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Court: Anonymous P2P no defense

Peer-to-peer networks cannot escape copyright infringement claims by giving members the ability to mask the content that changes hands on their networks, a federal court rules.

Operators of peer-to-peer networks cannot escape copyright infringement claims by giving their members the ability to mask the content that changes hands on their networks, a federal appeals court ruled Monday.

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Calling the tactic a form of "willful blindness," the 7th U.S. Circuit Court of Appeals in Chicago upheld a lower court's injunction against the Madster file-swapping network that had ordered the service shut down pending a trial. But, in a mixed decision, the court also bolstered a key defense argument invoking a comparison between file-swapping software and personal home video recording.

Before it was shut down, Madster had offered its users the ability to encrypt files traded over America Online's AOL Instant Messenger client. As a result, its operators had argued that they had no obligation to seek to block illegal files swapped on the network because they were unaware of specific copyright violations.

In a decision that could dampen efforts to bring privacy to file-swapping networks, the court on Monday rejected that reasoning.

"One who, knowingly or strongly suspecting that he is involved in shady dealings, takes steps to ensure that he does not acquire full or exact knowledge of the nature and extent of those dealings, is held to have criminal intent," the panel wrote in the 23-page decision.

Privacy in file-swapping was put on the front burner last week when the Recording Industry Association of America said it would begin investigations aimed at bringing lawsuits against individuals who make large numbers of files available for uploading on peer-to-peer networks such as Kazaa, Morpheus and Grokster.

Since June 17, a file-swapping client promising improved privacy known as Blubster 2.5, has seen more than 3.3 million downloads, according to CNET, a division of CNET Networks.

"I wouldn't say it's the end of the road for (Madster), but one of the things that makes it tough is that the (court) is highly critical of the willful blindness approach to running these sorts of companies," said Tim Wu, an associate professor at the University of Virginia Law School. The opinion "suggests that deliberately creating something beyond your control is not going to get you out of copyright infringement."

Madster, previously called Aimster, is one of several peer-to-peer, or P2P, online file-swapping services designed to facilitate the sharing of computer files, including audio tracks. Its more famous predecessor, Napster, has been credited with revolutionizing the distribution of popular music, though lawsuits by the recording industry shut it down. The services are also used to swap digitized copies of films and TV programs.

The Aimster case is not the only file-swapping case wending its way through the courts. In April, the courts handed a major defeat to the recording and movie industries with a decision holding that file-swapping networks Streamcast and Grokster were not liable for contributory infringement due to illegal activities of their users.

In December, a federal court ordered Madster to shut down after the service failed to comply with a preliminary injunction ordering it to put an end to copyright infringement. Monday's ruling upheld that decision.

"We are pleased that the injunction against Aimster was upheld, effectively shutting it down until trial," Motion Picture Association of America President and CEO Jack Valenti said in a statement. "This is another indication that so called 'file-sharing' businesses designed to benefit from the illegal use of copyrighted movies will not be tolerated."

Madster operator Johnny Deep said Monday that although the court had failed to lift the injunction against him and his service, it had taken his side in approving a legal analogy between Madster and Sony's Betamax video recorder--an analogy the recording industry is eager to discredit.

"The court agreed with us on matters of law," said Deep in an interview. "It said Sony does apply. It disagreed completely with the record industry on that."

In the 1984 Sony case--Sony Corp. of America, Inc. v. Universal City Studios, Inc.--the Supreme Court ruled that making a product that has "substantial noninfringing uses" is not itself a contributory infringement, even if that product is used to infringe. Therefore Sony couldn't be held responsible for the unlicensed copying on its Betamaxes of copyrighted works.

In Monday's decision, the court rejected the recording industry's argument that because Aimster was capable of blocking infringing uses, it should necessarily be considered a contributory infringer. Instead, the court ruled, if detection and prevention of copyright infringement were "highly burdensome" to a service provider, that provider would escape an infringement claim.

Deep pledged to appeal the injunction on the basis of its being too broad--a contention the 7th Circuit explicitly rejected. He also pledged that his determination to fight would sour the recording industry on its promise to sue individual file-swappers in large numbers.

"This is a case against me personally," Deep said. "And I'm going to give them a little taste of what it's like to sue these thousands of people who are determined and who believe that they're doing the right thing."