The Pirate Bay: sold and (gasp) reformed?

The recent prosecution of The Pirate Bay, a popular site for finding and downloading bootlegged movies, songs, video games and software, suggested that the company's gleeful flouting of copyright law might not be sustainable. (The Stockholm District Court sentenced four of The Pirate Bay's leaders to a year in jail after finding them guilty of violating copyrights, and fined them close to $30 million.) Something had to change at TPB, and it looks like it's going to be three things: the ownership, the business model and the infrastructure. Whether the site ends its love affair with all things bootlegged, however, is another question entirely.

Variety reported that Swedish video game company Global Gaming Factory X agreed to pay about $7.7 million to buy TPB, although the site's blog hinted that the deal was still tentative. (Apprently, the buyer still has to raise the money.) Variety quoted Global Gaming CEO Hans Pandeya as saying the value in TPB was its traffic: more than 20 million visitors and 1 billion page views a month.

"In order to live on, The Pirate Bay requires a new business model, which satisfies the requirements and needs of all parties, content providers, broadband operators, end users and the judiciary," Pandeya said. "Content creators and providers need to control their content and get paid for it. File sharers need faster downloads and better quality."

But as TPB's blog notes, "If the new owners will screw around with the site, nobody will keep using it. That's the biggest insurance one can have that the site will be run in the way that we all want to." Loosely translated, that means Global Gaming will quickly lose those 20 million visitors if it tries to stop users from downloading "Transformers: Revenge of the Fallen" for free....

RIAA: 2, Jammie Thomas-Rasset: 0

Maybe Jammie Thomas-Rasset should have quit while she was behind. Just as in Thomas-Rasset's first trial in 2007, a Minnesota jury found today that she infringed the copyrights of two dozen major-label songs on the Kazaa file-sharing network. But the new jury handed down a much larger punishment -- $80,000 a song, not $9,250. For the labels, that's roughly equivalent to selling 114,000 songs at Apple's iTunes Store.

Thomas-Rasset didn't seem likely to pay the original $222,000 penalty, so it seems even less likely that the RIAA will be able to extract nearly $2 million from her. The trade group has always been more interested in winning the judgment than the amount awarded; spokeswoman Cara Duckworth told CNet that the group has been willing to settle "since day one." But the size of the jury's verdict may only increase calls for Congress or the courts to reduce the financial penalties for copyright infringement

Thomas-Rasset's was the first trial in the campaign against individual file-sharers that the RIAA began in 2003 and ended late last year. As such, it was one of the few tests of the legal underpinnings of that campaign, including the argument that making tracks available to others online (by keeping them in a folder that was open for sharing) was a form of infringement. U.S. District Judge Michael J. Davis instructed the jury in Thomas-Rasset's first trial that making songs available was an infringement, a low threshold that would enable the labels to prove piracy just by collecting lists of the songs in people's shared folders. But Davis second-guessed himself after the verdict and ordered a new trial, mirroring the views of several other judges who had rejected the RIAA's interpretation of the law.

The result of the second trial suggests that the higher threshold isn't enough to derail the labels in an infringement lawsuit. The RIAA's anti-piracy contractor, MediaSentry, presented evidence that Thomas-Rasset actually distributed 11 copyrighted songs through Kazaa (to MediaSentry's investigators), and cited metadata from tracks in her shared folder strongly suggesting that the files had themselves been downloaded, not purchased or ripped from her CD collection. RIAA witnesses also linked the Kazaa uploads to a unique identifier on Thomas-Rasset's modem and computer and showed that the unusual username on the Kazaa account matched one that Thomas-Rasset acknowledged using on several other websites. In other words, the RIAA's case was built entirely on circumstantial evidence, but there was a lot of it.

Thomas-Rasset and her attorneys seemed eager to continue their battle against the RIAA, and although the trade group insists that it doesn't plan to file any new cases, there are still a number of older claims yet to be resolved. Defense attorneys are fighting these on several fronts, arguing that, among other things, MediaSentry's investigative tactics were illegal.

More interesting, IMHO, is the argument Harvard Law Professor Charles Nesson and others are raising that the statutory damages provided in copyright law are grossly excessive -- even unconstitutionally so. The two Thomas-Rasset verdicts, each of which was reached after just a few hours of deliberations, reflect the juries' irritation with her defense. But even if she did put 24 copyrighted songs in her shared folder, it's hard to believe that the labels suffered anything close to $2 million in damages. More important, the mere threat of such a penalty could persuade some accused infringers to settle with the RIAA rather than fight, even if they weren't the ones responsible. Thomas-Rasset may not be a sympathetic defendant, and there's no excuse for illegal downloading. But she will have done all Internet users a favor if her case prompts lawmakers to recalibrate the statutory damages in copyright law.

-- Jon Healey

Healey writes editorials for The Times' Opinion Manufacturing Division.

Photo credit: Julia Cheng / Associated Press

BitTorrent users spend money, too

Vuze -- the company that's trying to sell licensed, high-def videos to users of the BitTorrent file-sharing software -- has spent much of the past two years trying to persuade Hollywood that its users are customers, not thieves. So far, however, the major studios have entrusted little to Vuze beyond movie trailers and other promotional videos. Now Vuze is trying to prod Hollywood with some eye-opening data about its clientele's buying habits and purchasing power: in addition to being copyright infringers, they spend a lot of money on movies and movie-watching gear. Said Vuze CEO Gilles BianRosa, "Those users are actually Hollywood's best customers."

Yes, that's a self-serving comment. But BianRosa's assertion is supported by a survey by media consulting firm Frank N. Magid Associates of about 1,300 Internet users between the ages of 18 and 44, nearly 700 of whom use Vuze. The survey, which Vuze released late Tuesday, included the following insights about the members of the company's audience:

Antipiracy virus spreads through file-sharing websites

Users of popular file-sharing websites: Your next pirated download might be your last. That appears to be the intention of the Downloading is Wrong virus that has spread on some torrent portals.

When a user downloads and launches an infected file, portions of the Windows system's code, called hosts files, are modified; they block access to piracy hubs Mininova, the Pirate Bay and the Suprbay message board. Then, a series of pop-ups begin to fill the screen and a sound file is activated that says, "Downloading is wrong," according to BitTorrent blog TorrentFreak.

Some pointed fingers at MediaDefender, a Santa Monica company that distributes fake music and video files on file-sharing websites to deter piracy. But many signs indicate the culprit is simply an anonymous prankster.

For one, according to postings from affected users, the virus originated from a package of pirated software, rather than the music or video files that MediaDefender would probably target. The Trojan horse gallops its way onto the computer when launching the included keygen program (a small file that creates a valid serial code to activate software).

Antivirus developer Sophos dubbed the worm Troj/Qhost-AC and says the company has updated its software to protect against the Trojan.

Viruses are traditionally distributed for nefarious purposes -- sort of like the Twitter phishing scam that exploded over the weekend, snatching passwords. But it's not too often that a Trojan comes along in support of a morality message.

Maybe we'll see a virus come along that blocks me from getting Rickrolled. Hey, a guy can hope, can't he?

-- Mark Milian

Photo: Virus by Daquella Manera via Flickr

LimeWire adds social features

Lime Wire LLC announced a new version of the popular LimeWire file-sharing software today, advancing the company's vision of its software as a platform for services, not just a gateway to the Gnutella network. Clearly, the major record companies' lawsuit hasn't stopped the company from trying to develop its business -- or pushing p2p to higher levels of functionality.

One of the main upgrades in the new version -- due later this year -- is the addition of social-networking features. Users will be able to create their own private file-sharing networks with friends and/or family members, with greater control over what gets shared with whom. In a recent interview, Kevin J. Bradshaw, Lime's chief operating officer, described it as the ability to create a "personal publishing platform" that delivers photos to family members or homework assignments to students. Members can push items to each other through these networks and can watch what others in the group are sharing and experiencing, said Nathan Lovejoy, Lime's product manager. Those features should help make LimeWire, which has been mainly a tool for "directed search" (i.e., looking for and finding specific things), a more effective way to discover new content, Bradshaw said.

The company is walking a tightrope as it tries to build a business around users whose actions it professes not to observe or control.

Bringing search ads to file sharers

What would happen if you introduced one of the most lucrative business models on the Internet -- search-related advertising -- to the file-sharing networks that power much of the Net's underground economy? We're about to find out. Today, Brand Asset Digital launches a public version of P2Pwords, a service that lets advertisers deliver keyword-triggered pitches through peer-to-peer networks.

As with Google's AdWords, P2Pwords enables advertisers to target promotional messages to users based on what they're looking for. Brand Asset Digital's task is trickier than Google's because it inserts those messages into the search results delivered by other companies' programs (e.g., LimeWire). It does so with techniques similar to the ones anti-piracy firms use to prevent people from downloading bootlegged songs, movies and games. Yet AdWords and P2Pwords share a simple but powerful concept: pitches are more likely to work if they're shown to people hunting for something like the product being advertised. The approach has been so effective for Google, AdWords has practically become a license to print money.

This conceptual similiarity won't necessarily vault Brand Asset Digital co-founders Tim Hogan and Joey Patuleia into Larry Page and Sergey Brin's tax bracket. Many advertisers have shunned the most popular file-sharing networks because, let's face it, people use them mainly to download bootlegged songs, videos and games. Also, Brand Asset Digital isn't trying to reach users of BitTorrent, one of the most popular file-sharing programs. Nevertheless, the opportunity presented by P2Pwords is so large, it may be hard for advertisers to resist -- particularly if they're promoting something designed for younger users. Just compare Web searches to the activity on file-sharing networks. According to comScore, Web search engines answer queries about 400 million times per day. Those searches generate more than $20 billion a year in advertising.  But by data security firm Tiversa's count, file-sharers search for content on p2p networks about 1.5 billion times daily. That's almost four times the volume of Web searches.

Patuleia argues that no matter how you feel about what people are doing on p2p networks, it makes no sense to ignore such an enormous, content-hungry audience.

Another file-sharer faces costly day of reckoning

A federal judge has ordered a Kazaa user in Arizona, Jeffrey Howell, to pay the major record companies $40,850 for infringing copyrights on 54 songs. It's not a sum of Jammie Thomas proportions, but it's still gotta hurt.

Unlike Thomas, Howell never got the chance to present his case to a jury. Instead, U.S. District Judge Neil V. Wake declared victory for the labels after experts for RIAA reported that Howell had erased his hard drive. Howell, who admitted having Kazaa on his PC (to download porn, he said), blamed the software for autonomously placing songs into his shared folder without his knowledge. He told the judge that he'd wiped his drive to stop Kazaa before it could infringe again, but Wake concluded that Howell's actions weren't quite so innocent.

The award award represents the smallest amount provided by statute ($750 per song, plus $350 for the cost of filing suit), compared to the $9,250 per track that a Minnesota jury assessed Thomas. Both amounts pale next to the $30,000 that U.S. District Judge Florence-Marie Cooper ordered TorrentSpy to pay in another case that ended after the defendant was found to have destroyed crucial evidence.

-- Jon Healey

Healey writes editorials for The Times' Opinion Manufacturing Division.

FCC slams Comcast for blocking Internet traffic, vows to police ISPs

A sharply divided Federal Communications Commission this morning slammed Comcast for blocking Internet access to some customers. It accused the cable company of failing to tell its subscribers about the practice, lying when confronted by regulators and trying to cripple online video sites that compete with its on-demand service.

Despite the allegations, the FCC decided not to fine Comcast. But the 3-2 FCC vote sets a new precedent in the volatile battle over Internet traffic flow, known as net neutrality.

In concluding that Comcast violated principles that the FCC put in place three years ago to guarantee access to any lawful online applications, the commission fired a warning shot to all Internet service providers that it would not tolerate discriminatory behavior. FCC Chairman Kevin J. Martin (pictured at right above), a Republican, sided with the two Democratic commissioners in rebuking Comcast, which argued it was using "reasonable network management" to try to prevent congestion caused by peer-to-peer users sharing large video files.

Martin said the FCC vote would "send a message to the industry that bad actors will end up being punished." He said:   

By applying the framework that we are adopting today, the commission will remain vigilant in protecting consumers' access to content on the Internet. Subscribers should be able to go where they want, when they want, and generally use the Internet in any legal means. When providers engage in practices truly designed to manage congestion, not cripple a potential competitive threat, they should not be afraid to disclose their practices to consumers.

The FCC gave Comcast 30 days to ...

Saving 'The Dark Knight' from online pirates

Building buzz for "The Dark Knight" was easy. The tough part for Warner Bros. was keeping the film off the Internet before it was released in theaters.

Reporter Dawn Chmielewski takes you behind an unprecedented anti-piracy effort by Warner Bros. to keep the latest Batman film from being bootlegged, which the studio feared would have cut into box-office sales. As she notes, "The success of an anti-piracy campaign is measured in the number of hours it buys before the digital dam breaks." To that end, Warner Bros. employed a strategy that included staggered delivery of film reels, spot checks of theaters and even distribution of night-vision goggles to keep would-be film pirates at bay.

It seems to have worked. She writes:

Warner Bros. executives said the extra vigilance paid off, helping to prevent camcorded copies of the reported $180-million film from reaching Internet file-sharing sites for about 38 hours. Although that doesn't sound like much progress, it was enough time to keep bootleg DVDs off the streets as the film racked up a record-breaking $158.4 million on opening weekend. The movie has now taken in more than $300 million.

Read the full story for more details about the effort and to learn how "The Hulk" provided inspiration for the bootleg-fighting campaign.

-- Chris Gaither

Photo: Heath Ledger as the Joker in "The Dark Knight." Credit: Warner Bros.

Shawn Fanning sells third brainchild to EA

( OOPS: This post previously said TechCrunch reported the deal two weeks ago. It was actually almost a month ago.)

Shawn Fanning, best known as the founder of pioneering file-sharing service Napster, has finally earned some money.

Electronic Arts said tonight it had acquired his latest company, ThreeSF, and its video-game service Rupture. A person familiar with the deal said EA had paid roughly $30 million.

After introducing tens of millions of users to the awesome power of peer-to-peer networking -- or at least to all the free music they could eat -- Napster went bankrupt in a blaze of glory. 

Fanning never had voting power over that creation, and he started over with SnoCap, which tried to keep the best elements of Napster but added legal copyright controls. SnoCap faltered as the unauthorized peer-to-peer outfits inspired by Napster continue to grow. The company was sold in April to music-oriented social networking site iMeem for not very much money.

By then, Fanning had moved on to ThreeSF's Rupture, a San Francisco company that allows computer-game players to automatically spread word of their online accomplishments.

When the widely read blog TechCrunch wrote a month ago that gaming giant EA had bought Rupture for a reported $30 million, it wasn't true. But it is now.

Rupture could give EA a crucial tool for becoming a force...