Fill and Sign the Cds in Texas Timesheet 2022 PDF Form

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------------------------------------------x ARISTA RECORDS LLC; ATLANTIC RECORDING CORPORATION; BMG MUSIC; CAPITOL RECORDS, INC; ELEKTRA ENTERTAINMENT GROUP INC; INTERSCOPE RECORDS; LAFACE RECORDS LLC; MOTOWN RECORD COMPANY, L.P.; PRIORITY RECORDS LLC; SONY BMG MUSIC ENTERTAINMENT; UMG RECORDINGS, INC; VIRGIN RECORDS AMERICA, INC.; and WARNER BROS. RECORDS INC., 06 CV 5936 (KMW) OPINION & ORDER Plaintiffs, -againstLIME GROUP LLC; LIME WIRE LLC; MARK GORTON; GREG BILDSON; and M.J.G. LIME WIRE FAMILY LIMITED PARTNERSHIP, Defendants. ------------------------------------------------------------------x KIMBA M. WOOD, U.S.D.J.: I. Introduction Plaintiffs are thirteen major record companies that collectively produce, manufacture, distribute, sell, and license “the vast majority of copyrighted sound recordings sold in the United States.” (First Am. Compl. ¶ 1.) Plaintiffs raise various federal and state law claims of secondary copyright infringement against Lime Wire LLC (LW); Mark Gorton, the Chairman and sole Director of LW; Lime Group LLC (“Lime Group”); and the M.J.G. Lime Wire Family Limited Partnership (“Lime Wire FLP”) (collectively, “Defendants”) for their role in distribution of the LimeWire software program (“LimeWire”). LimeWire permits users of the program to share digital files over the Internet. Plaintiffs allege that LimeWire users employ LimeWire to 1 obtain and share unauthorized copies of Plaintiffs’ sound recordings, and that Defendants facilitate this infringement by distributing and maintaining LimeWire.1 Plaintiffs raise the following claims against LW, Lime Group, and Gorton: (1) inducement of copyright infringement; (2) contributory copyright infringement; (3) vicarious copyright infringement; and (4) state common law copyright infringement and unfair competition.2 Plaintiffs also raise a state law fraudulent conveyance claim against Gorton and Lime Wire FLP, and a claim for unjust enrichment against Lime Wire FLP. The parties now move for summary judgment. Plaintiffs move for partial summary judgment on their claims of (1) inducement of infringement; (2) contributory infringement; and (3) common law infringement and unfair competition. LW, Gorton, and Lime Group move for summary judgment on each of these claims, and on Plaintiffs’ claim of vicarious copyright infringement.3 Gorton and Lime Wire FLP move for summary judgment on Plaintiffs’ fraudulent conveyance and unjust enrichment claims. Defendants also have submitted a number of motions to exclude evidence submitted by Plaintiffs in support of their motion for summary judgment. 1 The case was transferred to the undersigned in October 2009 following the Honorable Gerard E. Lynch’s appointment to the Court of Appeals for the Second Circuit. 2 LW filed (1) antitrust counterclaims against Plaintiffs pursuant to Sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2, and Section 4 of the Clayton Act, Act, 15 U.S.C. §15; and (2) ancillary counterclaims under New York State law for conspiracy in restraint of trade, deceptive trade practices, and tortious interference with prospective business relations. The Court dismissed LW’s claims in 2007. Arista Records LLC v. Lime Group LLC, 532 F. Supp. 2d 556 (S.D.N.Y. 2007). 3 A joint amicus brief was submitted by the Electronic Frontier Foundation, Center for Democracy and Technology, Computer & Communications Industry Association, Consumer Electronics Association, Home Recording Rights Coalition, Information Technology Association of America, Public Knowledge, Special Libraries Association, and U.S. Internet Industry Association. 2 For the reasons stated below, the Court: (1) DENIES Defendants’ motions to exclude evidence;4 (2) GRANTS Plaintiffs’ motion for summary judgment on the claim against LW of inducement of copyright infringement, and DENIES LW’s motion for summary judgment on the claim; (3) DENIES the parties’ cross-motions for summary judgment on the claim against LW of contributory copyright infringement; (4) DENIES LW’s motion for summary judgment on the claim of vicarious copyright infringement; (5) GRANTS Plaintiffs’ motion for summary judgment on their claims against LW for common law copyright infringement and unfair competition, and DENIES Defendants’ motion for summary judgment on these claims; (6) GRANTS Plaintiffs’ motions for summary judgment on the claims against Gorton and Lime Group for inducement of copyright infringement, common law infringement, and unfair competition, and DENIES Defendants’ motions for summary judgment on these claims; (7) DENIES the parties’ motions for summary judgment on the claims against Gorton and Lime Group for contributory copyright infringement and vicarious copyright infringement; and (8) DENIES Gorton’s and Lime Wire FLP’s motion for summary judgment on the fraudulent conveyance and unjust enrichment claims. II. Factual Background Unless otherwise noted, the following facts are undisputed by the parties: A. File-Sharing Programs Over the last several years, technologies have developed that make it inexpensive and easy to record, distribute, and share music via the Internet. Many artists now digitally record 4 Except that, as set forth below, the Court (1) strikes three statements from the September 26, 2008 declaration of Greg Bildson; (2) places conditions on Plaintiffs’ future meetings and conversations with Bildson; and (3) excludes certain exhibits containing emails and internet forum postings written by Adam Fisk, a former LW employee, after his employment with LW had ended. 3 songs to sell through online music retailers. Individuals who purchase digital recordings often share them with others by using free or low-cost software or Internet programs, known as “filesharing programs.” File-sharing programs allow users to exchange digital files, including digital recordings, with each other through the Internet. Most digital recordings released in the United States, however, are copyright protected, and the copyright owners do not authorize sharing through file-sharing programs. A number of companies that have distributed file-sharing programs, including the distributors of the programs Napster, Kazaa, Morpheus, and Grokster, have faced liability for copyright infringement, on the ground that they facilitated infringement committed by users of their programs. See e.g., A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001).5 B. Creation and Design of LimeWire LW was founded in June 2000. The company released LimeWire in August 2000. LimeWire is a file-sharing program that utilizes “peer-to-peer” (“P2P”) technology. By employing P2P technology, LimeWire permits its users to share digital files via an Internet-based network known as the “Gnutella network.” LimeWire users can share almost all files stored on their computers with other LimeWire users.6 When a LimeWire user wishes to locate digital files available through the network, she enters search criteria into the search function on LimeWire’s user interface. LimeWire then scans the computers of other LimeWire users, to 5 Napster, Inc. was one of the first companies to develop a file-sharing program that permitted users to exchange digital recordings via the Internet. The vast majority of files that were shared through the Napster program were digital recordings protected by copyright, the sharing of which was not authorized. Napster was found liable of contributory and vicarious copyright infringement. The Napster program was shut down by a court-ordered injunction. 6 LimeWire recommends that “all LimeWire users share generously with one another.” (Pl. SUF ¶ 82.) LimeWire’s default settings make all files that a user downloads through LimeWire available to other LimeWire users for download. (Pl. SUF ¶ 83.) 4 locate files that match the search criteria. The LimeWire user can download any files that LimeWire locates. When the user downloads a file, LimeWire transfers a digital copy of the file from the computer on which it is located to the LimeWire user’s computer. C. Plaintiffs’ Copyrighted Recordings Plaintiffs sell and distribute the vast majority of all recorded music in the United States. They allege that they own the copyrights or exclusive rights to more than 3000 sound recordings, which are listed in exhibits to the First Amended Complaint. (First Am. Compl., Exs. A & B (as revised, Jan. 31, 2008).) In this litigation, Plaintiffs have provided documentation establishing that they own the copyrights to thirty popular recordings (the “Recordings”).7 Plaintiffs allege that LimeWire users share and download unauthorized digital copies of the Recordings via LimeWire, and that Defendants are secondarily liable for this infringement because they distribute and maintain LimeWire. III. Evidentiary Motions Defendants have filed a number of motions challenging the admissibility of evidence submitted by Plaintiffs (the “Evidentiary Motions”). The Court considers each of the Evidentiary Motions in turn. The Court determines the admissibility of the challenged evidence based on the same principles as would apply at trial. See Raskin v. Wyatt Co., 125 F.3d 55, 66 7 Plaintiffs provided this documentation pursuant to an instruction given by Judge Lynch at a hearing held on December 7, 2007. Since 1972, all new sound recordings have been protected by federal copyright law. See 17 U.S.C. § 102(a)(7). Sound recordings created before February 15, 1972 are protected from infringement by New York common law. See Capitol Records, Inc. v. Naxos of America, Inc., 830 N.E.2d 250, 263-64 (N.Y. 2005); 17 U.S.C. § 301(c). Here, twenty-five of the Recordings were made after 1972. Plaintiffs have provided federal copyright registration certificates that establish that Plaintiffs’ own valid copyrights to these recordings. See 17 U.S.C. § 401(c); Hamil Am. Inc. v. GFI, 193 F.3d 92, 98 (2d Cir. 1999). With respect to the five recordings created prior to 1972, Plaintiffs have provided copies of agreements granting them common law copyrights to these recordings. (Pl. SUF ¶ 102.) Plaintiffs have never authorized or licensed LW or users of LimeWire to distribute, publish, or copy any of the Recordings. 5 (2d Cir. 1997). The Court finds that, except with respect to certain limited issues discussed below, Defendants’ evidentiary objections are without merit. A. Motions to Exclude Reports and Testimony of Plaintiffs’ Experts Defendants move to exclude the reports and testimony of two expert witnesses retained by Plaintiffs, Dr. Richard P. Waterman and Dr. Ellis Horowitz. The Court denies Defendants’ motion. 1. Legal Standard A court may admit expert testimony once it has determined that such testimony is reliable. Daubert v. Merrell Dow Pharms., Inc, 509 U.S. 579, 589 (1993); Nimely v. City of New York, 414 F.3d 381, 396-97 (2d Cir. 2005). Reliability is analyzed under Rule 702 of the Federal Rules of Evidence, which provides that a witness who is qualified as an expert by knowledge, skill, experience, training, or education may provide testimony that is (1) based upon sufficient facts or data; (2) the product of reliable principles and methods; and (3) based on reliable application of the principles and methods to the facts of the case. Fed. R. Evid. 702. There must be “‘a sufficiently rigorous analytical connection between [the expert’s] methodology and the expert’s conclusions . . . and . . . the scientific principles and methods [must] have been reliably applied by the expert to the facts of the case.’” In re Zyprexa Prods. Liab. Litig., 489 F. Supp. 2d 230, 284 (E.D.N.Y. 2007) (quoting Nimely, 414 F.3d at 397). The party seeking to rely on expert testimony bears the burden of establishing, by a preponderance of the evidence, that all requirements have been met. See Daubert., 509 U.S. at 593 n.10 (1993); United States v. Williams, 506 F.3d 151, 160 (2d Cir. 2007). 6 2. Application a. Dr. Richard P. Waterman Dr. Waterman is an Adjunct Associate Professor of Statistics at The Wharton School at the University of Pennsylvania, and the President and Co-Founder of Analytic Business Services, Inc., a consulting company that provides expert advice and opinions in the field of statistical analysis. Plaintiffs hired Dr. Waterman to conduct a study of LimeWire that estimates the percentage of digital files (1) available through LimeWire that are authorized for free distribution; and (2) requested for download by LimeWire users that are authorized for free distribution.8 For the study, Dr. Waterman analyzed a random sample of 1800 files available through LimeWire. He determined that 93% of files in the sample (1644 files) were protected or highly likely to be protected by copyright, and thus not authorized for free distribution through LimeWire. (Waterman Report, 2-3.) He found that 43.6% of the files were digital recordings with copyrights owned by Plaintiffs. (Id.) Dr. Waterman next logged the number of times LimeWire users sought to download each of the files in the sample. Based on these results, Dr. Waterman estimated that 98.8% of the files requested for download through LimeWire are copyright protected or highly likely copyright protected, and thus not authorized for free distribution. (Id. at 7-8.) Defendants attack the reliability of Dr. Waterman’s study and expert opinion, arguing that Dr. Waterman’s methodology was deficient because (1) Dr. Waterman collaborated with 8 Dr. Waterman has conducted similar studies and provided expert opinion in other copyright infringement cases in this and other districts. Courts have approved and relied on his expert testimony in those cases. See Columbia Pictures Industries, Inc. v. Fung, Case No. 06-5578, 2009 U.S. Dist. LEXIS 122661, at *5-7 n.2 (C.D. Cal. Dec. 21, 2009); Arista Records LLC v. USENET.com, 633 F. Supp. 2d 124, 131 n.4 (S.D.N.Y. 2009). 7 Plaintiffs in designing and implementing the study; (2) the categories that Dr. Waterman used to classify the sample files were improper; and (3) the study improperly excluded certain files from the statistical analysis.9 The Court finds that Defendants’ objections are without merit. Dr. Waterman’s expert report and testimony are admissible. First, there is no support for the contention that Dr. Waterman’s study is flawed because of his collaboration with Plaintiffs. Plaintiffs assisted Dr. Waterman in a variety of ways, including obtaining the sample of files, categorizing the files in the sample, and implementing the statistical protocol that Dr. Waterman developed. Plaintiffs’ assistance in developing and implementing the study was entirely appropriate. See Fed. R. Civ. P. 26(a)(2)(B) advisory committee’s note (1993) (stating that counsel may provide “assistance to experts in preparing [expert] reports, and indeed . . . this assistance may be needed”); Inline Connection Corp. v. AOL Time Warner Inc., 470 F. Supp. 2d 435, 442-43 (D. Del. 2007) (noting that experts may rely upon information provided by the client, other experts, or counsel). The Court finds that Dr. Waterman applied his expert knowledge to develop a reliable methodology. Dr. Waterman’s methodology obtained a suitably random and representative sample of files available through LimeWire. Moreover, the limitations of Dr. Waterman’s study are well defined. Defendants can – and do – challenge the study’s probative value, and the Court has sufficient information to properly weigh Dr. Waterman’s findings and conclusions. 9 The Court notes that Defendants offer no statistical study to rebut the accuracy or reliability of Dr. Waterman’s findings and expert opinion, and do not challenge Dr. Waterman’s expertise in the field of statistical analysis. 8 Second, the Court finds that the categories of downloaded files used in Dr. Waterman’s analysis are appropriate.10 Similar studies using nearly identical file classifications have been considered and approved by other courts. See, e.g., Metro-Goldwyn-Mayer Studios Inc. v. Grokster, 545 U.S. 913, 952 (2005) (Breyer, J., concurring) (considering findings of statistical study as to proportion of files available on file-sharing network that were “infringing” and “likely infringing”); A&M Records, Inc. v. Napster, Inc., 114 F. Supp. 2d 896, 903 n.6 (N.D. Cal. 2000) (considering expert report that applied digital file categories (1) confirmed as infringing, (2) likely to be infringing, and (3) confirmed as not infringing); Arista Records LLC v. Usenet.com, Inc., 633 F. Supp. 2d 124, 145 (S.D.N.Y. 2009) (denying motion to exclude similar study by Dr. Waterman that utilized the same classifications of copyright status). Third, the Court rejects Defendants’ contention that the exclusion of twenty-six files identified as “spam, spoofs, and pornography” from Dr. Waterman’s sample renders his findings unreliable. Dr. Waterman has provided sufficient reasoning for these files’ exclusion from his analysis. (See Waterman Depo. at 230-78.) In any event, given the small number of files classified as “spam, spoofs, and pornography,” their exclusion from the sample size of 1800 files had an inconsequential effect on Dr. Waterman’s statistical findings and conclusions. The Court finds that Dr. Waterman’s expert report and testimony are based on reliable methodology and are therefore admissible. b. Dr. Ellis Horowitz Dr. Horowitz is a professor of Computer Science and Electrical Engineering at the University of Southern California. He possesses substantial knowledge and experience in software engineering and development. Dr. Horowitz has provided an expert report and 10 The categories used include: (1) “confirmed infringing;” (2) “highly likely to be infringing;” (3) “highly likely noninfringing,” and (4) “authorization status indeterminable.” 9 testimony on how LimeWire functions and what infringement-reducing technologies are available to prevent or mitigate the distribution of unauthorized files through LimeWire. Defendants seek to exclude Dr. Horowitz’s report and testimony on the grounds that he improperly opines on (1) the intent or state of mind of Defendants and LimeWire users; and (2) the relative efficacy of various infringement-reducing technologies.11 The Court rejects both arguments and finds that Dr. Horowitz’s expert opinion is admissible. First, Dr. Horowitz has not opined on the parties’ state of mind, but rather has provided information on the design and functionality of the LimeWire program. See, e.g., Horowitz Report ¶ 56 (“Although Lime Wire LLC professes to be agnostic about what files are transferred using LimeWire, LimeWire’s feature set is optimized for downloading popular audio files.”); id. ¶ 57 (noting that the design of LW’s “user interface” supports the download of music files); id. ¶ 66 (opining that the use of a “Classic Rock” genre category has the effect of generating search results containing unauthorized works); id. ¶ 70 (discussing that some of LimeWire’s features are “potentially confusing” to users). Such expert opinion is proper and aids the finder-of-fact in understanding LimeWire’s features. Dr. Horowitz does not make any impermissible legal conclusions, such as stating that LW actually intended to facilitate copyright infringement. He also does not cross the line into unreliable speculation about the intended purpose of various LimeWire design features. 12 See Nimely v. City of New York, 414 F.3d at 396 n.11 (noting that 11 Defendants do not challenge Dr. Horowitz’s expertise or his description of the LimeWire application and its file-sharing system. 12 Dr. Horowitz’s expert opinions on a computer software system and its features was found to be admissible and, in fact, “deserving of substantial weight” by another judge in this district. See Arista Records LLC v. Usenet.com, Inc., 608 F. Supp. 2d 409, 425 n.23 (S.D.N.Y. 2009); see also Arista Records LLC v. Usenet.com, Inc., 633 F. Supp. 2d 124, 130-31, 133, 150, 152 (S.D.N.Y. 2009) (relying on Horowitz’s testimony); Columbia Pictures Indus., Inc. v. Fung, 10 an expert witness is permitted substantially more leeway than a lay witness in testifying as to opinions that go beyond on his or her immediate perception) (citing United States v. Garcia, 291 F.3d 127, 139 & n.8 (2d Cir. 2002)); In re Zyprexa Prods. Liab. Litig., 489 F. Supp. 2d at 283-84 (noting that an expert is “permitted wide latitude to offer opinions,” so long as they rely upon expert knowledge and experience). Second, the Court finds that Dr. Horowitz’s expert opinions on the effectiveness of various infringement-reducing technologies are reliable and satisfy the requirements of Rule 702 and Daubert. Dr. Horowitz has substantial expertise in computer software design and engineering. His expert report makes clear that his opinions are based upon his observation and collection of relevant information about existing infringement-reducing technologies. The Court has found that Dr. Waterman’s and Dr. Horowitz’s expert reports and testimony are reliable and admissible. The Court thus DENIES Defendants’ motion to exclude the evidence. B. Bildson Declaration Defendants move (1) to strike the declaration of Greg Bildson (“Bildson”), submitted by Plaintiffs on September 26, 2008 (the “Bildson Declaration”); and (2) for a protective order enjoining Bildson from speaking further with Plaintiffs’ attorneys.13 The Court denies Case No. 06-5578, 2009 U.S. Dist. LEXIS 122661, at *5-7 n.2 (C.D. Cal. Dec. 21, 2009) (finding Horowitz’s testimony admissible on summary judgment). 13 Defendants also move for a stay of the summary judgment proceedings until the Court has considered Plaintiffs’ motion to strike the Bildson Declaration and for a protective order. Briefing on summary judgment is complete, however. The Court is capable of considering Plaintiffs’ motion to strike and for a protective order at the same time as the parties’ summary judgment motions, without prejudicing Defendants. Accordingly, the Court denies Defendants’ motion for a stay. 11 Defendants’ motion, except that the Court strikes three statements from the Bildson Declaration and places certain limited conditions on Plaintiffs’ future contacts with Bildson. When Plaintiffs filed this action in 2006, they named Bildson, LW’s Chief Technology Officer (“CTO”) and Chief Operating Officer (“COO”), as a defendant. On July 22, 2008, Bildson’s attorney, Michael Page (“Page”), contacted Plaintiffs to make a settlement proposal, whereby Plaintiffs would drop the claims against Bildson in exchange for Bildson providing Plaintiffs with factual information about LW and LimeWire and paying a nominal settlement amount. On July 28, 2008, Page contacted Charles Baker (“Baker”), LW’s attorney, and asked whether he consented to Bildson meeting with Plaintiffs’ attorneys to “speak substantively with [Bildson] . . . as a [LW] employee.” Baker consented. On September 4, 2008, Bildson and Page met with Plaintiffs’ attorney, Katherine Forrest (“Forrest”), to discuss settlement. Forrest proposed a settlement agreement that included a cooperation clause, under which Bildson would cooperate with Plaintiffs’ investigation of Defendants and provide information and, if necessary, testimony on LW’s infringing activities. Following the meeting, Bildson set forth his knowledge of LimeWire and of LW’s infringing activities in the Bildson Declaration. On September 9, 2008, Bildson voluntarily resigned from LW. On September 10, 2008, he executed the Bildson Declaration and the settlement agreement. Defendants move to strike the Bildson Declaration, on the grounds that it arose from improper ex parte communications between Bildson and Plaintiffs’ attorneys and that it contains information subject to the attorney-client privilege. Defendants seek a protective order purportedly to prevent Bildson from disclosing privileged information to Plaintiffs. 12 1. Legal Standard In New York, attorneys are prohibited from soliciting information about an opposing party that is protected by attorney-client privilege. See Muriel Siebert & Co. v. Intuit Inc., 868 N.E.2d 208, 210-11 (N.Y. 2007); Merrill v. City of New York, 2005 WL 2923520, at *1 (S.D.N.Y. Nov. 4, 2005); Wright v. Stern, 2003 WL 23095571, at *1 (S.D.N.Y. Dec. 30, 2003). The party invoking the attorney-client privilege bears the burden of establishing that the information at issue is privileged. To do this, the party must show that there was “(1) a communication between client and counsel, which (2) was intended to be and was in fact kept confidential, and (3) made for the purpose of obtaining or providing legal advice.” United States v. Constr. Prods. Research, Inc., 73 F.3d 464, 473 (2d Cir. 1996). The attorney-client privilege “only protects disclosure of communications; it does not protect disclosure of the underlying facts.” Upjohn Co. v. United States, 449 U.S. 383, 395-96 (1981). The Second Circuit “construe[s] the privilege narrowly because it renders relevant information undiscoverable; [it applies] only where necessary to achieve its purpose.” In re County of Erie, 473 F.3d 413, 418 (2d Cir. 2007) (internal citation omitted). The New York Rules of Professional Conduct provide that a lawyer representing a client may not have ex parte communications with an opposing party who the lawyer knows is represented by counsel, unless the lawyer has the consent of that party’s counsel. N.Y. Rules Prof. Conduct 4.2 (2009). The New York Court of Appeals has defined a “party” in this context to include “corporate employees whose acts or omissions in the matter under inquiry are binding on the corporation (in effect, the corporation’s ‘alter egos’).” Niesig v. Team I, 558 N.E.2d 1030, 1035 (N.Y. 1990); Estes v. City of New York, 2006 WL 2299350, at *1 (E.D.N.Y. Apr. 11, 2006). A lawyer may have ex parte contact with the opposing party’s former employees. 13 See Polycast Tech. Corp. v. Uniroyal, Inc., 129 F.R.D. 621, 628 (S.D.N.Y. 1990). If the former employee had access to privileged information while employed with the opposing party, however, a court may enter a protective order placing conditions on such contact, in order to prevent sharing of any privileged information. See Lyondell-Citgo Refining, LP v. Petroleos de Venezuela, S.A., No. 02 Civ. 0795, 2003 WL 22990099, at *2-3 (S.D.N.Y. Dec. 19, 2003). 2. Application The Court will not strike the entire Bildson Declaration. The Declaration does not arise out of improper ex parte communication between Bildson and Plaintiffs’ counsel, Forrest. Prior to meeting with Bildson, Forrest received consent from Defendants’ counsel for Forrest to “speak substantively with [Bildson] . . . as a [LW] employee.”14 Although Defendants claim that the content of the entire Bildson Declaration is protected by attorney-client privilege, they have presented no evidence to support their claim. Defendants have provided declarations from Gorton, LW’s CEO, and Baker, Defendants’ counsel, which establish only that two sentences and one phrase in the Bildson Declaration disclose privileged communications. Baker states that sentences in paragraphs 11 and 12 of the declaration reflect confidential legal advice that Baker gave LW, through Bildson, regarding how to avoid secondary liability. Gorton states that another attorney, Federick Von Lohman, gave LW, including Bildson, confidential legal advice regarding the need to establish a document retention 14 Defendants argue that the meeting was improper because Baker intended to give Forrest permission to speak with Bildson only about a settlement, not a declaration. Defendants’ argument is unpersuasive. Defendants have presented no evidence indicating that Baker attempted to limit the scope of Forrest’s conversation with Bildson, or that Forrest knew that Baker’s consent was limited. In her email, Forrest asked if she could have a “substantive” conversation with Bildson in his capacity “as a [LW] employee.” Baker responded “this is fine.” Baker’s response did not limit the conversation between Plaintiffs’ counsel and Bildson to settlement. 14 program to purge incriminating information about LimeWire users’ activities. This advice is reflected in a phrase in paragraph 21 of the declaration. Based on Gorton’s and Baker’s declaration, the Court strikes the identified sentences and phrase.15 The Court admits and considers the rest of the Bildson Declaration.16 Defendants argue that, because Bildson received privileged information while working at LW, the Court should conclude that the Bildson Declaration reflects confidential information and strike the entire document. Defendants, however, cite to no decision in which a court has struck an entire factual declaration, without any evidence that the entire declaration was privileged.17 Rather, when presented with a declaration from a party with access to privileged information, courts strike only those portions of the declaration that actually contain privileged information. See Major League Baseball Properties, Inc. v. Opening Day Productions, 1997 WL 525482, at 15 Specifically, the Court strikes from paragraph 11 of the Bildson Declaration the sentence that reads: “To the extent LimeWire does not actively utilize or configure these features in the client to routinely collect this information, it is because LimeWire wants to maintain plausible deniability regarding its users’ downloading of copyrighted music.” See Baker Decl. ¶ 4. The Court strikes from paragraph 12 the sentence that reads: “However, LimeWire made the tactical change to turn off this feature because LimeWire did not want to acquire incriminating knowledge of what individual users were searching for.” See Baker Decl. ¶¶ 4-5. The Court strikes from paragraph 21 the phrase “in order to prevent creation and preservation of incriminating evidence.” See Gorton Decl. ¶ 4. The remaining portion of paragraph 21 contains factual information that is not protected by the attorney-client privilege. 16 In his declaration, Baker also claims that paragraph 20 contains privileged information communicated to LW by an attorney named Fred Von Lohman, regarding steps LW should take to protect itself from secondary liability. In paragraph 20, however, Bildson states that Gorton told him that LW needed to take certain steps to protect itself from liability. Communications between Bildson and Gorton are not privileged. 17 Defendants cite to two cases to support their argument that the Court should strike the Bildson Declaration based on a presumption of disclosure, Hull v. Celanese Corp., 513 F.2d 568 (2d Cir. 1975) and MMR/Wallace Power & Indus., Inc. v. Thames Assocs., 764 F. Supp. 712 (D. Conn. 1991). These cases involve attorney disqualifications. They do not stand for the proposition that a court should strike an entire declaration where there is no evidence that the entire declaration contains privileged information. 15 *6 (S.D.N.Y. Aug. 22, 1997) (striking only one phrase from party’s testimony, because only that phrase reflected privileged information). This approach is consistent with the Second Circuit’s mandate that the attorney-client privilege be applied narrowly, so as not to exclude discoverable information. See In re County of Erie, 473 F.3d at 418. The Court will not issue a protective order prohibiting Plaintiffs from speaking with Bildson. Plaintiffs have made a good faith effort to avoid learning privileged information from Bildson. Forrest and Page, Bildson’s attorney, have submitted affidavits stating that Forrest met with Bildson only once, and that she never sought privileged information from him. Forrest and Page both state that they repeatedly warned Bildson not to provide them with such information. Defendants have presented no evidence that Bildson disclosed privileged communications to Plaintiffs, other than the three brief statements that the Court struck above. Because Bildson had access to privileged information while at LW, however, the Court believes that it is sensible and fair to order additional precautions to ensure that Bildson does not reveal privileged information to Plaintiffs in the future. Accordingly, the Court orders Plaintiffs: (1) not to request privileged information from Bildson; (2) to stop Bildson from revealing privileged information, if Plaintiffs are aware that he is doing so; (3) to promptly provide Bildson and his attorney with a copy of this order, and to ensure that Bildson’s attorney discusses with Bildson his obligation not to disclose privileged information; and (4) to provide Defendants with at least 10 days notice of any meetings or conversations between Plaintiffs and Bildson, including a general description of the topics that will be discussed. Accordingly, the Court DENIES Defendants’ motion to exclude the Bildson Declaration and for a protective order, except with respect to the Declaration passages discussed above and to the extent that the Court places conditions on any future contacts between Plaintiffs and Bildson. 16 C. Declarations of Sehested, Kempe, and Coggon Defendants move to strike the declarations of Thomas Sehested, Andrew Kempe, and Katheryn Coggon, on the ground that Plaintiffs failed to identify the three individuals as potential witnesses. The Court denies Defendants’ motion. Rule 26 requires parties to disclose the identity of individuals “likely to have discoverable information that the disclosing party may use to support its claims or defense.” Fed. R. Civ. Pro. 26(a). Parties must update and supplement their disclosures and other discovery responses in “a timely manner.” Fed. R. Civ. P. 26(e). If a party fails to disclose a witness as required by Rule 26, a court may exclude evidence obtained from that witness, unless the failure to disclose was substantially justified or harmless. Fed. R. Civ. P. 37(c). A court has discretion to exclude evidence because of a party’s failure to disclose. See Semi-Tech Litig. LLC v. Bankers Trust Co., 219 F.R.D. 324, 325 (S.D.N.Y. 2004). Because “‘refusing to admit evidence that was not disclosed during discovery is a drastic remedy,’ courts will resort to preclusion only ‘in those rare cases where a party’s conduct represents flagrant bad faith and callous disregard of the Federal Rules of Civil Procedure.’” Ward v. The Nat’l Geographic Soc’y, No. 99 Civ. 12385, 2002 WL 27777 (S.D.N.Y. Jan. 11, 2002) (quoting Grdinich v. Bradlees, 187 F.R.D. 77, 79 (S.D.N.Y. 1999)). Here, there is no evidence that Plaintiffs’ alleged failure to disclose Kempe, Coggon, and Sehested prejudiced Defendants. The information provided by Kempe is no different from that possessed by a witness whose identity was timely disclosed, Thomas Carpenter. Plaintiffs were not required to update 17 their disclosure to state that they would speak with Kempe instead of Carpenter. See Haritatos v. Hasbro, Inc., No. 6:05-CV-930, 2007 WL 3124626, at *3 (N.D.N.Y. Oct. 23, 2007). 18 Defendants claim that they have been prejudiced because they have not had an opportunity to cross-examine Coggon and Sehested. After Plaintiffs submitted the declarations, however, Defendants could have moved to depose the two witnesses, which would have remedied any prejudice Defendants claim to have suffered. Defendants’ failure to request depositions undercuts their argument of prejudice. The Court thus DENIES Defendants’ motion to exclude the declarations of Kempe, Coggon, and Sehested. D. Exhibits Purportedly Relating to Settlement Negotiations Defendants move to exclude thirty-three of Plaintiffs’ exhibits and related deposition testimony that they claim are inadmissible pursuant to Rule 408(a)(2) of the Federal Rules of Evidence. Rule 408 provides that “conduct or statements made in compromise negotiations regarding the claim” may not be admitted in evidence when offered to prove a party’s liability. Fed. R. Evid. 408(a)(2). In determining whether to exclude evidence under Rule 408, a court must weigh the need for evidence against the “potentiality of discouraging future settlement negotiations.” Trebor Sportswear Co. v. Limited Stores, Inc., 865 F.2d 506, 510-11 (2d Cir. 1989) (citing 2 J. Weinstein & M. Berger, Weinstein’s Evidence, ¶ 408[05], at 408-31 (1988)). Defendants argue that the documents they seek to exclude were created for the purpose of, or in the course of, settlement negotiations. The challenged documents relate to a proposal by 18 Kempe is the Manager of Technical Account Services at MediaSentry Services, a company hired by the Recording Industry Association of America to monitor various P2P programs, including LimeWire. In their initial witness disclosure list, Plaintiffs included Thomas Carpenter, a “Director” at MediaSentry Services. (See Forrest 12/05/08 Mot. To Strike/Exclude Decl., Ex. 492.) Plaintiffs sought the same evidence from Kempe that they would have sought from Carpenter, namely MediaSentry’s information regarding the infringing activity occurring through LimeWire. Both Kempe and Carpenter derived their knowledge of that information from their work at MediaSentry. 18 LW to implement various digital file filtering systems, and LW’s “Plan for Digital Market Growth.” The documents include internal LW communications; external LW communications with non-parties, such as online content providers; and LW’s business plans. The Court finds that exclusion pursuant to Rule 408 is not warranted. The disputed documents were created primarily to promote the growth and profitability of LW, and not for the purpose of settlement negotiations. Rule 408 does not shield business plans and communications with non-parties. See Union Carbide Corp. v. Montell N.V., 28 F. Supp. 2d 833, 841 (S.D.N.Y. 1998). Accordingly, the Court DENIES Defendants’ motion to exclude the evidence. E. Evidence of Defendants’ Conduct Outside of Limitations Period Defendants move to exclude documentary and testamentary evidence that predates August 3, 2003. Defendants argue that any evidence relating to activity prior to that date falls outside the three-year statute of limitations applicable to Plaintiffs’ copyright infringement claims. The Court finds that evidence of Defendants pre-August 2003 conduct is relevant, probative, and admissible. Although Plaintiffs may not recover for conduct that occurred outside the limitations period, “evidence of such conduct may be admissible to shed light on the motives with which acts within the limitations period were performed.” 19 Cooper v. Parsky, 140 F.3d 433, 440-41 (2d Cir. 1998); see also Sir Speedy, Inc. v. L&P Graphics, Inc., 957 F.2d 1033, 1038 (2d Cir. 1992) (noting that the statute of limitations does not “operate to bar the use of a document that predates the commencement of the limitations period but that is relevant to events during the period”). The disputed evidence is relevant to the determination of Defendants’ state 19 Plaintiffs do not seek to recover for conduct that occurred outside the limitations period. 19 of mind, including whether they were aware of LimeWire users’ infringing activities and whether they intended to facilitate those activities within the limitations period. Accordingly, the Court DENIES Defendants’ motion to exclude evidence that predates August 3, 2003. F. Objections Based on Relevance, Authentication, and Hearsay Defendants move to exclude a number of Plaintiffs’ exhibits on the grounds that they are either (1) not relevant; (2) unauthenticated; or (3) inadmissible hearsay. The Court considers each objection in turn. With the exception of certain exhibits discussed below, the Court finds that Defendants’ objections are without merit. 1. Relevance Evidence must be relevant in order to be admissible. Fed. R. Evid. 402. At trial or on a motion for summary judgment, evidence is relevant if it has “any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.” Fed. R. Evid. 401. Determinations of relevance are entrusted to the sound discretion of the district court. See United States v. Amuso, 21 F.3d 1251, 1263 (2d Cir. 1994). The standard for determining relevance is a liberal one. See Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. at 587; Contemporary Mission, Inc. v. Famous Music Corp., 557 F.2d 918, 927 (2d Cir. 1977). On a motion for summary judgment, barring substantial cause for excluding evidence on relevance grounds, a court should admit and consider the challenged exhibits and testimony. See Presbyterian Church of Sudan v. Talisman Energy, Inc., 582 F.3d 244, 264 (2d Cir. 2009). Although the probative weight of each of the contested exhibits varies, each is related to Defendants’ alleged state of mind and intent, and provides context for the alleged conduct. The exhibits, therefore, are relevant, and the Court DENIES Defendants’ motion to exclude them. 20 2. Authentication Rule 901 of the Federal Rules of Evidence requires evidence to be authenticated or identified before it is admitted. Fed. R. Evid. 901(a). To authenticate evidence, the party seeking to admit the evidence must present “evidence sufficient to support a finding that the matter in question is what its proponent claims.” Id.; see also United States v. Ruggiero, 928 F.2d 1289, 1303 (2d Cir. 1991). The standard for authentication is not rigorous. See United States v. Dhinsa, 243 F.3d 635, 658 (2d Cir. 2001). Authenticity may be established through a variety of means, including the testimony of a witness with knowledge of the document’s authenticity, see Fed. R. Evid. 901(b)(1), or based upon “[a]ppearance, contents, substance, internal patterns, or other distinctive characteristics, taken in conjunction with circumstances.” Fed. R. Evid. 901(b)(4). “[T]he standard for authentication, and hence for admissibility, is one of reasonable likelihood.” United States v. Pluta, 176 F.3d 43, 49 (2d Cir. 1999) (quoting United States v. Holmquist, 36 F.3d 154, 168 (1st Cir. 1994)). Having reviewed the disputed exhibits and the related deposition testimony, the Court finds the “appearance, contents, substance,” and other contextual indicators satisfy the authentication requirement. Accordingly, the Court DENIES Defendants’ motion to exclude the evidence on authentication grounds. 3. Hearsay Defendants object to seventy-six exhibits offered by Plaintiffs on the ground that they constitute inadmissible hearsay. Hearsay is an out-of-court statement offered to “prove the truth of the matter asserted.” See Fed. R. Evid. 801(c). Such a statement is not admissible unless it qualifies as nonhearsay, see, e.g., Rule 801(d), or satisfies a hearsay exception as set forth in Rules 803, 804 or 807. 21 The Court finds that the disputed exhibits are admissible on the grounds that they: (1) constitute nonhearsay as admissions of a party-opponent; (2) constitute nonhearsay as evidence of LW’s knowledge or intent; or (3) satisfy the business record exception to the hearsay rule. a. Admissions of a Party-Opponent A statement is not hearsay if it is offered against a party and is the party’s own statement, in either an individual capacity or a representative capacity. See Fed. R. Evid. 801(d)(2)(A). An admission made by a party’s employee is admissible against the party if it was made during the course of the employee relationship and relates to a matter within the scope of the person’s employment. See Fed. R. Evid. 801(d)(2)(D); United States v. Lauersen, 348 F.3d 329, 340 (2d Cir. 2003), vacated on other grounds, 543 U.S. 1097 (2005); Pappas v. Middle Earth Condo. Ass’n, 963 F.2d 534, 537 (2d Cir. 1992). Where a statement is deemed admissible as an admission by a party-opponent under Rule 801(d)(2), the surrounding statements providing essential context may also be considered. See United States v. Dupre, 462 F.3d 131, 136-137 (2d Cir. 2006) (email messages sent by third parties to defendants were admissible to provide context for email messages sent by defendants in response); see, e.g., Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 454 F. Supp. 2d 966, 974 (C.D. Cal. 2006) (“Grokster Remand”) (email chains and online exchanges deemed admissible as nonhearsay on the ground that the messages were offered to establish defendant’s knowledge and state of mind as to the activities of its software users). A number of the challenged exhibits contain email chains and internet forum postings that were written in whole or in part by LW employees, during the course of their employment with LW. The emails and postings pertain to infringement being committed by LimeWire users, and thus relate directly to matters within the scope of the employees’ employment with LW. The 22 exhibits therefore constitute direct or vicarious admissions by Defendants, and are not hearsay. The portions of the emails and postings written by LimeWire users and other non-parties provide essential context to the statements by LW employees, and are also admissible. The Court finds that certain forum postings and email messages written by Adam Fisk, a former LW employee, are inadmissible hearsay, because they were written after Fink’s employment with LW had ended. Accordingly, the Court DENIES Defendants’ motion to exclude the exhibits containing the email chains and forum postings, except that the Court excludes exhibits containing emails and postings written by Fisk after his term of employment at LW ended. b. Evidence of Knowledge and Intent Out-of-court statements are not hearsay if offered to show the context within which parties were acting, or to show a party’s motive or intent for behavior. See 5 Weinstein’s Federal Evidence, § 801.11[5]; see also United States v. Salameh, 152 F.3d 88, 112 (2d Cir. 1998). Out-of-court statements are also not considered hearsay if used to prove notice or knowledge. See Cameron v. Cmty. Aid for Retarded Children, 335 F.3d 60, 65-66 (2d Cir. 2003). Defendants challenge the admissibility of exhibits that contain (1) screenshots of software programs and related websites, (2) statements about LimeWire quoted in newspaper articles, and (3) strategy memos and talking points provided by LW’s public relations firm. The Court finds that these documents are admissible as probative of LW’s knowledge of infringing activity by LimeWire users or of LW’s intent to induce infringement. The Court DENIES Defendants’ motion to exclude the evidence. 23 c. Business Records Rule 803(6) contains an exception to the hearsay rule for business records.20 The business records exception has been construed generously in favor of admissibility, due to the general trustworthiness of regularly kept records and the need for this type of evidence in many cases. See Conoco Inc. v. Department of Energy, 99 F.3d 387, 391 (Fed. Cir. 1996); see also Health Alliance Network, Inc. v. Continental Cas. Co., 245 F.R.D. 121 (S.D.N.Y. 2007). Defendants object to documents created by Google Inc., which contain details of an advertising campaign that LW conducted through Google from 2002 through 2006. The documents include the specific keyword and search terms that LW purchased from Google for the campaign. Defendants argue that Plaintiffs have failed to lay a proper foundation to establish that these documents constitute admissible business records. Plaintiffs offered the testimony of a Google employee and former AdWords account manager, Jill T. Randell, who stated that the documents were “business records” and that the exhibits were “a copy of what someone from Google would see when logging into our internal [advertising system.]” Randell stated that the records were prepared in the normal course of business at Google. (Randell Tr. 11:12-11:15). The Court finds that Randell’s testimony is sufficient to establish that the Google documents are business records. Further, the Court finds that the documents possess “sufficient indicia of trustworthiness to be considered reliable,” and to warrant admissibility as business records. See Potamkin Cadillac Corp. v. B.R.I. Coverage Corp., 38 F.3d 627, 632-33 (2d Cir. 20 Rule 803(6) defines a business records as: “A memorandum, report, record, or data compilation, in any form, of acts, events, [or] conditions …, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record or data compilation, all as shown by the testimony of the custodian or other qualified witness, … unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness.” 24 1994) (quoting Saks Int'l, Inc. v. M/V "Export Champion", 817 F.2d 1011, 1013 (2d Cir. 1987). The Court DENIES Defendants’ motion to exclude the Google documents. In conclusion, the Court DENIES Defendants’ Evidentiary Motions, except that, as discussed above, the Court strikes certain statements from the Bildson Declaration, places conditions on Plaintiffs’ future meetings and conversations with Bildson, and excludes the emails and forum postings written by Adam Fisk after his employment with LW ended.21 The Court now turns to the parties’ motions for summary judgment. IV. Summary Judgment Standard Summary judgment is appropriate only if the record before the court establishes that there is no “genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). The Court must construe the evidence in the light most favorable to the non-moving party and must draw all reasonable inferences in the non-moving party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); In re “Agent Orange” Prod. Liab. Litig., 517 F.3d 76, 87 (2d Cir. 2008). A motion for summary judgment should be denied “if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party.” NetJets Aviation, Inc. v. LHC Commc’ns, LLC, 537 F.3d 168, 178-79 (2d Cir. 2008); see also Brown v. Henderson, 257 F.3d 246, 252 (2d Cir. 2001); Fed. R. Civ. P. 56(e). Summary judgment is warranted if a party “fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). 21 In addition to the objections discussed above, Defendants have made a number of other objections to Plaintiffs’ evidence. The Court has considered those objections and finds them to be without merit. 25 The non-moving party may not rely on “conclusory allegations or unsubstantiated speculation,” Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998), or on mere denials or unsupported alternative explanations of its conduct. See S.E.C. v. Grotto, No. 05-5880, 2006 WL 3025878, at *7. The non-moving party “must do more than simply show that there is some metaphysical doubt as to the material facts,” Matsushita Elec. Indus. Co., Ltd., v. Zenith Radio Corp., 475 U.S. 574, 586 (1986), and must set forth “significant, probative evidence” on which a reasonable factfinder could decide in its favor. Anderson, 477 U.S. at 249. V. Infringement Claims Against LW A. Direct Infringement Plaintiffs’ infringement claims against LW are based on theories of secondary liability. To establish their secondary liability claims, Plaintiffs first must establish that LimeWire users directly infringed Plaintiffs’ copyrights. There are no genuine issues of material fact as to direct infringement. The evidence in the record establishes that LimeWire users infringed Plaintiffs’ copyrights by sharing unauthorized digital copies of the Recordings through LimeWire. 1. Legal Standard Secondary liability for copyright infringement may be imposed on a party that has not directly infringed a copyright, but has played a significant role in direct infringement committed by others, for example by providing direct infringers with a product that enables infringement. See Grokster, 545 U.S. at 929-30; Sony Corp. v. Universal City Studios, 464 U.S. 417, 434-35 (1984). The rationale for secondary liability is that a party who distributes infringement-enabling products or services may facilitate direct infringement on a massive scale, making it “impossible to enforce [copyright protection] effectively against all direct infringers.” In such circumstances, “the only practical alternative is to go against the distributor of the copying device for secondary 26 liability.” Id. at 930 (citing In re Aimster Copyright Litig., 334 F.3d 643, 645-646 (7th Cir. 2003)).22 To recover on a claim based on secondary liability, a plaintiff first must establish direct infringement by the relevant third party, i.e. the party that received the infringement-enabling device. See Grokster, 545 U.S. at 930, 940 (holding that liability based on an inducement theory “requires evidence of actual infringement by recipients of the device,” and noting that vicarious infringement occurs where one “profit[s] from direct infringement while declining to exercise a right to stop or limit it”); Faulkner v. Nat’l Geographic Enters. Inc., 409 F.3d 26, 40 (2d Cir. 2005) (“[T]here can be no contributory infringement absent actual infringement.”). To establish direct infringement, a plaintiff must show that (1) the plaintiff owns the copyright or copyrights at issue; and (2) the third party infringed the copyrights by unauthorized copying or distribution. See Island Software & Computer Serv., Inc. v. Microsoft Corp., 413 F.3d 257, 260 (2d Cir. 2005). 22 It is notable that major record companies, including Plaintiffs, have pursued legal action against individuals who commit direct copyright infringement, with considerable success. See, e.g., BMG Music v. Gonzalez, 430 F.3d 888 (7th Cir. 2005); Sony BMG Music Entertainment v. Tenenbaum, 07-CV-11446-NG, 2009 WL 4547019 (D. Mass. Dec. 7, 2009); Atlantic Recording Corp. v. Visione, No. 07-2268, 2008 WL 1924892 (N.D. Ill. Apr. 29, 2008); Arista Records, LLC v. Butler, No. 8:07-cv-3-T-23EAJ, 2007 WL 4557198 (M.D. Fla. Dec. 21, 2007); Atlantic Recording Corp. v. Falgout, No. 06-3784, 2007 WL 4163430 (E.D. La. Nov. 21, 2007). Plaintiffs have sued more than 6,000 LimeWire users for direct copyright infringement. They have obtained judgments against more than 700 users and settled claims against almost 4,000 users. (Coggon Decl. ¶ 4.) The damage awards and other litigation costs imposed upon individual infringers and the publicity concerning such cases have arguably had some deterrent effect on Internet users’ infringing activities through online networks. See Justin Hughes, On the Logic of Suing One’s Customers and the Dilemma of Infringement-Based Business Models, 22 Cardozo Arts & Ent. L.J. 725, 731-35 (2005) (discussing the extent to which record companies’ lawsuits against music consumers for P2P copyright infringement are increasing awareness of copyright law and deterring future infringement). 27 2. Application The evidence establishes that LimeWire users have infringed Plaintiffs’ copyrights. First, Plaintiffs have proven that they own the copyrights for the Recordings. (Pl. SUF ¶¶ 98-102.) Second, the evidence demonstrates that LimeWire users employed LimeWire to share and download the Recordings without authorization. Plaintiffs have submitted documentation and electronic storage media data showing that LimeWire users share and download unauthorized digital copies of the Recordings through LimeWire. Plaintiffs have provided hard drives that contain digital copies of the Recordings, with electronic evidence that establishes that the Recordings were downloaded by LimeWire users without authorization.23 (Exs. 466, 487.) The report from Plaintiffs’ expert, Dr. Richard Waterman, also supports a finding of direct infringement. Dr. Waterman analyzed a random sample of files available on LimeWire, and determined that 93% of those files were protected or highly likely to be protected by copyright, and thus not authorized for free distribution through LimeWire. (Waterman Report, 2-3.) Dr. Waterman also analyzed the rate at which the sample files were requested for download by LimeWire users. Based on this analysis, he estimated that 98.8% of the files requested for download through LimeWire are copyright protected and not authorized for free distribution. (Id., 7-8.) 23 A conclusive determination of whether a particular audio file was downloaded through LimeWire may be made through analysis of its “hash.” A hash is a property of a particular digital file that reflects all aspects of that file, including its content, quality and resolution, length, encoding, and any “ripping” software that has been used to transfer the file. Thus, two audio files with the same hash not only have the same sound content but also have been created using the same “ripping” software. Based on a hash-based analysis, it is clear that copyrighted digital recordings downloaded through LimeWire by Plaintiffs’ investigators, were previously digitally shared and downloaded by other LimeWire users. 28 LW argues that statistical evidence of the “availability” of copyright-protected files and of download “requests” is insufficient to establish actual infringing activity by LimeWire users. Some courts have held that “request” evidence, on its own, does not suffice to establish direct infringement. See, e.g., Arista Records, Inc. v. Mp3Board, Inc., No 00-4660, 2002 WL 1997918, at *4 (S.D.N.Y. Aug. 29, 2002) (finding that availability of infringing material on a web site did not sufficiently establish unlawful distribution or dissemination); London-Sire Records, Inc. v. Doe 1, 542 F. Supp. 2d 153, 176 (D. Mass. 2008) (“[M]erely exposing music files to the internet is not copyright infringement.”). Plaintiffs, however, do not rely solely on evidence of “requests” and “availability” of the Recordings. Rather, they have submitted substantial direct and circumstantial evidence showing infringement by LimeWire users. Dr. Waterman’s report supports this evidence, and provides context as to the scope of infringement. The Court therefore finds that LimeWire users have directly infringed Plaintiffs’ copyrights.24 The Court turns to the merits of the parties’ motions for summary judgment. B. Inducement of Copyright Infringement The evidence establishes that LW, by distributing and maintaining LimeWire, intentionally encouraged direct infringement by LimeWire users. Plaintiffs, therefore, are entitled to summary judgment on their claim against LW of inducement of copyright infringement. 1. Legal Standard In Grokster, the Supreme Court confirmed that inducement of copyright infringement constitutes a distinct cause of action. The Court held that the Grokster defendants “induced” 24 Accordingly, the Court rejects Defendants’ motion for summary judgment on this ground with respect to all claims of secondary liability. 29 copyright infringement by distributing a device with the “object of promoting its use to infringe copyright, as shown by a clear expression or other affirmative steps taken to foster infringement.” Grokster, 545 U.S. at 936-37.25 To establish a claim for inducement, a plaintiff must show that the defendant (1) engaged in purposeful conduct that encouraged copyright infringement, with (2) the intent to encourage such infringement. See id. at 937 (“The inducement rule . . . premises liability on purposeful, culpable expression and conduct, and thus does nothing to compromise legitimate commerce or discourage [lawful] innovation . . . .”); id. at 940 n.13 (“[T]he distribution of a product can . . . give rise to liability where evidence shows that the distributor intended and encouraged the product to be used to infringe.”) (emphasis added); Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1170 n.11 (9th Cir. 2007) (“Google’s activities do not meet the ‘inducement’ test explained in Grokster because Google has not promoted the use of its search engine specifically to infringe copyrights.”). A defendant’s intent to foster infringement can be established by evidence of the defendant’s “clear expression” of such an intent, or of “affirmative steps [the defendant has] taken to foster infringement.” Grokster, 545 U.S. at 936-37. Direct evidence of inducement is an “advertisement or solicitation that broadcasts a message designed to stimulate others to 25 LW argues that because the tort of “inducement” was not defined until the 2005 Supreme Court decision in Grokster, pre-2005 evidence of inducement should not be considered. (See Lime Wire Mem. Opp. Pl. Mot. for Partial Sum. J. at 11, n.8.) This argument ignores the fact that an inducement claim is a form of the long-established cause of action for contributory copyright infringement. See Grokster, 545 U.S. at 930 (“One infringes contributorily by intentionally inducing or encouraging direct infringement . . . .”); Kalem Co. v. Harper Bros., 222 U.S. 55, 62-63 (1911) (Holmes, J.) (finding contributory infringement liability appropriate where the “defendant not only expected but invoked by advertisement the [infringing] use” of its product); Gershwin Pub. Corp. v. Columbia Artist Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971) (“One who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a ‘contributory’ infringer.”) (emphasis added). The Court rejects LW’s argument. 30 commit violations.” Id. at 937. Such evidence, however, is “not [the] exclusive way of” proving inducement liability. Id. at 938. In Grokster, the Supreme Court found that three specific kinds of evidence, considered in the context of the record as a whole, supported a finding that the defendants intended to induce infringement: (1) defendants’ internal communications and advertising efforts, which evidenced a clear intent to target users of Napster, a population wellknown for committing copyright infringement through file-sharing programs; (2) defendants’ failure to develop and implement filtering tools or other means of limiting infringement; and (3) defendants’ reliance on infringing activity for the success of their business (including evidence that defendants’ advertising revenue depended on Grokster having a high volume of users, which in turn depended overwhelmingly on users’ ability to engage in infringing activities through the program). Id. at 938-39. After making these findings, the Supreme Court remanded the case to the district court to determine whether to grant Plaintiffs’ motion for summary judgment on the inducement claim. On remand, the Grokster district court found that the evidence established defendants’ unlawful intent as a matter of law, and granted plaintiffs’ motion for summary judgment. The district court based its decision on evidence that: (1) the Grokster file-sharing program was used “overwhelmingly for infringement”; (2) defendants marketed Grokster to Napster users (who were known for their infringing activities), as evidenced in defendants’ internal communications and advertising and marketing efforts; (3) defendants provided technical assistance to users seeking to infringe; (4) defendants ensured that Grokster would be capable of infringing use; (5) defendants relied on revenue that depended on users’ ability to commit infringement through the program; and (6) defendants failed to take meaningful affirmative steps to prevent or mitigate the infringement facilitated by Grokster. Grokster Remand, 454 F. Supp. 2d at 984-92. 31 2. Application The evidence before the Court establishes that LW is liable for inducement of copyright infringement. First, there is overwhelming evidence that LW engaged in purposeful conduct that fostered infringement: LW created and distributes LimeWire, which users employ to commit a substantial amount of infringement. Second, the following factors, taken together, establish that LW intended to encourage infringement by distributing LimeWire: (1) LW’s awareness of substantial infringement by users; (2) LW’s efforts to attract infringing users; (3) LW’s efforts to enable and assist users to commit infringement; (4) LW’s dependence on infringing use for the success of its business; and (5) LW’s failure to mitigate infringing activities. a. LW’s awareness of substantial infringement by LimeWire users Plaintiffs have presented evidence showing that LimeWire is used overw