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Tim Culpan

Court finds Taiwan firm guilty of piracy, jails three executives and a customer

A landmark ruling against peer-to-peer (P2P) service provider Kuro has given a boost to the Taiwan music industry but cast doubts over the legal status of online file sharing in the island.

The Taipei district court on Friday handed out prison sentences to three executives of Kuro and one of its users after finding them guilty of illegally copying music.

It was the music industry's second victory against P2P services in as many weeks, after the Australian Federal Court  ruled Kazaa illegal and ordered its executives to modify the service to filter out illegal downloads.

Friday's ruling in Taiwan made international history after chief executive James Chen and general manager Victor Chen were each sentenced to three-year prison terms. Chairman Chen Shou-teng was sentenced to two years.

All three were also fined NT$3 million ($713,100). User Chen Jia-hui was given a four-month sentence, suspended for three years.

The defendants are expected to appeal the verdict and hit back at the music industry, which launched the case two years ago  led by the International Federation of the Phonographics Industry (IFPI).

'IFPI just wants to sue, they don't want to co-operate,' Kuro's James Chen said at a press conference after the verdict was announced.

He said  the Taipei-based firm had been looking into ways to co-operate with IFPI and music companies to find a way to share revenue but  the industry was unresponsive.

The music industry says it will not co-operate until Kuro stops allowing illegal downloads and finds  a way to implement digital rights management systems.

Launched in 2000, Kuro now has more than 400,000 users, each paying NT$99 per month to use the firm's P2P software.

Kuro's parent company, Fashion Now, last year posted operating revenue of NT$321 million and profit of NT$265 million. A profit margin of 83 per cent makes it the world's most profitable P2P service.

Kuro is Fashion Now's only business. Its investors include US venture capital firm WI Harper and Singapore's Vertex Management.

Despite Friday's guilty verdict,  the ruling does not help to clarify the legality of P2P services in Taiwan because an earlier ruling against a similar service, EZPeer, found executives of that company not guilty.

The EZPeer verdict in June and  Friday's Kuro verdict were handed down by the same court but in different geographies and by different judges, with the two rulings showing the lack of clarity in Taiwan's intellectual property law.

'We absolutely do not accept the [EZPeer] ruling in the Shihlin District Court and believe the current law can resolve online music legal issues,' said Robin Lee, secretary-general of IFPI Taiwan.

But Kuro's legal team jumped on the disparity between the two  rulings, using them to cast a shadow over the legality of Friday's verdict. 'How come the Taipei and Shihlin verdicts are so different?' said Lee Zong-de, lawyer for Kuro.

'The difference in result could be attributed to the judge being a little more knowledgeable and open-minded, or the prosecutor putting more resources into the case,' said John Eastwood, an intellectual property lawyer for Wenger Vieli in Taipei. 'This case seems to be an anomaly ... but it would have been disastrous for the music industry if they'd lost this time.'

Music industry executives pointed to the Kuro ruling and the previous  week's Kazaa verdict as evidence of the international trend against P2P services, but said they were not overjoyed with the guilty verdict against Kuro.

'We are not excited about today's verdict but hope this delayed justice may bring a ray of hope to  Taiwan's music industry,' Mr Lee said.



Ruling raises static on music and file sharing on internet