Napster has been reborn as a legal online music service, but the ghost of its former renegade song-swap self is trailing about $17 billion of legal baggage. On April 27, music labels and publishers wi
Napster has been reborn as a legal online music service, but the ghost of its former renegade song-swap self is trailing about $17 billion of legal baggage. On April 27, music labels and publishers will face off against Bertelsmann AG in federal court in San Francisco over claims that the German media company's 2000 investment in Napster kept the file-swapping service operating eight months longer than it would have done otherwise.
The lawsuits claim the extra lease on life promoted wide-scale piracy and cost the music industry $17 billion in lost sales.
The Bertelsmann cases were first filed in New York, while Vivendi Universal's Universal Music and EMI Group Plc also sued venture capital firm Hummer Winblad in Los Angeles, claiming its $15 million investment and installation of a chief executive at Napster in 2000 also promoted piracy. EMI declined comment; Universal was unavailable.
All the cases, first filed in 2003, were recently relocated to San Francisco under U.S. District Judge Marilyn Patel, who issued an injunction against Napster in 2000. That injunction was stayed, and Napster was operating at the time of the Bertelsmann deal in October 2000.
Napster went bankrupt in 2002. Software firm Roxio Inc. bought its name and logo, relaunching it as a pay service last year. Roxio is not named in the latest cases. Lawyers for Hummer and Bertelsmann said the plaintiffs, unable to get damages from Napster, are misguidedly seeking compensation from others who aimed to make the service legitimate.
By providing $90 million in 2000, Bertelsmann said it hoped to turn Napster into a licensed service. But the labels and publishers claim Bertelsmann's funding kept Napster going until July 2001, when it shut down because it could not comply with a new order Patel had issued after an appeals court largely upheld her original decision.
"Bertelsmann legitimized this company and totally changed the equation," said Carey Ramos, counsel to songwriters and publishers, adding Bertelsmann's investment inspired others to fund Napster "copycats" like KaZaA and Morpheus. "Napster created the piracy we've seen in the last four years that continues unabated worldwide," he said.