Near deal, MP3 hits high notes

Labels could settle suit, site may have to pay up to $100 mil

Shares of MP3.com soared nearly 50%, closing at $16.88 Wednesday, as speculation swirled that several of the five major label groups are close to settling their copyright infringement suits with the music site.

There would be two parts to any settlements:

First, La Jolla, Calif.-based MP3.com would pay somewhere between $75 million to $100 million for past damages to the major groups collectively, with each label group negotiating for its own piece of this pie. The Recording Industry Assn. of America (RIAA), which originally brought the suit, is not allowed to negotiate on its member labels’ behalf.

Second, MP3.com users would be allowed to stream licensed songs drawn from the label groups’ vast catalogs via the users’ own My.MP3.com lockers. This would be a non-exclusive arrangement, enabling labels to cut similar deals with other Internet sites.

MP3.com software lets computer users store music in a digital format that is easily accessible and exchangeable via the Internet.

A U.S. District Court judge in New York ruled April 28 that MP3.com infringed on copyrights held by the major labels by creating a database of more than 80,000 albums.

In a related development, Santa Cruz, Calif.-based MP3Board has filed suit against the RIAA, claiming that the MP3board.com site — which contains links to other sites that may contain pirated music — cannot be held responsible for any potential copyright violations that might arise.

Last month, the RIAA sent MP3Board a letter demanding that the company remove those links — an estimated 77% of all the links on the site — that can connect users to pirated materials or face a future lawsuit. MP3Board’s litigious response centers on the notion of such links being at the very heart of the Internet.

“For several months we’ve been attempting to resolve our issues with MP3Board.com without resort to the courts,” RIAA prexy-CEO said in a statement on RIAA’s Web site. “It’s not surprising that MP3Board.com would seek this action given that we have already contacted them about infringement on their site and given that we had identified Friday — the very day they filed suit — as the deadline for bringing their site into compliance with the law.

“I guess they thought that the best defense is a good offense. But legal tactics like these have been tried before and don’t work — it won’t make their site any less infringing. ”

The DVD Copy Control Assn. is involved in a similar suit against 2600.com, which links to sites offering software that allows users to copy DVD films. That case is pending.

Meanwhile, National Record Mart — America’s fourth-largest music retailer — continues to hammer out details to acquire MP3Board.com with an eye toward using it as a portal for the online sale of digital downloadable music.

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