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Limewire Case Settles, Mid-Trial, For $105 Million

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The U.S. record industry has finally exacted its tribute from Limewire, the file-sharing service that was in operation for a decade and allowed millions of users to illegally trade songs. Lawyers from the two sides reached a settlement mid-trial today, under which Limewire and its founder, Mark Gorton, will pay record labels $105 million.

The settlement was reached in the middle of a trial over how much Limewire would have to pay in damages. The trial was only on the damages issue, because Limewire had already been found to be breaking copyright law by a judge in the middle of last year. The service was forced to close up in October. Had the jury reached a decision, it could have picked a figure as low as $7.2 million or as high as $1.4 billion.

Limewire’s founder, Mark Gorton, had been testifying earlier this week, and admitted that he knew a large amount of files were being traded illegally on Limewire, but he had misread the law. “I was wrong,” Gorton told jurors, according to a CNET report. “I didn’t think our behavior was inducing [copyright infringement]. I understand that a court has found otherwise.”

For PR purposes, it was vital that the RIAA get a settlement that was more than $100 million. There’s something about a nine-figure legal settlement that really drives headlines. And as CNET’s Greg Sandoval pointed out, the file-sharing service KaZaa-which was only relevant for two years-had to pay $115 million to the music and film industries. So anything under $100 million would have looked like not enough.

Limewire’s law firm, Willkie Farr & Gallagher, released a statement confirming the settlement, and emphasizing how much lower the settlement was than some of the RIAA’s more out-there demands. And it seems to imply that the settlement was somehow connected to Limewire’s attorneys’ cross-examination of Edgar Bronfman Jr., co-owner of Warner Music Group (NYSE: WMG), one of the plaintiffs in the case. The law firm’s statement, in part:

Plaintiffs… claimed that they suffered $40 to $50 billion of damages and that Lime Wire was responsible for it all. At other times they have claimed that the amount of damages exceeded $1.4 billion.

On May 11, Defendants cross-examined Edgar Bronfman, Jr., the billionaire co-owner of Plaintiff Warner Music Group… Before that cross-examination was completed, the parties conducted a mediation and settled the case with a total payment of $105 million from the Defendants, thereby ending Mr. Bronfman’s cross-examination.

Probably best to take that with a few grains of salt. RIAA chairman Mitch Bainwol offered a different statement, noting that “LimeWire wreaked enormous damage on the music community, helping contribute to thousands of lost jobs and fewer opportunities for aspiring artists.”

3 Responses to “Limewire Case Settles, Mid-Trial, For $105 Million”

  1. Joe Mullin

    @Greg, remember that founder Mark Gorton is on the hook here too. LW reportedly had revenue of $20 million in 2006 and may have made similar amounts in 2007 and 2008; most of that probably went to Gorton. Gorton also has other businesses including a hedge fund, and a $4 million Manhattan home (as we learned from this trial.) I think the RIAA is definitely going to collect in this case.