So what happened to all the settlement money that Napster and Kazaa were forced to pay the record labels?
That's the question some music artists are asking, according to a story that appeared Wednesday in The New York Post.
The Post quoted two talent managers who said that artists have yet to see their cut of the Napster-Kazaa settlements. This isn't pocket change we're talking here. Napster paid $270 million to settle its copyright infringement case and . Some on the talent side suspect the top four record companies of foot dragging or playing "hide and seek" with the cash.
If nothing else, the controversy illuminates the degree of distrust that exists between artists and the labels. As CD sales continue to shrink, look for more squabbling between them.
But for its part, Warner Music Group says it isn't playing games.
Warner's share from Napster was $110 million, according to documents it filed with the government last April. Warner said at the time that "we will be sharing (the money) with our artists and songwriters."
In June, Warner received an additional $52 million related to the legal cases, according to the documents. The label issued this statement on Thursday: "WMG is sharing the Napster settlement with its recording artists and songwriters and at this stage nearly all settlement monies have been disbursed."
Representatives from EMI and Universal Music Group say they also intend to share the settlement with artists. Sony BMG Music Entertainment was a financial backer of Napster and ended up paying big money to the other three music companies. Sony BMG did, however, receive a share of the Kazaa settlement.
Jay Rosenthal, legal counsel for the Recording Artists Coalition, a group representing the interests of music artists said that the labels have told him that they are trying to decide how to divvy up the money and have been sending payments for a while. He's skeptical to say the least.
"If anything has been paid so far, it has been minimal," Rosenthal said. "The labels are always going to try to hide the money or use some self-serving formula when they finally get around to paying the artists."
But a source within the music industry said that the talent managers aren't looking at the realities.
First, who could deny that the Napster and Kazaa cases, which lasted years, didn't run up massive legal bills, the source asked. Also consider the "inordinate amount of time" it takes to collect the money and figure out which artist's music was infringed, the source said. He added that the labels must split the money between scores of performers.
"The lawyers get their cut first," said the source. "Then the money has to be split among hundreds of different artists at each of the labels."
After all is said in done, according to the source, the process takes a long time and "nobody gets rich from this."
Rosenthal said he has heard all this before.
"The (labels) are certainly going to claim that the legal costs have eaten up the proceeds," Rosenthal said. "But I don't believe that is the case."
Jammie Thomas is hard to rattle.
Jammie Thomas
She doesn't raise her voice or get angry when a reporter asks her to read a story where she is called a "liar" by a member of the jury that found her guilty of copyright violations and ordered her to pay the recording industry $220,000 in damages.
She calmly reads the quotes by juror Michael Hegg that appeared Tuesday in a story by Wired.com. She then draws a bead on where Hegg said he is a father, former snowmobile racer and has never been on the Internet.
"I don't need to say too much, obviously," Thomas told CNET News.com on Wednesday. "They admit that they are computer illiterate. This person (Hegg) has never been on the Internet, so how can he say whether my story is possible? I've been contacted by Internet security experts who said that spoofing my address would have been trivial. Internet illiterate people are not going to be able to understand that."
Thomas was sued by the Recording Industry Association of America (RIAA) for sharing 24 songs online and infringing on intellectual property. Instead of settling for a few thousands dollars like most of those sued by the group, Thomas is the first to take her case to a jury.
In the interview with Wired's David Kravets, Hegg, a steelworker from Duluth, Minn., said that during deliberations, the jury concluded after only five minutes that Thomas was guilty. They then spent five hours trying to decide what to award the recording industry. Hegg, 38, said the jurors did not believe her story that someone spoofed her IP address.
"She should have settled out of court for a few thousand dollars," Hegg told Wired. "Spoofing? We're thinking, 'Oh my God, you got to be kidding.' She's a liar."
Thomas, 30, has announced that she intends to appeal the case brought against her by the RIAA. She said she is seeking to argue her case before someone who is more tech-savvy.
But if Thomas can produce experts that can prove its possible her IP was spoofed, why didn't she present them in court?
"We didn't have the money to put those experts on the stand," Thomas said. "(Hegg) can say my story is not true, but at the same time you're talking about a person with no technology background whatsoever. He said his wife is an Internet guru, but his wife wasn't on the jury."
Thomas also was disappointed that the jury may have been punishing her for crimes committed by others.
"We wanted to send a message," Hegg said in the Wired interview, "that you don't do this, that you have been warned."
Thomas doesn't believe the law allows that.
The jury "saw those feeds that showed 2 million people shared using (file-sharing service) Kazaa and they want to hold me responsible for that," Thomas said. "The law states that you can't hold me responsible for the actions of another. This is one of the reasons why I'm appealing."
On a separate issue, a Web site created to accept donations from Thomas' supporters has crashed after receiving more than 500,000 visitors, she said. Freejammie.com is being moved to a new host server and should reappear in a few days.
Thomas said the site has raised more than $9,000 and the money will go to pay her legal bills.
The bad legal news continues for the recording industry.
After yesterday's ruling that the RIAA owes an Oklahoma woman nearly $70,000 in attorneys' fees, the European Union's top court today said that European ISPs are not required to disclose the names of subscribers whose IP addresses have allegedly been linked to illegal activity on file-sharing networks.
In the case at issue, a group of Spanish music producers filed a legal complaint about Spanish ISP Telefonica, which refused turn over IP addresses of apparent Kazaa users. Telefonica maintained that Spanish law required it to turn over these addresses only in criminal cases or matters of national security. The Spanish court overseeing the case asked for an opinion from the European Court of Justice, which essentially backed Telefonica, saying that this information did not need to be turned over in civil cases.
This opinion's not a legally binding ruling, but if the Spanish court accepts the opinion and rules accordingly, this could form the basis for similar decisions throughout the EU. This would mean that recording industry representatives would either have to convince criminal investigators--the police--to go after file-traders (unlikely), or would have to come up with some other technical method (possible) without violating the EU's stringent privacy laws (very difficult).
Meanwhile, in the U.S., the RIAA continues to spend a lot of money to get very little in return.
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