and Universal Settle for $53.4 million

By Richard Menta- 11/15/00

"Today's development takes us out of the courtroom and back into the business of moving our company forward,"'s CEO Michael Robertson told reporters after the hearing. has agreed to pay $53.4 million to Universal Music to resolve their copyright infringement suit. As part of the deal, Universal agrees to let offer its music on their digital locker service

A loss by in this case could have cost the company $250 million in damages. had settled its case with four of the five major labels for $20 million each. Universal refused to negotiate with initially and continued the suit.

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In September, U.S. District Judge Jed Rakoff ruled that was liable for $25,000 per song violation and set out to determine the number of violations for the final settlement. Universal claimed violated the copyrights on roughly 10,000 albums.

But shot back claiming the copyright claims of Universal were invalid. The reason was Universal's claim that the music was work-for-hire. The work-for-hire clause, which was repealed from copyright legislation recently, gave the music labels the rights to the works over the artists who recorded them. This was done by designating the artists as employees of the labels they made the recordings for.

The repeal of the work-for-hire clause put Universal in the possible position of not receiving any damages by the time the judges final decision was rendered. A brief filed by the Recording Artists Coalition siding with's interpretation of the works-for-hire issue put further pressure on the label to settle.

Officially the settlement is being referred to as a judgement. The reason is to avoid paying off on a "most-favored nation" clause found in the agreements with the other four labels. If triggered, the clause would automatically raise the settlement with the other four labels to the equal of Universal's. now owns the rights to broadcast the music of all the major labels and is expected to re-start its service soon.

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