Sony BMG settles CD software suit

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Sony BMG has discovered the hidden costs of digital rights management.

In a settlement that will cost the music giant more than $1.5 million, Sony BMG has agreed to stop distributing CDs secretly embedded with software alleged to make the discs vulnerable to hackers.

The agreement, part of a stipulated judgment in a case spurred by a civil consumer-protection complaint, was announced Tuesday by the Los Angeles County District Attorney's Office and California's Office of the Attorney General. The complaint was spurred by Sony BMG's distributing music CDs containing so-called digital rights management software to limit the number of copies consumers could make of the music.

Prosecutors alleged inadequate consumer disclosure on the software, which they said reduced consumers' control of their computers and boosted vulnerability of hacking. They also alleged that use of the hidden software amounted to false advertising, unfair competition and unlawful computer intrusion.

Prosecutors said Sony BMG released 79 music titles embedded with two different forms of DRM software from January 2005-November 2005. Sony recalled 52 of those discs in November 2005.

The recalled discs were embedded with software called Xtended Copy Protection, developed by U.K.-based First4 Internet. Those discs were deemed more objectionable than the remainder of the DRM-embedded titles, which contained Media Max 5.0 software developed by SunnComm of Arizona.

"In trying to gain market share, companies need to be sensitive to consumers' rights to privacy, especially in the electronic age," Los Angeles District Attorney Steve Cooley said.

Added state Attorney General Bill Lockyer: "Companies that want to load their CDs with software that limits the ability to copy music should fully inform consumers about it, not hide it, and make sure it doesn't inflict security vulnerabilities on computers. To its credit, Sony BMG learned this lesson and has stopped the practices that led to this lawsuit."

The music company will be required to make payments to consumers documenting costs associated with computer damage associated with the software.

The stipulated judgment contains no admission of liability but mandates $750,000 in penalties and costs, $622,000 in civil penalties and $128,000 in agency prosecution costs.

A similar stipulated judgment is being entered in Texas court, and "additional actions by other state attorneys general and the Federal Trade Commission are anticipated soon thereafter," officials said.

"We are pleased to have reached agreements with the offices of the California and Texas Attorneys General," Sony BMG said.
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