In agreeing to pay $53.4 million to Universal Music Group, MP3.com ended its legal dispute with the last of five major music makers and secured a licensing agreement that permits the online music service to use songs owned by the world’s largest record company.
The deal with Universal Music Group was announced Tuesday as testimony began in the damages phase of a federal trial that had already determined MP3.com willfully violated Universal’s copyrights.
Under the settlement, Universal will also get the right to buy a stake in MP3.com, MP3.com chief executive Michael Robertson said.
“Our shareholders should be excited about today’s development,” Robertson said. “It gets us out of the courtroom and into the business of delivering digital music.”
The company had earlier reached settlements with the four other major companies – Warner Music Group, BMG, EMI and Sony Music Entertainment – and had arranged licensing deals with each of them.
The overall amount of the settlements has not been disclosed, but Robertson said it falls within the $170 million the company set aside for legal costs.
Hadrian Katz, Universal’s lawyer, declined to comment outside court.
In a joint statement issued by the companies, Universal President Zach Horowitz said his company had “pursued this case to send a strong message that copyrights will be protected and that copyright owners and artists need to be properly compensated for their work.”
“It was never our intent to put MP3.com out of business with a judgment so large that it would threaten their viability as a company,” he said. “We support the development of legitimate music businesses on the Internet.”
MP3.com was sued by the record labels over its My.MP3.com service, which allows computer users to listen to CDs over the Internet. Members must first prove they paid for the recording by briefly inserting the CD into a computer’s CD-ROM drive.
U.S. District Judge Jed S. Rakoff ruled in September that MP3.com had intentionally violated the copyrights of the music companies. He awarded Universal $25,000 per CD – or up to $250 million by Universal’s count.
Under Tuesday’s settlement, Robertson said, Universal will buy warrants for the rights to buy MP3.com stock. MP3.com stock rose 63 cents, or 18 percent, to $4 on the Nasdaq Stock Market.
Hilary Rosen, president of the Recording Industry Association of America, said the deal between Universal and MP3.com will “drive home the point that the marketplace for legitimate music on the Internet really works.”
Some lawsuits with smaller labels remain to be resolved but were not expected to be a threat to MP3.com’s ability to stay in business.
My.MP3.com differs from the wildly popular file-swapping method employed by Napster, in which users share their music over the Internet while Napster serves as the clearinghouse.
Last month, media giant Bertelsmann said it would join with Napster in developing a membership-based music distribution system that will guarantee royalties to artists.
Other music industry giants have sued Napster in federal court for copyright infringement and sought to have the service shut down.
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