MP3.com Countersues Recording Industry

In the latest skirmish over the complex copyright issues surrounding music sales over the Internet, online digital music provider MP3.com (Nasdaq: MPPP) filed a countersuit yesterday against the Recording Industry Association of America (RIAA), alleging unfair business practices.

The suit, filed in a San Diego, California Superior Court, is in response to a lawsuit that the RIAA filed against MP3.com last month. It alleged that the company’s new My.MP3.com service compiled a vast database of copyrighted recordings without permission or license.

Innovation or Misappropriation?

The disputed service allows Web users to download digital copies of music that they already own or of music they bought from one of MP3.com’s CD retail partners. The database consists of 45,000 CDs, many of which the RIAA says are copyrighted works.

“Innovation based on blatant misappropriation is hardly innovation,” RIAA CEO Hilary Rosen wrote MP3.com founder and CEO Michael Robertson in an open letter last month.

Robertson blasted back at the organization in a statement yesterday, saying, “We can no longer tolerate the bullying tactics of this not-for-profit trade association. After we get to the bottom of all their legal actions toward MP3.com, we will vigorously pursue all of our legal remedies.”

The RIAA was unavailable for comment today.

A Treacherous Trail

MP3.com’s countersuit was not a surprise to industry observers, who have seen Robertson brawl with the traditional recording industry in the past. Unlike his other battles, from which the company rose victorious, this one could be Robertson’s downfall.

Many observers say that MP3.com’s service demonstrates a clear-cut case of copyright infringement, and cite a long line of legal precedent that restricts the use of copyrighted material for commercial purposes.

Robertson argues that the association does not control the use of music that has already been purchased by a consumer, and pointed out that “My MP3.com” has security features that determine that a user has purchased or owns the music before they download a digital copy.

“Our service is nothing more than a virtual CD player,” he wrote Rosen. “It is a new and innovative technology that lets people listen to their music. We have every intention of fighting your efforts to dictate the way people can use their music.”

Should a judge or jury disagree with those assertions, MP3.com could be faced with damages that could range into the billions of dollars (US$). For a company that booked revenues of $21.9 million and recorded a net loss of $36.3 million for the full year, any judgment against it could be catastrophic.