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June 21, 2010 / screwvala

RIP2P

On May 11, 2010, Judge Kimba M. Wood, a Federal judge sitting in the Southern District of New York, issued the latest smackdown on P2P networks.

In Arista Records, LLC v. Lime Group, LLC, a consortium of record labels won a resounding victory, holding LimeWire, its former CEO and sole director, and its largest investor, liable for direct and indirect copyright infringement.

The risk of operating a P2P network was made clear by the Supreme Court in MGM Studios, Inc. v. Grokster, which held that file sharing networks Grokster and StreamCast had engaged in massive direct and indirect copyright infringement by making available a system that allowed users to share copyrighted material in violation of the Copyright Act.

After Grokster, it is hardly surprising that the record labels succeeded in holding LimeWire liable. The Court’s decision holding its former CEO and sole director liable, however, merits some discussion. The Court based individual liability on the fact that the former CEO controlled and directed LimeWire’s infringing activity.

Of course, all businesses act at the direction of their owners and employees. Moreover, as a general rule, it is typically difficult to hold individuals liable for the acts of corporation — a key reason people create corporations. As the Court concluded, however, the law permits individuals to be held liable for copyright infringement where they exercise control over the infringing activities or they receive a substantial benefit from such infringement. This would probably not be the result in an attempt to hold individuals liable in a non-copyright infringement context.

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