Universal and EMI have sued a San Francisco based investment firm called Hummer Winblad Venture Partners for investing in the Napster of old - the lawsuit claims that by backing the now defunct file-share site the company contributed to millions of copyright violations - ambitious as ever the label's lawyers are asking for $150,000 per violation and punitive damages.
Industry insiders reckon the move is more about setting a precedent than actually winning compensation off Hummer Winblad. A number of the current file share websites have venture capital backing - the record labels hope that by threatening legal action against anyone who backs file share companies they will scare investors and cut off a vital income stream for file share operations of the present and future.
A spokesperson for the US based National Venture Capital Association told the LA Times yesterday that the labels might get their way even if they lose this case. They reckon that by simply filing a lawsuit in the first place many investors may be dissuaded from giving money to Napster clones.
Hummer Winblad's $13 million investment began in May 2000 after the RIAA first sued Napster. However the company's lawyers are likely to say that because no verdict had been reached on that legal action when the investment was made they are not liable for giving cash to what was later deemed an illegal operation.