updated 07:40 pm EST, Mon November 28, 2011
Damages could top $1 billion in case
Earlier this month, the record company Universal Music filed a lawsuit against the parent company of Grooveshark alleging the music service had infringed upon Universal's copyrights, and its managers had illegally uploaded musical content. The complaint and Universal's exhibits have now been made public. Included in these were internal Grooveshark emails which detail the company's intent of creating a stronger negotiating position for itself with the record companies by first trying to building a strong online audience without actually paying for it.
Grooveshark's strategy was simple. First the company would demonstrate a strong audience to the record companies, according to the messages. The company hoped to do this without paying royalties or fees. Then Grooveshark would turn around and ask the record companies to pay them for the opportunity to mine its user base. Grooveshark would offer to pay them fees for streaming, but planned that the mining revenues would be greater than the usage fees and Grooveshark would make a profit on the difference.
Although Grooveshark's chairman Sina Simantob said that the company was growing "without paying a dime" to labels, it's unclear from the documents of Grooveshark employees and managers whether or not they had actually engaged in any inappropiate uploading.
This is not the first time that Grooveshark has been accused of questionable practices. In April, the company's app was
pulled by Google from Android Market for "violating" Google's policies. In 2010, Universal filed another complaint in a New York state court alleging copyright violation.
Universal is looking to have significant sanctions imposed against Groovshark in the current federal case. If Universal prevails, Grooveshark could be facing damages in excess of $1 billion. [via CNET]