EXCLUSIVE: The Recording Industry Association of America on the LimeWire Settlement

LimeWire Settlement: Our Takeaway

It was an incriminating statement, as far as copyright trials go. "I was wrong." Those were LimeWire CEO Mark Gorton's very words when he took the stand in our one-and-a-half week damages trial this month that ended in an out-of-court $105 million settlement to the music labels. He was stating his understanding of how the law would be applied to his illicit peer-to-peer music trading program. In 2005, the Supreme Court issued a unanimous decision in the Grokster case, ruling that P2P services that encourage and facilitate mass infringement of their users are themselves liable under the Copyright Act.  Gorton admitted in the trial that he was aware of this decision and that his service risked liability.  He admitted receiving a letter from RIAA in the wake of the Grokster decision, demanding that Limewire shut down.   But some lawyers advised him that he might yet avoid liability if he engaged in a campaign of "plausible deniability" - pretending not to know what Limewire users were doing.  So Limewire systematically ignored emails from users asking about the legality of the service - even from concerned parents looking to protect their children.  And Gorton testified at his deposition before trial that LimeWire was not used primarily for infringing purposes, arguing that he did not know the specific file names that any individuals were downloading.  But no matter how hard he tried, Gorton couldn't escape the law. 

Once he finally took the witnesses stand in the case, Gorton exposed just how much LimeWire knew about its users' piracy habits.  He admitted that he knew a "large percentage" of the LimeWire users were stealing music.  While his service was being crowned king of the illegal marketplace, the music industry was experiencing a massive decline in revenue, heavy layoffs and  depleted artist rosters.  Legal music services couldn't break even while a competitor was giving it all away for nothing.  But Mark Gorton is a business person, not an Internet anarchist looking to bring down the record industry. What was in it for him?  As you would expect, he had a plan.  First, he would get users to pay for an enhanced version of LimeWire and then convert them to paying subscribers.  He was willing to cause billions of dollars in damage to make millions of dollars for himself. 

Finally, when the history of Gorton's long denials finally ended on the witness stand last week, he came to the table to negotiate a settlement.  The number is a very substantial portion of Gorton's net worth, avoids the appeals process and gives the certainty of a collectable recovery.  More importantly, it represents a meaningful deterrent to others who would build illegal services on the backs of artists, musicians and labels.

In today's modern music marketplace where fans are faced with many different ways to access music, it's incredibly important to weed out the bad so the good can thrive. In the end, we're very happy to have settled this case for a substantial sum that sends the message that creating a service that fosters massive copyright infringement is unacceptable and comes with a steep penalty (see our official comment here).

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