Copyright Act, include the right, within broad limits, to curb the development of
such a derivative market by refusing to license a copyrighted work or by doing so
only on terms the copyright owner finds acceptable.^125The court therefore ruled that the defendant was not entitled to a fair use defense as a
matter of law, and entered partial summary judgment holding the defendant to have infringed the
plaintiffs’ copyrights.^126 Subsequent to the court’s ruling of infringement, the defendant settled
with all but one of the plaintiff record companies (Universal Music Group) by taking a license to
reproduce the plaintiffs’ recordings on its servers and to stream them over the Internet to its
subscribers, for which MP3.com reportedly paid $20 million to each of the record companies and
agreed to pay a few pennies each time a user placed a CD in his or her locker, plus a smaller
amount each time a track was played.^127
Universal Music Group pursued a claim of statutory damages against MP3.com. The
court concluded that MP3.com’s infringement was willful, and awarded statutory damages of
$25,000 per CD illegally copied by MP3.com.^128 Even based on the defendant’s assertion that
there were no more than 4,700 CDs for which the plaintiffs qualified for statutory damages (an
issue that was to have been the subject of a separate trial), the statutory damages award would
have come to $118,000,000.^129 On the eve of trial, the defendant settled with Universal Music
Group by agreeing to pay the plaintiff $53.4 million and to take a license to Universal’s entire
music catalog in exchange for unspecified royalty payments.^130
MP3.com’s legal troubles did not end with the settlements with the RIAA plaintiffs. On
Aug. 8, 2001, a group of over 50 music publishers and songwriters filed suit against MP3.com on
claims of copyright infringement very similar to those asserted by the RIAA plaintiffs. The
plaintiffs sought to hold MP3.com liable for the copies of their works made in connection with
the My.MP3.com service, as well as for the subsequent “viral distribution” of copies of their
works allegedly done through services such as Napster, Gnutella, Aimster, and Music City by
MP3.com users after they download digital copies through MP3.com.^131 Numerous other suits
(^125) Id. (citations omitted).
(^126) Id. at 353.
(^127) See Jon Healey, “MP3.com Settles with BMG, Warner,” San Jose Mercury News (June 10, 2000), at 1A; Chris
O’Brien, “MP3 Sets Final Pact: Universal Music Group Will Get $53.4 Million,” San Jose Mercury News (Nov.
15, 2000) at 1C, 14C.
(^128) UMG Recordings Inc. v. MP3.com, Inc., 56 U.S.P.Q.2d 1376, 1379, 1381 (S.D.N.Y. 2000). The court rejected
the plaintiffs’ argument that a statutory damages award should be made for each song copied, rather than each
CD. The court cited 17 U.S.C. § 504(c)(1), which provides that a statutory damages award may be recovered in
a specified range “with respect to any one work,” and further provides that “all parts of a compilation or
derivative work constitute one work.” UMG Recordings Inc. v. MP3.com Inc., 109 F. Supp. 2d 223, 224- 25
(S.D.N.Y. 2000).
(^129) 56 U.S.P.Q.2d at 1381.
(^130) O’Brien, supra note 127, at 1C.
(^131) “Music Publishers, Songwriters Sue MP3.com for ‘Viral Distribution’ of Copyrighted Works,” BNA’s
Electronic Commerce & Law Report (Aug. 29, 2001) at 933. In late August of 2001, MP3.com was acquired by
media company Vivendi Universal.