Scour, Inc., the high-profile Internet entertainment venture backed by Hollywood heavyweight Michael Ovitz, has filed for Chapter 11 bankruptcy protection, the company announced Thursday.
The latest casualty of the ongoing dot-com shakeout, the Los Angeles-based company said the filing will allow it to evaluate “various strategic business alliances and alternatives” and stay all pending litigation. During the bankruptcy proceedings, all of Scour’s services — including its multimedia file-swapping and searching network Scour Exchange — will remain operational, the company said.
“We took this step in order to preserve Scour’s future,” said company president Dan Rodrigues. “The Chapter 11 process will also provide our management and board of directors with adequate time to review and develop recapitalization and restructuring alternatives to strengthen and improve Scour’s business position.”
Scour filed its petition in the U.S. Bankruptcy Court for the Central District of California in Los Angeles.
Infringement Lawsuit Fallout
Like its technological cousins Napster and MP3.com, Scour has been ensnared in costly legal challenges. It is currently fighting to stave off a copyright infringement suit brought by the Motion Picture Association of America (MPAA), the Recording Industry Association of America (RIAA) and the National Music Publishers Association (NMPA).
Scour executives maintain the suit is without merit since its music and video files are being shared by individuals, and says it stands a good chance of coming out on top in the battle.
Nevertheless, the suit has taken its toll, siphoning considerable time and resources from the company. In Scour’s brief statement that spelled out some of the reasons why it was seeking bankruptcy protection, executives acknowledged that the move could help ensure its continued operation in the face of “burdensome” lawsuits.
In addition, last month Scour was forced to hand pink slips to all but a fraction of its workforce after jittery investors pulled out of a planned round of venture financing. Company executives attributed the withdrawal to concerns that its management team’s attention to business operations was being diverted by the suit.
Scour is also reportedly facing a long line of vendors who are waiting to be paid for their services.
Stepping Up Digital Theft Measures
In related news, the RIAA is stepping up its efforts to combat digital theft, announcing Thursday that it is developing a uniform system to identify digital song files. Under the new system, each song could be coded to adapt to different Internet formats such as subscriptions, digital download programs or promotions.
Similar to a physical bar code identifier, the system would make it easier for record companies to track sales, usage figures and royalty payments by allowing the content provider to set restrictions on the usage of its material, such as limiting the number of copies customers can make of the product.