Net News

Kazaa to Pay $100 Million In Settlement

Just as this issue was going to press, Kazaa, the peer-to-peer (P2P) file-sharing Web site that once shared the spotlight with Napster, and the music and movie industry settled their long-running law suits ' and Kazaa will pay mightily. The settlement with the four major music companies ' Universal Music, Sony BMG, EMI and Warner Music ' calls for Kazaa, owned by Sharman Networks, to pony up $100 million and to become a legitimate file-sharing service immediately. Terms of Kazaa's settlement with the Motion Picture Association of America (MPAA) were not disclosed.

The settlement also resolves the case brought against Sharman in Australia, in which the Federal Court of Australia held that Kazaa could be held liable for contributory copyright infringement (see, 'Australian Court Finds For Music Company' in the October 2005 issue of I&LS).

Legitimate success won't be as easy for Kazaa ' it enters the legitimate downloading market a bit late. Apple Computer Inc.'s iTunes pay service has become quite popular, and Napster went to a pay system long ago, after a similar ruling against it.

Last month, the House of Representatives approved a Republican-written bill to limit Internet gambling by making it illegal for banks and credit card companies to make payments to online gaming sites.

This is bad news for the majority of online gamblers and the Web sites that keep the action going.

To enforce the ban, the bill prohibits credit cards and other payment forms, such as electronic transfers, from being used to settle online wagers. It also would give law enforcement officials the authority to work with Internet providers to block access to gambling Web sites.

Some opponents of the legislation say policing the Internet is impossible, and that it would be better to regulate the $12 billion industry and collect taxes from it. The online gambling industry is based almost entirely outside the United States, although about half its customers live in the U.S.

Other critics complain that the bill doesn't cover all forms of gambling. They point to exemptions they say would allow online lotteries and Internet betting on horse racing to flourish while cracking down on other kinds of sports betting, casino games and card games such as poker.

Congress has considered similar bills several times before. In 2000, disgraced lobbyist Jack Ambramoff led a fierce campaign against it on behalf of an online lottery company. Online lotteries are allowed in the latest bill, largely at the behest of states that increasingly rely on lotteries to augment tax revenues.

Professional sports leagues also like the bill, arguing that Web wagering could hurt the integrity of their sports. The horse racing industry also supported the bill because of the exemption it will get. Betting operators would not be prohibited from any activity allowed under the Interstate Horseracing Act. That law, written in the 1970s, set up rules for interstate betting on racing. It was updated a few years ago to clarify that betting on horse racing over the Internet is allowed.

The Justice Department has taken a different view on the legality of Internet betting on horse races. In a World Trade Organization case involving Antigua, the department said online betting on horse racing remains illegal under the 1961 Wire Act, despite the existence of the more recently passed Interstate Horseracing Act.

The department hasn't actively enforced its stance, but observers say it is possible the agency and the racing industry could face off in court in the future.

There is some hope for gamblers, however. A Bill similar to the one passed by the House has come up against some opposition in the Senate, and will not come up for a vote before the Senate's August recess ' and most likely not before the November elections.

When David Carruthers, chief executive officer of BetonSports, was arrested as he and his wife changed planes at an airport in Texas last month, it sent shockwaves through the British stock exchange and share prices tumbled.

The fallout from the announcement that the Scottish businessman is facing racketeering charges was even more severe: A wave of selling through the Internet gambling sector followed as gaming stocks plunged in the United Kingdom.

The case against Carruthers further proves that the U.S. government has Internet gambling in its legislative sight.

As Carruthers was awaiting his bail hearing in a Texan jail, U.S. authorities revealed an indictment filed in Missouri that names 11 people and four companies facing 'various charges of racketeering, conspiracy and fraud' relating to the betting firm.

The founder of BetonSports, Gary Kaplan, 49, was also charged with 20 felony violations, and a warrant has been issued for his arrest. His brother, Neil Scott Kaplan, was arrested in Fort Pierce, FL, U.S. officials said.

A separate civil case has been brought to stop BetonSports from taking sports bets in the U.S., and to force it to return money. The FBI has instructed four telephone companies to stop providing services to BetonSports.

BetonSports said it was urgently trying to clarify the situation and assess the impact of a temporary restraining order on business in the U.S., its biggest market.

Carruthers, 49, is a former regional director with Ladbrokes and has more than 30 years of experience in the gaming industry. He is a leading figure in the pro-online gambling lobby and is a resident of Costa Rica and Bromsgrove, Worcestershire.

The world's biggest music companies are preparing a lawsuit against Yahoo China for copyright infringement as part of the industry's efforts to crack down on piracy.

'Yahoo China has been blatantly infringing our members' rights. We have started the process and as far as we're concerned we're on the track to litigation,' saysd John Kennedy, chairman and chief executive of the music industry trade group the International Federation of the Phonographic Industry (IFPI).

'If negotiation can prevent that, so be it,' he adds.

Yahoo China officials could not immediately be reached for comment.

Yahoo China is a partnership between Internet giant Yahoo Inc, which owns 40% of the business, and China's Alibaba.com. The IFPI has blasted Yahoo China's search engine for providing links to Web sites that offer unlicensed music downloads.

In a speech in Shanghai in May, Kennedy said China was the most exciting new market in the world for the music industry, but that online piracy 'threatens to strangle the fledgling legitimate digital music market before it has hardly evolved.'

The IFPI estimates that about 85% of all music consumed in China is pirated.

Kennedy singled out Yahoo China and Chinese Internet search leader Baidu.com, which was ordered by a Beijing judge last year to stop directing users to music download sites.

The music industry has relied on an anti-piracy strategy of lawsuits against illegal music services and their users, paired with growth in legal music services, such as Apple's market-leading iTunes Music Store. The UK music trade group BPI is currently suing the Russian Web site AllofMP3.com.

Kazaa to Pay $100 Million In Settlement

Just as this issue was going to press, Kazaa, the peer-to-peer (P2P) file-sharing Web site that once shared the spotlight with Napster, and the music and movie industry settled their long-running law suits ' and Kazaa will pay mightily. The settlement with the four major music companies ' Universal Music, Sony BMG, EMI and Warner Music ' calls for Kazaa, owned by Sharman Networks, to pony up $100 million and to become a legitimate file-sharing service immediately. Terms of Kazaa's settlement with the Motion Picture Association of America (MPAA) were not disclosed.

The settlement also resolves the case brought against Sharman in Australia, in which the Federal Court of Australia held that Kazaa could be held liable for contributory copyright infringement (see, 'Australian Court Finds For Music Company' in the October 2005 issue of I&LS).

Legitimate success won't be as easy for Kazaa ' it enters the legitimate downloading market a bit late. Apple Computer Inc.'s iTunes pay service has become quite popular, and Napster went to a pay system long ago, after a similar ruling against it.

Last month, the House of Representatives approved a Republican-written bill to limit Internet gambling by making it illegal for banks and credit card companies to make payments to online gaming sites.

This is bad news for the majority of online gamblers and the Web sites that keep the action going.

To enforce the ban, the bill prohibits credit cards and other payment forms, such as electronic transfers, from being used to settle online wagers. It also would give law enforcement officials the authority to work with Internet providers to block access to gambling Web sites.

Some opponents of the legislation say policing the Internet is impossible, and that it would be better to regulate the $12 billion industry and collect taxes from it. The online gambling industry is based almost entirely outside the United States, although about half its customers live in the U.S.

Other critics complain that the bill doesn't cover all forms of gambling. They point to exemptions they say would allow online lotteries and Internet betting on horse racing to flourish while cracking down on other kinds of sports betting, casino games and card games such as poker.

Congress has considered similar bills several times before. In 2000, disgraced lobbyist Jack Ambramoff led a fierce campaign against it on behalf of an online lottery company. Online lotteries are allowed in the latest bill, largely at the behest of states that increasingly rely on lotteries to augment tax revenues.

Professional sports leagues also like the bill, arguing that Web wagering could hurt the integrity of their sports. The horse racing industry also supported the bill because of the exemption it will get. Betting operators would not be prohibited from any activity allowed under the Interstate Horseracing Act. That law, written in the 1970s, set up rules for interstate betting on racing. It was updated a few years ago to clarify that betting on horse racing over the Internet is allowed.

The Justice Department has taken a different view on the legality of Internet betting on horse races. In a World Trade Organization case involving Antigua, the department said online betting on horse racing remains illegal under the 1961 Wire Act, despite the existence of the more recently passed Interstate Horseracing Act.

The department hasn't actively enforced its stance, but observers say it is possible the agency and the racing industry could face off in court in the future.

There is some hope for gamblers, however. A Bill similar to the one passed by the House has come up against some opposition in the Senate, and will not come up for a vote before the Senate's August recess ' and most likely not before the November elections.

When David Carruthers, chief executive officer of BetonSports, was arrested as he and his wife changed planes at an airport in Texas last month, it sent shockwaves through the British stock exchange and share prices tumbled.

The fallout from the announcement that the Scottish businessman is facing racketeering charges was even more severe: A wave of selling through the Internet gambling sector followed as gaming stocks plunged in the United Kingdom.

The case against Carruthers further proves that the U.S. government has Internet gambling in its legislative sight.

As Carruthers was awaiting his bail hearing in a Texan jail, U.S. authorities revealed an indictment filed in Missouri that names 11 people and four companies facing 'various charges of racketeering, conspiracy and fraud' relating to the betting firm.

The founder of BetonSports, Gary Kaplan, 49, was also charged with 20 felony violations, and a warrant has been issued for his arrest. His brother, Neil Scott Kaplan, was arrested in Fort Pierce, FL, U.S. officials said.

A separate civil case has been brought to stop BetonSports from taking sports bets in the U.S., and to force it to return money. The FBI has instructed four telephone companies to stop providing services to BetonSports.

BetonSports said it was urgently trying to clarify the situation and assess the impact of a temporary restraining order on business in the U.S., its biggest market.

Carruthers, 49, is a former regional director with Ladbrokes and has more than 30 years of experience in the gaming industry. He is a leading figure in the pro-online gambling lobby and is a resident of Costa Rica and Bromsgrove, Worcestershire.

The world's biggest music companies are preparing a lawsuit against Yahoo China for copyright infringement as part of the industry's efforts to crack down on piracy.

'Yahoo China has been blatantly infringing our members' rights. We have started the process and as far as we're concerned we're on the track to litigation,' saysd John Kennedy, chairman and chief executive of the music industry trade group the International Federation of the Phonographic Industry (IFPI).

'If negotiation can prevent that, so be it,' he adds.

Yahoo China officials could not immediately be reached for comment.

Yahoo China is a partnership between Internet giant Yahoo Inc, which owns 40% of the business, and China's Alibaba.com. The IFPI has blasted Yahoo China's search engine for providing links to Web sites that offer unlicensed music downloads.

In a speech in Shanghai in May, Kennedy said China was the most exciting new market in the world for the music industry, but that online piracy 'threatens to strangle the fledgling legitimate digital music market before it has hardly evolved.'

The IFPI estimates that about 85% of all music consumed in China is pirated.

Kennedy singled out Yahoo China and Chinese Internet search leader Baidu.com, which was ordered by a Beijing judge last year to stop directing users to music download sites.

The music industry has relied on an anti-piracy strategy of lawsuits against illegal music services and their users, paired with growth in legal music services, such as Apple's market-leading iTunes Music Store. The UK music trade group BPI is currently suing the Russian Web site AllofMP3.com.