Record Labels Countersued by LimeWire

The business group that operates the LimeWire online file-sharing software has filed a counterclaim against a coalition of major record labels, accusing the music companies of refusing to license their works to the company in a bid to put it out of business.

New York-based Lime Group LLC, whose subsidiaries designed and distribute LimeWire, also denied that it encourages computer users to swap music without permission, among other claims made by the record labels in a copyright infringement lawsuit filed last month.

Lime Group's counterclaim, filed in the Southern District of New York on Monday, says the record labels conspired to ''destroy any online music distribution service'' not under their control by withholding licenses to distribute their recordings or forging restrictive licensing agreements.

''This case is but one part of a much larger modern conspiracy to destroy all innovation that content owners cannot control and that disrupts their historical business models,'' according to Lime Group's lawsuit.

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In a statement, the Recording Industry Association of America, which represents the major record labels, called Lime Group's claims ''a kitchen sink of frivolous charges.''

The original lawsuit against Lime Group and its counter claim involves record labels owned by Sony BMG Music Entertainment, Vivendi's Universal Music Group, Warner Music Group Inc. and Britain's EMI Music.

In their lawsuit, the record labels seek compensatory and punitive damages, including at least $150,000 for each instance in which a copyright song was distributed without permission.

The case is the first piracy lawsuit brought against a distributor of file-sharing software since the U.S. Supreme Court ruled last year that technology companies could be sued for copyright infringement on the grounds they encouraged customers to steal music and movies over the Internet.

LimeWire allows computer users to make files on their PCs available to a multitude of other computer users all connected to each other, a method known as peer-to-peer file-sharing.

Last fall, Lime Group was among several operators of file-sharing services to receive letters from the RIAA warning them to shut down or face litigation.

Several of those file-sharing software distributors who received letters or have been targets of music industry lawsuits have shut down. Others have agreed to field versions of their software that filter out unauthorized music from being distributed by computer users or been acquired by others working to do so.

In its counterclaim, Lime Group contends it also sought to reach an agreement with the labels so that it could field a licensed music service. It also claims it was prepared to employ a filtering system of its own design.

The company claims the record labels refused to broker a deal, insisting it use a filtering system approved by the labels or reach an agreement with iMesh Inc., a rival file-sharing service that has been operating with the blessing of record labels since settling a copyright infringement case in 2004.