Having already paid millions in settlements to the major music labels for alleged copyright infringement, MP3.com Inc. has been hit with another lawsuit, this time from a coalition of independent labels led by online distributor Emusic.com Inc. Emusic and five indie labels--Fuel 2000 Records, Spinart, Gig Records, Fearless Records, and Invisible Records--have filed suit in U.S. District Court claiming that MP3.com's music locker service, My.MP3.com, infringes upon their copyrights.
The suit alleges that by letting visitors store digital versions of CDs they own, MP3 is violating the digital download rights owned by Emusic and the five labels. Emusic says it owns the digital rights to about 13,000 albums from more than 600 labels.
The suit continues the legal morass surrounding online distribution.
In addition to the suits filed by the majors against MP3.com, music file-sharing service Napster Inc. awaits a ruling in a copyright-infringement suit brought against it by the Recording Industry Association of America.
Emusic execs declined to comment on the suit against MP3.com, but Emusic issued a statement saying that despite its settlements with the five majors, MP3.com has "chosen to ignore their infringing actions with respect to independent record labels." MP3.com execs declined to comment on the suit.
Webnoize analyst Ric Dube says there's more to Emusic's decision to sue than simple copyright infringement. Dube says that even though Emusic reported a 23% increase in revenue and a 40% decrease in losses for the most recent quarter, the company continues to lose twice as much money as it's bringing in. He estimates the company will run out of cash in April at this rate. The suit could be a last-ditch effort to stay afloat. Ultimately, Dube says, the strategy may proveeffective. "There's plenty of precedence to support this lawsuit."