HOLLYWOOD — The recorded music business — and the rest of Hollywood’s creative community — breathed a collective sigh of relief Friday.
That’s when a U.S. federal court ruled that MP3.com violated copyright law by creating a database wherein users could download music and then access it by any computer connected to the Internet.
Database was created without the permission of the five major record companies — and most importantly, without paying them for the privilege.
The ruling stems from a lawsuit filed in January by the Recording Industry Assn. of America (RIAA) — which represents the five major record companies — alleging that the database of more than 80,000 albums created by San Diego-based MP3 reps an infringement of their copyrights, even though consumers must own an original copy of the CD for the service to work (Daily Variety, Jan. 24).
“Plaintiff’s motion for partial summary judgment holding defendant liable for copyright infringement is hereby granted,” ruled Judge Jed Rakoff of the U.S. District Court for the Southern District of New York, adding that a written opinion setting forth the grounds for this determination would come within the next two weeks.
The RIAA was seeking $750 to $150,000 per CD — up to $12 billion — in damages. They also will be determined at a future date.
“This isn’t just about the music business, it’s about all copyright and intellectual property rights throughout the entertainment industry,” Bank of America managing director of entertainment and new-media research Stewart Halpern told Daily Variety. “This demonstrates that the judiciary is not going to weaken the copyright protection that’s given to the entertainment industry.”
But MP3 officials were adamant that the ruling would do nothing but hurt the record companies and vowed to fight on.
“This is not a victory for the record labels — it’s a loss.” MP3 chair-CEO Michael Robertson said in response to the decision. He added that the judgment will create “a vacuum in which other technologies can emerge that don’t respect artist rights and do not compensate artists.”
Robertson is referring to file-sharing programs such as Napster, which is also the target of suits filed by the RIAA and, more recently, by artists ranging from Metallica to Dr. Dre.
MP3 execs expect the RIAA to seek an injunction that would remove copyrighted material from the MP3 Web site and that the company would comply. MP3 claims to have recordings from 4,000 labels — many of them indies unaffiliated with the RIAA — in its database.
‘We’re not done’
“We lost round one,” MP3 prexy-chief operating officer Robin Richards said, “but we’re not done fighting yet.”
Richards noted that 80% of the company’s revenues come from ads on other parts of the site and that last week’s decision would have no impact on future revenues.
Trading on the Nasdaq, MP3 stock opened Friday at $12, but closed at $6.94 after news of the verdict. The stock’s 52-week high was $105.
(Ann Donahue contributed to this report.)