MP3.com, BMI Reach Pact, Napster Loses a Round

BOSTON (05/08/2000) - MP3.com Inc., which was recently found liable for infringement of copyright law, claimed a small victory in its battle for legal legitimacy today. The company announced that it has reached a licensing agreement with Broadcast Music Inc. (BMI) that will allow MP3.com to offer potentially 45 million songs from BMI on its site.

The news follows Napster Inc.'s major setback Friday in an MP3-related case.

The motion for summary judgment Napster had filed as part of its defense of a lawsuit brought against the startup by the Recording Industry Association of America (RIAA) was rejected by U.S. District Court Judge Marilyn Patel in San Francisco Friday. Napster's software allows users of MP3 technology to locate MP3 files on the Web and trade them. MP3 is the popular music encoding format used by MP3.com. The RIAA represents the major U.S. record labels.

Patel rejected Napster's motion for summary judgment, in which the company claimed it only acted as a "conduit" for information. Patel's decision means the lawsuit will go to trial.

Napster's attorney, Laurence Pulgram, said that his client is planning to use several other defenses now that the case is going ahead. Among the defenses the company will use is the claim that many songs are authorized for distribution over Napster.comPatel's decision is the second victory for the RIAA, which is hoping to nip in the bud what it considers Internet piracy and copyright violations. Recording artists and their record companies have increasingly been angered by what they say is unauthorized use of their work by the likes of Napster and MP3.com.

On April 28, MP3.com suffered a defeat in a lawsuit filed by the RIAA which claimed the company was violating copyright laws by allowing users to download copyright-protected songs from its Web site and download them on to their hard drives. The RIAA sued MP3.com on behalf of its members for US$150,000 for each title the company has in its database, which could amount to billions of dollars in damages.

New York District Court Judge Jed Rakoff granted partial summary judgment in favor of the RIAA, ruling that MP3.com was liable for copyright infringement.

Damages have not yet been determined, and the judge is expected to file details of his decision soon.

Meanwhile, MP3.com's agreement with BMI, one of the few bright spots in the startup's ongoing relationship with the music establishment, concerns the myMP3.com service, which allows users to download songs from personalized accounts on the company's Web site.

The license covers performing rights for songs, but not however other music copyright interests or other copyright holders, such as record companies, according to a statement from BMI. This means the pact does not cover, for example, "mechanical" rights -- the copyright for a specific recording of a song that is owned by a record label, according to an official at MP3.com who asked not to be named.

On the other hand, the license would cover a recording of a performance of a song by the composer as long as the composer hadn't sold or given the copyright for that particular recorded performance to a third party, the MP3.com official said. The pact with BMI could also let MP3.com offer its users "covers" of songs -- songs performed by people other than the composer, in cases where performance copyrights are not held by major recording labels, the official added.

The myMP3.com lies at the heart of the RIAA lawsuit against MP3.com. MP3.com software, accessible on the company's Web site, matches music CDs that users insert into their PCs with CDs stored in MP3.com's own library. The software runs the users through a questionnaire, asking users if they already own the CDs. If users verify they already own the CDs in question, and the CDs match those in MP3.com's library, users then may log into their myMP3.com account from any PC to listen to the CDs, played in streaming format. Among other issues, RIAA is concerned that the method of verification offered by myMP3.com provides inadequate copyright protection.

BMI, headquartered in New York City, can be reached at +1-212-586-2000 or via the Web at http://www.bmi.com/. Napster, based in San Mateo, California, can be reached at +1-650-570-5382 or via the Web at http://www.napster.com/. MP3.com, based in San Diego, California, can be reached at +1-858-623-7000 or via the Web at http://www.MP3.com/. The RIAA, based in Washington, D.C, can be reached at +1-202-775-0101 or via the Web at http://www.riaa.com/.

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