MP3.com Loses Case Against Music Labels

In a U.S. district court ruling today, Judge Rakoff ruled that MP3.com (http://www.mp3.com) violated copyright laws in the lawsuit brought by the Recording Industry Association of America (RIAA) ( http://www.riaa.com).

At issue was whether MP3.com's Beam-It service violated copyright law because it pre-encoded music tracks that users were adding to their online accounts. The labels claimed that MP3.com had no right to pre-encode CDs without going through licensing agreements with each label.

Naturally, MP3.com was disappointed. "This is not a victory for the record labels -- it's a loss," MP3.comchairman/ceo Michael Robertson said in response to the decision. "Newtechnologies for delivering music are here to stay, and the technology trendis moving in only one direction: forward." In response to the news, MP3.com's stock price dropped 40%.

Robertson said that its service actually encourages purchasing of CDs. "My.MP3.com is a system which requires the purchase of CDs inorder to function, as opposed to other services like Napster that do notrequire users to first purchase a CD before accessing music," he said. "The labels madethe decision to challenge a technology that will protect their intellectualproperty interests and grow their business. They will be left with copyrightchaos, as we're witnessing today."

What's unclear now is what will happen to MP3.com's database of music. Currently users can still access their "beamed" CDs, but it's likely that the database will be dismantled. What may remain, however, are songs from labels that weren't plaintiffs in the suit.

With this decision, the case enters the damages stage. How much will MP3.com have to pay for this transgression? It's unclear now but word is that the company is still in talks with the RIAA.

The RIAA is still embroiled in a more bitter battle with Napster, which allows members to trade and download music files. Even artists like Metallica and Dr. Dre have filed suits against the company, making sure that lawsuits are always a part of digital music.