May 17, 1999 2:00 PM PDT

MP3.com named in copyright lawsuit

Net music technology developer PlayMedia Systems today said it has added MP3.com to its pending lawsuit against Nullsoft, creator of the Winamp MP3 player.

The move comes just days after MP3.com--a music news, download, and community site--filed with the Securities and Exchange Commission for an initial public offering, looking to raise up to $115 million.

PlayMedia said it added MP3.com MP3: Sound and fury to the suit because it determined that the site is the largest redistributor of the disputed playback software. It said the site has been distributing the Winamp player since April 1998.

For the most part, legal wrangling surrounding the MP3 format has involved disputes over copyright-protected music. The PlayMedia suit, on the other hand, is over the copyright-protected source code of PlayMedia's AMP decoder.

"We haven't been officially notified of any lawsuit. So I don't know anything more than what you and I both read in the press release today," MP3.com chief executive Michael Robertson said today in an email interview.

"We have over 100 MP3 software players listed on our site," Robertson added. "I imagine just about every MP3 Web site in the world has pointed people to Winamp as an MP3 player choice. I guess PlayMedia will sue anyone they think has money."

But Henry Gradstein of the firm Gradstein, Luskin & Van Dalsem, which is counsel for PlayMedia, said today that "Robertson's statement is surprising, since according to our process server, he was served with the lawsuit at his San Diego home on April 28."

Nullsoft representatives were not immediately available for comment.

PlayMedia is looking to get a minimum of $15 million in damages, Gradstein said. This figure is based on PlayMedia's estimate of how many downloads of Winamp have taken place on MP3.com, applying a charge of about $1 to $1.50 per download. But Gradstein contended that PlayMedia could be entitled to much more money if the court finds in its favor.

MP3.com's business largely is based on MP3 downloads and thus has "required them to give their users the ability to download music in the MP3 format, which in turn has been reliant on Winamp," Gradstein said.

He added that under copyright law, PlayMedia would be entitled to "actual damages and any profits" arising from the use of Winamp if the court finds that Nullsoft infringed on its copyright. That means PlayMedia could collect on MP3.com's ad revenue or other parts of its business because Winamp is "a contributor to the overall enterprise" of MP3.com, according to Gradstein.

The suit is significant because the controversy surrounding the MP3 format (MPEG 1, Audio Layer 3) generally has pitted proponents of the format against the mainstream music industry. The PlayMedia suit involves a battle between camps within the MP3 community, however.

MP3 is an audio compression format that allows users to easily download See related Newsmaker: Michael Robertson music files to a computer hard drive or portable player without losing significant sound quality. It enjoys great popularity among Net users but is reviled by many in the mainstream record business because it lacks copyright protections.

The $20 million suit against Nullsoft, filed in March, accuses Nullsoft of using the copyright-protected code for the AMP code playback engine--which was written by PlayMedia principal Tomislav Uzelac--in its Winamp player.

Nullsoft earlier this month released a new version of the player. One of the changes made was the replacement of the so-called Nitrane decoder with one by the Fraunhofer Institute, which created the decoder that is the International Organization for Standardization (ISO) standard, according to Rex Manz, director of business strategies for Nullsoft. A decoder is a program that allows a user to revert an MP3 file to its original format, such as WAV, so it can be played back or recoded to another format.

Manz said Nullsoft made the change to avoid further legal wrangling. Though it removed the disputed technology, it did not admit guilt.

The significance of one MP3 company suing others was not lost on PlayMedia executives.

"From a personal standpoint, I was reticent to take this action for a number of reasons. But from a business standpoint, I took this action without hesitation," PlayMedia chief executive Brian Litman said in a statement. "PlayMedia is compelled by obvious business imperatives, including compliance with federal copyright law, to defend any and all of its valuable intellectual property, regardless of whom the alleged infringer may be.

"MP3.com's popularity has a lot to do with their offering Internet users free and legal MP3 music files. These files require a player like 'Winamp,'" he added. "Going back to at least May of 1998, I personally conveyed to MP3.com CEO Michael Robertson my deep concerns over what we alleged was infringement by Nullsoft of PlayMedia's AMP MP3 decoder. Nevertheless, in November of last year, MP3.com considered it prudent to jointly create and market a special MP3.com 'branded' version of 'Winamp' in concert with Nullsoft. To my knowledge, it is the only player, out of literally hundreds of players, that MP3.com has so embraced."

 

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