IMesh, Labels Reach Deal on File Sharing

A leading online file-sharing company made peace Tuesday with its record industry adversaries, but the treaty could drive away the users it depends on for its livelihood.

IMesh.com Inc., whose file-sharing network ranks fourth in popularity, agreed to begin monitoring millions of users and stop them from making unauthorized copies of songs -- a degree of control that other file-sharing companies say isn’t possible with current technology. Neither IMesh nor the Recording Industry Assn. of America would discuss how IMesh planned to modify its network to comply with the agreement.

IMesh also will pay the major record labels $4.1 million to settle a copyright-infringement lawsuit brought last year.

The settlement was a major concession for IMesh, which promised to modify its network by the end of the year. Last year a federal judge in Los Angeles ruled that two similar, decentralized file-sharing networks were not responsible for their users’ illegal downloading. That ruling is on appeal.

It also represents a huge risk for the company, said Elan Oren, who served as the company’s chief executive until this year. Preventing users from sharing hit songs for free will simply drive them off IMesh and onto other file-sharing networks, he said.

For the record companies, meanwhile, the settlement provides new ammunition for its lobbying campaign in favor of a bill by Sen. Orrin G. Hatch (R-Utah) designed to force file- sharing networks to stop unauthorized copying.

The record companies have agreed to let the IMesh network continue to operate in its current form for an undisclosed period until the new technology is ready. When the labels went after the original Napster -- the network that popularized the free exchange of music -- they pressed for an immediate shutdown.

The $4.1 million translates to a fraction of a penny per unauthorized song download on IMesh since it started in 1999, far less than the record companies are collecting from the individuals it has sued for copyright infringement.

Privately held IMesh, a U.S. company with operations in Israel, doesn’t disclose its revenue, but industry executives have said that the leading file-sharing networks collect millions of dollars annually from advertisers.