LimeWire

What did it do?

LimeWire was a free peer-to-peer file-sharing program for Windows, Mac OS X, Linux and Solaris, created by Mark Gorton in 2000. Alongside the free version, New York-based Lime Wire LLC sold a paid LimeWire PRO that promised faster downloads. Running on the Gnutella network and the BitTorrent protocol, the program was known as one of the tools most widely used to download pirated music.

Why did it shut down?

In 2005 the US Supreme Court's ruling in MGM v. Grokster opened the way to holding file-sharing software companies liable for inducing infringement. In the case brought by Arista Records, federal judge Kimba Wood ruled in 2010 that LimeWire and Gorton had committed copyright infringement, engaged in unfair competition and induced others to infringe. An injunction issued on 26 October 2010 required the software's search, download, upload and sharing functions to be disabled. The company stopped distributing the software and remotely disabled new versions. In May 2011 Gorton agreed to a settlement under which the company would pay 13 record labels around $105 million.

The story

In the RIAA's new 2011 case against LimeWire, the statutory damages claimed reached $72 trillion, more than three times the world's annual gross product. The figure rested on estimates of thousands of downloads for each of 11,000 songs on the platform. The calculation was exaggerated, but it also showed the legal dead end one of the most popular file-sharing programs of the 2000s had walked into.

LimeWire was created by Mark Gorton in 2000. New York-based Lime Wire LLC distributed a free version of the program, which ran on the Gnutella network, and LimeWire PRO, sold at prices starting from $21.95 and promising faster downloads and 66 per cent better search results. The program soon became one of the best-known tools for downloading pirated music; the paid version, too, was often shared without permission over the same network.

The warning signs came early. In June 2005 The New York Times reported that the company was considering ending distribution of the program after the Supreme Court's ruling in MGM v. Grokster, a decision that gave judges a powerful tool for finding inducement to infringe. The same year the US Federal Trade Commission issued a warning about the identity-theft and litigation risks of file-sharing networks. One study found malware in 37 of 123 randomly downloaded files. The company carried on regardless.

In the case brought by Arista Records, federal judge Kimba Wood ruled in 2010 that LimeWire and Gorton had committed copyright infringement, engaged in unfair competition and induced others to infringe. An injunction issued on 26 October 2010 required the software's search, download, upload and sharing functions to be disabled. The company stopped distributing the program and remotely disabled new versions; older versions, however, kept working. In May 2011 Gorton agreed to a settlement providing for around $105 million to be paid to 13 record labels. In 2022 the LimeWire name was reused, to Gorton's displeasure, for an unrelated NFT platform.

LimeWire's story shows that a product users love cannot survive without legal footing. The Grokster ruling was a clear warning; the company did not use it to change its business model, and five years later it was shut down on the same grounds.

Lessons for founders

• If the most common use of your product is illegal, the fate of your business model will be decided in court; pursue licensing with rights holders early.
• Track precedent-setting rulings that affect your sector (such as Grokster) as a risk signal and update your strategy accordingly.
• Revenue from a paid tier does not offset the legal risk of a product built on unlicensed content; build the revenue model and the legal footing together.

Sources

1. LimeWire (Wikipedia)
2. Court shuts down LimeWire music-sharing service (Reuters, 2010-10-26)
3. LimeWire shut down by federal court (The Guardian, 2010-10-27)

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