MP3.com to Pay $118M in Copyright Case

N E W  Y O R K, Sept. 5 -- A federal judge ruled today that theInternet music-sharing service MP3.com willfully violated thecopyrights of record companies, and ordered it to pay UniversalMusic Group roughly $118 million, or $25,000 per CD.

U.S. District Judge Jed S. Rakoff said it was necessary to senda message to the Internet community to deter copyrightinfringement.

Rakoff said he could have awarded as much as $150,000 per CD butchose a considerably smaller amount, in part because MP3.com hadacted more responsibly than other Internet startups.

Universal Music Group, the world’s largest record company, hadurged a stiff penalty in the closely watched case.

“Music is a media and the next infringement may be verydifferent,” said Universal lawyer Hadrian Katz. “It may be videoor it may be film or it may be books or it may be something verydifferent.”

Katz had urged the judge to award the record company up to $450million because MP3.com had copied 5,000 to 10,000 of the company’sCDs.

The lawyer said such a penalty would cost MP3.com as much as$3.6 billion once the company was forced to pay all the othercompanies whose copyrights it had violated when it created anonline catalog of 80,000 CDs.

Shares Halted Prior to Decision

Shares of MP3.com were halted before the decision; the mostrecent trade was at $7.88 per share, down 68.8 cents on the NasdaqStock Market.

Universal’s record companies were the lone plaintiffs at thetrial. The nation’s four other major record companies settled withMP3.com after Rakoff found earlier this year that MP3.com hadviolated copyrights. The amount of the settlements were notdisclosed but the company set aside $150 million recently to coverits legal costs, including the deals.

Michael Rhodes, MP3.com’s lawyer, pleaded with the judge not toimpose a penalty “in the Draconian range of $400 million, an awardthat could never be satisfied and would end up being the largestpaper award in history.”