MP3.com ordered to pay $118 million in copyright case

The My.MP3.com service was launched in January 2000. The company built up a library of popular CDs, copied them onto a server accessible from its web site, and invited subscribers to customise and download the music files from any location. In an attempt to avoid copyright infringement, subscribers were required to either demonstrate that they already owned any of the CD albums from which they wanted to download MP3 format tracks or purchase the CDs from an on-line retailer co-operating with MP3.com.

However, a previous decision determined that MP3.com was infringing copyright; yesterday’s decision determined that the company did so wilfully. A trial scheduled for November will determine the sum of damages payable to Universal, but Judge Jed Rakoff said that it will be a minimum of $118 million and a maximum of $250 million, depending on the evidence presented as to the extent of the infringement.

Judge Rakoff said that MP3.com “knew it was entering into dangerous legal territory” when it planned its “Beam It” and “Instant Listening Services” in 1999 and launched them in January 2000. He pointed to a lack of evidence from MP3.com that it felt, in good faith, that its service would not violate Universal’s copyrights in the music, and to the decision by the company to not present evidence on what advice it had received from a law firm it consulted on the issue.

The company argued that all it provided was a “storage” service for customers who had purchased CDs, but Rakoff said he found the analogy to be “strained at best.”

Four other record companies suing MP3.com had settled the case before the latest trial began. MP3.com is understood to have paid each company around $20 million.

Rakoff said yesterday that MP3.com should pay $25,000 per CD for its infringement. In November’s trial, Universal and MP3.com will argue the extent of the violation. MP3.com believes the award should be based on no more than 4,700 CDs; Universal argues that the figure should be nearer 10,000. Rakoff added:

“There is no doubt in the court’s mind that the potential for huge profits in the rapidly expanding world of the internet is the lure that tempted an otherwise generally responsible company like MP3.com to break the law, and that will also tempt others to do so if too low a level is set for the statutory damages in this case.”

He also warned other internet companies that, just because their technology is novel, they are not immune from ordinary law, including copyright law.

Michael Robertson, chairman and chief executive officer of MP3.com said:

"We believe that everyone should have the right to listen to the music they purchase, even if it's on the Internet... 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."

Before the judgement, a lawyer for the company said any fine above $5 million would be a virtual "death sentence". He argued that Universal did not deserve a windfall and that there was "not one iota of evidence that they even lost a penny."