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Music industry zeros in again on LimeWire

LimeWire creator Mark Gorton is accused of reneging on a promise to compensate a group of indie labels a sum commensurate with the amount Gorton paid to settle with the four largest record companies. In May, Gorton paid the major labels $105 million.

LimeWire is far from finished with compensating the music industry for years of inducing copyright infringement, according to legal claims made last week by a group of independent record companies.

LimeWire creator Mark Gorton Greg Sandoval/CNET

Merlin, a trade group that represents more than 12,000 indie labels and such artists as Arcade Fire, Neko Case, and Carla Bruni, has claimed in a lawsuit that Lime Wire, the company that created the now defunct LimeWire peer-to-peer network, broke a promise made in 2008 to compensate them for the millions of music tracks that LimeWire users pirated via the site.

According to legal documents filed last week with a New York federal court, Lime Wire and founder Mark Gorton agreed to pay Merlin members an amount that was in line with whatever Lime Wire ended up paying to settle with the four major music labels. In 2007, Universal Music Group, Sony Music Entertainment, Warner Music Group, and EMI Music accused the company of cashing in on a service designed to help people pirate music.

Last year, a federal judge agreed with the labels. She ruled that Lime Wire and Gorton were liable for copyright infringement and ordered the LimeWire network shut down. Two months ago, Gorton agreed to pay the majors $105 million to settle. Previously, Gorton paid the trade group representing music publishers a sum that topped $12 million, according to music industry sources. And there are other music-industry entities that could possibly press claims against Lime Wire that are still unheard from, such as the American Association of Independent Music.

Rich Bengloff, AAIM's leader, declined to comment other than to say that his group supports Merlin in its case against Gorton and Lime Wire.

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Merlin wants a settlement figure that uses the $105 settlement as a benchmark. If the majors received that amount for their music, which makes up the majority of the song sales each year, then Merlin can use that figure to determine what its pirated music is worth based on market share.

An attorney representing Gorton said Merlin's claims were completely without merit.

Frank Scibilia, one of Merlin's lawyers, said that Merlin sent Gorton and Lime Wire a cease-and-desist letter in 2008 and suggested that the trade group would have filed a copyright suit against Gorton then. But Gorton asked Merlin to refrain from filing a copyright suit until his case with the major labels was completed and a settlement was reached. An agreement was made that Gorton and Lime Wire no longer want to honor, said Scibilia.

A court date has yet to be scheduled.