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LimeWire Files for Lawsuit Dismissal
July 19, 2008
Thomas Mennecke
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LimeWire and BitTorrent are the only two large P2P development firms still functioning in the United States. BitTorrent has escaped the legal wrath of the entertainment industry, thanks to its innovative distribution protocol that can be easily translated to movie distribution. LimeWire hasn’t been so lucky, and has fought a protracted legal batter with the music industry over copyright infringement. On Friday, the P2P firm filed a preemptive motion to dismiss the case against them, anticipating the plaintiff’s own summary motion.

2005 wasn’t a good year for file-sharing developers. It saw the Supreme Court remand the Grokster vs MGM case back to the lower courts, setting into motion a chain reaction against P2P developers. The Supreme Court found that Grokster could be found liable for inducing copyright infringement, also known as secondary copyright infringement. In other words, the Supreme Court found that Grokster could be sued for promoting copyright infringement by virtue of its advertising. Unfortunately, the legal questions surrounding secondary copyright infringement were never answered, as Grokster settled with the entertainment industry for $50 million.

Within months of the decision, other P2P companies began to feel the music industry’s wrath. Emboldened by the Supreme Court decision, Ares Galaxy, WinMX, Bear Share, MetaMachine (eDonkey2000) and LimeWire all received cease and desist notices. The letters demanded that the P2P companies “… immediately cease-and-desist from enabling and inducing the infringement of RIAA member sound recordings. If you wish to discuss pre-litigation resolution of these claims against you, please contact us immediately."

BearShare and MetaMachine both closed shop and settled for $30 million. WinMX ceased operations and was never heard from again. Ares Galaxy defiantly opened its source code, while LimeWire stood its ground. LimeWire stands unique from the rest of these operations, as it’s comparatively much more financially secure – giving the operation the ability to fight back rather than fold like a cheap suitcase.

Progress so far in the LImewire vs. music industry lawsuit has been exceptionally slow. The music industry lawsuit, represented by the RIAA (Recording Industry Association of America), was filed in April of 2006. Here we are in the latter half of 2008, and any kind of resolution to this case seems rather distant at best. LimeWire hasn’t been dormant, however, as the development of new releases and their much-anticipated music store has rolled out despite the pending legal situation.

In a recent flurry of activity to the case, LimeWire has submitted a motion for a summary judgment, anticipating the music industry will also file a summary motion for their claim. A summary judgment, as its name suggests, is a streamlined tool a judge can use to make a decision on a case based only on the legal briefs submitted. It forgoes the lengthy trial, which in this circumstance has already take 2 years.

LimeWire’s motion, filed yesterday in Federal Court in New York, extensively argues why Greg Bildson (CTO), Mark Gorton (Chairman of Lime Group) and LimeGroup should not be held liable for inducing copyright infringement. The motion then focuses heavily on defending LimeWire’s transfer of ownership from LimeGroup to a new firm, Family Limited Partnership. The music industry claims this move, which was made shortly after the Grokster decision, was designed to “defraud creditors” if there was a judgment rendered against the three defendants. In other words, by transferring the ownership and assets of LimeWire to another company, the music industry feels they could be cheated out of a substantial amount of money if LimeGroup, Mark Gorton and Greg Bildson eventually lose. The defense argues the move was merely a part of Mark Gorton’s estate planning.

“Plaintiffs contend that the transfer of LG’s interest in LW to the FLP and the subsequent dividends LW paid to the FLP were fraudulent conveyances in violation of Section 276 of New York’s Debtor and Creditor Law,” the defense motion reads. “Plaintiffs’ claim is based on little more than the coincidence of timing and Plaintiffs’ unsupported speculation that the FLP was formed to avoid liability to copyright holders in the wake of the Supreme Court’s opinion in Grokster.”

"The endless stream of lawsuits filed by the major record labels hasn't done anything to help the music consumer, nor has it put a single penny into the pockets of artists, songwriters and publishers," George Searle, Chief Executive Officer, Lime Wire, said in a statement. "Litigation isn't a good digital business model. We're confident in our position and in the eventual outcome of this lawsuit, and we look forward to the day we can work together with the entire music industry to help expand its reach and deliver more to the consumer."

In the mean time, expect a summary motion from the plaintiffs to come soon. It would be a surprise if either motion were granted, even if such a move would speed an already lumbering process along. However time is on the side of LimeWire, and any time spent arguing in the courtroom is better than time spent negotiating a settlement. If neither side's motion is granted, LimeWire may prove to be the first P2P company capable of defending itself to the bitter end, and perhaps answering the extent and focus of secondary copyright infringment.

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P2P Clients :: LimeWire

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