When the recording industry's legal team sued Jammie Thomas, a single mother of two in Minnesota for allegedly pirating music over the Internet from her home computer, it relied on intelligence gathered by a small Baltimore-area company that has built itself into the digital sleuth of the entertainment world: SafeNet Inc.
With the ability to track down computers around the world that have illegally downloaded the latest George Clooney movie or Britney Spears song, SafeNet's subsidiary MediaSentry has become a sought-after celebrity of sorts to an industry that's desperate to contain digital piracy. Belcamp-based SafeNet uses technology to study the Internet habits of those who download digital data.
"There would be no case without SafeNet," said Brian Toder, a lawyer for Thomas who asked for a new trial after a jury fined his client $222,000 this month. He called the tactics employed by SafeNet to track down his client and more than 26,000 alleged copyright infringers for record companies "very impressive."
"They have created a harvesting machine," Toder said.
Piracy has proliferated rapidly with globalization and the evolution of Internet technology, and costs entertainment companies billions of dollars in lost sales. Not only are digital pirates using handheld camcorders to record movies in theaters and streaming them on the Internet for free, but they are scanning the pages of best sellers and posting them online for all to see.
While SafeNet tracks digital scofflaws to help companies crack down on copyright infringement, it also has helped the industry see a global opportunity - new audiences. By looking into who is downloading a TV show, for instance, the company has been surprised to find that a program made for U.S. audiences is popular in Russia or Israel.
But SafeNet's role as one of the entertainment industry's primary investigators has stirred fears among privacy advocates who say they don't know how intrusive the company's proprietary searches of private individuals can be. The company has been accused in court actions of illegal and flawed searches. For their part, SafeNet officials say the information they mine from public sites is available to anyone who wants to collect it.
"Whenever anyone can track your comings and goings, of course it's troubling," said Gigi Sohn, president of Public Knowledge, a Washington public interest group that advocates for the digital rights of consumers. "A lot of times you just don't have the slightest idea of who's gathering information on you."
SafeNet, founded by two National Security Agency engineers in a Timonium basement in the 1980s, has grown into one of the largest digital copyrights management companies, selling network security and encryption technology. It acquired MediaSentry two years ago in a cash-and-stock deal worth $20 million.
MediaSentry provides anti-piracy services for music, software, movies, print and video-game publishers. Its clients include the Recording Industry Association of America, a trade group that represents the largest record labels such as Universal and Sony BMG. MediaSentry's competitors include Entrust Inc. and VeriSign Inc.
John Desmond, vice president of MediaSentry Services, said the company's founders saw an opportunity in the 1998 passage of the Digital Millennium Copyright Act, which strengthened copyright protections. About that time, with the advent of music-sharing site Napster, the recording industry decided to take action. It teamed with MediaSentry.
"We have invented a proficiency at watching online traffic much like Google has a proficiency for telling people what's on the Internet," Desmond said.
In general, SafeNet patrols peer-to-peer networks, in which users share music and other content, for people swapping music subject to copyright protection. The company's computer system records the Internet protocol address, a series of numbers that denominates a computer, and the time of the infringement.
SafeNet doesn't gather data on individuals beyond the IP address and information associated with that address, including geographic location. It doesn't have access to the names of people associated with IP addresses; those are obtained from Internet service providers, Desmond said.
RIAA estimates that it has lost $3 billion in sales over the past seven years, in large part from music theft online. In addition to thousands of lawsuits, the trade group targets university campuses, where it believes the piracy problem is acute, sending letters to schools that provide IP addresses to pass on to students, warning them of pending lawsuits.
Most RIAA cases are settled, reportedly for an average of $4,000.
Toder, the lawyer in the Thomas case, argued that the damages awarded were "grossly excessive." He noted that songs sold through legitimate online outlets usually go for about $1.
In another piracy case brought by the recording industry with the help of SafeNet, the alleged copyright infringer, Tanya Andersen of Oregon, fought and got the lawsuit thrown out. She has since sued the music companies and SafeNet, alleging that MediaSentry conducts "illegal, flawed and negligent investigations." Her suit claims that MediaSentry was acting as an unlicensed private investigator.
SafeNet officials declined to comment on the pending case, but the RIAA has noted in court filings that because the peer-to-peer networks are open, the information gathered there could be obtained by anyone.
Khalid Kark, an analyst who covers information security for Forrester Research, said SafeNet might come under increasing pressure not only from customers but from the general public to be more forthcoming about their methods. The company needs to balance its desire to limit competition with customer demands to prove the level of security from its services and privacy concerns.
"Some purists would want SafeNet to be a lot more public," Kark said. "If it's not a good business model for them, obviously they are not going to disclose it. But there are ways to be a little more transparent."
SafeNet doesn't discuss its clients or the value of contracts. In its last full year as a public company in 2005, SafeNet reported sales of $263 million. The company hasn't filed financial statements since getting caught up in the stock options-backdating scandal that has stung hundreds of companies and forced earnings restatements. Former SafeNet executive Carole D. Argo pleaded guilty this month to a federal charge that she manipulated the options program to boost their value.
SafeNet was taken private in April by California's Vector Capital Corp., which acquired the company for $634 million. It is no longer required to publicly disclose its finances.
But company officials say the company is growing and has broadened product offerings. They realized that media companies could use the reams of data gathered about the downloading of songs and other content from the Internet for other services, such as customizing campaigns to reach new markets.
"We've been doing this enough to say that our accuracy has been vetted and contested many, many times, and ironically because we are so good at this, that's why we can expand," Desmond said.
Another irony is that without the peer-to-peer networks used around the world, media companies wouldn't know those viewers or listeners even existed. "It's causing folks who own this content to think globally about consumers," Desmond said. "Let's be reasonable about stopping piracy but not impede the opportunity."