MP3.com to pay $53.4 million in copyright case

Online music downloading service MP3.com yesterday was ordered to pay $53.4 million to Universal Music Group (UMG) to settle charges of copyright infringement.

          Online music downloading service MP3.com yesterday was ordered to pay $53.4 million to Universal Music Group (UMG) to settle charges of copyright infringement, two months after the federal judge handling the case ruled that MP3.com had willfully violated copyrights held by the record company.

          At the same time, the two companies announced a deal that gives MP3.com a nonexclusive license to use UMG-controlled recordings as part of its downloading services. The financial terms of the licensing deal weren't disclosed.

          In the copyright infringement case, U.S. District Court Judge Jed Rakoff in New York awarded UMG $50 million in damages and $3.4 million in attorney's fees. The judge's order ended litigation that began in January when New York-based UMG and four other record companies filed suit against San Diego-based MP3.com, charging it with illegally copying thousands of CDs and then offering them as free Internet downloads.

          Officials at UMG and MP3.com didn't return phone calls today and couldn't be reached for comment. But the statement that they issued yesterday said MP3.com doesn't plan to appeal the judgement by Rakoff, who originally ruled that MP3.com could have been liable for damages of at least $118 million. That figure was based on a potential payment of $25,000 for each of the estimated 4,700 CDs in Universal's collection.

          As part of the announcement, MP3.com CEO Michael Robertson said MP3.com executives "are glad that this case is now behind us." The settlement "provides clear evidence that the needs of [copyright] holders and music fans can be accommodated in the digital music space," he added.

          MP3.com had previously settled similar copyright infringement cases with the four other music labels that filed suit against it -- Warner Brothers Music Group, EMI Group, BMG Entertainment and Sony Music Entertainment. MP3.com reportedly paid about $20 million to settle each of those cases.

          The amount of damages awarded to UMG "is by far the largest copyright infringement judgement I've ever heard of," said Len Rubin, an Internet attorney at Gordon & Glickson in Chicago. "You see that size of a judgement in patent infringement cases."

          But, Rubin added, a court-ordered settlement isn't unusual in such cases. And, he said, the judgment is a good resolution for both companies and isn't so huge that MP3.com will be forced out of business.

          In a statement, UMG CEO Zach Horowitz said the damages award probably would have been larger if the case had gone to trial. "[But] it was never our intent to put MP3.com out of business with a judgment so large that it would threaten their viability as a company," he added. "We support the development of legitimate music businesses on the Internet."

          The end of the MP3.com case follows last month's announcement of a settlement deal between record-company owner Bertelsmann and music file-sharing service Napster , which is the subject of a similar digital-copyright infringement lawsuit filed by the Recording Industry Association of America (RIAA) on behalf of Bertelsmann and four other music labels (see story).

          In a related announcement today, online file-sharing service Scour said its Napster-like Scour Exchange file exchange service will be shut down by Friday as part of an ongoing Chapter 11 bankruptcy case. By shuttering the service, Scour said, the Beverly Hills, Calif.-based company hopes to end copyright infringement litigation filed against it by the RIAA and the Motion Picture Association of America.

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