Record Labels Again Sue Creators of Morpheus Service

Like frustrated prosecutors charging an acquitted crime boss with tax evasion, the major record labels are suing the creators of the Morpheus file-sharing network again -- not over the software that millions of people use to copy billons of songs for free but over a service that never launched.

The claims come about a month after the labels, music publishers and Hollywood studios suffered a stunning setback in their first copyright infringement lawsuit against Morpheus’ creator, Streamcast Networks Inc. U.S. District Judge Stephen V. Wilson ruled that Streamcast and Grokster, the distributor of another popular file-sharing program, weren’t responsible for the piracy committed by their programs’ users.

Wilson is in Los Angeles. The labels took the new case to a federal court in Nashville, where Streamcast and its precursor companies were based when they developed the service in dispute.

“The legal term for this is ‘forum shopping,’ ” said attorney Mark Radcliffe, a copyright-law expert at Gray Cary Ware & Freidenrich in Palo Alto. “You get a bad decision someplace, you go someplace else.... They’re filing in a place where music is important, where they’ve got a good chance of getting a sympathetic decision.”

The Recording Industry Assn. of America issued a brief statement in response to questions about the lawsuit, saying only that “this is another step in our ongoing litigation against Streamcast, a company that we believe is responsible for widespread copyright infringement.”

Streamcast executives said they were outraged. They said the company tried to develop an online radio service three years ago, abandoning the effort when it couldn’t get licenses from the labels. Now, they complained, they’re being sued for legitimate steps they took to prepare for the would-be venture.

The record labels are “sore losers,” said Michael Weiss, chief executive of Streamcast. “It looks like they’re coming after us for exploring another legal business model, one that we didn’t even launch.”

At issue is a computerized collection of music that Streamcast -- previously known as MusicCity.com Inc. and Infinite Music Inc. -- compiled in 1999 and 2000.

The lawsuit alleges that Streamcast acquired CDs with thousands of songs, then converted them into a digital database on hard drives and other storage devices. The company made multiple copies of the songs and the database, all without the permission of the copyright owners, the lawsuit alleges.

The labels made a similar accusation in 1999 against MP3.com Inc., which launched an online music-storage service without the labels’ permission. A federal judge in New York ruled that MP3.com violated the labels’ copyrights, forcing the company to pay more than $100 million in settlements.

Unlike MP3.com, Streamcast created its database for an Internet radio service that complied with the 1998 Digital Millennium Copyright Act, said Charles S. Baker, the company’s attorney. Streamcast tried to strike licensing deals with the labels; Baker said it did that even though it wasn’t clear that a radio service needed to be licensed.

All Internet radio stations convert their discs into an electronic database, and a legitimate station’s database shouldn’t be grounds for a lawsuit under the 1998 act, said Jonathan Potter of the Digital Media Assn., a trade group for online broadcasters.

“The questions for Streamcast are: What did they do with it and why, and are the record companies being over-aggressive or did Streamcast do something it shouldn’t have done?” Potter said.

The lawsuit accuses Streamcast of distributing songs and copies of its database -- without saying how or to whom -- as well as transmitting the songs digitally for a commercial purpose. It also alleges that Streamcast withheld critical information about the database and its actions until last year, when the information was disclosed in the industry’s first lawsuit.

Baker said the second suit was filed too long after the alleged infringements to be valid. He also accused the labels of violating a protective order issued in the first case in Los Angeles by releasing information about the database that they were supposed to keep confidential.

Michael Cohen, an attorney at Heller Ehrman White & McAuliffe in Washington who specializes in antitrust, copyright and digital-media issues, said the labels could have legitimate procedural reasons for suing Streamcast a second time in a different district years after the alleged piracy occurred.

“Just because it’s past and not ongoing doesn’t mean you weren’t hurt by it when it happened,” Cohen said.

Potter, a frequent opponent of the RIAA, had a different reaction: “The record companies have a history of suing people that they just don’t like.”