File Sharing Firm Wins Limit on Damages Against Record Companies

A federal judge limited the potential financial liability facing the operator of LimeWire, a once-popular file-sharing service found liable for copyright infringement, at an upcoming damages trial.

Rejecting an argument that could have led to “trillions” of dollars in damages, U.S. District Judge Kimba Wood agreed with Lime Group LLC that the 13 record companies whose works were infringed by LimeWire deserve one award per work infringed.

The record labels had argued they deserved one award for each infringement by individual LimeWire users. Sony Corp and Vivendi SA own various of the labels.

Wood’s ruling allows the labels to recover between $7.5 million and $1.5 billion of “statutory” damages from New York-based Lime Group and other defendants, including LimeWire founder Mark Gorton.

This sum is based on $750 to $150,000 of possible damages for each of roughly 10,000 post-1972 recordings infringed through LimeWire. The labels are also entitled to “actual” damages for infringement of about 1,000 earlier works.

The 13 record companies include Arista, Atlantic, BMG Music, Capital, Elektra, Interscope, Laface, Motown, Priority, Sony BMG, UMG, Virgin and Warner Brothers, court records show.

THOMAS EDISON

Wood said that had she accepted the labels’ theory of damages, Lime Group could have been on the hook for trillions of dollars, citing the “thousands (or even millions)” of uploads and downloads that took place over several years.

“Plaintiffs are suggesting an award that is more money than the entire music recording industry has made since Edison’s invention of the phonograph in 1877,” Wood wrote, citing a Lime Group court filing referring to the inventor Thomas Edison. She called this an “absurd result.”

Wood had found last May that Lime Group wrongfully assisted users in pirating digital recordings. She shut down LimeWire in October. A trial on damages is scheduled for May 2.

A spokesman for the Recording Industry Association of America, a trade group for the record companies, had no immediate comment on the ruling.

Joseph Baio, a partner at Willkie Farr & Gallagher LLP representing Lime Group, said: “We’re pleased the court accepted the logical theory that recovery is based on infringements per work.”

On Monday, Lime Group settled a separate copyright lawsuit brought by more than 30 music publishers.

Record companies own copyrights to recordings while publishers can own copyrights to the songs themselves.

The case is Arista Records LLC et al v Lime Group et al, U.S. District Court, Southern District of New York, No. 06-05936.

(Reporting by Jonathan Stempel in New York; editing by Andre Grenon, Phil Berlowitz)