Federal Court of Australia, Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2005] FCA 1242

Sharman, who operated the Kazaa filesharing platform, were found liable for authorising the infringements of its users. The court held that Sharman knew that the Kazaa system was primarily used to share copyright material. Infringing activity attracted more visitors to the Kazaa site, which benefitted Sharman through advertising revenue. Although there was no Kazaa central server through which Sharman could control users’ activities, the court held that Sharman had the power to prevent infringements because it could have forced an upgrade of the software to inhibit infringement. The court considered, for example, that a keyword filter could have been implemented, or Sharman could have flooded users’ search results with files containing only copyright infringement warnings. Since Sharman had the power to take these steps but did not, the court found Sharman liable for authorising infringement.