Beating Napster at its own game?

Not according to software development company MediaDefender Inc. The Los Angeles-based startup thinks new music-swapping technologies and so-called peer-to-peer music and entertainment networks will always be one step ahead of the law. Instead of taking hackers to court, the company argues, the entertainment industry should beat them with their own weapon: technology.

How? MediaDefender claims the answer lies in "spoofing," a method in which a peer-to-peer entertainment network is flooded with fake files of a certain title. If an end user tries to download that title, he receives a "spoof" that has the same title as the requested song or video, but actually contains a message warning the user that he has attempted to break copyright law.

"Legislation changes slowly, but technology changes at warp speed, " says former law student Randy Saaf, the founder and chief executive of MediaDefender, which has a staff of 10 at a tiny office near Venice Beach. "Unauthorized duplication of copyrighted media is impossible to avoid. If you can hear it, you can copy it. That means you can only prevent piracy by attacking distribution channels."

MediaDefender and several other high-tech startups are trying to build an industry out of fighting Internet-based piracy. They argue that the entertainment industry's Net-related copyright problems are just beginning, and could grow beyond swapping music files to swapping movies and other entertainment. As free music-swapping service Napster is tied up in court following a lawsuit by the Recording Industry Association of America and major member record labels, similar peer-to-peer networks are still going strong, and still others are being built in the U.S. and Europe.

Most of these P2P networks are operated by a series of individuals, not by a central Web site or company. The only way to shut such networks down is one user at a time. Because those users can be anywhere in the world, that's a near-impossible task.

The entertainment industry has come up with three answers, none particularly successful: legal action, business deals and encryption of intellectual property. Legal action appears to be only a temporary solution. If Napster is shut down, users will go to other networks. Bertelsmann unit BMG recently struck a deal with Napster, but trying to commercialize Napster may pose a similar challenge: Why would users pay for music they can get for free on other networks? And encryption can't stop anyone from creating an MP3 file from an unencrypted CD recording and posting it on the Web.

To be sure, MediaDefender's method could itself become the target of hackers with a grudge against its role as a spoiler. And it's not even certain whether it's legal to mislead Internet users into thinking a file contains something other than it says it does. Moreover, record companies may think twice about taking aim at electronic youth-oriented networks: Many users of Napster and comparable networks are also active buyers of music at record stores. Shutting their networks down or slowing electronic traffic by tricking people into opening spoof files might not go down well, analysts warn.

"It's a bit aggressive, but from a technical viewpoint it would definitely work," says Johan Montelius, an Internet technology analyst at Jupiter Communications in Stockholm. "It would shut a network down in a hurry. But it could backfire, irritate the user and damage the reputation of the record company or recording artist involved."

MediaDefender's Saaf counters that copyright problems are likely to mushroom to a point where tougher actions, like spoofing, will become viable defense options for the recording industry, which can't sue all the members of a P2P network. For example, Gnutella, a P2P music-swapping network, has no overarching business structure: It consists purely of thousands of end users who like to exchange electronic media files. "Napster is only a foretaste of what will happen to the entertainment industry in the next few years," Saaf says. "Our method may still be untested in court, but it's the only effective remedy I know of."

But much remains to be done before spoofing has a shot at fighting piracy. MediaDefender today is little more than a catchy name on the Internet front. No major record group has yet bought the technology, though MediaDefender says it's in talks with several companies in the music industry. The company is running, thanks to venture capitalists and has secured funding of nearly $1 million, enough, it says, to keep it alive for a while. (Unlike many Web startups, MediaDefender hasn't yet spent anything on marketing.)

In the next few months, Saaf hopes to make MediaDefender the centerpiece of the entertainment industry's blitzkrieg against hackers, and land high-profile backers from the music and film world. "It's really easy to copy a music file online, but that doesn't entitle people to break the law," he says. "We can help prevent music-swappers from breaking the law."

The real test will come when music-swappers are confronted with MediaDefender's spoofs. So far, they don't seem to see such systems as much of a threat. Mattias Pihlgren, a 29-year-old management consultant in Stockholm, frequently listens to jazz and progressive dance music downloaded from the Web, including via Napster and Gnutella. What would he do when a spoof appeared? "I would just find another peer to peer community," he says. "There are plenty of them. The Net is very self-preserving. Users always find a way around obstacles."