AOL Guilty of Copyright Infringement

In a decision that could have a chilling effect on online auctioneers, Internet Service Providers and e-commerce companies, a German judge has ruled that AOL Germany violated copyright law by taking no action to prevent subscribers from swapping pirated digital music files.

The suit, which was filed in 1998 by Hit Box Software, requested $50,000 (US$) in damages. The company claims that each track, valued at up to $15 per CD, was downloaded more than 1,000 times on AOL.

The court has delayed a ruling on the amount of damages.

Napster Embarrassment

Just last month, AOL was embarrassed when a small subsidiary, Nullsoft, released an open beta version of a clone of the controversial Napster software for distributing songs in MP3 format over the Web.

In December 1999, the Recording Industry Association of America (RIAA) sued Napster “because it launched a service that enables and facilitates piracy of music on an unprecedented scale,” according to the RIAA.

Online Piracy

It is too early to determine how the ruling will affect the black market industry in the United States, where several similar lawsuits have been filed recently.

In December, RealNetworks, a leading maker of software for playing video and audio online, sued startup Streambox.com. In its complaint, RealNetworks alleged that the Redmond, Washington-based company infringed upon copyrights by designing software that enables users to copy audio and video into RealNetworks’ proprietary media format.

RealNetworks also claimed that Streambox’s software lets users convert the files to other formats, such as MP3 and those played by Microsoft Corp.’s Windows Media.

In another high profile case, former Beatle Paul McCartney filed suit in U.S. District Court in Manhattan, accusing MP3.com of copyright infringement. The lawsuit says that MP3.com’s online service allows users to copy and store the contents of CDs, thus violating copyright law.

The suit alleges that “MP3.com has itself systematically copied tracks from over 80,000 copyrighted CDs onto its computer servers in order to enable it to transmit these works to consumers for a profit.”

Implications for eBay and Yahoo!

The ruling could reverberate far beyond the music industry, encouraging further litigation over a wide range of issues. Both Yahoo! and eBay have been sued in the last month over items posted for sale on their sites.

Yahoo! was hit by a joint suit filed in San Francisco federal court by interactive entertainment powerhouses Sega America, Electronic Arts, and Nintendo of America. The companies claim that Yahoo! knew that counterfeit video and computer games were being sold through Yahoo! Auctions and Yahoo! Stores.

Earlier this week, the International League against Racism and Anti-Semitism (LICRA) filed a lawsuit against Yahoo! in Paris, charging the Internet giant with illegally hosting auctions of Nazi-related paraphernalia. Selling or displaying any items that incite racism, including Nazi artifacts, is strictly illegal in France.

Amazon Sued

Other online retailers have also recently found themselves the object of lawsuits claiming infringement on intellectual property. Intouch, holder of a patent that allows customers to hear portions of songs at kiosks or online, is taking on Internet giant Amazon in a patent dispute.

Intouch is alleging that Amazon and other Internet sites, including Listen.com, Liquid Audio, Discover.music.com and Time Warner’s Entertaindom, misappropriated the technology to offer music samples online.

According to Intouch, this infringement caused the company economic harm because it lost market share during “this critical period in the development of the Internet.” Intouch wants a jury trial and is seeking unspecified damages and legal fees.

Zagat Sues

Zagat Survey, which publishes dining guides, filed a federal lawsuit earlier this week against E-Compare, claiming that “E-Compare has deliberately copied almost all the Zagat restaurant rankings, ratings and reviews for the entire United States” and posted them on Sprint’s Wireless Web.

The New York-based Zagat is seeking $100 million in compensatory damages, $100 million in punitive damages, and an injunction to prohibit future pirating by the San Jose, California-based startup.

According to published reports, E-Compare Chief Executive Jason Ashton said that the company had permission to use the reviews and was planning on paying royalties.