Kazaa settles with record industry

In a dramatic close to the legal battle between file-sharing software developer Kazaa and the recording industry, Kazaa on Thursday settled the two major cases against it out of court.

Kazaa would not reveal the size of the settlement but the International Federation of the Phonographic Industry, a recording industry trade group, called it a "substantial sum." As part of the agreement, Kazaa said it would implement filtering technologies that would help prevent users from using its software to share copyright-infringing files. Kazaa and the record and movie industries also said they will work together to develop a legal model for distributing digital music and movies.

The settlement marks an end to the U.S. and Australian legal battles instigated by most of the big recording labels, including Universal Music Group, Sony BMG Music Entertainment Ltd. and EMI, in an attempt to stop copyright infringement over the Kazaa file sharing network. The lawsuits were filed against Sharman Networks Ltd., which owns and distributes the Kazaa software.

The parties were vague about Kazaa's future model. Kazaa plans to work with the music and motion picture companies to make peer-to-peer file sharing a part of future online digital entertainment, Kazaa said. Kazaa will make more announcements about its new business model in the near future but it's too early now to say how exactly that will pan out, said Felicity Campbell, a spokeswoman for a firm that represents Kazaa.

The settlement follows a ruling last year in Australia where a judge found that Kazaa authorized the widespread violation of copyright works, ordering Kazaa to make changes to the way its system works. The U.S. Supreme Court last year said that file sharing software developers can be held liable for copyright infringements by their users but at the time Kazaa said that ruling wouldn't apply to it because Kazaa requires users to agree not to use the software to infringe on intellectual property.

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