As Universal Music and Bertelsmann announced their deal regarding BMG Music Publishing yesterday, behind the scenes a long running dispute between the two major music companies was resolved.
As previously reported, Universal is one of the major record companies that has been pursuing legal action against Bertelsmann for years relating to the original Napster. BMG was the only major to offer any support to the original Napster company who, prior to their bankruptcy, were trying to develop a legitimate version of their P2P operation which would compensate rights holders. As part of this support BMG made some funds available to Napster, and that is what is at the heart of the legal cases other major record companies have been pursuing against them.
They argue that, by funding Napster, BMG allowed the P2P network to operate for longer than it would otherwise have been able to, and that therefore they are responsible in some ways for any copyright violation committed by Napster users in the latter part of the P2P service's life. For their part, BMG argue that making money available to Napster to enable it to develop a legitimate business model does not make them liable for copyright violation committed on the then existing Napster network.
In the out of court settlement, Bertelsmann will pay Universal $60 million, though they stress that that is to cover the Vivendi company's legal expenses, and does not amount to BMG accepting any liability for copyright violation on the Napster network. This is important, because EMI and a collective of other independent publishers and songwriters are still pursuing their claim against Bertelsmann and other Napster investor Hummer Winblad - a claim due to be reconsidered in the American courts in light of the US Supreme Court's ruling on Grokster last year.
In related news, it is thought that the Universal / Bertelsmann deal won't have any affect on the side case running alongside the Napster dispute. As previously reported, Hummer Winblad are countersuing EMI and Universal essentially claiming that the two majors used anti-competitive practices at the time of the original Napster in order to stop the P2P company from launching a legitimate business model (because, at the time, the majors had vested interests in their own developing but ultimately unsuccessful download platforms). As part of that case both EMI and Universal have been ordered to had over internal papers which the labels have previously claimed are covered by client-attorney privilege, but which the plaintiffs in this action reckon might prove their case. The deadline for handing over those documents is next week. (It should be added that the US Department Of Justice has already investigated the anti-competition claims that surround the early days of digital music, and they found that the majors were not guilty of the alleged anti-trust practices, though it will be interesting to see if those aforementioned papers do reignite the case against the majors).
PS: Going back to the Universal / Bertelsmann deal, an interesting part of the agreement between the majors is that Universal cannot take future action against the German conglom relating to its support of Napster either on behalf of its own record company or publishing house, or on behalf of BMG Music Publishing. Now that would have been fun - Universal buy BMG Music Publishing, and then sue on behalf of the songwriters it represents over alleged copyright violation liabilities committed by the company that owned it at the time. Alas, the lawyers saw that one coming, hence the deal. No fun.