MP3.com will pay an undisclosed amount for the lawsuit settlement and an undisclosed fee to license Sony's catalog. The site will use the music catalog in its My.MP3.com service, which was the focal point of the record company's lawsuit.
News of the settlement drove shares of MP3.com up $1.60, or 20 percent, to $9.34 by the close of regular trading. The shares reached a high of $11 earlier in the day.
Today's settlement marks the latest deal brokered between MP3.com and the record industry. The Recording Industry Association of America (RIAA), the legal arm of the record industry, in January sued MP3.com for its My.MP3.com service, which gives consumers access to digital copies of their CDs. A federal judge in April ruled that the service infringed on the recording industry's copyrights.
The contention has revolved around My.MP3.com, which the company introduced in January. The service lets consumers listen to their CDs through any computer with Web access. To provide the service, MP3.com bought tens of thousands of CDs, created a database of MP3-encoded downloads, and offered access to people who proved they had bought the CD by placing the disc in their computer.
However, MP3.com's move resulted in quick legal action against the company, leading to its round of costly settlements.
"MP3.com respects the rights of copyright holders, and now, with this settlement and license, we can offer consumers an avenue to access music online from CDs they have purchased," Michael Robertson, CEO of MP3.com, said in a statement.
The record industry has waged war on several Net music companies in an effort to curb alleged copyright infringement of its works. The RIAA is in the midst of a high-profile lawsuit against music file-sharing service Napster. A judge ruled that Napster infringed upon copyrights and ordered the start-up to shut down.
Including Sony, MP3.com has reached settlements with four of the "Big Five" record companies. In June, MP3.com reached an agreement with Time Warner's Warner Music Group and German media giant Bertelsmann's BMG Entertainment. Last month, the company reached an agreement with EMI Group.
Universal Music Group is the remaining "Big Five" label that has yet to settle with MP3.com.