Universal in Copyright Violation

Universal Music Group violated music publishers’ copyrights by putting their songs in an Internet jukebox without paying royalties, a federal judge has ruled.

The decision, issued late Tuesday by U.S. District Judge John S. Martin in New York, could delay and raise the cost of a number of long-awaited online music services. These include the Pressplay venture co-owned by Universal and Sony Corp., which has been put on hold while the labels seek licenses from the publishers.

A Universal spokesman said company executives disagree with the ruling and intend to appeal. If the decision isn’t reversed, Universal could be liable for more than $500 million in damages.

The case revolved around an experimental online jukebox launched last year by Farmclub.com, a Web site owned by Universal. The jukebox enabled music fans to listen to more than 20,000 songs by Universal artists, including U2, Bon Jovi and Mary J. Blige.

More than a dozen songwriters and music publishers filed suit in December, arguing that Universal filled the jukebox’s core database with unauthorized copies of their songs.

In its defense, Universal contended that the licenses it obtained to put the publishers’ songs on CD also extended to the jukebox database.

Martin dismissed Universal’s arguments as specious, ruling that the jukebox service required a separate license. In fact, Martin said, such services aren’t even eligible for the mandatory licenses provided by copyright law--instead, they must negotiate for the publishers’ permission.

The decision echoed a ruling last year by U.S. District Judge Jed S. Rakoff, who found that MP3.com violated the major labels’ copyrights by putting their works into an online database without obtaining licenses or paying royalties. Universal ultimately collected $53 million from MP3.com as a consent judgment in that case.

“The irony of this case is that it’s MP3.com redux. It’s deja vu,” said Cary Ramos, the publishers’ attorney in the Universal lawsuit.

The ruling is bad news for any company that wants to launch an online jukebox or streaming service, said Jonathan Potter of the Digital Media Assn., a trade group for online music and video companies.

The ruling enforces double-dipping by the publishers, letting them collect whenever a song is copied onto a streaming service and again whenever a song is played, Potter said.

In a preview of the ruling’s effect, Dallas-based Streamwaves, an upstart online music company, announced Wednesday the first broad deal with music publishers for the right to include songs in an online jukebox.

Streamwaves agreed to pay the publishers 10 cents per song added to the database, plus 10% of its gross revenue per month or $1 per subscriber, whichever is greater.