User:Carothuf/Arista Records LLC v. Lime Group LLC

Arista Records LLC v. Lime Group LLC 715 F.Supp.2d 481 (2010) is a United States District Court for the Southern District of New York case in which the court held that defendant Lime Group LLC induced copyright infringement with its P2P file sharing software LimeWire. The lawsuit is a part of the Recording Industry Association of America's larger campaign against piracy.

Background
LimeWire LLC was founded in June 2000 and released its software program, LimeWire, in August 2000. LimeWire is a program that uses peer-to-peer file sharing technology, which permits users to share digital files via an Internet-based network known as Gnutella.

File sharing in Limewire allowed users to search for files from other users. Once a file was located, a copy of that file was transferred from the host user's computer to the computer of the user searching for files. LimeWire's default setting made all files that a user downloaded through LimeWire available to other LimeWire users for download. Most of the files shared by users are "media files," many of which contained copyrighted material in the form of MP3 files.

Dr. Richard Waterman presented an expert report during the trial which found that 93% of a random sample of files available on LimeWire were determined to be protected by copyright. These copies were distributed, published, and copied by users of LimeWire without authorization from the copyright owners. LimeWire was widely used, with 4 million users per day at the time the lawsuit was filed. Plaintiffs claimed that this wide user base competed with the plaintiffs' sale of copyrighted music recordings.

Thirteen major recording companies led by Arista Records sued Lime Wire LLC, Lime Group LLC, Mark Gorton, Greg Bildson, and M.J.G. Lime Wire Family Limited Partnership for copyright infringement in 2006. The lawsuit originally included antitrust counterclaims against plaintiffs and ancillary counterclaims for conspiracy in restraint of trade, deceptive trade practices, and tortious interference with prospective business relations, which were all dismissed by the Court in 2007.

The plaintiffs alleged that LimeWire users employ LimeWire to obtain and share unauthorized copies, and that LimeWire facilitated this infringement by distributing and maintaining LimeWire. Accordingly, the recording industry plaintiffs sought to hold LimeWire liable for acts of copyright infringement by users of its software and raised the following claims against LimeWire:
 * 1) inducement of copyright infringement
 * 2) contributory copyright infringement
 * 3) vicarious copyright infringement
 * 4) state common law prohibiting copyright infringement and unfair competition

Opinion of the Court
In granting the Recording Industry Association of America (RIAA)'s motion for summary judgment under the Federal Rules of Civil Procedure Rule 56 judge Kimba Wood found LimeWire liable for inducement of copyright infringement as well as for common law copyright infringement and unfair competition as to the plaintiffs’ pre-1978 copyrighted works. The court found that LimeWire was liable for inducing copyright infringement. The Court entered its opinion and court order on May 11, 2010, and amended it on May 25, 2010.

All claims of copyright infringement were equally applicable against Lime Group LLC and Mark Gorton, because all persons and corporations who participate in, exercise control over or benefit from an infringement are jointly and severally liable as copyright infringers. Mark Gorton is the sole Executive director of LimeWire and LimeWire Group, and the evidence established him as intimately involved in the business operations and that the two companies were in fact operated as a single company. The claims against former LimeWire employee Greg Bildson were dropped in exchange for providing factual information about LimeWire and paying a settlement. It was not appropriate to settle the fraudulent conveyance claim against M.J.G. Lime Wire Family Limited Partnership under summary judgment due to a genuine issue of fact.

Secondary liability
The plaintiffs based their infringement claims on theories of secondary liability. Secondary liability for copyright infringement may be imposed on a party that has not directly infringed a copyright, but has played a significant role in the direct infringement. The rationale for secondary liability is that a party who distributes infringement-enabling products or services may facilitate direct infringement on a massive scale, thereby making effective enforcement illusory.

The pre-requiste of direct infringement was fulfilled by the fact that LimeWire users infringed the established copyrights by sharing unauthorized digital copies through LimeWire. An expert testimony estimated that 98.8% of the files requested for download through LimeWire were copyright protected and not authorized for free distribution.

Inducement
The inducement claim was established by the RIAA to the effect that LimeWire, by distributing and maintaining LimeWire, intentionally encouraged direct infringement by the users. The Court made a thorough assessment of the inducement doctrine as announced by the Supreme Court of the United States in MGM Studios, Inc. v. Grokster, Ltd. in 2005. To establish a claim for inducement it must be shown that LimeWire engaged in purposeful conduct that encouraged copyright infringement with the intent to do so. Applying the inducement doctrine from MGM Studios, Inc. v. Grokster, Ltd., the Court found that the overwhelming evidence of LimeWire's purposeful conduct fostered infringement, and the following factors established that LimeWire intended to encourage infringement by distributing LimeWire:
 * 1) LimeWire's awareness of substantial infringement by users;
 * 2) LimeWire's efforts to attract infringing users;
 * 3) LimeWire's efforts to enable and assist users to commit infringement;
 * 4) LimeWire's dependence on infringing use for the success of its business; and
 * 5) LimeWire's failure to mitigate infringing activities.

The Court noted that LimeWire's electronic notice when a user first downloads LimeWire asking users to affirm that they were not using the software for copyright infringement did not constitute meaningful efforts to mitigate infringement. In 2006 LimeWire had implemented an optional hash-based filter capable of identifying a digital file that contains copyrighted content and block a user from downloading the file, but the Court did not consider this a sufficient barrier. The Court thus found inducement, because the failure to utilize existing technology to create meaningful barriers against infringement is a strong indicator of intent to foster infringement.

Contributory copyright infringement
The plaintiffs and LimeWire also cross-moved for summary judgment on the claim that LimeWire was secondarily liable for contributory copyright infringement, because LimeWire materially contributed to the infringement committed by LimeWire users. Unlike an inducement claim, a claim for contributory infringement does not require a showing of intent to foster infringement, but must instead show that the defendant 1) had actual or constructive knowledge of the infringing activity, and 2) encouraged or assisted others' infringement or provided machinery or goods that facilitated infringement. A joint amicus curiae brief was submitted by the Electronic Frontier Foundation and a coalition of industry and public interest groups urging the Court to apply the law in a manner that would not chill technological innovation and to reaffirm that developers should not be held liable for copyright infringement based on misuses of their technology that they did not actively promote. In particular, the brief urged the Court to preserve the "Sony Betamax" doctrine from Sony Corp. of America v. Universal City Studios, Inc., which protects developers of technologies capable of substantial noninfringing uses from contributory infringement liability based on the activities of end-users. However, the Court did not find it appropriate to grant a summary judgment because the case did not contain enough facts to determine whether LimeWire was capable of substantial noninfringing uses.

Vicarious copyright infringement
LimeWire also moved for summary judgment on the claim that LimeWire was vicariously liable for copyright infringement. Vicarious liability occurs when a defendant is profiting from direct infringement while declining to exercise a right to stop it. The Court found substantial evidence that LimeWire had the right and ability to limit the use of its product for infringing purposes, including by 1) implementing filtering, 2) denying access, and 3) supervising and regulating users, none of which were exercised. Furthermore, the Court found that LimeWire possessed a direct financial interest in the infringing activity, because its revenue was based on advertising and increased sales of LimeWire Pro, both consequences of its ability to attract infringing users. Accordingly, the Court denied LimeWire's motion for summary judgment.

Common Law Copyright Infringement and Unfair Competition
Lastly, the parties cross-moved for summary judgment on the claim of common law copyright infringement and unfair competition. The claim was included because federal copyright law does not cover sound recordings made prior to 1972. The elements for finding inducement for copyright infringement are the same as under federal law: direct infringement, purposeful conduct, and intent; which the Court all found established on the previous evidence, and granted summary judgment to the plaintiffs. The unfair competition claim was also granted, because LimeWire made free and unauthorized reproduction and distribution of plaintiffs' copyrighted music recordings, for which they also competed with in the marketplace.

Evidentiary Motions
LimeWire filed a number of motions challenging the admissibility of evidence submitted by the recording industry plaintiffs, including objections as to the reliability of one expert opinion, the properness of another expert opinion, failure to identify individuals as witnesses, exclusion as to exhibits purportedly relating to settlement negotiations, exclusion of evidence of conduct outside of limitation period, strikes as to a declaration from a former LimeWire employee, and finally objections based on relevance, authentication and hearsay in United States law. The Court found that all the evidentiary objections were without merit and denied the motions, except that the Court placed certain conditions on plaintiffs' future interaction with a specific prior employee of LimeWire.

Permanent injunction
Although the litigation continues, the parties consented to the entry of a permanent injunction. Judge Kimba Wood issued a permanent injunction on 26 October 2010 shutting down the LimeWire file-sharing service. The website limewire.com shows notice thereof. The plaintiffs argued that all four of the factors used to determine whether a court should order a permanent injunction weighed in their favor: (1) that they suffered an irreparable injury; (2) that remedies available at law such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.

The permanent injunction prohibits LimeWire from copying, reproducing, downloading, or distributing a sound recording, as well as directly or indirectly enabling or assisting any user to use the LimeWire system to copy, reproduce or distribute any sound recording, or make available any of the copyrighted works. LimeWire was also required to disable the file trading and distribution functionality for current and legacy users, to provide all users with a tool for uninstalling the LimeWire software, to obtain permission from the plaintiffs before offering any new version of the software, and to encourage all legacy users to upgrade to the new version. The court order also required that if LimeWire sells or licenses any of its assets, it must require as a condition of the transfer that the purchaser or licensee submit to the Court’s jurisdiction and agree to be bound by the permanent injunction. The Court will maintain jurisdiction in order to provide a final ruling on LimeWire’s liability and damages to determine the appropriate level of damages necessary to compensate the record companies.

Reactions
A Law & Technology blog called it a smackdown for LimeWire, while the New York Times brought quotes from George Searle, LimeWire’s chief executive and Steven Marks, the general counsel for the Recording Industry Association of America disagreeing on the impact of the decision. The New York Times also ran a story about Mark Gorton. The case furthermore resulted in another lawsuit from National Music Publishers Association in order for them to be included in any future settlement negotiations and damages.