Like other online storage services, FreeDrive was intended as a site where people could keep personal files such as office documents or baby photos. But some members began using it to trade illegally copied software and music files, eventually raising copyright concerns similar to those that have dogged services such as Napster and Scour.
In a letter to customers, FreeDrive said it was taking the unusual step because it had "determined that significant abuses of our Public Share utility are occurring by individuals who are selling illegally obtained software to others."
So-called online storage services have become extremely popular in the past year, with numerous sites that can be accessed only by others who have passwords.
However, FreeDrive added a unique twist by allowing members to store software and files that were accessible to anyone. It was this service, the company said, that piqued the Justice Department's interest, prompting it to shut down the service rather than face a potential legal firefight with copyright holders. The company still allows access to the private, password-protected folders common throughout the industry.
A DOJ spokeswoman said the agency does not confirm or deny ongoing investigations. It's unclear whether any investigation would extend beyond FreeDrive to similar services run by other companies.
Napster is embroiled in a famous legal dispute brought by music companies that charge the file-swapping company is aiding the theft of copyrighted materials. Last year, Scour ran into legal woes in part after striking a deal with online storage company I-Drive.com. The movie industry feared that access to large amounts of storage would facilitate illegal film swapping, so Scour backed down and put limits on customers' storage capacity.
FreeDrive Chief Executive David Falter said piracy is an issue most of the companies in his market are grappling with.
"I wouldn't be surprised if our competitors followed suit," he said.
FreeDrive's Public Share utility allowed subscribers to publicly post files of all types--both illegal and legal--for anyone to download. People could find the files by searching keywords on public searching services such as AltaVista. Once they found the file name located on the FreeDrive storage system, they could join FreeDrive and download the software.
However, the public system opened the company to charges that pirates were using it to distribute software.
Three months ago, Falter said he received a phone call from the DOJ and a large maker of office automation software, notifying him that pirates were using his system to store illegal software. After consulting with company executives and attorneys, Falter said he decided to close the public system. He would not identify the software company.
"There is no easy way to stop this other than to shut down the public sharing," Falter said, adding that he hoped the closure would "stem the tide of software piracy."
Falter said the move would affect just 1 percent of the 11.5 million members who use its service. Most FreeDrive subscribers use a private sharing system, where people can get files only if they've been invited to do so. That system will stay up and running, Falter said. FreeDrive, like its rivals, collects revenue largely from advertisements shown to those visitors.
Until the closure, FreeDrive was one of the few online storage companies that had allowed its members to open their files to the general public. Other companies decided against it because of the liability. Ari Freeman, a spokesman for competitor MySpace.com, said his company considered starting a public sharing system but didn't because of the "potential problems behind it." Instead, the company has a password-protected service.
Still, even the private systems are open to abuse. Some mischievous hackers cite them as one of their favorite places to trade pirated software, or "warez."
The online storage drives have been a consistent haunt of music, video and software pirates almost from their inception, say those familiar with the computer underground.
From the copyright evader's perspective, storage services such as I-Drive, Xdrive Technologies or Freespace were similar to the networks of short-lived, private FTP (file transfer protocol) sites, where individuals have long offered pirated games, software or music files to those in the know. The difference is that the online storage sites offered fast connections for uploading and downloading that few, if any, private FTP operators could afford.
That led to people adopting the storage sites as favorite places for keeping and distributing illegally copied files, some say.
"From what I understand, these free hard drive services have been a major hub for the distribution of pirated software for 'Web warez' sites," said David Rocci, founder of online 'zine Isonews. "These sites require their users to click banners and find passwords for their own profit, then after the users sort through a vast amount of garbage, they finally get a small app or game stored on one of these free online storage bins."
The sites themselves maintain terms-of-use policies barring any such illegal activity. Xdrive.com, for example, forbids use of its services for "anything to do with unlawful or illegal activities relating to: drugs, gambling, pornography, prostitution, child pornography, robbery, spreading computer viruses, cracking into private computer systems, software infringement, trafficking in credit card codes, or other crimes."
Still, online storage companies acknowledge that the private services are difficult to police.
Analysts say that online storage systems--like many other Internet applications--can always be misused by people determined to abuse them.
"Giving people the ability to store and share is sort of like Prometheus bringing fire to the Earth," said Dan Tanner, a storage analyst with Aberdeen Group. "You can use it for good things, like cooking or heating your home, or for bad purposes, like setting fire to some else's house."