The recording industry has a lawsuit pending in US District Court in Los Angeles against Kazaa, seeking to grind it away to nothing as it did to Napster. Kazaa is currently the most popular online file-swapping software, downloaded by more than 160 million people. At any given time, more than 3 million people are running the program, double the number that Napster had at its peak.

But the US legal system is having a tough time grappling with Kazaa. Not only does the software operate in a decentralized way, but it’s also a poster case for the new global economy. The three young men who developed the software hail from Estonia. They were commissioned to do the work by a company in the Netherlands. That company has since sold the software to another based in the Pacific island nation of Vanuatu, whose executives work in Australia.

The District Court is dutifully issuing orders, but it’s not clear anybody else will care. The US judge ordered the developers to turn over all of their documentation and testify about how the program works (which would coincidentally give the recording industry insights about how to crash it), but an Estonian judge rejected the request. Meanwhile an appeals court in the Netherlands ruled that local distributors of the software shouldn’t be responsible for piracy by its users – the same question that’s before the District Court – and the Vanuatu-based company argues that it is not subject to U.S. laws. An interesting quagmire that the world’s legal system is ill-equipped to resolve neatly. Here’s an article in the Washington Post today about the case.