Record Labels Conduct Raid in Australia

The major record companies picked a new fight Friday with the people behind the Kazaa file-sharing network -- this time hitting them where they live.

The anti-piracy arm of the Australian recording industry raided the homes and offices of two top executives of Sharman Networks near Sydney, searching for evidence that they violated copyrights by distributing Kazaa software.

Australian investigators also raided four Internet service providers, three universities and the home and office of Kevin Bermeister, chief executive of Brilliant Digital Entertainment, a company that uses Kazaa to distribute authorized copies of music, games and movies.

The major labels, which blame Kazaa and similar file-sharing programs for promoting online piracy, have sued in U.S. courts to shut the networks down. In the United States, the record labels also have filed copyright-infringement lawsuits against more than 900 people who use the networks.

Friday’s operation, though, marked the most invasive tactic yet against those behind Kazaa. It was mounted by Music Industry Piracy Investigations, a group funded by the Australian divisions of the five major record companies -- Universal Music Group, Sony Music Entertainment, Warner Music Group, BMG Entertainment and EMI Group -- and a large Australian label, Festival Mushroom Records.

Australian law allows people preparing copyright lawsuits or other civil claims to conduct surprise searches if they can convince a high-court judge that evidence might otherwise be destroyed.

The raids prompted a volley of recriminations from Sharman and its allies, which accused the labels of making desperate moves to harass and intimidate Sharman -- incorporated in the South Pacific tax haven of Vanuatu but run by Australian entrepreneur Nikki Hemming. Hers was one of the homes searched.

Sharman attorney David B. Casselman accused the recording industry of “trying to do an end run” around its pending case against Sharman in U.S. District Court in Los Angeles. Under Australian law, a company commits piracy when it authorizes someone else to violate copyrights, potentially giving the labels a lower threshold to meet than they face in U.S. courts.

Courts in the Netherlands already have validated the Kazaa software. And the case against Kazaa in the United States suffered a setback last year when the presiding judge, Stephen V. Wilson, ruled that two similar file-sharing networks did not violate copyright law.

The music and movie industries appealed the ruling, but appellate judges at a hearing Tuesday expressed skepticism about key elements of the entertainment companies’ case.

Spokesmen for music industry trade associations in the U.S. and Australia said Friday’s action had nothing to do with the case in Los Angeles. But at least some of the evidence gathered during the raids will become part of the public record in Australia, enabling the labels to use it in any other case.

Michael Speck, general manager of the Music Industry Piracy Investigations, said his group started investigating Sharman about six months ago because it saw “significant shifts in the physical and technical infrastructure of Kazaa.” These shifts made it clear that the network “has become an Australian operation,” Speck said.

MIPI convinced a federal court judge in Sydney that it had a copyright-infringement case and that crucial evidence would disappear if Sharman and the other targets were notified in advance, Speck said. In addition to Hemming’s home, investigators searched the home of Sharman technology director Phil Morle.

“We were looking for computer-based material, electronic material and documents” related to the operation and activities of Kazaa, Speck said. MIPI will return to court Tuesday to report what it found and set up a timetable for the lawsuit it intends to bring against Sharman, Hemming and Morle, he said.

But Casselman, the Sharman attorney, said the raids were unnecessary because the labels had obtained much of the same information through standard procedures in U.S. courts.

Sharman said in a statement that it had complied with orders from the Australian court and called the raids “a cynical attempt by the industry to disrupt our business, regain lost momentum and garner publicity.”

The labels “fed the court a complete raft of information that we believe was just fundamentally untrue,” Casselman said, adding that MIPI didn’t tell the judge in Sydney about the cases in the Netherlands and the U.S.