In the midst of a legal war, Sharman Networks, the company that distributes Kazaa, countersued the RIAA and MPAA for antitrust violations last January. Last Thursday a federal judge threw the case out:

The labels and studios filed suit last year against Sharman Networks, alleging that it violated their copyrights by distributing and supporting Kazaa, which lets users copy files from one another's computers. Sharman countersued in February, claiming that the firms conspired to keep authorized and copy-protected versions of their songs and movies off Kazaa.

....U.S. District Judge Stephen V. Wilson in Los Angeles dismissed Sharman's antitrust claims. Even if its allegations were true, Wilson said, Sharman isn't entitled to damages because its business is distributing file-sharing software, not entertainment. In effect, the judge said, Sharman is not entitled to bring an antitrust lawsuit because it doesn't participate in the online entertainment market.

The ruling won't prevent Sharman from trying to prove later that the labels and studios colluded to block its partner Altnet from obtaining licenses to their songs and movies. Sharman alleged the labels and studios feared Altnet could compete with their online efforts.

....In its antitrust claims, Sharman argued that its strategy always has been to work with Altnet - a subsidiary of Woodland Hills-based Brilliant Digital Entertainment - to distribute authorized copies of music and movies through Kazaa. Sharman's role ostensibly was to provide the pipeline, and Altnet's was to get licenses.

Sharman alleged that the major media companies conspired to withhold licenses. But Wilson said, "Sharman is neither a competitor nor a customer" in that market, and any injuries would be "incidental, not integral, to the alleged anti-competitive scheme." [LA Times]