Merlin settles for the indies

The global independent music rights agency Merlin has settled its long-running copyright infringement claim on behalf of its members against the now defunct peer-to-peer service LimeWire. The settlement was reached out-of-court subsequent to a lawsuit filed by Merlin in July 2011. Merlin’s settlement follows the major record labels’ announcement that they reached a $105 million out-of-court settlement with LimeWire in May 2011.

Merlin’s members’ claims against LimeWire were settled for an amount commensurate with the major record labels’ settlement, taking into account the aggregate market shares of the Merlin members relative to the major labels’ shares and costs of action. Merlin’s members’ market share in the US is around 10%. Merlin will pay out the proceeds of the settlement to its members shortly. Labels such as Epitaph, Merge, Warp, Yep Roc/Red Eye, Naïve, Naxos, Tommy Boy, One Little Indian, Kontor, Secretly Canadian, Beggars Group, [PIAS] Group,!K7, Sub Pop, Domino and Koch/E1 are all members of Merlin. Charles Caldas, Merlin CEO said:

“It is deeply satisfying to announce this settlement today. The exclusion of independents from past major settlements such as Kazaa was a key factor in the formation of Merlin, and I am proud to say that this time, via the actions of Merlin, our members’ rights have been properly protected. We will continue to do everything we can to ensure that the labels we represent are never again left out in the cold”.

http://www.merlinnetwork.org/home/

Limes are not the only fruit

I’ve been pondering over the weekend who the real winners and losers in the LimeWire saga were – and where the recorded music industry goes from here - and for that matter where film companies and other content owners go from here. Despite a court victory for the record labels, and an agreed settlement, I just can’t find any real winners, but I can find lots of losers, including (of course) LimeWire which has been shuttered and forced to pay over $105 million.

What we had was a widely popular internet service that was admittedly used by many to download illegal content – but LimeWire’s own figure showed that 30% of consumers used the service to find new music – and another 25% were “morally persuadable” – in that they could have been encouraged to pay for content. In a “can pay, won’t pay” era, not a bad market at all – and that’s gone. So a potential business has been lost, the consumer has lost out – and consumers have been lost too.

The recorded music sector is still in a steep decline, and the unpalatable truth is that those who used LimeWire for illegal downloading and peer-2-peer fileswapping will have undoubtedly moved elsewhere - as no doubt will those who would have paid. When the French government ran a survey of French consumer habits post the introduction of their version of the three strikes law (the ‘Law Hadopi’) in January this year, it showed that 49% of French internet users continued to download illegally. This can be compared with the 25% of LimeWire users who were“ hardcore pirates” and the 20% who were ‘legally unaware’ that what they were doing was illegal (or didn’t care) and whose behaviour is perhaps harder to change and monetise. That said, 55% remain as potential consumers (or 51% in France!) and losing that audience to other (often illegal) services can’t be a good move, can it (?) when your market has declined 52% in the last ten years (and that’s the record industry’s own figures).

So LimeWire lose – and the record labels lose, and consumers lose too! And what about those poor sods who actually created and paid for the sound recordings in the first place – the artists. As successful artists almost always have to assign ownership of their sound recordings over to record labels, despite paying for those recordings out of recouped royalties that would have otherwise been due to them, surely they have the most to lose financially? And I haven't seen much by way of statements from the labels on whether or when they will be making payments from the settlement to artistes - and indeed artistes don't really seem to have benefitted from any of the previous settlements received by the record labels from legal actions against downloaders and websites. In the cases I have seen, funds are (reportedly) being allocated to legal costs, enforcement costs and invested in ‘education’. I won' dwell on this, but lets be clear, the artist loses too.

But am I being to negative? Its not all doom and gloom. The live music industry, whilst not recession proof and certainly damaged by high ticket prices and ticketing charges over the last two years, remains in rude health and U2 have just broken box office records for the highest grossing World tour ever. The festival market in buoyant with a raft of 'sell outs' across Europe and the USA this year; merchandising is still a highly profitable sector; and music publishing revenues appear to be holding up, not least because of the success of the collection societies in continuing to monetise copyrights, and the successful growth of revenue streams such as synch licensing. With the recorded, music sector Warner Music Group has just been sold and there were a number of parties interested in buying the major label - and the Citigroup owned EMI have just announced healthy profits of £330 million for 2010 from their music publishing and recorded music divisions.

Even the data that came out of the LimeWire trial wasn't all negative. Whilst I suspect a relatively large proportion of LimeWire users would prefer not to pay for their music, the fact that 30% were 'sampling' new music, 20% were legally unaware of the true copyright position and that 25% were "morally persuadable" to pay means that up to 75% WOULD PAY. That’s a lot better than some of the record industries own statistics, such as those offered by the IFPI that show that 19 out of every 20 downloads are illegal. If the record industry could monetise 75% of downloads I imagine they would be very happy indeed, if not laughing all the way to the bank! And very recent French research conducted by the organization set up in France to administer its “three-strikes” file-sharing law, found that 50% of citizens view HADOPI as a positive initiative, and the same number also said it has persuaded them to “more often” seek legal content online - and that 72% of the respondents who had received a file-sharing warning from HADOPI, or knew of someone who did, either ceased or reduced their illicit downloading.


Traditional copyright law provisions, the new deterrent offered by three strikes laws,and the legal tools available post Grokster (at least in the USA and other countries such as Spain) against wesbites and software that encourages or induces illegal dwnloading means that customers can be pushed towards legal services, if the prices and offerings are right, and that those who profit from illegal filesharing can be chased down (sometimes) and their services can be shut down. This does give some legal protection to a 'content' business that isn’t entirely based on give always and copyright theft. But the fact remains is not an easy 'market' to monetise. The UK's Hargreaves review of IP law may offer a glimmer of hope - it may well recommend the introduction of a consumer right to format shift. The labels, both the majors and the indepdent labels, have always fudged this, but it the modern era consumer restricting DRM on paid for content seems just plain wrong and methinks the labels need some tough love here. But it will be moves to simplify and globalise content licensing that will be the key to this - something the music publishers have definately been better at - both domestically and on a global level, although criticisms still remain that the licensing both songs and sound recordings remains hopelessly out of step with new internet business models. Again, it might not quite be what the labels want but it is what the online content businesses desperately need - on both sides of the table. And whatever Hargreaves says (and of course the Report may well NOT favour content owners but may well favour internet businesses interests) there is no simple solution.

The rise of Apple as a brand has clearly shown the value of music in creating value -its just not much of that value went back to the major record labels and artistes. Apple is now the most valuable business in the World and its rise from a smallish boutique computer company to a global phenomenon can be almost directly synchronised with the rise of the iPlayer and iTunes. In early March this year at a talk I gave for BLACA I pointed out that between 1992 and 2003 Apple's revenue growth was almost static, but once the iPlayer was launched and then iTunes was launched (in 2003 in the USA and 2004 in Europe) Apple's revenues grew rapidly - from $8 billion in 2004 to $24 billion in 2007, and then to $65 billion in 2010. Apple became sexy (and valuable) in no small part because of its association with music. I am not sure the reverse is true, a least when looking at the 'value' part!

In some ways artistes are, despite some being in truly appalling contracts with record labels, in a better position to monetise themselves than the record labels will ever be, and this includes a better position to monetise their copyrights in the digital age as bands like Nine Inch Nails and Radiohead have proved when freed fom label contracts. Image Rights and in particular Trade Marks still give substantial protection to bands as 'brands' and increasingly artistes seem to recognise this. My concern for the recorded music sector remains that the major labels are stuck with supporting outmoded business models and, whilst changing faster than they would like, almost certainly are not changing fast enough.

I noticed an interesting story last week about the launch of a new £350 million investment fund called Icebreaker. The venture capital fund, up by former Kleinwort Dresden banker Caroline Hamilton, has the backing of wealthy investors and aims to back recording artistes who want to operate outside traditional record company business models. The fund has brought in UK indie label Cooking Vinyl as a consultant and has already placed its first funding, providing backing for Marilyn Manson’s new recordings. Like the Edge Group which also operates in a similar way, these financing deals provide a far more interesting business model for artistes in the digital age when they can move away from thinking about 'record music' and 'live music' and 'merchandising' and 'endorsement 'and 'publishing' as discrete areas of business, and rather can combine all of their activities into a 'business' where MAYBE the recorded music element supports live but maybe its a 'loss leader' or a pure promotional tool. Lady Gaga now has ten million followers on Twitter - whether or not that is a the basis for a new revenue stream who knows - but I suspect in the future artists will be at the core of '360 degree' business models but ones that do not necessarily involve record labels. It is a music business, just not as we know it!

And on that note, a new report on how record companies have evolved to cope with the challenges of the digital era has been published (16th May) having been launched at The Great Escape Conference and Festival in Brighton over the weekend. Penned by BPI Chair and former EMI UK chief Tony Wadsworth for MusicTank, the paper challenges the idea that record labels are outdated 'dinosaurs'. Based on interviews with key players from across the music business, including the majors, independents, managers and agents, the Report does make some suggestions for changes in the industry, though, including a call for more innovation in licensing and more transparency so that all stakeholders feel rewarded for their efforts.

The report is available from Westminster University's Music Tank at www.musictank.co.uk for £45, including a year's membership to MusicTank.

And interesting comment on the LimeWire settlement from digitalmusicnews.com; My thanks to Len Bendel for sending this link over to me http://www.digitalmusicnews.com/stories/051311labels

And a really clear review of many of the issues Professor Hargreaves will be considering has been compiled by Laurie Kaye in 'A Big Week For Copyright" which can be here on Laurie's Blog: http://laurencekaye.typepad.com/laurence_kayes_blog/

LimeWire settles with record labels for $105 million

LimeWire, the now defunct file sharing platform, and its founder, Mark Gorton, have reached a settlement with the 13 record labels that brought an action against them in the Manhatten federal court, agreeing to pay $105 million in damages. The defendants has already been found liable for copyright infringement last year by Judge Kimba Wood and the trial that has been settled was to award damages – the Jury could have potentially awarded up to $1.4 billion in statutory damages. LimeWire had already settled an action brought by 30 music publishers in March 2011.

Glenn Pomerantz, the lawyer representing 13 record labels in their legal action in the Manhatten federal court against Lime Wire LLC and founder Mark Gorton, said at the start of the action 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,”

The record companies 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 2005 that 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 pointed 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 were hampered by another of Judge Wood’s rulings when 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 wouldn'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, would have been allowed to give evidence.

As the trial progressed 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" although I am not quite sure why the defence felt this helped their case. 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" – again I am not quite sure why this helped the defence - its all piracy and all damaging! LimeWire's attorney concluded his 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".

Next it was LimeWire founder Mark Gorton’s turn to give evidence. Noting last year's court ruling on his company's operations, Gorton told the court "I was wrong. I didn't think our behaviour was inducing [copyright infringement] but I understand that a court has found otherwise". The RIAA clearly have a different opinion and said that Gorton ploughed ahead (despite a cease and desist letter sent after Grokster) because of the potential profits he could make - even more so once most of his US competitors shut down post Grokster. Indeed Pomerantz highlighted a pre-Grokster interview Gorton gave to the New York Times in which he said: "If the Supreme Court says it is illegal to produce this software, LimeWire will cease to exist" and also noted that LimeWire staff divided up their users into four categories: “hardcore pirates” (25%), “morally persuadable” (25%), those “sampling music” (30%) and “legally unaware” (20%). Pomerantz also said that Gorton had banned his staff from responding to user queries regarding the service's legality. Gorton told the court that he took the cease and desist letter as a request by the labels that he find a way of persuading his users to pay for music, and that he forbade staff discussing LimeWire’s legality as hadn't wanted to be placed in a position of giving legal advice to internet users.

And then it was time for the first of the record industry heavyweights – with Warner Music Group Chief Executive Officer Edgar Bronfman telling the federal jury that Lime Wire’s effect on Warner’s business was “devastating.” Bronfman, 54, testified that the drop in revenue caused by peer-to-peer music sharing services such as Lime Wire forced Warner to fire employees and release fewer recordings. He said he had hoped the services would shut down voluntarily after the Supreme Court Grokster decision held that music-sharing programmes could be held liable for infringement. “When Lime Wire kept operating it frustrated me greatly,” adding “It was devastating, frankly.” And that was the last of the heavyweights too as .... and the case was suddenly announced as settled, with the first report I saw in the Wall Street Journal, based on a defence statement to the press.

With a week of the trial still scheduled, and with no public indication from the record labels about how much they were seeking, media reports were still speculating that it would be maximum statutory damages (under federal copyright law) for 9,561 sound recordings released since 1972. If the jury awarded 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 were also being sought. In my own opinion the record labels had made a good case – and of course had already won the argument about whether or not LimeWire was liable for infringement - but clearly LimeWire alone was not the reason for the decline in the sale of recorded music – there are many reasons – piracy and P2P file swapping being key factors of course – but the record labels failure to adapt to the digital age is as much to blame in my mind (and yes, I still remember the awful Pressplay and Music Net the labels launched which is another story altogether). That said, much of the defence was, at best, irrelevant and some seemingly self defeating. Baio had 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. What did become clear was that as the case developed, ongoing settlement talks had run parallel with case with the Wall Street Journal again reporting that lawyers for the labels and LimeWire representatives have met on at least three occasions in the hope of replacing the jury decision. And then on May 12th the WSJ reported that a settlement HAD been reached with LimeWire LLC and its founder, Mark Gorton, agreeing to pay the (major record labels) plantiffs and their trade group the Record Industry Association of America $105 million to settle the copyright infringement lawsuit, according to a statement issued by the defendants' lawyer with LimeWire and Mr. Gorton saying that they were "pleased that this case has concluded” and quite possibly very pleased that LimeWire group companies - and indeed Mr Gorton personally - were facing having to pay over less than 10% of what COULD have been awarded, and certainly a lot less than the record labels had been suggesting was the real economic damage to the recorded music market by LimeWire. That said the labels will probably be pleased that they are not reliant on an unpredictable jury, that a significant (if not ground breaking) sum of money had been recovered and another important precedent publicly set, without too much collateral damage, in a public arena.

Update: I have just found the post settlement comments from chairman and CEO of the RIAA Mitch Bainwol who told reporters: "We are pleased to have reached a large monetary settlement following the court's finding that both LimeWire and its founder Mark Gorton were personally liable for copyright infringement. LimeWire wreaked enormous damage on the music community, helping contribute to thousands of lost jobs and fewer opportunities for aspiring artists". He added: "The significant settlement underscores the Supreme Court's unanimous ruling in the Grokster case: designing and operating services to profit from the theft of the world's greatest music comes with a stiff price".

What remains is one now defunct internet business and a declining recorded music business.



Arista Records LLC v. Lime Wire LLC, [2011] 06-05936, U.S. District Court, Southern District of New York (Manhattan).

EMI April Music Inc et al v. Lime Wire LLC, [2011] U.S. District Court, Southern District of New York, No. 10-04695.


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/

http://news.cnet.com/8301-31001_3-20061209-261.html

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/

Limewire closure slows down illegal filesharing, but new alternatives emerge

Research firm NPD Group have released findings that show that illegal file sharing of songs via peer-to-peer services has dramatically dropped off since Lime Wire was shut down by a US federal court who found the company liable for copyright infringement. The Recording Industry Association of America had file a copyright suit against Lime Wire and CEO Mark Gorton in 2007, claiming the company encouraged the pirating of billions of songs.

NPD said "the percentage of Internet users who download music via peer-to-peer services was at 9 percent in the fourth quarter of 2010, compared to 16 percent in the same period earlier in 2007" which is clearly a significant drop. NPD also found that the average number of music files downloaded from P2P networks also declined from 35 tracks per person in Q4 2007 to just 18 tracks in Q4 2010, although some downloaded just one or two tracks, while others took hundreds. NPD estimates there were 16 million P2P users downloading music in Q4 2010, down from 28 million in the same period in 2007.

Good news for content owners? Maybe ..... the research also noted that it appears that former LimeWire users are now moving to similar networks. Greg Sandoval, writing on CNet, reports that Frostwire had seen usage double in the final six months of 2010 after Limewire was shuttered in October, whilst Bittorrent client u-Torrent had a fifty percent uplift in users.

Read more at: http://news.cnet.com/8301-31001_3-20046136-261.html

Last slice of the Lime: no ice, no fizz

Limewire is no more and the company has said that it will close its small (legal) download business and cease trading. In a statement, Team Lime said: "Given our current situation, plans to bring our separate, legal music service to market have been cancelled. The beginning of 2011 will mark the closing of LimeWire's New York office and cessation of business by LimeWire. We attracted some of the top talent from the technology community over the years to build our new music service. We'll be helping our team members commence their job search over the next few months".

But next on the radar of content owners may well be RapidShare which has attracted particular interest in Europe, notably in Germany, where the Regional Court of Hamburg ordered RapidShare to put in place filters that would stop users illegally sharing 148 specific text books in reponse to a claim by book publishers. It seems that RapidShare failed to comply and the publishers went back to court with the result that the court have now imposed a 150,000 euro fine on the tech company with the court saying that the company had "culpably failed to take reasonable examination and control measures. These measures include the utilisation of a word filter, which checks the file name during the uploading of files to the servers of [RapidShare] with regard to whether the author, the title, the ISBN number of the publisher may be contained in this name".

http://celebrifi.com/gossip/US-court-shuts-down-LimeWire-3818438.html

Another slice

Less than two weeks after Judge Kimba Wood in the federal District Court in Manhatten ordered a halt to distribution of the file-sharing software application LimeWire, TorrentFreak reports that a "secret" development team has reengineered the software and released it back onto the Internet as the new and seemingly improved “LimeWire Pirate Edition” which is based on the LimeWire 5.6 beta released earlier this year. TorrentFreak say “LimeWire is back as good as new” with “a few significant changes which make it better and more streamlined than before”. A source told TorrentFreak that after the court’s decision “a horde of piratical monkeys climbed aboard the abandoned ship, mended its sails, polished its cannons, and released it free to the community” adding “All dependencies on LimeWire LLC’s servers have been removed, all remote settings have been disabled, the Ask toolbar has been unbundled, and all features of LimeWire PRO have been activated for free”.

http://s0.2mdn.net/1651284/v3_new.html?rfp=http://www.v3.co.uk/v3/news/2272936/limewire-riaa-p2p-pirate and http://torrentfreak.com/limewire-resurrected-by-secret-dev-team-101108/

Judge Tells LimeWire to Disable Its Software

Judge Kimba M Wood in the Federal District Court in Manhattan has issued a permanent injunction that will essentially shut down LimeWire, the music file-sharing service that has been embroiled in a four-year legal struggle with the music industry. The case has already resulted in the company and its founder being found liable for potentially hundreds of millions of dollars in damages (see More Freshly Squeezed Lime, 18th June 2010 and Squeezing the Lime Dry , 12th June 2010 on this Blog) The company says that it will continue negotiations with the major music companies in an effort to offer music legally for sale with a subscription service but in her ruling, the Judge ordered the company to disable “searching, downloading, uploading, file trading and/or file distribution functionality” of the company’s file-sharing software.

Visitors to LimeWire’s Web site were greeted with a legal notice and the text: “downloading or sharing copyrighted content without authorization is illegal.” In a statement the Recording Industry Association of America, the music industry’s trade group that had led the legal action, said: “For the better part of the last decade, LimeWire and [founder Mark] Gorton have violated the law. The court has now signed an injunction that will start to unwind the massive piracy machine that LimeWire and Gorton used to enrich themselves immensely.” In May, Judge Wood ruled that the company had violated copyright law and was liable for damages. The court is scheduled to decide early next year the amount the company and Mr. Gorton will be forced to pay. “In January, the court will conduct a trial to determine the appropriate level of damages necessary to compensate the record companies for the billions and billions of illegal downloads that occurred through the LimeWire system,” the RIAA said in its statement. Music publishers have brought a separate action led by EMI Music.

http://www.nytimes.com/2010/10/27/technology/27limewire.html?_r=1 http://www.computerworld.com/s/article/9193499/Like_Grokster_LimeWire_felled_by_secondary_liability_law?taxonomyId=70

More freshly-squeezed Lime

In a fresh blow, peer-to-peer file-sharing service LimeWire has been sued for copyright infringement by eight member companies from the National Music Publishers Association (NMPA) headed up by EMI and Universal. The lawsuit is similar to the thus far successful suit filed by the Recording Industry Association of America (RIAA) against LimeWire and its executives, seeking damages and injunctive relief and is also filed in the Manhatten federal court. A trial is scheduled for January and the NMPA said in a statement “The songs that make their illegal venture lucrative don’t appear out of thin air .... Behind every song is a vast network of people - a songwriter, a publisher, a performer, a record label. They have robbed every individual in that chain.”

Limewire publicly remains convinced it can offer legitimate business models to the content owners in the music industry saying in a statement "We have had many promising meetings with labels, publishers, and artists alike about our new music service and a business model that will compensate the entire industry”.

EMI April Music Inc. v. Lime Wire LLC, 10-cv-04695, U.S. District Court, Southern District of New York (Manhattan).

http://www.dailytech.com/New+Suit+Against+Limewire+Could+Total+15+Times+Music+Industrys+Yearly+Income/article18769.htm

Squeezing the Lime Dry?

On 14 May we reported that US District Judge Kimba Wood had decided that the Lime Group, the company behind Limewire, was liable for the copyright infringements committed by Limewire users. Two weeks later the Lime Group asked the court to reconsider this judgment. This request was followed by one from the RIAA, asking the court to shut down Limewire by granting a permanent injunction with the RIAA arguing that Limewire’s operation has to be stopped immediately, to avoid it doing any more harm to the music industry saying “It is patently obvious that the rampant illegal conduct that Lime Wire intentionally induced, and for which it has been adjudged liable, will continue uninterrupted day after day unless and until the Court issues an injunction to rein in this massive infringing operation” with the RIAA’s lawyers saying “Every day that Lime Wire’s conduct continues unabated guarantees harm to Plaintiffs that money damages cannot and will not compensate” adding for good measure “The scope of the infringements that Lime Wire induced...boggles the mind."

Bloggers in the USA have pondered the quantum of damages facing Lime Group and Limewire founder Mark Gorton, with one estimating damages at $1.5 trillion (see link below) The RIAA itself said “In every case in which a perpetrator of massive online infringement has been held liable on summary judgment, the courts have promptly issued an injunction to try to stop the continued harm to the plaintiffs. It does not require sophisticated mathematics to calculate that the likely damage award in this case will run into the hundreds of millions, if not the billions of dollars”. The RIAA has also argued that following the Supreme Court’s decision in MGM v Grokster, Gorton moved his own assets into ‘family partnerships’ to shield them from any judgment. Despite the fact that many bloggers and some academic papers argue that careful scrutiny of relationship between illegal downloads and lost sales to the music industry shows no direct correlation, The RIAA are relying on US statutory damages which can indeed lead to massive awards when thousands and thousands of illegal acts of infringement are involved.

In another twist to this story, Limewire has told Computerworld that it hopes it can “amicably settle” its dispute with the record industry. Pointing out that Lime Group have been developing legitimate digital services, a spokesperson told Computerworld that the company was "actively engaged" in working with the music industry to settle the labels' legal claims, and to then "move forward with a new way of working together that benefits all parties involved" adding "LimeWire absolutely does not encourage or condone the illegal copying or sharing of copyrighted material", pointing out that LimeWire had added an option to its P2P platform that could filter out unlicensed files. It has to be said that Judge Kimba Wood was earlier unimpressed by the filter – not least because it had to be activated by the user, and was disabled by default
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The words ‘pigs’, ‘might’ and ‘fly’ spring to mind about any potential settlement but the fact remains that closing Limewire itself might have very little impact on global digital piracy and perhaps the RIAA might (just might) consider a deal, however unpalatable, to show that it is trying to promote legitimate business models for users to easily buy music.

The RIAA and representatives of Lime Wire will appear before the court on Monday. A Lime Wire spokeswoman to US reporters "We are looking forward to an opportunity to address the Court for the first time in two years and show that as a matter of fact and law there is no support for this motion."

http://news.cnet.com/8301-31001_3-20006879-261.html

http://the1709blog.blogspot.com/2010/05/limewire-bites-dust.html

Does Limewire owe the RIAA 1.5 Trillion? http://www.p2pnet.net/story/40481

Limewire bites the dust .....

The international music industry has responded with delight at a court ruling that has found against Limewire, one of the oldest file-sharing networks on the Internet. In a 59-page decision issued Tuesday (May 12th) in New York, U.S. District Judge Kimba Wood has ruled in a summary judgment that the peer-to-peer company is guilty of inducing copyright infringement, committed copyright infringement and practiced unfair competition. Reuters report that the judge leaned heavily on one of the plaintiff's expert witnesses, Dr. Richard Waterman of the Wharton School, who testified that a random sample of 1800 files turned up copyright infringement in 93% of them, including 43.6 percent of copyrighted files owned by the plaintiff record labels. Based on the results, Dr. Waterman concluded that "98.8 percent of the files requested for download through LimeWire are copyright protected or highly likely copyright protected, and thus not authorized for free distribution."

The judgment itself is perhaps unsurprising given the Supreme Court's stance in MGM v Grokster where the Court unanimously held that defendant P2P file sharing companies Grokster and Streamcast (maker of Morpheus) could be sued for inducing copyright infringement for acts taken in the course of marketing file sharing software

Here it is interesting that the judge was willing to take a long hard look at the evidence available and the fact that the site promoted filesharing - Judge Wood dismissed LimeWire's contention that the statistics weren't reliable and accepted evidence that the service was not only aware of the copyright abuse but actively tried to attract infringing users. Wood also noted that the only step LimeWire took to curtail abuse was to make users agree not to infringe copyrights in its terms of service. The notice does "not constitute meaningful efforts to mitigate infringement," she wrote. The Court found that from 2004 to 2006 Limewire's annual revenue grew from nearly US$ 6 million to an estimated US$20 million. The judge found this growth depended greatly on Limewire users’ ability to commit infringement through Limewire.

Record label trade bodies were naturally delighted with Mitch Bainwol, CEO of Recording Industry Association of America saying "This definitive ruling is an extraordinary victory for the entire creative community" adding "Unlike other P2P (peer to peer) services that negotiated licenses, imposed filters or otherwise chose to discontinue their illegal conduct following the Supreme Court's decision in the Grokster case, LimeWire instead thumbed its nose at the law and creators. The court's decision is an important milestone in the creative community's fight to reclaim the Internet as a platform for legitimate commerce." IFPI chairman and CEO John Kennedy said: “Limewire has been a major hurdle in the music industry's efforts to make the transition to a new, legitimate online music business. This ruling will be hugely valuable both as an educational message and as a legal precedent internationally. It shows the stark reality of a site which made a fortune by violating the rights of artists and creators. The judgment also ends years of uncertainty among consumers, many of whom have felt free to use Limewire in the incorrect belief that it was a legitimate music site. Now it has been made clear to them that Limewire is not legal, does not respect artists and creators, has profited handsomely from its illegality and is not OK to use.”

In related news, a German court has granted a preliminary injunction against the current Germany-based Web hosts of file-sharing hub The Pirate Bay, TorrentFreak has reported. The Motion Picture Association petitioned a court in Hamburg for an injunction against CB3ROB Ltd, operators of the CyberBunker Web hosting service. The court said that CyberBunker must specifically remove links to torrents purporting to facilitate downloads of "The Bounty Hunter," "Alice in Wonderland," "Our Family Wedding," "Green Zone," "Repo Men" and "Cop Out." CyberBunker now must either disconnect The Pirate Bay entirely, or else The Pirate Bay must remove those specific torrents to comply with terms of the court's order. Sanctions include fines of up to E250,000 for each instance of infringement and potential custodial sentences for CB3ROB directors.

http://abcnews.go.com/Entertainment/wireStory?id=10632737

MGM v Grokster 545 U.S. 913 http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&navby=case&vol=000&invol=04-480

UPDATE

See http://news.cnet.com/8301-31001_3-20004982-261.html

Legal experts: LimeWire likely doomed: "It is obviously a fairly fatal decision for them," said Michael Page, the San Francisco lawyer who represented file sharing service Grokster in the landmark case, MGM Studios, vs. Grokster and also represented Lime Wire's former CTO in the company's most recent copyright case. "If they don't shut down, the other side will likely make a request for an injunction and there's nothing left but to go on to calculating damages."

With an injunction, the RIAA can force LimeWire to cease file-sharing operations. Music industry sources who spoke to CNET on condition of anonymity said the RIAA, the trade group representing the four largest music labels, is considering whether to seek an injunction prior to a status conference Wood scheduled for June 1. If that happens, LimeWire may have little room to maneuver and the company could be forced to shutter operations within weeks. Representatives for the Lime Group did not respond to interview requests. An RIAA spokesman declined to comment. "

Ruling could have chilling effect on P2P Services
http://www.reuters.com/article/idUSTRE64E09C20100515