Federal Judge Orders MP3.com to Pay $53.4 Million to Universal

A federal judge ordered the online music seller MP3.com(MPPP Quote) to pay $53.4 million to the Universal Music Group, the only record company that had forgone a settlement and pressed its copyright case in court.

Universal granted MP3.com licensing rights to its entire catalog for use in the company's my.mp3.com service, which allows users to digitally store music. And MP3.com granted Universal the right to buy warrants in the company, convertible to stock, an MP3.com spokesman said.

The New York judge ruled in September that MP3.com willfully violated copyright law when it offered music from Universal's compact discs on its Web site. He had ordered it to pay $25,000 per CD in damages, which could have reached as high as $250 million.

A spokesman for Universal, which is owned by Seagram (VO Quote) did not immediately return a call seeking comment.

MP3.com's battles with the recording industry have served as both precursor and test of the application of copyright law online. The lawsuits began after MP3.com made computerized copies of more than 40,000 compact discs without permission, and a federal court in San Diego found the company liable for copyright infringement in April.

Since then, the music-sharing service Napster, offering more complex technologies with simpler uses, has eclipsed MP3.com's popularity and raised deeper ire from record companies and some musicians.

All five major record labels sued MP3.com, but only Universal went to court. The others -- EMI, Time Warner's(TWX Quote) Warner Music Group, Sony's(SNE Quote) Sony Music Entertainment and Bertelsmann's BMG Entertainment -- settled their suits. MP3 agreed to licensing deals with each company and paid an average of $20 million a case, according to the Wall Street Journal.

Following the judge's ruling, MP3.com's shares gained 63 cents, or 18.52%, to $4. Seagram's shares rose $1.69, or 3%, to $57.06.

In the Universal case, because the judge had ordered MP3.com to pay $25,000 in damages for each compact disc that violated copyright, the remaining issue was how many CDs would qualify. MP3.com argued that 4,700 CDs should qualify, which would result in a damage award of $118 million.

Universal lawyers had asked the judge to impose $45,000 in damages per CD, which theoretically would have resulted in $450 million in damages.

At the time of the judgment, Robertson said the company had about $300 million in cash.

Judge Jed Rakoff indicated that he had other Internet companies in mind when making his ruling, intended to deter future copyright infringement.