Imeem, a social networking site that was in the recording industry's crosshairs earlier this year for allowing file-sharing on its network, has pulled off an impressive feat. This summer it settled its lawsuit with Warner Music by promising to give Warner a cut of advertising revenues from the site. Now the Wall Street Journal is reporting that it's signed similar deals with all four major labels, meaning that Imeem is now the first website whose users have the music industry's blessing to share music for free. What's especially striking about this is that for the last decade, the fundamental principle of the labels' business strategy is that sharing music without paying for it is stealing. They drove Napster, AudioGalaxy, Grokster, Kazaa, and other peer-to-peer file-sharing services out of business on that basis. As we pointed out way back in 2000, all this accomplished was to drive file-sharing underground where the recording industry couldn't get a cut of the profits. Had they approached Napster in 2000 the way they approached Imeem this year, they could have been collecting ad revenue from every file-sharing transaction over the last seven years. Instead, they wasted a lot of money on lawsuits, angered a lot of their customers, and ultimately still had to concede that music sharing might be OK as long as they get a cut. The only significant difference between Napster and Imeem is that Imeem only allows you to play music on its website, whereas Napster allowed you to download songs to your hard drive. But this isn't as big of a difference as it might appear at first glance. The Imeem website doesn't provide a "download" button, but there's no DRM involved, and it's quite easy to download music files from Imeem using third-party tools. And because Imeem's site doesn't use DRM, Imeem downloading tools are probably legal under the DMCA. So what we have here is the de facto legalization of Napster-like sites, as long as the record labels get a cut of the advertising revenue. It's an exciting development, albeit one that should have happened seven years ago.

While Congress' new bill on education funding may not be as bad as some are making it out to be, it still seems quite questionable that Congress appears to be regulating the idea that universities need to do the kind of marketing and educational campaigns that the recording industry cannot. We've asked supporters of the bill to explain how it could possibly make sense to mandate such things, and the MPAA's top lawyer, Fritz Attaway, has given his answer, claiming that it's because the internet is "used primarily to allow college students to traffic in infringing content," while being subsidized by gov't funds. It would be nice if Attaway or someone else at the MPAA could actually back up the claim that the primary use of the internet by students is infringement. While I wouldn't doubt that it's a popular use, to say that it's the primary use is hard to believe -- unless you count things like visiting Facebook pages, using Google and sending emails as "infringement." At the same time, this doesn't seem to support the reasons for this bill. After all, many kids on college campuses own cars -- and I'd imagine that most of those students break the speed limit frequently enough. Yet, we don't see any bills being proposed in Congress that would prevent financial aid funding unless universities start handing out more speeding tickets and put in place plans to offer public transportation. So why should they do that for copyright infringement?

Two developments this week suggest that the recording industry is finally taking baby steps in the direction of a genuinely competitive online music market, but the progress continues to be painfully slow. First, Apple is cutting prices on DRM-free music in an apparent bid to stay competitive with Amazon's launch of a DRM-free music store last month. This is a particularly interesting development because just last year, the talk was about whether Apple would increase prices on iTunes songs. But now it's looking like further price cuts are more likely to be in the cards. Even Amazon's 89 cent price point is still a lot more expensive than eMusic, which charges around 33 cents per song. Meanwhile, Napster has unveiled a new web-based version of its music store that appears to allow people to listen to their music in their web browsers, including non-Windows PCs. The new Napster will also make it easier for you to embed your favorite music YouTube-style on other websites. Those are great new features, but it appears that the service will still require people to use Microsoft's comically-named (and increasingly irrelevant) PlaysForSure platform if they want to listen to their music on a mobile device, which is quite a handicap in an iPod-dominated market.

A bunch of folks have been submitting the latest story on a patent hoarding firm, Premier International Associates, who appears to have absolutely no other business than getting its hands on questionable, overly broad, obvious patents and then suing everyone possible. In this case, the patent is for the basic concept of a playlist, which can be found just about anywhere. So, it should come as little to no surprise that the list of companies sued is quite long, including: Microsoft, Verizon, AT&T, Sprint, Dell, Lenovo, Toshiba, Viacom, Real, Napster, Samsung, LG, Motorola, Nokia, Sandisk, HP, Acer, Gateway and Yahoo (phew!). That's quite a list, though it's not surprising to see that there are a ton of companies offering software that has a concept so basic and so obvious as a playlist.

However, there is one very interesting point here. Apple is missing from the list. As the folks over at Ars Technica figured out, Premier actually had sued Apple about this same patent back in 2005, but at the same time it was filing all these new patent lawsuits it filed to dismiss the Apple suit, suggesting that Apple most likely paid off the company (perhaps giving it the money needed to suddenly sue every other company in the universe. Apple certainly has a history of doing this. When the company was sued on a rather similar obvious patent on a hierarchical menu-based user interfaces held by Creative, it eventually (after spending some time fighting it) decided to simply pay $100 million to be left alone. Of course, all that did was allow Creative to head out and sue plenty of others. Sound familiar? By settling on these questionable patent claims, all Apple is doing is encouraging more lawsuits of this nature for itself, as well as others.

It never made sense that the various record labels and music publishers sued record label Bertelsmann for the Napster affair. Yes, it's true that Bertelsmann was the only major record label to view Napster as an opportunity rather than a threat. And it's true that Bertelsmann invested quite a bit of money into Napster. But, the other record labels' misguided complaint was with Napster -- not with Bertelsmann. The problem was that after winning the original Napster lawsuit, the other record labels realized that Napster had no money. So they sued Bertelsmann instead, for being the only record label with forward-thinking management to invest in Napster. However, it makes no sense to put any kind of liability on investors in a company. Otherwise, it would make life quite difficult for any investor today -- who could then be sued for the actions of the company he or she invested in. It would greatly increase the liability for retail investors as well as institutional investors. It's for that reason that it would have been nice to see Bertelsmann fight this case and win it.

Unfortunately, before the case had a chance to get anywhere, Universal Music (who was the first to sue Bertelsmann) bought Bertelsmann. Then, rather than sue itself, the company quickly settled that portion of the lawsuit and proceeded to settle the other portions as well, with the final part of the case finally settling late last week. Bertelsmann eventually had to pay out approximately $300 million in all of these "settlements," which is a real shame since all the company did was invest in a service that its executives (who were soon fired) realized could have revolutionized the music business. While these are all settlements, meaning that there's no court precedent, this could still encourage companies to sue investors in companies rather than the companies themselves. Venture capitalists and private equity firms might want to take note.