Investors refuse to back new 'Napsters'

Silicon Valley's venture capital (VC) community is withhold funding for promising new technologies because of concerns about entertainment industry lawsuits.

Hank Barry, former Napster chief executive and a partner with Hummer Winblad Venture Partners, said that his firm, which invested millions in the controversial file-swapping technology, is reluctant to fund technologies with the potential to violate intellectual property laws.

He told the Mercury News that a company whose technology could stream music over cellular phone networks was recently refused funding because the VC's felt that they could lose their money in a court room tussle with the music industry.

"In these very uncertain times, the investors do the prudent thing. They back away, and innovation loses out," said Barry.