Category: Lawsuits

Sony’s Mega Payola Pay Out
Not that it’s surprising or anything, but apparently getting radio stations to play a Jennifer Lopez song is a crime in New York.
Sony BMG decided to get right with New York State Attorney General Eliot Spitzer, agreeing Monday to pay $10 million to the state in a blockbuster payola settlement that has rocked the music industry.
Among the revelations coming out of the settlement: Sony BMG routinely gave radio deejays and music directors cash or gifts to hype Sony BMG artists like Lopez.
In one email memo obtained in response to the lawsuit, a Sony radio promotions exec wrote: “Please be advised that in this week’s Jennifer Lopez Top 40 Spin Increase of 236 we bought 63 spins at a cost of $3,600.”
The “Get Right” singer’s camp had no immediate comment on the label’s pay-for-play practices involving her music. But Sony and its affiliated labels (including Arista, Columbia and Epic) did not limit their aggressive radio campaigns to Lopez.
Audioslave was linked to the scandal in a series of dispatches that showed VPs would do virtually anything to get an add for stations in large markets. “What do I have to do to get Audioslave on WKSS this week?” one missive read. “Whatever you can dream up, I can make it happen.”
While outright pay-for-play was thought to be finished after strict legislation was enacted following scandals in the late 1950s, Spitzer characterized the practice as still “pervasive” in the music industry. He threatened to take on other labels in the wake of his success with Sony BMG.
While labels routinely hire independent record promotion companies to secure airplay for their artists in the increasingly competitive corporate-owned radio environment, outright gifts of laptops or trips tied to radio “adds” are prohibited under a 1960 federal law.
Still, Spitzer’s suit against Sony BMG said the label was engaged in precisely that kind of payola scheme over the past few years–in a big way.
For its part, Sony BMG tried to move beyond the scandal, saying in a statement some of its employees had engaged in “wrong and improper” practices.
The label, whose market share dipped from 34 percent in the first half of 2004 to just 27 percent this year, also said it looked forward to “defining a new, higher standard in radio promotion” going forward.
One member of the FCC said that the email trail uncovered by Spitzer and his investigators was “a whole arsenal of smoking guns.”
“This is a potentially massive scandal,” Jonathan Adelstein, a Democratic member of the FCC, told the Associated Press. Spitzer has handed over his evidence against Sony to the commission, which could penalize any stations found to have been willing partners in payola.
Meanwhile, the $10 million penalty will go to nonprofit music-education programs, Spitzer said.

Canada cracks down on online pirates
WASHINGTON (AP) – In an investigation that covers 11 countries, including Canada, the U.S. Justice Department announced Thursday a crackdown on large-scale Internet pirates who illegally distribute first-run movies, video games and other copyrighted materials.
FBI agents and investigators in the other countries conducted 90 searches starting Wednesday, arresting four people and shutting down at least eight major online distribution servers for pirated works, a Justice official said.
Authorities also seized hundreds of computers in raids in the United States, Canada, Australia, Belgium, Denmark, France, Germany, Israel, the Netherlands, Portugal and Britain.
Attorney General Alberto Gonzales planned a news conference Thursday afternoon to announce the arrests and other measures that law enforcement officials are taking as part of Operation site Down.
Among those arrested was Chirayu Patel of Fremont, Calif., on charges of violating U.S. federal copyright protection laws, said a law enforcement official. The officials spoke on condition of anonymity so as not to pre-empt the official announcement.
Patel is alleged to be a member of a “warez” group, a kind of underground Internet co-op that is set up to trade in copyrighted materials. Warez (pronounced “wares”) groups are extraordinarily difficult to infiltrate because users talk only in encrypted chat rooms, their computer servers require passwords and many are located overseas, the FBI has said.
Warez groups differ from popular file-swapping networks, where millions of files are shared without such precautions.
Last month, authorities shut down a popular website that facilitated the downloading of movies and other materials. Investigators said many of the copyright movies were available through the Elite Torrents site even before their commercial release. No arrests were announced at the time.
President George W. Bush signed a new law last month setting tough penalties of up to 10 years in prison for anyone caught distributing a movie or song prior to its commercial release.

File-sharing decision quashed by U.S. Supreme Court
Internet file-sharing services can be held accountable for billions in lost revenue if they intend their software to be used to swap songs and movies illegally, the U.S. Supreme Court ruled Monday.
The ruling could open the door for lawsuits from the entertainment industry against file-sharing services for copyright infringement.
The Supreme Court decision sends the case back to the lower court, which had favoured Grokster Ltd. and StreamCast Networks Inc., companies that operate file-sharing services, by saying they could not be sued by entertainment conglomerate MGM.
The lower courts based their judgments on a 1984 Supreme Court decision that Sony could not be sued because consumers used its VCRs to make illegal copies of movies. As well, they said the file-sharing services were not legally responsible because they don’t have central servers pointing users to copyrighted material.
Monday’s ruling directs the lower courts to re-examine the Grokster/StreamCast case. The high court says there is enough evidence of “unlawful intent” for the case to go to trial. It means the services may have to pay out billions to music and movie artists if they are found to have promoted illegal downloading. It will become a test case for the issue of file-sharing.
“We hold that one who distributes a device with the object of promoting its use to infringe copyright … is liable for the resulting acts of infringement by third parties,” Justice David Souter wrote for the court.
Souter directed the lower courts to examine certain factors such as how companies marketed the product or whether they took steps to reduce the use of their software for illegal purposes.
Monday’s judgment gives the entertainment industry an alternative to going after individual online file-swappers. Recording companies have already sued thousands of users, settling about 600 cases for roughly $3,000 each.
However, the problem of piracy is unlikely to go away as software programs created abroad aren’t subject to U.S. copyright laws.
Music and production companies claim as much as 90 per cent of songs and movies copied on the file-sharing networks are downloaded illegally.
Grokster and other similar services contend they do not have direct control over what online users are doing with the software they provide for free.

Canadian music biz loses Net appeal
TORONTO (CP) – The music industry lost its quest Thursday to curb online file-sharing when an attempt to smoke out the identities of 29 alleged uploaders was quashed by the Federal Court of Appeal.
Despite losing the case, music makers greeted the ruling with smiles because the court offered them key guidelines for next time. The 27-page decision gives the Canadian Recording Industry Association a roadmap of how to present file-sharing evidence in future attempts to stop rampant music swapping. It also rejected the lower court’s ruling on copyright law, saying the judge was premature in his statements that file-sharing is permissible.
Richard Pfohl, the music industry’s lawyer, went as far as to call Thursday’s decision “a complete success” even though the organization cannot proceed with lawsuits against these 29 people at this time.
“It provides us with a blueprint to proceed,” he said. “We know exactly what we need to do.”
For over a year CRIA has been trying to figure out who’s behind pseudonyms such as Geekboy(at)KaZaA and Jordana(at)KaZaA.
The two are among 29 individuals suspected of collectively making 43,541 songs available to any web surfer for free.
Finding out the identities from Internet service providers, such as Shaw, Rogers and Bell, is a necessary step in order to launch lawsuits against people who use services like Kazaa and IMesh.
Writing on behalf of the three-judge panel, Justice Edgar Sexton said much of the evidence was hearsay posing a risk that “innocent persons might have their privacy invaded and also be named as defendant where it is not warranted.”
The evidence was gathered by workers at New York-based MediaSentry and presented by the company’s president who had only second-hand knowledge of how it was collected. Dating back to late 2003, it was based on screen grabs showing a list of songs placed in a shared folder.
Those representing the public’s interest in the case also called the ruling a victory.
“The decision recognizes and affirms the right of privacy for individual Canadians,” said Howard Knopf, a copyright lawyer with Macera and Jarzyna in Ottawa who represented the public’s interest during the case.
However, Knopf cautioned that a portion of the decision “opens the door to the kind of shock and awe campaign that we’ve seen in the U.S.” because it gives CRIA a chance to come back with better evidence.
Thursday’s decision included several strong statements about the importance of protecting copyright in the online world so that music makers are not “robbed of the fruits of their efforts,” suggesting CRIA should return to court when it has met all the necessary criteria.
Sexton went a step further saying that with proper evidence, musicians “have a right to have the identity revealed for the purpose of bringing action.”
He tempered the statement, saying the courts will still need to make sure “privacy rights are invaded in the most minimal way.”
The decision also refrained from making grand conclusions on copyright laws – specifically about the legality of downloading or uploading music via file-sharing.
At the time of the original ruling, headlines around the world called Canada a haven for pirates because courts couldn’t prosecute due to outdated copyright laws.
Thursday’s ruling strongly stated that the lower court should never have broached the subject of copyright infringement. At the time, Justice Konrad von Finckenstein said that uploading songs to shared folders on a home computer was permissible under law because the songs weren’t actively being distributed to others.
“Conclusions . . . should not have been made in the very preliminary stage of this action,” Sexton said in Thursday’s written decision. “They would require a consideration of the evidence as well as the law applicable to such evidence after it has been properly adduced.”
The industry interpreted the comment as vindication in its battle to thwart online cheaters.
“It makes it harder for people to say ‘Canada is a piracy haven so steal whatever you want to.’ It ought to be a warning sign for people on peer-to-peer services that you can, and will, be held accountable,” said CRIA’s Pfohl.
How soon remains to be seen as the court system is notoriously slow. As well, government legislation by the Liberals to amend copyright laws in favour of the music industry has been slowly working its way through Parliament.
This case has been closely watched by the TV, film and book publishing industries, which have also been negatively affected by the popularity of peer-to-peer sharing systems.

Linkin Park protests Warner Music’s scheduled IPO
Sex, drugs and IPOs? Initial public offerings are hardly on the short list of things rock ‘n’ roll bands concern themselves with. That changed Monday after the popular band Linkin Park all but threatened to stop making music for its label, Warner Music, in protest of the company’s IPO next week.
Upset that just $7 million of the IPO’s $600 million in estimated proceeds will go to the company and its artists, Linkin Park demanded in a statement to be released from its contract to deliver seven albums to Warner. The band, popular for albums that meld rock, rap and electronica, declined comment.
Linkin Park’s move is potentially significant because it is an embarrassing public airing of unhappiness by a Warner artist, says Melanie Hase, analyst at IPO tracker Renaissance Capital. Linkin Park said that it accounts for 10% of Warner’s revenue and that it was scheduled to release its newest album next year. Nielsen SoundScan data, though, show the band accounted for less than 3% of shipments so far this year and since 2000.
Revenue questions aside, Hase says the band’s displeasure is understandable. A vast majority of the IPO proceeds are being used to pay back debt incurred when management, including music industry vet Edgar Bronfman Jr., bought the unit from Time Warner in March 2004. By the time of the IPO, company insiders and executives will have received more than $800 million in bonuses and dividends, while the company will still have $2.2 billion in debt, Hase says.
Still, unless other artists join in, it’s questionable whether Linkin Park will have enough clout to make Warner rethink its strategy or for investors to reconsider the IPO, says Brian Garrity, business editor at Billboard magazine. “The track record of bands going up against labels like this isn’t very favorable,” he says.
Garrity says Linkin Park is renegotiating its contract with Warner, and he figures the band is using the IPO as a bargaining chip. “This is a nice piece of leverage for them to try to get a better deal with Warner,” he says.
Warner says Linkin Park has been paid fairly. “They have always been compensated generously for their outstanding worldwide success,” spokesman Will Tanous said in an e-mailed comment.
If anything sours investors, though, it will be the IPO’s questionable terms, not Linkin Park, says Francis Gaskins, president of IPOdesktop.com. Gaskins says Warner is just the latest in a flurry of IPOs in which investors, having bought a company by using heavy debt, look to cash in and pay down the debt. Investors have been lukewarm on such deals. “This is a serious bailout, and that’s why people don’t like it,” he says.

Music labels tell appeal court Kazaa users can’t hide behind anonymity of Web
TORONTO (CP) – The fight to curb file-swapping by music fans moved to the Federal Court of Appeal on Wednesday with record labels arguing song pirates can’t hide behind the veil of their Internet service providers.
The Canadian Recording Industry Association is seeking the identities of 29 Jane and John Does, who are currently only known by pseudonyms like Geekboy and Jordana.
The group wants the court to force Internet providers, including Shaw, Bell and Rogers, to hand over alleged infringers’ real names based on an IP address that made hundreds of music files available on peer-to-peer networks Kazaa and IMesh.
A ruling in favour of the music industry could mean the beginning of U.S.-style downloading lawsuits in Canada.
The first of two days in front of a three-judge panel had lawyers for the music industry debating the fine points of privacy and disclosure law.
Harry Radomski, a lawyer for the association, said evidence presented during the original hearing showed someone at each of the 29 IP addresses moved a large number of songs into shared directories to “make them available to an unbelievable number of people.”
At issue is whether the surfers are entitled to keep their anonymity using existing privacy laws. Internet companies must keep their customer files sealed unless ordered otherwise by a court.
Radomski also argued that when consumers sign up with an ISP they sign contracts “agreeing not to receive or transmit copyrighted material.”
When contracts are broken, consumers no longer expect to be protected by privacy laws, he told the court.
Four Internet service providers are arguing against revealing the identities.
“Our participation in this appeal is to ensure that the rights of our customers are respected and that any order that’s issued is granted on the basis of a solid case,” said Jay Thomson, the lawyer representing Telus.
Quebec’s Videotron has backed the record industry.
The case generated plenty of buzz last year after the lower court judge dismissed the motion to reveal the names, saying the record industry didn’t have enough evidence proving they were doing anything illegal.
The ruling stated that placing a song in a shared directory wasn’t a strong enough action to constitute copyright infringement.
That meant using peer-to-peer networks to nab music for free wasn’t illegal in the eyes of the court, despite the music industry shouting otherwise.
A major spike in the amount of music piracy followed last year’s ruling, admitted Graham Henderson, president of CRIA, outside court during a break Wednesday.
While he’s risking another spike should CRIA lose this appeal, Henderson says establishing clarity in the law is more important.
“We have to try to get clear laws so that Canadians know what’s right and what’s wrong,” he said, adding that an estimated 134 million songs are illegally acquired each month in Canada compared to one million paid ones via online stores like ITunes.
Last year’s ruling prompted Prime Minister Paul Martin to take note of the issue and push forward copyright reform, added Henderson.
The bill – which would add a “making available” clause to the current rules – is working its way through government although a June election would kill it from the queue.
That makes winning this appeal all the more vital, says Henderson.
“We can’t necessarily stand around and wait for that bill to become law because it’s already taken us seven years to come this far,” he said. “If the government calls a snap election it would set us back by several months.”
The case is being watched closely by the film and television sectors who claim people are illegally accessing their products using newer and faster peer-to-peer services like BitTorrent.
Representatives from the film industry asked to speak at this appeal but were denied because the group hadn’t been part of the original case.
A ruling is expected later in the summer.

Online Music Case Outcome Rests on VCR Technology
WASHINGTON (Reuters) – When Internet file-sharing services and the entertainment industry square off in the U.S. Supreme Court on Tuesday, the outcome will likely rest on a nearly obsolete technology — the videocassette recorder.
Backers of “peer to peer” networks like Grokster will argue that the software makers deserve the same protections as VCR manufacturers, because both can be used for good or ill.
Record labels and movie studios will argue that Grokster should be held responsible when its millions of users illegally copy movies and music directly from each others’ computers.
Both sides will agree one one thing — the court could harm their ability to produce innovative new products if it doesn’t rule in their favor.
“If nothing is changed and these services continue to operate, it will have an impact on the creative process. For the movie industry, it will mean less risk will be taken in terms of the creation of new material,” said Dan Glickman, president of the Motion Picture Association of America.
“The way new technology is created and funded is it’s a high-risk affair. It’s not going to get funded if there’s a sword of litigation hanging over it,” said Gary Shapiro, president of the Consumer Electronics Association, which supports Grokster.
The Supreme Court in 1984 ruled that Sony Corp. couldn’t be held responsible if users of its Betamax VCR copied television shows without permission, because it also could be used for legitimate purposes such as taping a show to watch later.
Lower courts have said that ruling applies to Grokster as well.
The Betamax ruling has allowed consumer-electronics makers to develop products without getting permission from Hollywood first — a key to the industry’s success that could be upset if the court rules against Grokster, backers say.
“Every technology from the CD burner to the personal computer to the iPod has emerged in part because of the clarity of the (Betamax) rule,” said Fred von Lohmann, a senior attorney with the Electronic Frontier Foundation who is representing Morpheus.
Grokster backers point out that the entertainment industry has a long history of initially opposing new technology, from the player piano to the VCR, that has ultimately benefited it in the long run.
But that doesn’t change the fact that Grokster makes its money almost entirely by encouraging people to illegally copy music and movies, the entertainment industry argues.
Using that logic, a single instance of “legitimate” use can justify millions of illegal transactions, they say.
“Nobody would suggest that the iPod is a business based on infringement,” said Cary Sherman, president of the Recording Industry Association of America. “Grokster, on the other hand, was conceived for the very purpose of encouraging and profiting from infringement.”
Though the vast majority of traffic over peer-to-peer networks involves copyrighted material, legitimate uses have begun to emerge in recent years.
Independent artists like Steve Winwood have released their music over peer-to-peer networks, while scientists and government bureaucrats have used peer-to-peer technology to distribute information cheaply without central server computers.
Record labels have begun to licensing their music to a new breed of peer-to-peer networks like Mashboxx that will let copyright owners exert some control over their material.
The court will also hear arguments about whether cable companies should have to allow rival Internet service providers to use their high-speed pipeline.

‘Doctor Who’ Culprit Fired
A Canadian TV worker has been sacked after a brand new episode of sci-fi series Doctor Who was leaked onto the internet.
The 45-minute episode, entitled “Rose,” appeared on the web on March 7, three weeks before the series was due to premiere on British TV channel BBC One.
BBC Worldwide claim its broadcast partner in Canada, the Canadian Broadcasting Company (CBC), harbored the culprit who had access to an preview copy of the eagerly awaited first episode.
BBC bosses remain tightlipped about the identity of the individual to blame, but revealed that the person worked for a “third-party company in Canada”. BBC Worldwide, which is taking legal action, released the following statement: “After a thorough investigation by BBC Worldwide’s Canadian broadcast partner, the source of the leak of episode one of the new Doctor Who series has been traced to a third party company in Canada which had an early preview copy for legitimate purposes.
The individual responsible for the leak has had their employment terminated by that company as a result. BBC Worldwide is considering further legal remedies and takes extremely seriously any unlawful copying or misuse of its copyright material.”

Harry Situation
In court affidavits filed last week, a Teton County prosecutor swore that Kelly Frank confessed to the FBI that he had plotted to kidnap David Letterman’s toddler Harry from the Late Show host’s Montana ranch. Nonetheless, the Associated Press reports, Frank pleaded not guilty on Tuesday to felony charges surrounding the alleged plot to kidnap 16-month-old Harry and his nanny and ransom them for $5 million. He was ordered to remain jailed pending bail of $600,000, with his next court date scheduled for April 5.
Frank, who’s on probation for a felony conviction for intimidating a woman, was fingered by erstwhile friend and coworker Robert Gondeiro and arrested last Monday. Gondeiro told investigators that Frank, a handyman and painter who had worked at the Letterman ranch, tried to enlist him in the kidnap plot. Frank was charged with felony solicitation, felony theft (authorities said he confessed to overcharging Letterman between $1,000 and $1,500), and misdemeanor obstruction (for his initial denial to investigators).
Frank’s attorney, Jim Hunt, acknowledged to AP that his client had discussed the kidnap scheme, ”but with no purpose of carrying it out.” He called the discussion a ”lighthearted conversation.” His explanation echoed that of Frank’s fianc√àe, Laurie Johnson, who told reporters over the weekend that Frank’s remarks had been taken out of context, and that Gondeiro turned him in because of a grudge he’d been carrying against Frank ever since a squabble they’d had at work.
Letterman, who’d issued a statement of gratitude to the police and FBI investigators on Friday, spoke for the first time about the plot on Monday’s Late Show, his first broadcast since reports of Frank’s arrest surfaced last Thursday.
”Last week, my family and I were involved in a little legal activity, and fortunately everything turned out fine, but I want to just take a second here to thank some people,” Letterman told his audience. He specifically thanked four of the lawmen involved, as well as “the great people of Choteau, Montana.” Curiously unmentioned was Gondeiro.

UK Courts Crack Down On File Sharing
The UK courts are cracking down on illegal online file sharing and ordering ISPs to give names and addresses of sharers.
The names and addresses of 31 accused people will be given to The British Phonographic Industry (BPI). The BPI will then write to the individuals and offer them a a chance to settle before taking them to court.
According to a CNET article, the ISPs involved in the case now have 14 days to provide the names sought by the BPI. The individuals named will then be invited to settle the charges, probably by paying a fine of around $3,820 (2,000 pounds).
The BPI hopes that the amount of publicity generated by last week’s court success will deter Internet users from uploading copyright material to file-swapping networks.
“We’re reluctant to say, ‘OK, the job’s done. Let’s spend money on making records,'” the BPI spokesman said. “I suspect that the problem won’t go away just because we’ve launched two rounds of litigation.”