Zomba May Sue Over MP3.com’s Service

Adding to MP3.com Inc.’s legal woes, Zomba Recording Corp. and Zomba Music Publishing are expected to file copyright infringement lawsuits in U.S. District Court in New York today against the online music start-up.

Analysts warn that the Zomba cases could be the first of many copycat claims brought by smaller labels and publishers against MP3.com.

Like the major labels, Zomba Recording and Zomba Music are suing for copyright infringement stemming from MP3.com’s My.MP3.com service. The service allowed users to store music from their personal CD collections and then access it via any computer connected to the Internet.

Zomba Recording owns Jive Records, which has sold tens of millions of albums by such pop stars as ‘N Sync and Britney Spears. “MP3.com has adopted a blatant strategy of attempting to unlawfully build a business by misappropriating our artists’ [works],” company officials said.

MP3.com was sued in January by Seagram Co., Sony Corp., EMI Group, Bertelsmann and Time Warner Inc. for the same thing. While MP3.com scrambled to reach out-of-court settlements with four of the record companies, Universal Music Group, the world’s largest record conglomerate, refused to settle.

Last Wednesday, U.S. District Judge Jed S. Rakoff in New York ordered the San Diego-based company to pay $25,000 for every Universal CD illegally posted on its My.MP3.com service, or at least $117 million.

The unprecedented order delivered a potentially devastating blow to MP3.com, sending its Nasdaq-traded shares plummeting from $7.88 a share Wednesday to a 52-week low of $5.66 when the markets closed Friday.

MP3.com officials said last week that the company will appeal the ruling. They could not be reached for comment regarding the Zomba suits.

Though Universal’s win is thought to be the largest copyright infringement penalty in history, Zomba officials insist they will seek a higher price-per-CD award.

Zomba Recording is already embroiled in litigation against another new-media firm. The New York-based record company joined numerous major record labels, film companies and music publishers in a case against Scour Inc., a Beverly Hills venture backed by former super-agent Michael Ovitz.