The creator of the large-file sharing utility has moved from Seattle to San Francisco, hired a COO, and will try to beat Microsoft to the legal P2P movie sharing market.

The Mercury News has reported that Bram Cohen, creator of the popular file-sharing BitTorrent technology, wants to take his company into the mainstream.

He and COO Ashwin Navin visited Burbank, California, for what the article describes as “high-level” talks with the Motion Picture Association of America. Considering that some BitTorrent users have indulged in sharing movies online, many in the tech world will be surprised that the MPAA received their visitors with courtesy instead of with a hail of automatic weapons fire.

Legal online distribution, and a method of tracking and monetizing movie downloads, would fulfill part of the puzzle. Users with home theater systems and high-definition screens get a high quality movie experience now from DVDs, which have become, until recently, a big revenue source for Hollywood.

Being able to identify illegal uploads and remove them would be a benefit that Mr. Cohen said he could provide, simply by removing links to that content upon notification from the film studios. The article notes how search engines like Google follow similar practices.

But the studios, and therefore the MPAA, would prefer BitTorrent to do that filtering proactively, instead of placing the burden of research and notification on Hollywood. BitTorrent has worked with Ask Jeeves to develop a search engine, and that work should allow for the incorporation of filters.

That leaves a couple of issues unaddressed. The first one would be the same question that could be asked of Mashboxx, a P2P music service that uses the Snocap database to determine if users should be prompted to pay for a music file before downloading it: will people pay for what they’ve been getting for free?

The second question the BitTorrent crew might ask could be “has Microsoft been by here to chat yet?” It’s pretty well known by now that Microsoft has been working on a technology similar to BitTorrent that will also address the problem of the last “rare bits” of a file.

Microsoft has been working on its perception within Hollywood. Bill Gates’ company doesn’t have the Hollywood cachet of Steve Jobs‘ Apple yet. The players in Hollywood may be more comfortable cozying up to the world’s richest man instead of a startup that the MPAA bitterly criticized in May for its facility in spreading copies of Star Wars Episode 3 around the world.

David Utter is a staff writer for Murdok covering technology and business. Email him here.