MP3 spins wheels

Judge labels grilling of Bronfman a 'waste'

NEW YORK — Efforts by MP3.com’s defense team to paint Universal Music Group’s boss as a vindictive bully, out to rid the marketplace of upstart competitors, went down in flames Wednesday morning.

After a little more than an hour of objection-riddled testimony, Edgar Bronfman Jr., chief exec of Universal parent Seagram was excused from the stand by U.S. District Court Judge Jed Rakoff.

Bronfman was called by the defense as a hostile witness in the ongoing trial to determine the level of damages MP3.com must pay to compensate Universal for copyright infringement relating to the former’s My.MP3.com service.

The judge let Bronfman go after he concluded that MP3 attorney Michael Carlinsky’s questions were focused primarily on establishing that Universal’s real goal in the damage proceedings was to eliminate competition for its own businesses, including its nascent Webcentric music label Jimmy and Doug’s Farmclub.

Judge Rakoff admonished MP3 attorneys about dragging Bronfman into court to pursue a line of questioning that had little to do with the main issues of the trial, namely whether MP3.com’s copyright violations were “willful,” and whether damages should be substantial enough to act as a deterrent against would-be imitators.

‘Waste of time’

Since the questioning didn’t address those two issues, “What we’re engaged in is not only a colossal waste of time, but also a misuse of court proceedings for the airing of hard feelings,” he said.

Carlinsky questioned Bronfman specifically about an interview he gave on the CNBC financial cable channel in November, when Carlinsky said the Seagram topper likened the business model of then-just-launched Farmclub unit to that of MP3.com.

The interview contributed to “a pattern of evidence that Universal had picked out MP3.com as a competitor,” Rhodes said.

However, Bronfman alleged that he named MP3.com only in the interest of providing a “ready analogy” to help investor-viewers get a handle on the business model.

The main issue in the litigation is the discontinued service called MyMP3.com, which allowed users to listen to streamed music on the Web, but only if they could prove they’d bought the music themselves on CD. MP3.com loaded roughly 80,000 CDs worth of music onto its servers without asking permission of the labels that produced them.

Settlements reached

MP3.com has already settled with four of the big five record companies — Sony Music, EMI Group, Warner Music and Bertelsmann unit BMG Entertainment — for roughly $20 million each.

But Universal could stand to receive a lot more than that if it can prove MP3.com willfully flouted copyright law. Potential damages under that outcome could reach as high as $150,000 per CD, Rakoff said earlier in the proceedings.

It’s not clear how many of the CDs loaded by MP3.com came from Universal artists, but given the total of 80,000 and U’s 23% global market share, damages could theoretically reach $2.8 billion. Considering MP3.com’s recent market cap of $571 million, a worst-case ruling would likely crush the company.

However, if MP3.com can demonstrate that the copyright infringement was not willful, Rakoff said damages could be as little as $200 per album, costing the company less than a fifth of the amount required in its settlements with the other four majors.

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