Back on May 12, 2010, US District Judge Kimba Wood handed down a judgment against the file-sharing service LimeWire LLC and its founder Mark Gorton and ruled in favor of the Recording Industry Association of America (RIAA) .
Serious implications concerning the future of P2P (peer-to-peer) music file-sharing are at stake, with possible consequences being felt before month’s end -- thanks in large part to the court's decision that found LimeWire liable of inducing copyright infringement. Wood's 59-page rendering also accuses Mark Gorton of copyright infringement and engaging in unfair competition.
Judge Wood wrote in her decision: "The evidence demonstrates that [Lime Wire] optimized LimeWire's features to ensure that users can download digital recordings, the majority of which are protected by copyright, and that [Lime Wire] assisted users in committing infringement."
In a May 23 interview with The New York Times, the 43-year-old Gorton said, "Perhaps I was naïve… If I knew when the lawsuit started what I know now about the music industry, maybe we would have done something different." The article further indicates that the RIAA believed Gorton "had willfully skirted the law."
This week, lawyers for 13 record companies backed by the RIAA (Arista, Atlantic, BMG Music, Capital, Elektra, Interscope, LaFace, Motown, Priority, Sony BMG, UMG, Virgin, and Warner Brothers) accused Mark Gorton of moving upwards of 90 percent of Lime Wire's assets to a financial entity that would protect the company from damages from any impending lawsuit.
The assets at stake range from $450 million to $1 billion, which obviously is a significant amount of money up for grabs. Legal experts believe this would be a "fatal blow" to Lime Wire, as reported by CNET News.
I'm not so sure Gorton can continue to use the naive defense. According to Reuters, papers filed by the group of 13 say Gorton and affiliated defendants "have engaged in a series of fraudulent actions" to "frustrate a legal judgment in this case... An asset freeze is required in order to ensure that plaintiffs recover at least some of the monetary compensation they are entitled to."
Last week, a permanent injunction was sought to prevent any further piracy from taking place. This in effect will force Lime Wire to shut down after 10 years of service.
Judge Wood has granted a two-week reprieve to allow Lime Wire to respond to the latest motions levied by the RIAA. Wood also granted a request by two law firms representing Lime Wire, Fulbright & Jaworski LLP and Porzio, Bromberg & Newman PC, to end their representation.
I spoke with Alan Young, lead counsel for Porzio. He assured me that his firm's role in the litigation of Lime Wire was only administrative in nature. PB&N were able to file a declaration for another out-of-state law firm representing Lime Wire and nothing more.
To evaluate what the Lime Wire decision means to P2P file sharing, it helps to look back at the verdict handed down in the 2005 decision of Metro-Goldwyn-Mayer Studios Inc. v. Grokster.
Grokster and co-defendant StreamCast's defense cited an earlier 1984 Betamax decision
that protected them from any copyright liability. In that decision, the court deemed makers of VTRs, or "video tape recorders," could not be held responsible even if VTR owners used machines illegally. "The sale of the VTR's to the general public does not constitute contributory infringement of respondents' copyrights," the decision stated (Pp. 428-456).
That critical distinction was the basis that left the court unable to render an opinion on file-sharing itself. At issue, rather, was the way Grokster "encouraged" the activity of piracy, which created the "secondary infringement" liability.
Now fast-forward to this latest ruling. Why has the file-sharing decision against Lime Wire become valid? According to Mark Gorton, he attempted to apply filters to prevent free file sharing of copyrighted works or songs sold as part of a paid service.
That appears to be Lime Wire's undoing, as it clearly showed they were aware and encouraging free file-sharing previously. Wood echoes Supreme Court Justice David Souter's Grokster decision that "[Lime Wire] assisted users in committing infringement."
The court failed, however, to address whether Lime Wire is liable for contributory infringement. So, in the coming weeks we shall see whether the Supreme Court's decision of 2005 has the teeth to set precedent in 2010.
— Chris Poley has been a professional trader for more than 20 years.