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Music Piracy Lawsuit Settled

Times Staff Writer

The men behind the Grokster file-sharing network have settled a piracy lawsuit filed by the major record companies against an ill-fated online music store based in Spain.

The settlement announced Monday called for Grokster founder Daniel Rung of Palm Springs, his brother Michael Rung, his son Matthew Rung and former Grokster President Wayne Rosso to pay a total of $500,000.

It also required Sakfield Holding Co., the Spanish company the Rungs created to operate the site, to pay $10 million. But that amount will be difficult to collect, given that Sakfield had little time to generate revenue before the site, dubbed Puretunes, tanked.

Puretunes sold MP3s at a deep discount, enabling users to download unlimited songs for as little as 83 cents a day. But it shut down in June 2003 after only a few weeks in operation and was sued by the record companies shortly thereafter.

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Puretunes never obtained licenses from the labels, but Sakfield’s Spanish attorney, Javier Siguenza, claimed in an interview in May 2003 that it didn’t need them. Instead, he argued that Spanish law allowed the company to cut deals only with the Spanish associations of music publishers and performing artists and apply the same terms by default to the labels.

The problem for Puretunes was that it never obtained licenses from those other associations either.

“Puretunes.com duped consumers by claiming it was a legitimate online music retailer when, in fact, it was no such thing,” said Cary Sherman, president of the Recording Industry Assn. of America. “It’s essential for the integrity and security of the legitimate online music marketplace that impostors like Puretunes.com are held accountable,” he said.

Rosso, who left Grokster last year for another file-sharing company, responded: “The owners of Puretunes, of which I never was, would never have launched a service without the proper licenses in place. Once they found out that the licenses were not in order as they were led to believe by their attorneys, they immediately shut it down. There’s no way they would be involved with any service that wasn’t properly authorized.”

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Investigators said the Rungs, who could not be reached for comment, created an elaborate web of companies in multiple countries to conceal their ownership of Puretunes and Sakfield Holdings. But their involvement ultimately was revealed by tracing the site’s Internet service provider and its computers, which were based in the United States and Canada.

The record companies alleged that several thousand U.S.-based users downloaded more than 2 million copies of major-label songs during Puretunes’ brief tenure. That pales in comparison with the billions of songs copied each month on file-sharing networks such as Grokster.

Still, a growing number of unlicensed sites are trying to charge for downloadable music, including several based in Europe and Russia. They typically charge a flat fee per day or per megabyte and claim to pay a percentage of their revenue to the copyright owners.

“These things take time,” Sherman said, noting the difficulty of finding and stopping the responsible parties. “But more importantly, this settlement demonstrates that we can hold pirate services accountable, no matter where they may try to hide.”

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