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Could American copyright law be applied outside US borders?

US District Judge Stephen Wilson believes it could. In Los Angeles, on Monday, November 25, Wilson entertained arguments by record companies and movie studios that they should be allowed to proceed with copyright-infringement suits against Sharman Networks, Ltd., the parent company of file-sharing service KaZaa. Sharman Networks is headquartered in Australia and incorporated in Vanuatu, an island in the Pacific Ocean.

Sharman Networks' attorney David Casselman told Wilson that "holding the online swapping company liable for copyright violations would be akin to prosecuting a computer manufacturer for the actions of computer hackers," according to an Associated Press report. Legal precedent is unclear; but telephone companies were long ago exonerated from any responsibility for criminal activities involving their systems. Sharman attorney Rod Dorman argued that applying US law to offshore companies could invite similar action against US Internet companies by judges in "communist China." China and other countries routinely block websites deemed unacceptable by government censors.

Wilson didn't rule immediately, but mentioned that he "would be inclined to find there's jurisdiction against Sharman." Plaintiffs stated that approximately 21 million US computer users have access to copyrighted music and movies available through KaZaa, which has $4 million in annual advertising revenue. "I find the argument about providing the service to so many California residents compelling," Wilson stated. A lawsuit against Sharman could put the company in the same legal and financial quagmire that sank upstart Napster.

In a related development, a study published in October by research firm Digital Tech Consulting (DTC) predicts that "copy protection and digital rights management (DRM) solutions for digital consumer products and services" will be a $2 billion industry by 2006. DRM-related technology and services generated $600 million globally in 2002, according to The Business of Digital Copyright: Content Protection and Management in the Consumer Digital Era. The report analyzes Internet usage, television and radio transmissions, and consumer electronics devices capable of being fitted with content protection and/or DRM software, such as set-top converter boxes, digital video recorders, and optical disc players.

"The fear of wide-spread distribution has resulted in services that don't offer full catalogs of titles, [and have few] or no downloading privileges and limited or no ability to port content to portable devices," said DTC senior analyst Antonette Goroch. "Media suppliers adopting sophisticated DRM technologies allowing some content storage and portability will be the first to find a viable revenue stream on the Internet."