February 20, 2003 9:41 AM PST
Lawsuit targets Bertelsmann over Napster
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The 18-page complaint, filed in federal district court in New York, charges that Bertelsmann's strategy to fund Napster extended the life of the file-swapping service, leading to greater numbers of copyrighted works being shared illegally.
The complaint alleges that Bertelsmann "was fully aware of the critical role its funding played in facilitating infringement by Napster users" and therefore "systematically participated in, facilitated, materially contributed to and encouraged" illegal music file swapping.
The music publishers also charge that Bertelsmann had the ability to halt Napster services but instead kept it "operating in order to preserve Napster's user base for Bertelsmann's own commercial advantage."
The filing, first reported in The Wall Street Journal, exacerbates the legal wrangling that led to the demise of Napster. The recording industry and music publishers, including Bertelsmann's BMG division, won a suit two years ago that essentially killed Napster. Now, many of the same plaintiffs have targeted one of their own, going after Bertelsmann, which has invested almost $100 million in Napster since 2000. This turn may portend other suits by the music industry targeting assets of companies that back independent file-swapping services.
Bertelsmann spokeswoman Liz Young said she was unaware of the suit. She added that even if she were aware of a complaint, the company would not comment on ongoing litigation.
Record companies and music publishers have much to be concerned about, according to figures released on Thursday by Ipsos, a market research firm. The report says that despite efforts to curb illicit file sharing, half of all teens and 19 percent of all Americans over age 12 reported having downloaded music from file-swapping services in 2002
Ipsos added that almost 10 percent of Americans reported downloading music in the past 30 days. Using the findings from its survey, Ipsos extrapolated from U.S. census data for 2000 to suggest that nearly 20 million people have downloaded music illegally in the past 30 days.
The plaintiffs in the suit against Bertelsmann include the songwriting team of Jerry Leiber and Mike Stoller, famous for songs like "Hound Dog" and "Jailhouse Rock," according to the Journal. The report added that Leiber and Stoller hope to represent a wider group including members of the Harry Fox Agency, a rights group for most U.S. music publishers.
The music industry has tirelessly worked to eradicate online file-sharing services. Its lawsuits against Napster and Aimster led to the demise of those services, and the industry continues to target other players including Sharman Networks, owner of the popular Kazaa file-swapping software.
The only blemish in the recording industry's legal campaigns is the investigation ordered by federal judge Marilyn Hall Patel looking into the record labels? licensing practices toward online companies and into the structure of Pressplay and Musicnet, services largely owned by record labels.
In October 2000, Bertelsmann stunned the entertainment world when it announced that it would invest in Napster--even though BMG Entertainment, a record company owned by Bertelsmann, was suing the file-swapping software company. As continued lawsuits crippled Napster, Bertelsmann offered to buy it outright but that plan fell through. Software maker Roxio now owns most of Napster's assets.