The Flash-based cookies, generated by technology partner Clearspring Technologies, enable data collection and tracking of surfing activity beyond the immediate sites in question.  That opens a broad range of data collection, including detailed demographic and health information.

Even worse, these cookies allegedly have the ability to regenerate upon deletion, a huge privacy override.  Those claims will be tested in court, though numerous references are being made to an earlier case involving Quantcast and a range of major media companies like Hulu, MySpace, and MTV.

How bad? Attorney Ray Beckerman dug into the filings, and estimated that more than $16 million in 2008 legal costs failed to net even $400,000 in returns.

Now, the RIAA is fighting back. In a weekend conversation with Digital Music News, group spokesperson Jonathan Lamy declined to comment on rumors that legal costs are being actively reduced. “No more details for now,” Lamy quipped, perhaps drawing inspiration from the Soup Nazi.

But across the board, the group is feverishly attempting to recharacterize the math. “The line in our tax forms represents a lot more legal activity than end user litigation or even anti-piracy enforcement,” Lamy continued. “So making judgments of anti-piracy effectiveness simply based on that line is misleading and inaccurate.”

The greater gains – according to the RIAA – include huge, multi-year victories involving Limewire, Kazaa, and even Napster, all efforts whose payoffs have been debated. “We think our efforts have made a real difference,” the group continued.

Back to the math, the group also noted that legal returns often go straight back to the labels, though the issue of what piece artists receive remains foggy. “In [the Kazaa] instance, the settlement revenues went directly to the label plaintiffs which share the proceeds of such recoveries with their artists in accordance with their artist contracts,” the RIAA offered.

The order denies an RIAA motion but does not reverse the original decision against Limewire. If nothing else, it offers needed breathing room during the damages phase. “While we believe this is a positive development in the case and one that certainly benefits our global user base, it doesn’t alter our long-stated strategy,” a Limewire executive said.

The company is currently developing its cloud-focused relaunch, an ambitious “plan B” that comes under serious legal stress. “We will continue to work hard to garner the confidence and support of the music industry and other key stakeholders in the development of a new service that pushes the boundaries in digital music discovery and consumption.”

The RIAA declined comment. Court documents may be available ahead of the weekend.

But these groups have responded in kind, and now, it’s Creative Commons father Lawrence Lessig’s turn. “Creative Commons, Public Knowledge and EFF are not aiming to ‘undermine’ copyright; they are not spreading the word that ‘music should be free’; and there is certainly not yet any rally within Congress in favor of any of the issues that these groups do push,” Lessig recently blogged in the Huffington Post.

Lessig argues that Creative Commons is a system firmly rooted in copyright law, but its “some rights reserved” approach merely offers more flexibility to authors. “Hundreds of millions of digital objects… have been licensed in this way, and by an extraordinarily diverse range of creators or rights holders.”

The lawsuit focused on the Google-owned video giant, a growth story that Viacom alleges was partly powered by its content. But Stanton ruled that YouTube has been complying with the Digital Millennium Copyright Act (DMCA) by effectively investigating and removing videos upon request. “Indeed, the present case shows that the DMCA notification regime works efficiently: when Viacom over a period of months accumulated some 100,000 videos and then sent one mass take-down notice on February 2, 2007, by the next business day YouTube had removed virtually all of them,” Stanton opined.

Google was obviously pleased. “The decision follows established judicial consensus that online services like YouTube are protected when they work cooperatively with copyright holders to help them manage their rights online,” said Kent Walker, Vice President and General Counsel of Google in an afternoon statement.

The implication suggests a status quo for labels and publishers, though the parties have long since created revenue sharing agreements. On top of that, the integration of Vevo has cleaned the number of dirty dupes on YouTube, leading – at least potentially – to a more “monetize-able” site.

According to Metlawgroup founder David Michail, the reason often has less to do with malevolence and more with miscommunication and process breakdowns between different parties. “The general practice of most agency agreements is to ensure that all IP is owned by the agency so that it can be transferred to the client per the terms of that agreement,” Michail noted.

But when freelancers and additional contracting parties get involved, the risk of copyright violations increase. And compounding the problem is the ever-urgent deadline, a monster that sometimes pushes IP considerations to the side. “In the bustle of [the] day, what easily gets left out of the equation is ensuring that the legal terms and conditions of the services agreement [are] being properly structured into the agency’s process,” Michail continued. “Most likely, copyrights are often overlooked, particularly when dealing with third party subcontractors and freelancers.”

Of course, inside and outside of the agency world, simple ignorance also plays a role. Back to the performance side, PROs sometimes come knocking on the doors of small establishments only to find that an education in performance royalties is the first step. Other times, small businesses question or fight the royalty demands themselves, a stance that typically comes at the expense of songwriters.

Just like the RIAA’s action, the suit not only targets LimeWire LLC and its parent Lime Group LLC, but also founder Mark Gorton, former CTO/COO Greg Bildson, and an entity referred to as the “M.J.G. LimeWire Family Limited Partnership.”  The inclusion of the Partnership suggests that, like the RIAA, the NMPA consortium is very serious about pursuing individual liabilities, including accounts that may be squirreling personal and business funds.

In a discussion with Digital Music News, NMPA president David Israelite noted that publishers bring unique issues to the table, beyond the big label action.  And this goes well beyond the big guys.  ”The NMPA represents 2,548 publishers, 2,544 of whom are not represented in any way in the RIAA suit,” Israelite relayed, while underscoring the importance of the participation of the four largest publishers. “In any future settlement that involves future licensing, the RIAA is not in a position to negotiate licensing terms for the entire songwriting and publishing industry.”

Several hours after the filing, LimeWire CEO George Searle responded by inviting publishers to participate in a future, legitimized version of LimeWire.  ”We definitely want publishers at the table,” Searle told Digital Music News. “We have had many promising meetings with labels, publishers, songwriters and artists alike about our new music service and a business model that will compensate the entire industry. Publishers are absolutely a part of that solution, and we’re hopeful that this action will serve as a catalyst to help us get to there.”

“Every day that Lime Wire’s conduct continues unabated guarantees harm to plaintiffs that money damages cannot and will not compensate,” RIAA lawyers wrote to U.S. District Judge Kimba Wood. “The scope of the infringements that Lime Wire induced…boggles the mind.”

The RIAA also fears that Gorton is shifting his assets in a bid to make it harder for the group to recover damages.

“Lime Wire has attempted to secrete assets into Mark Gorton-controlled ‘family partnerships’ with the intention of shielding those assets from a judgment award in this case,” the group wrote, to Judge Wood.

“We are looking forward to an opportunity to address the Court for the first time in two years and show that as a matter of fact and law there is no support for this motion,” a LimeWire spokesperson told CNET News.com.

LimeWire has in recent weeks been working to apply a filter that would block copyrighted works, as well as talk to labels on potential licen

The probe does not involve Warner directly, but does involve WMG chief Edgar Bronfman, Jr. Prior to helming WMG, Bronfman was a vice chairman of the board at Vivendi SA, a company led by then-CEO Jean-Marie Messier. In the early 2000s, the story of that reign is marred by bad acquisitions and tanking valuations.

So many years later, Messier has been panned for unsuccessfully attempting to recast an old-world water utility into a music and television empire. Failure is typically a legal endeavor, though Messier and company are being accused of misappropriation of funds, stock manipulation, and the intentional misguidance of investors.

In that soup, Bronfman has been accused of insider trading in 2002. Bronfman lawyers contend that shares were dumped without knowledge of sensitive company information.

Does this revision make any sense? According to publicly-available IRS documents (available at the permalink below), the year-end, unpaid balance in 2008 was actually approaching $260 million ($259.7 million). Presented with that $260 million figure earlier this month, SoundExchange immediately shaved the balance down to $200 million for early 2009 based on ongoing payouts.

During the multi-week investigation, the group declined to offer a more revised, up-to-date figure, citing auditing confidentialities. SoundExchange executive Laura Williams noted that “‘stuck’ or delayed funds in 2007 were around $101 million and a little over $200 million at the start of 2009,” while acknowledging a “110 percent” increase in just two years.

It gets worse. The updated math seems more than just fuzzy, and suggests a broader transparency issue. In an indirect retort to Wired and other outlets unwilling to ask tough questions, Calhoun noted that $39 million remains reserved for ‘artists and copyright holders who haven’t yet registered,’ and led with that figure. But the same SoundExchange breakdown also includes a roughly $40 million outstanding balance from ‘bad data,’ ‘no data,’ or money locked in foreign PROs. That alone adds up to about $79 million in unpaid royalties.

Then, about $100 million of the $200 million, according to new figures from Calhoun, is ‘flow-through’ that has already been paid out. The rest is being held pending court resolutions on various royalty rates.

The flow-through figure raises even more questions. Flow-through is certainly present, though according to an earlier breakdown from Williams, year-2008 payouts were already more than $100 million. Still, the IRS filings show an end-of-year balance of $260 million, suggesting a far greater figure in 2010 by simple extrapolation.

Perhaps Calhoun is engaged in a bit of balance ‘time-shifting,’ a practice that seems to ignore incoming – and unpaid – royalty amounts while focusing heavily on subtraction. Here are the outstanding ‘fund balances’ (end-of-year) as confirmed by the available federal filings. So far, the only documented balances have come from the IRS.

* 2006: $96.7 million
* 2007: $192.7 million
* 2008: $260 million

Time for an investigation? Something isn’t quite adding up, at least until more documentation or transparency is offered by SoundExchange. In the absence of that, additional federal filings – when made public – will offer a more complete update.