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Sam Yagan, resident of MetaMachine which makes eDonkey, told the US Senate Committee on the Judiciary that the recent Supreme Court ruling against P2P operator Grokster had left other operators with little option but seek another business model that does not enable their software to be used in a potentially illegal manner.

Yagan says that this is not because the court has ruled definitively that P2P software is illegal - it hasn't - but because the cost of proving otherwise is too great.

'Many technology companies, including eDonkey, whose products can be used for infringement will simply find themselves unable to continue operations in a Post-Grokster world - not necessarily because they would lose under the new Grokster standard, but rather because they literally cannot afford the costs of mounting a legal defence,' he told the Senate committee. 'Companies like eDonkey must face the reality that confronting unimaginably larger opponents that can outspend small, under-funded technology companies to death makes the question of "legal" or "illegal" a moot point.'

Yagan says

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that the only option for P2P operators is to reinvent themselves as closed services which allow controlled, paid-for file sharing. This would involve letting rights holders - record labels and movie studios - have the DRM tools to manage key aspects of every transaction.

'Unfortunately, before licensing content to us, the labels demanded that we control the activity of our users - something that we could not do even if we wanted to given the purely decentralised nature of the eDonkey software,' he said.

Nonetheless he appears to be confident that a licensed, more centralised version of P2P can prove a viable business model.

'A challenge will be to retain the "old P2P's" appeal to the consumer - as a terrific facilitator of music discovery, including some amount of free music for listening before purchasing, and for participating in a vibrant community based on sharing musical preferences.'

In the meantime innovation in P2P technology will inevitably be driven by the need to steer clear of litigation.

'Individuals, basic researchers, hobbyists, and hackers, ... will continue to explore technological advances, although probably not publicly in the United States for fear of ruinous litigation prosecuted by the entertainment industry,' he predicts. 'Undoubtedly, the next generation of open P2P applications will travel even further down the road of anonymity and secrecy. They will come with more data security (encryption) and more user anonymity than anything currently available.'

The full text of Yagan's address can be read at judiciary.senate.gov.