Neowin.net

Just seen this over at The Nando Times

The record industry must provide documented proof it owns copyrights to scores of popular songs it is seeking to protect in its lawsuit against Napster, a federal judge ruled in an order released Friday.

U.S. District Judge Marilyn Hall Patel also appointed an expert to review the documents, which officials for the recording industry's trade group say they are ready to provide.

The record labels are seeking damages from the once-popular online file-sharing network for allowing the copyright songs to be trafficked.

The judge also opened the door to legal discovery on Napster's claims that the labels misused their copyrights to dominate the growing online music distribution industry.

Napster said both rulings were significant victories for the embattled company, which has been offline since July.

"We are pleased that the court granted Napster's request to examine two critical issues: the record companies' ownership of artists' copyrights and anticompetitive behavior that amounts to misuse of their copyrights," Napster general counsel Jonathan Schwartz said in a statement.

Cary Sherman, general counsel for the Recording Industry Association of America said Napster's allegations of misuse are without merit, which will be confirmed through the ordered discovery.

"We look forward to providing the court with evidence to refute Napster's claims," Sherman said in a statement.

News source: The Nando Times

"The question now becomes how do you pay for all the customers you acquired at a royalty rate that is this high," he said. "Everybody was figuring ... this was going to be an advertising-supported media."

If 1,000 people use their computers to listen to a song through a standalone service, the Webcaster would have to pay $1.40.

Live365 Inc. streamed 6.5 million listening hours in January at a rate of about 15 songs per hour, Jeffrey said. Under the proposal, it would owe about $2 million a year plus retroactive fees since 1998.

MusicMatch, another online broadcaster, offers subscription and free services. It has a separate license with the recording industry and would not be immediately affected by the rates, but in the future it could be.

In that case, the free radio streaming would vanish, said Bob Ohlweiler, MusicMatch's senior vice president of business development.

"It's definitely going to hurt the free radio industry in general," he said. "If and when MusicMatch is affected by the rates, we certainly couldn't afford to keep free radio up and running."

Companies that are able to attract subscribers through added services are more likely to survive than the free services. But it won't be easy.

"(The fee) is within the realm of what we had projected and prepared for," said Matt Graves, spokesman for Listen.com. "It makes it tough. It makes it tough for everybody."

The proposal does finally resolve a long-standing issue in the Internet radio business - how much it costs to operate.

"If we get through the initial devastation that may hit the small Webcast industry ... at least there's clarity for investors and financial planners to understand what their costs are going to be," Potter said.

The proposed rates also would create an extremely high barrier for companies looking to enter the Internet radio business. Capital, once readily available for dot-coms, has all but dried up.

"It's questionable whether any new series will be able to get off the ground now," said P.J. McNealy, research director of Gartner G2.

The Recording Industry Association of America said it was pleased, though the Copyright Arbitration Royalty Panel's recommendation was 35 percent smaller than the industry's proposal.

The music and Internet industries will have 60 days to comment on the recommendations.