Limewire files countersuit against major labels alleging anti-trust violations

November 2006

Record labels, internet

Peer-2-peer software developer LimeWire has filed a counterclaim to the action brought by Warner Bros. Records, Virgin Records America, Sony BMG Music Entertainment and other music labels. The counterclaim filed in U.S. District Court in New York alleges that the record companies have engaged in unfair business practices to scare away its users. The record companies allege that Limewire’s technology provides a means for copyright infringement by illegal peer-2-peer fileswapping and downloading. In its countersuit Lime Wire alleges that the major record labels launched their own digital-distribution to “destroy any online music distribution service they did not own or control, or force such services to do business with them on exclusive and/or other anticompetitive terms”. This is not the first time this allegation has been made and the major labels are facing a class action in the USA alleging that the labels first forays into digital retailing were nothing more than blocking devices to shut other companies out of the digital market. Lime Wire’s suit also argues that the record companies combined and conspired to restrain trading in the market for online distribution of recorded music and, as a result, violated sections of the Sherman Act and the Clayton Act. The (separate) class action against the labels (from leading class law firm Lerach Coughlin Stoia Geller Rudman and Robbins) alleged that the major labels were fixing download pricing and that the record labels sought to shut down online music pioneer Napster at the same time they were introducing their own joint ventures to sell online music. The suit went further and alleged that the labels own download services, MusicNet and Pressplay, “were not serious commercial ventures, but rather attempts to occupy the market with frustrating and ineffectual services in order to head off viable online music competitors from forming and gaining popularity after Napster’s demise”

The Recording Industry Association of America (RIAA), which has fronted the legal battle against peer-to-peer companies on behalf of the music labels, maintains that Lime Wire’s business is based on copyright infringement. Limewire assert that it is merely the developer of an open source software and that people who swap files do so solely of their “own volition” and the if the case gets to court will be an important test of the rules set down by the Supreme Court in MGM vGrokster where it was held “that one who distributes a device with the object of promoting its use to infringe copyright … is liable for the resulting acts of infringement by third parties

Elsewhere, the RIAA, IFPI and the BPI appear to have won a major skirmish with Russian based without a legal battle f ollowing the news that Visa was stopping processing payments for the site and Mastercard said it was acting likewise. Both credit card companies appear to be concerned that by allowing their customers to use their cards to buy tracks from the download platform they may open themselves up to claims of enabling copyright violation. It is thought that the XRost pre-pay card system still works (the cards can be bought via eBay). yesterday called the moves by the credit card companies “arbitrary, capricious and discriminatory”, saying Visa and Mastercard “lack the authority to adjudicate the legality” of the destination. The company’s owners added: “AllofMP3 has not been found by any court in the world to be in violation of any law”. At the same time as the credit card companies took their action, a Danish Court ordered internet service provider tele2 to block user access to As a result the owners of the site said they would now provide FREE downloads!

MGM v Grokster 04-480 27th June 2005 (US Supreme Court) Music Law Updates Archive August 2005

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