Record industry looks for $1.4 billion in Limewire trial

Glenn Pomerantz, the lawyer representing 13 record labels in their continuing legal action in the Manhatten federal court against Lime Wire LLC and founder Mark Gorton, has said that the defendants should pay the highest range of damages for harming the recording industry by allowing people to download songs for free saying “The harm that Lime Wire has caused is truly staggering,”

A brief reminder of the facts behind the trial: last May District Judge Kimba Wood ruled that Lime Wire induced or willfully contributed to the infringement of recordings by allowing its users to download and illegally share thousands of songs on the Internet through its peer-to-peer file-sharing software. The court ordered Lime Wire to shut its music service last year and it duly did (although a ‘pirated’ LimeWire software later appeared).

The record companies have also accused Gorton of the fraudulent transfer of assets into family limited partnerships where they would be shielded from liability. Gorton, who was CEO of Limewire from 2000 to 2006, was found by the court to have been intimately involved with the management of the company and until 2005, Gorton owned at least 87% of the company, according to court records. Pomerantz told the jurors Gorton made the transfer three days after the U.S. Supreme Court ruled in 2005that file-sharing service Grokster could be held liable for copyright infringement in the MGM v Grokster case. In a pre-trial ruling Judge Kimba Wood said that Gorton and all his business entities (such as Lime Group and Lime Wire FLP) could be liable for copyright infringement, so that he himself and any other companies he set up will also be liable to pay any damages awarded to the rights owners.

The record labels evidence all points to LimeWire’s role is facilitating illegal downloading and the resultant destruction of the recorded music market. In opening remarks Pomerantz told the jury the record industry’s revenue declined 52% from 2000 (the year Lime Wire was founded) to 2010. Gorton and LimeWire’s lawyers have, unsurprisingly, a slightly different take on this, arguing that many other factors were responsible for the drop in music industry revenue besides peer-to-peer file sharing, with the defendant’s attorney Joseph Baio saying “The record companies know and have known that their problems started well before Lime Wire” in his opening remarks. Baio cited the record companies’ own past comments to show that other factors were more to blame for the decrease in revenue than file-sharing. These included counterfeit and copied CDs, the economic recession, bankruptcies of music wholesalers and retailers, the maturation of the CD market, competition from other forms of entertainment such as video games, and the industry’s own inability to exploit the new technologies.

The defendants have been hampered by another of Judge Wood’s rulings where she said that one of their key witnesses, a damages expert called George Strong, would not be allowed to deliver his entire testimony. Strong planned to tell the court that the link between file-sharing and slumping record sales in the last ten years was not proven, and that there is evidence that file-sharing can lead to an increase in record sales, ie the 'file-sharing is basically a preview service' argument. However Wood ruled that Strong was not an expert on either the music or technology industries, and that as he hadn't undertaken any of his own research regarding file-sharing, he would not be allowed to make such sweeping statements in court with Judge Wood saying ”he can’t argue that file sharing may have stimulated additional music purchases, because he didn’t do any analysis in that area”. Judge Wood has also indicated that she won’t allow evidence from recording artistes who would say that illegal file swapping has not harmed their careers – and in some cases may have (in their opinion) helped their careers. Judge Wood was happier with the record companies’ experts and Dr. Richard Waterman of the University of Pennsylvania, who ran a study which concluded that 98.8% of the files requested by Limewire users were copyright protected, will be allowed to give evidence.

However, the defence did produce a number of statements in court from various record label executives to explain the rise of filesharing and point towards the label’s own failures to contain piracy. One internal memorandum produced to the court by the defence from Warner Music Group chief Edgar Bronfman Jr, saying “"[W]e inadvertently went to war with consumers ... [and] consumers won," Doug Morris, former head of Universal Music wrote in a note presented as evidence "The real problem is that there is no technology coming from the record companies" with current Universal Music CEO Zach Horowitz also quoted: It seems when told by Victory Records CEO Tony Brummel, "You can't compete with free," Horowitz replied "We can. We have to. It's just that we have to be creative and add value." LimeWire also produced a memo from Recording Industry Association of America (RIAA) chairman Mitch Bainwol, entitled, "Burning and Ripping are Becoming a Greater Threat Than P2P." LimeWire concluded its opening statement in the case by pointing out that anytime a file-sharing network has been shuttered, users have migrated to another service. CNET reports Baio concluded by saying "Music that is free is here to stay".

The record labels haven’t publicly indicated how much they are seeking from Gorton but it understood that they will try to get statutory damages (under US federal copyright law) for 9,561 sound recordings released since 1972. If they ask the jury for maximum statutory damages of $150,000 for each recording, that would result in an award of $1.4 billion. Other damages on pre-1972 recordings will also be sought. Baio said the labels deserved far less and seemingly said that Gorton made only about $6 million from the songs the record companies have listed as infringed.

In related news, a new lawsuit has been filed by film producer Alki David, who also runs online TV-on-demand service FilmOn.com. He has sued tech website CNET and its publisher CBS Interactive for copyright infringement on the basis they were the "main distributor" of the LimeWire software. Reports say that CNET has always had a section on its site where users can download free software, or free previews of premium software, and among the packages offered over the years have been various P2P technologies, including LimeWire. The lawsuit asserts that LimeWire was downloaded 220 million times from CNET since 2008, and that that amounts to 95% of the software's distribution in that time. In a statement issued to Billboard, a CBS Interactive spokesman said: "CBS and a host of other media companies were awarded a court ordered injunction against one of Alki David's companies last year with respect to that company's improper use of copyrighted content. This latest move by Mr David is a desperate attempt to distract copyright holders like us from continuing our rightful claims. His lawsuit against CBS affiliates is riddled with inaccuracies, and we are confident that we will prevail, just as we did in the injunction hearing involving his company".


Arista Records LLC v. Lime Wire LLC, 06-05936, U.S. District Court, Southern District of New York (Manhattan).

www.thecmuwebsite.com (CMU Daily, 5th May 2011)

http://www.bloomberg.com/news/2011-05-04/lime-wire-jury-chosen-as-warner-music-sony-labels-seek-copyright-damages.html

http://paidcontent.org/article/419-limewire-trial-beginsjury-to-decide-how-much-labels-are-owed/