UMG hangs suit on Bertelsmann

Teuton co.'s support of Napster brings legal action

NEW YORK — The world’s biggest record company has found a new target for its legal fury over the piracy on peer-to-peer file-sharing networks: the parent company of a fellow major.

Universal Music is suing Bertelsmann, which owns label group BMG, arguing that the German conglom contributed to massive infringement of UMG’s copyrights by propping up the infamous peer-to-peer service Napster.

Filed in U.S. District Court for the Southern District of New York, the suit alleges that Bertelsmann took “numerous actions that directly and materially contributed to millions upon millions of illegal acts of copyright infringement by the users of the Napster system.”

File-sharing furor

Bertelsmann, which loaned Napster more than $85 million over 2000 and 2001, has long contended that it wanted nothing more than to help the service develop a legal, subscription-based version of its popular file-sharing service.

But U contends in its suit that the conglom sought to control Napster and manipulate the Netco “for its own financial benefit.” UMG argued that the loans were in fact the first stage of a plan to acquire Napster outright.

The suit adds that Bertelsmann knew its efforts to build a legitimate service would take far longer than anticipated, and it therefore sought to keep the illegal version up and running in order to hang on to its vast user base.

Songwriters also sued

UMG’s complaint is the second to be filed against Bertelsmann over its involvement with Napster.

Veteran songwriters Jerry Leiber and Mike Stoller led a group of musical scribes in initiating a class action suit against the German conglom earlier this year.

UMG’s suit is likely to be consolidated with that case as the two unfold.

Separately, Universal and fellow major EMI filed suit last week against two principals of Hummer Winblad, the Silicon Valley venture capital firm that provided more than $13 million in development financing to Napster.

Napster was effectively shut down by a federal court injunction in July 2001 — the result of a copyright-infringement suit filed against it by all five major labels, including Bertelsmann’s BMG unit. Netco filed for Chapter 11 bankruptcy protection last year.

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