LimeWire Settles With Record Labels, Still Faces $1 Billion Claim

[Guest bigdady]

After LimeWire was ordered to cease its operations, the legal troubles continued for the file-sharing company. Dozens of record labels still demanded hundreds of millions of dollars in damages to compensate for their claimed losses. One of these lawsuits involving all the major music publishers has now been settled, reducing the potential damages to just a billion dollars the record labels are claiming in another case.

After LimeWire shut down its file-sharing business in October last year, the trouble for the company was far from over. Record labels and music publishers kept chasing LimeWire demanding compensation for the losses they claim the file-sharing service operator had caused.

One of these lawsuits has now been concluded with EMI, Warner Bros., Universal, Sony and several other major music publishers reaching a settlement agreement with LimeWire. No details on the deal have been released, except the court filing which note that both parties “shall each bear its own costs of suit, including attorney’s fees.”

While this settlement brings to an end a lawsuit started in June last year when LimeWire was still operational, by no means does it mark the end of LimeWire’s legal troubles. Due to the complex copyright pyramid the music industry has set up, many of the same companies are still fighting the company in a separate case as copyright owners (vs. publishers).

This case is where the permanent injunction which forced LimeWire to shut down was issued last October. According to the injunction, LimeWire “intentionally encouraged infringement” by LimeWire users, its software was used “overwhelmingly for infringement” and the company knew about the “substantial infringement being committed” by its users.

The evidence further showed that LimeWire marketed its application to Napster users and that its business model depended on mass copyright infringements.

The injunction was the result of a lengthy and ongoing litigation process which dates back to 2006, and soon after it was awarded the record labels filed a claim to recoup damages said to have been caused by LimeWire. The labels calculated that the company behind the popular file-sharing client owes them up to a billion dollars.

The case dragged on and in recent weeks dozens of documents were submitted to the court in a noteworthy side-battle. To get to the bottom of how the music industry sets up licensing deals with other Internet companies, LimeWire subpoenaed internal emails from Apple, Amazon, Yahoo, Google, MySpace and others.

Thus far a quarter million pages of emails have been collected, leading LimeWire to draw some interesting conclusions. Among other things, they found that unauthorized downloads actually boosted the revenue of music labels, and that their income took a dive when LimeWire shut down.

Both parties continue their dispute in the coming weeks and a trial has been scheduled for May, in which the damages claim will be assessed.

While the record labels are hoping to catch a big score against LimeWire, many ex-users of its file-sharing client have moved on to one of the many LimeWire alternatives, or the resurrected pirate edition.