Defunct Napster's Saga Back in Court
A judge will rule whether two investors -- Bertelsmann and a venture firm -- can be held liable in copyright suits.
By Joseph Menn, Times Staff Writer
SAN FRANCISCO The two biggest financial backers of the defunct online song-swapping service Napster appeared in federal court here for the first time Tuesday to defend themselves against a pair of copyright lawsuits from beyond the grave...
...The copyright suits against Bertelsmann and Hummer Winblad could change the legal standard for when investors can be held responsible for the improper acts of firms they back. As things stand, liability for corporate actions almost always ends with the company itself. Venture experts said they didn't know of any case in which the investors had been held liable.
"If they won, it would be a cause for concern," said intellectual property lawyer Evan Cox of Covington & Burling in San Francisco. "For companies who have business models close to the edge, it's one more thing for investors to worry about."
Santa Clara University law professor Tyler Ochoa said the case was "extraordinarily significant."
"The whole purpose of corporate formation is so that the investors have limited liability," Ochoa said. A loss by either Bertelsmann or Hummer Winblad would "lead to a chilling effect on venture capital and investment in new technology and could have a terribly destructive effect on a vital sector of the economy," he said...
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