Big record labels seeks to freeze LimeWire assets

NEW YORK (Reuters) - Thirteen big record companies want to freeze assets of the provider of popular file-sharing service LimeWire, accusing its founder of fraudulently trying to evade hundreds of millions of dollars in damages over copyright infringement.

U.S. District Judge Kimba Wood last month found that Lime Wire LLC assisted users in pirating digital recordings, and that founder Mark Gorton personally “directed and benefited from many of the activities” that resulted in liability.

In papers filed on Monday in Manhattan federal court, lawyers for the record companies said Gorton has moved “significant” assets, including nearly 90 percent of Lime Wire’s ownership stakes, to an entity he “openly” hopes will be shielded from damages that could top $1 billion. The assets allegedly moved were blacked out in the papers.

Gorton and affiliated defendants “have engaged in a series of fraudulent actions” to “frustrate a legal judgment in this case,” the papers said. “An asset freeze is required in order to ensure that plaintiffs recover at least some of the monetary compensation they are entitled to.”

Last week, the record companies also sought a permanent injunction to halt piracies. It said that despite Wood’s ruling, Lime Wire appeared to have done nothing “to change its illegal ways,” and that every recording on Billboard’s Top 40, Top 40 Country, Top 40 Rock and Top 40 Latin Pop charts were still available to download through LimeWire software.

According to court records, Wood on Monday also granted the requests of two law firms to stop representing Lime Wire: Fulbright & Jaworski LLP, and Porzio, Bromberg & Newman PC.

A Lime Wire spokeswoman said: “We will continue to stay focused on the development of our new music service and ensure that the company continues business as usual.” She added that the change in law firms had been planned before the latest court filings, saying: “We were looking for a better firm.”

Arista, Atlantic, BMG Music, Capital, Elektra, Interscope, LaFace, Motown, Priority, Sony BMG, UMG, Virgin and Warner Brothers are the 13 record companies that sued Lime Wire, backed by the Recording Industry Association of America.

Lime Wire created its service in 2000 and has said it has more than 50 million monthly users. These users accounted for 58 percent of people who said they downloaded music from a peer-to-peer service in 2009, a survey by NPD Group shows.

Wood’s decision followed a 2005 U.S. Supreme Court ruling against file-sharing service Grokster Ltd, which said companies could be sued for copyright infringement if they distributed devices designed to be used that way, even if the devices could also be used lawfully.

The law firms that withdrew from the LimeWire case and lawyers for the record companies did not immediately return requests for comment.

The case is Arista Records LLC et al v. Lime Group et al, U.S. District Court, Southern District of New York, No. 06-05936.

Reporting by Jonathan Stempel, editing by Dave Zimmerman