HITS Daily Double
UMG accuses Bertelsmann of contributory infringement, vicarious infringement and unfair competition.


Middelhoff’s Folly Brings More Grief for German Media Conglom, as Suit Claims Contributory Infringement for P2P Investment

Universal Music Group has filed suit against Bertelsmann for its ill-fated investment in now-shuttered P2P pioneer Napster.

The complaint, filed Monday in New York District Court, accuses Bertelsmann of contributory infringement (for giving Nappy financial support initially disguised as a "loan" and thus sustaining illicit file-sharing), vicarious infringement (for not shutting down the P2P system when it took control) and unfair competition (for "misappropriating" plaintiffs’ sole rights to swapped recordings).

UMG asks damages of $150,000 or more per work infringed for the first two counts and unspecified punitive damages (plus attorney and court fees) for the third.

"Universal Music Group has joined with the music publishers in seeking damages from Bertelsmann for the massive and unprecedented copyright infringement that took place on the Napster system," reads a UMG statement. "Bertelsmann did not merely provide a loan to Napster; nor was it merely a passive investor in Napster. Rather, it took control of the Napster system to financially benefit itself at the expense of Universal and its artists."

The complaint duly notes that while its music group, BMG, joined the other Big Five in pursuing injunctive and other legal relief against Napster, the Bertelsmann mothership plotted not only to take over and convert the file-sharing company but to sustain its unauthorized activity.

UMG clearly regards as a smoking gun the Bertie "Task Force" that exchanged memos regarding the firm’s plans. Not only does the excerpted material indicate Task Force members saw the necessity of sustaining Napster in its outlaw form [code-named "Thunderball" in the memos] in order to maintain a user base for the planned legit service [AKA "newco"], but that they didn’t know how to spell "disperse" or "music."

The $85 million Napster effort was the brainchild of then-Bertie chief and synergy exponent Thomas Middelhoff. Ultimately, this sizable expenditure got Bertelsmann little more than control of a brand that had been rendered useless by injunctions, defections and threats of continued litigation.

Neither the subsequent discrediting of Middelhoff’s plan nor his abrupt departure from Bertelsmann in 2002 have quelled UMG’s desire for retribution.

The label group’s complaint insists Bertie’s actions in the Napster debacle were "willful, intentional and purposeful, in violation of plaintiffs’ rights," and continues its litany by calling the German media conglom’s conduct "gross, wanton, willful, fraudulent and/or morally culpable to an extreme degree."

Heck, we get called that on a good day.

So far, no other label groups have announced plans to join UMG’s suit.