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Pearl Jam doesn’t play the corporate game. Or so the hugely successful Seattle-based rock music group would have you believe. The band’s origins are in that city’s anti-corporate, grunge rock movement. Fronted by singer-songwriter Eddie Vedder, the band’s street credibility was reinforced by a lengthy, late 1990s feud with Ticketmaster, which the band boycotted in an effort to keep ticket prices down for its fans. But last week, a Delray Beach, Fla., music entrepreneur, Shep Alster, challenged Pearl Jam’s populist image in Palm Beach Circuit Court. He is suing the band and its business consultant, Peter McQuaid, contending that they breached an oral agreement with him and his company, defrauded him and stole his marketing ideas. Alster also alleges violations of the Florida Uniform Trade Secrets Act. The lawsuit faces the difficult challenge of proving the existence of an oral contract and raises the question of why Alster didn’t take stronger legal steps to secure his rights to the intellectual property, experts say. But handshake deals are often the way business is done in the music industry, which leads to lots of litigation, said Steve Eisenberg, a Miami solo practitioner who is treasurer of the Florida Bar’s Entertainment, Arts and Sports Law Section, and who is not involved in the case. Alster’s suit alleges that his company, Licensing Ventures Inc., and McQuaid had an oral agreement to be partners in “Band2Fan,” an Internet-based subscription service created by Alster through which music fans could register to purchase live concert recordings — dubbed “official bootlegs.” Alster claims that under the terms of the agreement, McQuaid was to provide his “connections to some of the largest bands in the country, including Pearl Jam,” while Licensing Ventures was to provide “technical know-how” and capital investment for Band2Fan. Last September, according to the complaint, McQuaid brought Pearl Jam staff to the negotiating table with Alster. But the plaintiff claims that after months of consulting with the group about Band2Fan, he learned in January that McQuaid, not Licensing Ventures, had been hired by Pearl Jam to manage the band’s official bootleg system, with minimal participation by Alster’s company, which would get no share of the lucrative distribution rights. Alster says he learned early in April that Pearl Jam’s live music distribution rights, which allegedly also were promised to Licensing Ventures, would continue to be held by Sony Music Corp. Then it became clear, Alster’s complaint alleges, “that McQuaid and Pearl Jam were utilizing Licensing Venture’s professional assistance, proprietary information, technical services and trade secrets with no intention of compensating LVI in any manner.” “Pearl Jam’s representatives met with my client over an extended period of time,” Alster’s attorney James Mann, a Miami solo practitioner, said in an interview. “They lied to him for the purpose of stealing proprietary information.” The suit by Licensing Ventures seeks a declaratory judgment to enforce the claimed oral contract. McQuaid and Pearl Jam did not return repeated calls for comment. MET THROUGH GRATEFUL DEAD In an interview, Alster said that he’s a 20-year veteran of the marketing of music and music-related products. His holdings, he said, include a 50,000-square-foot distribution center in Memphis, from which he ships compact discs, videos, posters, toys and other items around the world. He met McQuaid, he said, through their business involvement with the Grateful Dead band in the mid-1990s. He held a marketing license for some Dead products while McQuaid ran the legendary band’s merchandising operation. Alster said he first proposed the Band2Fan idea to the Dead, which passed on it. McQuaid contacted him, he said, after they’d both left the band’s employ. McQuaid suggested they revive the concept. Last September, Alster alleges, he and his technical engineer, Tony Schreiber, traveled to the Seattle home of Pearl Jam manager Kelly Curtis, where they met to discuss Licensing Ventures concepts with Curtis, McQuaid and other Pearl Jam staff, including the band’s road manager and promotional specialist. Alster’s suit states that Pearl Jam’s representatives were particularly impressed with the proprietary information Band2Fan could develop based on its component, the LVISS inventory system. As Alster describes it in the suit, the LVISS system would “fulfill every order while simultaneously tracking customer information and profiles” and “provide real-time access for the bands to see their actual sales numbers, thus reducing possible cheating by the record companies.” Alster alleges that Curtis and the other Pearl Jam representatives at the September meeting expressed to him the band’s dissatisfaction and distrust of Sony, their record company, and assured him they were “free agents,” able to explore and sign any record deals brought their way. In January, Alster alleges, Pearl Jam’s attorney called Allen Arrow, a New York entertainment attorney who had represented Alster with the Grateful Dead. Alster does not identify Pearl Jam’s attorney in his complaint. Alster alleges that Pearl Jam’s attorney repeated the assurances that the band was tired of Sony and free to make new deals with its recording rights. Arrow confirmed to the Miami Daily Business Review that this is what Pearl Jam’s attorney said. According to Alster’s suit, he first asked for a written contract with Pearl Jam early this year, after McQuaid started working for Pearl Jam and announced revisions to his previous understanding with Alster. But by March, Alster alleges, because of the “drastic change in the deal” and because McQuaid had “switched sides,” Licensing Ventures asked to be bought out by Pearl Jam. Alster alleges that Pearl Jam, through its management, was intimately involved in the Band2Fan planning, and availed itself of the system’s design. His suit contains three alleged instances of direct participation in the claimed fraud by Pearl Jam representatives other than McQuaid. Other than those alleged acts, Alster said, McQuaid’s actions on Pearl Jam’s behalf make the band liable. In essence, Alster claims that McQuaid and the band strung Licensing Ventures along after McQuaid started working for Pearl Jam, prying out information about Band2Fan for use on behalf of Pearl Jam, until Alster broke off relations. CONTRACT OR NOT? Entertainment law experts not involved in the case varied in their evaluations of Alster’s claim. “The music industry is full of piracy,” said Louis Tertocha, a Miami solo practitioner who chairs the Florida Bar’s Entertainment, Arts and Sports Law Section. “It’s also full of claims of theft. Some are legitimate and some are not.” “A promise unfulfilled is not necessarily a fraud,” Tertocha said. He said the resolution of the case called for a fact-intensive analysis — what did Pearl Jam know and when did they know it? Steve Eisenberg said the plaintiff’s central problem is demonstrating the existence of the alleged oral contract. “Plaintiff has the burden of proving they had an understanding and that it was specific in nature as to the terms of the agreement,” he said. He said Alster might be able to prove the existence of a contract by citing McQuaid’s March 2002 letter to Alster, which included a “possible initial term sheet,” and by demonstrating that Licensing Ventures did considerable preparation and passed up other business in the expectation of working with Pearl Jam. Alster’s claim is “awfully detailed for there not to have been an agreement,” Eisenberg said. He noted that it is common in the music industry to do business “on a handshake and a term sheet.” But, he said, “these informal relationships often lead to lawsuits.” Entertainment lawyer Richard Wolfe, a partner at Miami’s Pathman Lewis who has represented controversial artists including 2LiveCrew and Marilyn Manson, said that even if the suit’s narrative is accurate, it still provides no basis for liability. “Theft of an idea is not a cause of action unless bound by a contract,” Wolfe said. “All you have here is a bunch of people talking about a potential deal.” Wolfe said it’s not unusual for people to file nuisance suits against prominent recording artists in hopes of extracting a settlement. The experts agreed that Alster showed a lack of foresight in failing to get an agreement in writing and taking legal steps to protect his claimed trade secrets. They also wondered why Sony was not a named defendant. Mann, Alster’s attorney, said his client did not demand a written contract with McQuaid because “he had no reason to until they lined up some business.” Alster failed to patent Band2Fan and LVISS because “you can’t copyright an idea,” Mann said. Mann said the suit didn’t name Sony as a defendant because “we can’t identify what they’ve done.” He declined to rule out adding Sony to the suit pending discovery. The suit seeks unspecified damages.

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