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TONIA OUELLETTE KLAUSNER _TOK-8279_ WILSON SONSINI GOODRICH

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TONIA OUELLETTE KLAUSNER _TOK-8279_ WILSON SONSINI GOODRICH Powered By Docstoc
					TONIA OUELLETTE KLAUSNER (TOK-8279)
WILSON SONSINI GOODRICH & ROSATI, P.C.
1301 Avenue of the Americas, 40th Floor
New York, New York 10019
(212) 999-5800

DAVID H. KRAMER (admitted pro hac vice)
WILSON SONSINI GOODRICH & ROSATI, P.C.
650 Page Mill Road
Palo Alto, CA 94304
(650) 493-9300
Attorneys for Defendants and Counterclaimants

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
                                                            )   ECF Case
EMI ENTERTAINMENT WORLD, INC., et al.                       )
                                                            )   Civil Action No.:
                                                            )   07-CV-232 (PAC) (DCF)
                             Plaintiffs,                    )
       v.                                                   )   ANSWER TO FIRST
                                                            )   AMENDED COMPLAINT
PREMIUM WIRELESS SERVICES, INC., et al.                     )   WITH COUNTERCLAIMS
                                                            )   AND DEMAND FOR
                             Defendants.                    )   JURY TRIAL
                                                            )
                                                            )


       Defendants Infospace Mobile, Inc. (for itself and as successor to Premium Wireless

Services USA, Inc. and Premium Wireless Services USA, Inc. d/b/a Moviso), Premium Wireless

Services, Inc. Canada (“PWS Canada”), Moviso LLC, and Infospace, Inc. (collectively,

“Defendants”) hereby answer the First Amended Complaint (the “Complaint”) of Plaintiffs EMI

Entertainment World, Inc. (“EMI”), Avon Gate Music, Inc., Barham Boulevard Music, Inc.,

Beechwood Music Corp., Burbank Plaza Music, Inc., Carwin Music Inc., Colgems-EMI Music

Inc., Combine Music Corp., EMI Affiliated Catalog Inc., EMI Al Gallico Music Corp., EMI

Algee Music Corp., EMI April Music Inc., EMI Belfast Music, Inc., EMI BMPC Corp., EMI

Blackwood Music Inc., EMI Brillig Music, Inc., EMI Duce Music, Inc., EMI Easy Listening

Music Corp., EMI Feist Catalog Inc., EMI Gold Horizon Music Corp., EMI Golden Torch Music
Corp., EMI Grove Park Music, Inc., EMI Hastings Catalog Inc., EMI Intertrax Music Inc., EMI

Jemaxal Music Inc., EMI Miller Catalog Inc., EMI Mills Music, Inc., EMI Mogull, Inc., EMI

Norbud Music, Inc., EMI NTM Holdings, Inc., EMI PST Holdings, Inc., EMI Robbins Catalog

Inc., EMI Sosaha Music Inc., EMI Slithy Songs, Inc., EMI TSM Holdings, Inc., EMI U Catalog,

Inc., EMI Unart Catalog Inc., EMI Variety Catalog Inc., EMI Vine Music, Inc., EMI Virgin

Music, Inc., EMI Virgin Songs, Inc., EMI Waterford Music, Inc., EMI Worldtrax Music, Inc.,

Foray Music, Glenwood Music Corp., Jobete Music Co., Inc., New Tandem Music, Inc., Screen

Gems-EMI Music Inc., Stone Diamond Music Corporation, Triple Star Music, Inc., EMI Full

Keel Music, EMI Longitude Music, and Fun Glenwood Music Corp. (collectively, “Plaintiffs”)

as follows. To the extent not explicitly admitted, all allegations of the Complaint are denied.

                                    NATURE OF DISPUTE
       1. Defendants deny the allegations in paragraph 1.

       2. Defendants admit that EMI, Beechwood Music Corporation, B. Feldman and

Company Ltd., Colgems-EMI Music Inc., Combine Music Corporation, Donna Music Ltd., EMI

April Music Ind., EMI Blackwood Music Inc., EMI Feist Catalog Inc., EMI Gold Horizon Music

Corporation, EMI Miller Catalog Inc., EMI Mills Music, Inc., EMI Music Publishing Lid., EMI

Robbins Catalog Inc., EMI U Catalog Inc., EMI Unart Catalog Inc., EMI Vine Music, Inc., EMI

Virgin Music Ltd., EMI Virgin Music, Inc., EMI Virgin Songs, Inc., Hit & Run Music

(Publishing) Ltd., Jobete Music Co., Inc., Keith Prowse Music Pub. Co. Ltd., Queen Music Ltd.,

Robbins Music Corporation Ltd. and Screen Gems-EMI Music, Inc. brought a lawsuit in 2000

alleging copyright infringement against Global Music One LLC (“GMO”) and its Chairman

Ralph Simon. Otherwise Defendants deny the allegations in paragraph 2.

       3. Defendants deny the allegations in paragraph 3.




                                                -2-
                                    SUMMARY OF CLAIMS

       4. Defendants admit that: Infospace Mobile, Inc. (f/k/a Premium Wireless Services

USA, Inc., and/or Premium Wireless Services USA, Inc. d/b/a Moviso) and PWS Canada

(collectively, the “Infospace Subsidiaries”) are or have been providers of musical content to

certain mobile operators; the Infospace Subsidiaries, together with certain mobile operators,

provide various types of downloadable content to consumers, including “ringtones” for use on

cellular phones: a “ringtone” is a digital snippet of music that a mobile phone user may select (by

downloading from a service such as the Infospace Subsidiaries’) to signal an incoming call; the

ringtones at issue do not embody actual sound recordings of popular artists; and certain of the
Infospace Subsidiaries created monophonic and/or polyphonic ringtones. Defendants are

without knowledge or information sufficient to form a belief as to the truth as to the allegation in

the first sentence of Paragraph 4, and on that basis deny the allegation. Otherwise Defendants

deny the allegations in paragraph 4.

       5. Defendants admit that: in accordance with certain license agreements between EMI

Entertainment World, Inc., as licensor, and Premium Wireless Services USA, Inc. (“PWS USA”)

and PWS Canada as licensees (collectively, the “Licensees”), Plaintiffs provided lists of

available musical compositions they claimed to hold an interest in for licensing and distribution

as ringtones (the “EMI Ringtones”) by the Licensees and through third-party websites and

mobile networks; the Licensees agreed to pay a royalty to Plaintiffs for every downloaded EMI

Ringtone; throughout the term of the license agreement, EMI and Licensees generated

substantial revenue from customers downloading Ringtones during the term of the license

agreements. Otherwise Defendants deny the allegations in paragraph 5.

       6. Defendants admit that: in 2005 and early 2006, Infospace, Inc. did not have complete

records for the period prior to its acquisition of Moviso LLC on site; that the parties negotiated a

non-disclosure agreement; and that Plaintiffs’ agent falsely reported that: (i) Infospace, Inc.

and/or its subsidiaries or predecessors owed additional royalties, fees and interest to Plaintiffs in

an amount in excess of $10 million; and (ii) it was possible that further underpayment of




                                                 -3-
royalties might exist but could not be determined because of lack of documentation. Otherwise

Defendants deny the allegations in paragraph 6.

        7. Defendants deny the allegations in paragraph 7.

        8. Defendants admit that the Infospace Subsidiaries, with EMI’s full knowledge and

consent, and indeed at EMI’s urging, continued to offer certain EMI Ringtones for download

after May 30, 2006 and until Plaintiffs filed this action. Otherwise Defendants deny the

allegations in paragraph 8.

        9. Defendants deny the allegations in paragraph 9, and specifically deny that Plaintiffs
are entitled to benefit for their complaint in this action.
                                              PARTIES

        10. Defendants are without knowledge or information sufficient to form a belief as to the

truth of the allegations in Paragraph 10, and on that basis deny the allegations therein.

        11. Defendants deny the allegations in paragraph 11.

        12. Defendants deny the allegations in paragraph 12.

        13. Defendants admit that PWS Canada is a Canadian corporation, and that PWS Canada

is a wholly owned subsidiary of Moviso LLC, which is a wholly owned subsidiary of Infospace,

Inc. Otherwise Defendants deny the allegations in paragraph 13.

        14. Defendants admit that: Moviso LLC is a California limited liability corporation with
a place of business at 10904 Wilshire Boulevard, 9th Floor, Los Angeles, California 90024, and

that Moviso LLC is a wholly owned subsidiary of Infospace, Inc. Otherwise Defendants deny

the allegations in paragraph 14.

        15. Defendants admit that: Infospace Mobile, Inc. is a California corporation with a

place of business at 10904 Wilshire Boulevard, 9th Floor, Los Angeles, California 90024;
Infospace Mobile, Inc. was formerly known as Premium Wireless Services USA, Inc. and/or

Premium Wireless Services USA, Inc. d/b/a Moviso; and Infospace Mobile, Inc. is a wholly




                                                  -4-
owned subsidiary of Moviso LLC, which is a wholly owned subsidiary of Infospace, Inc.

Otherwise Defendants deny the allegations in paragraph 15.

       16. Defendants admit that: Infospace, Inc. is a Delaware corporation with a place of

business at 601 108th Avenue NE, Suite 1200, Bellevue, Washington 98004; and Infospace, Inc.

acquired Moviso LLC, which at the time of acquisition owned PWS USA and PWS Canada.

Otherwise Defendants deny the allegations in paragraph 16.

       17. Defendants deny the allegations in Paragraph 17.

       18. Defendants admit that in its Form 10-Q, filed November 2, 2004 with the S.E.C.,

Infospace, Inc., on behalf of itself and its subsidiaries that comprise Infospace, Inc.’s “Mobile

division,” stated that the Mobile division “had relationships with many leading wireless carriers,

. . . and media publishers, including . . . EMI”; and that in its Form 10-Q, filed with the S.E.C. on

November 7, 2006, Infospace, Inc., on behalf of itself and its subsidiaries that comprise

Infospace, Inc.’s “Mobile business,” reported an increase in revenue in the Mobile business

“primarily attributable to an increase in sales of our media download products, such as ringtones

and graphics.” Otherwise Defendants deny the allegations in paragraph 18.

       19. Defendants deny the allegations in paragraph 19.

       20. Defendants deny the allegations in Paragraph 20.

       21. Defendants deny the allegations in Paragraph 21.
                                 JURISDICTION AND VENUE

       22. Defendants admit the Court has subject matter jurisdiction over the claims asserted by

the copyright plaintiffs. Otherwise Defendants deny the allegations in Paragraph 22.

       23. Defendants deny the allegations in Paragraph 23.
       24. Defendants deny the allegations in Paragraph 24.
                                  FACTUAL ALLEGATIONS

       25. Defendants are without knowledge or information sufficient to form a belief as to the

truth of the allegations in Paragraph 25, and on that basis deny the allegations therein.




                                                 -5-
       26. Defendants are without knowledge or information sufficient to form a belief as to the

truth of the allegations in Paragraph 26, and on that basis deny the allegations therein.

       27. Defendants are without knowledge or information sufficient to form a belief as to the

truth of the allegations in Paragraph 27, and on that basis deny the allegations therein.

       28. Defendants admit that Exhibit A to the Complaint lists musical compositions together

with their alleged copyright registration numbers. Defendants are without knowledge or

information sufficient to form a belief as to the truth of the allegation in Paragraph 28 that

Plaintiffs are the owners of copyrights in and to the musical compositions at issue and have
complied in all respects with all applicable laws in securing copyright registrations and

protecting and maintaining their rights, and on that basis deny the allegation. Otherwise

Defendants deny the allegations in paragraph 28.

       29. Defendants are without knowledge or information sufficient to form a belief as to the

truth of the allegations in Paragraph 29, and on that basis deny the allegations therein.

       30. Defendants admit that certain of the Infospace Subsidiaries are providers and

publishers of mobile content, products and services that assist customers with finding

personalization tools and entertainment for mobile phones and that through a website located at

http://www.moviso.com (“moviso.com”), the Infospace Subsidiaries provide media products and

content, including ringtones, to consumers. Otherwise Defendants deny the allegations of
paragraph 30.

       31. Defendants admit that certain of the Infospace Subsidiaries provide or have provided

media products, content and related services to certain mobile operators that allow such operators

to use their websites (the “Third Party Websites”) to deliver content, including ringtones, to

mobile subscriber. Otherwise Defendants deny the allegations in paragraph 31.

       32. Defendants admit that the Infospace Subsidiaries acquire or did acquire the rights to

certain content they make available to mobile carriers for downloading by their customers onto

wireless devices through licensing agreements with content owners, such as Plaintiffs.

Otherwise Defendants deny the allegations in paragraph 32.




                                                 -6-
       33. Defendants admit that Infospace, Inc. acquired Moviso LLC, which is the parent

company of the Infospace Subsidiaries. Otherwise Defendants deny the allegations in paragraph

33.

       34. Defendants admit that in or about August 2000, EMI, Beechwood Music Corporation,

B. Feldman and Company Ltd., Colgems-EMI Music Inc., Combine Music Corporation, Donna

Music Ltd., EMI April Music Ind., EMI Blackwood Music Inc., EMI Feist Catalog Inc., EMI

Gold Horizon Music Corporation, EMI Miller Catalog Inc., EMI Mills Music, Inc., EMI Music

Publishing Lid., EMI Robbins Catalog Inc., EMI U Catalog Inc., EMI Unart Catalog Inc., EMI
Vine Music, Inc., EMI Virgin Music Ltd., EMI Virgin Music, Inc., EMI Virgin Songs, Inc., Hit

& Run Music (Publishing) Ltd., Jobete Music Co., Inc., Keith Prowse Music Pub. Co. Ltd.,

Queen Music Ltd., Robbins Music Corporation Ltd. and Screen Gems-EMI Music, Inc. brought

a lawsuit alleging copyright infringement against GMO and its Chairman Ralph Simon.

Otherwise Defendants deny the allegations in Paragraph 34.

       35. Defendants admit that: on or about May 31, 2001, EMI and PWS USA, incorrectly

identified as Premium Wireless Services, Inc. in the agreement, entered into a one-year ringtone

license agreement (the “2001 Ringtone License”) covering the United States and Canada;

pursuant to the 2001 Ringtone License, EMI granted a license to PWS USA to arrange and

record certain musical compositions to create “EMI Ringtones” from certain catalogues of
musical compositions for which EMI claimed to control the music publishing rights; and certain

EMI Ringtones were then made available to mobile carriers for downloading by their customers

onto wireless devices. Otherwise Defendants deny the allegations in paragraph 35.

       36. Defendants admit the language of paragraph 2(b) of the 2001 Ringtone License.

Defendants are without knowledge or information sufficient to form a belief as to the truth of the

remaining allegations in paragraph 36 and on that basis deny those allegations.

       37. Defendants admit that: under the 2001 Ringtone License, PWS USA was to pay to

EMI Entertainment World, Inc. (i) a recoupable advance of $10,000, and (ii) “a Royalty equal to

Publisher’s Prorata Share of US$.0755 (or the equivalent of the current statutory mechanical rate




                                               -7-
at the time of the transaction) for each Download Sold to a consumer”. Otherwise Defendants

deny the allegations of paragraph 37.

        38. Defendants admit the language of paragraph 6(c) of the 2001 Ringtone License, but

deny that EMI has accurately characterized the language. Defendants otherwise deny the

allegations in paragraph 38.

        39. Defendants admit that paragraph 6(c) of the 2001 License Agreement provides in part

that:

             EMI, by its designated representative, shall have the right, upon
             reasonable written notice, and during normal office hours, to
             examine the books and records of Licensee, at Licensee’s regular
             place of business where the books and records are maintained, as
             the same pertain to the subject matter of this Agreement and to
             make copies and extracts thereof. Licensee shall cooperate with
             EMI’s representative to assist them in understanding all such
             material. If, as a result of any audit, it is determined that Licensee
             has understated the royalties due to Publisher, Licensee shall
             immediately pay to Publisher the amount of such underpayment.
             If, as a result of any audit, it is determined that Licensee has
             understated the royalties due to Publisher by ten (10%) percent or
             more, Licensee shall pay to EMI the amount by which royalties
             have been understated and shall reimburse EMI for the cost of the
             audit.
Otherwise Defendants deny the allegations in paragraph 39.

        40. Defendants admit that: Paragraph 6(f) of the 2001 License Agreement provides in

part that “Licensee shall reimburse EMI, within five (5) days from receipt of its invoice, for

EMI’s reasonable attorney’s fees and costs arising out of the occurrence of any Default Event (as
defined in paragraph 11), including, without limitation, any failure by Licensee timely to render

statements and account to Publisher with respect to royalties which accrue to Publisher in

connection with Licensee’s exploitation of its rights pursuant to the applicable provisions

hereof”; Paragraph 11(a) of the 2001 License Agreement defines “Event of Default” to include

“Licensee’s failure or inability to fulfill any of its material obligations hereunder”; and that

paragraph 8(d) of the 2001 License Agreement states in part that Licensee “will fully indemnify

EMI (and each Publisher . . . from any and all liabilities . . . which may be occasioned, suffered

or incurred by EMI (and each Publisher), . . . resulting from or in connection with any breach or




                                                 -8-
threatened breach by Licensee of any of the terms, covenants, representations and warranties

contained herein . . . .” Otherwise Defendants deny the allegations in paragraph 40.

       41. Defendants admit that: on or about June 1, 2002, EMI entered into a Ringtone

License agreement with PWS USA and PWS Canada initially covering the United States and

Canada (the “2002 Ringtone License”); pursuant to the 2002 Ringtone License, EMI granted a

license to PWS USA and PWS Canada to arrange and record certain musical compositions to

create “EMI Ringtones” from certain catalogues of musical compositions for which EMI

controlled the music publishing rights; the 2002 Ringtone License provided that Licensees could
sell Downloads of the EMI Ringtones, on and through the “Network”; and “Network” was

defined to include “Approved Third Party Websites,” which included among others,

www.voicestream.com, www.verizon.com, www.motown.com, www.universalmusic.com, and

http://wireless.sonymusic.com. Otherwise Defendants deny the allegations in paragraph 41.

       42. Defendants admit that the grant of rights under the 2002 Ringtone License was to

“Approved Compositions,” that the list of Approved Compositions could be expanded by

Publisher, and that Licensees could seek and obtain clearance of additional Compositions for use

in the creation of EMI Ringtones. Otherwise Defendants deny the allegations of paragraph 42.

       43. Defendants admit that Paragraph 2(c) of the 2002 Ringtone License provides that:

             Publisher reserves the right to prevent any Compositions from
             falling under the terms and conditions of this Agreement. For
             example, but without limitation, as of the date hereof,
             Compositions written in whole or in part by Tracy Chapman, John
             Lennon, Jeff Lynne, Carole King, John Mellencamp, Rod Stewart,
             James Taylor, Vangelis and Stevie Wonder, and the members of
             the recording artists known as Aerosmith, Foo Fighters, Matchbox
             20, Nirvana, Tool and Red Hot Chili Peppers, are not available.
Otherwise Defendants deny the allegations in paragraph 43.

       44. Defendants admit that: under the 2002 Ringtone License, PWS USA and PWS

Canada were each to pay to “Publisher” (i) a recoupable advance of U.S.$10,000, and (ii)

“Publisher’s Prorata Share of, an amount equal to ten (10%) percent of the retail selling price of

each Download Sold to a consumer” in the United States and Canada “with a minimum royalty




                                                -9-
for each Download Sold of (Publisher’s Prorata Share of) Ten (US$.10) Cents. Otherwise

Defendants deny the allegations of paragraph 44.

        45. Defendants admit that the 2002 Ringtone License called for Royalties under the

Agreement to be paid on a quarterly basis and be accompanied by Royalty statements, and that

the 2002 Ringtone License called for PWS USA and PWS Canada to “to keep and maintain true

and accurate records and books of account in connection with the sale of Downloads and all

transactions related thereto or otherwise contemplated under this Agreement, and shall retain all

such records and books for a period of not less than three (3) years after each accounting to
Publisher.” Otherwise Defendants deny the allegations in paragraph 45.

        46. Defendants admit that paragraph 7(c) of the 2002 Ringtone License provides in part

that:

             Publisher, by its designated representative, shall have the right,
             upon reasonable written notice, and during normal office hours, to
             examine the books and records of Licensee, at Licensee’s regular
             place of business where the books and records are maintained, as
             the same pertain to the subject matter of this Agreement and to
             make copies and extracts thereof. Licensee shall cooperate with
             Publisher’s representative to assist them in understanding all such
             material. If, as a result of any audit, it is determined that Licensee
             has understated the royalties due to Publisher, Licensee shall
             immediately pay to Publisher the amount of such underpayment.
             If, as a result of any audit, it is determined that Licensee has
             understated the royalties due to Publisher by ten (10%) percent or
             more, Licensee shall pay to Publisher the amount by which
             royalties have been understated and shall reimburse Publisher for
             the cost of the audit.
Otherwise Defendants deny the allegations in paragraph 46.

        47. Defendants admit that: Paragraph 7(f) of the 2002 Ringtone License provides in part

that “Licensee shall reimburse Publisher, within five (5) days from receipt of its invoice, for

Publisher’s reasonable attorney’s fees and costs arising out of the occurrence of any Default

Event (as defined in paragraph 14), including, without limitation, any failure by Licensee timely

to render statements and account to Publisher with respect to royalties which accrue to Publisher

in connection with Licensee’s exploitation of its rights pursuant to the applicable provisions

hereof”; Paragraph 14(a) of the 2002 Ringtone License defines “Event of Default” to include




                                                -10-
“Licensee’s failure or inability to fulfill any of its material obligations hereunder”; and that

paragraph 10(d) of the 2002 Ringtone License calls for Licensee “to fully indemnify Publisher . .

. from any and all liabilities . . . which may be occasioned, suffered or incurred by Publisher, . . .

resulting from or in connection with any breach or threatened breach by Licensee of any of the

terms, covenants, representations and warranties contained herein . . . .” Otherwise Defendants

deny the allegations in paragraph 47.

       48. Defendants admit the allegations in Paragraph 48.

       49. Defendants admit the allegations in Paragraph 49.
       50. Defendants admit the allegations in Paragraph 50.

       51. Defendants admit the allegations in Paragraph 51.

       52. Defendants admit the allegations in Paragraph 52.

       53. Defendants admit the allegations in Paragraph 53.

       54. Defendants deny the allegations of paragraph 54.

       55. Defendants deny the allegations in Paragraph 55.

       56. Defendants admit that by letter dated August 12, 2005, Plaintiffs provided notice to

PWS USA of EMI’s intention, pursuant to ¶6(c) of the 2001 Ringtone License and ¶7(c) of the

2002 Ringtone License, to audit PWS USA’s “books and records, and verify the accuracy of all

accounts and statements . . . for the statement periods from inception through the period ending
June 30, 2005.”

       57. Defendants admit that by letter dated September 1, 2005 to Infospace, Inc. EMI’s

agent, Gelfand, Rennert & Feldman L.L.P. (“GRF”) requested that certain documents and

information be made available for review by GRF. Defendants refer the Court to the September

1, 2005 letter for its content. Defendants are without knowledge or information sufficient to

form a belief as to the truth of whether the items requested by GRF “included standard items

typically reviewed during a royalty audit,” and on that basis deny the allegation. Otherwise

Defendants deny the allegations in paragraph 57.




                                                 -11-
       58. Defendants admit that they requested that the parties negotiate a non-disclosure

agreement to govern EMI’s review of its subsidiaries’ records, which is standard procedure in

the industry. Otherwise Defendants deny the allegations in paragraph 58.

       59. Defendants admit that non-disclosure agreements are commonly used in royalty

reviews involving licenses of musical compositions, and that the parties negotiated the terms of

the non-disclosure agreement to govern EMI’s review of records. Otherwise Defendants deny

the allegations in paragraph 59.

       60. Defendants admit that complete books and records for the years prior to November
2003 were not on site at Infospace, Inc. Defendants otherwise deny the allegations in paragraph

60.

       61. Defendants admit that certain of the back-up materials provided to GRF during EMI’s

review of records comported perfectly with the royalty reports. Otherwise Defendants deny the

allegations in paragraph 61.

       62. Defendants admit that EMI’s agent, GRF, claimed that it discovered deficiencies in

the royalty amounts paid by the Infospace Subsidiaries and that Plaintiffs have listed in

paragraph 62 those claimed deficiencies, but Defendants deny that such deficiencies actually

existed. Otherwise Defendants deny the allegations in paragraph 62.

       63. Defendants deny the allegations in Paragraph 63.
       64. Defendants deny the allegations in Paragraph 64.

       65. Defendants admit that: EMI’s agent GRF claimed that more than $6 million was due

for EMI Ringtones for the period from December 6, 2000 through December 31, 2002; and

Plaintiffs received at least $142,872 in royalty payments attributable to that period. Defendants

deny that GRF’s “estimates” have any merit and otherwise deny the allegations in paragraph 65.

       66. Defendants admit that in a report dated July 6, 2006, EMI’s agent claimed that EMI

was owed more than $10 million in royalties, fees and interest, and EMI’s agent further claimed

that it was possible that additional amounts could also be due under the 2001 and 2002 Ringtone

Licenses (together, the “Ringtone Licenses”) but could not be determined because of lack of




                                               -12-
documentation. Defendants dispute GRF’s claims and otherwise deny the allegations in

paragraph 66.

       67. Defendants admit that by letter dated July 20, 2006, Plaintiffs provided written notice

that the review conducted by its agent had resulted in what Plaintiffs claimed were findings of

incorrect accounting and provided written notice of Plaintiffs’ objection to “all Infospace

statements submitted during the Audit Period.” Otherwise Defendants deny the allegations in

paragraph 67.

       68. Defendants deny the allegations in paragraph 68.
       69. Defendants admit that the Infospace Subsidiaries made EMI Ringtones available for

download after May 30, 2006, and state that they did so with EMI’s knowledge and consent, and

at EMI’s urging. Otherwise Defendants deny the allegations in paragraph 69.

       70. Defendants deny the allegations in paragraph 70.

       71. Defendants admit that EMI sent a letter dated November 17, 2006 to Infospace, Inc.

and refer the Court to the November 17, 2006 letter for its contents. Otherwise Defendants deny

the allegations in paragraph 71.

       72. Defendants admit that by letter dated November 29, 2006, Infospace, Inc. responded

to EMI’s demand and, while strongly contesting its methodology and conclusions, proposed to

settle the dispute, and further stated that “[i]f EMI chooses to reject the settlement offer,
Infospace will deem the rejection as a notice of removal pursuant to Section 2(d) of the license

agreement and remove EMI-published compositions from its catalogue and all distribution

channels. . . .” Otherwise Defendants deny the allegations in paragraph 72.

       73. Defendants admit that they received no response to the November 29 letter, and no

other direction from EMI to cease use of EMI compositions and ringtones. Otherwise

Defendants deny the allegations in paragraph 73.

       74. Defendants admit that: the Infospace Subsidiaries made EMI Ringtones available for

download after May 30, 2006; the Infospace Subsidiaries made payments for royalties for




                                                 -13-
downloads occurring after May 30, 2006; and EMI continued to accept payment for such

downloads. Otherwise Defendants deny the allegations in paragraph 74.
                                 FIRST CLAIM FOR RELIEF

        75. Defendants repeat and reallege their responses to paragraphs 1 through 74 as if fully

set forth herein.

        76. Defendants are without knowledge or information sufficient to form a belief as to the

truth of the allegations in paragraph 76, and on that basis deny the allegations.

        77. Defendants deny the allegations in paragraph 77.

        78. Defendants admit that PWS USA (later re-named Infospace Mobile, Inc.) undertook
the obligation to perform under the 2001 Ringtone License. Otherwise Defendants deny the

allegations in paragraph 78.

        79. Defendants deny the allegations in paragraph 79.

        80. Defendants deny the allegations in paragraph 80.
                                SECOND CLAIM FOR RELIEF

        81. Defendants repeat and reallege their responses to paragraphs 1 through 80 as if fully

set forth herein.

        82. Defendants are without knowledge or information sufficient to form a belief as to the
truth of the allegations in paragraph 82, and on that basis deny the allegations.

        83. Defendants deny the allegations in paragraph 83.

        84. Defendants admit that PWS USA (later renamed Infospace Mobile, Inc.) and PWS

Canada undertook the obligation to perform under the 2002 Ringtone License. Otherwise

Defendants deny the allegations in paragraph 84.

        85. Defendants are without knowledge or information sufficient to form a belief as to the

truth of the allegations in paragraph 85, and on that basis deny the allegations.

        86. Defendants deny the allegations in paragraph 86.

        87. Defendants deny the allegations in paragraph 87.




                                                -14-
                                   THIRD CLAIM FOR RELIEF

        88. Defendants repeat and reallege their responses to paragraphs 1 through 87 as if fully

set forth herein.

        89. Defendants admit that Plaintiffs have identified in Exhibit A to the Complaint the

copyrights they claim in this action were infringed. Defendants are without knowledge or

information sufficient to form a belief as to the truth as to whether Plaintiffs are the owners of all

right title and interest in and to their music catalogues and the musical compositions and

copyright registrations therein, and on that basis deny the allegation. Defendants otherwise deny

the allegations in paragraph 89.
        90. Defendants deny the allegations in paragraph 90.

        91. Defendants deny the allegations in Paragraph 91.

        92. Defendants deny the allegations in paragraph 92.

        93. Defendants admit that the Infospace Subsidiaries made certain EMI Ringtones

available for download after May 30, 2006, but deny they were not authorized to do so and

otherwise Defendants deny the allegations in paragraph 93.

        94. Defendants deny the allegations in paragraph 94.

        95. Defendants deny the allegations in paragraph 95.
                                            DEFENSES

                                           First Defense
        96. The Complaint fails to state a claim upon which relief can be granted.

                                          Second Defense
        97. Plaintiffs’ claims are barred or limited by virtue of Plaintiffs’ license to Defendants,

and/or by other publishers’ licenses to Defendants.

                                           Third Defense
        98. Plaintiffs’ claims are barred or limited by estoppel.

                                          Fourth Defense
        99. Plaintiffs’ claims are barred or limited by acquiescence.




                                                 -15-
                                             Fifth Defense
       100.    Plaintiffs’ claims are barred or limited by waiver.

                                             Sixth Defense
       101.    Plaintiffs’ claims are barred or limited by the applicable statutes of limitations.

                                            Seventh Defense
       102.    Plaintiffs’ claims are barred or limited because of Plaintiffs’ unclean hands.

                                            Eighth Defense
       103.    Plaintiffs’ claims are barred or limited by the doctrine of laches.

                                             Ninth Defense
       104.    Plaintiffs’ claims are barred or limited by the doctrine of accord and satisfaction.

                                             Tenth Defense
       105.    Plaintiffs’ claims are barred, in whole or in part, because certain of the Plaintiffs

do not have standing and/or capacity to assert any or all of the causes of action alleged in the

Complaint.

                                            Eleventh Defense
       106.    To the extent that Plaintiffs suffered any damage or injury, which Defendants

expressly deny, Plaintiffs failed to take the necessary steps to mitigate the damage or injury

sustained.

                                            Twelfth Defense
       107.    Plaintiffs’ claims are barred or limited by the doctrine of copyright misuse.

                                        Thirteenth Defense
       108.    Plaintiffs’ claims are barred or limited on the grounds that the license agreements

they seek to enforce are unenforceable, in whole or in part.

                                        Fourteenth Defense
       109.    Plaintiffs’ claims are barred, in whole or in part, because provisions of the

contracts at issue violate public policy.




                                                  -16-
        WHEREFORE, Defendants respectfully request that the Court enter an Order:

        (a) that Plaintiffs take nothing by way of their Complaint;

        (b) entering judgment in favor of Defendants and against Plaintiffs, and dismissing

Plaintiffs’ action in its entirety with prejudice;

        (c) awarding Defendants the costs of defending against this lawsuit, including reasonable

attorneys’ fees; and

        (d) awarding such other and further relief as the Court deems just and proper.

                                        COUNTERCLAIMS
        Defendant and Counterclaimants Infospace Mobile, Inc. and Premium Wireless Services
Inc. Canada (collectively “Infospace Mobile”), by and through their undersigned counsel, allege

as follows as their counterclaims against EMI Entertainment World, Inc. (“EMI”):

                           NATURE AND SUMMARY OF DISPUTE
        1.      During the time frame at issue in EMI’s Complaint, Infospace Mobile, both on

its own and in conjunction with certain operators of mobile telephone services, provided

various types of digital content such as games, wallpaper and “ringtones” for downloading onto

wireless devices. A ringtone is a snippet of music that a mobile phone user may download

from a service and use to signal an incoming call on her mobile phone. Infospace Mobile and

the mobile carriers with whom it had relationships generally charged a small per-download fee

to subscribers who downloaded ringtones.

        2.      Until shortly after the commencement of this suit, included among the ringtones

Infospace Mobile made available for download were monophonic and polyphonic ringtones of

musical compositions to which Plaintiff-Counterdefendant EMI claims to hold or control the

publishing rights (hereinafter “EMI Ringtones”).

        3.      EMI, in conjunction with its affiliated music publishing entities, on information

and belief, owns or controls the publishing rights to numerous musical compositions from

leading songwriters.




                                                     -17-
        4.     Between May 31, 2001, and January 11, 2007, Infospace Mobile and EMI were

parties to a ringtone license agreement. Pursuant to this agreement, EMI granted Infospace

Mobile the right to create and sell EMI Ringtones in exchange for the payment of specified

royalties.

        5.     At times the agreement between Infospace Mobile and EMI was memorialized

in a formal written contract. At other times, the agreement was implied by the conduct of the

parties, the course of dealing of the parties, and industry custom, all of which were to continue

or extend licensing agreements without a formal written agreement following the end date of a
written agreement’s specified term.

        6.     During periods following the stated term of a formal written licensing

agreement, Infospace Mobile continued to offer EMI Ringtones, to provide royalty reports to

EMI, and to pay royalties for EMI Ringtones that had been downloaded. During such periods,

EMI continued to communicate with Infospace Mobile about compositions that had been newly

approved or were no longer available for use in EMI Ringtones, to encourage Infospace Mobile

to continue making EMI Ringtones available for download, to accept royalty payments from

Infospace Mobile and to treat Infospace Mobile in all respects as it had during the specified

term of the written agreement.

        7.     Upon information and belief, such continued dealing under an implied contract
is standard in the music publishing industry.

        8.     Upon information and belief, EMI has dealt with other music licensees in a

manner that continued or extended a formal written licensing agreement by conduct after the

specified term of the agreement.

        9.     The course of conduct between EMI and Infospace Mobile during the period

between May 30, 2006 and the date on which EMI filed this action was substantially the same

as that during any other period in the five-year contractual relationship between the parties.

        10.    Between May 30, 2006 and January 11, 2007, EMI and Infospace Mobile

continued to communicate on a regular basis concerning the availability of songs for use as




                                                -18-
EMI Ringtones and Infospace Mobile continued to provide royalty reports reflecting EMI

Ringtones that had been downloaded, each time specifically referring to the existence of a

license agreement between the parties. Infospace Mobile continued making royalty payments,

and EMI continued to accept such payments.

       11.     At no time between May 30, 2006 and November 17, 2006 did EMI claim that

Infospace Mobile's continued use of EMI Ringtones was unauthorized.

       12.     At no time between May 30, 2006 and the filing of this lawsuit did EMI direct

Infospace Mobile to cease its use of EMI Ringtones.
       13.     Despite the existence of a continuing contractual relationship, which included

EMI’s repeated urgings of Infospace Mobile to offer new EMI Ringtones, and Infospace

Mobile’s continued payment of and EMI’s continued acceptance of payment of royalties, on

January 11, 2007, EMI filed this action and made the claim that Infospace Mobile’s conduct in

making available EMI Ringtones after May 30, 2006 was unlicensed and therefore EMI was

entitled to “in excess of $100 million” in damages for willful copyright infringement.

       14.     By filing this action and anticipatorily repudiating its agreement to license

compositions to Infospace Mobile for another year, EMI breached the license agreement

between the parties, including the covenant not to sue that is the heart of the license agreement.

       15.     EMI’s conduct in inducing Infospace Mobile to continue to make EMI
Ringtones available for download after May 30, 2006 and then claiming Infospace Mobile

committed copyright infringement because Infospace Mobile continued to make EMI

Ringtones available for download after May 30, 2006, thereby interfering with and reducing the

value of Infospace Mobile’s contracts with mobile carriers is sufficiently egregious to warrant

punitive damages against EMI in addition to monetary compensation for the damages caused

by EMI’s premature termination of its licensing agreement with Infospace Mobile and

interference with Infospace Mobile’s third-party contracts and relationships.




                                                -19-
                                          The Parties
       16.     Counterclaimant Infospace Mobile, Inc. is a California corporation with a place

of business at 10960 Wilshire Boulevard., Los Angeles California 90024. Infospace Mobile,

Inc. formerly was known as Premium Wireless Services USA, Inc. and/or Premium Wireless

Services USA, Inc. d/b/a Moviso.

       17.     Counterclaimant Premium Wireless Services, Inc. Canada is a Canadian

Corporation with an address of 66 Wellington Street, West, Suite 3600, Toronto, Ontario

M5H3Y2.

       18.     Upon information and belief, Counterdefendant EMI is a New York corporation

with its principal place of business at 1290 Avenue of the Americas, New York, New York.

                                    Jurisdiction and Venue
       19.     This Court has jurisdiction over the subject matter of these counterclaims

pursuant to 28 U.S.C. § 1367 and Federal Rule of Civil Procedure 13.

       20.     Venue is proper in this Court pursuant to 28 U.S.C. § 1391(b).

                                      Factual Allegations
       21.     On or about May 31, 2001, EMI entered into a license agreement with Premium

Wireless Services USA, Inc. (“PWS USA”), incorrectly identified as Premium Wireless

Services, Inc. in the agreement. (the “2001 Ringtone License Agreement”).

       22.     Under the terms of the 2001 Ringtone License Agreement, EMI granted PWS

USA a license to create EMI Ringtones and make them available for downloading onto

wireless devices in exchange for royalty payments to EMI.

       23.     The stated term of the 2001 Ringtone License Agreement was one year.

       24.     Sometime after June 18, 2002, EMI entered into new written agreement with

PWS USA and PWS Canada dated “as of” June 1, 2002 (the “2002 Ringtone License

Agreement”).




                                              -20-
       25.     Under the terms of the 2002 Ringtone License Agreement, EMI granted PWS

USA and PWS Canada a license to create EMI Ringtones and make them available for

downloading onto wireless devices in exchange for royalty payments to EMI.

       26.     During the time between the stated end of the term of the 2001 Ringtone License

Agreement and execution of the 2002 Ringtone License Agreement, the parties continued

dealing with each other as they had under the 2001 Ringtone License Agreement and EMI

never directed PWS USA or PWS Canada to stop creating and making available EMI

Ringtones even though no formal written contract existed between the parties.
       27.     The stated term of the 2002 Ringtone License Agreement was one year,

commencing May 31, 2002 and terminating May 30, 2003.

       28.     Section 14 of the 2002 Ringtone License Agreement provided that in the event

of a breach of the Agreement, EMI would notify PWS USA and PWS Canada in writing of

such claimed breach.

       29.     On or about January 10, 2003, PWS USA and PWS Canada executed an

amendment to the 2002 Ringtone License Agreement dated December 19, 2002.

       30.     The December 19, 2002 Amendment stated that it extended the term of the 2002

Ringtone License Agreement “for an additional period of one (1) year” until May 30, 2004.

       31.     The parties subsequently executed an amendment to the 2002 Ringtone License
Agreement dated October 20, 2003, but effective as of October 1, 2003.

       32.     The parties subsequently executed an amendment to the 2002 Ringtone License

Agreement dated March 9, 2004, but effective as of October 1, 2003.

       33.     Following May 30, 2004, the stated end of the term of the written 2002 Ringtone

Licensing Agreement as amended, the parties continued dealing with each other as they had for

the three years prior to May 30, 2004, and EMI never directed PWS USA or PWS Canada to

stop creating and making available EMI Ringtones while no formal written contract existed

between the parties.




                                             -21-
       34.     By Amendment dated August 10, 2004, the parties amended the 2002 Ringtone

License Agreement by retroactively extending the term of the formal written agreement from

May 31, 2004 to May 30, 2006.

       35.     At no time between May 30, 2004 and August 10, 2004 did EMI provide notice

to PWS USA or PWS Canada that it believed they were in breach of the agreement between the

parties or directed that PWS USA and PWS Canada otherwise should stop making EMI

Ringtones available for download until the parties had executed an amendment extending the

term of the formal written agreement. Instead, EMI continued to treat PWS USA and PWS
Canada as if they continued to be licensed per the terms of the written agreement.

       36.     Between May 31, 2001 and May 30, 2006, EMI periodically advised PWS USA

and subsequently Infospace Mobile of additional EMI controlled songs that had been approved

for use in EMI Ringtones.

       37.     Between May 31, 2001 and May 30, 2006, EMI periodically advised PWS USA

and subsequently Infospace Mobile of EMI controlled songs that were no longer available for

use in EMI Ringtones.

       38.     Between May 31, 2001 and May 30, 2006, PWS USA and subsequently

Infospace Mobile provided EMI with periodic royalty reports.

       39.     Between May 31, 2001 and May 30, 2006, PWS USA and subsequently
Infospace Mobile provided to EMI and EMI accepted periodic royalty checks.

       40.     Between May 31, 2006 and January 11, 2007, EMI and Infospace Mobile

continued the same course of dealing with respect to the licensing of EMI controlled songs for

use in EMI Ringtones as they had engaged in during the prior five years.

       41.     Between May 31, 2006 and January 11, 2007, EMI periodically advised

Infospace Mobile of additional EMI controlled songs that had been approved for use in EMI

Ringtones.




                                              -22-
        42.    Between May 31, 2006 and January 11, 2007, EMI periodically advised

Infospace Mobile of EMI controlled songs that were no longer available for use in EMI

Ringtones.

        43.    Between May 31, 2006 and January 11, 2007, Infospace Mobile provided EMI

with periodic royalty reports, using the same text in its cover email as it had used in the cover

email for the last royalty report sent prior to May 31, 2006.

        44.    Between May 31 2006 and January 11, 2007, Infospace Mobile provided to EMI

and EMI accepted periodic royalty checks.
        45.    On May 30, 2006, Kristin Wueste of Infospace Mobile sent an e-mail request to

Daniel Peters of EMI seeking information regarding the availability of certain compositions for

use under the parties’ “current license agreement”. Mr. Peters provided a response to Ms.

Wueste that same day, providing the requested information.

        46.    On over a dozen occasions after May 30, 2006, Ms. Bailey-Lemansky of EMI

sent e-mails to Infospace Mobile personnel regarding songs EMI had received clearance to

license and of which Infospace Mobile therefore could create and make available EMI

Ringtones. One such e-mail sent by Ms. Bailey-Lemansky to EMI was dated November 16,

2006.

        47.    Other EMI personnel, including Tami Lester, Oscar Mazzola, Doug James, and
Aaron Monty, sent e-mails to Infospace Mobile personnel after May 30, 2006 relating to

Infospace Mobile’s continued offerings of EMI Ringtones.

        48.    On June 6, 2006, Ms. Wueste of Infospace Mobile e-mailed Mr. Peters of EMI

requesting “the availability of the compositions on the attached spreadsheet for use under our

current license agreement”. On June 7, 2006, Mr. Peters responded by providing a revised

spreadsheet to Ms. Wueste that indicated which compositions were “approved” for use by

Infospace Mobile.

        49.    On June 14, 2006, Mr. Peters sent an e-mail to Derek McNeill and Ms. Wueste

of Infospace Mobile noting that Infospace Mobile should remove from the ringtones Infospace




                                                -23-
Mobile was offering for sale a particular ringtone for which EMI no longer had the right to

license. Mr. McNeill responded that same day that he had “alerted our content processing team

that this needs to be taken down.”

       50.     On July 13, 2006, Ms. Wueste of Infospace Mobile e-mailed Mr. Peters of EMI

requesting “the availability of the compositions on the attached spreadsheet for use under our

current license agreement”. That same day, Mr. Peters responded by providing a revised

spreadsheet to Ms. Wueste that indicated which compositions were “approved” for use by

Infospace Mobile.
       51.     On July 13, 2006, Ms. Wueste sent an e-mail to Ms. Bailey-Lemansky regarding

the proper “split control” for certain songs listed as being approved for use in an e-mail sent to

Ms. Wueste by Ms. Bailey-Lemansky that same day. Ms. Bailey-Lemansky referred Ms.

Wueste’s inquiry to Mr. Peters, who responded to Ms. Wueste on July 20, 2006 with a

spreadsheet providing the information she had requested.

       52.     On July 31, 2006, Ms. Bailey-Lemansky e-mailed Mr. McNeill and asked him to

provide EMI with the amount of royalties EMI could expect to receive for Infospace Mobile’s

sales of ringtones based on EMI-controlled compositions during the second quarter of 2006

(i.e., April, May, and June 2006). The two then exchanged e-mail correspondence regarding

the estimate, which was ultimately provided on August 4, 2006.
       53.     On August 3, 2006, Ms. Wueste of Infospace Mobile e-mailed Mr. Peters of

EMI requesting “the availability of the compositions on the attached spreadsheet for use under

our current license agreement”. The next day, Mr. Peters responded by providing a revised

spreadsheet to Ms. Wueste that indicated which compositions were “approved” for use by

Infospace Mobile.

       54.     On September 5, 2006, Ms. Wueste e-mailed Mr. Peters requesting “the

availability of the compositions on the attached spreadsheet for use under our current license

agreement”. The next day, Mr. Peters responded by providing a revised spreadsheet to Ms.

Wueste that indicated which compositions were “approved” for use by Infospace Mobile.




                                                -24-
       55.    On December 5, 2006 Ms. Bailey-Lemansky of EMI sent an e-mail to Mr.

McNeill with a copy to Debra McMahon of EMI. Ms. Bailey-Lemansky informed Mr.

McNeill that she would no longer be handling ringtones and that Ms. McMahon would be Mr.

McNeill’s new EMI contact. Mr. McNeill responded by e-mail of December 5, 2006, in which

he stated “I look forward to working with you Debbie.” Ms McMahon responded to Mr.

McNeill in an e-mail dated December 14, 2006, in which she stated, “HI Derek: I look forward

to working with you as well.”

       56.    The communications referenced in Paragraphs 46-55 above reflected the
understanding of EMI representatives that Infospace Mobile remained licensed to use EMI

Ringtones after May 30, 2006.

       57.    There are numerous other communications between the parties after May 30,

2006 that reflect their mutual understanding that Infospace Mobile remained licensed to use

EMI Ringtones after May 30, 2006.

       58.    On or about August 11, 2006, Infospace Mobile sent a royalty payment check to

EMI for downloads of EMI Ringtones covered by the parties’ license agreement during the

second quarter of 2006 (i.e., the quarter ending June 30, 2006). EMI deposited the check.

       59.    On or about November 13, 2006, Infospace Mobile sent a royalty payment

check to EMI for downloads of EMI Ringtones covered by the parties’ license agreement
during the third quarter of 2006. EMI deposited the check.

       60.    In early 2007, Infospace Mobile sent a royalty payment check to EMI for

downloads of EMI Ringtones covered by the parties’ license during the fourth quarter of 2006.

To date, EMI has not returned that check.

       61.    During the period between May 31, 2006 and January 11, 2007, in neither its e-

mails to Infospace Mobile, nor in response to any of Infospace Mobile’s e-mails to EMI, did

EMI direct Infospace Mobile to stop making EMI Ringtones available.

       62.    By letter to Infospace, Inc. dated November 17, 2006, EMI first advised

Infospace Mobile of its position that Infospace Mobile’s continued sale of EMI Ringtones was




                                              -25-
“absent a valid license.” Nowhere in the letter did EMI direct Infospace Mobile to stop making

EMI Ringtones available for download. Instead, EMI stated that “[i]f EMI does not have a

favorable response to the audit and a new license agreement with you in place by December 1,

2006, EMI will turn the matter over to its outside litigation counsel.”

       63.     By letter dated November 29, 2006, Infospace, Inc. responded to EMI’s letter of

November 17, 2006. Infospace set forth its understanding that a license agreement continued to

exist between the parties, and stated that Infospace would like to continue its relationship with

EMI. Infospace specifically noted potential problems with its distribution partners if it had to
remove EMI Ringtones from its offerings.

       64.     In its letter of November 29, 2006, Infospace, Inc., while strongly contesting the

methodology and conclusions of the “audit” to which EMI referred, offered to settle the matter

and stated that “[i]f EMI chooses to reject the settlement offer, Infospace will deem the

rejection as a notice of removal per Section 2(d) of the license agreement and remove EMI-

published compositions from its catalogue and all distribution channels . . . .”

       65.     EMI never responded to Infospace, Inc.’s letter of November 29, 2006.

       66.     On or about January 11, 2007, EMI filed this action based in substantial part on

the allegation that between May 31, 2006 and the filing of suit there was no license agreement

in effect between EMI and Infospace Mobile and that therefore Infospace Mobile’s continued
offering of EMI Ringtones during that time period amounted to copyright infringement

entitling EMI to in excess of $100 million dollars.

       67.     As a result of EMI’s repudiation of its agreement, Infospace Mobile was forced

to remove all of the EMI Ringtones from its platform and instruct its mobile provider partners

that operated their own platforms to do the same.

       68.     According to EMI, it controls 40% of the music publishing market.

       69.     EMI acted with knowledge that by repudiating its agreement with Infospace

Mobile, it was closing 40% of the music publishing market to Infospace Mobile and its mobile

carrier business partners.




                                                -26-
        70.    EMI’s repudiation of its agreement with Infospace Mobile was an abuse of its

market power to the detriment of consumers, Infospace Mobile, and Infospace Mobile’s mobile

carrier business partners.

        71.    If Infospace Mobile had not been forced to stop offering EMI Ringtones,

Infospace Mobile would have made at least $1.5 million in revenues from sales of those

ringtones between the date of suit and May 30, 2007.

                                      First Cause of Action

                                 (Breach of Implied Contract)
        72.    Infospace Mobile repeats the allegations contained in paragraphs 1-71 above.

        73.    An implied contract was formed between EMI and Infospace Mobile as of May

31, 2006, based upon the parties’ conduct, prior course of dealing, and industry custom.

        74.    The implied contract was for a term of one year.

        75.    Implicit in the implied contract to license EMI-controlled compositions was a

promise not to sue for creating and/or making EMI Ringtones available for download.

        76.    Implicit in the implied contract was a covenant of good faith and fair dealing.

        77.    The implied contract was supported by consideration and constitutes a valid and

enforceable contract.

        78.    EMI’s actions as complained of herein constitute a breach of the implied
contract and a breach of the implied covenant of good faith and fair dealing.

        79.    EMI’s actions as complained of herein have caused Infospace Mobile to suffer

and accrue monetary damages, including, but not limited to, lost profits from the loss of sales

of EMI Ringtones that Infospace Mobile would have made during the term of the implied

contract absent EMI’s breach; lost goodwill in that Infospace Mobile can no longer offer a full

complement of ringtones; and damages from being required to defend against a meritless

copyright infringement claim based upon downloads of EMI Ringtones following May 30,

2006.




                                               -27-
                                     Second Cause of Action

                                (Anticipatory Breach of Contract)
        80.     Infospace Mobile repeats the allegations contained in paragraphs 1-79 above.

        81.     An implied contract was formed between EMI and Infospace Mobile based upon

the parties’ conduct, prior course of dealing, and industry custom.

        82.     The implied contract was for a term of one year from May 30, 2006 through

May 30, 2007.

        83.     EMI repudiated and anticipatorily breached that implied contract by claiming

that no contract existed between the parties and suing Infospace Mobile for copyright

infringement.

        84.     EMI’s anticipatory breach of its contract with Infospace Mobile has caused

Infospace Mobile to suffer and accrue monetary damages, including, but not limited to, lost

profits from the loss of sales of EMI Ringtones that Infospace Mobile would have made during

the term of the implied contract absent EMI’s breach; and lost goodwill in that Infospace

Mobile can no longer offer a full complement of ringtones.

                                      Third Cause of Action

                             (Tortious Interference With Contract)
        85.     Infospace Mobile repeats the allegations contained in paragraphs 84 above.

        86.     Throughout 2006, Infospace Mobile had valid contracts with numerous cell

phone carriers, including but not limited to T-Mobile and AT&T Mobility (f/k/a Cingular).

        87.     Pursuant to its contracts with cell phone carriers, Infospace Mobile made EMI

Ringtones available to the carriers’ subscribers, which generated income to Infospace Mobile.

        88.     EMI was aware of Infospace Mobile’s contracts with numerous cell phone

carriers.

        89.     EMI’s actions, as complained of herein, were designed to interfere with

Infospace Mobile’s contracts with cell phone carriers or done with knowledge that such

interference was substantially certain to occur as a result of its conduct.




                                                 -28-
        90.    EMI’s intentional actions, as complained of herein, were intended to interfere

and interfered with Infospace Mobile’s contracts with cell phone carriers in that Infospace

Mobile was forced to pull EMI Ringtones from the catalogues of ringtones offered to such

carriers.

        91.    Infospace Mobile has been damaged by EMI’s interference with its contracts

with cell phone carriers in that, among other things, the revenues paid by such carriers have

been significantly reduced as a direct result of the removal of EMI Ringtones from the

catalogue offered by Infospace Mobile.
        92.    EMI’s intentional interference with Infospace Mobile’s contracts with cell

phone carriers was malicious, wanton, oppressive, fraudulent, reckless and in willful disregard

of Infospace Mobile’s rights and property interests in its contracts with the cell phone carriers.

In order to punish EMI and deter it from engaging in such outrageous conduct in the future

with its other licensees, EMI should be required to pay punitive damages.

                                     Fourth Cause of Action

                      (Tortious Interference With Contractual Relations)
        93.    Infospace Mobile repeats the allegations contained in paragraphs 1-92 above.

        94.    Throughout 2006, Infospace Mobile had business relationships with numerous

cell phone carriers, including but not limited to T-Mobile and AT&T Mobility (f/k/a Cingular).
        95.    Pursuant to its business relationships with cell phone carriers, Infospace Mobile

made EMI Ringtones available to the carriers’ subscribers, which generated income to

Infospace Mobile.

        96.    EMI was aware of these ongoing business relationships.

        97.    EMI’s conduct as complained of herein was intended to interfere and interfered

with these business relationships.

        98.    Upon information and belief, following May 30, 2006, EMI induced Infospace

Mobile to include EMI Ringtones among those ringtones sold to the subscribers of the cell

phone carriers with whom Infospace Mobile had business relations and then declared Infospace




                                                -29-
Mobile’s conduct unauthorized for the improper purpose of laying the groundwork for a claim

of massive copyright infringement that EMI could use to extract an exorbitant settlement from

Infospace Mobile, far out of proportion to any actual amounts that EMI could possibly be owed

under its Ringtone License Agreements with Infospace Mobile.

       99.       EMI acted solely to harm Infospace Mobile, or out of malice or relied upon

dishonest, unfair and improper acts in interfering with Infospace Mobile’s business relations

with cell phone carriers.

       100.      As a result of EMI’s improper conduct, Infospace Mobile’s business relations
with cell phone carriers have been and continue to be harmed, causing damages to Infospace

Mobile in an amount to be determined at trial.

       101.      EMI’s intentional interference with Infospace Mobile’s contracts with cell

phone carriers was malicious, wanton, oppressive, fraudulent, reckless and in willful disregard

of Infospace Mobile’s rights and property interests in its contracts with the cell phone carriers.

In order to punish EMI and deter it from engaging in such outrageous conduct in the future

with its other licensees, EMI should be required to pay punitive damages.

                                         Requested Relief
       WHEREFORE, Counterclaimants respectfully requests that this Court:

       (a)       Enter judgment in favor of Counterclaimants and against EMI;
       (b)       Award compensatory damages to Counterclaimants in an amount to be

determined at trial, but not less than $1.5 million;

       (c)       Award punitive damages to Counterclaimants in an amount to be determined at

       trial;

       (d)       Award Counterclaimants its costs incurred in connection with this action;

       (e)       Award Counterclaimants pre-judgment interest as provided for by law;

       (f)       Award Counterclaimants post-judgment interest as provided for by law; and

       (g)       Award Counterclaimants such further and other relief as the Court deems just and

       proper.




                                                 -30-
                                            Jury Demand

         Defendants and Counterclaimants hereby demand a trial by jury on all claims and counterclaims

in this action.

                                                    Respectfully submitted,




Date: May 15, 2007                                   s/
                                                     Tonia Ouellette Klausner (TOK-8279)
                                                     WILSON SONSINI GOODRICH & ROSATI, P.C.
                                                     1301 Avenue of the America, 40th Floor
                                                     New York, New York 10019
                                                     (212) 999-5800

                                                     David H. Kramer (admitted pro hac vice)
                                                     WILSON SONSINI GOODRICH & ROSATI, P.C.
                                                     650 Page Mill Road
                                                     Palo Alto, CA 94304
                                                     (650) 493-9300
                                                     Attorneys for Defendants and
                                                     Counterclaimants




                                                  -31-

				
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