Scour Files for Bankruptcy

Scour's travails began with Napster. Once that notorious music-swapping site came under fire from the record industry, the movie industry rooted around for mischief in its own field and found Scour, primarily taking issue with Scour Exchange, which allows for peer-to-peer exchanging of files with a particular focus on multimedia. A lawyer for the Motion Picture Association of America said that Scour investor and Hollywood power broker Michael Ovitz was contacted about Scour's perceived misdealings, but that he did not dismantle Scour's file-sharing network as they had hoped.

On July 20, the MPAA and the Recording Industry Association of America filed suit against Scour alleging piracy. Scour followed Napster's lead by putting together a legal dream team comprised of litigator Fred Bartlit, copyright law guru Arthur Miller and intellectual property expert Peter Toren.

Sources said that after the suit was filed, Ovitz began shopping around his minority share in the company. Ovitz's office wouldn't comment.

With all the attention Scour received in the wake of the lawsuit, and with the increase in traffic to the site that followed, Scour was in desperate need of additional funds to keep operating and to purchase additional servers to build its infrastructure.

In September, the company folded under those pressures and laid off 52 people, leaving 12 employees as stopgap life support. The company said at the time that the pending litigation was acting as a deterrent to potential investors and that it didn't have enough money to keep paying a full staff.

Thursday's bankruptcy filing reveals that Scour has assets of $US1 million to $US10 million, between 100 and 199 creditors, and debts of more than $US100 million. At least one of those creditors has already filed suit against the company. Earlier this month, Scour's former public-relations firm, CarryOn Communications, charged Scour with failing to pay its bills. Scour countersued, saying that it received poor PR service from CarryOn. All Scour-related suits are now frozen until the bankruptcy court determines how they should be handled. Bankruptcy specialists Perkins Coie are providing legal support.

Scour recently entered into an agreement with United Devices that leverages its network to find surplus computing power on the machines in its network. United Devices hopes to turn that power over to companies that can't afford super-computing systems. Although Scour executives didn't say so explicitly, the deal might help establish examples of how Scour's peer-to-peer network can be used in ways that don't infringe on the MPAA and RIAA's copyrights.

Scour's bankruptcy filing is just the latest in a rough year for online entertainment. In March, Warner Bros' Entertaindom shelved its IPO plans and began paring back its site and staff. In May, the Digital Entertainment Network closed its doors after burning through $US67 million. Napster was sued in June and remains embattled despite successfully avoiding an injunction leveled against it. And in early September, Shockwave.com cut 12 per cent of its workforce, and Pop.com, the much-anticipated site from DreamWorks and Imagine Entertainment, laid off most of its staff and abandoned plans to ever launch the site announced in October 1999.

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