As a country that prides itself on technological knowhow, Israel has also become a hot spot for music and film piracy over the Internet. Over the past years, Israel has been labeled a modern hell by American regulators as well as global trade bodies for anything that has to do with the Internet and copyright law. "On the one hand, you have people who think they deserve to get things for free in a legal environment with no law that deals with the Internet. And on the other hand, Israel is a haven for early adapters to technology, so the combination makes it a real nightmare. In Israel, we have one of the highest numbers of Internet users in the world relative to the total population," said Moti Amitay, head of enforcement of the Israeli branch of the International Federation of the Phonographic Industry, the global music industry's trade body. Last week the Haifa District Court ruled against music file-sharing websites including Shift, Lala, Lionetwork, and Subcenter. The lawsuit was filed by 27 music recording companies, including Hed Arzi Ltd., Helicon Ltd., and NMC Music Ltd. The IFPI, under the auspices of Dr. Sarah Presenti & Co. Law Offices, presented the NIS 500,000 lawsuit last week against Web sites that allow piracy by providing the necessary software. "This case is one of our biggest cases in the field of copyright. We have also decided to ask for damages. The damage to our clients involves millions of millions of dollars. You cannot always show financial damages. But, in this case, we do think that we can hit them in their pockets as well. And, believe me, we shall fight," said Dr. Presenti, who has specialized in intellectual property laws for more than 20 years, in an interview with The Jerusalem Post. The law firm represents a number of leading Israeli and international record companies including EMI, BMG, NMC, Hed Artzi and others. The petitioners claimed that the sites were violating their copyright. The sites' operators were ordered to pay an interim sum of NIS 500,000 until damages to the petitioners are assessed. The lawsuit follows the US Supreme Court's decision at the end of June that on-line file-sharing services Grokster and Streamcast could be held liable for copyright infringement if they encouraged Internet users to illegally copy movies and music from each others' computers. The long-awaited ruling was seen as a key test of copyright law in the digital era. "Intellectual property and copyright has become a serious issue in Israel, since the Americans have decided to put us high on their watchlist not only because of copyright infringement but also because of patent infringement concerning pharmaceutical patents," said Presenti. "My clients are all the major record and film companies in Israel and abroad." The watchlist gives warnings to countries that are watchful for piracy as well as those, like China, that ignore it and let the piracy spread. "Big brother is always watching us. It is not only us, but also the Palestinians. In Gaza, the British copyright is law the same as in Israel. In the West Bank, it is the old Jordanian law. But there are a lot of other issues to worry about in these areas apart from intellectual property. So a lot of piracy merchandise is shifted into Israel. When it comes to piracy and drugs, there is a harmonious relationship between Israelis and Palestinians. Both sides are making very good money and we have to fight it. There is no politics here," said Presenti. According to a report by the International Intellectual Property Alliance (IFPI), estimated losses to the US copyright industries in 2004 due to copyright piracy in Israel were $113.4 million. Amitay explains that the current law, as amended in 2002, still fails to incriminate the unauthorized use of business software in a business setting, i.e. corporate end user piracy of business software. Copyright law in Israel makes it legally impossible to take criminal actions against corporate end user pirates. According to the IFPI, the value of lost sales for the record industry in 2004 amounted to $30m., compared with $25m. in the year before. "The figure includes copyright infringement of CDs, CDRs and Internet files. From 2003 to 2004, we have seen a significant increase of 25 percent to 30% for piracy regarding the Internet," said Amitay. "We have decided to do anything in our capability to protect the assets of the industry. But first we need to enforce a legal framework that will provide guidance on what is allowed legally and what is not." Until 10 years ago, record companies made their money by selling records and then CDs. Today much of their income is made from selling the use of their copyright for public performances, broadcasting, and other purposes. It is not only the record companies who are losing out, it is also the composer and the performers who get percentages from sales. If the record companies don't make money, they don't give a chance to new performers. "The piracy problem, like the drug problem, will never be solved. The question is how to deal with it," said Presenti. "Israeli companies, like international companies, need to get used to the new era. They need to find their niche and their protection in this new era. That's why it is so important to fight it now, so we provide them with a window of time. And this is what all these cases are about - buying time." The long-term goal is to move users of file-swapping services to industry-sanctioned services, which charge users a fee for downloading music.