LimeWire loses everything in infringement battle with RIAA

In a decision handed down in US District Court in New York this afternoon, representatives of the recording industry won summary judgment against P2P file-sharing software maker LimeWire, in a patent infringement suit first filed in 2006.

Though the case took almost four years to resolve, as Judge Kimba Wood wrote in her decision today, LimeWire may very well have sealed its fate in July 2008. At that time, Greg Bildson, the company's CTO/COO met with plaintiffs' attorneys to discuss a potential case settlement.

That meeting left Bildson without a job, and left LimeWire fighting for nearly two more years about the admissibility of evidence obtained by plaintiffs through those discussions. Today's summary judgment order was coupled with denials of LimeWire's motions to exclude that evidence, and then to dismiss the case on lack of evidence.

At issue there was whether Bildson met with plantiffs' attorneys on advice of counsel. Judge Wood found he did, and that he was advised on more than one occasion by his attorneys not to reveal privileged information that Bildson was apparently willing to reveal.

What attorneys did discover, apparently through this settlement negotiation, included the contents of e-mail conversations between LimeWire executives during the company's startup stage, from 2000 to 2002. At that time, the e-mail messages reveal, LimeWire execs had planned their business around building a massive audience around the sharing of unauthorized media files, and then at some set date in the future, convert that audience somehow into fully authorized users of that media. Though unspecified, LimeWire called this the "Conversion Plan."

In internal communications, LW [LimeWire LLC] regularly discussed the fact that LimeWire users downloaded copyrighted digital recordings through the program. For example, a draft of a LW Offering Memorandum, created in 2001, states that LimeWire "allows people to exchange copyrighted mp3 files." A September 2002 statement of LW's goals acknowledges that: "Currently, the most common use of the Gnutella Network is the sharing of music files, many of them copyrighted." Other LW documents state that "the only information being shared on peer networks are media files," a category composed primarily of copyrighted digital recordings, and that the "[s]haring [of] media files is bringing the initial user base" to LimeWire.

In 2006, LW developed a strategic plan to "convert" LimeWire users who were sharing unauthorized digital recordings into customers of LW's online music store, which would sell authorized music (the "Conversion Plan"). In the Conversion Plan, LW openly acknowledged that the majority of LimeWire's users were infringers. The Plan stated that (1) 25% of LimeWire's users were "hardcore pirates;" (2) 25% of users were "morally persuadable;" (3) 20% of users were legally aware; and (4) 30% of users were "samplers and convenience users." The Plan provided that over time LW would introduce features to LimeWire to block users from downloading infringing recordings, and to direct them to LW's online store.

In what may have been a procedure to prepare the company for probable legal action, Judge Wood went on, LimeWire employees maintained copies of e-mails and third-party Web articles about the company, in a file that was actually labeled "Knowledge of Infringement."

Plaintiffs' expert testified that nearly 99% of content traded over the Gnutella network using LimeWire was unauthorized, much of it MP3s ripped from CDs. Judge Wood maintained that LimeWire demonstrated it had the technical capability to block such content, having already implemented a filtering agent on its site to block pornography from users' download feeds. With not only the knowledge of infringing activity but the intent to build its business plan around it, coupled with having overlooked the technical ability to have gone a different direction, LimeWire's defeat in this court was only a matter of time.

Just what LimeWire may owe at this point is for the judge to yet determine, though the recording industry originally sought $150,000 per infringed title.

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