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.
MBC, I am totally aware of your side of this issue. It has as much merit as does mine. My point is if I am providing a service, product or original entity, I would want to be paid for it, PERIOD. That is why we have a patent office, copyright laws and business registration for these things to be protected against theft.
There are certainly, judicial protections against lost and potential earnings due to negligence, theft and fraud. Again, proving it in a court of law is yet another thing.
As far as potential taxes, have you ever heard of income tax evasion? The IRS will not only recoup lost income but charge an additional 15% per month of the net tax due.
As far as potential wages, have you ever heard of workers’ compensation disability due to injury on the job because of the fault of a company?
True but from the enterprise's view, even if you're not reselling pirated content, the loss of the sale nonetheless is what counts. If you download a CD illegally on a P2P network, you're not paying XYZ company $11. Remember that the $$ is also split among many different groups. So when they also lose potential revenue, they will bark up the tree even louder... thus why the Limewire's & ISPs get those letters in the mail.
I'm guessing that the high dollar valuation of LimeWire is due to its potential, fulfilled or not, as a sales and advertising platform.
As for lost revenue, it's all speculation. The fact that someone downloads an item illegally doesn't mean - by any stretch - that the same person would have paid for it, if the illegal channel hadn't been available.
Also, there is substantial evidence indicating that giving away a piece of content for free can actually be good for business in the long-term: some people want to give the creator back something; some pay because they want the extras: the case, the printed manual, the tschotskes; some pay because (in the case of software) they want hassle-free support and upgrades; some wait until they have more money in the bank, and then buy the next version/album/etc. because they're already sold on the product/content/artist and were just waiting until they could afford to actually pay.
But on top of all that, there is the fact that no company is entitled to potential revenue, no government is entitled to potential taxes, and no worker is entitled to potential wages. If the money doesn't come, then it wasn't "lost;" it was simply never gained. The fact that a company has been humming along for years doesn't mean that private citizens are somehow obligated to feed it in order to keep it alive.
Hi Nathan, You can refer to the "one credible analysis by the Institute for Policy Innovation concludes that global music piracy causes $12.5 billion of economic losses every year, 71,060 U.S. jobs lost, a loss of $2.7 billion in workers' earnings, and a loss of $422 million in tax revenues, $291 million in personal income tax and $131 million in lost corporate income and production taxes. For copies of the report, please visit www.ipi.org."
I think everyone finds it convenient to disbelieve that there is no one being harmed when P2P file-sharing takes place. So bury your head in the sand if you choose to, but piracy whether on the high seas off the coast of East Africa or piracy in the more latent sense of the word, through stealing files of copy righted material is still THEFT through ill gotten gains.
MBC, I meant lost revenues, rather than indivduals profiting. But, somehow Lime Wire is valued at close to a $1 billion so I'm not sure how that happened.
What I meant to say was hundreds of million in lost revenues, wages, jobs.
"There are two categories to consider here: losses from street piracy – the manufacture and sale of counterfeit CDs – and losses from online piracy.
One credible analysis by the Institute for Policy Innovation concludes that global music piracy causes $12.5 billion of economic losses every year, 71,060 U.S. jobs lost, a loss of $2.7 billion in workers' earnings, and a loss of $422 million in tax revenues, $291 million in personal income tax and $131 million in lost corporate income and production taxes. For copies of the report, please visit www.ipi.org."
How do they even effectively do a quantified measurement of these so-called theoretical future losses anyway? Michael Bennett Cohn has a good point: "I have never encountered a situation in which someone has pirated a piece of content using a P2P network and then sold it to someone else.". I've never encountered a situation like this either and I doubt anyone really has.
Chris Poley: My problem is that people are making hundreds of millions of dollars from illegal downloads.
Are they really? I admit I don't have proof either way, but this is hard for me to believe. Although I have witnessed a lot of piracy, I have never encountered a situation in which someone has pirated a piece of content using a P2P network and then sold it to someone else.
Piracy is, by definition, free, and it's also very easy. If you are willing to break the law to get your content, then there's no reason to pay someone else to get it for you; you can just get it yourself.
I have seen the street vendors here in New York, hawking DVDs of movies that clearly haven't been released on DVD yet. But it's understood that those are low quality versions usually taken from cameras that were actually smuggled into the theater. I guess you could call that "piracy," but it's not really what P2P is about, and even someone who wanted one of those ripoffs could still usually find it free online.
Hey there Paul, If the pending civil suit awards the plaintiffs their compensation, there is no way LimeWire can sustain itself.
Having said that, the vast majority of people that use LimeWire are downloading their P2P songs on the Gnutella network. So, even if LimeWire blocked filed bought on their store, there is always a clone available out there throught he use of any P2P software.
Wow MBC, Are these your views? You're a bit over the top no? If you think the act of piracy is not hurting anyone you are sadly mistaken. I understand your point that file-sharing as a concept isn't a bad thing when done on a small scale, for non profit. My problem is that people are making hundreds of millions of dollars from illegal downloads. Although I am not an advocate of the RIAA or the tyrannical way music distribution companies have used the artists for all of time, but that’s between those parties. It is not your or my place to iron out that justice through piracy.
Hi Paul, I think what Michael is insinuating concerning LimeWire and more specifically Mark Gorton, is their promise to uphold the premise of protecting the record companies digital catalogs from piracy through their apparent non DRM technology.
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