Settlement applies to P2P's global operations.

The major record companies and motion picture studios have reached an out-of-court settlement, revealed today (July 27) by the RIAA and IFPI, with Sharman Networks and other operators of peer-to-peer network Kazaa.

Under the settlement, the network's owners and operators will pay $115 million in damages to the major record labels--Universal Music Group, Sony BMG Music Entertainment, EMI Music and Warner Music Group. Kazaa will additionally introduce filtering technologies so that users cannot share unauthorized copyrighted files.

The settlement applies to Kazaa operations worldwide and concludes litigation in Australia and the United States, the latter as part of the MGM Studios vs. Grokster case filed in the federal District Court in California.

"Kazaa was an international engine of copyright theft which damaged the whole music sector and hampered our industry's efforts to grow a legitimate digital business,"says John Kennedy, chairman/CEO of IFPI. "It has paid a heavy price for its past activities. At the same time Kazaa will now be making a transition to a legal model and converting a powerful distribution technology to legitimate use. This is the best possible outcome for the music industry and consumers."

Mitch Bainwol, chairman/CEO of the RIAA, adds, "This is welcome news for the music community and the legal online music marketplace. Steadily but surely, we are passing another important marker on the remarkable journey that is the continuing transformation and development of the digital marketplace. The winners are fans, artists and labels and everyone else involved in making music, and our partners in the technology community."

The settlement follows a landmark ruling in the Federal Court of Australia last year which found the Kazaa operators liable for authorizing widespread copyright infringement, and litigation in the United States by record companies, music publishers and motion picture studios against the operators of Kazaa, Grokster and Morpheus for copyright infringement.

The case against Grokster and Morpheus operator Streamcast ultimately reached the U.S. Supreme Court, which in June 2005 unanimously ruled that individuals or companies that induce copyright theft by users of their service can be held responsible. Grokster settled the case with the record labels and motion picture studios in November last year.

Kazaa is one of the world's most popular peer-to-peer networks for the illegal trading of music and movies, and at its peak had 4.2 million simultaneous users worldwide. In May 2003 Sharman Networks declared Kazaa the most downloaded software ever, at 239 million downloads.

The settlement coincides with a new report from IFPI showing the global scale of Internet piracy. The report, entitled "Protecting Creativity in Music," chronicles a year of change in the digital music market, during which unauthorized services around the world have migrated to legitimacy or stopped their infringing operations--including Grokster, iMesh and Bearshare in the United States, Ezpeer in Taiwan, Soribada in Korea, and now Kazaa.