Kazaa, whose technology was used by millions to illegally swap music and movies, agreed Thursday to pay $115 million to settle lawsuits with the record industry and to launch a 'legitimate' service.

The Australian peer-to-peer file-sharing company also reached a settlement with the Motion Picture Association of America, and agreed to pay an undisclosed sum.

The settlements come a little more than a year after the Supreme Court's unanimous decision in the landmark Grokster case, which determined Internet file-sharing services can be sued if they encourage people to use their sophisticated software to steal copyrighted material.

"This settlement marks the dawn of a new age of cooperation between peer-to-peer technology and content industries," Nikki Hemming, chief executive of Sharman Networks, which acquired Kazaa from Zennstrom and Friis, said in a statement.

In 2005, there were an estimated 20 billion illegal downloads, according to the International Federation of the Phonographic Industry.

The Kazaa settlement, and the one involving Grokster last fall, are important wins for the entertainment industry, said Eric Garland, chief executive of BigChampagne, a Los Angeles research firm that monitors file sharing.

"It's now becoming clear that companies that build businesses around vast file-sharing communities are not going to be allowed to persist, at least within the reach of U.S. law enforcement," he said.

By John Boudreau
San Jose Mercury News