LimeWire Countersues Record Industry

By Scott M. Fulton, III, BetaNews

September 27, 2006, 12:57 AM

UPDATED The proprietors of the P2P file-sharing program LimeWire, who were sued last August by a coalition of the major names in the recording industry, has filed a countersuit in the U.S. District Court in New York, claiming that the RIAA is using its copyrights over recorded works as a weapon to disable competition from anyone in the Internet distribution business.

But anti-competitive behavior is not the counter-claimant's principal defense. First, Lime Group argues that LimeWire is unlike Napster -- whose original incarnation lost its legal battle and was forced to shutdown -- in that Lime's software does not rely on a centralized server to warehouse its directory of sharable files.

Instead, the directory itself is assembled by each user based on a P2P distributed query of other users' available content. That fact, Lime Group claims, relieves it from being held accountable as a broker for potentially illegal transactions.

"Users who install LimeWire on their computers do so by their own volition," the countersuit reads, "and are only able to install the LimeWire application if they first agree not to use the application to infringe the copyrights of others. Thereafter, those persons make use of LimeWire in the manner that they alone choose."

From that point, the countersuit explains that the original plaintiffs -- Arista Records, Atlantic Recording, BMG Music, Capitol Records, Elektra Entertainment, Interscope, LaFace, Motown, Priority, Sony BMG, UMG, Virgin Records, and Warner Bros. -- "joined together and embarked on a scheme to cartelize [the digital music] market and its financial promise for themselves."

"Their goal was simple: to destroy any online music distribution service they did not own or control, or force such services to do business with them on exclusive and/or other anticompetitive terms so as to limit and ultimately control the distribution and pricing of digital music, all to the detriment of consumers," the suit reads.

It may be a difficult case to make, especially given the abundance of analysts' opinions in recent years that digital music distribution was actually a boat that the music industry didn't see coming.

After technology company MetaMachine, which produced services for file-sharing group eDonkey, settled with the RIAA two weeks ago, RIAA CEO Mitch Bainwol made a public claim that LimeWire would be the next domino to fall.

If LimeWire can't be held accountable for its lack of a centralized file directory, the RIAA made a case that it might be held accountable because it knows who its users are. And if individuals are compelled to use LimeWire because they can trade in illegal materials, then Lime Group may be complicit.

"Defendants have the right and ability to supervise and control the infringing activities of LimeWire users on Defendants' system/network," stated the August RIAA complaint. "For example, Defendants can view searches on LimeWire, and view what is being 'shared' via LimeWire at a given time. Defendants provide the LimeWire software to users, distribute updates and upgrades, and have dictated license terms governing the use of the software."

A 2005 paper by Microsoft Research technicians looking into the relative security of users on P2P file-sharing systems, which the paper termed the "Darknet," alleged that P2P systems built on Gnutella technology (LimeWire is one of them) may be vulnerable due to the fact that its users are not necessarily anonymous.

A malicious user could conceivably trace users' endpoints. Such an argument could end up hurting LimeWire legally, if it can be proven that LimeWire can affectively re-assemble a list of its users at any given time, and perhaps take a look at what files they're sharing. In fact, plaintiffs could allege, if LimeWire fails to do so, it may be condoning file-sharing violations indirectly.

In its countersuit, Lime Group claims it tried to establish a paid subscription model site using a derivative of its technology, called MagnetMix, where subscribers download licensed content. But certain of the original plaintiffs declined to participate, Lime Group said, citing the fact that Lime didn't use the recording companies' preferred method for digital rights management.

It then alleges that the recording industry has colluded to set up a "preferred" P2P service provider called iMesh, which the RIAA then demanded that companies such as Lime make deals with, or else face the threat of lawsuit.

"iMesh is allegedly the only 'authorized' P2P file-sharing company in the U.S.," states Lime Group's countersuit (although there clearly are others). "It claims to have been granted a license by the Major Labels to allow distribution of their content, and also offers a 'one-stop shop' for what iMesh promotes as the only RIAA-approved filtering mechanism."

The countersuit alleges that iMesh's CEO was the former CEO of the RIAA. In fact, Jason Berman, the former RIAA CEO -- which the suit did not name specifically -- stepped down from the RIAA in November 2005, and later was appointed Chairman Emeritus of the International Federation of the Recording Industry, which represents recording companies in international courts. Mr. Berman made that fact clear to us in an e-mail to BetaNews Wednesday afternoon.

Berman did join the board of directors of Wurld Media, which operates a P2P licensed download service, also contradicting the countersuit's claim that iMesh was established to be the only such service. He also serves on the board of directors of Loudeye, which manages a catalog of licensed digital music.

iMesh was reportedly the subject of a British Phonographic Industry investigation in 2004, grouped together at that time with KaZaa, Grokster, and others suspected of facilitating the trade of illegal material. Among those lending their voices in favor of the investigation, at that time, was Jason Berman, acting in his parallel role at the time with the IFRI.

Since then, iMesh has re-established itself as "the first peer-to-peer service to work proactively with the recording industry to transition its offering to an authorized environment."

"iMesh's and the RIAA's goal is to have these P2P companies concede, under the threat of expensive litigation, to sell their assets for essentially nothing, with the promise of a 'get out of jail free' card from the RIAA," the countersuit continues. "In return, the P2P company must simply turn over its user base (which is the single largest asset typically) to iMesh so they can then force a conversion to the iMesh platform which, in turn, will lead to huge profits to iMesh and, of course, the Major Labels."