Judge Richard C. Neal's ruling, however, authorizes an independent audit be conducted on New Destiny's behalf, examining allegations that the defendants were "shaving" affiliate revenue from the alleged exploitation of the Homegrownvideo.com website. The cost of the audit will be split evenly between Homegrown and the defendants, the judge ruled.
And while the defense was pleased with the ruling, calling it a victory and a major step toward "vindication and finality," David S. Olson, counsel for New Destiny, told XBiz that in essence, the audit is what his clients have been aiming for since the beginning of the suit.
"The only thing they won was on the copyright infringement, everything else is in favor of New Destiny, and we're very happy with where we're at," Olson told XBiz. "Let's do the audit and see what the numbers show."
Olson added that the audit will give them the opportunity to comb through the defendant's books and records pursuant to allegations that they cut New Destiny out of an estimated $6 million in unpaid revenue share and interest.
Ira Rothken, counsel for the defense, told XBiz, that from the beginning of the case, both sides had an opportunity to scrutinize financial data related to the Homegrown website and that New Destiny repeatedly declined the audit.
"We were the ones asking for the audit since the beginning of the case, and the other side opposed it," Rothken said. "Now the arbitrator thinks the request has validity."
Rothken added that in a further victory for the defense, the judge said he has not yet found that New Destiny has proven its allegations of underpayment.
"We believe the independent auditor will come back and say that the plaintiffs have been paid in full under the agreements between the two parties," Rothken said. "Furthermore, we're optimistic that the auditor will come back with a finding that the respondents overpaid New Destiny, and that is why we are especially pleased about the independent audit."
A July conference has been set between the parties regarding implementation of the auditor.
In the meantime, the case of co-plaintiff Xplor Media Group vs. Voice Media Inc., Trade News and Internet Business Services is currently in federal court and has been stayed pending the outcome of New Destiny's case.
Both New Destiny and Xplor filed a lawsuit in federal court against the defendants in February 2004 alleging they had infringed by making a copy of the Homegrown Video Website Tour available online without permission from New Destiny, and that Voice Media overbilled and repeat-billed numerous Homegrown video end users in an "egregious" manner.
However, Voice Media has argued that New Destiny was able to disable the home tour link at any time. Voice Media has also presented evidence in court that it had removed the tour page from the Internet and all of its affiliate sites, and that prior to filing a lawsuit, New Destiny profited hugely from their partnership before bringing the issue to court.
