Scour files for bankruptcy protection
The Web file-swapping company says it has filed for Chapter 11 bankruptcy protection, the latest setback for the Internet start-up backed by Hollywood power broker Michael Ovitz.
The bankruptcy filing is the latest step downward for Scour. The company was sued in July by the motion picture and recording industries, which alleged widespread copyright violations from one of Scour's products. The costly lawsuit eventually led to the company laying off two-thirds of its staff in September.
Scour's services, which include Napster-like file-sharing software and a multimedia Web search engine, will remain available to consumers. The company added it filed for bankruptcy protection "in the face of burdensome lawsuits."
"We took this step in order to preserve Scour's future," Dan Rodrigues, president of Scour, said in a statement. "The Chapter 11 process will also provide our management and board of directors with adequate time to review and develop recapitalization and restructuring alternatives to strengthen and improve Scour's business position."
Scour stumbled upon notoriety in June 1999 when Ovitz and supermarket magnate Ron Burkle took a minority stake in the company.
Scour is one of many Web file-sharing services that have been thrown in the spotlight of entertainment industry litigation. The most high-profile lawsuit pits the recording industry against Napster, alleging the Internet start-up infringes copyrights.
The central issue behind the industry's anger toward Scour and Napster involves the unauthorized distribution of copyright works from major record labels. Napster and Scour both let people search other people's hard drives for music files to download. Scour's product, called Scour Exchange, takes it a step further by letting people trade multimedia files, including movies formatted for the Web.
These services have blossomed in popularity but have set off angry reactions from the entertainment industry.
Scour filed for Chapter 11 in the U.S. Bankruptcy Court for the Central District of California in Los Angeles.