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Music Media Government The Almighty Buck The Courts News

Record Labels Sue Napster's VC 594

Posted by michael
from the feeding-frenzy dept.
zemkai writes "From the "wtf?!?" department... Universal Music Group and EMI are suing Hummer Winblad Ventures for contributing to copyright infringement due to that firm's investment in Napster... I'd like to put something witty here, but I'm just speechless."
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Record Labels Sue Napster's VC

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  • by coupland (160334) <dchase@nOSpaM.hotmail.com> on Tuesday April 22, 2003 @05:25PM (#5785001) Journal

    Lemme verify my logic here...

    1. Napster lets you share music while viewing banner ads. Napster gets sued for everything it has.
    2. Napster VCs made money from banner ads. VCs get sued for everything they have.
    3. I viewed banner ads that made money for VCs.

    Holy crap, we're all next...

    • by EpsCylonB (307640) <eps AT epscylonb DOT com> on Tuesday April 22, 2003 @05:34PM (#5785117) Homepage
      Holy crap, we're all next...

      haven't they already started prosecuting college students ?
      • by NintenDoctor (630435) on Tuesday April 22, 2003 @05:40PM (#5785175) Journal
        You bet. Right in my backyard [mtu.edu], even.

        Fortunately, there's a bit of a resistance starting. Some students have started a website dedicated to the case here [servemp3.com], and there's supposed to be a rally Sunday afternoon.

        You'd better believe I'm going to show up.
        • by Directrix1 (157787) on Tuesday April 22, 2003 @09:14PM (#5786517)
          This whole plan of sueing VCs is a perfectly logical step for the music industry. Lets see... Napster provided illegal music file sharing services and was funded by company X. If they win, then the generic case if illegal music file sharing service has company X for funding then they can be sued will be viable. And hencely, then the VCs can be sued for their investment in Kazaa, and Kazaa will crumble and die, because VCs will be pulling out right and left. Its so obvious even I can see it.
          • General logic... (Score:4, Interesting)

            by AftanGustur (7715) on Wednesday April 23, 2003 @02:18AM (#5787557) Homepage


            If they win, then the generic case if illegal music file sharing service has company X for funding then they can be sued will be viable.

            The laws are "general" i.e. I doubt the laws that have (supposedly) been broken here mention the words "music sharing" at all.

            The real danger is that everything that those laws apply to will be just as illegal.

            Is anyone doubting that Microsoft (just an example) is breaking some competition laws (somewhere on the planet) ?

            Well, if you buy Microsoft Stock, you are helping them to commit a crime ..

            Are you ready to go to prison for that ?

            • Re:General logic... (Score:3, Interesting)

              by HiThere (15173)
              I can see more direct reasons that someone should go to jail for "aiding and abetting" Microsoft. But I think corporate law specifically shields those who buy the stock from liability. As to whether it should....

    • Enron? (Score:4, Funny)

      by Tailhook (98486) on Tuesday April 22, 2003 @05:36PM (#5785136)
      Let's arrest former Enron employees for contributing to corporate fraud. After all, by allowing Enron to utilize their retirement funds they enabled, and profited from, Enron's criminal activity.
      • Re:Enron? (Score:3, Insightful)

        by pyrrho (167252)
        VCs are not quiet little investors like little old ladies or clerks with retirment accounts.

        They run the show, hire the executives, micromanage the show in many cases. Further, when they shopped for this investment they didn't go to the market and comparative shop based on market statistics, etc... they specifically chose to invest because of the business model, which did happen to involve illegally trading music, like it or not. And in any other case the liability would stop at the corporation, maybe it
    • by Lord Prox (521892) on Tuesday April 22, 2003 @06:03PM (#5785359) Homepage
      In the artical at news.com it read that the record label was suing for 150,000 per infringment and that Napster was guilty of "billions" of acts?!

      By the time of its close, Napster had contributed to billions of separate acts of copyright infringement, according to Monday's complaint. The record labels are seeking punitive damages of no less than $150,000 per violation of copyright, among other awards.

      Assuming 1 billion violations * 150k$ = 150e12 bucks? Am I doing the math right here? Is this a Guiness World Record here or what...

      and I thought that woman suing McDonalds was funny...

      Right, wrong, irrelevent. What is, is.
      • by Xformer (595973) <avalon73@cae[ ]on.us ['rle' in gap]> on Tuesday April 22, 2003 @06:24PM (#5785558)
        Hmm... idea... sue the record labels for $150k for each infringement of fair use rights.

        Oh, that's right... they stole them from us. Damn.
      • Dude they had to say "trillion" or risk lookin' a fool like Dr. Evil.
    • by xigxag (167441) on Tuesday April 22, 2003 @06:54PM (#5785798)
      LOS ANGELES (Embreuters) -- The Recording Industry Association of America (RIAA) today lodged suit against a Mr. Eldrad E. Barge for $38 million in statutory, compensatory and punitive damages. Using the DMCA to subpoena his credit card records, the RIAA was able to establish that Mr. Barge charged $129 in CD purchases in 1998, $144 in 1999, $163 in 2000, but then his purchases precipitously and illegally dropped to $93 in 2001 and only a measly $68 in 2002. Meanwhile a suspicious $20 in blank CD-Rs were purchased in 2001 and $39 worth in 2002. Their court papers claim that this is incontrovertible proof that Mr. Barge has resorted to piracy to avoid buying record albums, even though the defendant alleges that he just got tired of the nigh-endless stream of uncreative Mariah Carey bombs and dead-rapper Tupac Shakur remixes being foisted upon him. He also claims the recordable CD purchases were "mostly for Phish and pr0n." The high monetary damages, says RIAA spokesperson Ibeah Bigg-Gonad, are to deter other pirates from stealing food out of artists' mouths. "However," she adds, "we'll consider dropping the suit if Mr. Barge agrees to a lifetime membership in Columbia House or the BMG Group's record club."
  • by Anonymous Coward
    Napster was a tool for violating copyrights. They invested in it hoping to reap a reward from its users criminal activities.

    It's like investing in a local street gang. You can be sued by their victims.

    Quit with the mock shock every time something completely expected and sensible happens.
    • by jjjefff (525754) on Tuesday April 22, 2003 @05:28PM (#5785039) Homepage
      Well, it's not as simple as that... From the article: "In May 2000, Hummer Winblad invested about $13 million in Napster and took control of its business and legal liabilities , with Barry assuming an interim CEO role." I hate the record industry for all this shit, but they probably do have a pretty good case.
    • (The following could be wrong)
      I though that it was determined by the appeals court that Napster had a substantial non-infringing use so techincaly it wouldnt have been a tool for violating copyrights specificaly. They were just required to remove content copyright owners told them to.
    • Correction (Score:5, Insightful)

      by Anonymous Coward on Tuesday April 22, 2003 @05:29PM (#5785050)
      Napster is a tool that CAN violate copyrights. The program doesn't inherently do any of this though.

      Unless of course you consider your car a tool for running people over, since that's but one of many options available to you...
    • by ravenwolff (605916) on Tuesday April 22, 2003 @05:29PM (#5785051)
      Napster was a tool for violating copyrights.

      In the same way FTP clients are a tool for violating copyrights.
      • by timmyf2371 (586051) on Tuesday April 22, 2003 @05:35PM (#5785122)
        Whatever way you look at it, imho Napster was a tool to violate copyrights. Yes, perhaps Shaun didn't originally plan it like that, but in the final days, that is mainly what it was used for.

        Tim

        • My beef has never been with Napster, Smith and Wesson, Ford, or cutting utensil manufacturers. People are ultimately responsible for their own actions either way regardless of the gravity. I'm not comparing murder to copyright infringement, but using a tool for the "wrong" purpose is frowned upon and the tool is still not to blame. I have no problem charging someone for 50,000 counts of theft for downloading all those songs they did not own is still a theft no matter what little spin you want to put on i
      • Oh My God! Windows comes with an FTP client! I'd better sell my Microsoft stock before they sue ME!
      • by Greyfox (87712) on Tuesday April 22, 2003 @06:06PM (#5785380) Homepage Journal
        The case against Napster hinged around the fact that top management at the company was very open about the fact that its primary use was for copyright infringement. The advertising pretty much said the same thing -- "Download your favorite music RIGHT NOW" kinda thing.

        That's the key. The key to holding the VCs responsible is proving that they were aware that the activities Napster was promoting were illegal. Personally I'd argue that you'd have to be a complete fucking idiot not to have realized that, but I am not a lawyer.

        That's not to say I particularly like the music companies, but I think they have a very good chance of winning this one (Again, my non-lawyerly opinion.)

    • Wrong (Score:5, Insightful)

      by localroger (258128) on Tuesday April 22, 2003 @05:31PM (#5785084) Homepage
      If they are allowed to proceed with this suit it means the end of business as it is practiced in the USA. It means, among other things, the end of the stock market.

      Modern capitalism is based very strongly on the concept of limited liability which means precisely that investors are not responsible for liabilities incurred by the companies they invest in. The companies are, and the investors can lose their investment, but they are not criminally liable for the company's actions (unless they participate directly in those actions) and they are liable only for the amount of their investment.

      It's like investing in a local street gang.

      No, it's like investing in Exxon before the Exxon Valdez or in Union Carbide before Bhopal. You can lose your investment. To suggest that it go any further undermines every principle upon which our economy is founded.

      • by Kwil (53679)
        ..is this really the best way to do things?

        Perhaps if investors could have been held liable we would not have seen Exxon Valdez or Bhopal.

        Yes, this would slow the economy down quite a bit. Then again, I've never been one to agree with "economy uber-alles" anyway.

        • by Anonymous Coward
          Sure, say that -- then trying to go into business for yourself.

          "I'm sorry, sir, you can't write and sell software."

          "Why not?"

          "Because it could be used for terrorism. Come with me."

          * * *

          "I'm sorry, sir, you can't sell fast food."

          "Why not?"

          "Because it contributes to obesity. Come along."

          * * *

          "I'm sorry, sir, you can't sell pencils."

          "Why not?"

          "Because someone might get poked in the eye and we can't allow that. Come with us. We are the government. We're here to help."

          * * *

          Of course, they would
        • No, people invest in companies because it is reletivly easy, it is a way to make money and (for the majority) it is a retirement plan (think 401k).

          Slow the economy quite a bit? It would destroy it. People would be terrified to invest in a company, there would be no more mutual funds, no more retirement funds, it would be nearly impossible for anyone but the very rich to start a company (where would the funding come from?). This is not about "Dirk Billionaire" and his portfolio, this is about companies usin
      • Here's the distinction they're going to try to make, though: they're going to say that these VC dudes funded a project designed to violate the law, and specifically exploting the RIAA's IP, for the intent of making a profit. Think of it like this: a venture capital firm funds a murder-for-hire firm that kills people and then is shut down by the government. Are the VC guys responsible in any way for the crimes of the company they funded, when it was clear the function of the company was to murder people for
        • I agree as "invest" seems to be the wrong word for what Hummer Winblad (mmm Anne Winblad... rich, a geek, and a redhead) did. They did not invest. They essentially bought Napster.

          I would disagree that Napster was "designed to violate the law and specifically exploting the RIAA's IP" for two reasons. One, the RIAA has almost /NO/ intellectual property (and some would say no intellect for that matter). It's members have some intellectualy property but the organization does not -- pendantic but correct.
      • by Ibag (101144)
        They weren't just investors, though.

        From the article:

        "In May 2000, Hummer Winblad invested about $13 million in Napster and took control of its business and legal liabilities, with [Hank] Barry [general partner of Hummer Winblad] assuming an interim CEO role."

        I agree that the lawsuit seems wrong on several levels, but I think the record companies could argue that Hummer Winblad did participate directly in Napster's actions.
    • A crowbar is commonly known as a "universal key". It's clearly a tool for breaking and entering, right? Should all purchasers of crowbars should be considered potential criminals?
  • That's just great!
    Now they can get you for just humming the songs.
  • by Anonymous Coward
    So is it the "wtf?!?" dept. or the feeding-frenzy dept.?

    Did you get the memo about the TPS reports?
  • The reason the record companies are not making as much now as they were before, it's because they keep paying these darn lawyers incredible amounts of money to go after companies that have absolutely nothing to do with the fact that they have crappy music that no one wants to buy!

    ---
    The devil finds work for idle circuits to do.
  • Heh (Score:5, Insightful)

    by blitzoid (618964) on Tuesday April 22, 2003 @05:26PM (#5785015) Homepage
    This is just another example of major music labels refusing to accept responsability for lost profits by blaming it on things like P2P file swapping. One really must wonder if they'll ever wake up and embrace new ways of getting music to the people before they die by clinging to their old ways.
    • wonder if they'll ever wake up and embrace new ways of getting music to the people

      Presumably they're both (or at least Universal) aware of what Apple are planning to announce next week. Be interesting to see if that is cited as part of this - perhaps as some kind of "this is how to do music online legitimately, Napster chose to do the exact opposite" example.
    • It's pretty said, the only way they can make profits now is by suing everyone and everything.
    • Re:Heh (Score:3, Insightful)

      by Xzzy (111297)
      No, it's another example of their new business model.

      The goal isn't to make money selling music, the goal is to make money off people stealing music. Why else would they be so lax about modernizing their business model? Stubborness clinging to old ideas is probably part of it, but lawsuits can be big money.

      And this is only half sarcasm. :p
    • Re:Heh (Score:2, Insightful)

      by Lank (19922)
      Well, if I recall correctly, CD sales were increasing while Napster was still around. Then, after the record labels sued the shit out of Napster and forced them into backrupcy, and ultimately to turn off their servers, the decline of CD sales started. It's continued on every year since then. You'd figure they would have learned that sharing music actually promotes CD sales.
  • by Anonymous Coward on Tuesday April 22, 2003 @05:27PM (#5785024)
    Hehe, that is clever though. You see, RIAA was unsuccessful so far to stop companies like LimeWire or KazAa, and by suing their VCs instead, they have more results. VCs will now be afraid in the future to fund such projects, so by doing so, RIAA cuts the feet of fileswapping where it really hurts.. Clever...
    • This doesn't really work because of the fact that investors will loose confidences in investing in any company due to the fact that this could fundementaly break the encomey.

      Now, if a company does something bad, basically people can sue the investor.

      Doesn't work very well, does it.
    • You're assuming that most fileswapping software was funded by VCs. This isn't the case. In fact, most companies aren't funded by classic "VC" firms, but are done by people's personal savings.
  • Make tort reform that much easier to argue for! This is perfect for the Republicans to use as an example of why tort reform is necessary.
  • by Capt. DrunkenBum (123453) on Tuesday April 22, 2003 @05:28PM (#5785032) Homepage
    Is that they took so long to go after someone.
  • "Who's Left?" (Score:2, Interesting)

    by reiggin (646111)
    Victimization mentality has led these people to just sit around think up of whoever is left for them to beat down in their pathetic attempt to make some more money off of this, their hidden cash cow. Make no mistake of it -- the record companies have made plenty of money off of Napster and they'd like to continue to do so.
  • by ackthpt (218170) on Tuesday April 22, 2003 @05:28PM (#5785041) Homepage Journal
    I'm not sure if this is simply the work of a few hungry lawyers goading these concerns to sue, more likely (IMHO) the record labels thumping their chests and pissing on things to mark their territory -- as to say, "It stinks like us here, don't come into this circle unless you want trouble." Yay for the music labels, leeches 'til the end of time.

    "And in the year 2030, Mooseball Music Corp lobbies congress to extend copyrights another 70 years..."

  • by greenskyx (609089) on Tuesday April 22, 2003 @05:28PM (#5785043)
    I'm not sure that corporations are going to be happy if this becomes law. Imagine if this becomes legal precedence. Would we get to hold ALL CEO's accountable or just ones who violated copyright law?
  • What did those Napster guys think the users were swapping? 10 MB recipe files?
    • by Atzanteol (99067)
      Does Smith and Wesson think their product kills nobody?

      That's not the point. The question is whether Napster, Smith and Wesson, and even the *investors* in these companies are responsible for what people do with their product.

      If I have a company that sells sharp knives, and you stab somebody with it, I am not (or should not at least) be liable for your crime. Nevermind my investors.
  • Napster... I'd like to put something witty here, but I'm just speechless

    Go Kazaa. More files, more filetypes, and more spyware. its a trifecta!
  • Umm, ok... (Score:4, Insightful)

    by scot4875 (542869) on Tuesday April 22, 2003 @05:30PM (#5785056) Homepage
    So a CEO isn't liable for things that their company does, but investors can be held liable for actions of the users of their "investee's" products?

    --Jeremy
  • by StandardCell (589682) on Tuesday April 22, 2003 @05:30PM (#5785057)
    ...they'll be suing the individual investors of tobacco companies for wrongful death due to an individuals cancer.

    Asininity at its finest. But hey, the more they keep digging, the deeper they get.
    • If those investors step in and assume all legal liabilities of the tobacco company, sure.

      Try to read the articles. I know the expected reaction is Music companies are GAY! Winbolows! I hate music! I only like one song why pay for the whole CD! blah blah blah.

      Hummer Winblad are the people who are legally responsible for Napster. They're the ones to sue.
      • If those investors step in and assume all legal liabilities of the tobacco company, sure.

        Well, as someone who has been across the table from both VC's and reporters on numerous occasions, as well as being a strong believer in Occam's Razor, I assumed, assume, and will continue to assume that the "legal liabilty" assumption by HW is just plain wrong. VC contracts tend to go the exact opposite direction, up to and including the "if you get sued, we get our money back first!" type of term. Sorry, barring

  • by earthforce_1 (454968) <earthforce_1@[ ]oo.com ['yah' in gap]> on Tuesday April 22, 2003 @05:30PM (#5785062) Journal

    The **AA are at war. They are going to use every trick, every tool in the box to sew fear and uncertainty in all those who would act against their survival. The idea of course, is to put the fear of god into anybody who might finance a startup venture that would break their business model.

    • The **AA are at war.

      Indeed. It is total war with their customers.

      They are going to use every trick, every tool in the box to sew fear and uncertainty in all those who would act against their survival.

      Then they might as well just shoot themselves in the head and get it over with, because it is they, themselves, that act against their own survival.

      [/me nominates RIAA and MPAA for Darwin awards]
  • by Wrexs0ul (515885) <mmeierNO@SPAMracknine.com> on Tuesday April 22, 2003 @05:30PM (#5785070) Homepage
    in the trial? It's obvious Napster was used by millions to transfer copyrighted music, but Bertelsmann invested to make a legal music sharing service and the VC guys just provided a funding means to develop internet file swapping software and may not have known the use of Napster's final product.

    So, what does Universal have to prove? Isn't there some protection in place for VCs?
  • by fisgreen (568052) on Tuesday April 22, 2003 @05:31PM (#5785075)

    From the article:

    In May 2000, Hummer Winblad invested about $13 million in Napster and took control of its business and legal liabilities, with Barry assuming an interim CEO role.

    IANAL, but it sure as hell sounds like whatever Napster was legally responsible for will apply to Hummer Winblad (what a silly, cool name). They were hardly silent partners.

  • Heh good luck (Score:3, Insightful)

    by Fnkmaster (89084) on Tuesday April 22, 2003 @05:33PM (#5785101)
    The passive investor defense has gone a mighty long way in the past. There's a reason that venture capitalists structure deals the way they do - they don't take responsibility for any of the actions of the managers of the companies they invest in, generally. There is a reason we have the corporate shield to protect people and organizations from such lawsuits - if you were an LP in an investment fund that put money into a company, would you want your liability for that company's operations to be greater than the share of your monies put into that company?


    Sounds like grasping for straws to me, basically the dying gasps of an industry that knows it's fucked. Napster was just the messenger, and these idiots are going to try to squash everyone who helped the messenger. That's like suing the people who ran the colo where Napster hosted their servers - after all, they entered into a business deal that let Napster perpetrate their infringement! Ridiculous. Ain't gonna go nowhere.


    Of course, my favorite part is:



    Hummer Winblad knowingly facilitated infringement of plaintiff's copyrights for its direct financial benefit.


    For some reason, I don't really think they made much money from this investment. :)

  • Free money (Score:5, Interesting)

    by NanoGator (522640) on Tuesday April 22, 2003 @05:34PM (#5785104) Homepage Journal
    At Napster's peak, the RIAA's sales were at their peak. There's no hard data that any amount of money was lost as a result of Napster.

    So, in order to make the case work, they'll claim that they'd have made some imaginary number of money more (96 billion dollars?) because millions of people downloaded MP3s, therefore didn't buy albums as a result of it. So even though that money didn't materialize, they'll magically make money on it by claiming damages as a result of Napster.

    That's pretty messed up. I worked for a company that made a product and sold a whopping $5,000 worth of it. (Gross, not net even.) A larger company came along and claimed we infringed on a patent. We didn't, but how do you convince a jury that? They used lawyer math to claim this company did one million dollars in damages. Uh right. Their revenue was consistent with both their predictions and on previous experience, and the company I worked for only made 5k.

    Like I said, free money. I wish I had a suggestion as to how this whole system could be fixed to prevent this type of fraud.
    • Re:Free money (Score:4, Insightful)

      by kcbrown (7426) <slashdot@sysexperts.com> on Tuesday April 22, 2003 @06:34PM (#5785626)
      I wish I had a suggestion as to how this whole system could be fixed to prevent this type of fraud.

      I have one such suggestion: fix it so that you can't claim a loss of any kind unless you also made the same loss claim to the IRS.

      That'll force these morons to sue only when incurring real losses, not on the basis of this fantasyland crap.

  • by BrynM (217883) on Tuesday April 22, 2003 @05:34PM (#5785112) Homepage Journal
    in a fake FOX Newsish voice...

    In an effort to fight rampant piracy, the RIAA announced that law enforcement officials will be arresting customers exiting music stores carrying product of any kind. "We've got to stem the flow of piracy at it's source" says Robbie Flack, the RIAA's cheif advisor to the Bush Administration. "These people are taking our intellectual property and playing it loud enough for other people to hear or showing it to their friends. Clearly this violates 'public performance' laws."

    When asked whether this would discourage music sales, Flack responded that "those sheeple should just stay home and listen to appropriately licensed broadcasts of their favorite artists." RIAA officials stated that this is merely the first step in a long plan that they term the "War on Privac.... er Piracy" [ed note: this is how all RIAA staff pronounce it]. The next step according to the plan is to arrest executives from the very labels that the RIAA represents. "[the executives] are putting all of this copywritten material out there and giving consumers a sense that they own it. This is just wrong.", said Flack. The plan will culminate with the RIAA arresting themselves once Congress passes IMGOD-327, a controvercial new bill that would make RIAA staff federal law enforcement officers. The bill is expected become law in 2004 with very little resistance.

  • by Sabu mark (205793) on Tuesday April 22, 2003 @05:34PM (#5785113)
    ...don't they understand?

    The defining characteristic of a corporation, in America, is that its investors cannot be held liable for more than the amount of their investment.

    In other words, suing the VCs for the actions of the company they invested in is SPECIFICALLY PROHIBITED. What's next? Someone finds a syringe in a Coke bottle, and lawyers sue every little old lady who owns shares in a mutual fund that invests in Coca-Cola stock?
    • by Anonymous Coward on Tuesday April 22, 2003 @06:57PM (#5785814)
      Just so we have this clear. Limited Liability only applies if you keep you hands off. The more you are involved in the day to day operations of a corporation/LLC/whatever, the more the court will find that the entity is merely the investor's alter ego. This is nebulous test where the court will look at such factors as the extent to which assets are co-mingled, the extent to which the investor made day to day operational decisions, whether or not the company was underfunded, and the extent to which the corporate formalities were followed. That latter part means that if they weren't holding regular board meetings and getting board and shareholder approval for certain actions, the more it looks like a scam to avoid liability.

      If you look at a publicly traded companies, you will virtually never be able to pierce the corporate veil down to the shareholders. The reason for this is that they stock is so widely distributed that the courts could not reasonably find that such a publicly traded company was the alter ego of any single or small group of investors.

      The same cannot be said of small enterprises. It is not uncommon, when a company is getting started, for the CEO/President/staff to use his personal funds to prop up the company and then to take company funds for personal use. This is a no no. It is also common for the investors to get together and decide how to do things and not keep minutes. This too is a no no.

      There are many means available to resolve these problems, or at least lessen them, today. The most common is the use of a Limited Liability Company. This lets you dispense, or at least lessen some of the corporate formalities in terms of board meetings. You would still be well advised to keep the bank accounts seperate. The biggest limitation of an LLC is generally the number of investors, depending on the state.

      In short, there are a lot of people out there who could use just a little legal advice on how to keep their liabilities limited, but they are penny wise and pound foolish by not making a regular visit to the lawyer just like they do the doctor. Yes, IAAL, but I am not your lawyer. Go get one...blah, blah, blah.

      -cliff
  • The RIAA sued Napster. The court ruled in the RIAA's favour, and awarded damages.

    Now, my understanding is that the damages should offset 100% of the losses made by the RIAA, so that the books are balanced, and the side on the right side of the law doesn't make a loss.

    If this has already happened, why are they now suing another party? Did they make a further loss because these people invested in the company? Aren't they claiming twice for the same injury?
  • 1. Wait for someone to have a good idea
    2. Sue there assess off
    3. Profit!

  • My Business Law teacher used to tell us, "You sue everyone for everything all the time". They are trying to scare anyone who is or is thinking of becoming associated with Napster type applications. It's a common tactic to stop what you can't compete against.

    As for the $150,000 per violation, lawyers routinely ask for the sky knowing that it will be amended. I was on a jury recently for a DWI lawsuit and the plaintiff's lawyer was asking for several hundred thousand. During deliberation, everyone discus
  • I'm suing everyone who has ever purchased music for contributing to their stupidity.
  • by ryantate (97606) <ryantate@ryantate.com> on Tuesday April 22, 2003 @05:40PM (#5785172) Homepage
    ... and the legal scholars I talked to found plenty for Hummer Winblad to worry about. Of course, this was before Bertelsmann became involved.

    My article, from Upside.com:
    Hummer Winblad could answer for Napster's sins [ryantate.com]
    Legal experts say there is a good chance the flush venture capital firm Hummer Winblad stands to lose more than its $13 million investment in Napster Inc. if the music-swapping firm is fined for music piracy.

    then the Economist did a story:
    Hummer's Napster bummer: Napster's backers under attack [ryantate.com]
  • One of the major principles of corporate law, for the past hundred years, is that only the company itself (and in certain circumstances the company's directors) are liable for legal action. The shareholders are exempt, and their loss is limited to the amount of their original investment (i.e. the company files for bankruptcy and the value of their shares drops to zero.

    The attempt to sue a major investor of Napster is equivalent to attempting to sue every mutual fund, investment bank, or major shareholder

    • "The attempt to sue a major investor of Napster is equivalent to attempting to sue every mutual fund, investment bank, or major shareholder who owns Philip Morris for "Supporting a product that causes death and disease"

      So, can we now all file lawsuits against every director, every major investor, VC firm, etc, associated with a RIAA label, for their contributon towards their illegal collusion in CD price fixing?

      Proven now more than ONCE.
  • by ketan (3574) on Tuesday April 22, 2003 @05:42PM (#5785188) Homepage
    If we want to make corporate responsibility a real thing in the post-Enron days, this sort of thing is going to have to happen. Lots of people want laws to enable us to go after people who lie to shareholders or pollute the environment, but the sword cuts both ways. If you want to make it more difficult for someone (either a real person or another corporation) to hide behind a corporation after engaging in illegal activity, you're going to have to accept that these laws will be used by people we don't like (RIAA) to go after people we do like (Napster) breaking laws we don't like.

    How is this such a wrong thing anyway? Hummer Winblad knew that Napster operated by exploiting copyrights they did not own, but they gave them money anyway. Giving money to a terrorist group that will commit crimes is illegal; why shouldn't it be illegal to give money to a company that will commit crimes also? Ignore whether the law is just; as it stands right now, Napster was illegal.
  • "By the time of its close, Napster had contributed to billions of separate acts of copyright infringement, according to Monday's complaint. The record labels are seeking punitive damages of no less than $150,000 per violation of copyright, among other awards."

    So at a minimum, this is two-billion times $150 thousand, or $300 trillion! And you thought asking $97 billion from college students was bad...

  • "Record companies and music publishers have much to be concerned about, according to recent research. Worldwide sales of music CDs, records and cassettes fell for the third year in a row, hit largely by rising Internet piracy in the United States, according to figures for 2002 by the International Federation of the Phonographic Industry. Last year saw the steepest fall yet, with a 7 percent drop in global music sales and a 10 percent fall in units sold in the United States."


    Piracy? Piracy? This is total
  • Ray Kroc, owner of the McDonald's franchise until his death in 1984, once asked some students that had attended his business seminar, what is my business? They responded, Hamburgers, of course! No, he told them, his business was real estate, and that is where the majority of McDonald's income comes from. McDonald's is the largest single owner of real estate in the entire world, even more than the Catholic church.

    And now the music labels seem to be running off of a similar philosophy. I can just imagine
  • Next step (Score:5, Insightful)

    by realdpk (116490) on Tuesday April 22, 2003 @05:49PM (#5785244) Homepage Journal
    Sue the CDROM manufacturers that enabled music reading/playing for computers. Seriously. They could argue that the CDROM manufacturers should have only created them to read data CDs.

    Maybe sound card manufacturers for having good quality line-in/mic jacks - they should have limited them to 22khz or something suitable for voice.

    It probably won't go as far as suing the retailers for selling CDs to "pirates", however.
  • Why do I have the distinct feeling that, in the not-so-distant future, most companies will receive their funding from anonymous people in brown paper bags left on the street corner...the funds in small denominations, unmarked, and non-sequential serial numbers.

    Trust me...the day I win Powerball [powerball.com] several [fsf.org] organizations [nmss.org] are [gentoo.org] going [debian.org] to [eff.org] receive [slashdot.org] anonymous [zophar.net] donations [kuro5hin.org].
  • by mdfst13 (664665) on Tuesday April 22, 2003 @05:53PM (#5785275)
    Look at what record companies are producing now: $17 or $18 CDs of bands that wouldn't have been allowed out of the garage in the 80s. Who is the best guitarist in alternative music? Who knows? Who cares? Alternative music doesn't require technical virtuosity to play. It's all about small acts. The record companies like this because it doesn't lock them in to paying prima donnas like Eddie Van Halen or David Lee Roth the big bucks, but it also means that alternative bands are far more interchangeable and can't demand as much of a premium over other bands.

    Eventually, a record company will realize that it would be better off releasing a higher quality product at a lower price, its sales will go through the roof, and everyone else will follow. Until then, we will just have to listen to them whine about file sharing. File sharing is not the problem, price and quality are.

    The people who really have something to lose are radio stations. They are a free music delivery mechanism, but why listen to a radio station that only plays music you like some of the time when you can download MP3s and listen to your favorites.

    Perhaps the future weakness of the radio station is what really bothers the record companies. Radio stations are their promotion mechanism. Without them, they might have to actually produce a quality product to get people to buy it (instead of just playing it to the point that people feel vaguely uncomfortable when the radio is off because they are so accustomed to the sound of the song).
  • by Dark Bard (627623) on Tuesday April 22, 2003 @05:55PM (#5785290)
    I'm still a bit confused with the pervasive attitude that there is nothing wrong with services like Napster and that trading music is okay. I'm in the entertainment industry myself and things are getting rougher by the day. Where does it say that all intellectual property should be free? Artist have a right to get paid for their work. Taking that work without compensation is stealing. Saying it is because the record companies over charge for CDs is rationalizing the act. If the government doesn't go after Napsterlike orginizations should they go after the individuals doing the trading? Would it be better to let Napster off and give everyone else two years probation? It may feel like you are getting away with something by swapping music but in the long run you aren't. Without the influx of money the record industry will have to downsize. It will be ten times harder for new bands to make it and the selection of music will be a fraction of what it is now. The record companies won't loose in the long run. They already got rich. You'll loose. And no I've never downloaded music.
    • by dissy (172727) on Tuesday April 22, 2003 @07:05PM (#5785859)
      > I'm still a bit confused with the pervasive attitude that there is nothing wrong
      > with services like Napster and that trading music is okay.

      If people dont want their information taken, they shouldnt give it out to the public. Its as simple as that.
      A song put on a cd or played on the radio will be heard. Thus by definition, you cant prevent it from being heard or known about. You lose control over it once you give it to someone else.

      Dont like that? Dont give it out. Pretty damn simple.

      > I'm in the entertainment industry myself and things are getting rougher
      > by the day.

      May i suggest, get a real job?

      > Where does it say that all intellectual property should be free?

      In the definition of 'intellectual property'.
      You cant own an idea.

      You can have an idea and keep it to yourself. But people making music arnt doing that (Or atleast not these people.) Even then, someone else will most likely eventually come up with that idea too.

      So, what ever gave you the idea that intellectual property should _NOT_ be free?

      Copyright was setup in the USA so that an artist can have legal stranglehold over a work for a limited time in exchange for that work being released for the benifit of mankind.

      Looks to me like the artists are trying to renig on that deal. So i say fuck them. Im reniging on my part of it too.

      You dont wanna give your works to the public after 17 years? Fine. I dont want to honour your copyright. You play fair, then I will.

      > Artist have a right to get paid for their work.

      Nobody has a right to get paid for anything.
      If your work sucks, you have no right at all to force me to pay for it.
      If your work isnt something i want, you have no right at all to force me to pay for it.

      Does this give us the right to take it anyways? See my above point.
      You play by the copyright rules and give your shit to us at the end of the 17 years, and THEN i will too play by the copyright rules and let you have those 17 years to profit.

      > Taking that work without compensation is stealing.

      No, taking something so you no longer have it but i do is stealing.
      Taking someones work without compensation is copyright voilation.
      Again, see my above point on copyright.

      Until you care about the fact you are breaking copyright law by not giving us your works after 17 years, why should i at all care that im breaking copyright law too?

      > Saying it is because the record companies over charge for CDs is rationalizing
      > the act. If the government doesn't go after Napsterlike orginizations should
      > they go after the individuals doing the trading?

      Actually the government should go after the copyright holders and force THEM to abide by the law before worrying about us.

      > It may feel like you are getting away with something by swapping music but in
      > the long run you aren't. Without the influx of money the record industry will
      > have to downsize.

      So? As i said, they have no right to take money from me if i dont wish to give it to them.
      As it seems, alot of people dont want the recording industry to have their money. In the USA, this means your company will fail. Its capitolizm. Dont like it? Move to china.

      > It will be ten times harder for new bands to make it and the selection of music
      > will be a fraction of what it is now.

      The funny part is, there are more people that make music because they enjoy it, than there are people that make music to get rich.

      I could care less if the 'i just want money' bands go away.
      The real talent lies in those that know about music, not about wanting money.

      > The record companies won't loose in the long run.
      > They already got rich.
      > You'll loose.

      Bank robbers get rich too. So do companys like enron.
      Guess your right, we lose, they win.
      (That was my only sarcastic remark in this post by the
    • I'm still a bit confused with the pervasive attitude that there is nothing wrong with services like Napster and that trading music is okay.

      The huge number of people who say "I don't understand why people think Napster is OK" on every single RIAA related story should be proof enough that it's not all that pervasive.

      Artist have a right to get paid for their work.

      Sure, I can agree with that. Though you do realise the current copyright system - even without the pirates (arr) - does not guarantee y

  • by SuperBanana (662181) on Tuesday April 22, 2003 @05:56PM (#5785307)
    I'd like to put something witty here, but I'm just speechless.

    As part of the due-diligence, the major investors have publicly stated that they went to their lawyers, and the lawyers advised them to steer clear, because Napster was knowingly letting/encouraging people swap copyrighted material(this knowing/encouraging bit is important.)

    They went ahead anyway, because they were greedy- the same reason people threw traditional rules-of-business out the window for countless dot-coms that(surprise) turned into dot-bombs.

    Surprise surprise, people come knocking when they hear you funded a company which YOU KNEW(AND HAD BEEN ADVISED BY A LAWYER TO THE SAME EFFECT), WAS ENGAGING IN ILLEGAL ACTIVITY. It's called aiding and abetting, and in this case, the investors knew full well what was going on; it's not like someone was cooking the books and the investors honestly didn't know. EVERYONE at Napster knew they were doing something illegal.

    If you want to be all "RIAA/MPAA sucks!", fine- but don't mix up centuries-old legitimate law. If you fund a business you know is a front for a drug operation, are you gonna be "speechless" when the DEA comes and arrests you? Actually, being speechless in such a case might be an excellent idea, particularly given your understanding of legal matters ;-)

    • YANAL (Score:4, Insightful)

      by Lethyos (408045) on Tuesday April 22, 2003 @06:59PM (#5785824) Journal
      If you want to be all "RIAA/MPAA sucks!", fine- but don't mix up centuries-old legitimate law. If you fund a business you know is a front for a drug operation, are you gonna be "speechless" when the DEA comes and arrests you? Actually, being speechless in such a case might be an excellent idea, particularly given your understanding of legal matters ;-)

      You're assuming Napster was doing something illegal, which they weren't. No violation of the law was made further than any other system that indexes files and provides their locations.
  • by dogbertsd (251551) on Tuesday April 22, 2003 @06:06PM (#5785373)
    "Worldwide sales of music CDs, records and cassettes fell for the third year in a row, hit largely by rising Internet piracy in the United States, according to figures for 2002 by the International Federation of the Phonographic Industry" (emphasis added).

    The sales figures I have seen only indicate that sales are less than in the past. The causal connection made by this and other articles indicating that this reduction is a result of piracy is not entirely established. Record companies have blamed the Internet for their poor performance so many times that it has been accepted by many in the media as established fact.

    There are many other possibilities to explain the sales reduction. Reduced interest in current, big name artists, increased interest in a splintered set of independent artists, the failure of the industry to adapt to new market formats (much as occurred when cassette tapes became popular), and the alienation of large parts of their customer base all come to mind as possible alternative explanations.

    Many "old steel" industries are becoming frustrated that customers are not more like cattle. Tastes tend to change suddenly in ways that large companies have a hard time dealing with and it is easier to blame outside forces that to fix a difficult problem.

    Perhaps their numbers won't be off for a fourth year if the recording industry drops its defensive stance and instead recognizes that the market has changed and that they need to adapt. At some point shareholders have to begin asking what else the industry is doing to increase revenue besides suing everyone.
  • by timotten (5411) on Tuesday April 22, 2003 @06:36PM (#5785646) Homepage
    Universal Music Group announced today that it had filed suit against Josephine Fanning, mother of Shawn Fanning, the founder of the defunct Napster peer-to-peer file sharing service. Mrs. Fanning allegedly contributed to copyright infringement over a period of twenty years.

    "Mrs. Fanning knowingly nurtured and encouraged her son, who in turn facilitated file-sharing among millions of internet users, who in turn made unauthorized reproductions of our clients' copyrighted works," said Universal lawyer Duey Screw. "What began as a 'good time' with Mr. [Robert] Fanning grew into an international piracy ring. By intentionally providing food, clothing, and education to her son; by encouraging him to pursue his interests; and by failing to report inappropriate activity to the authorities, Mrs. Fanning indirectly caused $98 billion worth of copyright infringement."

    Asked for comment, Shawn Fanning said that his mom "was just doing her job." He suggested, using terms we cannot quote here, that the record labels would regret filing the suit. "They just shouldn't go there", he suggested, because he had located revealing "pictures of that ___ ___ ___ that raised Hilary", he said referring to the mother of an authority in the Recording Industry Association of America.

    A lawyer representing Mrs. Fanning complained that the labels had rejected his attempts to settle the matter out of court. "They want $98 billion, but my client doesn't have $98 billion. We offered several batches of home-made cookies, but the labels wouldn't bite."
  • by aquarian (134728) on Tuesday April 22, 2003 @06:41PM (#5785693)
    You know what Willy Sutton said about why he robbed banks, "It's where the money is..." Well, so it goes here. What's the use in suing bankrupt dot-bombs? Go for the "deep pockets"...
  • by frovingslosh (582462) on Tuesday April 22, 2003 @06:49PM (#5785761)
    Do I understand this right? So Napster was a tool for file pirating. Hummer Winbald bought them, changed them, and basically destroyed them. Now they are being sued for buying them and shutting them down.

    If I understand this right, I think it's great. Let the industry fight amoung themselves and certainly let them send each other the message that it's not OK to shut down a pitate organization by buying them.

    And just to make my position clear: Is pirating wrong? Yes its is. But it also seems to be the lesser of two evils.

  • by TygerFish (176957) on Tuesday April 22, 2003 @06:49PM (#5785764)
    Let's get real. The suit is not really surprising; 'evil?' yes. 'Surprising?' not by a long shot.

    For decades now, the recording industry has used digital technology in the form of compact discs to extract vast sums from the public by price-fixing and the centralized control of content. Originally using the excuse that they had to recoup the expense of implementing the then new digital technology, the recording industry sold CDs at a premium that put the cost of CDs far beyond that of the records and tapes that the new technology was to eventually replace. Now, long after the maturity of digital technology has made CDs cheap and easy to produce, the record industry persists in demanding a premium from the public - with the rationale for elevated pricing this time based on the notion of recouping the costs of promotion.

    Then as now, the big players in the music industry are an oligopoly with a strangle-hold on all things musical, one made possible by contract law and industry-favoring interpretations of copyright that keep both artists and the public in line; the only reason this worked was because of the technical inability of people to copy and transfer music that was for all intents and purposes their property among themselves.

    The advent of the internet and file-sharing software have effectively broken that monopoly, providing the kind of socio-technological trend that always seems to trip up large corporate entities with their long reaction times in response to new trends. Predictably, instead of reacting to the new technology by redefining their business models to absorb and exploit it for everyone's benefit (cheaper CDs, CD-singles, cheap online transfers, etc.) they have turned to the courts and copy-protection technology in a two-pronged attempt to maintain a world in which their wheezing profit-engine is defined as every music user's reality. And the current lawsuit is unsurprising as one more manifestation of this strategy.

    By suing investors, the massively well-funded legal apparatus of the record industry is, in effect, taking out insurance against more services like Napster springing up in the future. Unless the record industry loses, quickly and resoundingly, they will have established that providing funding for services like Napster or anything like it will, at the very least, lead to an expensive and protracted nuisance suit.

    The only thing surprising about the lawsuit is either the creativity to be seen in embracing it or the desperation it implies on the part of the record industry.
  • by sdo1 (213835) on Tuesday April 22, 2003 @07:01PM (#5785840) Journal
    Then you MUST read the The Daily Adventures of Mixerman [prosoundweb.com] . It should be, without any doubt, required reading for anyone with even a remote interest in the goings on of the music industry.

    So why do record companies sell less records these days? It's not because of downloading. They're doing it to themselves.

    -S

  • by Kenrod (188428) on Tuesday April 22, 2003 @07:03PM (#5785851)
    Hummer Winblad (giggle) is listed as one of the defendants in the original Napster suit. In that suit, the Court found that Napster had a responsibility to prevent trade of copyrighted material on their network (known as "vicarious infringement") and gave Napster an opportunity to police their own network. After a few months, the Court determined that Napster had failed to prevent the trade of copyrighted material and ordered them to immediately shutdown.

    Vicarious infringement requires that if an entity can prevent copyright infringement and gains from the infringement, they can be held liable even if they don't know about the infringement. The idea (and it is a correct one) here is to hold owners responsible for actions they have control over. There is a long legal history to this principle, and it applies to most areas of conduct liability, not just copyright infringement.

    The real question here is the extent of Hummer Winblad's amount of control of Napster. Since the CEO was a Hummer Winblad partner (Hank Barry) and John Hummer himself was on the board, it doesn't look good for them. And it sounds to me like they knew the risks when they got in : Original announcement [thestandard.com]

  • Worldwide sales of music CDs, records and cassettes fell for the third year in a row, hit largely by rising Internet piracy in the United States, according to figures for 2002 by the International Federation of the Phonographic Industry. Last year saw the steepest fall yet, with a 7 percent drop in global music sales and a 10 percent fall in units sold in the United States.

    Just burns me up... how the hell do they know that "internet piracy" caused the decline in CD, record and cassette sales? Have these morons ever considered that the worldwide economy has been in the tank during the same period of time they're talking about? Maybe people are buying less CD's because they can't freaking afford them.

    I'l bet all those out of work ex-Nortel employees damn sure aren't rushing out to buy dozens of CD's per pop....
  • by Master of Transhuman (597628) on Wednesday April 23, 2003 @12:08AM (#5787190) Homepage
    Let's sue the record labels and the RIAA for producing the product that was pirated!

    After all, you can't have piracy without a product to pirate, right?

    So the labels and the RIAA ARE RESPONSIBLE FOR PIRACY!

    This logic is no worse than the RIAA's...

    You could also argue that the excessive prices charged for music CD's encourage piracy and that suing people for it after the fact is in fact entrapment, which is illegal...

    More convoluted and perfectly legitimate logic comparable to the RIAA's...

    Let's face it, folks, there is no logic involved in any action by these people. It is naked greed and power grabbing, just like everyone else in industry, religion, education, government, etc.

    The only proper response is cut their balls off...
    any way you can. Legally, illegally, whatever.

    I just had a relevant discussion with someone today who pointed out that journalistic investigations always only go so far before they run into the government as those responsible for whatever is being investigated (name the crime, government or the cops are behind it somewhere down the line). He said the journalists are always forced to back off. I said as long as you use ethical journalism, you will lose. You have to use ILLEGAL means to combat ILLEGAL actions by LEGAL authorities. That means a journalist has to wiretap, trail people around, break-and-enter, and hack computer systems - just like the government will do to anyone investigating them. If you aren't willing to go all the way, you're just wasting your time - go home and forget about it.

    My friend pointed out that journalists don't want to go to jail. Well, I told him, that's the price you pay for resisting the state. If you can't do the time, don't do the crime... The Arab saying is, "When you draw your sword against your Prince, you must throw the scabbard as far away as possible."

    I did eight years for picking up a gun to destroy the state. Now I'm using different tactics. I'll see you, statist assholes, next time - but you won't see me...

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