MP3.com, which offers digital audio by 50,000 artists, filed a complaint in San Diego Superior Court yesterday alleging that the Recording Industry Association of America (RIAA) and its president, Hilary Rosen, gathered technical information from the Net music company and spoke to analysts about its stock price just days before suing it for copyright infringement.
The RIAA quickly countered today, calling MP3.com's claims "ridiculous."
In its lawsuit, which could garner billions of dollars in damages, the RIAA accuses MP3.com of creating unauthorized copies of more than 40,000 CDs through its Instant Listening and Beam-it services, which were launched last month. MP3.com argues that its services fall under the "fair use" exemptions in the copyright law, which permit consumers to make copies of works they own, but only for personal use.
MP3.com today said that it is suing the RIAA to counter its "bullying tactics."
"Since inception, MP3.com has faced the increasingly aggressive tactics of the RIAA and its leadership," Michael Robertson, MP3.com's chief executive, said in a statement. "After we get to the bottom of all of their actions toward MP3.com, we will vigorously pursue all of our legal remedies."
The company goes on to state in its lawsuit: "MP3.com is informed and believes, and on that basis alleges, that RIAA, Rosen and their affiliates have published a multiplicity of negative and disparaging statements about MP3 technology in print and online media and other publications of wide circulation.
"RIAA and/or Rosen have also directly communicated disparaging statements about MP3.com to certain of MP3.com's financial partners."
Rosen scoffed at the accusations in her statement issued today.
"This is a transparent attempt on the part of MP3.com to silence criticism of its infringing tactics," Rosen said.
"The lawsuit against MP3.com has nothing to do with MP3 technology. It has to do with MP3.com, the company, taking music they don't own and haven't licensed to offer new services to make money for themselves," she continued. "And there is nothing illegal in my saying so."
Named after the most prevalent audio encoding format, MP3.com from the beginning has taken on the established recording industry: BMG Entertainment, EMI Recorded Music, the Universal Music Group, Warner Music and Sony Music. By creating a promotion and distribution platform for independent artists that relies on an "insecure" but flexible format, MP3.com aims to shake up the major labels' grip on talent and music prices.
But by creating a database of popular music without licenses from the labels, industry insiders and analysts alike say that MP3.com may have walked into the line of fire. The RIAA's lawsuit not only threatens MP3.com's coffers, but also could give weight to the site's up-and-coming competitors, such as RioPort and Myplay.com. Those sites are scrambling to deliver digital music that many consumers want--tracks by the "Big Five" labels--and are working closely with those labels, not against them.
The Big Five are cutting deals to eventually offer all or parts of their collections to digital music consumers via the Net or retail outlets. Still, the RIAA has been busy trying to derail those companies that aren't playing nice with its members.
Aside from MP3.com, the RIAA has sued start-up Napster, claiming that its software creates a black market for illegal copies of digital music by letting online users trade music files directly from their PCs. The RIAA also is working with universities to block students from giving other Net users access to allegedly illegal copies of digital music owned by its member companies.
Shares of MP3.com closed at $28.50 yesterday and have traded as high as $105 and as low as $23.31 since the company's impressive initial public offering in July.