The recording industry may have found a silver bullet in its fight against file-trading companies, bringing lawsuits against the founders who launch rogue services that violate federal copyright laws. The threat of personal bankruptcy could prove to be a powerful dissuasion to upstart CEOs.

"Now you're seeing executives like Johnny Deep and the (Audiogalaxy CEO Michael Merhej) being named in these suits," said Fred von Lohmann, senior staff attorney with the Electronic Frontier Foundation (EFF), which represents Morpheus and ReplayTV. "It's a whole different story today when these organizations want to take your house."

Deep, the professor who launched Aimster, has been dogged by legal problems since the day his file-trading service hit the scene. He filed for bankruptcy last year after losing his domain to America Online in a trademark dispute and facing the RIAA in a copyright infringement suit.

While there is no legal precedent requiring Audiogalaxy to shutter its service completely, the company folded its tents, effectively shutting its system down in favor of an "opt-in" network. Such a system requires Audiogalaxy to block any music files that haven't been licensed from the music labels and publishers. The problem facing such services is the dearth of content currently available.

Centerspan Communications, which purchased the multimedia file-trading network Scour out of bankruptcy court in 2000, is the only company currently running an "opt-in" network.

"The Napster court never suggested that there be an outright ban on all content even with the filters in place," said von Lohmann. "The RIAA just got Audiogalaxy to become Centerspan. It's system stays empty until the music industry puts something in it."