MP3.com Trial Begins After Negotiations Fail

The trial in Universal Music Group’s copyright infringement lawsuit against Internet music site MP3.com Inc. began Monday morning after weekend negotiations failed to produce a settlement.

The nonjury trial before U.S. District Judge Jed S. Rakoff in New York opened with testimony from MP3.com President and Chief Executive Michael Robertson. Universal, the world’s No. 1 record distributor and a unit of Seagram Co., is the only plaintiff remaining in the case after four other major record companies reached settlements with the San Diego-based site.

In April, Rakoff ruled that MP3.com had infringed the record companies’ copyrights through its My.MP3.com service. The trial will determine whether MP3.com’s conduct was “willful” and exactly how many Universal copyrights the company violated. MP3.com could face damages of as much as $150,000 for every Universal compact disc it copied. An estimated 5,000 CDs are in contention.

MP3.com stores in its computers digitized copies of more than 80,000 compact discs. The company provides access to music from that database, allowing subscribers to listen to CDs from their personal collections on any computer, as long as they can show that they already own that particular disc. Subscribers verify ownership by putting the CD into a computer and allowing MP3.com to scan it.

Robertson admitted that some users of the site are able to download music files to the hard drives of their computers instead of simply listening to files that are stored on MP3.com’s computers. Once the files are downloaded, users are able to share them with others.

The My.MP3.com service was started because the company wanted to create a way for users to listen to their music collections on the Web while ensuring that copyright holders were compensated, Robertson said. Users must first purchase a CD before they can access a copy from My.MP3.com, he said.

MP3.com has settled with Sony Corp., Time Warner Inc., EMI Group and Bertelsmann. The company reportedly has paid about $20 million in each settlement, analysts said. The settlements allow MP3.com to resume online distribution of songs owned by those record companies.

MP3 shares fell 22 cents to $8.88 in trading on Nasdaq.