for contributory and vicarious copyright infringement for facilitating the copying of digital music
files over the Internet. The plaintiffs alleged that the Audiogalaxy service was even worse than
the Napster system in facilitating infringement, because the Audiogalaxy service allowed users
to download entire record albums, cover art, and software.^1991 Less than one month later, on
June 17, 2002, the plaintiffs announced a settlement with Audiogalaxy that required the file
sharing service to halt the infringement of copyrighted works on its network and allowed, but did
not require, the service to employ a “filter-in” system that would not make music available
without the consent of the copyright holder. Audiogalaxy also agreed to pay the plaintiffs a
substantial sum in settlement.^1992
(8) The Hummer Winblad/Bertelsmann LitigationAfter Napster filed for bankruptcy, several of the plaintiffs in the Napster litigation
brought suit against the venture capital firm Hummer Winblad and the media company
Bertelsmann AG, each of which had funded Napster, seeking to hold those defendants
secondarily liable for the infringement of the plaintiffs’ works committed through the Napster
system. The plaintiffs alleged that by investing in Napster and assuming control of the operation
of Napster,^1993 the defendants contributorily and vicariously infringed the plaintiffs’ rights. In
July of 2004, Judge Patel denied summary judgment motions filed by the defendants, ruling that
the plaintiffs’ allegations that Bertelsmann and Hummer Winblad “exercised essentially full
operational control over Napster during periods in which Napster remained a conduit for
infringing activity” would, if proved, give rise to liability for contributory and vicarious
infringement.^1994
The defendants subsequently filed motions for summary judgment seeking to limit their
liability for copyright infringement to those works that were the subject of notice to Napster, and
more narrowly, those works of which Bertelsmann had actual notice, in view of the Ninth
Circuit’s rulings in Napster I and Napster II, discussed extensively in Section III.C.2(c)(1) above.
Judge Patel’s opinion of May 2006 denying such motions^1995 afforded her an interesting and
detailed opportunity to construe some of the more confusing aspects of the Napster I and Napster
II cases, as well as to explicate the effect of the Supreme Court’s Grokster decision on the Ninth
Circuit’s rulings and their applicability to Hummer Winblad’s and Bertelsmann’s secondary
liability.
In moving for summary judgment, the defendants argued that the Ninth Circuit’s rulings
in Napster I and Napster II limited Napster’s liability to those works of which Napster had actual
(^1991) “Record Labels, Music Publishers, Songwriters Sue Audiogalaxy; Allege It Is Same as Napster,” BNA’s
Electronic Commerce & Law Report (June 5, 2002) at 561-62.
(^1992) “RIAA, NMPA Reach Settlement With Audiogalaxy,” BNA’s Electronic Commerce & Law Report (June 26,
2002) at 655.
(^1993) Hank Berry, a partner at the Hummer Winblad firm, was installed by Hummer Winblad as Napster’s CEO
shortly after Hummer Winblad made a substantial venture capital investment in Napster.
(^1994) UMG Recordings, Inc. v. Bertelsmann AG, 222 F.R.D. 408 (N.D. Cal. 2004).
(^1995) In re Napster, Inc. Copyright Litigation, 2006 U.S. Dist. LEXIS 30338 (N.D. Cal. May 17, 2006).