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    Limewire - case review

    Saturday, August 05, 2006

    The peer-to-peer (P2P) file sharing channel has received intense media attention over the past month. This has been primarily as a result of the Limewire lawsuit filed by a coalition of record companies including Universal, Warner, EMI and Sony BMG in the United States District Court in New York against Limewire et al.

    The Limewire lawsuit is premium news in the field of technology law, breaking new ground as the complaint lists not only the corporate entity of Lime Wire LLC and Lime Group LLC as defendants in the action, but also the CEO, CTO and COO. This should sound as a warning bell for resellers, distributors and other channel players who have traditionally found solace in hiding behind the corporate veil; and what is clear is that directors and other executive officers of companies are, in certain circumstances, vulnerable to being sued in their personal capacity. In Australia, company directors have been sued for, amongst other things, letting their company's trade whilst insolvent.

    Another ground breaking factor in the Limewire lawsuit is that the software was developed as open source, This has led some to query whether the open source contributions made by the open source software community can be used in Limewire's defense.

    The Limewire lawsuit comes in the wake of several important decisions handed down by Australian and United States courts that have dealt with P2P providers. Originally sparked by the vehement Napster decision, the chain of cases has quickly turned over decisions regarding the popular Grokster, Morpheus, Aimster and Kazaa software. Some say that it was only a matter of time until Limewire was in the record industry's cross-hairs. Most of the above P2P providers have been sued, shutdown or otherwise transformed into a pay-per-download service provider. However, it seems that with P2P providers, for every provider that is sued or otherwise shut down, another emerges in its place.

    One company that has capitalised, albeit legally, on the online media black market phenomenon is Spiral Frog, a New York based company who recently signed a deal with Universal Music Group (UMG) to make UMG's comprehensive catalog available – for free – over the internet via the spiralfrog.com website. The website will reportedly offer both audio and video content in exchange for advertising on the Spiral Frog website.

    In Australia, P2P providers must comply with, amongst other laws, the law of authorisation liability, provided under the federal Copyright Act 1968. That legislation provides that a Court in determining whether or not a person has breached copyright by “authorising” the breach, without the licence of the owner of the copyright, must take into account:


    • (a) the extent (if any) of the person's power to prevent the doing of the act concerned;

    • (b) the nature of any relationship existing between the person and the person who did the act concerned; and

    • (c) whether the person took any reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice.


    In July 2005, the Federal Court judgment found in the case of Universal Music Australia Pty Ltd v Cooper that the webmaster and internet service provider that operated and hosted a website were liable for authorising internet users to infringe copyright in pirated sound recordings made accessible in MP3 format via hyperlinks on the website.

    Resellers and internet service providers generally are subject to a range of laws regarding the “authorisation” of infringement of copyright via their networks under copyright law and other laws. It is vital to take the appropriate steps necessary to limit providers' risk to exposure to liability in this area.

    Disclaimer: This column is for general informational purposes only. It is not legal advice nor is it a substitute for legal advice. Readers should seek legal advice on their own particular circumstances. Alan Arnott is a technology & telecommunications lawyer with qualifications in computer science and law with Arnotts Lawyers Jones Bay Wharf in Sydney. For more information, please visit www.arnotts.net.au.

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