Lime Wire settles with RIAA for $105 million

Entrepreneur Mark Gorton, creator of the LimeWire file-sharing system, agrees to pay $105 million to settle copyright case.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
3 min read
The RIAA's legal team, including Jennifer Pariser, senior vice president of litigation (middle, with light-colored bag), appeared confident after leaving federal court Wednesday. Greg Sandoval/CNET

Having facilitated the mass piracy of billions of songs over a 10-year period, Lime Wire founder Mark Gorton and his file-sharing company have agreed to compensate the four largest record labels by paying them $105 million.

As first reported by CNET, Gorton's lawyers closed in on a settlement agreement today after meeting this morning to hammer out a deal.

"We are pleased to have reached a large monetary settlement following the court's finding that both Lime Wire and its founder Mark Gorton are personally liable for copyright infringement," said Mitch Bainwol, chairman of the Recording Industry Association of America (RIAA). "As the court heard during the last two weeks, Lime Wire wreaked enormous damage on the music community, helping contribute to thousands of lost jobs and fewer opportunities for aspiring artists."

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Bainwol can now report back to his label members that he has taken out the last for-profit company operating an illegal file-sharing service in the United States, though the pirating of music continues. As for Gorton, 44, he avoids paying what might have been a financially ruinous damages award.

After a U.S. District Judge found Lime Wire and founder Mark Gorton personally liable for copyright infringement and ordered the company to cease operations, the case then moved to assessing damages. Over the past two weeks, a jury in Manhattan heard evidence in the case as it prepared to determine what amount Lime Wire and Gorton would have to pay. If the jury had found he deserved the maximum under the law, Gorton could have been required to pay as much as $1.4 billion.

In a statement, Gorton's lawyer, Joseph Baio, attempted to show that the $100 million settlement was far short of the kind of money the RIAA sought. "In the recent past, the plaintiffs have pressed for a $75 trillion verdict. The Court labeled that claim 'absurd.' Plaintiffs then claimed that they suffered $40 to $50 billion of damages and that Lime Wire was responsible for it all. At other times they have claimed that the amount of damages exceeded $1.4 billion."

It doesn't appear the RIAA will be taking control of Gorton's $4 million Manhattan home anytime soon, thanks to settlement agreement. To check out CNET's round up of Lime Wire stories, click the photo. Greg Sandoval/CNET

LimeWire was a throwback to the early 2000s when a crop of peer-to-peer networks, including Kazaa, eDonkey, Grokster, and BearShare, challenged the music industry for the right to help people swap music with each other. They argued that people should be allowed to share their songs with whomever they wanted. The major labels said the operators were filling their pockets at the expense of content owners and artists.

Most of the major P2P networks either closed down or went legit after 2005, when the U.S. Supreme Court ruled against Grokster in a landmark copyright decision. Only Lime Wire and Gorton continued to operate as if the decision didn't apply to them. Gorton was warned by the RIAA as well as former operators of P2P networks to stop. Now he's on the hook for $105 million.

That's a lot of money for sure, but at this point only Gorton knows whether the amount represents a heavy burden. During his damages hearing last week, RIAA lawyers suggested his net worth was larger than that.

They noted he possessed $100 million in an IRA account. His Manhattan home is worth more than $4 million. In addition to Lime Wire, Gorton operates a hedge fund and a medical-software company. Gorton's lawyers claimed in court that he made little money from Lime Wire. Maybe, but records show the privately owned company generated $26 million in revenue in 2006 and sales climbed dramatically after that. During most of Lime Wire's 10-year history, Gorton was chairman, CEO, and only board member.

Where the settlement money will go is hard to tell. In similar cases in the past, the RIAA has split up big awards with the four member labels. How much of the money goes back to the artists is unclear.