Timberline Venture Partners Lawsuit Streamcast

StreamCast Networks, Inc. (originally doing business via “MusicCity.com” and the Morpheus file-sharing software) was a peer-to-peer (P2P) technology company that licensed or developed software enabling users to discover, share or download digital media files.

Timberline Venture Partners is a venture-capital firm (Northwest affiliate of Draper Fisher Jurvetson) that was an early investor in StreamCast.

The relevant litigation focused on copyright infringement liability for StreamCast (via its Morpheus network) and whether the conduct of StreamCast and its backers/investors supported secondary liability for induced infringement. One key question was whether Timberline (as a major investor/board participant) might bear some liability or at least had relevant documents and involvement (though it was not sued as a primary defendant in the large copyright case).

Key Allegations & Legal Issues

Inducement of Copyright Infringement

In the landmark case of Metro‑Goldwyn‑Mayer Studios, Inc. v. Grokster, Ltd. (2005) the U.S. Supreme Court held that a party that distributes a device or service with the intent of fostering copyright infringement by others may be liable for such infringement (so-called “inducement” liability). The court held that distribution plus intent to encourage infringing use is sufficient.
In the StreamCast case (which the trial court granted summary judgment in favour of the plaintiffs for StreamCast’s liability) the court found that the record supported an inference that StreamCast intended to facilitate infringement and targeted Napster-users, relied on high-volume infringing use, did not implement filtering, etc.

Role of Timberline/Venture Capital Support

Although Timberline was not sued directly in the leading summary judgment motion, documents produced by Timberline Venture Partners were admitted in the record as part of StreamCast’s materials — e.g., Exhibit 17 in the court record consisted of documents produced by Timberline. The court’s discussion of authenticity and admissibility noted that Timberline was StreamCast’s primary investor.
Specifically, the court in the case held that: “Exhibits 16 and 17 … were not produced by StreamCast in discovery but by its public relations firm … and its primary venture-capital investor, Timberline Venture Partners.”
This is significant because it shows Timberline’s role was not merely passive investor—they produced documents and evidently were part of the chain of internal communications and materials that the plaintiffs used as evidence of intent and knowledge.

Business Model and Intent

The court’s summary judgment opinion states that StreamCast’s business model depended on high-volume file-sharing, that its internal presentations identified “no product costs to acquire music” and “ability to get all the music,” and that the company targeted Napster users.
The court also pointed to emails in which StreamCast’s executives said things like “We do not care what was on those files … we only cared that we were able to compare ourselves favourably with the much larger … Napster.”
Thus the question of intent (to promote infringing use) was strongly made by the plaintiffs.

Investor Liability and Board/VC Role

While the primary suit focused on StreamCast, the role of Timberline as investor/partner raises issues of whether an investor can be responsible for knowing involvement or encouragement of infringing conduct. Courts will look to factors such as: did the investor participate in corporate control or board decision-making; did the investor receive communications showing infringing use; did it encourage or direct business models dependent on infringing use.
In the StreamCast decision, documents produced by Timberline were admitted as evidence of StreamCast’s knowledge and intent. The court noted that because Timberline was a business partner and investor, the documents it produced could be authenticated and used.

Legal Developments & Status

In the specific case (MGM v. Grokster/Grokster-type inducement claims against StreamCast) the court granted summary judgment against StreamCast for inducement liability.
The court’s order reads: “This Court GRANTS Plaintiffs’ motion for summary judgment as to StreamCast’s liability for inducing copyright infringement through MusicCity/OpenNap and Morpheus.”
Thus StreamCast has been held liable at summary judgment stage, so liability was established before trial.
The role of Timberline as a separate defendant is less clear from publicly available sources: Timberline itself was not the defendant in that order (at least not in the sources we reached). But because documents from Timberline were used, its involvement is significant from a risk perspective for investors backing similar companies.

Why It Matters

For Investors and VCs

This case is a cautionary tale: investing in a company whose business model relies on high-volume sharing of possibly infringing content can expose not only the company but potentially the investors (or at least invite document production and scrutiny). Investors should conduct robust due diligence: ensure that the company’s business model is legally sound, ensure policies are in place regarding infringing use, filtering, and licensing.

For Technology Companies

Any company distributing peer-to-peer, file-sharing, or other content-sharing platforms must carefully evaluate legal risk: the distribution of technology is not per se illegal, but if the company distributes it with the purpose of fostering infringement, liability may attach under inducement doctrine. The StreamCast case shows courts will examine internal communications, business model motives, marketing to infringing user base, and failure to implement filtering or enforcement.

For Copyright Holders

The case reinforces that copyright owners may seek secondary liability (inducement) not only against direct infringers but also against distributors of technology whose business models lean heavily on infringing use.

For the Broader Ecosystem

The case illustrates how the legal framework for digital distribution, user-generated content, and peer-to-peer networks remains active and significant. It also underscores that a strong business model reliant on infringing use may not succeed legally even if technologically feasible.

Key Legal Takeaways

• Intent matters: A defendant’s internal business strategy and communications targeting infringing usage can form the basis for inducement liability.
• Volume of infringing use is relevant: In StreamCast, studies showing 87%+ of files on the network likely infringing were part of the proof.
• Investor/document production risk: Even if an investor is not sued as a primary defendant, documents and communications may become part of the litigation record if the investor was deeply involved.
• Filtering/enforcement deficiency: A company that fails to implement reasonable steps to prevent infringing use may signal intent and thus face liability.
• Business model dependency: If a company’s revenue model depends on high-volume use of a technology that enables infringement, courts may infer illegality.

Limitations & Considerations

• The case does not mean all peer-to-peer or file-sharing services are automatically liable; the key is the intent to promote infringement and the business model.
• Not all investor involvement creates liability; courts will look at the actual control, communications, and role of the investor or board member.
• The litigation is complex; the summary judgment decision focused on one defendant (StreamCast) and the broader implications for investors like Timberline remain less defined as publicly reported.
• Different jurisdictions may have different approaches to secondary liability and inducement, so the U.S. context may differ from other countries.

Conclusion

The lawsuit involving Timberline Venture Partners’ investment in StreamCast Networks and the downstream litigation over StreamCast’s Morpheus software offers important lessons in U.S. digital-copyright law and investment risk. For companies developing content-sharing technologies, for investors backing them, and for copyright owners enforcing rights, the case illustrates how business strategy, marketing, business model, and internal communications can shape legal liability. While Timberline itself did not appear as a primary defendant in the publicly available summary judgment order, its role as investor and document producer highlights how closely linked investor involvement can become in high-risk technology ventures.