Facing music industry's legal wrath, eDonkey to fold

In wake of Supreme Court ruling, peer-to-peer exec tells Congress his company's "throwing in the towel."

Leading peer-to-peer application eDonkey will soon comply with the demands of the Recording Industry Association of America (RIAA) and shut down, the top executive behind the service told a congressional committee Wednesday.

According to a transcript from testimony before the Senate Judiciary Committee, Sam Yagan, the CEO of eDonkey developer MetaMachine Inc., said that his company would be "throwing in the towel" after it received an RIAA cease-and-desist notice.

"I'd like to make it clear to the committee that we have replied to the RIAA's cease-and-desist letter," Yagan told the committee in a hearing called Protecting Copyright and Innovation in a Post-Grokster World.

The hearing was set up in the wake of the US Supreme Court's decision in MGM vs. Grokster, which found that Grokster could be sued for inducing copyright infringement for acts taken in the course of marketing file sharing software.

After the ruling, RIAA sent cease-and-desist letters to seven file-sharing services, including once-popular WinMX, which shut down last week.

The eDonkey site is currently live, and Yagan did not provide details on the company's termination of the service.

"The Grokster standard requires divining a company's intent, the decision was essentially a call to litigate," he said. "This is critical because most startup companies just don't have very much money... I simply couldn't afford the protracted litigation needed to prove my case in court under Grokster. Without that financial ability, exiting the business was our only option despite my confidence that we never induced infringement and that we would have prevailed under the Grokster standard."

But although Yagan said his company couldn't deal with the legal costs of an industry lawsuit, he did say that RIAA's tactics aren't helping the music business.

"I fear that the winners in Grokster will not be the labels and the studios, but rather the offshore, underground, rogue P2P developers who will have just lost half a dozen of their biggest competitors," Yagan warned.

An RIAA spokesperson could not be reached for comment.