Advanced Copyright Issues on the Internet - Fenwick & West LLP

such a derivative market by refusing to license a copyrighted work or by doing soonly on terms the copyright owner finds acceptable. 121The court therefore ruled that the defendant was not entitled to a fair use defense as amatter of law, and entered partial summary judgment holding the defendant to have infringed theplaintiffs’ copyrights. 122 Subsequent to the court’s ruling of infringement, the defendant settledwith all but one of the plaintiff record companies (Universal Music Group) by taking a license toreproduce the plaintiffs’ recordings on its servers and to stream them over the Internet to itssubscribers, for which MP3.com reportedly paid $20 million to each of the record companies andagreed to pay a few pennies each time a user placed a CD in his or her locker, plus a smalleramount each time a track was played. 123Universal Music Group pursued a claim of statutory damages against MP3.com. Thecourt concluded that MP3.com’s infringement was willful, and awarded statutory damages of$25,000 per CD illegally copied by MP3.com. 124 Even based on the defendant’s assertion thatthere were no more than 4,700 CDs for which the plaintiffs qualified for statutory damages (anissue that was to have been the subject of a separate trial), the statutory damages award wouldhave come to $118,000,000. 125 On the eve of trial, the defendant settled with Universal MusicGroup by agreeing to pay the plaintiff $53.4 million and to take a license to Universal’s entiremusic catalog in exchange for unspecified royalty payments. 126MP3.com’s legal troubles did not end with the settlements with the RIAA plaintiffs. OnAug. 8, 2001, a group of over 50 music publishers and songwriters filed suit against MP3.comon claims of copyright infringement very similar to those asserted by the RIAA plaintiffs. Theplaintiffs sought to hold MP3.com liable for the copies of their works made in connection withthe My.MP3.com service, as well as for the subsequent “viral distribution” of copies of theirworks allegedly done through services such as Napster, Gnutella, Aimster, and Music City byMP3.com users after they download digital copies through MP3.com. 127 Numerous other suits121122123124125126127Id. (citations omitted).Id. at 353.See Jon Healey, “MP3.com Settles with BMG, Warner,” San Jose Mercury News (June 10, 2000), at 1A; ChrisO’Brien, “MP3 Sets Final Pact: Universal Music Group Will Get $53.4 Million,” San Jose Mercury News(Nov. 15, 2000) at 1C, 14C.UMG Recordings Inc. v. MP3.com, Inc., 56 U.S.P.Q.2d 1376, 1379, 1381 (S.D.N.Y. 2000). The court rejectedthe plaintiffs’ argument that a statutory damages award should be made for each song copied, rather than eachCD. The court cited 17 U.S.C. § 504(c)(1), which provides that a statutory damages award may be recovered ina specified range “with respect to any one work,” and further provides that “all parts of a compilation orderivative work constitute one work.” UMG Recordings Inc. v. MP3.com Inc., 109 F. Supp. 2d 223, 224-25(S.D.N.Y. 2000).56 U.S.P.Q.2d at 1381.O’Brien, supra note 123, at 1C.“Music Publishers, Songwriters Sue MP3.com for ‘Viral Distribution’ of <strong>Copyright</strong>ed Works,” BNA’sElectronic Commerce & Law Report (Aug. 29, 2001) at 933. In late August of 2001, MP3.com was acquiredby media company Vivendi Universal.- 40 -