SAN FRANCISCO -- A self-described "old hippie" and music producer has filed suit against Bertelsmann BMG's e-commerce unit, alleging it is helping to finance Napster Inc.'s online music-sharing service.

Matthew Katz, owner of record label San Francisco Sound, said Tuesday he is nearly out of business because of Napster's service, which allows millions to download and swap copyrighted music over the Internet.

"My business is practically out of business," he said. "I'm hoping this will bring attention that musicians are not getting what they should get."

Bertelsmann and Napster announced an accord in October that would allow Napster and Germany-based Bertelsmann to develop a secure membership-based music distribution system that will guarantee payments to artists on Bertelsmann's label.

Bertelsmann and other record companies are suing Napster, alleging the Internet site contributes to copyright infringement by allowing users to access copyrighted works for free online. The record giant said it would drop its suit once a payment system is put in place. Other record labels have not taken Bertelsmann's position.

The 9th U.S. Court of Appeals in San Francisco is weighing whether Napster can continue operating while the labels' suit goes forward in a San Francisco federal court.

Katz said the Bertelsmann-Napster accord includes a $50 million payment to Napster, and gives Bertelsmann a 40 percent stake in the Silicon Valley company. Those payments, Katz said in a suit filed in U.S. District Court in San Francisco, are propping up Napster so it can continue its service while the suit is pending.

Bertelsmann spokeswoman Melinda Meals declined comment on the suit and noted that financial terms of the accord have not been disclosed.

Katz said he has a financial interest in bands such as Jefferson Airplane, Moby Grape and It's a Beautiful Day.

The case is Katz vs. Bertelsmann, C004395BZ.<

Recommended for you

(0) comments

Welcome to the discussion.

Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
PLEASE TURN OFF YOUR CAPS LOCK.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.

Thank you for visiting the Daily Journal.

Please purchase an Enhanced Subscription to continue reading. To continue, please log in, or sign up for a new account.

We offer one free story view per month. If you register for an account, you will get two additional story views. After those three total views, we ask that you support us with a subscription.

A subscription to our digital content is so much more than just access to our valuable content. It means you’re helping to support a local community institution that has, from its very start, supported the betterment of our society. Thank you very much!