Bertelsmann Settles With EMI Over Napster Investment Dispute

Legal Issues

from the over-and-done-with dept

Back in the days of the original Napster, the only major label to recognize that Napster represented an opportunity, rather than a threat, was Bertelsmann (BMG). Berteslmann eventually invested in Napster before the court system shut it down and forced the assets to be sold off. After all of that happened, various other major record labels decided to punish Bertelsmann by suing the company for investing in Napster. This was quite surprising — because usually you have shareholders suing a company for its mismanagement rather than other companies suing shareholders for what a company did. It was a case that investors of all stripes (especially venture capitalists) should have been watching closely, as a finding against Bertelsmann could mean that other investors could be held liable for what the companies they invested in did. As the case went forward, things got awkward last year when Universal Music, who had kicked off the lawsuits against Bertelsmann, bought BMG, leading the two companies to quickly settle. The latest news is that Berteslmann has now settled with EMI as well, while still not admitting any liability. It’s good that Bertelsmann never needed to admit liability, but it would have been nice to have a judge point out that making investors liable for what their portfolio companies do is simply not reasonable.