RIAA, Lime Wire close to settling copyright suit

Lime Wire, the file-sharing service found liable for copyright infringement last year, could pay a significant sum to the four largest record companies to compensate them for their losses.

Lime Wire, the company that helped people obtain perhaps billions of songs illegally, is close to forking over a "significant" amount of money to settle a copyright suit filed against it by the Recording Industry Association of America, sources close to the discussions told CNET.

Lime Wire founder Mark Gorton leaves U.S District Court in Manhattan yesterday. Greg Sandoval/CNET

The two sides were still negotiating this morning, but a deal could be finalized as soon as today, the sources said. They didn't specify the exact settlement figure and cautioned that the talks could still break down.

Should a deal be finalized, it would put an end to a 5-year-old copyright case and close the book on Lime Wire, the company behind the peer-to-peer system of the same name that the big four record companies alleged cost them billions of dollars and thousands of employees their jobs.

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 was hearing evidence in the case as they determined what amount Lime Wire and Gorton would have to pay. If they found he deserved to pay the maximum under the law, Gorton could be required to pay as much as $1.4 billion.

Ethan Smith at The Wall Street Journal reported that the sides have held three settlement meetings without securing a deal. The talks began in earnest yesterday, said the sources who spoke with CNET.

Gorton was in a precarious legal position.The jury tasked with assessing damages was often reminded by Glenn Pomerantz, the RIAA's lead attorney, that Gorton had already been found liable of willful copyright infringement by U.S. District Judge Kimba Wood.

Anticipating how a jury may react is hard to do, but on Monday, they heard Gorton acknowledge while on the witness stand that he's long known that a large majority of LimeWire users pirated music via the P2P service. Gorton said he saw most of his biggest competitors cease operating or try to legitimize their services after the U.S. Supreme Court ruled against file-sharing operations like Lime Wire's.He conceded that he chose to continue operating despite the court's decision and the RIAA has shown that he pocketed profits as a result.

Glenn Pomerantz, the lead attorney for the music lawyers. Greg Sandoval/CNET

Gorton's interview appeared to be a big win for the labels and he was scheduled to testify again when the hearing was postponed so the parties could try and reach an agreement. Gorton's team of attorneys, led by Joseph Baio, tried to deflect the RIAA's attack on their client by showing the many factors that have led to plummeting music sales, including waning consumer interest in CDs and more competition from other entertainment sectors, such as video games.

Update: 1 p.m. PT Multiple sources say that the lawyers are still at the negotiating table. Though CNET's sources haven't disclosed what kind of dollar figures are being discussed, it's unlikely that the RIAA would settle for anything under $100 million. In 2006, the file-sharing network Kazaa agreed to pay the music and film sectors $115 million to settle copyright infringement claims, according to a report that year from The New York Times. Yes, Kazaa had to satisfy claims from two different industries, but the outlawed version of the company was only around for for five years. LimeWire operated for a decade.

Another reason I don't think Gorton will pay less is that the RIAA needs to report to the public a number that stirs some kind of shock and awe. It won a decisive court victory last year against Gorton after he thumbed his nose at copyright law for years. It needs to make an example of him and anything under $100 million, when the RIAA has already said in court that Gorton has the same amount in a single retirement fund, could create the image that he got off cheap.

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