Report claims Kazaa "makes the rules"

The report made by Dr George Barker, the Australian National University director of the Centre for Law and Economics, Intellectual Property and Copyright, focuses on the economic and financial consequences of the Kazaa system.

According to the report, the Kazaa system is a "marketplace" that brings together users who have copies of works under copyright and users that wish to make copies of those works. The report adds that Kazaa "designs the rules, facilitates the 'market' for exchange of copyright works and enforces or has the capacity to enforce the rules of that market".

"The attractiveness of the system to users, and the success of Sharman's network growth strategy is verified by the fact that Sharman claims that Kazaa has more than 60 million subscribers and is the most downloaded program in history -- approximately 20 million downloads per month. As the network grows in size, it becomes more attractive to potential users -- because more content will be available -- and more valuable to Sharman."

Barker's report also included details on how Kazaa makes its profits from unauthorised music sharing and the damage this causes to the music industry and the Australian economy.

Barker said that Kazaa's unauthorised distribution system made money from global advertising, commercial referrals to Internet Web sites, direct marketing and market research.

Sharman Network counsel Anthony Meagher argued that Barker's affidavit is not relevant to the recent issue of filtering (which dealt with the Kazaa system's ability or inability to stop the sharing of unauthorised music files) or the authorisation issue raised by the applicants (the record label companies).

Wilcox, however, rejected the objections from Kazaa operators, saying it was "blindingly obvious it would be to Kazaa's financial advantage" if people could use it as widely as possible. And if that meant using unauthorised material "that would be to Kazaa's benefit ... of course it will pay people to freeload on others -- it happens all the time".

During the cross examination of Tom Mizzone, vice president of data service at anti-piracy company MediaSentry, Mizzone admitted that only 22 percent of the "warning" instant messages they sent were received by Kazaa users.

Mizzone previously said that, aside from being able to trace IP addresses of Australian Kazaa users, they were also able to communicate with users via instant messaging.

However, Mizzone admitted today that instant messaging could be disabled by the Kazaa users, therefore blocking attempts to send warnings about copyright infringement.

The hearing will continue on Tuesday of next week.