Project Playlist puts legal troubles behind it

Struggling music start-up settles legal dispute with top music labels and can now offer music from three of the four biggest ones.

Two of the largest recording companies have withdrawn a copyright lawsuit against music service, formerly known as Project Playlist.

Jeremy Riney, founder Greg Sandoval/CNET

The fledgling music service has reached a settlement with Universal Music Group, the largest of the four top recording companies, after the sides negotiated a business arrangement. Terms of the agreement were not released. Warner Music Group has also agreed to drop the lawsuit, but whether Warner will allow the service to offer its music is unclear.

"While it was unfortunate that legal action was necessary, we are pleased to have resolved this litigation in an amicable manner," a Universal spokesman said in a statement. Representatives of Playlist were not immediately available for comment.

In 2008, Playlist was accused in the lawsuit of facilitating piracy by helping users find unauthorized music files. The complaint was filed by Universal, Warner, and EMI. However, EMI eventually dropped out and cut a deal with Playlist. is turning out to be scrappy little start-up. It absorbed a high-profile, embarrassing defection when former Facebook exec Owen Van Natta became CEO and then left just a few months later to operate MySpace. Playlist's financial situation is unclear, but music industry sources told CNET in March that the company had spoken to AOL about investing. It's not known whether anything came of the talks.

The settlement with Universal means that will be able to offer music from three of the top four largest music labels: Universal, Sony Music Entertainment, and EMI.

Update at 5:40 a.m. PDT May 12:Added information about Warner Music Group's decision to drop its lawsuit against

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