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Dutch Court Clears Web Music Swapping

In a setback for efforts to halt copyright abuse, a Dutch appeals court on Thursday told a technology firm it could distribute a software program that is designed to let users share music and films on the Internet. The ruling in the case between Internet software company KaZaA and Dutch music rights organization Buma Stemra overturned a decision in November in favor of the music industry.

The music industry says rampant online piracy has severely damaged recording sales and the movie industry fears the same could happen to it as computers become more powerful.

The Amsterdam Court of Justice ruled that KaZaA was not liable for any individuals’ abuse of its software, which is being used by millions of people around the world every day to swap copyright-protected games, music, pictures and films.

“We are stunned by the verdict,” a Buma Stemra spokesman in the Netherlands said, adding the organization could appeal further to the High Court. But Niklas Zennstrom, the Swedish founder of Netherlands-based KaZaA and its technology provider Fasttrack, heralded the decision as “a great victory for our company and for the whole technology sector.”

However, he also said the ruling came too late to save KaZaA, whose main assets were sold after the initial ruling last year to Australian company Sharman Networks.

Zennstrom continues to run Fasttrack, which developed and licenses the file-swapping software used by KaZaA and its U.S. peer Grokster.

Both companies, and their rival Morpheus MusicCity, are still facing a court battle against music and film industry trade groups Recording Industry Association of America and Motion Picture Association of America, which is expected to start in October.

KaZaA attorney Christiaan Alberdingk Thijm expected the Dutch ruling to be closely watched in the U.S., as his defense was partly built on a 1984 U.S. Supreme Court ruling which said manufacturers of video recorders are not liable if consumers use their products to abuse copyrights.

“This is not just about KaZaA. It also affects producers of digital recording devices,” he said. These would include DVD recorders from Philips and Panasonic, and digital TV recorders from TiVo (news/quote).

The Dutch ruling is in stark contrast to last year’s decision in which a U.S. judge forced Napster, the original file-swapping Internet service, to cease operation until it could guarantee that there was no copyright infringement on its network.

Unlike Napster, KaZaA and its peers do not operate a central server connecting different users and enabling them to transfer files. KaZaA has claimed in its defense that it was unable to control usage after its “peer-to-peer” software has been installed on PCs.

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