XM settles copyright suit filed by Universal

XM Satellite Radio Holdings Inc. said Monday that it had settled a copyright infringement lawsuit filed by Universal Music Group and hoped to reach deals with other music companies.

The dispute centers on XM’s portable Inno device, which can store and record music from satellite radio.

Major music labels including Vivendi’s Universal, Warner Music Group Corp., EMI Group and Sony BMG sued XM in May 2006, saying the Inno infringed copyrights and transformed a passive radio experience into the equivalent of a digital download service such as Apple Inc.’s iTunes.

XM said it had reached a multiyear deal with Universal, which will withdraw from the complaint. It said the pact covered all XM radios with advanced recording functions, including future products. XM did not give the financial terms.

“We look forward to continuing our discussions with the other music companies in hopes of arriving at a resolution that benefits everyone, especially consumers,” XM said in a statement.

Warner Music, EMI and Sony BMG, a joint venture between Sony Corp and Bertelsmann, all declined to comment.

Warner Music is in talks with XM to try to settle the dispute and expects a resolution soon, said a person familiar with the matter who spoke on condition of anonymity.

Janco Partners analyst April Horace said the Universal agreement probably would be followed by others.

She said the two companies probably had agreed to a set fee for every related device XM sells, but she noted that because these devices were not XM’s highest-volume products, the payments were unlikely to have a material effect on XM finances.

The original lawsuit, filed in New York federal court, had accused XM of “massive wholesale infringement” and sought $150,000 in damages for every song copied by XM customers using the Inno, which went on sale last year.

XM argued that the Inno, which is made by Pioneer Corp., was a legal device that let consumers listen to and record radio as the law had allowed for decades.

“We are pleased to have resolved this situation in an amicable manner,” Universal Music Chairman and Chief Executive Doug Morris said.

XM, with more than 8.5 million subscribers, is waiting for regulatory approval to merge with No. 2 satellite radio company Sirius Satellite Radio Inc.

XM shares dropped 64 cents to $12.91, a move that Horace noted was more closely related to general stock market weakness and investor impatience for approval of the merger rather than a reaction to the settlement.

Sirius shares fell 16 cents to $3.15.