Is Warner's Seeqpod Lawsuit A Warning?

Warner Music Group's lawsuit against Seeqpod, the site that scours the Web for MP3s and lets you play them, has some Web thinkers confused.

But WMG's complaint, published by the Electronic Frontier Foundation's Fred von Lohmann, is pretty straightforward. The short version: WMG is suing Seeqpod because it's a site that scours the Web for MP3s and lets you play them. That is, Seeqpod can't claim that it's merely linking to sites with MP3s. It's caching the songs so users can listen to them on Seeqpod's player (which, as we said, is excellent).

Seeqpod has posted a sort-of defense on its blog, which says that it's really just a passive search engine. But to us it seems clear: The site is the equivalent of YouTube or any other site that hosts copyrighted material. And regardless of what the DMCA does or doesn't say, in the real world there's now a precedent for these sites, at least those with commercial aspirations: They either get sued by copyright holders, or settle with them. Frequently, both.

The only twist here: Normally, the site and the copyright holder start out negotiating, then move to a lawsuit when that doesn't work (see: Viacom v. YouTube, Universal Music v. MySpace, etc). And from what we understand, Seeqpod and WMG hadn't ever talked prior to the suit.

It's certainly possible that the two sides will end up with a deal. The basic template for these is that the startup gives the labels cash and/or equity, plus a rev share or per-stream payment. But the preemptive nature of the lawsuit gives us a hint that Warner is up to something else here. We're guessing that it wants to use Seeqpod as a warning to entrepreneurs and their investors: We're sick of letting startups flourish using our stuff, then settling with them once they've attracted market share and money -- we want them to come to us before they startup.

So our question to Seeqpod and its investors, who include the DOE's Lawrence Berkeley National Laboratory:  How's your legal fund? It looks like WMG wants to make an expensive example out of you.