Universal Asks Judge to ‘Sting’ MP3.com

With a decision due as soon as Wednesday in the copyright infringement case pitting Universal Music Group (UMG) against MP3.com (Nasdaq: MPPP), the record label is asking the judge hearing the case to “sting” the file-sharing company with a stiff monetary penalty.

On Tuesday, lawyers for Universal asked U.S. District Court Judge Jed S. Rakoff to award it $450 million (US$) in damages, an amount that lawyers from MP3.com said could put the company out of business.

“An award should sting,” Universal lawyer Hadrian Katz told the judge during closing arguments in the case. “It should be serious.”

Decision Any Time

The judge must first determine whether the San Diego, California-based MP3.com willfully infringed the copyrights held by UMG, the world’s largest record label, and then will set a price for each violation.

The MP3 case is being watched closely throughout the online and music communities. Especially interested are principals of Napster, a file-sharing network that has itself been targeted for lawsuits by a coalition of record labels and individual artists, and Scour.com, a Michael Ovitz-funded company that allows sharing of both music and video over the Web.

Late last week, Scour said that its own lawsuit worries had scared away a group of investors, forcing the Los Angeles firm to lay off 52 of its 70 workers.

Earlier this year, MP3.com settled lawsuits with four other record labels after Judge Rakoff found copyright infringement did take place. However, negotiations between MP3 and Universal left the two parties more than $75 million apart, lawyers for both sides said.

The question in the case now is whether MP3 intentionally violated the copyrights held by Universal. If so, Rakoff could award increased damages.

Out of Business?

The $450 million that UMG is seeking represents $45,000 for each of the 10,000 compact discs the record company says were copied and distributed to MP3.com customers. Katz said the amount would hurt MP3.com, but not put it out of business.

According to published reports, MP3.com lawyer Michael Rhodes called the proposed award “draconian” and told the judge that Universal should not benefit from the case. “There’s not one iota of evidence that they even lost a penny,” he said. “The bottom line here is, if you do anything more than the statutory minimum, it’s over. Deterrence here is a death sentence.”

Question of Intent

MP3.com claims that it developed technology that required users of its MyMP3.com service to prove they owned a CD before listening to tracks from it over the Web.

Still, the music site’s lawyers appeared resigned to some settlement, asking the judge to consider an award in the $2.4 million range.

Meanwhile, MP3.com may have given a glimpse of its own future by touting the success of its New Music Army program, which features the digital music of unsigned artists — an area of the company’s business free from potential copyright infringements.