Kazaa stands on the edge of a legal "maelstrom," and a Danish anti-piracy group mailed invoices to downloaders of copyrighted materials.

Kazaa's situation is discussed by John Borland:

A Los Angeles federal judge heard arguments Monday as to whether record companies and movie studios can sue the parent company of Kazaa, the most popular online file-swapping service, in the United States.
Much of Kazaa's future, from a business and legal perspective, hangs on the judge's decision. The parent company, Sharman Networks, is headquartered in Australia and incorporated in the Pacific Island nation of Vanuatu, and has tried to keep business contact with the United States to a minimum in order to decrease its legal risk.

If a judge says Sharman can be sued in the United States, Kazaa will get sucked into the same legal maelstrom that has grabbed Napster, Aimster, Audio Galaxy, Grokster and Morpheus, closing some of the popular services and threatening the existence of the others. The Kazaa case is the biggest yet in the recent copyright wars that have been testing the international reach of U.S. courts.

The judge did not rule on the issue Monday, but observers said he appeared ready to order Sharman to stand trial. A ruling is expected in the next several weeks.

"He seemed like he was pretty interested in keeping Sharman in the case," said Fred von Lohmann, senior intellectual-property attorney for the Electronic Frontier Foundation, which is representing Sharman rival Streamcast Networks in an associated case.

....If Sharman loses this round, the company will be added to a larger lawsuit ongoing against Streamcast Networks and Grokster, two rival file-swapping companies that use the same underlying technology as Sharman.

A critical hearing in that case will be held Dec. 2, in which both sides will argue that the case should be concluded immediately with a so-called summary judgment without going to a full trial. Each side is arguing for the completion of the case in its own favor.

The Danes are going straight to the "pirates":

The Danish Anti Piracy Group (APG) identified 150 alleged pirates asking them to pay a combined $133,600, said Morten Lindegaard, an attorney for the group. The biggest offenders face a bill of $13,360.

"We are demanding full payment for the use of these copyrighted materials," Lindegaard said. The APG has worked with the Danish branch of music trade body International Federation of the Phonographic Industry, to crack down on online piracy. The decision to seek compensation for downloads opens up a controversial new front in copyright holders' ongoing campaign to curb consumer piracy on the Internet, a phenomenon blamed for a decline in CD sales and upswing in the free trade of video games, computer software and video games.

The tactic is drawing protests from some technical and legal experts who insist that without the violators' computer it's impossible to prove the existence of copyright violations. Others question the size of the bills.

"In this case, we're talking about compensation for the damage the Anti Piracy Group claims its members have suffered. It's the courts that decide the amount of compensation to be paid due to copyright infringement, not the victim." said Martin von Haller Groenbaek, a Danish attorney specialising in IT law.