The lawsuit, filed Wednesday in the Southern District Court of New York, was brought by New York-based DownloadCard, whose technology helps record labels promote store-bought albums with Web tie-ins. The company charges Universal Music, a customer of DownloadCard, with appropriating its system for the upcoming U.S. release of Bon Jovi's "Bounce," due out in stores Oct. 8.
"They're not allowed to take all of our work and cut us out of the equation," said Stephen Kramarsky, plaintiff's attorney and a partner at Dewey Pegno & Kramarsky. "So we're seeking to prevent Universal Music from releasing or distributing any products that use our technology."
A representative from Universal Music would not comment on the lawsuit.
The complaint comes at a time when record labels are desperately seeking to shore up in-store and traditional album sales while protecting against theft of digital music files on the Internet. Illustrating the extent of its worry, the recording industry this week started an educational advertising campaignsuch as Madonna who compared music file swapping to stealing. The plea is meant to educate music fans that MP3-trading on the Net is hurting artists and the business.
At the same time, the recording industry is urging Congress to enact laws that would require technology companies to include copy-protection measures in all electronic devices. Record labels are also testing new technologies to protect against digital theft and promote album sales.
DownloadCard's system, while not an anti-copying technology, aims to protect album sales through the use of incentives. For example, one promotion it engineered for Universal Music's release of "The Scorpion King" included certificates in every album sold for three months. The certificates directed consumers to visit a Web site, punch in a unique ID number printed on the label, and register personal information to receive a free T-shirt in the mail.
Kramarsky said that DownloadCard had worked with Universal Music on a number of similar campaigns over the last year. This summer, it had pitched a large marketing campaign for the "Bounce" release, but the record label declined, he said. Months later, the company discovered a similar promotion in the works for "Bounce," but without mention of DownloadCard.
"We invented the system; if they take the system and use it for their own release, that's a violation of our intellectual property rights," he said.
DownloadCard is asking for a preliminary injunction against Universal and is seeking damages that could be more than $750,000, according to the complaint. The hearing is scheduled for Oct. 3.