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Bertelsmann will have to go to court for Napster, after all

Law is competition by other means

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It would be easy to think that Bertelsmann should start to worry over its part in keeping the original Napster live via investment, as this week a US court threw out its call for summary dismissal of the case. Back in April and May 2003 EMI and the Universal Music Group took out suits against the investors of Napster, an act that Faultline said at the time made a mockery of corporate limited liability law.

A German court agreed with us and said that it was “against Germany’s constitution” to allow a US court to judge a Germany based company, and called for the case to be dismissed. That’s like red rag to a bull and no US court would ever agree that anything is outside of its jurisdiction if a foreign court simply says it is.

Bertelsmann is in the frame with venture capital company Hummer Winblad which between them invested $98m in the early version of Napster, which was subsequently found guilty of large-scale copyright infringement.

However, Judge Patel from the US District Court of San Francisco also ruled that placing a song on a central index was not a crime and that the plaintiffs would have to prove specific cases of illegal downloads.

This could set up a tit-for-tat war. If Bertelsmann is seen to be victimized purely as a means of competition, which is what the German court suggested, then it could retaliate in a German court against EMI and Universal.

The two sides will now prepare for trial and the suing labels will have to prove that Bertelsmann knew what Napster was doing, and that it had control over it, as well as proving that copyrights were infringed.

It will also have to demonstrate the extent of the infringement. All of that seems to mean that there is not much point in a trial, but the lawyers are having a field day with this, so the early indications that it would be settled cheaply out of court now seem less likely.

Copyright © 2005, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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