Audiogalaxy to ask first, trade later

An out-of-court settlement requires the free file-swapping service to obtain consent before using copyrighted works, bringing the site to a standstill.

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Audiogalaxy reached a legal settlement with the recording industry Monday, agreeing to obtain permission before allowing people to swap copyrighted songs through its popular file-trading service.

The agreement halted song trades on the service Monday night. Searches conducted by CNET News.com for tunes by musicians including Lauryn Hill, Marvin Gaye and James Brown returned no results or an error message saying "search prohibited."

The out-of-court settlement comes a year after Audiogalaxy began voluntarily filtering copyrighted music from its system in an attempt to appease the recording industry. Its efforts failed last month, when the Recording Industry Association of America, National Music Publisher's Association and Harry Fox Agency sued the file-swapping service, saying its filters were ineffective.

Under Monday's settlement, Audiogalaxy is required to obtain permission from a songwriter, music publisher or recording company to use and share copyrighted works. In addition, Audiogalaxy has agreed to pay the music publishers and recording industry an undetermined amount of money to settle the suit, according to the RIAA.

Although the settlement clears the way for Audiogalaxy to leave its legal headaches behind, it raises other, equally pressing concerns over the company's future. Audiogalaxy has attracted millions of Web surfers by offering a broad menu of free music--an arrangement that almost certainly will not survive the settlement.

The tough road to legitimacy for file-swapping companies was illustrated last year by Napster, which added filters aimed at blocking its users from trading unauthorized files, only to shut down voluntarily when they proved insufficient. The company has remained dark ever since. It filed for bankruptcy protection earlier this month, although it still awaits a chance to come back online, according to its primary backer, German media giant Bertelsmann.

The Audiogalaxy settlement comes as the RIAA continues to wage a legal battle against a string of other file-swapping services, including StreamCast Networks and its Morpheus software, Kazaa BV, Grokster, MP3Board and Madster, formerly known as Aimster.

According to Download.com, a software aggregation site operated by News.com publisher CNET Networks, Audiogalaxy's software has been downloaded at least 30 million times.

"This is a victory for everyone who cares about protecting the value of music," Hilary Rosen, chief executive of the RIAA, said in a statement. "This should serve as a wake-up call to the other networks that facilitate unauthorized copying. The responsibility for implementing systems that allow for the authorized use of copyrighted works rests squarely on the shoulders of the peer-to-peer network."

Audiogalaxy CEO Michael Merhej could not be immediately reached for comment.

News.com's Scott Martin contributed to this report.