Wired has a story about a recently awarded patent for dampening filesharing by spawning lots of fake files:
A computer science professor and graduate student have been awarded a patent for a method of thwarting illegal file sharing on peer-to-peer networks by flooding the network with bogus files that look like pirated music.
The software creates bogus files with attributes -- such as file names and description tags -- that make them look like the real thing, but they are in fact white noise, low-quality recordings or advertisements to buy the song. What's more, the software sends out thousands of decoys to frustrate P2P users with fruitless downloads.
The patent can be found here (#6,732,180). I guess this'll work for software like Kazaa; I'm not sure if it'll be effective for newer methods like BitTorrent (though I guess somebody could spit out fake torrent files throughout the Internet).