Judge Rules on MP3.com Payout Today.

By Robert Menta
09/06/00

Today, U.S. District Judge Jed S. Rakoff will rule on whether MP3.com willfully infringed Universal's copyrights. The keyword here is willfully and that will determine how much MP3.com must pay per violation.

 


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The award can be as much as 450 million. That comes to $45,000 for each of 10,000 CDs Universal claims were illegally copied. The judge can also rule the violation was unintentional calling for a $2.4 million penalty, a slap on the wrist as far as Universal is concerned, but a far cheaper alternative for MP3.com than continuing an expensive appeals process to overturn the courts decision that it violated copyright laws.

MP3.com's lawyer, Michael Rhodes, pleaded with the not too sympathetic judge not to impose a penalty ``in the Draconian range of $400 million, an award that could never be satisfied and would end up being the largest paper award in history.''

``There's not one iota of evidence that they even lost a penny,'' Rhodes continued.

Universal's lawyer, Hadrian Katz, disagreed calling for the stiffest of penalties. ``Massive copyright infringement is the kind of innovation that needs to be deterred,'' he said. ``An award should sting. It should be serious,''

Of course one has to wonder what Universal will do if it does win a high judgment. A $450 million dollar award can easily drive MP3.com to the appeals court rather than to the bargaining table. The reason is the settlements that MP3.com made with the four other record companies, EMI, Sony, Time Warner, and BMG has a parity clause. If Universal should negotiate more money, their settlements will grow too, a further strain on MP3.com cash stock.

Worse yet, not all of the CD's showcased on the MP3.com's MyMP3.com site were from the major labels meaning a large award for Universal can spawn a wave of similar lawsuits from independent labels.

Still, continuing this fight in the courts doesn't help their battered stock price, which is down almost 90% from its high.

The decision should come sometime this afternoon. It may change the face of the Net music industry forever.

 

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