Lime Wire turns tables, sues record companies

Peer-to-peer (P-to-P) file-sharing software developer Lime Wire has countersued the biggest record companies, charging them with anti-competitive behavior.

The suit, filed Monday in the U.S. District Court for the Southern District of New York, follows the closing of most of the popular file-sharing Web sites due to lawsuits initiated by record companies. It also comes on the heels of a suit filed by 13 record companies against Lime Wire, accusing the developer of music piracy and demanding damages that could amount to $476 million.

Lime Wire now charges the record companies with colluding to create a monopoly over the digital distribution of copyrighted music. The record companies “have engaged in these unfair business practices for the specific purpose of eliminating sources of decentralized peer-to-peer file sharing and acquiring a monopoly over digital distribution of commercially valuable copyrighted music and movie content,” the lawsuit reads.

The alleged unfair business practices include collusion among the record companies to price their licensing rates such that independent music sellers can’t afford to stay in business, Lime Wire said.

Lime Wire added that a since-changed policy at the record companies of requiring licensees to negotiate only with certain companies that represent a group of record labels resulted in artificially high licensing fees.

Lime Wire also charges the record companies with trying to extend their monopoly by forcing music distributors to work only with their affiliated filtering system supplier. Lime Wire says it developed a filtering application to prevent illegal downloading and encourage legal content purchasing. But the record companies refused to give the developer access to the metadata that uniquely identifies each song in order for the filtering system to work, Lime Wire claims.

Instead, Lime Wire alleges the record companies encouraged Lime Wire to use their preferred supplier for a P-to-P filtering system, iMesh While Lime Wire concedes that iMesh is not owned by the record companies, it alleges the supplier is controlled by the record companies. A top executive at iMesh is a former leader of the Recording Industry Association of America (RIAA) and iMesh is the only RIAA-sanctioned business of its kind in the U.S., according to Lime Wire.

Lime Wire is asking for a jury trial. The record companies named in the suit include Arista Records, Atlantic Recording, BMG Music, Capital Records, Electra Entertainment Group, Interscope Records, Laface Records, Motown Record Company, Priority Records, Sony BMG Entertainment, UMG Recordings, Virgin Records America and Warner Bros. Records.

The suit follows some high profile settlements by other leading P-to-P networks. In July, Kazaa agreed to pay at least $100 million to four record companies and an additional amount to motion picture companies to settle lawsuits. Earlier this month, eDonkey agreed to pay $30 million to settle similar suits.

EDonkey’s founder last year predicted that all U.S. P-to-P companies would cease to exist because they wouldn’t have the resources to defend themselves against the record companies after a Supreme Court ruling against Grokster Ltd. That ruling vaguely said that P-to-P software developers may be liable for illegal use of the software.

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