Riaa Suit Vs. Mp3.com Raises "fair Use' Issues

LOS ANGELES-While the industry debates the merits of the Recording Industry Assn. of America's (RIAA) copyright infringement lawsuit against MP3.com's My.MP3.com service, all agree that both sides have enough financial backing and staying power to go the legislative distance.
On Jan. 21 the RIAA filed a copyright infringement lawsuit against MP3.com in U.S. District Court in New York, claiming that the My.MP3.com service "copied the tracks from some 45,000 commercial CDs" onto its computer server without proper authorization or license from the label copyright holders (BillboardBulletin, Jan. 24).
The service, announced on Jan. 12, features Instant Listening Service and Beam It, which permits consumers to store, customize, and listen to their CDs from any Internet connection. The Instant Listening Service allows users to purchase CDs from any of MP3.com's E-tailer partners and instantly listen to them using their My.MP3.com account as soon as it receives a receipt of purchase from the customer.
When MP3.com announced the service, MP3.com chairman/CEO Michael Robertson dismissed speculation that the service could lead to a lawsuit (Billboard, Jan. 22).
In a letter to MP3.com CEO Michael Robertson, RIAA president/CEO Hilary Rosen says, "MP3.com's actions not only violate the rights of our member companies but also are an affront to artists, music publishers, writers, producers, and other retailers. We regard MP3.com's business choices to be in reckless disregard of the law."
In an open letter to Rosen, posted Jan. 21 on MP3.com's Web site, Robertson calls the lawsuit an action "against consumers' rights, against new technologies, and against expansion of artists' revenues."
Says Forrester Research analyst Dan O'Brien, "This lawsuit shows that the record industry is operating from a position of fear. It would be much better if record companies and the RIAA would work with companies like MP3.com, since they have demonstrated they don't have the gene for the Internet and are locked into a business model they've had for 30 to 40 years."
Adds entertainment lawyer Bobby Rosenbloum, "What the RIAA should really be concerned with is technology that makes it easier and less expensive to get music. What they're doing is attacking a business model. The RIAA could win the battle but lose the war."
According to Rosenbloum, the case boils down to whether or not MP3.com violated the "fair use" section of the U.S. Copyright Act. In order to win its case, he says, the RIAA must prove that the copy MP3.com makes diminishes the market for the original.
With similar services available or in development, some say the lawsuit could hinder further technological advancements.
"It exerts a chilling effect," says Forrester's O'Brien, "and it's sure to hinder small companies that don't have the money that MP3 has. It's not a win for anyone who wants to sell music online."
MP3's Robertson says the company has "every intention of fighting this to the court of last resort, if necessary."
Myplay co-founder David Pakman says, "This lawsuit was totally expected because [although] it's a great service, you need a [distribution agreement with the labels]."
Myplay has a competing service that allows consumers to search for music, which it stores in a personal Web "locker." Unlike MP3.com, Myplay does not copy material. "MP3.com did this to start a controversy," says Pakman. "We think it's more important to be partnered with the record labels rather than be a renegade."
Kevin Conroy, BMG Entertainment senior VP of worldwide marketing and new technology, says that a service that stores personal music collections is beneficial as long as everyone along the chain is compensated. "The idea represents an interesting approach that I would have wanted to explore further had [MP3.com] approached me prior to launching the service," says Conroy. "Their total disregard for the rights of our artists, and other copyright holders, betrays their stated desire to empower creators."
While it's clear the major labels will give MP3.com the cold shoulder, Wall Street analysts aren't jumping ship. Says Phil Leigh of Raymond James & Associates, "While we cannot predict the outcome, we do not think the investment rating should change from "buy' until the outcome is known."

Assistance in preparing this story was provided by Brian Garrity in New York.