Facing a possible $1 billion judgment, Lime Wire lawyers tell a jury that the file-sharing service didn't play a large role in 50 percent drop in record labels' revenue. They blamed CD ripping, a poor economy and the labels' own inaction.
Greg SandovalFormer 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.
NEW YORK--Free music is here to stay and punishing Lime Wire founder Mark Gorton for that fact is unjust and won't change a thing, Gorton's lawyers said in court today.
A trial to determine the amount of damages Gorton must pay the top four record companies for infringing their copyrights got under way in a Manhattan federal courtroom. Gorton has a possible $1 billion judgment hanging over his head after the major music labels accused him in a 2006 copyright suit of encouraging music fans to use his company's LimeWire software to illegally swap music files.
Lime Wire's lawyers did not dispute that LimeWire was a peer-to-peer network that millions of people used over the past decade to obtain songs without paying artists or rights holders.
For the companies that produce the vast majority of today's popular music, the case is about shutting down a major file-sharing operation and making an example of Gorton. At stake for Lime Wire's founder is a potential judgment that could be financially ruinous.
A year ago, U.S. District Judge Kimba Wood found Gorton liable for willful copyright infringement and last October ordered Lime Wire to shut down. The Recording Industry Association of America (RIAA) wants Gorton and Lime Wire to pay the maximum amount under the law: $150,000 for each of the 9,715 albums it seeks damages for, or a total of $1.4 billion.
LimeWire as scapegoat
Burdening Gorton with a judgment that's even close to that figure would be wrong, Joseph Baio, one of Gorton's attorneys, said during his opening statement to the jury.
With Gorton sitting nearby, Baio tried to undermine the RIAA's assertions that the file-sharing service financially "devastated" the large record companies: Universal Music Group, Sony Music Group, Warner Music Group and EMI Music. Earlier in the hearing, the RIAA suggested that LimeWire was largely to blame for the 52 percent decline in music sales during the past 10 years.
Baio pointed out that music sales began dropping off in 2000, when Lime Wire was just starting out and its audience was insignificant. He used e-mails and public statements from executives of the record companies to show that even they blamed their shrinking business on such things as CD ripping and burning, the poor economy, and their own inability to adapt to changing technology.
Baio showed the jury a note written by Doug Morris, the former CEO of Universal Music, that seemed to blame the record labels for not innovating quickly enough. Morris wrote that every time in the past that a new technology had come on the scene, the music industry was able to use it to make money. But in the Internet age "the real problem is that there is no technology coming from the record companies," Morris wrote.
Baio mocked the assertion that the labels were in financial shambles. He ticked off the other revenue streams the labels have built, such as Internet radio, royalties from video games, and ad dollars from YouTube. He said that the record companies were doing well enough for Warner Music to have paid three top executives $100 million in salary and bonuses since 2004. He told the jury that some experts have said sharing music online may increase sales.
He ended is statement by telling jurors that anytime in the past that a file-sharing service had gone offline, the masses "just funnel into the next-best service" and nothing changes, the implication being that consumers have chosen to obtain music this way and it's not anyone's fault.
"Music that is free is here to stay," Baio said. He then quoted from an e-mail written to subordinates by Edgar Bronfman Jr., the chief of Warner Music. "The consumer has won."
During the RIAA's opening statement, attorney Glenn Pomerantz reminded the jury that U.S. District Judge Kimba Wood had already concluded that Gorton had known that his users infringed copyright and he had taken no action. On the contrary, Wood found that Gorton encouraged them to do so.
Gorton schemed to not just make music available to anyone for free but to make himself rich doing it, Pomerantz said. The lawyer underscored the fact that Gorton lived in a home in Manhattan's affluent Upper West Side and within his retirement account he had socked away $100 million.
Pomerantz said that what Gorton had done, most of us would call stealing.
He presented charts to illustrate what he said were massive amounts of file-sharing LimeWire facilitated every day. He said Gorton tried to create a file-sharing system that was specially designed to offer him a way to claim he didn't know anything about the file-sharing that occurred there, what Pomerantz called "plausible deniability."
To protect his claim of ignorance, Gorton ordered employees never to respond to inquiries from users about the site's legality, Pomerantz said.
"He knew what he was doing was wrong," Pomerantz told the jury. "He knew one day he could face you."
Notes: The judge told lawyers from both sides that she thought the trial could take as long as four weeks...The nine-person jury consisted of eight women and one man. Most of the jurors appear to be middle aged. Since the average techie and file sharer is male and since they typically are in their 20s or 30s, the jury didn't appear to favor Lime Wire.