MP3.com Seeking Settlement with RIAA

Just one week after his company lost the first round in a bitter legal battle with the Recording Industry Association of America (RIAA), MP3.com CEO Michael Robertson expressed hope for a negotiated settlement.

“We’ve been talking to the labels for about three to four weeks on a daily basis,” Robertson told CBS MarketWatch on Thursday. “Actually — in the meantime — we believe a business resolution is the right thing to do. It’s the right thing for us to do, because the last thing an Internet company needs is a three-year legal entanglement.”

Robertson added that MP3.com is trying to work out a licensing agreement that will still allow its users to download cuts from the service’s music database in return for sharing a percentage of MP3’s ad revenue with the record labels.

Judge Leaves No Doubt

Last Friday, a U.S. federal court granted the RIAA’s motion for a summary judgment holding MP3.com liable for infringement. The court will next consider such remedies as an injunction shutting down the service and monetary damages. The RIAA is asking for damages in excess of $6 billion (US$).

MP3.com’s sudden focus on a negotiated settlement with the recording industry coincided with the release Thursday of Judge Rakoff’s legal opinion on the case. In the 10-page document, Judge Rakoff seems to scoff at MP3.com’s argument that it did not violate copyrights, but instead provided a useful service to consumers.

“Stripped to its essence, defendant’s ‘consumer protection’ argument amounts to nothing more than a bald claim that defendants should be able to misappropriate plaintiffs’ property simply because there is a consumer demand for it,” the judge wrote.

The judge also rejected MP3.com’s argument that it did not violate copyright law because it required subscribers to prove they already owned the CD version by inserting them into their computers.

“In actuality, defendant is replaying for the subscribers converted versions of recordings it copied, without authorization, from plaintiffs’ copyrighted CDs,” he wrote.

Finally, the judge said he was not persuaded by MP3.com’s assertion that the record companies were benefiting from having their music played over a new medium.

Bad News for Napster

Some analysts feel that Judge Rakoff’s strong position against MP3.com could amount to a death knell for Napster, which is allegedly being used by thousands to pirate popular recordings.

Napster made headlines earlier this week when drummer Lars Ulrich of the heavy metal rock band Metallica personally presented the company with the names of about 300,000 users who have allegedly been trading the band’s songs online without permission.

Through its attorney, Metallica demanded that Napster refuse service to all of the individuals on the list, claiming that the users have effectively stolen the music.

Nuclear Winter for Record Industry

MP3.com’s Robertson publicly condemned Napster and Gnutella — another MP3 swapping software program — by saying such products could mean “nuclear winter” for the recording industry.

“These systems do not compensate artists and rights owners,” Robertson said.

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