Kazaa players' assets on ice

Senior executives of companies involved in the music industry court action over the controversial Kazaa software have agreed to freeze their personal assets until seven days after judgement is reached. The executives had previously agreed not to move, dispose of or disperse their private assets following a request made by record companies to the Federal Court in early March.

Senior executives of companies involved in the music industry court action over the controversial Kazaa software have agreed to freeze their personal assets until seven days after judgement is reached.

The executives had previously agreed not to move, dispose of or disperse their private assets following a request made by record companies to the Federal Court in early March.

The record companies had sought a Mareva order -- covering freezing of assets -- against Sharman Networks' chief executive officer Nikki Hemming, Altnet chief executive officer Kevin Bermeister and his wife, Beverly Bermeister.

The applicants also asked the court on Tuesday to order the respondents to file an affidavit of assets detailing their possessions. However, Justice Murray Wilcox, who is hearing the case, opted to require only Hemming to make the filing.

Michael Speck, head of the music industry's piracy investigations unit, had previously said Bermeister mortgaged his share of a property to his wife in September last year. Barrister for Altnet, Steven Finch, said the move was on the public record since that date, pointing out that the applicants only discovered it in February 2005.

The applicants' lead barrister, Tony Bannon, conceded the music industry parties were late in finding Bermeister's property transaction, but argued that it was no coincidence that other transactions -- particularly Hemming's sale of her Castle Cove property to Sharman's accountant John Myers for AU$2.1 million in February this year -- were going on at the same time.

Altnet's proposed "advertising fund" -- whereby revenue generated by advertising on popular peer-to-peer applications such as Grokster, eDonkey and Kazaa is shared with independent music labels -- also came under fire from the applicants. Bannon described the fund as part of a plan to "dissipate" revenue and asked for the fund to be placed on hold until judgement is released. However, Finch retorted it would only be considered dissipation of assets if the fund represented a 'gift' rather than a contractual agreement between content providers and advertisers.

"They seek to shut us down. What they are doing is using the court under the guise of an application to clamp down the business," Finch said.

Kicking off the applicants' closing statements, Bannon emphasised the absence of evidence from Hemming and Bermeister.

"One of the curious things we've seen is the lack of evidence from the respondents. No one came forward to explain their side," Bannon said.

He said the Kazaa software was a combination of technologies owned by Altnet and Sharman Networks which specifically facilitated copyright infringement.

"It was admitted that they were aware of it and they are building a business on this. Their software enabled and facilitated copyright infringement. This business will only exist if they combine their technology," Bannon said.

Bannon's closing submission said that the respondents "take no steps to enforce the terms of their own licenses".

"They are capable of inhibiting infringing activity and do nothing .... They do nothing because they fear losing their copyright-infringing user base which they see as their commercial advantage.

"There were several steps which the respondents could have taken but did not take to prevent or avoid the doing of the acts which have infringed, are continuing to infringe and threaten to infringe the applicants' copyright in the defined recordings," Bannon said.

He added that the respondents had the ability to block copyright infringing files. "The respondents could have designed filters which were non-optional and which prevented the display in search results of 'blue files' [copyright infringing music files] which matched words associated with the names of sound recordings in the applicants' catalogues or the names of their artists.

"The respondents could have created gold files which consisted simply of a copyright infringement warning ... or devised a filter which excluded MP3 files -- a predominant format used for unauthorised music files," he said.

Sharman Networks and associated parties are releasing their closing statements today.