Court Battle Between Recorded Books and NetLibrary Heats Up

Jennifer Pinkowski -- Library Journal, 7/27/2007

On July 17, Library Journal reported that the three-year-old e-audiobook distribution deal between Recorded Books and NetLibrary had gone sour and that the two were suing each other for breach of contract, violation of copyright, unfair competition, and defamation, among other charges. That article has now become part of the lawsuit, which has continued to heat up, with no immediate resolution. On July 23, a day before U.S. District Judge Deborah Chasanow in Baltimore, MD, was supposed to hear arguments on a preliminary injunction motion filed a month ago by Recorded Books to force NetLibrary to stop distributing its downloadable audiobooks, Recorded Books' publisher Brian Downing filed a third "declaration" that includes facts he says he learned from LJ's coverage.

Downing stated that Recorded Books first learned that the Iowa City Public Library system had dropped NetLibrary in favor of its main competitor, OverDrive, through LJ. He also characterized the assertion made by NetLibrary in its counterclaim that 88 percent of libraries renewed their subscriptions as “misleading.” According to his declaration, 44 of the 168 of the libraries that renewed their subscriptions between January and May 2007 demanded discounts as high as 60 percent on the previous year's subscription cost. The declaration also cites an e-mail that Mary Hogue, director of public library services for the West Virginia Library Commission, sent to Recorded Books after she read about the lawsuit in Library Hotline. "If you all need cheerleaders I'll be standing on the sidelines yelling, ‘Sic 'em! Sic 'em!'" Hogue wrote in the message. "[J]ust because we didn't cancel our downloadables through NetLibrary didn't mean that we were happy or satisfied or not frustrated with NetLibrary."

NetLibrary responded to the preliminary injunction request with documentation of its own, which Scott Wasinger, director of business development for NetLibrary, filed with the court in anticipation of the July 24 hearing. Among the papers are a half-dozen subscription renewal forms from libraries dating to as late as June 2007. (Also note positive comments from a customer commenting to LJ.) It also includes e-mail correspondence between Downing and NetLibrary VP Marge Gammon dating back three years. The tone is generally friendly. Perhaps a harbinger, however, is a May 2006 exchange in which Gammon tells Downing that NetLibrary has signed Listen & Live and is about to sign Blackstone, but assures him that the agreements don’t violate Net Library’s deal with Recorded Books. “I’m assuming you have no concerns or issues with our selling their titles as we do eBooks,” Gammon writes.

“I read the contract differently than you do, that is for sure,” Downing responds.

On July 24, both sides presented arguments before Judge Chasanow, who neither ruled on the injunction nor indicated when she would do so, according to Jenny Johnson, a spokesperson for NetLibrary.