SAN FRANCISCO -- As Napster 2.0 plugs ahead in the digital music marketplace, the original Napster's investors are stuck in court. A federal judge in San Francisco's U.S. District Court on July 14 den
SAN FRANCISCO -- As Napster 2.0 plugs ahead in the digital music marketplace, the original Napster's investors are stuck in court.
A federal judge in San Francisco's U.S. District Court on July 14 denied motions from Napster's former investors, Bertelsmann AG and venture-capital firm Hummer Winblad, to dismiss ongoing lawsuits brought by music publishers, songwriters and record labels.
The allegations state that the defendants' investments allowed Napster to run longer than it would have otherwise, a move that facilitated widespread piracy and cost the music industry $17 billion in sales.
Bertelsmann and Hummer Winblad's investments in Napster were $90 million and $15 million, respectively.
Judge Marilyn Patel, who issued an injunction against the original Napster in 2000, permitted the case to proceed through its discovery phase.
A spokeswoman for EMI, a plaintiff in the suit against Hummer Winblad, applauded the judge's decision, saying the record company has a "strong case."
However, Tony Berman, copyright attorney with Idell, Berman and Seitel in San Francisco, feels the lawsuits could have a "chilling effect" on investment in music-related technology.
"This could put fear into hearts of VCs. Firms want to invest in innovation, not litigation," he says.
Bruce Rich, a lawyer for Bertelsmann, says his client will continue to seek a dismissal of the litigation.
Napster went bankrupt in 2002 and was then bought by Roxio Inc., which launched Napster 2.0 in 2003.