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IFPI plans to file civil damages case against profitable Kuro, which has been accused of loading songs from CDs on to its file-sharing site

It looks like Napster and works like Napster, but Taiwan's Kuro peer-to-peer (P2P) service has something Napster never had: profit.

That profit irks Taiwan's music industry, which has launched another salvo at the  popular but legally dubious file-sharing service.

This time, industry groups claim that Kuro has gone past merely acting as the passive middle-man to  actively  ripping and uploading songs from CDs to its network. And they say they have the indictment and evidence to prove it.

'The implication is that while P2P relies on the consumer for files, Kuro has actually paid someone to add files to its servers,' said Alex Chen, assistant to Taiwan's secretary-general of the International Federation of the Phonographics Industry (IFPI), which represents music labels.

Adding to IFPI Taiwan's arsenal  is its  plan to file a NT$400 million ($96 million) civil damages case  for lost income  from Kuro's operations. IFPI figures show total music sales in Taiwan last year came to NT$4.5 billion.

Kuro is estimated to have as many as 500,000 members in Taiwan and charges a NT$99 per month  access fee. These figures cannot be verified as Kuro is a private company.

Kuro also  provides a range of content on its website. Industry observers say Kuro is making a very high margin on its operation, while  it claims to spend a lot on staff and research and development.

Prosecutor Lin Yuh-bin filed an indictment in September  that accuses Kuro of hiring two Taiwanese companies, Xinji Technology and Puxuen Technology, to upload new music on to its P2P network.

Among the defendants is Chen Shou-teng, nominated as the principal person on record for Kuro's parent company Fashion-Now, who  is a defendant in a  criminal copyright case filed last year involving IFPI and Kuro. The latest indictment has been added to last year's one. IFPI says Kuro is the founder of  Xinji Technology and Puxuen Technology, and  Chen Shou-teng is also a co-founder of Puxuen Technology.

A police raid in a CD piracy crackdown uncovered evidence of Kuro's alleged uploading activity. CDs, computers loaded with numerous music files and evidence of the business relationship between Kuro and Xinji were seized.

Among the evidence was contracts between Kuro and Xinji, and Xinji and Beijing Darlu Huangzhong, Kuro's  mainland operation.

According to the September indictment - a copy of which has been obtained by the South China Morning Post - Kuro paid Xinji Technology NT$800,000 per month to convert CDs to MP3 files and upload them to  Beijing Darlu.

Xinji  closed  in April last year.  The indictment further alleges that the same people set up Puxuen Technology in May last year to continue uploading songs,  graphics and text from album covers for distribution to Kuro's mainland operation.

Kuro spokesman Eric Yang has denied the company owned Puxuen or  Xinji.  He said it contracted the companies to act as its sole distributor for online CD sales.

'We don't have any relationship with Puxuen other than the business relationship to outsource our distribution to them.' He said Puxuen was the sole distributor for Kuro's online CD sales.

Evidence presented in the indictment suggests that in  October last year Puxuen's income was  NT$42,831 on just 116 transactions. That is evidence that Puxuen's main business is the reproduction of MP3 files, the indictment says.

'I wouldn't say [CD sales] is a very good business,' Mr Yang said.

Joining IFPI in protesting against Kuro's actions is the Music Publishers' Association of Taiwan (MPA) and the Taiwanese authors' society called Must.

Must general manager Johnson Chu said his organisation had tried for months to work out a deal with Kuro to collect royalties for his members, but described the company  as 'unco-operative'.

He said Kuro had responded  by saying it was unable to provide information about which authors' works the company  had used and continued to argue  over the price.

MPA and Must are expected to launch a civil damages claim against Kuro similar to the one  the IFPI is preparing.

Kuro defends its actions as legitimate and says business shall continue as usual. 'Until a final judgment comes in, we're free to operate,' Mr Yang said.



Napster-style web service in Taiwan riles music sector