Two years after music industry lawyers pounded Napster Inc. into submission, the major record companies are pointing fingers at each other over the flourishing of online music piracy.
AOL Time Warner Inc.'s Universal Music Group, EMI Music and a cadre of publishers blame Bertelsmann, claiming the German media giant abetted copyright infringement by supporting Napster financially in 2000 and 2001. Bertelsmann says its accusers are at least partly responsible because they missed the chance to turn Napster's song-stealing users into paying customers.
For The Record
Los Angeles Times Tuesday June 24, 2003 Home Edition Main News Part A Page 2 National Desk 1 inches; 43 words Type of Material: Correction
Bertelsmann lawsuit -- An article in Monday's Business section about record labels suing Bertelsmann over its involvement with Napster in 2000 and 2001 incorrectly indicated that AOL Time Warner Inc. owns Universal Music Group. The record label's parent company is actually Vivendi Universal.
The companies are battling in federal court in New York, where record labels and publishers sued Bertelsmann this year, demanding compensation for the alleged assist the German company gave to copyright infringement. The case provides a rare look at the infighting spawned by the industry's failure to find an effective response to the Internet song sharing that the labels hold responsible for declining CD sales.
Recent interviews with Bertelsmann lawyers reveal an aggressive twofold defense: First, Bertelsmann can't be found liable because it didn't control Napster, let alone its users. Second, Bertelsmann had the right idea strategically, while others' refusal to license their music and otherwise support a legitimate version of Napster only drove the masses into the arms of ungovernable successors such as Kazaa.
Bertelsmann's ultimate goal in loaning money to Napster "was to create a licensed service that would provide users with the functionality they enjoyed in the old Napster service," said Bertelsmann attorney R. Bruce Rich. The company feared that consumers would flock to other free-music services if Napster didn't lead them away from piracy, Rich said, and "history has proved this to be absolutely correct."
Napster's estimated 40 million users scattered quickly to a new generation of file-sharing networks after federal judges forced the company to start cracking down on copyright infringement in March 2001. Those networks now attract an estimated 80 million users, according to anti-piracy firm MediaDefender Inc.
The relentless increase in piracy has infuriated record executives, whose courtroom victories have returned a fraction of the billions of dollars they claim to have lost to song sharing.
Bertelsmann will file a formal response to the suits within the next few weeks. But it already seems clear that both prongs of its defense will face difficulties.
