Ovitz may get rid of site stake in wake of lawsuit

Hollywood movie and music companies trained their legal guns on Scour.net on Thursday, filing a lawsuit against the search engine that locates digital music and video files on the Internet.

The Motion Picture Assn. of America, the Recording Industry Assn. of America and the National Music Publishers Assn. were among the trade groups filing the suit against the Beverly Hills-based company on behalf of more than 20 companies including Sony, Time Warner, Fox and Disney.

In the suit, the groups alleged that Scour, in which AMG topper Michael Ovitz is a minority investor, allows the illegal downloading and copying of both commercial music and movie files over the Web, including pirated copies of “X-Men” and “The Perfect Storm.”

“This lawsuit is about stealing,” MPAA president Jack Valenti said. “Technology may make stealing easier, but it doesn’t make it right.”

Just as the RIAA has been attacking Napster on the music front, the MPAA is gearing up to wage war against distributors of digital movie files.

Grabbing attention is the growing popularity of DivX, a new compression technology that bears no relation to the failed DVD format.

A hacked version of Microsoft’s video-compression software, the technology allows full-length movies of VCR quality to be posted online and downloaded in just a few hours.

Scour and its Scour Exchange file-sharing program work much like the much maligned music service Napster, allowing individuals to trade music and video files via their computers. DivX movie files have been found on Scour.

“This is so simple, what Scour is doing. It’s really just Napster with movies. It’s (users) taking down that which doesn’t belong to them for free,” Valenti said.

Scour was founded on a shoestring budget by a group of students at UCLA, including 23-year-old prexy Dan Rodrigues.

“We’re very surprised about this morning’s MPAA and RIAA lawsuit,” Rodrigues said in a statement.

Deals with plaintiffs

He said that Scour already has licensed agreements for trailers and other movie promotional content from Miramax Films and Hollywood Records, both plaintiffs in the lawsuit. In addition, he said, company held licensing talks this week with three of the big five record labels — Sony Music, Warner Music and BMG Entertainment — and it plans to meet soon with Universal Music Group.

Ovitz acquired a 51% stake in Scour last year for an undisclosed sum (Daily Variety, June 11), but his interest has since dropped to 20%. An additional 20% is held by the Yucaipa Co.’s Ron Burkle, who sits on Scour’s board of directors. Ovitz is not a board member of Scour.

The MPAA’s Valenti declined to discuss Ovitz’s involvement in the site, maintaining that “this has nothing to do with Ovitz, this has to do with Scour.”

A source close to Ovitz, however, said that he has repeatedly urged the company’s board to hold out an olive branch to the record and film industries.

Ovitz getting out?

He has also hired a financial adviser with an eye toward divesting himself of his stake in Scour, the source said.

The MPAA and RIAA said they would be seeking injunctive action against the file sharing portion of Scour’s offerings, as well as an undisclosed amount of monetary damages (although statutory damages could reach as high as $150,000 per work infringed, they said).

Scour maintains that “all Scour services have complied with all applicable laws, including the Digital Millennium Copyright Act of 1998.”

Cary Sherman, the RIAA’s general counsel, said the chief defense raised by Napster (and potentially applicable to Scour) that file sharing falls under “fair use” as defined by current copyright law, is “totally without merit.”

“Sharing with anyone and everyone in the free world cannot possibly constitute fair use,” he said.

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