$250 m. verdict could torpedo MP3.com

By : |August 8, 2000 0

In what may well amount to a death sentence, federal US judge Jed Rakoff
ordered MP3.com to pay the Universal Music Group studio a whopping $25,000 for
 each of some 10,000 copyrighted Universal Music CDs the company had made
available on its Web site. The punishment could amount to a $250 million damage
award. If upheld, MP3.com will have to file for bankruptcy.

Rakoff was blunt in pronouncing his verdict which he indicated was meant to
send a clear message to other online companies engaging in the distribution of
copyrighted material without the explicit permission from the publisher or
artist. “Internet companies have a misconception that, because their
technology is somewhat novel, they are somehow immune from the ordinary
applications of laws of the United States, including copyright law. They need to
understand that the law’s domain knows no such limits.”

MP3.com said it will appeal the verdict. Universal was the only major record
label that decided not to settle a lawsuit with MP3.com. Earlier this summer,
four labels settled for $150 million.



Universal had asked for damages of around $450 million. “Music is a
media and the next infringement may be very different,” said Universal lawyer
Hadrian Katz. “It may be video or it may be film or it may be books or it
may be something very different.”

Universal claims MP3.com copied up to 10,000 of its CDs. MP3.com has put the
number of CDs at 4,700, which would make the damage award nearly $118 million.
Rakoff will hold a hearing later this month to decide the actual number of CDs

MP3.com officials said they were disappointed but hopeful the company will win
on Appeal. Although they did not have permission to make copyrighted CDs
available online, MP3.com claims its service did not harm recording companies as
users were required to prove that they owned a legal copy of the CD they wanted
to listen to online.

To do so, users have to insert the original CD in their CD-ROM drive. Only
then can they hear the contents of the disk while at work or traveling.
“There’s not one iota of evidence that they even lost a penny,”
MP3.com lawyer Michael Rhodes argued saying that Universal did not deserve such
a huge windfall profit.

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