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MP3 Crusher -- Jurisprudence Over Profits?

U.S. District Judge Jed Rakoff this week found that MP3.com willfully violated the copyrights of Universal Music Group, and ordered the Internet music sharing company to pay Universal $25,000 per compact disc, perhaps as much as $250 million.

This follows on his ruling in April that MP3.com violated federal copyright law in a in a lawsuit filed by the Recording Industry Association of America in January alleging that MP3.com failured to seek permission from the industry before creating an online database of music.

Rakoff could have chosen the $150,000 per CD authorized by the federal copyright statute but refrained because he felt MP3.com acted more responsibly than other Internet music startups.

Universal wanted up to $450 million, claiming MP3.com had copied 5,000 to 10,000 of its CDs onto the database. 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."

MP3 -- and many consumers and record companies -- thinks this is inappropriate application of dated laws in a new technological world.

"We believe that everyone should have the right to listen to the music they purchase, even if it's on the Internet," pleaded Michael Robertson, chairman and chief executive officer of MP3.com. "While we respect the court, we disagree with the court's decision and we look forward to taking our case to the court of appeals."

The other major recording companies seem to agree with him. Sony Corp., Time Warner Inc., EMI Group and Bertelsmann agreed to a settlement offer made by the San Diego-based MP3.com after the April ruling. The companies allowed their music to be used by MP3.com and settled for undisclosed amounts, which trade pundits have estimated at $20 million each. It would appear that Universal is playing the spoiler when the industry has found a new cash cow, a distribution model that actually increases profits.

The judge does not agree.

"Some companies operating in the area of the Internet may 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," Judge Rakoff said. "They need to understand that the law's domain knows no such limits."

Not unexpectedly, Cary Sherman, senior executive vice president and general counsel of the Recording Industry Association of America (RIAA), echoed:

"We're obviously pleased with today's ruling. This should send a message that there are consequences when a business recklessly disregards the copyright law. We trust this will encourage those who want to build a business using other people's copyrighted works to seek permission to do so in advance. That's the best and quickest way to create a vibrant marketplace for music on the Internet."

"We built technology that lets people listen to their own CD collections," Mr. Robertson countered. "We think the law needs to accommodate consumers' need to listen to their own CD collections online in a digital form."

The legal point being made is that, although it is permissible for an individual to copy a purchased piece of music, technically, MP3 served as an agent to copy rightfully-owned material on the owners' behalves and thus were infringing the law and subject to punishment. This, on more personal terms, might be the equivalent of saying that it's acceptable to duplicate your own CD but if you ask your sister to do it for you, she can be arrested. That, in a nutshell, is MP3's argument, one which business leaders seem to be buying into as a way to make, not lose, profits -- with the exception of Universal.

The next phase of the tri



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