LimeWire Settlement a Sour Deal for Artists

The founder of LimeWire LLC, the distributor of the LimeWire file-sharing software program that was found to infringe copyrights on a massive scale, has reached an agreement with the music industry’s trade group, the Recording Industry Association of America, to settle its lawsuit for US$105 million.

The $105 million is far less than the $1.4 billion the plaintiffs were seeking, attorney Joseph Baio said in a statement, and as part of the settlement, LimeWire founder Mark Gorton makes no admission of wrongdoing.

Baio declined to comment further to the E-Commerce Times.

A Napster Era Holdover

Before its demise last year, LimeWire was among the last of the Napster clones still operating — those peer-to-peer sharing sites that sprung up when high-speed internet became ubiquitous more than 10 years ago and Web 1.0 was still flying high.

Napster broke legal ground — albeit not in its favor — with a series of rulings that determined that placing copyrighted music online to share and downloading that music were in violation of IP law.

Napster eventually was shut down. Following in its wake were the legal takedowns of other sites such as Grokster and the original Kazaa. Indeed, the fight over Grokster reached the Supreme Court, and its decision became a landmark copyright case.

Shortly after that decision, the RIAA began suing other providers, including LimeWire. Last year, a U.S. district court found the site was illegally distributing copyrighted music and, in addition, said Gorton should be held personally liable. The settlement between Gorton and the RIAA was reached as a jury was hearing testimony to determine the penalty to be paid by LimeWire and Gorton.

“All of this was basically cleanup,” Randy M. Friedberg, counsel with White and Williams, told the E-Commerce Times.

“The only thing left to determine was the measure of damages and rather than continue to spend a lot of money, the parties just arrived at a number that was significant enough to claim victory on one side and not so big as to cause a bankruptcy on the other.”

What About the Artists?

The proceeds from the settlement will be distributed to the recording companies. It is unclear how much, if anything, the individual artists will receive from this amount. It’s likely they’ll get nothing, based on some news reports.

The RIAA, which said in a publicly released statement that it was pleased with the outcome, pointed the E-Commerce Times to the recording companies for further comment.

For some observers, the probability that artists will not get a cut of the settlement does not sit too well, especially given the RIAA’s strong rhetoric on the plight of music creators resulting from the P2P movement.

Clearly, the major beneficiary of the settlement and litigation efforts is the RIAA, Miles J. Feldman, a partner with Raines Feldman, told the E-Commerce Times. “From what I can tell, no artists or rights holders will get any of the settlement directly [even though] the RIAA claims that its antipiracy work benefits artists.”

No New Legal Ground

The case didn’t even break new legal ground, Doug Panzer, a partner with Caesar, Rivise, Bernstein, Cohen & Pokotilow, told the E-Commerce Times.

“I don’t think we’ll look back on it as being as influential as the Sony case in the 80s or even the Grokster case, which was precedential for the idea of inducing infringement. This one to me is more the end of a soap opera than the culmination of a legal doctrine.”

Perhaps its most significant legacy, he speculated, will be its deterrent effect.

“With both LimeWire and Mark Gorton not only being found liable for infringement but actually shelling out money, we may find that software companies and individuals in the U.S. — or who U.S. courts can get their hands on — won’t want to be the next one to have a nine-figure judgment against them. And if nobody’s willing to distribute new file-sharing software, maybe this is the turning point the content industries need.”