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In a new twist in the entertainment industry’s ongoing war against Internet file-sharers, two renowned songwriters and two independent music publishers have sued the German media giant Bertelsmann AG for $17 billion for allegedly helping the once phenomenally popular Napster song-swapping service stay in business. The suit, Lieber v. Bertelsmann AG, No. 03 CV 1093, was filed in Manhattan federal court last week. It seeks class action status for about 160,000 songwriters and their publishers who were allegedly damaged by Napster’s service facilitating free online copying of songs in violation of federal copyright law. The lawsuit, which is based heavily on evidence arising out of Napster’s bankruptcy proceedings last year, contends that starting in October 2000, Bertelsmann not only infused about $85 million into the struggling company but also exercised significant power and control over its operations. Without Bertelsmann’s involvement, the lawsuit claims, Napster would have closed its doors nearly a year before the district court ordered it to shut down in July 2001. The named plaintiffs in the case are Jerry Leiber and Mike Stoller of the Lieber & Stoller songwriting team, who wrote such classic hits as “Hound Dog,” “Jailhouse Rock” and “On Broadway.” Frank Music, one of the music publishers, licenses such songs as “Unchained Melody,” and Peer, the other publisher, controls the copyrights for “Walk Like an Egyptian,” and “Blue Moon of Kentucky.” The Bertelsmann filing is just the latest in a string of lawsuits for contributory copyright infringement brought by the songwriters against Internet file-swapping services. The first to be sued was Napster, which pioneered the use of peer-to-peer technology permitting millions of users to swap digital copies of songs. At the height of Napster’s popularity, users copied as many as 10,000 songs per second, many of which were copyrighted. The 9th U.S. Circuit Court of Appeals upheld a preliminary injunction against the company, but the case never went to trial because Napster filed for bankruptcy in June 2002. SIMILAR CASE The legal case against Bertelsmann is similar to the earlier one against Napster, charging the company with contributory copyright infringement for helping users find music it knew to be protected. When it first invested in Napster, Bertelsmann publicly stated that its loan would be used to create a file-swapping system that complied with copyright law. Instead, the plaintiffs allege, much of the initial $50 million went toward Napster’s operating costs. A document produced in the bankruptcy proceeding shows that a Bertelsmann task force recommended that instead of pressuring Napster to stop allowing illegal file-swapping, Bertelsmann should keep Napster operating in its existing infringing form to keep its customer base intact, while Bertelsmann worked on building the new, legitimate company. The suit alleges that Bertelsmann management adopted the plan and directed Napster to continue operations accordingly. “Bertelsmann — a company founded on copyrights — sealed a cynical pact with the very entity that BMG [a subsidiary] had only weeks earlier declared to be ‘the most egregious case of massive copyright infringement that has ever existed,’” the complaint alleges. “In so doing, Bertelsmann intentionally prolonged the massive infringement of plaintiffs’ copyrights by Napster users to maximize the value of Napster for Bertelsmann.” Copyright experts said that the suit will hinge on Bertelsmann’s level of involvement in Napster’s operations. “If they simply invested money like a bank, they’re probably not liable,” said Ethan Horwitz, head of the intellectual property department at Goodwin Procter in New York. “On the other hand, if they were actually running Napster,” liability is more likely to attach, he said. “The question is where on the spectrum from just investing money to acting as Napster’s alter ego do they fall,” Horwitz said. The $17 billion in damages sought derives from the maximum statutory penalty of $150,000 for each of the more than 100,000 copyrighted works allegedly infringed on. None of the music labels have joined in the lawsuit yet, although the Financial Times has reported that EMI, the world’s third largest music company, is considering it. The songwriters have also sued several of the other song-swapping services that have flourished in the wake of Napster’s demise, including Morpheus, Kazaa, Grokster and Aimster, for copyright infringement. These cases are pending. A Chicago federal court has preliminarily enjoined Aimster (now Madster) from operating its service. A Bertelsmann spokeswoman declined to comment, saying the company does not comment on pending legal proceedings. A lawyer for the plaintiffs declined to comment.

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