BMG settles Napster infringement case


WASHINGTON -- Bertelsmann AG has agreed to pay music publishers $130 million to settle a copyright infringement case brought on by the German media giant's deal with the Napster P2P company.

If approved as expected by a federal judge, the deal announced Friday by the National Music Publishers Assn. and BMG would end the four-year lawsuit that accused Bertelsmann of contributing to Napster's copyright infringement as an original investor -- before the online music company changed its business model and became a recognized distributor of licensed music via paid downloads. That deal allowed Bertelsmann to end its involvement in a copyright infringement suit with the other major labels.

Bertelsmann has made similar deals with other record labels amounting to $154 million. In all the deals, the company does not admit to any wrongdoing.

Napster eventually was shuttered by U.S. courts in 2002 over copyright violations but has attempted to re-establish itself as a legitimate online music distributor.

Officials for the NMPA and BMG declined comment, but the settlement cites the uncertain legal terrain, expense and time that the lawsuit would take as good reasons to make a deal.

"There are several areas of risk that make the settlement a preferable course of action at this stage," the settlement reads. "For example, the matter involves several complex and untested areas of copyright law, including how the inducement theory outlined by the Supreme Court in MGM Studios v. Grokster Ltd. applies to this case. Further, there are a number of complex evidentiary issues involved in establishing direct infringement of the original Napster users, which would, among other expenses, require a significant amount of costly expert discovery, from all parties."

In June 2001, the Supreme Court ruled that the Grokster P2P service was liable for copyright theft because it encouraged users to steal copyrighted works. While the ruling established a company's liability for encouraging copyright theft, it left open many of the particulars that have yet to be settled by case law.