Record companies sue Hummer Winblad & Hank Barry.
Anybody else know Hank Barry, a former WSGR attorney who joined Hummer and served as CEO of Napster? I hate to see something like this happen to him (and to a lesser extent Hummer). But, he had to see it coming.
I think that the outcome of this case could drastically change the way VCs operate their businesses. What say ye?
Seven
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Record labels sue VC firm over Napster support
By Dawn C. Chmielewski
Mercury News
Two record labels filed suit Monday against Hummer Winblad Venture Partners, accusing the venture capital firm of contributing to widespread Internet music piracy through its financial support of Napster.
Universal Music Group and EMI Recorded Music accused the firm -- and partners John Hummer and Hank Barry individually -- of perpetuating global piracy through its $13 million investment in the controversial file-swapping service.
``Businesses (as well as those individuals or entities who control them) premised on massive copyright infringement of works created by artists, should face the legal consequences for their actions,'' the labels said in a joint statement.
Filed in L.A.
The lawsuit, filed in U.S. District Court in Los Angeles, is another in a new round of litigation that has arisen after Napster sought the haven of bankruptcy court in June. That filing resulted in an unresolved end to copyright infringement lawsuits the five major record labels brought, seeking billions in damages. Joining Universal Music and EMI Music in the December 1999 suits to shut down Napster were Sony, AOL Time Warner and Bertelsmann.
But the lawsuits -- like the unauthorized music downloading itself -- didn't stop with Napster's financial collapse. Two prominent songwriters sued Napster benefactor Bertelsmann for $17 billion in February, accusing the German media conglomerate of deliberately helping users of the wildly popular service violate copyrights.
That suit alleged that without Bertelsmann's $90 million investment, Napster would have collapsed in July 2001, and fewer songs would have been downloaded.
Monday's suit seeks to hold Hummer Winblad, which backed Redwood City-based Napster, its one-time chief executive, Barry, and former board member Hummer accountable for what the labels describe as unprecedented global piracy.
A Hummer Winblad spokesman issued a brief statement saying, ``We've received a copy of the complaint and we are reviewing it.''
Possible defense
Sources close to the venture capital firm predict that Hummer Winblad will likely raise the defense that, when the firm invested in Napster in April 2000, there had been no court ruling on the legality of the song-swapping service.
The National Venture Capital Association, in a recent letter to Sen. John Kerry, D-Mass., wrote that the mere threat of such litigation against one limited partnership firm would shrink the flow of capital to the entire technology segment.
``The uncertainty attendant to those pending lawsuits is deterrence aplenty to the flow of investment capital to new technology,'' wrote association president Mark Heesen. ``Even without the threat of direct suit, investors in innovative technologies face the very real risk of loss of their investment.''
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