Just When we Thought We'd Seen the Recording Industry at its Lowest ...

In what appears to be a bitter attempt by the recording industry to find someone with a deep pocket they can legally blame and successfully collect damages from, the recording industry has sent its legal bloodhounds on the trail of the "evil" venture capitalists who backed the creation of Napster. No, this is not just a bad dream: EMI and Universal Music have filed a legal action against Hummer Winblad Venture Partners, the California venture capital firm that invested $13 million into the now-defunct Napster venture. The suit names Hummer Winblad and two of its partners and seeks $150,000 per copyright violation, plus punitive damages. Damages of these proportions could not be collected from Napster, which filed for bankruptcy last summer. The investment in Napster by Hummer Winblad was made in 2000, prior to any legal proceedings or Court rulings that Napster was operating illegally. The music giants' lawsuit reportedly claims that Hummer Winblad's investment was a legal cause of enabling Napster users to copy and post downloaded music that was protected by copyright onto the Internet.

Seeking to extend its tentacles into yet another untouched market, EMI and Universal Music are seeking to make new case law by asking the Court to rule that a group of investors can be held liable years later for the actions of an entity that the investors helped to finance. This seems a giant stretch of the imagination and of legal principles. If venture capitalists can be held liable years later for actions of companies and its officers - which were not foreseeable to the investment company - where does the chain of liability end? The venture capital industry has expressed outrage over the music group claim and legal action, and Hummer Winblad has vowed to fight the legal action vigorously.
The music group lawsuit was filed after a U.S. District Court Judge ruled that Gnutella, Grokster and Streamcast, peer-to-peer file sharing services, were operating legally.

Share: