WASHINGTON — One of the big guns of the Wild West days of freely downloading music and movies over the Internet is going straight.
Settling lawsuits around the world, the company behind software called "Kazaa" said yesterday it would redesign its pioneering file-sharing program to block customers who try to find and download copyrighted music and movies. It also will offer licensed entertainment for a price, and it agreed to pay more than $100 million in penalties to leading music and movie companies.
The settlement ends one of the longest-running and fiercest copyright disputes of the Internet era, in which the entertainment industry spent millions suing Sharman Networks Ltd. and the company's customers to end the illegal trade of its products.
Sharman Networks pledged to "use all reasonable means" to discourage online piracy, including building into new versions of its software "robust and secure" ways to frustrate computer users who try to find and download copyrighted music and movies, court papers said.
Kazaa's popularity has declined dramatically in recent years amid concerns over "spyware" monitoring programs bundled with its freely distributed software and as new, more efficient downloading services — both legal and illegal — emerged.
"Kazaa has been yesterday's file-sharing technology for some time now," said Eric Garland, chief executive at BigChampagne Online Media Measurement, which tracks online entertainment. "We're resolving court battles months or even years after the cultural relevance of these software applications has waned."
Reuters reported yesterday that Sharman Networks had agreed to pay the world's four major music companies — Universal Music, Sony BMG, EMI and Warner Music — more than $100 million, according to the International Federation of the Phonographic Industry. A lesser amount is to be paid to the movie industry.
Reuters quoted IFPI Chairman and Chief Executive John Kennedy as saying: "There are very substantial damages being paid — in excess of $100 million — and Kazaa will go legal immediately. They've had time to prepare for this."
Vice chairman for EMI Music, David Munns said, "While the award may seem like a vast pot of money, it will merely offset the millions we have invested — and will continue to invest — in fighting illegal pirate operations around the world and protecting the works that our artists create."
The settlement concludes legal battles against Sharman Networks around the world. Sharman Networks has boasted that its Kazaa software was downloaded more than 389 million times, and the company operated the underlying "Fast Track" file-sharing network that connected tens of millions of personal computers.
It was not immediately clear how or when Sharman Networks will impose filters to frustrate its customers from distributing copyrighted files illegally. Justin Timberlake's "Sexy Back" and Chamillionaire's "Ridin' Dirty" — two popular, modern hits — were available on Sharman's network using older versions of its software without cost hours after the settlement was announced.
"Services based on theft are going legit or going under, and a legal marketplace is showing real promise," said Mitch Bainwol, head of the Washington-based Recording Industry Association of America, the trade group for the largest labels.
The head of the Motion Picture Association of America, Dan Glickman, called the settlement an important victory in a historic legal case.
Sharman Networks indicated it would negotiate licenses with entertainment companies to distribute music and movies lawfully over its Kazaa service, similar to Apple Computer Inc.'s iTunes service. The settlement does not prohibit Sharman Networks from legally distributing copyrighted files.
The chief executive of Sharman Networks, Nikki Hemming, said the settlement "marks the dawn of a new age of cooperation" between file-sharing services and the entertainment industry. "This settlement ensures that we will be working together with the content providers to the benefit of consumers, businesses and artists," she said.
The Supreme Court ruled last year in Metro-Goldwyn-Mayer Studios v. Grokster that the entertainment industry can file piracy lawsuits against technology companies caught encouraging customers to steal music and movies over the Internet. Earlier this month, in a related federal lawsuit, a U.S. judge said evidence was "overwhelming" against StreamCast Inc., which produced similar software called "Morpheus" for downloading music and movies.