File-Sharing Firm Shuts Down

The operators of the BearShare online file-sharing service have agreed to pay $30 million to avoid potential copyright infringement lawsuits from the recording industry, according to court documents filed Thursday.

Free Peers Inc., which distributed the BearShare software, also agreed to close up shop and not operate any online music or film download services.

A federal judge must still approve the settlement terms.

Free Peers was one of several file-swapping software companies to receive letters from the recording industry last fall warning them to shut down or prepare to face lawsuits.

Since then, the firms behind i2Hub and WinMX have shut down. The Grokster file-sharing service, which was sued by Hollywood film studios and recording companies in 2001, agreed last fall to a $50-million settlement.

The operators of Warez P2P, LimeWire, eDonkey and Soulseek have yet to shut down or settle. The firms behind Kazaa and Morpheus are defendants in a copyright infringement case pending in U.S. District Court in Los Angeles.

As part of the BearShare settlement, Free Peers agreed to sell its technology, rights to the BearShare domain name and data on users of the software to a subsidiary of IMesh Inc., which distributed file-swapping software until 2004.

IMesh reached a $4.1-million settlement with the recording industry and relaunched last year as a licensed music service.

The company said it had been in talks to buy BearShare “for a while,” but declined to disclose financial terms of the deal or how it planned to use BearShare assets.

Calls left after hours to Free Peers’ Miami-based attorney were not returned Thursday.

In a statement, the Recording Industry Assn. of America, which represents major recording companies, credited last year’s Supreme Court ruling in a file-swapping case for paving the way for the settlements.

The high court’s decision opened online file-sharing companies to potential liability if they were found to intentionally induce or encourage the theft of copyrighted works.