Ed Felton has a nice post about eDonkey CEO Sam Yagan’s testimony before the senate judiciary commitee during a hearing on “Protecting Copyright and Innovation in a Post-Grokster World “.

The title of his entry “eDonkey Seeks Record Industry Deal” puts another spin (albeit perhaps inadvertently) on the company’s agenda. It differs significantly from the connotation offered up by Mp3NewsWire, which was one of several sources that quoted Yagan as saying that eDonkey was throwing in the towel after receiving a C & D letter from RIAA. This quote must have come from his verbal testimony, as it appears nowhere in his written testimony.

It may be that the company sees no other option but to reach some kind of agreement with the record industry. Or it may be that the Grokster decision left enough breathing room for both sides that this kind of a deal becomes appealing to both eDonkey and the RIAA. eDonkey may be realizing that their future under an active inducement rule is nebulous at best, and the RIAA may (or at least should) realize that the Supreme Court declined to rule on their argument (that Grokster wasn’t shielded by the SNIU ruling in Sony), and the present legal environment will not give them a cheap, clear solution to their P2P problem.

In other words, both sides in this particular legal struggle seem to be coming to terms with the reality of the market: you can’t stop file-sharing, and nor should you. The RIAA probably wants eDonkey’s traffic. eDonkey probably wants the RIAA’s money. Ahhh, capitalism.

To be sure, the RIAA is throwing around its weight more than it should. They have spun the Supreme Court’s recent ruling in Grokster as an unequivicol victory for their stance against P2P companies, and they seem to be intent on bullying said companies into complying with their demands. But at the same time I’m not convinced by Yagan’s claim that they have nothing to hide and are thus capitulating because they can’t afford a lawsuit. I think a more accurate statement would be that they can’t risk a lawsuit under the current Supreme Court active inducement rule.

Since the Supremes gave only skance guidance regarding what can be considered “active inducement,” I think most P2P companies are reasonabely concerned that a trial may in fact reveal evidence of “active inducement.” These companies have basically lost the shield of summary judgement, and have to consider that their internal documents, emails, advertising campaigns, etc. may be supoeonaed and subject to an analysis of active inducement. In that sense, the Grokster decision definitely made for a murky legal environment for technology companies.

While it is troubling that companies are already folding under the new active inducement rule, I’m not convinced that the Grokster ruling will ultimately have a significant effect on technology, or even on P2P networks specifically. eDonkey’s recent decision, whether it is pure capitulation, opportunism, or a combination thereof, has virtually no effect on the eDonkey/Overnet network. As Nicolas Christin recently mentioned in an email conversation about this, “[eDonkey’s] decision has virtually no impact on the content available, as 1) they are not a content provider, and 2) off-shore, open-source alternatives are readily usable and already represent a dominant share of the
client market on the eDonkey/Overnet network.” Indeed, eMule has that share.

So, eDonkey may have sold out or given up or whatever, but the P2P revolution continues, with or without the recording industry’s consent.