Oracle, the giant enterprise software company, has accused Qtrax, the legal peer-to-peer music service, of copyright infringement and breach of contract in a $2 million lawsuit filed last week in Northern California.
Qtrax is the music service that was ridiculed in January 2008 after the four major labels denied the company's claims that it had licensing agreements with them. Eventually, Qtrax did get the major label deals. Nonetheless, the start-up has apparently run into some trouble paying bills in the past several months, said a source close to the company.
Oracle said in the complaint, filed with U.S. District Court for the Northern District of California, the problem began when Qtrax's payment for database software Oracle provided bounced. In November 2008, Oracle received a $1.8 million check from Qtrax but the check was returned for insufficient funds, Oracle alleges in court documents.
Numerous attempts were made to collect the money from Qtrax, but the company never made good, Oracle claims. "Qtrax's failure to pay the outstanding invoices constitutes a material breach of the software license," Oracle's attorney wrote. Meanwhile, Oracle asserted in the court documents that Qtrax continued to use Oracle's software.
Oracle representatives did not respond to interview requests. Allan Klepfisz, Qtrax's CEO, acknowledged that the company has been "at times short of money" but has recently acquired new funding.
"We're not in trouble, thankfully," Klepfisz said. "I feel both Oracle and ourselves will get beyond this. You should also know we have not used any of the licenses under this contract (with Oracle)."
Qtrax's troubles come at a time when ad-supported music sites are struggling to generate revenue. Two of them, SpiralFrog and Ruckus, were forced to shut down earlier this year.