Kazaa Oz lawsuit wows the crowd

The Earth is flat, the Moon landing never happened, the world will end next week and Ashlee Simpson is one of the great recording artists of her generation. It's funny how misinformation can enter the marketplace and get reported as the truth. It's also funny how the misinformation gets reported so widely.

As we already know, on 4 March 2005 the Australian Federal Court refused to grant a request by the Australian Recording Industry Association (ARIA) to force the alleged owners of the Kazaa Media Desktop to disclose their assets, and refused to dispose of their assets pending a decision in the Kazaa case. We also know that at least one well-respected publication incorrectly reported that the injunction had been granted. Innocent mistake, or another shot fired in the PR war? You decide.

ARIA had sought Mareva orders in order to "restrain... the respondents from dealing with assets under their control so as to dissipate or remove them from the applicants' reach and thereby frustrate a potential judgment in the applicants' favour". ARIA also requested that the respondents be ordered to file an affidavit of assets detailing their possessions as at last Friday.

So what actually happened on 4 March 2005?

Counsel for the respondents, including Sharman Networks' Nikki Hemming and Altnet chief Kevin Bermeister, sought an adjournment of the request for an affidavit of assets, saying it would "interrupt" them as they are currently preparing a written response to the submissions prepared and lodged by the applicants in preparation of the closing statements of the case. Justice Margaret Stone, the sitting judge on the day, contacted Justice Murray Wilcox who has heard all of the Kazaa case to date. Justice Stone allowed the adjournment following an assurance from Justice Wilcox, that he will hear the applicants' request on 22 March, 2005 - prior to closing statements.

What was the point of the application of these Mareva orders?

A Mareva order is an order which is granted under Australian law for the administration of justice. It takes the form of a negative interlocutory injunction. Typical Mareva orders include orders for the respondent to preserve assets and not to leave the jurisdiction. They are usually granted to an applicant after they have successfully obtained a judgement against the respondent, but before there has been an order for damages.

So, has there been a judgement in the Kazaa case? No. We haven't even heard final submissions yet, so it seems as though ARIA's application was premature. Yet was it premature? No - not if the purpose of the application was to distract the respondents while they are preparing their final submissions.

There are only a finite number of lawyers working for the respondents who are involved in this case, and if they are working on a response to a Mareva order application then they are NOT working on final submissions. Great litigation tactic - force your opponent to take their eyes off the ball! This Mareva tactic also suggests that ARIA is very confident it will win its case, or it would like the world to think it is very confident. ARIA is so confident about victory that they are not even waiting for that victory before they apply for a Mareva order! Such an expression of confidence is very risky - given that we are probably at least two months from a decision and no one can read Justice Wilcox's mind.

The instigation of all of this fuss was the Altnet press release entitled "Altnet Launches First-Ever Advertising Fund Dedicated to Sharing P2P Revenue".

The press release announced "the first-ever online advertising revenue-sharing fund to be split with top independent labels. Among its numerous significant independent label customers, V2, Artemis, Epitaph/Anti, Side One Dummy and Palm, Simmons/Latham, and Koch Media will participate in this fund where they will share the revenue generated from advertising that appears in the user interface of popular Peer to Peer applications".

ARIA effectively claimed that Altnet was going to spend their money now by distributing it to other companies - and wanted the court to prevent them from doing so. All of this was very surprising. The amounts of money are very small - we're talking thousands of dollars but not hundreds of thousands of dollars. Also, on 1 March, 2005 - three days before the Mareva hearing the following report appeared in one of Australia's most respected music industry columns:

"LABELS TAKE P2P CASH... Australia's peak record industry body, ARIA, is currently suing Altnet for copyright infringement - but won't kick out or discipline members of ARIA who take the company's tainted cash.

"This has nothing to do with the Kazaa case locally, which is about the unlicensed distribution of sound recordings and the liability for that activity," an ARIA spokesperson says. "Any arrangements which may exist between copyright owners and Altnet in relation to the licensed distribution of recordings is entirely a matter between those parties - it has no relevance to, or connection with, the liability for the unlicensed distribution of recordings via peer to peer networks which is the subject of the local proceedings in relation to the Kazaa network."

So when did the change in position by ARIA take place, and why didn't anyone tell the ARIA PR rep? You know that old cliché about the left and right hand... That's the problem with litigation stunts - they can backfire and sometimes you forget to tell your own people you are doing them. Can't wait for the next one...

BTW, Ashlee, if you are reading this - I love you, please come home, I forgive you. Or is this more misinformation? ®

Alex Malik has a B.Com (Finance) and LLB from the University of New South Wales and an LLM from Sydney University. He is in the final stages of a PhD in Law with a specialisation in intellectual property rights enforcement, at the University of Technology.

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