Lime Wire founder on copyright law: 'I was wrong'

NEW YORK--Lawyers representing the four largest music labels tried to convey a message in court here today: Lime Wire founder Mark Gorton was so determined to help people pirate songs that he disregarded copyright law, artists' rights, and even the Supreme Court.

And eventually, Gorton conceded.

The best that he could offer for an excuse was that he misread the law. "I was wrong," Gorton told the court. "I didn't think our behavior was inducing [copyright infringement]. I understand that a court has found otherwise."

In numerous exchanges with Glenn Pomerantz, the labels' lead attorney, Gorton acknowledged knowing that LimeWire was being used to swap songs without paying for them by a "large percentage" of users. Despite being aware of the piracy, Gorton said he refused to shut down the service.

The copyright case brought in 2006 against Lime Wire and Gorton by the Recording Industry Association of America (RIAA)--the record companies' trade group--is in the final stages. A year ago, U.S. District Judge Kimba Wood found Gorton liable for inducing mass copyright infringement. Last October, Wood ordered that Lime Wire's peer-to-peer service, LimeWire, which Gorton today acknowledged was used by millions of people to pirate perhaps billions of songs, be shut down.

It was the court that determined Gorton would pay but a jury is now tasked with deciding the amount, which can be anywhere between $7 million and $1.4 billion. Not only could a damages award mean a big payday for the labels, but it will also serve to make an example of Gorton.

With Gorton, 44, having already been found liable, the record labels are operating with a big advantage, sort of the courtroom equivalent of a penalty kick in soccer or free throws in basketball. There's no question of whether Gorton infringed the labels' copyrights. Lawyers for the record companies can now home in on just making it look like he acted with bad intentions. And in court today, Gorton's past comments and e-mails provided the labels with plenty of assistance.

Pomerantz showed a pie chart created by Lime Wire to show how Gorton and his managers classified users into four groups. "Hardcore pirates" made up 25 percent of the service's users. "Morally persuadable" users equaled another 25 percent. "Legally unaware" users were said to be 20 percent of LimeWire's users, and those that "sampled" music were 30 percent.

Lime Wire's managers reported to Gorton that of these groups, the company could expect to convince only 20 percent to pay for music, Pomerantz told the jury.

Pomerantz and the labels don't believe Gorton misread the law. They argued that he knew exactly what he was doing when he refused to cease operations. He told potential investors in 2001 that the service faced significant legal risks and could be sued by the RIAA. And then came the June 2005 Supreme Court ruling in the Grokster case. Grokster was one of the leading file-sharing services and the highest court in the land found in a unanimous decision that Grokster was "unmistakably unlawful."

That sent a message to most of Grokster's competitors. Gorton acknowledged most of his important file-sharing competitors closed down or tried to legalize their operations following the Supreme Court's decision. Gorton predicted prior to the ruling, in a New York Times interview that: "If the Supreme Court says it is illegal to produce this software, LimeWire will cease to exist."

A Supreme Court decision, which Gorton said he read, wasn't the only signal Gorton received that LimeWire was illegal.

Pomerantz showed a letter that was written to Gorton on behalf of the top labels--Universal Music Group, Sony Music Entertainment, Warner Music Group, and EMI Music--soon after the Grokster decision. The record companies spelled out the ways the Grokster decision applied to LimeWire and notified Gorton that they would sue him personally if he didn't "cease and desist."

Nonetheless, Gorton acknowledged, Lime Wire operated as before.

Gorton didn't take them at their word. He said he thought that the labels just wanted him to start trying to convert users to some kind of paying service.

Pomerantz told the jury there were filtering systems and other technologies available that could have helped Gorton and his managers stop some of the file sharing. "There were technologies that you didn't use that would have stopped some of the sharing, but you didn't use those?" Pomerantz asked Gorton.

"No," Gorton replied.

When it came to receiving questions from users about whether LimeWire was legal, Gorton acknowledged ordering employees not to respond such inquiries. He said he didn't want them giving legal advice.

Pomerantz showed the jury some of the e-mails from users.

• "I found my child downloading music and films from your site," wrote one parent on Christmas day in 2005. "Is this legal for my child to do so?"

• "Is LimeWire different from Napster?" wrote another user. "I'm a little afraid people will accuse me of copyright infringement."

Pomerantz summarized the situation this way: "People were trying to do the right thing and LimeWire didn't have an answer."

Notes: RIAA lawyers called Gorton to the stand to start the day and are scheduled to resume questioning of him tomorrow...In the court's gallery were executives for some of the major labels including Thomas Hesse, president of Sony Music Entertainment...Edgar Bronfman Jr., the chairman of Warner Music, is expected to testify on Wednesday...Gorton's lawyers indicated he will soon testify about the money he began putting away into family trusts following the Grokster decision. The RIAA has alleged that this was an attempt by Gorton to hide money in case he was sued. Gorton is expected to testify that he was only interested in managing his estate.