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Kazaa exec defends sleeper software

Two days after people using the file-swapping program are told that their machines could be used to host and distribute other companies' content, Kazaa's owner defends its actions.

Two days after disclosures that file-swappers using Kazaa were unwittingly downloading software that could turn their computers into part of a new network, Kazaa's owner spoke up to defend the company's actions.

As previously reported, Kazaa quietly has been bundled for two months with software that contains the core of a new peer-to-peer network. This software, from a California company called Brilliant Digital Entertainment, has been installed on potentially tens of millions of computers. Brilliant Digital plans to "turn on" this software in four to six weeks, tapping the resources of potentially tens of millions of ordinary PCs to distribute content or advertising or to run complicated computer tasks.

Kazaa is owned by Australian company Sharman Networks, whose chief executive, Nicola Hemming, on Wednesday defended the company's arrangement with Brilliant Digital as having "no downside" for Kazaa users.

"Nothing from (Brilliant Digital) has been downloaded which breaches Sharman's or industry standards of users' privacy protection," Hemming wrote in a statement. Brilliant Digital has simply acted in "much the same way that major software publishers such as AOL, Microsoft and RealNetworks (do to) deploy components for future functions," she added.

Brilliant Digital's plans, first outlined in a document filed Monday with U.S. securities regulators, are the most reaching yet of a long list of companies trying to make money off the millions of people who download and use file-swapping software.

The company, run by Australian entrepreneur Kevin Bermeister, originally focused on 3D advertising and media software. Its advertising software was distributed last year along with Kazaa, while the file-swapping software was still owned by the group of Dutch programmers who had created its original peer-to-peer technology.

But in February, Brilliant Digital created a new subsidiary, called Altnet, with the ambitious goal of creating a new peer-to-peer network that piggybacked on Kazaa's wide distribution. The original Dutch programmers took 49 percent of Bermeister's new company and licensed their peer-to-peer technology to Brilliant Digital.

The Kazaa program itself was sold to Sharman early this year. But Sharman's Hemming, a former business associate of Bermeister, agreed to continue distributing Brilliant Digital's software along with Kazaa.

That new software, the core of Brilliant Digital's Altnet business plan, has the ability to "wake up" and weld the millions of computers on which it has been installed into a new peer-to-peer network, in which each computer can talk to the other. That network, which would be controlled by Brilliant Digital, would be used to distribute content or perform complicated distributed computing tasks for Brilliant Digital's clients.

Bermeister said in an interview Monday that Altnet would get people's permission before using their computers. When the network is activated, a pop-up box will appear and ask if the computer user wants to participate. Those who do participate will be compensated, possibly with gift certificates or free videos, he said.

Bermeister said Wednesday that only a small portion of the planned Altnet software had been downloaded and installed on people's computers so far. The actual peer-to-peer communications components will come in the next four to six weeks, and computer users will be notified when those arrive, he said.

"We intend to follow a policy of full disclosure," Bermeister said. "I can't build a business unless end users are fully aware" of what's happening, he added.

The disclosure of the sleeper network set off a firestorm of criticism among Kazaa users, however. Kazaa has been downloaded well over 20 million times since early February, creating a huge base of people who might be affected.

Brilliant's stock, which trades on the American Stock Exchange, has fluctuated wildly since the disclosure of the company's plans. It began the month holding steady at about 20 cents a share. It jumped to more than $1.25 at one point late Tuesday and fell back to about 55 cents a share by the end of the trading day Wednesday.

"That is the most frightening thing I have read, since I am a Kazaa user myself," wrote Eric Santiago, a self-described "avid file-sharer and computer user" from Brooklyn, N.Y., in one typical e-mail to "I guess I should uninstall and start reading user agreements in the future."

The news has also thrown the program's owner into the defensive. Hemming defended Brilliant Digital's plan as a way for all Kazaa users to have a "richer P2P experience," including faster downloads, new kinds of content, and the ability to be compensated for use of their extra computing power.

But Hemming also spotlighted her own companies' privacy policy for the first time, describing exactly what information Kazaa keeps.

The policy reads much like other Web sites'. The company collects a considerable amount of data in its log files, including Internet service provider, Internet address, date and time of visit, and number of clicks. It does not collect personal information from log files, the company says.

The company also does not collect information on what files people are searching for or storing as part of the file-swapping program, a representative said.