MP3.com to fight court ruling

Internet music service MP3.com is to fight a court ruling that found it is violating record company copyright.

The ruling can be seen as a victory for the world's largest music labels, who have long feared that the MP3 technology could wipe out their revenues.

The MP3.com website offers a service called my.mp3.com which allows users access to their own CD collection online for free.

The recording industry say that MP3.com did not have record company permission to create the database that makes this service possible.

MP3 is a technology for compressing sound, either music or speech, into a small file, about one twelfth the size of the original. The sound quality is similar to the original.

Judge Jed Rakoff ruled on Friday that MP3.com was "liable for copyright infringement".

He said a written opinion would be available in the next two weeks.

Record company joy

The lawsuit was brought by the Recording Industry Association of America, which has welcomed Judge Rakoff's decision.

The record companies involved in the court case include Time Warner's music group, Sony Music Entertainment, Seagram's Universal Music Group and Bertelsmann's BMG.

Sony artists such as George Michael can be accessed via MP3

These companies are now expected to apply for an injunction, that will force MP3.com to remove from the database the music whose copyrights are held by major labels.

Fighting talk

MP3.com has made it clear that it intends to appeal and that business will continue as usual.

"We lost round one," Robin Richards, MP3.com's president said. "We're in a heavyweight fight, and there are five heavyweights ( in the ring against us. We will take shots, but this is by no means the end of the fight," he added.

He pointed out that "my.mp3.com features music from over 4,000 labels, many of whom have allowed us to make their music available in this way."

The success of MP3.com, with an estimated 400,000 customers, has prompted the recording industry to launch an aggressive anti-piracy crusade.

The website had initially focused on creating a platform for unknown artists.

What prompted the RIAA to start this lawsuit was MP3.com's launch of two new services.

Instant Listening Service allows customers to listen to a CD after they have purchased it, while Beam-IT allows users to add their own CDs to their MP3.com personal playlist online.

While individuals can listen to their CD collections online anyway, MP3 was making it easier for them by offering them access to its database.

The major record companies objected to the unauthorised creation of the database, even though the system cannot work unless the user has an original copy of the copyrighted work.

Investor fears

The news sent MP3.com shares plummeting on Friday, with shares closing 40% lower at $7.

When it was first issued in July last year, the share had traded as high as $105.

Chairman and chief executive Michael Robertson has since sought to reassure worried investors.

"This ruling will have no impact on the future revenues of the company," he said.

The my.mp3.com site does not generate any revenue for MP3.com, he said.

About 80% of the company's revenues come from advertising in other parts of the site, he added.