Filed in Federal District Court in New York, the lawsuit focuses on MP3.com's My.MP3.com features, which were unveiled earlier this month.
With MP3.com's new Instant Listening Service and Beam-it programs, Net users can get digital copies of CDs they already own or of music they've purchased from the company's CD retail partners. MP3.com says it uses security technology to verify that the computer user owns a physical copy of the CD.
But the RIAA is accusing MP3.com of creating an unauthorized digital music catalog of up to 45,000 CDs, claiming many of the copyrighted works are the property of its members.
The RIAA said that the "company's violation of the copyright law is brazen on its face" in a letter to MP3.com CEO Michael Robertson today.
"Simply put, it is not legal to compile a vast database of our members' sound recordings with no permission and no license," Hilary Rosen, CEO of the RIAA, stated in the letter. "Obviously, you are not free to take protected works simply because you want them."
A market leader, MP3.com primarily offers free digital audio tracks by independent artists and had a stellar initial public offering in July. In a statement released late this afternoon, Robertson said the company plans to "vigorously" defend the suit.
"On behalf of consumers, we are disappointed that the positive benefits and security features of our newly upgraded My.MP3.com service are misunderstood by some people in the music industry," Robertson stated. "We believe My.MP3.com will stimulate CD sales and be a financial boon for the music industry overall."
MP3.com and competitors such as Myplay.com let music lovers store their collections in a central place so they can access it online from anywhere. But legal experts say that by creating a catalog of digital music without an explicit license, MP3.com has overstepped copyright laws.
"I don't know what MP3.com is thinking," said Lon Sobel, editor of the Entertaiment Law Reporter and a former Loyola University Law School professor. "Under the Audio Home Recording Act of 1992, consumers get the right to make copies of material for their own non-commercial uses. It does not give others the right to do it on consumers' behalf."
If MP3.com is found liable for copyright infringement, legal experts said the damages could be tremendous.
If it is established that MP3.com made unauthorized copies of thousands of CDs and distributed them in a commercial setting, under one scenario the company could be fined for each song on each CD. The number of violations could be doubled because each song has a recording and publishing copyright attached to it.
"This is a textbook case of copyright infringement," said Bob Kohn, a renowned licensing expert who co-wrote Kohn on Music Licensing and is chairman of EMusic.com, an MP3.com competitor.
"There is a long line of cases that say you can use your own copy machine at home to make a copy of a book you own. But you can't take the book to Kinko's and do the same thing, or Kinko's will get sued and it knows that," he added.
Even the Digital Media Association (DiMA) says the RIAA has a case. DiMA represents companies such as America Online that are battling the RIAA over how much they have to pay record companies to stream their recordings over Net radio stations.
"Without seeing the complaint, it's fair to say that DiMA members generally agree that the reproduction of sound recordings for commercial purposes without a license is problematic," said Jonathan Potter, DiMA's director.
MP3.com isn't the only nascent Net music company under fire by the RIAA. The association also filed a lawsuit against Napster last month, charging that its software helps foster a black market for illegal copies of digital music by allowing online users to trade audio tracks directly from their PCs.
The music industry was furious when it found out that Napster was being feverishly used by college kids and other Net users to swap droves of copyrighted songs. Some say MP3.com's new services are no different.
"MP3.com is Napster is sheep's clothing," said one veteran music industry executive.