The Kazaa system enables one user to share music and indeed any other type of file by placing it in a folder called "My Shared Folder". A user who wants to copy the file searches the "My Shared Folder" files of other users. If the file that he or she seeks is found, the title will be displayed against a blue icon on the user's computer. The file can then be downloaded. Altnet improved the speed and accuracy of the "My Shared Files" searches. The Kazaa system is extremely popular. Over 317 million people across the world are said to have had downloaded Kazaa onto their computers. The defendants claimed at one point to conduct 79% of the world's peer-to-peer file-sharing activities.
The claimants sued the defendantsinfringementement of copyriinfringementement of the Australian federal Trade Practices Act and conspiracy. Wilcox J threw out the trade practices and conspiracy claims but concluded that the defendants had infringed the claimants' copyrights in their sound recordings. The judge set out his reasoning as follows:
"(i) despite the fact that the Kazaa website contains warnings against the sharing of copyright files, and an end user licence agreement under which users are made to agree not to infringe copyright, it has long been obvious that those measures are ineffective to prevent, or even substantially to curtail, copyright infringements by users. The respondents have long known that the Kazaa system is widely used for the sharing of copyright files;
(ii) there are technical measures (keyword filtering and gold file flood filtering) that could enable the respondents to curtail Â although probably not totally to prevent the sharing of copyright files. The respondents have not taken any action to implement those measures. It would be against their financial interest to do so. It is in the respondents' financial interest to maximise, not to minimise, music file-sharing. Advertising provides the bulk of the revenue earned by the Kazaa system, which revenue is shared between Sharman Networks and Altnet.
(iii) far from taking steps that are likely effectively to curtail copyright file-sharing, Sharman Networks and Altnet have included on the Kazaa website exhortations to users to increase their file-sharing and a webpage headed "Join the Revolution" that criticises record companies for opposing peer-to-peer file-sharing. They also sponsored a "Kazaa Revolution" campaign attacking the record companies. The revolutionary material does not expressly advocate the sharing of copyright files. However, to a young audience, and it seems that Kazaa users are predominantly young people, the effect of this webpage would be to encourage visitors to think it "cool" to defy the record companies by ignoring copyright constraints."
Between trial and judgment, the US Supreme Court delivered judgment in Metro-Goldwyn-Mayer Studios Inc v Grokster Ltd 125 S.Ct 2764; 73 USLW 4675 ("Grokster"). His honour invited the parties' submissions on that case but they tended to confirm the learned judge's impression that although there were similarities between the cases there were also differences on the facts and in the law. The upshot was that Wilcox J found little assistance in the Supreme Court's decision.
The interesting point from the English point of view is that Wilcox J distinguished the House of Lords decision in CBS Songs Ltd v Amstrad Consumer Electronics PLC  1 AC 1013. In that case, the law lords found that the manufacture and sale of recorders that could replicate the claimants' tapes did not amount to authorizing infirngement. Following earlier Australian authority, opinion J was of opinon that there were sufficient differences between authorization under s.101 of the Australian Copyright Act and s.12 of the Copyright Act 1956 not to follow the House of Lords' decision.