Emusic.com Sues MP3.com

By Robert Menta- 12/20/00

What? You thought all the litigation was going to end when Bertelsmann bought Napster and MP3.com settled with the big 5 major labels? It doesn't look that way, in fact the recent MP3.com deal may be spurring more legal actions including this weeks announcement which pits dot com v. dot com. Emusic.com is suing MP3.com for copyright infringement.

The complaint, filed in the U.S. District Court for the Southern District of New York where MP3.com lost its ruling to Universal Music Group, maintains that the same MP3.com service that was ruled to have infringed on the copyrights of the major labels is liable for similar damages to Emusic. EMusic claims exclusive digital rights to approximately 13,000 albums from over 600 record labels, mostly independents.

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Some of those labels have already joined EMusic in the complaint including SpinART Records, Fuel 2000 Records, Fearless Records, Gig Records, Invisible Records, and Victory Records. More independents are expected to join the action soon. At this time, EMusic is unable to determine how many albums found their way onto the MP3.com service.

"They have chosen to ignore their infringing actions with respect to independent record labels" said Gene Hoffman, President and CEO of Emusic. Hoffman was referring to the fact that MP3.com chose to settle with the major labels while leaving out the smaller ones in their negotiations. The independents feel they are now due their share and are using those settlements to help cut themselves in on a deal possibly worth ten's of millions of dollars.

That is money that would be warmly welcomed by Emusic who is struggling to contain their cash burn rate and avoid the fate of the many dot coms that have bitten the dust this season. A $10 million settlement would be equal to a $10 million capital investment in Emusic without having to dole out a percentage to a venture capitalist.

The initial reaction to their lawsuit has proved fruitful in one area, the stock market. Emusic's battered stock rose 18% on the news. This on a day the NASDAQ itself dropped over 100 points.


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