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Record Labels Sue Napster's VC
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."
(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.
(This Space For Rent)
... 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
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
You bet. Right in my backyard, even.
Fortunately, there's a bit of a resistance starting. Some students have started a website dedicated to the case here, and there's supposed to be a rally Sunday afternoon.
You'd better believe I'm going to show up.
I've moved on.
The initial judgment (in legal parlance: the suiting docket adjuis-fortis) settled on the basic amount for damages, exclusive of any contractual inequity. All of the contractual inequities are henceforth covered under ad litem agreements at the court's discretion.
In this case, the court found that, given balance and pretext, the ad litem balances were no longer considered pre-emptory, and therefore could be brought against the primarily responsible parties to the contracts -- Hummer.
Chances are, based upon the Deleware interpretation of at litem enforcement, this will only result in a summary judgement, the result of which will be to force the original adjuis-fortis parties (the primary respondants) back into court for an adjusted ruling.
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 ;-)
Please help metamoderate.
I wish I could remember where I read it at...
US Democracy:The best person for the job (among These pre-selected choices...)
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
Something which is NOT illegal.
Sure, there are a few recordings out there that can legally be copied, but the VAST majority cannot.
A few recordings? There are more than a few. But by shutting down Napster that was essentially a move to make sure the number of such recordings would not increase--something that was legal but would hurt the RIAA, even if their music was not downloaded.
There is, in fact, no non-trivial legal use of Napster.
BS. First, if there is any reasonable legal use of something then why should it be illegal? There are hundreds, probably thousands, of independent artists that could have distributed their music via Napster. It's entirely possible that there are MORE such artists than those owned by the RIAA, and as the service matured you would've found more such legally-copyable material as indepedent artists got heard and proportionally less RIAA garbage. That's a very SIGNIFICANT legal use of Napster and it's downright disgusting that was ignored (actually it wasn't, I think that's the main reason the RIAA really wanted it shut down--not so much to keep its own stuff from being copied but making sure non-RIAA artists weren't easily heard).
Actually, it wasn't. Napster wasn't technically shut down by the courts. It was effectively shut down by making the unreasonable and technically impossible restriction that it must be 100% sure that no copyrighted music could be transferred with Napster. That's silly. The whole Sony videotape argument said that since there was significant non-infringing uses that it was legal. It DIDN'T say that since there are significant non-infringing uses that it was legal only if safeguards could be made to make 100% certain that no infringing uses take place.
The Napster case was a very awful double-standard. Did it ever get appealed to the Supreme Court? I don't see how the Napster decision can live in harmony with the Sony videotape decision. But I'm almost scared to think what would happen if the RIAA won against Napster at the Supreme Court level--all kinds of things could be made illegal with a precedent such as that.
Oh? They've done a LOT of things. Let's see, they're buying legislation so that they can change the Fair Use rules. Look how successful they are at keeping things from entering the Public Domain. They've bought legislation that exempts them from common labor laws. Their contracts with the artists would be illegal in every other industry. They're buying legislation so that they can "actively go after the bad guys". What this really means is be allowed to infiltrate EVERYONE's computer, and "only" sabotage the distributers. Why do you think we fight over wire tapping laws with the police? And believe me, once they have access to your computer, they will steal all your information and make money off it anyway they can. They have and continue to fight all technology that competes against their ancient business practices. If the music industry was a horse ranch, Henry Ford would be in jail, and we'd all be riding horses. The music industry acts like it is their god-given right to profit. It is not. And I'm sick of them blaming me that they have sales slumps during a recession!!