The struggling music industry claimed a victory yesterday when the Taipei District Court found the nation's largest peer-to-peer (P2P) file-sharing operator guilty of infringing intellectual property rights (IPR).
Chen Shou-teng (陳壽騰), chairman of kuro.com.tw, was sentenced to two years in prison and fined NT$3 million (US$92,000). Kuro CEO James Chen (陳國華) and president Chen Kuo-hsiung (陳國雄), sons of Chen Shou-teng, received three years in jail and a NT$3 million fine each.
Making the case more noteworthy was the jailing of Chen Chia-hui (陳佳惠), one of Kuro's 500,000 members, who was sentenced to four months in jail with a probation of three years. Because the term is shorter than six months, however, it can be substituted with a fine of NT$300 per day.
The verdict came as a surprise to some observers as Kuro's smaller rival, Ezpeer, was found not guilty of copyright infringement by the Shilin District Court in July.
"We will appeal the case, and believe we will eventually win because the verdict did not rule that P2P software is illegal," James Chen said at a press conference yesterday after the verdict was announced. "We will keep running our site and ensure our members' interests."
The ruling said Kuro had been running advertisements that had encouraged members, who pay a monthly fee of NT$99, to swap copyrighted music files via its Web site. It said Kuro was therefore party to infringement of the Copyright Law (著作權法), in a ruling similar to a US Supreme Court verdict against Grokster and StreamCast Networks in June.
The three defendants also hired employees to transfer music files from CDs and place them on Kuro's site, the verdict said.
Kuro attorney Lee Tsung-teh (李宗德) denied that the advertisements in question encouraged Kuro members to illegally share files, adding that all files swapped on the company's site were those of the members, and not the defendants.
Celebrating the music industry's long-awaited victory, Robin Lee (李瑞斌), the secretary-general of the International Federation of the Phonographic Industry (IFPI) in Taiwan, which represents major record companies, said that copyright holders still had a long way to go.
"The verdict did not change the fact that the output value of the industry is still declining." he said.
Lee suggested that Kuro adopt digital rights-management technologies -- forms of encryption technology that control or restrict the use of digital media content -- which he said had been widely adopted by P2P operators for obtaining licenses from the music industries around the world.
John Eastwood, a co-chairman of the Intellectual Property Committee of the European Chamber of Commerce Taipei, said the ruling may help Taiwan be taken off the US Trade Representative's Watch List of IPR violators next year.
He suggested that the music industry work out a way of cooperating with P2P operators, otherwise P2P activities could go underground, making them harder to regulate.
Kuro shares climbed NT$0.10 to NT$20.30 on a gray market ahead of a stock-exchange listing. For the first eight months of the year, the company saw sales of NT$256 million, with 99 percent of that amount coming from monthly membership charges.