My favorite free online music site, Grooveshark, relies on users to post their own recordings, then makes them available to anybody else who visits the site. This gives Grooveshark the broadest and most diverse selection of any service out there--I've found recordings on Grooveshark that are lacking even on paid services such as MOG and Rhapsody--but it puts the company in a legal gray area. Grooveshark has told me that it pays appropriate copyright fees, but content owners don't always seem to agree.
In October, Grooveshark settled a lawsuit filed by record company EMI, but now it faces its second lawsuit from a major label. On Friday, Universal Music Group filed suit in a New York state court, alleging that Grooveshark maintains on its servers illegal copies of Universal's pre-1972 catalog, including songs by The Jackson Five, Buddy Holly, and The Who. In the filing, posted as a PDF file by Digital Music News, Universal alleges Grooveshark "paid nothing" to use these songs without permission, and claims that Grooveshark refuses to provide copyright filtering software because its "business plan is based on copyright infringement." Universal also notes that it legally licenses these for streaming by MySpace and Rhapsody, drawing a clear contrast between Grooveshark and these services. Ouch.
I love the service, but I've always wondered if it was a little too good to be true. Here's hoping that Grooveshark can reach a licensing agreement with Universal as it did with EMI.