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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."
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...
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.
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...
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
Jesus was a liberal
...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.
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.
My rights don't need management.
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?
--- Need web hosting?
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.
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.
Brackets contain world's first nanosig, highly magnified:[.]
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.
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.
"Derp de derp."
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.
US Democracy:The best person for the job (among These pre-selected choices...)
...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?
What Would Jesus Do
(for a Klondike bar)?
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?
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.
Maw! Fire up the karma burner!
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 discussed how it was unreasonable and would be much less. If this goes before a jury I expect them to be awarded very little, if anything.
..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.
That Jesus Christ guy is getting some terrible lag... it took him 3 days to respawn! -NJ CoolBreeze
... 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
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 money?
If you buy that, they can be held liable pretty easily for funding a criminal operation. There are a number of distinctions between this and limited liability: for one, shareholders of Exxon are investing in an oil business, and didn't make the decision to stick Alaska with the cleanup bill, for instance.
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.
You have a choice: tax and spend Democrats, or borrow and spend Republicans. Choose wisely.
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.
"Ignorance more frequently begets confidence than does knowledge"
- Charles Darwin
From the Article:
:)
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.
Let me check my math here:
~1 billion (1,000,000,000) acts
x $150,000 per act fine
==========
~$150 TRILLION dollars ($150,000,000,000,000)
Two Things:
1) Does this amount of money even exist?
2) Did anyone else here Dr. Evil's voice when they read that last figure?
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.
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).
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.
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.
"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.
Corporatism != Free Market
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.
"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 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. This means that the entire world GNP for 10 years will be given to the 6 major record labels.
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.
Why bother.
Let me first acknowledge that the person you're replying to is probably a little more extreme than a lot of people. BUT...
Even though I disagree with the way he expresses his opinion (telling you to get a job was rather childish) he is correct. The conglomerates themselves have invalidated the entire concept of copyright by acting outside the boundaries (and spirit) of the original intent of copyright. To ensure innovators innovated, and to insure that useful ideas weren't kept out of the public's hands forever... One of many measures essentially enacted to prevent the formation of an ultra-wealthy aristocracy.
They didn't intend to allow conglomerates to keep culturally enriching materials out of the public domain forever, yet that is essentially where we're at, and essentially the point of view you're arguing.
I can't wait for somebody to become a big star by financing his own recordings, promoting himself with unencumbered p2p delivered mp3 (or oggs or whatever) of songs, perhaps embedding his web-site name in one of the ID3 fields so people who really liked it could logon and buy cds, t-shirts, and tickets to see him in concert.
It will eventually happen, and if your music is good enough, it could be you. The critical difference is that somebody who becomes huge this way gets to keep all the profits, keep ownership (for a time) of the rights to his songs, and not be a slave to some idiot in a suit's concerns about your record and whether there are any "singles" on it. Every artist who sides with the RIAA and their ilk only lengthen their time of servitude under an oppressive regime.
Hello Apples, meet Oranges. A house is physical property. It can be taken away. A song can't be taken away unless I take all your tapes and erase your memory of it. The law plainly intends for copyrights to eventually expire, why can't you (and the RIAA) accept that rather than trying to sue everybody into submission?
Using your logic, how is playing the radio loud any different than Napster? I'm allowing many people to "enjoy" "your" music but only paying for one copy. For that matter, why is Napster different than a radio station? Sure, radio stations pay for the right to broadcast music, but the per song breakdown is pretty small. The reason the labels had this arrangement in the first place was PROMOTIONS.
Why won't the labels license Napster-like services to provide unlimited downloads? It would be the same as radio--better really because the user would hear exactly as much of what they are interested in as they want--lose interest fast? Decide the artist sucks? Erase file.
Every "starving musician" I've ever met who is vehemently anti-Napster invariably has some pie-in-the-sky dream of living the life of a rock star--fame, fortune, big money, and chicks everwhere. All of them desperately want to believe that those three things are achieved on merit, but they aren't. They're based on promotional budget, production budget, and access to good drugs.
Who did what now?
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 ?
echo '[q]sa[ln0=aln80~Psnlbx]16isb572CCB9AE9DB03273snlbxq' |dc