Arista Records LLC et al v. Lime Wire LLC et al

Filing 176

MEMORANDUM OF LAW in Opposition re: 140 MOTION to Strike Plaintiffs' Exhibits (Settlement Related and Pre-August 2003 Objections). ("Plaintiffs' Memorandum Of Law In Opposition To Defendants' Settlement Related And Pre-August 2003 Objections To Plaintiffs' Exhibits To Their Motion For Partial Summary Judgment And Defendants' Motion To Strike Plaintiffs' Exhibits"). Document filed by Capitol Records, Inc., Elektra Entertainment Group, Inc., Interscope Records, Laface Records LLC, Motown Record Company, L.P., Arista Records LLC, Priority Records LLC, Sony BMG Music Entertainment, UMG Recordings, Inc., Virgin Records America, Inc., Warner Bros. Records Inc., Atlantic Recording Corporation, BMG Music. (Attachments: # 1 Exhibit A, # 2 Exhibit B)(Forrest, Katherine)

UNITED SOUTHERN

STATES

DISTRICT OF

COURT NEW YORK

DISTRICT

ARISTA

RECORDING LLC; ATLANTIC CAPITOL MUSIC; RECORDS, INC.; ELEKTRA ENTERTAINMENT GROUP INC.; INTERSCOPE LAFACE RECORDS RECORD RECORDS; LLC; MOTOWN PRIORITY RECORDS SONY BMG MUSIC COMPANY, L.P.; LLC; UMG ENTERTAINMENT; RECORDINGS, INC.; VIRGIN RECORDS AMERICA, INC.; and WARNER BROS. RECORDS INC.,

RECORDS

CORPORATION;

BMG

06 Civ.

5936

(GEL)

Plaintiffs,
Vo

ECF

CASE

LIME

WIRE

LLC;

LIME

GROUP WIRE

LLC;

MARK

GORTON;
LIMITED

GREG

and BILDSON; PARTNERSHIP,

M.J.G.

LIME

FAMILY

Defendants.

PLAINTIFFS' SETTLEMENT EXHIBITS AND

MEMORANDUM RELATED TO THEIR AND

OF

LAW

IN

OPPOSITION 2003 OBJECTIONS SUMMARY PLAINTIFFS'

TO

DEFENDANTS' TO PLAINTIFFS'

PRE-AUGUST FOR TO

MOTION MOTION

PARTIAL STRIKE

JUDGMENT EXHIBITS

DEFENDANTS'

Katherine Teena-Ann Joanne

B. Forrest V. Sankoorikal M. Gentile SWAINE Avenue 10019 & MOORE LLP

CRAVATH,
825 New

Eighth

York, NY

[phone]
LLC; Attorneys for Plaintiffs Arista Records Atlantic BMG Music; Recording Corporation; Capitol Records LLC," Elektra Entertainment Group Inc.; Interscope Records; LaFace
Records

LLC; Motown
Records

Record

Company, L.P.;
BMG Music

Priority
November

LLC;
UMG

Sony
and

Entertainment;

Recordings, Inc.;
Warner Bros.

Virgin

7,

2008

Records Records

America,
Inc.

Inc.;

TABLE

OF

CONTENTS 1 3

Preliminary
Argument
I°

Statement

..........................................................................................................

.............................................................................................................................

EVIDENCE NOT A°

THAT

PRE-DATES
.................................................................................................

AUGUST

4, 2003

AND

GROKSTER

IS 3

PRECLUDED

Defendants'
Now Seek the
to

Waived Exclude of

Their

Objections by Using

the

Evidence

They
3

...................................................................................

B°

Neither

Limitations, Nor the "ContinuingInfringement Doctrine", Nor the Chevron Exception to the Principal
of
on

Statute

Retroactivity Admissibility
that

Are

Rules

of Evidence
.......................................................................

and

Thus

Have

No

Bearing
4

of Evidence the

C°

Evidence Because Such

Pre-dates

Grokster

Decision and Claim

is Admissible Even for If It Does

Grokster Evidence

Applies Retroactively
is Relevant
to

Not,
7

Plaintiffs'

Contributory

Infringement
II. RULE 408 DOES

.................................................................................................

NOT

RENDER

THE

PROFFERED

EVIDENCE 11

INADMISSIBLE No Rule 408

...................................................................................................

Does it Does

Not Not

Bar

Admission

of the Evidence "Conduct
or

in Exhibit Made

A in
..............

Because

Constitute

Statements R. Evid.

Compromise Negotiations"
°

Pursuant Seek
to

to

Fed.

408(a)(2)

12

Evidence Because Kind Other

Defendants
It Has

To Exclude Do with

Is Admissible of

Nothing

Negotiations

Any
12

................................................................................................

°

Evidence

that

Defendants
It Relates Efforts
to to

Seek

to

Exclude
not

Is

Admissible
Negotiations,
B° The and Defendants

Because
or

Business,
with

Settlement,
Law
.....................

to

Comply
408 In

the

14

Have
to

Waived the

Any Rule
Same Facts

Continuing

Invoke

Objection By Invoking Support of Their Own
22 25

Claims Conclusion

........................................................................................................

.........................................................................................................................

Table

of Authorities

Page(s)
Cases

Allen-Myland,
vacated Am. Dream Jan. Am. Soc
on

Inc. other

v.

Corp., 693 F. Supp. 262 (E.D. Pa. 1988), grounds, 33 F.3d 194 (3d Cir. 1994)
................................................

Int 'l Bus.

Mach.

22

Enter.,

Inc.

v.

Trump, No. 95 Civ. 0625, 1997

WL

3275

(S.D.N.Y.
6

3, 1997)

...................................................................................................................

& Publishers 'y of Composers, Authors 912 F.2d 563 (2d Cir. 1990) Inc., Inc.
v.

v.

Showtime/The

Movie

Channel,
24

................................................................................

Big 0 Tire Dealers,
Cir.

Goodyear

Tire

& Rubber

Co., 561 F.2d

1365

(10th
16

1977)
v.

.....................................................................................................................

Blu-J, Inc.

Kemper
v.

C.P.A.

Group,

916

F.2d 47

637

(1 lth
Cir.

Cir.

1990)
.......................................

................................

20

Capobianco
Chevron Oil

City of New
v.

York, 422 F.3d
97 Cir.

(2d

2005)

4, 22 3, 8, 9
6

Co.

Huson, 404 U.S.
140 F.3d 433

(1971) 1998)

...........................................................

Cooper
Deere Ditto

v.

Parsky,
v.

(2d

...................................................................

& Co.

IntTHarvester 510 F.3d

Co., 710 F.2d
1070

1551

(Fed.
...............................................................

Cir.

1983)

................................

16 8

v.

McCurdy,
v.

(9th
936

Cir. F.2d

2007)
1131

Eisenberg
Gero
v.

Univ.

of NewMexieo,
535 F.

(10th

Cir.

1991)

.................................

22 6 8 22 8 5 8

The

Seven-Up Co.,

Supp.
509 W.D. 55

212

(E.D.N.Y.
86

1982)

..........................................

Harper
In
re

v.

Virginia Dep "t of Taxation,
333 B.R. 261

U.S. Pa.

(1993)

.................................................

Groggel,
Co.
v.

(Bankr.
222 U.S.

2005)

.......................................................

Kalem

Harper Bros.,

(1911) (2d
Cir.

..................................................................

Kregos Margo

v.

Associated

Press, 3 F.3d
55

656 Cir.

1993)

.......................................................

v.

Weiss, 213 F.3d
v.

(2d

2000)

........................................................................

Mendelovitz

Adolph

Coors

Co., 693 F.2d
v.

570

(5th

Cir.

1982)

......................................

16

Metro-Goldwyn-Mayer 2004) Metro-Goldwyn-Mayer

Studios, Inc.

Grokster,

Ltd., 380 F.3d

1154

(9th

Cir. 17

............................................................................................................................

Studios, Inc.

v.

Grokster,
ii

Ltd., 543 U.S.

1032

(2004)

.................

18

Metro-Goldwyn-Mayer
Cal.

Studios, lnc.

v.

Grokster,

Ltd., 454 F. Supp. 2d 966 (C.D. 7, 8

2006)

...................................................................................................................

Metro-Goldwyn-Mayer
RamadaDev. Co. Prods. lnt
v.

Studios, lnc.

v.

Grokster,
1097

Ltd., 545 U.S.
Cir. Unit Cir. B

913

(2005)

...........

passim
20, 21
12

Rauch, 644 F.2d
v.

(5th
1234

1981)

............................

Raybestos
Rondor

Co. 'l

Younger,

54 F.3d

(7th

1995)

.......................................

Music Cal.

v.

TVT Records

LLC, No. CV 05-2909, 2006

WL

5105272 12

(C.D.
S. R Sadhu

Aug. 21, 2006)
H.W.

............................................................................................

'y. Co.

v.

Vaughn,
Trust 577

359

F.2d

424

(5th

Cir.

1966)

................................................

22 Commc

Singh Hamdad 503 F. Supp. 2d
lnc.
v.

v. Ajit Newspaper Adver., Mktg. (E.D.N.Y. 2007)
...........................................................................

and

"ns, lnc.,
5

SirSpeedy,

L &P

Graphics, lnc.,

957

F.2d

1033 464

(2d
U.S.

Cir. 417

1992) (1984)

.........................

5, 6
9 5 16 16

Sony Corp. of Am.
Stone Union Union United United Universal A.L.R. Watson
v.

v.

Universal 1043

City Studios, lnc.,
(2d Cir.

............................

Williams, 970 F.2d
Carbide Carbide States States

1992)

.................................................................

Corp. Corp.
v.

v.

MontellN. Montell 509 365 N. F.2d F.

V., 28 F. Supp. 2d 833 (S.D.N.Y. 1998) K, 944 F. Supp. 1119 (S.D.N.Y. 1996)
793

....................

v.

.....................

Ashdown, Saneaux,
Australia 2005 R.R.

(5th
2d 493

Cir.

1975)

.................................................

5, 6
........................................

v.

Supp.
v.

(S.D.N.Y.
License

2005)

6

Music 1

Pty. Ltd.
WL

Sharman

Holdings

Ltd.

(2005) 220
18

(Austl.),
lsland

2119310

..........................................................................

v.

Long
v.

Co., 500 F. Supp. 2d 266 (S.D.N.Y. 2007)
381 F.

.......................

4, 22
......................

Wechsler

HuntHealth

Sys., Ltd.,

Supp.

2d

135

(S.D.N.Y. 2003)

12

Statutes Fed.

& Rules 408

R. Evid.

.......................................................................................................

passim

°°°

111

Other Jack

Authorities B. Weinstein and

Margaret

A.

Berger,

Weinstein's

Federal

Evidence

(2d ed.
24

1986)

............................................................................................................................

iv

Plaintiffs

Arista

Records

LLC, Atlantic
Entertainment

Recording Corporation, Group Inc., Interscope

BMG

Music, Capitol Records,
LaFace Records

Inc., Elektra
Record

Records,

LLC, Motown

Company,

L.P., Priority Records
Records

LLC, Sony Inc., and
of Law in

BMG

Music

Entertainment,
Records Inc.

UMG

Recordings, Inc., Virgin
submit

America,
Memorandum

Warner

Bros.

(collectively, "plaintiffs")
Settlement Related and

this

Opposition
Plaintiffs'
Motion
to

to

Defendants'

Pre-August

2003

Objections
and Defendants'

to

Exhibits

to

Their

Motion

for Partial

Summary Judgment
reasons

Strike

Plaintiffs'
and their

Exhibits.
motion

For

the

that follow, defendants'

objections

should

be overruled

denied.

Preliminary
In addition
to

Statement of law in

their

two

memoranda

opposition
submitted

to

plaintiffs'
three

single

motion

for

partial
1

summary These

judgment,
motions

defendants

have

separate
of

"evidentiary"
documents
and the two

motions.

challenge
pages

the

admissibility testimony
three

of dozens

defendants

themselves

produced,

of
2

of their

own

witnesses

reports of plaintiffs' expert

witnesses.

All

motions

are

meritless.

1

Defendant's
Ph.D Exhibits and

other

two

motions

are

Defendants' from

Motion the

to

Exclude

Plaintiffs' of Ellis

Proffered

Expert Summary Judgment
and Richard and P.

Evidence

Horowitz,
Plaintiffs'

Waterman,
to

Ph.D., and Defendants'
to

Depositions and Reports Objections to
for Partial and

Deposition Excerpts
Motion Strike

Their

Motion Exhibits

Summary

Judgment
2

Defendants' 56.1

Plaintiffs'

Deposition Excerpts.
to

Plaintiffs' B.
to

Statement

was

supported by Volumes
2008

I to VII

the

Declaration

of

Katherine

Forrest, dated
defendants' Volumes

July 18,
two

were

oppositions supported by September 26, 2008
56.1

56.1
to

VIII

("Forrest 7/18/08 Decl."). Plaintiffs' facts thereto, Statements, as well as the additional X to the Declaration B. Forrest, dated of Katherine
Plaintiffs
two

statement,

their

included memorandum motions.

thereto; the
of law Documents

("Forrest Decl."). oppositions to defendants supporting exhibits; both
9/26/08 in support of their cited motion herein

hereby incorporate
s

here facts

their

56.1

and

their

additional and their

Forrest and in

declarations;

(or excerpts)

opposition to defendants ("Ex. __") are consecutively

to

numbered

in

Defendants'
defendants

objections plaintiffs'

on

this

motion

fall into

two

categories. First, they pre-date August 4, object plus
decision
to

object

to

83 of

exhibits

on

the

grounds
and

that

2003, the beginning of the applicable limitations
of the exhibits
to which

period,

also

84 exhibits

(all

defendants
the

object

as

to

pre-August 4,
June

2003

one

additional

exhibit) because

they pre-date
lnc.

Supreme

Court's

27, 2005
913

in Metro-

Goldwyn-Mayer Studios, objections
these
are

v.

Grokster,

Ltd., 545 U.S.

(2005) ("Grokster").
waived any

These

both

waived

and

groundless. Defendants
of their motions

have

objections
and in their

on

grounds because
to

in support

for summary cite
to

judgment
and

opposition
2003 and

plaintiffs' motion,
documents.

defendants

themselves

rely

on

pre-August 4,
exhibits

pre-Grokster
exhibits

(See infra § I.A.)
Even
were

In

some

cases,

defendants'

are

the very

to which

they object. (1)
nor

they
of

not

waived, however, these
nor

objections

are

groundless because

neither

the

statute

limitations,
to the

the

"continuing infringement doctrine" retroactivity
evidence is
a

the Chevron
not

exception provide
has
a

principal

of

rule

of evidence

and, thus, do

basis

for

excluding
effect

that

(see infra § I.B);

and

(2)

the

Grokster

decision

retroactive

(see infra

§ i.c). Second, defendants
admission of 33

object
of which

to

certain

deposition testimony excerpts produced
to

and

the

documents,
in

most

were

plaintiffs

over

a

year

ago,

and

marked

as

exhibits

depositions

without

objection by defendants,

on

the

grounds

Volumes

I-X

referenced

above,

or

XI to XII

to

the

Declaration

of Katherine

B.

Forrest,

("Forrest 11/7/08 Decl."), submitted herewith. Excerpts from Tr. __"), reports of the parties' experts (" deposition testimony (" Report ") and Declarations Decl. __") cited herein are (" arranged alphabetically by the
November

dated

7, 2008

witness Exhibits

or

expert's

last

name

and

are

contained

in Volume

XI and

Volume

XIII

of the

to the

Forrest

11/7/08

Declaration.

that

they

are

settlement

related.

In

fact, these

documents

relate

to

contemplated
sale of Lime

business

negotiations

and

transactions

with

non-parties involving
subscribers of LimeWire

the

possible

Wire

LLC, the conversion

into

paying

software

users

engaged

in

infringement
reduce
or

of

digital

music

files, and the implementation of
music files.

a

filtering capability
As

to

prevent the exchange of such unlicensed
Rule of Evidence 408

explained below,
of this

Federal

("Rule 408")
not

does

not

bar

admission
or

evidence,
in

as

defendants

argue,

because

it does

constitute

"conduct

statements

made

compromise negotiations",
defendants
themselves have waived

Fed.

R. Evid.

408(a)(2) (see infra § II.A);
inter

but

even

if it

did,

their

objections by,

alia, using this evidence

affirmatively

(see infra § II.B). Argument

I.

EVIDENCE NOT

THAT

PRE-DATES

AUGUST

4, 2003

AND

GROKSTER

IS

PRECLUDED Defendants claim that evidence

pre-dating August 4,
be excluded
as

2003

and

the

Supreme
statute

Court's

decision

in Grokster

should

beyond

the

applicable
have

of limitations

and Grokster's
to the

prospective application. First, they
now

defendants

waived

their

objections
evidence

evidence defense.
or

seek

to

exclude

by affirmatively using
no

that

very

same

in their

Second, defendants
to

provide

authority
in Chevron Oil

applying
Co.
v.

statutes

of limitations

the

exception
evidence.

retroactivity described
do not

Huson, 404 U.S.

97

(1971),

to

Third, defendants
to

meet

the

elements

required
A.

to

invoke

Chevron's

exception
Their

retroactivity. by Using
the Evidence

Defendants' Now Seek
to

Waived Exclude.
to

Obieetions

They

Defendants

object

84 of

plaintiffs' exhibits, listed
a

on

Exhibit

B to

defendants'

memorandum

("Exhibit B"),

copy 3

of which

is attached

hereto, both

on

the

grounds
decision.

that

they

are

dated

before

August 4,
both

2003

and

before

the June

27, 2005
motion

Grokster

But

defendants'
3

own

exhibits

in

opposition
motions

to

plaintiffs'

for
4

partial
also

summary

judgment

and

in

support of their
the Grokster

own

for summary

judgment

pre-date August 4,
are

2003

and

decision.

Indeed, 18 of defendants'
with these motions.
5

exhibits

the

exact

same

exhibits

to which

they
on

now

object

Thus, party
cannot

defendants'

objection
the admission

to these

exhibits

both

grounds
on

are

waived

since

a

object

to

of evidence

that

it invokes

its

own

behalf.

See, e.g.,
any

Capobianco objections
Watson
v.

v.

City of New

York, 422 F.3d
of the

47, 55 (2d Cir. 2005) ("defendants waived

to the

admissibility

reports by offering them

themselves");

see

also

LonglslandR.R.
were

Co., 500 F. Supp. 2d 266, 269 n.5 (S.D.N.Y. 2007). waived,
as

Even

if

their

objections
B.

not

shown

below, defendants'
the
to

objections

are

meritless.

Neither

the

Statute Nor

Doctrine", Admissibility
With

Nor Limitations· the Chevron Exception Rules of Evidence

of

"Continuing-Infringement
the

Principal
Have No

of

Retroactivity

Are

and

Thus

Bearing

on

of Evidence.
to

respect
the

documents

dated

prior

to

August 4, 2003, defendants
years, all evidence dated

argue

that

because

applicable limitations

period

is three

1, 2, 3-5, 7, 9-14, 15, 16, 18, 19, 20, 21, 23-25, 29-31, 33, 34-36, 47, 59-62, (all pre-date August 4, 2003 and Grokster); ld. Exs. 37, 9-14, 16-18, 21-31, 32, 34-42, 50-56, 58-62, 64, 67, 73, 75, 78-79 (which pre-date Exs. 1, 2, 15, 19, 20, 32 and Grokster). Although it is not obvious from the face ofDefs.'
64 of which

3

See

Baker

9/26/08

Defs.

Exs.

they ¶¶ 15-21.)
47 that
4

are

pre-2003

and

pre-Grokster, they plainly

are.

(See

Forrest

11/7/08

Decl.

See

Baker

7/18/08

and

Grokster);
5

Id. Exs.
Baker Pls.

1, 27, 29, 30-31 (all of which pre-date August 4, 2003 1-4, 8-10, 16, 18-23, 25, 27-32 (which pre-date Grokster).
Defs. Exs. 9/26/08 Exs.

Compare

59, 60, 61, 209, 207, 208, 236, respectively.

62 with

1, 2, 4, 5, 6, 14, 18, 23, 24, 29, 33, 34, 35, 58, 52, 3, 95, 68, 97, 76, 37, 251,195, 233,222, 221,243, 21,

Defs.

Exs.

4

more

than

three

years

before

the

filing
because

of the

lawsuit

is "irrelevant".

(See Defs.'
not

Br.

at 5-

8.)

That

specious argument
not

fails

statutes

of limitations

are

evidentiary
commencement

rules--

i.e., they "do[]
of the limitations

operate

to

bar the
that

use

of

a

document

that

predates

the

period

but

is relevant

to

events

during the period". 1992); ef
United

Sir

Speedy,
v.

Inc.

v.

L&P

Graphics, Inc.,
509 F.2d

957

F.2d

1033, 1038

(2d

Cir.

States

Ashdown,
not
a

793,798

(5th Cir.

1975) ("[t]he
it "has
no

statute

of limitations

is

a

defense...,

rule

of

evidence";
The

accordingly,

bearing

on

the

admissibility
make

of

evidence")).
reference

"continuing-infringement
Br.
at

doctrine"

to which
6

defendants

make

(see

Defs.'

7-8) similarly
even

has

no

application.
to the

Rather

than

attempt

to

argue

contrary
to

--

that

statutes

of

limitations
evidence

or

the

"continuing infringement
try
to

doctrine"

apply

exclude

background
exhibits

--

defendants
2003
to

convince

the Court

that

plaintiffs
outside

offer

pre-dating
statute

August 4,

establish

a

claim

based
which

upon

activity
is not

of the

applicable
do not

of limitations

(see

Defs.'

Br.

at

6-7),

simply
the

true.

Plaintiffs

seek

to

recover

for conduct
offer

that occurred
dated

prior prior
to

to

applicable
to

limitations

period. Rather,
of

plaintiffs

evidence

August 4, 2003

show

the evolution

admissibility bar by "continuing-infringement doctrine" to copyright cases to precludes plaintiffs' use ofpre-August 4, 2003 evidence intent. (See Defs.' Br. at 7-8.) The Second Circuit's prove rejection of the for infringement that begins "continuing-infringement doctrine", which permits recovery the limitations before into it, means that "[r]ecovery is allowed period but continues only for those within three years of suit". acts Stone v. Williams, 970 F.2d 1043, occurring 1049 (2d Cir. 1992) (emphasis added); accord Sadhu Singh Hamdad Trust v. Ajit and Commc 503 F. Supp. 2d 577, 585 (E.D.N.Y. 'ns, Inc., Newspaper Adver., Mktg. Press, 3 F.3d 656, 662 (2d Cir. 1993). Like the 2007); see also Kregos v. Associated of limitation it was intended the doctrine its absence statutes to expand, neither nor in any way to the admissibility of evidence. relates
a

6

Defendants

spuriously equate
Second Circuit's

contending

that

the

limitation recovery refusal to apply the

with

an

defendants' encouragement
is consistent

business
and

and

the basis

for and

development
the

of defendants' LimeWire

intent,
software.
7

knowledge
Second

of

infringement using
view, which
may
not
recover

Such

use

with
8

the

Circuit's

defendants

do not

dispute (see
occurred

Defs.'

Br.

at 7

n.2.),

that

"although plaintiffs
of such

for conduct be admissible

that

prior
on

to

the limitations motives

period, evidence
which
acts

conduct

may

to

shed

light

the

with

within

the

limitations
957 F.2d
at

period

were

performed".

Cooper,
the

140

F.3d

at 441

(citing

Sir

Speedy, Inc., object

1038). Accordingly, because
to

evidence

to which

defendants
intent
to

is

provided

establish

the

evolution

of defendants'

state

of mind

and

induce

copyright infiingement
recover, has
as

--

and

not

to prove

infringing
believe
--

acts

for which

plaintiffs

seek

to

defendants

would

have

this

Court

the

three-year limitations Similarly,

period
with

no

application.
to

respect

documents

dated

prior

to

the

Supreme Court's
of the

decision

in

Grokster,

defendants

nowhere

explain

how

the

general principles

of evidence only authority discussing the exclusion is, therefore, that any commercial inapposite. In Gero, plaintiff, an artist, unable to produce evidence within the applicable limitations produced by defendants, a soda company, period had affidavits of witnesses who claimed to have infringed his work, sought to introduce viewed a commercial work outside the applicable statute of infringing plaintiff's limitations. See Gero v. The Seven-Up Co., 535 F. Supp. 212, 214-17 (E.D.N.Y. 1982). The Gero court refused those affidavits, which to consider plaintiff proffered as support for a claim based of the statute on activity outside of limitations. Id. at 217 n.3.
8

7

Defendants'

Although defendants
to the context

contend

that

the relevance and
to

ofpre-limitations
claims, there
and claims the

period
is
no

evidence rule of

is limited

of
Second

employment
Circuit have

discrimination of

logic

or

law
courts

that

limits

its "relevance"

Indeed,
relevant.

in the
or

employment (and elsewhere) adjudicating
also treated evidence

claims

discrimination. unrelated
to
as

employment

discrimination
Sir

fiduciary duty);
F.2d WL 365

Cooper v. Parsky, 140 Speedy, lnc., 957 F.2d at 798 (criminal fraud); Am. Dream Enter., lnc. v. Trump, No. 95 3275, at "1-2 (S.D.N.Y. Jan. 3, 1997) (breach of contract); United F. Supp. 2d 493,505 (S.D.N.Y. 2005) (criminal conspiracy).
See, e.g.,

period F.3d 433,440-41 (2d Cir. 1998) (breach of at 1038 (breach of contract); Ashdown, 509
Civ. States

outside

limitations

0625, 1997 v. Saneaux,

retroactive

application
Even

of

judicial decisions
Court

would

impact

those

of

evidentiary
Grokster should
not

considerations.

if this

agreed

with

defendants'

view

that

have retroactive

application, defendants
with the relief
before that

cite

no

authority
as

that

would

enable

the

Court

to

provide
conduct

them

sought

--

to

exclude

irrelevant

all evidence

relating

to

occurring

decision.

Defendants' the

failure

to

provide authority applying
of

statutes

of limitations

or

Chevron's

exception
moot

to the

principle
evidence

retroactivity

to

evidence

renders

those

arguments
C.

and

plaintiffs'
that

admitted.

Evidence Grokster Evidence

Pre-dates

the

Grokster and

Decision Even Claim

is Admissible

Because Such

Applies

Retroactively
to

If It Does for

Not·

is Relevant

Plaintiffs'

Contributory

Infringement.
On

remand, the district
913

court

applied
summary

the

Supreme
on

Court's

ruling theory
of

in

Grokster,
inducement
Court's

545

U.S.

(2005)
based

and

granted
evidence

judgment

the

of

copyright
See

upon

that, necessarily, pre-dated the Supreme
lne.
v.

decision.

generally Metro-Goldwyn-Mayer Studios,
454 F.

Grokster,
so,

Ltd.

("Grokster (Remand)"),
court

Supp.

2d 966

(C.D.
it to

Cal.

2006).
its June

In

doing

the

district

noted

that

the

Supreme
ld.

Court

intended

apply
the

27, 2005
Court had

ruling
hinted

to

the

remaining defendants,
summary

at 992

(observing
for

that

"Supreme

that

judgment should
Court that

be

granted

Plaintiffs"). Despite
decision
to be

this

clear

indication

by
and
to

the

Supreme
the very

it intended

its Grokster

applied retroactively,
that that decision should

defendants
to

in that

case,

defendants
at

here

contend

not

be

applied

them.

(See

Defs.'

Br.

8-10.) give
do any
reason

Defendants
from the Grokster defendants.

do not

that

they should

be treated

differently
that
a

Nor

they dispute

the well-established

principle

federal

court's

ruling
to

"must

be

given

full

retroactive

effect

in all

cases

still

open

on

direct

review

and

as

all events,

regardless
Margo
v.

of whether

such

events

predate

or

postdate [the]

announcement

of the rule".

Weiss, 213 F.3d
509 U.S.

55, 60 (2d Cir. 2000) (quoting

Harper

v.

Virginia Dep

't

of Taxation,
the

86, 97 (1993)) (emphasis added).
intentions in Grokster and argue

Instead, defendants
to

simply ignore
that Grokster

Court's

(contrary

those

intentions)

established

a new

theory
Oil

of

secondary liability
v.

precluding

its retroactive

application
at

under

Chevron

Co.

Huson, 404 U.S.
Chevron
test

97

(1971). (See
where
to

Defs.'

Br.

9-10.)

Defendants

are

wrong. whether

The

only applies
be

the

Supreme

Court

"reserve[s] Harper,
509

the

question
at 97.
9

its

holding happen
that

should

applied

the

parties before
as

it".

U.S.

That

did not

in Grokster.

Instead,
had

described
"hinted"

above, the district
as

court

on

remand

believed

the

Supreme Supp.

Court

actually

to

its

preferred analysis

result.

Grokster

(Remand),

454

F.

2d at

992.

Accordingly,
Even

Chevron's

is

inapplicable.
defendants
cannot

were

Chevron

applicable,
established
a

establish

its

requirements: application Grokster;
404 U.S.

(1)

that

Grokster

new

rule

of

law; (2) that retrospective
of the rule established in

of the decision and

will

retard

the purpose
will

and

effect

(3)

that

retroactive

application

produce substantial

inequity. Chevron,

at

106-07.

First,

Grokster

did

not

create

a

"new"

theory
is
a

of inducement.

As the

Supreme

Court

recognized
545 U.S.

in

Grokster,

inducement

principle "recognized Harper Bros.,
222 U.S.

in every

part of the law".

at 935

(quotingKalem

Co.

v.

55, 62-

9

In
v.

Ditto

light of Harper, the continuing validity McCurdy, 510 F.3d 1070, 1077 n.5 (9th

of Chevron Cir.

2007)

open (stating that

is

an

question.
Chevron

See
was

63

(1911)).
an

Neither

is inducement

a new

basis

for

secondary infringement liability.
a

In

fact, it is law",
1°

element

of

contributory infringement,
for

theory

"well

established

in the

which

was

the basis

plaintiffs'
Court

claims

in the most

recent

secondary copyright
v.

infringement

case

the

Supreme
417

has decided,
See

Sony Corp. of Am.
545 U.S.
at 930-34.

Universal

City
court

Studios, lnc., 464 U.S.
established
a

(1984).

Grokster,

In

Sony the
from the

rule

that

"limits

imputing culpable
distributed

intent

as

a matter

of law

characteristics
established that

or

uses

of

a

product". beyond
uses,
a

Id.

at 934.

The

Grokster

decision

"where

evidence
be put to

goes

product's characteristics
and shows
statements
or

or

the

knowledge
to

that

it may

infringing

actions

directed

promoting infringement, Sony's staple-article

rule

will

not

preclude liability".

Id.

at 935.

Whatever
Chevron. A decision

novelty

Grokster

did introduce of law

is far below

the

high

bar

set

in

becomes

a new

principle

"either

by overruling
an

clear

past

precedent impression
The

on

which

litigants
resolution

may
was

have relied..,
not

or

by deciding

issue

of first

whose

clearly

foreshadowed".

Chevron, 404 U.S.
an

at

106.

Grokster

decision

neither

overruled

Sony,

nor

decided

issue

of first

impression,
rules of

but, instead, merely
fault-based
545 U.S.

clarified

that

an

expansive reading
common

of

Sony

to

"foreclose

liability
at 934-35.

derived

from the

law"

was

inappropriate.
that Grokster's

Grokster,

Moreover,

defendants'

argument

impact

was

not

"discredited
10

by"

and

"effectively
even

overruled should
to

in

Harper").
have
as

prospective application, which, object as pre-Grokster also element of plaintiffs' claim for contributory infringement (see support the inducement Pls. 7/18/08 SOF ¶¶ 539-40), which, as shown above, certainly was not created by Grokster. Accordingly, the evidence must not be excluded.
shown

Accordingly,

if Grokster

only

here, it should

not, the

exhibits

which

defendants

foreshadowed

is belied

by
--

the fact

that

as

early

as

2004, they themselves Grokster,
Circuit's of the

--

Lime

Wire

LLC, Gorton

and

Bildson

wrote,
remand

in advance

of

anticipated
in that
case.

effect

of the

Supreme infra
at

Court's

reversal

or

of the Ninth

decision

(See

17-19.) Second, defendants
argue

that, because
the rule's

copyright
purpose

inducement

requires
for

intent, retroactive

application
not

contravenes

by creating liability

parties
the

who

could

have

intended

to

infringe secondarily, thus, effectively eliminating
at

intent

requirement.
of the intent

(See

Defs.'

Br.

9-10.) However, nothing prior
under
to

in Grokster

impacted 8-9.)
intact, and

the nature

requirement
Grokster is

as

it existed

Sony. (See

supra

at

Culpable

intent

under

culpable

intent

Sony, leaving

the rule

precluding

evasion

of

liability
the

for

inducing infringement.
to

In contrast,

failure

apply

Grokster

retroactively
of

would

shield

defendants

from

liability

under

an

unintended

reading

Sony, whereby
even

courts

would

apply Sony's staple-article
was

rule

to

limit

or

preclude liability
--

where

intent

to

infringe
Wire

firmly established.
denial of

Under

such

a

reading

a

reading defendants
for

urge

--

Lime

LLC's

knowledge

of the utilization

of LimeWire

copyright infringement
it from

and

the

purported non-infringing
face of massive

uses

of LimeWire

would

immunize

liability
and

even

in

the

evidence

showing (LW)

statements

and

actions

promoting
see

encouraging
SOF

infringement. ¶¶ 140-529.)

(See Pls. 9/26/08

Add'l

SOF

¶¶ 1-49;

also

Pls.

7/18/08

Third, defendants'

argument
the facts.

that

retroactive

application
is

would

be

substantially unfair

is belied

by
have

Defendants'

contention

premised
rule existed

upon

the

assumption that they

would

acted

differently

had

the

Grokster

earlier.

10

Yet, since

Grokster

came

down

and

defendants
filter

became

aware,

at a

minimum,

of their

obligation
still have

to

implement

an

effective

(see Gorton

9/26/08

Decl.

7 36), defendants
behavior
to

not

implemented
with

such

a

filter

or

substantially
argument
THE

shifted

their

in any

way II.

comply
RULE

Grokster.11 Thus,
DOES NOT

their

is without

merit.

408

RENDER

PROFFERED

EVIDENCE

INADMISSIBLE

Defendants

claim

that

Rule

408

renders

certain

evidence

that

they
33 exhibits and

produced inadmissible. deposition testimony
memorandum that

Rule

408, however,
seek
to

does

not

bar

admission

of the

defendants
a

exclude, listed in Exhibit
is attached

A to defendants'

("Exhibit A"),
the

copy

of which seek

hereto.
either

First, Rule
has

408

does

not

apply
with

because

evidence
of any
to

defendants
or

to

exclude

plainly

nothing
with

to

do

negotiations
unrelated

kind

relates

to

contemplated business

transactions

non-

parties
408

the

settlement

of

litigation. (See infra § II.A.) Second,
because

even

if Rule

somehow

applies,
the
same

it has

been

waived

defendants

have

themselves

relied

on

and

utilized

facts.

(See infra § II.B.)

copyright 9/26/08 Decl. 7¶ 37-38; see also Bildson 9/10/08 Decl. ¶ 15-17.) (See Gorton acknowledges as much, but conveniently blames plaintiffs' unwillingness to provide a list of copyrighted works to Lime Wire LLC. (See Gorton 9/26/08 Decl. 77 37is misleading. Even if plaintiffs had provided Lime Wire LLC with excuse 38.) Gorton's a list of copyrighted works, a filter relying solely on the hashes derived from that list
not
nor

11

Lime

Wire

LLC

currently

does

have,

has

it

ever

had,

an

effective

filter.

Gorton

would hashes.

not

be effective Pls.
a

because SOF

identical

audio

files may
On the other

have

an

infinite Gorton

number could

of have

hand, 7¶ 478-480.) truly effective filter even without plaintiffs' list of copyrighted songs by of the third-party filtering companies with whom he negotiated (see infra at limited infringement by adopting the strategies he proposed to third parties in the "conversion code", "auto upgrade" or "forced plans", i.e., "time-bombed upgrade". (See infra at 15 n.14, 21-22.)

(See implemented engaging one 19, 21-22), or

7/18/08

11

Ao

Rule Because

408

Does it Does

Not Not

Bar

Admission

of the "Conduct

Evidence
or

in Exhibit Made

A in

Constitute

Statements R. Evid. in

Compromise
Under Rule

Negotiations" 408, "conduct
admissible..,
or

Pursuant
statements

to

Fed.

408(a)(2). negotiations

made

compromise

regarding [a]
of,
or

claim"

are

"not

when

offered

to prove

liability for, invalidity
whether
to

amount

of

a

claim".

See

Fed.

R. Evid.

408(a)-(a)(2).
considers

In

determining

exclude

evidence

under

the

rule, the Court
v.

the circumstances

of the conduct

or

statements.

See

Wechsler

HuntHealth

Sys., Ltd., 381 F. Supp. 2d 135, 151 (S.D.N.Y.
and the existence of
a

2003) ("Both the timing of the offer
the

disputed

claim

are

relevant

to

determination.") (citations omitted).
The party

seeking
the

to

exclude

evidence

under

Rule

408

must

make

a

"substantial

showing"
Prods.

that

evidence

was

part of

an

attempt

to

settle

the

dispute. See,
Music

e.g., lnt'l

Raybestos
v.

Co.

v.

Younger, 54 F.3d

1234, 1241 (7th Cir. 1995); Rondor
WL

TVTRecords

LLC, No. CV 05-2909,
have made
no

2006

5105272,

at *11

(C.D.
12

Cal.

Aug. 21, 2006). Defendants
1. Evidence It Has Several

such

"substantial
To Exclude

showing".

Defendants

Seek Do with and

Is Admissible of

Because

Nothing

to

Negotiations

Any

Kind. in defendants'

of the documents

deposition excerpts negotiations.

listed

Exhibit

A are,

on

their

face,

not

related

to

settlement

(See

Exhibit

A at

Exhibits

41, 42, 43, 44, 285, 325, and Cho and Gribble First, three
of the documents
on

testimony.)
A
are

Exhibit

public
have

articles

or

blogs

that

mention

Lime

Wire

LLC.

Obviously,

such

public

documents

absolutely nothing

to

do not even Notably, defendants try and explain the basis for their objection as to exhibits, choosing instead to lump all of them together. (See, e.g., Defs.' Br. particular at 1-5 and Exhibit can A.) Plaintiffs only guess as to the basis for defendants' objection to a particular exhibit.

12

12

do with

settlement

discussions

nor

any

attempt

to

settle

a

dispute. (See Exhibits

42, 43,

44.) Second, Exhibit
discomfort with Lime Wire 285 is
a

dratt

letter

from

Jesse

Rubenfeld

expressing
decision.

his

LLC's

lack

of

compliance
letter with

with

the

Grokster

Rubenfeld's

testimony
its contents

is that

he

wrote

this

his

attorney, but instead
Tr.

of

sending
His

it, discussed
letter relates

with

Mark

Gorton, his boss.
at

(Rubenfeld

52:2-63:13.)

to

filtering (see infra
argue that it
was

19-22),

not

settlement.

Indeed, defendants

do not

even

attempt

to

written

for settlement

purposes. with

Third, Exhibit
which

325

is

an

e-mail

chain

Mashboxx,

a

non-party,
Mark

in

Greg Bildson,
to
even

on

behalf

of Lime

Wire

LLC, tells MashBoxx
--

that

Gorton

is

reluctant

begin
not

discussions

with

them

hardly
the

a

negotiation.
with whom

Moreover,
it

Lime

Wire

LLC

does

include
a

Mashboxx

among

parties

alleges
325

it

was

negotiating
"conduct
or

and

developed

"plan". (Defs.'
in settlement 41 is

Br.

at

4.) Nothing

in Exhibit

contains

statements

made

negotiations".
chain between Mark Gorton and
an

Fourth,
individual
the
at Time

Exhibit

an

e-mail

Warner

--

a

non-party
a

that

Lime

Wire

LLC

also

did

not

include

among

parties

with

which

it

developed
to

"plan". (Defs.'
Wire LLC

Br.

at

4.) In Exhibit
for
a name

41, Gorton
of
someone

simply
AOL

relates

his intention

sell

Lime

and

asks

at

with

whom

he

can

speak.
we are

Gorton

claims

that

this

sale

"is

going
of

to be

a

huge

opportunity"
users

and

that

"[i]f

able

to

convert

a

couple percent
This

our

[LimeWire]

to

a

subscription service, that would be huge.
-

deal could
This

be worth
is
a

$50,000,000
not
a

$400,000,000 negotiation.

a

year

in

revenue

"
....

(Id.)

document

sales

pitch,

settlement

13

Fifth,
relates
to

the

deposition testimony
and

of

Stephen
same

Cho

to

which

defendants

object

placing downloads
of defendants'

uploads

in the

folder, (Cho Tr. 80:20-81:7), and Gribble,
Tr.
to

the

testimony object,

own

expert witness,
SIMPP

Steven

which

defendants

also

relates

to

LimeWire's

settings (Gribble
Neither the Cho

201:6-22;
Gribble

203:13-20)
relate

and

LimeWire

updates (id.
to

at

299:25-301:7).

nor

testimony

in

any

way

settlement.
2. Other Because
to

Evidence It Relates
to

that
to

Defendants

Seek
not

to

Exclude

Is Admissible

Business,
with Lime the Wire

Settlement,

Negotiations,

or

Efforts

Comply
and

Law. LLC understood that decision

As shown

below, Gorton

a

favorable
Wire LLC.

to the

copyright-holder plaintiffs
at

in Grokster

was

a

game-changer

for Lime

(See infra
Grokster,

15, 17-19.) Consequently, the day the Supreme Court

issued

its

decision

in

defendants
service

began negotiating provider,
not

a

deal

with

iMesh,
would

a

legitimate
Lime Wire

licensed
LLC.

music

subscription
has
sworn

in which

iMesh

subsume
Wire

Gorton

that

he did

believe

at that

time

he

or

Lime

LLC

would

be sued

for
into

copyright infringement.
conversations with other

Over

time, defendants
music

conversations

with

iMesh

evolved

licensed

providers, including Napster,
Wire LLC

RealNetworks

and

iTunes.

At the

same

time, Lime

began

talks

with

entities

offering effective
Gorton viewed
as

filtering services, including SNOCap, Audible
necessary exhibits
to

Magic

and

Magix,

that

comply
which

with

the law

as

set

out

in Grokster.

The

to

defendants

now

object

were

created

as

part of those

business

negotiations.

They show,

among

other

things, knowledge

that

LimeWire's

14

entire

userbase

was

engaged

in

copyright infringement,
A, Pls. Exs.
for

13

and

an

understanding

as

to

how

to

stop the infringement.
the evidence
on

(See Exhibit
motion

56-62, 151,265-278.)
summary

Now, faced
demonstrates

with

plaintiffs'
intent

partial

judgment

that

conclusively defendants'
evidence

to induce

copyright infringement,
is inadmissible

defendants

protest
408 because

that

relating
of the

to these

business
dated

negotiations

under

Rule

many months

exhibits

are

after plaintiffs'

"cease

and

desist"

letter, 4.)
a

sent

several

after

business

negotiations
what

began.14(See
in

Defs.'

Br.

at

However,
settlement
but

is relevant

determining during

whether

document
was

relates

to

negotiations

is not

the

point

in time

which

the document

created,

the motivation

for the document's

creation.

As shown

below,

it

was

defendants'
from the

belief

that

and

understanding
that

of the

change

in the

legal

environment

resulting
--

Grokster

decision

led them

to

the business

negotiations

at issue

not

plaintiffs'

13

Gorton
to

believed
music

that

users

legitimate

converting even purchasers would

"a
mean

couple percent"
revenues

of LimeWire's

infringing
$400 million.

between

$50

to

(See Ex. 41 .)

object to most of the deposition testimony surrounding Instead, they object to small snippets of testimony that simply are not made in or statements protected by Rule 408 because they do not reveal "conduct defendants Catillaz in which she compromise negotiations". First, object to testimony Plans with either simply testifies that no one ever told her that the proposed Conversion RealNetworks or Napster not feasible. were (See Exhibit A; Catillaz Tr. 259:9-12; 259:21-260:2 (see Pls. Ex. Vol. VI)) Similarly, defendants object to Catillaz's testimony that no one told her that "forced upgrade" or "auto upgrade" concepts were ever not feasible. (ld. at 285:22-286:3,288:6-288:22.) Second, defendants object to Catillaz's in which she says only that it was Mark Gorton's idea to reeducate LimeWire testimony users (id. at 267:22-268:21) and that Gorton coined the term "hardcore pirates" to describe of LimeWire a large segment These users. at 323:19-323:21.) (ld. objections have nothing to do with settlement and everything to do with protecting Mark Gorton. Third, defendants object to only one portion of Jesse Rubenfeld's testimony (see Exhibit Tr. 332:11-333:17 A; Rubenfeld (see Pls. Ex. Vol. VII)) in which he testifies that he recalls work relating to the "value of a converted LimeWire for sound user doing recordings". None of this testimony falls under Rule 408.
these

14

Oddly, defendants

do not

documents.

15

"cease

and

desist

letters".

A

change

in the

legal
made

environment

that

makes

litigation
"conduct
or

more

likely
statements

does

not

make

all business

decisions

in

light

of that

change
Corp.
v.
v.

made

in

compromise negotiations". (S.D.N.Y. 1998) (see
Union

Union

Carbide

Montell

N.

V., 28

F.

Supp.

2d

833,841
1130

Carbide

Corp.
See also

MontellN.

V., 944 F.
v.

Supp. 1119,
Harvester

(S.D.N.Y. 1996) for underlying facts).
1551, 1556-57
while

Deere

& Co.

Int'l

Co., 710 F.2d
was

(Fed.
were

Cir.

1983) (fact that patent
in

license

with

third

party

negotiated
inadmissible

parties

locked

dispute

over

the

patent does
v.

not

render

license

evidence

of settlement

negotiations);
a

Mendelovitz

Adolph

Coors

Co., 693 F.2d

570, 580 (5th Cir. 1982) (finding

letter

between

litigating parties
not

not

to be

part of settlement
or

negotiations,
claim in this

since

"on

its

face, [the letter] does
defendants
Br.
at

offer
an

to

compromise

settle

any

action").

As

even

concede,
also Deere

"actual

dispute"
710 F.2d

is

required
1556

for Rule

408

to

apply. (See
could

Defs.'

2.)
time

See

& Co.,

at

(noting

no

dispute
lnc.
v.

be identified

at the

of the

1973

offer);

accord

Big 0 Tire Dealers,
Cir.

Goodyear

Tire

& Rubber

Co., 561 F.2d
had

1365, 1373
not

(10th

1977) (affirming
to

admission

of evidence

where

"discussions
cut-off

crystallized

the

point

of threatened

litigation,
business

a

clear

point").
Lime Wire LLC

That

months

after

such

negotiations started,
did
not

received

a

"cease

and

desist"

letter

from

the RIAA

transform

documents

created

as

part of business
settlement

negotiations negotiations".

into
15

documents

that

were

"only

created

in order

to be

part

of the

(Defs.'

Br.

at

4.) Defendants

cannot

claim

that

15

Indeed, the "cease
to

and

desist"

letter

did

not

demand

that

defendants

sell

their

business
from

iMesh and Pls.

or

anyone

else, but merely that they "immediately cease-and-desist
the SOF

enabling
see

inducing
7/18/08

301,

also

infringement of ¶ 535.) Gorton's
16

RIAA decision

member
to

sound sell
was

recordings".
thus
one

(Ex.

of two

business

negotiations prompted by Grokster
as

were

for settlement

purposes

and

protected

by

408

shown

by

the

following

brief

chronology.
year after the LimeWire software

In October

2001, just
an

a

launched,

copyright
in connection

holders

began
the

action

for

contributory
file

and

vicarious

copyright infringement

with

distribution
See Grokster

of the P2P

sharing applications Grokster,
F.

Morpheus
court

and

Kazaa.

(Remand),
in favor of the

454

Supp.

2d at 970-71.

The

district

granted
v.

summary

judgment

P2Ps, Metro-Goldwyn-Mayer

Studios,
Circuit

lnc.

Grokster,

Ltd., 259 F. Supp. 2d 1029 (C.D. Cal. 2003), and the Ninth Studios, lnc.
Lime Wire
v.

affirmed.

Metro-Goldwyn-Mayer
In its 2004

Grokster, Ltd., 380 F.3d
discussed the Grokster

1154

(9th
--

Cir.

2004).

Marketing Plan,
Circuit
--

LLC

case

then

pending stating,
look
to

before

the Ninth

in its "Political

and

legal

environment"

section,
should

inter

alia, "in the

event

that

it is decided

that

Grokster

is

liable, LimeWire
issues
or

developing technology
16

that

is far from

any

possible copyright

argument

of

non-neutrality".

(Ex.

97 at LW

DE

1172924-25.)

(in which case the sale negotiation cannot negotiation) recognition that no viable business existed has no substantial inducing copyright infringement i.e., that LimeWire
a

things:

business

decision

be considered in the absence

a

settlement

or

a

of

--

non_infringing

use.

That,
16

of course, Wire LLC

is also

true.

Lime

was

also

keenly

aware

of another of Australia file

Sharman

Networks
to

Ltd.

in the Federal of the Kazaa

Court P2P

respect
"LimeWire

its distribution 2004

Marketing Plan", defendants

pending at the time against copyright infringement with sharing application. In fact, in its stated that "[t]he significance of this case
for

suit

Australia, LimeWire found liable, because

with no offices in As a company against Kazaa] is unclear. be free from copyright fraud prosecution even if Kazaa is might [the Music Industry Piracy Investigations, an intellectual property rights enforcement organization in Australia] had to physically search Kazaa's computers for electronic evidence. of the trial and public support for Nonetheless, the outcome Australia lawsuit Kazaa

[the

should
that "the

be

accordingly."
found

in Australia monitored monitored, and LimeWire's presence 97 at LW DE 1172925-26.) In 2005, the Federal Court of Australia (Ex.

predominant

use

of Kazaa

was

for the

sharing

of

copyright-infringing

17

The

Supreme

Court

agreed

to hear

the matter.

Metro-Goldwyn-Mayer February 21, 2005,
LLC's then Chief before the

Studios, lnc.

v.

Grokster,
issued

Ltd., 543 U.S.
in

1032

(2004).
Lime

On

Supreme
Officer

Court

its decision

Grokster,

Wire

Technology
court

and

Chief

Operations Officer, Greg Bildson, upheld
99 the

wrote

that

the

district

in

California,
software". have

"has

right

of software

companies
also Ex.

to

create

and

sell

our

[LimeWire] "It]he
courts

(Ex.
our

(emphasis added); rights
be
a

see

320.) He also

wrote

that

affirmed

to

produce

and

sell

this

[LimeWire] software. Supreme
that Court in the

If there

is any Grokster

change..,
case".

it would

negative ruling by

the

pending
such
a

(Ex. 316) (emphasis added). Bildson

added

if there

was

ruling
to

"we

[Lime Wire] will have
.

plenty
in
our

of lead

time

to make

changes existing

to

our

services

customers.

there

would

be value

trying quoted
to

to transition

users

[to

a

different
that

product

or

service]". (ld.) Supreme
company Court

Gorton

was

in the New

York

Times

as

saying

"'[i]fthe
LimeWire the

says

it is

illegal

produce this [P2P file-sharing] software,

will

cease

to

exist'".

(Ex. 201.)
States

On June that

27, 2005, the United
the P2P file

Supreme

Court

unanimously
be held

ruled

the

companies distributing
a

sharing applications
its
use

could

liable

for

distributing
"inducement
after this

device

with

the

object

of

promoting
U.S. 913

for
In

copyright infringement (the
an

doctrine").
Gorton

Grokster,
stated

545

(2005)
had

email

written

three

days
in

decision,

that

the decision

"put the LimeWire
an

business

flux".

(Ex. 323.)

On the

same

day,

Bildson

wrote

in

email

to

Download.corn,

"[w]e

material"

and

found

Sharman

Networks sound

Ltd.

liable

for

copyright infringement
Music 2005 Australia WL

of
v.

plaintiffs' (record companies) recordings Sharman License Holdings Ltd. (2005) 220 A.L.R.

Universal 1

Pty. Ltd.

(Austl.),

2119310.

18

are

in the process
at CNET

of

deciding
And

what

to

do with

the

future

of the

LimeWire

product".

(Ex. 33

00039.)
"I have the law.

Gorton

has

stated:

always run Lime Despite the fact

Wire that

LLC

to be in

full

the effectiveness

compliance of copyright

with

filtering in a P2P client is subject to much debate, when the Supreme Court [in Grokster] specifically stated that a P2P that tried to reduce company infringement by implementing a filter could not be liable for copyright infringement, copyright had Lime Wire LLC build a copyright filter."
(Gorton 9/26/08
Decl.

I

¶ 36.)
Marco of iMesh

Talmon

approached
to

Gorton

on

June

27, 2005

--

the very 1/31/08

day
Decl.

of Grokster

decision

--

with

a

plan

purchase

Lime

Wire

LLC.

(See Gorton

¶ 3.) Marco
of

testified

that

when

he first

approached
version".

Gorton, he explained "the (Marco Tr. 226:2-21
iMesh.

idea

specifically light
has of

converting
Lime

Lime

Wire

to

a

filtered

.) In
Gorton

Grokster,
that
as

Wire

LLC

began negotiations
--

with

Notably,
decision

Mark

swom

of June
"I did

30, 2005
not

three

days after
Lime Wire

the

Grokster

and

Marco's

approach

to

him

--

believe

that

or

I would

be sued

for

copyright
testified

infringement".
that iMesh and

(Gorton
Lime

7/17/08

Decl.

¶ 7 (emphasis added).) Indeed, Marco
on

Wire

LLC

"had

and

off discussions

for about

a

year" up until

around

"summer

of '06"
that

(Marco Tr. 227:4-19), and that during this time, Gorton
he did
not

specifically

stated

"believe
that

that

he

[would] get
that iMesh

sued"

(id.

at

228:18-229:2).
as a

Gorton's

contention

he believed

was

acting

"proxy"
Gorton did

for the

RIAA

(see Gorton

1/31/08

Decl.

¶ 3)

17

is thus

irrelevant,

because

since

17

Marco

has

testified

that

neither

the record and Lime

labels Wire

nor

the RIAA

assisted

in any

way

in iMesh's

that, aside
the RIAA

negotiations with Gorton from meetings informing
nor

the RIAA involved

the

record

labels

were

(Marco Tr. 233:17-234:5), and that negotiations were progressing, neither in the negotiations with Lime Wire LLC.
LLC

19

not

believe

he would

be

sued, he could
via iMesh.

not

possibly
if Gorton's

have

been

negotiating
that iMesh

any
an

sort

of

settlement

with

the RIAA

Even

belief

was

agent

acting

for the RIAA is there

were

correct

(but

see

supra
to

at

19 &

n.

17), defendants

do not

contend,
iTunes
or

nor

a

shred

of evidence

support, talks
LLC.
were

that

RealNetworks, Napster anything
but

and

any
a

other business
Never

entity
deal

involved

in these

independent

entities

negotiating

with

Lime

Wire

18

was

litigation anticipated they
tried
to do
a

between

defendants

and

any

of the

non-parties
transactions

with

whom

deal.

The

evidence

of the

contemplated
made in

cannot

therefore
Rule 408.

be considered

"conduct

or

statements

compromise
Rauch, 644
637

negotiations"
F.2d 1097

under

Defendants
and

reliance

on

Ramada

Dev.

Co.

v.

(5th

Cir.

Unit

B

1981)
merit,

Blu-J, Inc.
neither
case

v.

Kemper

C.P.A.

Group, 916 F.2d

(1 lth 3.)
the

Cir.

1990),
documents
as a

is without

as

provides
evaluative

such

support.

(Defs' by
the

Br.

at 2-

The

excluded

in those

cases

were

reports used
settlement. For

parties
in

to

dispute

centerpiece

to determine

the

appropriate
commissioned

example,
to prepare

Blu-J, lnc.,

an

independent

accountant

was

by

both

parties
process.

an

independent
641-42.

evaluative

report

designed

to

facilitate

the

settlement

926

F.2d

at

Similarly,

in Ramada

Development Company,

an

architect

prepared

a

report

(ld.)
iMesh

Marco and
18

did

testify

that

at one

point

there

was

a

meeting

at which

Lime

Wire

LLC,

the RIAA

were

all present.
to which

(ld.

at

233:9-16.)

Several Warner

of the exhibits

defendants

object

were,

Time

Mashboxx defendants'
versions which
or were

thinking

of

(Ex. 41); Napster (Ex. 265); RealNetworks of (Ex. 325). Others are Conversion Proposals, or pieces or summaries Conversion Plans (Exs. 56, 57, 58, 59, 60, 151,265, 266, 274, 277) or pieces of the Digital Sales Growth Plan (Exs. 61, 62, 273,275, 276, 278), sent to various were third-parties with whom defendants negotiating or were negotiating.

face, directed (Exs. 267, 268, 269); and
on

their

to

20

outlining "arguable
644 F.2d

the

construction

defects

in the motel

in order

to

"identify", for
terms

both

parties,

defects

that

could

then

be discussed

in

monetary

in the

negotiations".

at

1106-07.

In contrast,

many

documents
are

that

defendants

seek

to

exclude

here

(e-

mails,

term

sheets, proposed agreements)
with

business
are

communications

aimed

at

pursuing agreed

partnerships
upon

non-parties.
to

These
nor

documents
were

not

independent evaluations
to

by

both

parties

the

dispute,

they

a

centerpiece

settlement

negotiations

between
the

plaintiffs
under

and

defendants.

Defendants

therefore

provide
with

no

authority supporting
unrelated
to

exclusion

Rule

408

of business

negotiations

non-parties

settlement

with

those

non-parties.

The

challenged
Tr.

evidence

related

to

filtering (see (see
Ex. Vol.

Exhibit

A at Exs.

286,

289-292

and

Bildson

152:16-21,

161:16-162:20

VI))
in

is also

admissible.
Lime

Although filtering provider SNOCap first
Wire LLC made
no

contacted

defendants
for

September 2004,
works

attempts
2005

to

develop filtering
decision.

copyrighted
281

prior
that

to the

Supreme
has

Court's

June

Grokster

(Ex.
and

(Bildson stating
it" and that

"LimeWire

considered

filtering

as

an

option
or

in the past enables

rejected
of any

"LimeWire

will

not

support anything that implies

filtering 286.)

kind");
above

see

also

Rohrs

Tr.

142:14-143:11

(see
to

Ex.

Vol.

VII);
Wire

see

Ex.

As shown

(see supra

at

18-19), comply

according
with

Gorton, Lime
19

LLC

finally

undertook

to

filter

specifically
LLC's

to

Grokster.

(Gorton

9/26/08

Decl.

¶ 36.) Thus,

Lime

Wire

post-Grokster

19

The

very

fact that

Gorton

believed

that

Lime

Wire

LLC

had

his understanding that the business post-Grokster demonstrates for it is copyrighted works that the "filters" meant to are copyright infringement, A "filtering solution" is meaningless without a copyright infringement problem.

implement a filter depended upon illegal
to

catch.

21

filtering attempts
but
an

were,

according
Wire LLC
to

to

defendants

themselves,
the law.

not

part of settlement

talks,

effort

by

Lime

comply

with

B.

The and

Defendants

Have
to

Waived the

Any Rule
Same Facts

408 In

Continuing

Invoke

Objection By Invokin· Support of Their Own

Claims. A

party

cannot

object

to the

admission

of evidence

that

it invokes

on

its

own

behalf.

See, e.g.,
of the

Capobianco,

422

F.3d

at 55

("defendants
see

waived

any

objections

to

the

admissibility
2d at 269

reports by offering them
basic

themselves");

also

Watson, 500 F.
Rule 408: when

Supp.
a

n.5.

That

principle
would

of fair

adjudication applies
the rule's exclusion

to

party proffers evidence
made in

that

fall within

of"conduct

and

statements

compromise negotiations", they
v.

waive

any

objection
936 F.2d

to

its admission

by

the

other

side.

See, e.g., Eisenberg
waived

Univ.

of New Mexico,
to

1131, 1134

(10th

Cir.

1991) ("Ms. Torres
of the affidavit

any

claim
20

Rule

408

protection

by

her

own

submission

to the

court.")

Throughout
now

this

litigation,
own

defendants
21

have

invoked

the very brief
on

evidence

they

seek

to

exclude

--

on

their

behalf.

In their

January 2008

copyright

1966) (waiving predecessor to Rule 408); Allen-Myland, Inc. v. Int'l Bus. Maeh. Corp., 693 F. Supp. 262, 284 n.51 (E.D. Pa. 1988), vacated on other grounds, 33 F.3d 194 (3d Cir. 1994); In re Groggel, 333 B.R. 261,297 (Bankr. W.D. Pa. 2005).
v.

2o

See

also

S. R

'y. Co.

H.W.

Vaughn,

359

F.2d

424, 424-25

(5th

Cir.

common

law

21

Defendants their way

write into

their

motion

as

if the documents but the fact

on

Exhibit

A somehow

plaintiffs' possession, defendants gave were majority of the documents produced over a year ago, although some were produced even earlier. (See Forrest 11/7/08 Decl. ¶ 24.) Notably, defendants exercised their right to recall those documents never under the protective order agreed to by the parties and entered the Court on March by 8, 2007, despite that on that right and recalled other documents. multiple occasions, defendants exercised (ld. Even when plaintiffs marked these documents exhibits at numerous as ¶ 25.) depositions and over over never again, defendants objected. (ld. ¶ 26.)
is that them
to

found

just most of

plaintiffs.

The

22

misuse, defendants
iMesh and its

laid

out

in detail

evidence

of Lime

Wire

LLC's

negotiations
such
as

with

attempts

to

enter

into

transactions

with

third

parties
as

RealNetworks

and

iMesh, the latter
with

of which

defendants

attempted
2008

to

cast

having

an

"incestuous

relationship"
Porter &

plaintiffs. (See January 31,
to

Letter

Brief

from Charles
Letter

Baker,

Hedges LLP,
Decl.
at

the Court

at

11, 14-18

("Copyright

Misuse

Brief');
attached
to

Gorton

1/31/08

7¶ 3-14.)
2006

In his

January 31, 2008
that iMesh
sent to

declaration,
the RIAA

Gorton

his

declaration

a

January 17,
that

letter

laying

out

a

settlement

proposal
(See Gorton Now,

includes

plans

related

to

filtering

and

"converting"

LimeWire

users.

1/31/08

Decl., Ex. F.)

on

summary that

judgrnent,
lacked the

defendants

rely
induce

on

the

same

facts

--

in

detail

--

to

demonstrate

they

intent

to

infringement and,
and

in order

to

comply

with

Grokster,
user

developed copyright filtering techniques
base
to

plans
Mem.

to

convert

their

copyright-infringing 30-32.)
exclude. In his

paying
Gorton

customers.

(See
to use

LW

9/26/08

at

3, 5, 13,
seek
to

latest

declaration,
9/26/08

continues

the evidence

defendants
in his section

(See Gorton
Wire's

Decl.

7¶ 38-42, 45-61.)
and

For

example,

tiffed,

"Lime

Attempts

to

Reach

out

Engage the Recording Industry", Gorton

referenced
Ex. 60

several

exhibits
and

to which

defendants
his

object, including
with iMesh

Ex.

276

(id.

at

¶ 55)
the

and

(id.

at

¶ 57),
Plans"

described
at

negotiations
his

(id.

at

77 46-54),
at

"Conversion

(id.

¶7 45, 54, 58), "gradual

Digital

Sales

Growth

plan (id.
users

7¶ 55, 56,
an

58-60),

and

his

plans for

the

conversion"

of LimeWire

through

23

"educational

campaign" (id.
22

at

¶¶ 45, 55, 56, 59) and "graduated filtering" (id.
evidence defendants seek
to

at

¶¶ 45,

55, 58, 59, 60).

This

is the

same

exclude.

Defendants

cannot

on

the
on

one

hand

submit

evidence

to

support their

position
evidence.

that

they

are

not

liable

and

the

other, prevent
have waived

plaintiffs
any

from

using
that

that

same

(See

also

infra § I.A.) Defendants

protection

Rule

408

might

have

provided.

22

That

defendants
about

rely

for the most

part upon
and conversion

Mark

Gorton's
--

filtering plans does not negate the waiver of deposition testimony proffered by plaintiffs Rule 408. A contrary rule would the party with personal knowledge of settlement permit facts while denying the other party the negotiations to rely upon settlement-related to do the same, the bilateral of the waiver. See Fed. R. nature opportunity nullifying Evid. 408 advisory committee's note (2006) ("the protections of Rule 408 cannot be waived declarations of facts of settlement unilaterally"). Using negotiations implicates the policy concerns and testimony underlying Rule 408 just as much as using documents those facts. to demonstrate See Am. Soe 'y of Composers, Authors & Publishers v. Showtime/The Movie Channel, Inc., 912 F.2d 563,581 (2d Cir. 1990) ("Rule 408 is based the policy of aiding the compromise and settlement of disputes.") (quoting 2 Jack B. upon Weinstein and Margaret A. Berger, Weinstein "s Federal Evidence § 408.02 at 408-4 (2d ed. 1986)); see also Fed. R. Evid. 408 advisory committee's note (1972) ("A more consistently impressive ground [for exclusion] is promotion of the public policy favoring of disputes."). the compromise and settlement
rather exhibits and
--

declaration

defendants'

self-serving, rambling than on the specific

24

Conclusion For the

foregoing
denied.

reasons,

defendants'

objections

should

be overruled

and

their

motion

to

strike

Dated:

November

7, 2008

Respectfully submitted,
CRAVATH,
SWAINE & MOORE

LLP,

by

·v._____ · "·.
Katherine Teena-Ann Joanne B. Forrest V. Sankoorikal M. Gentile

Worldwide 825

Plaza

Eighth
New

Avenue

York, NY 10019-7475 [phone]

[phone] (fax) [e-mail] [e-mail] j gentile@cravath, com
Attorneys for Plaintiffs

Of Counsel:

Karyn Temple Recording Industry
1025 F

Association 10th

of America Floor

Street, NW,
DC

Washington,

20004

[phone]

(fax) [phone] [e-mail]

25