Judge Rejects MP3.com Claim

N E W  Y O R K, Aug. 30, 2000 -- A judge today rejected an accusation by MP3.com Inc. that Seagram Co.’sUniversal Music Group was using its copyright infringement claimto put the online music company out of business.

U.S. District Court Judge Jed Rakoff alsoruled as irrelevant MP3.com’s allegation that Universal, theworld’s largest record company, was unwilling to settle the suitout of court because of its own online strategy.

Rakoff ruled in April that the San Diego-based MP3.com brokecopyright law by creating a database of more than 80,000 albums,which when combined with its software, allows users to storemusic digitally and then access it via any computer. The serviceis called My.MP3.com.

Time Warner Inc.’s Warner Brothers music group, SonyMusic Entertainment, BMG, the music unit of BertelsmannAG and EMI Group Plc, have all reachedsettlements with MP3.com that allow their music to be used in thedatabase.

But Universal, home to such artists as No Doubt, Jay-Z andLimp Bizkit, is the only major label not to strike a deal,forcing a trial, which opened Monday, to determine the damagesMP3.com must pay Universal.

A Hostile Witness

Today, MP3.com’s attorney Michael Carlinski calledSeagram President and Chief Executive Edgar Bronfman Jr. as ahostile witness as he sought to portray Universal Music as afierce competitor that was trying to “put this company [MP3.com]out of business or publicly vilify” it.

Carlinski suggested to Bronfman that FarmClub.com, a Web sitecreated by top executives at Universal Music, was a directcompetitor to MP3.com. Both MP3.com and FarmClub.com offer freedownloads of music by acts that are not signed to major labelcontracts.

But Rakoff said that Bronfman and Universal’s motives in thetrial were irrelevant.

“You think Mr. Bronfman and his company have a motive toeconomically damage the defendant [MP3.com],” Rakoff said toCarlinski. “You’ve presented no evidence of that, but assumingyou did, it’s irrelevant as far as I’m concerned.

“This is a trial to determine the [intent] of the defendant,”he added. “The motivation of any other parties is not involved inthis case.”

Did MP3.com Willfully Break the Law?

The damages in the case will be determined, in part, bywhether or not the court believes that MP3.com “willfully brokethe law,” according to the judge. If the court finds willfulintent, it has the power to impose more severe damages.

Carlinski tried to argue that there was a legal precedentthat the conduct and attitude of plaintiffs was relevant.

He also drew attention to a speech at “Real Conference 2000”in San Jose, Calif., in which Bronfman said, “In theappropriation of intellectual property, my.MP3.com, Napster andGnutella … are, in my opinion, the ringleaders, the exemplars oftheft, of piracy, of the illegal and willful appropriation ofsomeone else’s property.”

Napster and Gnutella make software that allows users loggedon to the Internet to download music files others have stored intheir computers. The five major labels have filed a copyrightinfringement suit against Napster, which denies it broke thelaw.

After verbally jousting with Bronfman for close to an hour,Judge Rakoff held a private conference with Carlinski andUniversal’s attorney Hadrian Katz.

Shortly thereafter, Rakoff cut short Bronfman’s testimony andannounced to the court, “The defendant’s thrust is their beliefthat [Universal Music has] competitive motives for pursuing thislawsuit. That’s why [MP3.com] hasn’t been able to settle. Butthis is completely irrelevant to the willfulness question.”

Carlinski argued that Universal was “using the judicialprocess in an inappropriate manner.” Nevertheless, Rakoffdismissed Bronfman from the witness stand.

After his testimony, Bronfman was asked if he was using thetrial as a means to put MP3.com out of business. “This is amatter that’s still in litigation and it would be inappropriatefor me to comment,” he told Reuters.