REDACTED VERSION COMPLETE VERSION FILED UNDER SEAL UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ARISTA RECORDS LLC; ATLANTIC RECORDING CORPORATION; BMG MUSIC; CAPITOL RECORDS, INC.; ELEKTRA ENTERTAINMENT GROUP INC.; INTERSCOPE RECORDS; LAFACE RECORDS LLC; MOTOWN RECORD COMPANY, L.P.; PRIORITY RECORDS LLC; SONY BMG MUSIC ENTERTAINMENT; UMG RECORDINGS, INC.; VIRGIN RECORDS AMERICA, INC.; and WARNER BROS. RECORDS INC., 06 Civ. 5936 (GEL) Plaintiffs, ECF CASE v. LIME WIRE LLC; LIME GROUP LLC; MARK GORTON; GREG BILDSON; and M.J.G. LIME WIRE FAMILY LIMITED PARTNERSHIP, Defendants. PLAINTIFFS' MEMORANDUM OF LAW IN SUPPORT OF THEIR MOTION FOR PARTIAL SUMMARY JUDGMENT Katherine B. Forrest Teena-Ann V. Sankoorikal Joanne M. Gentile CRAVATH, SWAINE & MOORE LLP 825 Eighth Avenue New York, NY 10019 (212)474-1000 Attorneys for Plaintiffs Arista Records LLC; Atlantic Recording Corporation; BMG Music; Capitol Records LLC; Elektra Entertainment Group Inc.; Inter scope Records; LaFace Records LLC; Motown Record Company, L.P.; Priority Records LLC; Sony BMG Music Entertainment; UMG Recordings, Inc.; Virgin July 18, 2008 Records America, Inc.; and Warner Bros. Records Inc. TABLE OF CONTENTS Page TABLE OF AUTHORITIES iii PRELIMINARY STATEMENT 1 ARGUMENT 4 I. THE LIMEWIRE SOFTWARE HAS BEEN AND IS WIDELY USED FOR THE DIRECT INFRINGEMENT OF PLAINTIFFS' COPYRIGHTS 5 II. PLAINTIFFS ARE ENTITLED TO SUMMARY JUDGMENT ON COUNT I BECAUSE THE UNDISPUTED EVIDENCE SHOWS THAT DEFENDANTS ACTED WITH THE OBJECT OF PROMOTING INFRINGEMENT 8 A. The Sheer Volume and Notoriety of the Infringement Committed By Users of the LimeWire Software, Which Defendants Distribute, Is Itself Indicative of Defendants' Intent to Facilitate Infringement 9 B. Lime Wire Pursued and Aggressively Sought to Retain the Customer Base of Known Infringers 11 C. Lime Wire's Business Model is Predicated on Promoting Massive Infringement 16 D. Lime Wire Has Taken No Meaningful Affirmative Steps to Prevent Infringement 19 E. Lime Wire Designed Its Technology to Facilitate Infringement 24 F. Lime Wire Has Assisted and Turned a Blind Eye to Infringement 28 III. PLAINTIFFS ARE ENTITLED TO SUMMARY JUDGMENT ON COUNT II BECAUSE THE UNDISPUTED EVIDENCE SHOWS THAT DEFENDANTS KNOWINGLY AND MATERIALLY CONTRIBUTED TO THE INFRINGING CONDUCT OF LIMEWIRE USERS 30 A. Lime Wire Has Knowledge of Its Users' Infringing Activity 30 B. Lime Wire Has Induced, Caused and Materially Contributed to Direct Infringement 33 C. LimeWire Has No "Substantial" or "Commercially Significant" Noninfringing Uses 33 -i- IV. PLAINTIFFS ARE ENTITLED TO SUMMARY JUDGMENT ON THEIR COMMON LAW COPYRIGHT INFRINGEMENT AND UNFAIR COMPETITION CLAIMS (COUNTS IV AND V) WITH RESPECT TO PRE-1972 SOUND RECORDINGS 39 CONCLUSION 40 -11- TABLE OF AUTHORITIES Page(s) Cases A&MRecords, Inc. v. Abdallah, 948 F. Supp. 1449 (C.D. Cal. 1996) 36 A&M Records, Inc. v. Napster, Inc., 114 F. Supp. 2d 896 (N.D. Cal. 2000), aff'd in part and rev 'd in part, 239 F.3d 1004 (9th Cir. 2001) 11,19 A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001) 1, 7, 30, 33 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) 4 Arista Records, Inc. v. Flea World, Inc., No. 08-2670 2006 WL 842883 (D. N.J., Mar. 31, 2006) 30, 33 Atari, Inc. v. JS&A Group, Inc., 597 F. Supp. 5 (N.D. 111. 1983) 37 Atlantic Recording Corp. v. Heslep, No. 4:06-cv-132-4,2007 WL 1435395 (N.D. Tex. May 16,2007) passim BMG Music, et al. v. Gonzalez, 430 F.3d 888 (7th Cir. 2005) 7 Capitol Records, Inc. v. Naxos of America, Inc., 4 N.Y.3d 540 (N.Y. Ct. App. 2005) ..................................................................................... 6, 39 Dennison Mfg. Co. v. Ben Clements & Sons, Inc., 467 F. Supp. 391 (S.D.N.Y. 1979) ........................................ .... ................... .......................... 37 Erico Intern. Corp. v. Doc's Marketing, Inc., 2007 WL 108450 (N.D. Ohio 2007) ........................................................................................ 35 Faulkner v. National Geographic Society, 211 F. Supp. 2d450 (S.D.N.Y. 2002) ...................................................................................... 30 Firma Melodiya v. ZYX 'Music 882 F. Supp. 1306 (S.D.N.Y. 1995) ......................................................................................... 39 Fromberg, Inc. v. Thornhill, 315 F.2d 407 (5th Cir. 1963) ................................................................................................... 35 -iii- Gershwin Pub. Corp. v. Columbia Artist Management, Inc., 443 F.2d 1159 (2d Cir. 1971) 30 HamilAm. Inc. v. GFI, 193 F.3d 92 (2d Cir. 1999) 6 Higazy v. Templeton, 505 F.3d 161 (2d Cir. 2007) 4 Hoffman-La Roche, Inc. v. Promega Corp., 33 U.S.P.Q.2d 1641, 1648-49 (N.D. Cal. 1994 38 /« reAimster Copyright Litigation, 334 F.3d 643 (7th Cir. 2003) passim Island Software and Computer Service, Inc. v. Microsoft Corp., 413 F.3d 257,260-261 (2d Cir. 2005) 5 Jeffreys v. City of New York, 426 F.3d 549, 553 (2d Cir. 2005) 4 Lauratex Textile Corp. v. Allton Knitting Mills Inc., 517 F. Supp. 900(S.D.N.Y. 1981) 4 Matthew Bender & Co., Inc. v. West Pub. Co., 158 F.3d 693 (2d Cir. 1998) 30, 33 McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184 (2d Cir. 2007) 4 McKesson Information Solutions, Inc. v. Bridge Medical, Inc., 2005 WL 2346919 (E.D. Cal. Sept. 23, 2005) 36 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. ("Grokster"), 545 U.S. 913 (2005) passim Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 454 F. Supp. 2d 966 (C.D. Cal. 2006) passim Mini MaidSvcs. Co. v. Maid Brigade Sys., Inc., 967 F.2d 1516 (llth Cir. 1992) 10 Pickholtz v. Rainbow Technologies, Inc., 260 F. Supp. 2d 980,989 (N.D. Cal. 2003) 38 Poly Vision Corp. v. Smart Technologies Inc., 501 F. Supp. 2d 1068,1090-91 (W.D. Mich. 2007) 38 -iv- Rogers v. Koons, 960 F.2d 301, 306 (2d Cir. 1992) 5 Roy Export Co. v. CBS, Inc., 672 F.2d 1095 (2d Cir. 1982) , 39 RSO Records, Inc. v. Peri, 596 F. Supp. 849 (S.D.N.Y. 1984) 4 Sony Corp.ofAmer. v. Universal City Studios, Inc., 464 U.S. 417 (1984) 30, 33, 34, 36 Sony Pictures Home Entertainment, Inc. v. Lott, 471 F. Supp. 2d 716 (N.D. Tex. 2007) 2 Universal Music Australia Pty Ltd. v. Sharman License Holdings Ltd., (2005) 220 A.L.R. 1 (Austl.), 2005 WL 2119310 (Sept. 5, 2005) 14 Warner Bros. Records, Inc. v. Does 1-4, No. 2:07 cv 0424 TC, 2007 WL 1960602 (D. Utah July 5,2007) 2 Worlds of Wonder, Inc. v. Vector Intercontinental, Inc., No. C86-2671, 1986 WL 15608 (N.D. Ohio Dec. 31, 1986) 38 Statutes & Rules 17 U.S.C. § 102(a)(7) 6 17 U.S.C. §106 6,7 17 U.S.C. §106(1) 7 17 U.S.C. §106(3) 7 17 U.S.C. § 301(c) 6, 39 17 U.S.C. § 401(c) 6 17 U.S.C. §504(c)(2) 6 Fed. R. Civ. P. 56(c) 4 Other Authorities 2 M. & D. Nimmer, Nimmer on Copyright § 8C.02 at 8C-4 39 Restatement (Second) of Torts §8A (1965) 10 -v- Plaintiffs ("plaintiffs" or "Record Companies") submit this memorandum in support of their motion for partial summary judgment on Counts I, II, IV and V of their First Amended Complaint against defendants Lime Wire LLC, Lime Group LLC, Mark Gorton and Greg Bildson (collectively "defendants" or "Lime Wire"). PRELIMINARY STATEMENT After two years of litigation, thirty-seven depositions and the production of over seven million pages of documents, the undisputed facts confirm what everybody (certainly every teenager and college student) already knows: Lime Wire LLC's eponymous peer-to-peer ("P2P") software, Lime Wire, is good for one thing and used for one thing-massive infringement of sound recordings each and every day. The testimony of Lime Wire's current and former employees and the documents produced in this case demonstrate that defendants intended and assisted this unprecedented level of piracy. This case is not the first of its kind. It occurs against the backdrop of a steady progression of prominent cases involving unlicensed and infringing P2P services-from Napster to Aimster to Grokster, Morpheus and Kazaa. These cases, and now LimeWire, have rendered the infringing use of unlicensed P2Ps a matter of common knowledge. See, e.g., Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. ("Grokster"), 545 U.S. 913, 920 (2005) ("[Although the [peer-to-peer (P2P)] networks ... can be used to share any type of digital file, [users] have prominently employed those networks in sharing copyrighted music and video files without authorization."); In re Aimster Copyright Litigation, 334 F.3d 643, 645 (7th Cir. 2003) ("Teenagers and young adults who have access to the Internet like to swap computer files containing popular music. If the music is copyrighted, such swapping, which involves making and transmitting a digital copy of the music, infringes copyright."); A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013 (9th Cir. 2001) ("Napster") ("The record supports the district court's determination that 'as much as eighty-seven percent of the files available on Napster may be copyrighted and more than seventy percent may be owned or administered by plaintiffs [copyright holders]'").' This motion addresses whether defendants have either induced or knowingly contributed to such infringement by users of the LimeWire software. Clearly, they have done both. Indeed, on the record of this case, no reasonable jury could find otherwise. The enormous scope of the infringement-roughly 93% of the material made available by LimeWire's users, and nearly 99% of the actual download requests to LimeWire users-puts the Lime Wire defendants' unlawful objective in proper perspective. These statistics result from purposeful action. No benign intentions could have created a business that has only one purpose-piracy.