Lime Wire Countersues RIAA, Citing Antitrust Violations

Lime Wire didn’t dispute some RIAA claims that made it sound lax in copyright enforcement. Its website said “keep in mind that many users disobey copyright laws” and its software had “certain filtering mechanisms” that could be used to police for copyrighted tracks. But it shot back that RIAA was suing in part over unprotected works in the public domain and that RIAA used “deceptive and misleading advertising” in distributing some works and “caused fraud upon the Copyright Office.” Some sued P2P users were “innocent infringers” -- apparently meaning they didn’t know downloading copyright works by P2P was illegal, or that they didn’t know their licensed music was in a shared folder.

RIAA member companies “embarked on a scheme to cartelize their market and its financial promise for themselves,” pooling resources to “destroy” competitors that didn’t accept their harsh terms, Lime Wire said. Agreements among the majors essentially fixed prices, requiring licensees to pay minimum amounts to labels, not on a per-copy basis, the suit alleged: “Independent retailers faced excessive wholesale prices, and consumers faced higher-than-average prices” as a result. The MusicNet and Pressplay joint ventures between the majors allowed executives to “discuss their own pricing and prices of competitors” illegally, the suit said. The majors have a history of illicit cooperation, Lime Wire said, noting investigations by the N.Y. Attorney General’s office and DoJ.

Lime Wire recounted its attempt to launch a licensed P2P model, whose failure it blamed on the RIAA. It intended to “ultimately” charge consumers for DRM-encoded downloads through its MagnetMix website, started in 2003, and educate users on legal downloading. Its request to the majors for their file “hashes” -- unique identifiers -- to use in a filter Lime Wire had developed was repeatedly rebuffed, the company said. The majors wanted Lime Wire to use its “preferred” protection system, acoustic fingerprint technology like that offered by Audible Magic, the suit said.

The majors used the rechristined iMesh as the “latest venture to ‘funnel’ their efforts to control the distribution” of digital music, Lime Wire said. Though iMesh isn’t outwardly controlled by RIAA members, “dealings with iMesh by Lime Wire and other P2P companies demonstrate, in reality, that is not the case": IMesh’s CEO formerly led RIAA, for one thing. RIAA created terms under which P2P companies would have to accept iMesh acquisition offers or be sued -- told in effect to “sell their assets for essentially nothing, with the promise of a ‘get out of jail free’ card,” Lime Wire said.

Licensing terms were terrible, Lime Wire said. The RIAA offered “dead end licenses,” allowing a single retrieval of a digital file from a server alone, precluding true P2P distribution. DRM exists for P2P companies to track distributions of files and pay RIAA, Lime Wire said. Only a company with an offering tied to a product with higher margins -- such as Apple’s iPod -- could break even on the terms, the company said.

RIAA violated state and federal privacy laws and DMCA antihacking provisions in gathering information on Lime Wire users, the company said. The trade group falsely called Lime Wire a “pirate” and “smut peddler,” and pressured ISPs and artists not to do business with the P2P company, the suit said. Lime Wire wants triple damages under the Clayton Act and punitive damages on claims that RIAA harassed its actual and potential customers and business partners.

“Lime Wire is a conspicuous holdout” against following the Supreme Court’s Grokster decision, an RIAA spokeswoman told us. “A kitchen sink of frivolous shares doesn’t change the law… or the fact that Lime Wire has built a business based on theft, and continues to profit from it.” She didn’t answer our question about iMesh’s relationship to the major labels.