center last year, following customer complaints about the quality of service. The call center operation for the OptiPlex desktops and Latitude laptops was moved back to the United States.

Dell's chief information officer, Randy Mott, said in an interview that the Bangalore center was unable to deal satisfactorily with the volume of calls generated by the rapid growth of those product lines. Mott did not rule out future expansion in India and said Dell has a policy of "all shoring"--spreading jobs throughout Dell's global reach--wherever the right skills exist to meet the needs of its global business.

The U.S. technology industry's demand for offshore services is apparently beginning to drive up pay rates in India, raising questions about the long-term benefits of outsourcing work to that country. Information technology workers in India reported double-digit salary growth in 2003, according to recent research, while pay for similar work within U.S. borders has been relatively stagnant if not declining.

Although India's salaries generally remain significantly lower than U.S. averages, the narrowing wage gap and other unforeseen factors are leading at least some American companies to reassess the cost savings in sending work offshore.

Also of note
Microsoft's efforts to bolster security in Windows XP will likely delay the release of a widespread test version of its forthcoming operating system until next year...Gateway said it will close its retail stores and lay off about 2,500 employees associated with the shops, or nearly 40 percent of its work force...Meanwhile, Sony Electronics plans to open additional retail stores, paying more attention to its small and medium-size business customers and broadening its Vaio brand...Apple is trying to patent the interface for its iPod music player.