Labels Now Going After Napster Backers

Having killed the horse, record labels are now suing those who fed it:

Two major record labels filed suit Monday against venture capital firm Hummer Winblad Venture Partners for its investment in Napster, alleging that it contributed to rampant music theft through the former file-swapping network.

Universal Music Group and EMI Recorded Music filed a lawsuit in the U.S. District Court in Los Angeles against San Francisco-based Hummer Winblad, its cofounder John Hummer and general partner Hank Barry, who was formerly the CEO at Napster.

The 23-page complaint charges that the Napster system, as conceived and implemented, “provided a safe haven for the rampant piracy of copyrighted works on an epic and unprecedented scale…Hummer Winblad knowingly facilitated infringement of plaintiff’s copyrights for its direct financial benefit.”

During the Napster heyday, while millions of people logged onto the peer-to-peer community to exchange digital music files, Hummer Winblad was one of the outfit’s chief backers. In May 2000, Hummer Winblad invested about $13 million in Napster and took control of its business and legal liabilities, with Barry assuming an interim CEO role.

Legal efforts by the recording industry and music publishers essentially crushed Napster two years ago. But now the music industry is seeking punitive damages from Napster backers, in a move that could portend further suits targeting assets of companies that back independent file-swapping services.

“Businesses (as well as those individuals or entities who control them) premised on massive copyright infringement of works created by artists, should face the legal consequences for their actions,” said a joint statement from the two record labels.

….The suit is the music industry’s latest legal shot at backers of illegal file-sharing networks. In February, a group of music publishers filed a lawsuit against Bertelsmann in federal district court in New York for at least $17 billion. The publishers alleged that the German media company’s investment in Napster led to massive abuse of their copyrighted works, and they charged that Bertelsmann’s strategy to fund Napster extended the life of the file-swapping service, leading to greater theft of copyrighted works. [CNET]

UPDATE
Andrew Orlowski has a little more opinionated take on the story in the Register:

Music industry lobby group the RIAA has been attacking cherished institutions of national life, such as the military and education, in recent months. But by attacking finance capital itself, could the pigopolists have gone too far?

….The music and film industries’ litigation is intended for one reason only: to encourage a climate of fear.

….the suit against the VCs – designed to deter investment – may be one step too far. As the San Jose Mercury reports, finance capital isn’t going to like this one bit:-

“The uncertainty attendant to those pending lawsuits is deterrence aplenty to the flow of investment capital to new technology,” says a VP . “Even without the threat of direct suit, investors in innovative technologies face the very real risk of loss of their investment.”

Now, at school we were taught that the reward for risk was something called ‘profit’, so to hear VCs complaining about risk may strike some of you as little bogus. At the same time, the nuturing of new entrepreneurs is a value held dear to many here, and by attacking finance capital it may have given both sides of the partisan divide some common cause. Maybe.