Scour Files for Bankruptcy Protection
Scour Inc., the controversial Beverly Hills multimedia company backed by former Hollywood super-agent Michael Ovitz, became the latest victim of the “dot-com” crash Thursday when it filed for protection from its creditors in federal bankruptcy court.
The company, which is facing at least two lawsuits and recently laid off all but 12 of its 70 employees, is seeking to restructure its finances under Chapter 11 of the federal Bankruptcy Code.
The filing puts the company’s daunting legal and financial troubles on hold and gives company officials time to develop a plan of reorganization that ultimately must be approved both by its creditors and the court. The company has more than $100 million in debt, and estimated its assets at between $1 million and $10 million, according to the filing in federal Bankruptcy Court in Los Angeles.
Scour will continue to operate its Web site and file-sharing services, President Dan Rodrigues said in a statement. Company officials declined to comment further.
Scour was created in 1997 by a group of UCLA students who developed a computerized search engine that hunted for multimedia files, such as music, video and pictures. Initially a darling of the Los Angeles new-media set, the buzz about Scour’s search technology attracted the attention of Ovitz and the Yucaipa Cos., the investment vehicle for supermarket magnate Ronald Burkle. Together they took a majority stake in Scour in 1999 and moved the company’s offices to Beverly Hills.
Ovitz and officials with Yucaipa could not be reached for comment late Thursday.
Scour had been searching for additional financing over the last few months, but officials said a lawsuit filed against the company in July by the Motion Picture Assn. of America and the Recording Industry Assn. of America had essentially scared off potential investors.
The suit seeks to block Scour from operating its Scour Exchange service, which allows consumers to copy and swap with one another digitized versions of songs, movies, photographs and other multimedia files. The plaintiffs seek statutory damages of $150,000 for each copyrighted work infringed. If each person who downloaded the Scour Exchange software bootlegged a single song or movie, the damages would hit $225 billion.
Technology experts say the free Scour Exchange software patterns itself after the file-sharing program developed by Napster Inc. But while Napster lets consumers swap only music files, Scour Exchange allows people to search for a variety of multimedia products, including songs, movies, photographs and other images.
Scour’s legal troubles grew in September when public relations firm CarryOn Communication filed a civil suit in Los Angeles Superior Court, alleging that Scour owed it more than $154,000. CarryOn, whose officials declined to comment Thursday, had represented Scour from April until August.
Scour countered that CarryOn’s work was “unsatisfactory.”