Record companies allege that Sharman Networks, the owner of Kazaa, didn't comply with a Federal Court order (described by the court as order number four) to modify the software to ensure 3,000 keywords would be filtered by 5 December.
However, Sharman disagreed since it managed to block Australian users from downloading Kazaa by identifying their IP (internet protocol) address (see below).
"Contempt proceedings are fairly rare in this court and I've never yet sent anyone to jail," Justice Murray Wilcox said in the Federal Court in Sydney today. "I've threatened to a few times, but there's always a first I suppose."
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The motion includes Sharman Networks chief executive Hemming, Altnet chief executive Bermeister, and associated companies Sharman Networks, LEF Interactive, Altnet and Brilliant Digital Entertainment.
Wilcox will hear the record industry's motion for contempt of court on 30 January.
"If there has been a breach [of the court order], that's contempt of court.
"On the other hand, if [order] four has been complied with, that's the end of the contempt charge.
"This motion is going to raise the matter of whether there is compliance or not," Wilcox said.
Counsel for the record industry, Tony Bannon, said his side "didn't want" an imprisonment outcome, but argued that Sharman had failed to comply with the order.
"What they have done or attempted to do was to prevent downloads of the Kazaa software to Australian IP (internet protocol) users," Bannon said, claiming this had been "ineffective".
"They've continued to supply unfiltering versions of the software to many users, the copyright infringements continue ... they continue to supply advertising ... we say that's a clear breach of order four [on authorisation]," said Bannon.
However, counsel for Sharman, John Ireland QC, said his client had complied with the order: "What we did in lieu of implementing the filter was to take down the availability of this program in Australia completely. We say that that action involves obedience to the injunction and that is the issue on the contempt application."
"[The order] involved the continued making available of the software in Australia to anyone that wanted it. That has ended," Ireland said.
Although he scheduled the motion for hearing, Justice Wilcox again showed signs of frustration with the prolonged nature of the case, and blamed participants on both sides.
"I would cheerfully have nothing more to do with this case. I don't wake up in the morning and think 'I'd like a bit more Kazaa today'," he said, citing learning about the technology as "quite time consuming".
On 5 September, after an 18-month battle, the Court found in favour of about 30 music labels by ruling that Sharman and associated parties had authorised users of Kazaa to breach copyright.