Officials with the Grokster file-trading network have agreed to pay $500,000 to settle charges they operated a separate music download service without permission, a recording-industry trade group said Monday.
The Recording Industry Association of America has been unsuccessful in a copyright infringement lawsuit against Grokster, which enables users to copy music from each others' computers for free.
But the RIAA had better luck when Grokster officials attempted to set up a paid download service along the lines of Apple Computer Inc.'s iTunes.
Called Puretunes.com, the service allowed users to download as many songs as they wanted for $24.99 per month, but the RIAA charged the company never obtained clearance from copyright holders.
"Puretunes.com duped consumers by claiming it was a legitimate online music retailer when, in fact, it was no such thing," said RIAA President Cary Sherman in a press release.
One man named in the settlement, former Grokster president Wayne Rosso, said the company's lawyer had obtained e-mail agreements from Spanish performing-rights organizations, but had not signed off on the actual documents themselves when the Web site opened for business.
Once the problem was uncovered the Web site was taken offline immediately, Rosso said.
Rosso, an outspoken critic of the recording industry, said he thought the settlement was designed to embarrass him.
"I think it's terrific -- at least they've got something to do this week," he said.
Rosso, along with Daniel Rung, Michael Rung and Matthew Rung agreed to pay a total of $500,000 to settle the case.
As part of the settlement, Puretunes.com's parent company, Sakfield Holding Co., is ordered to pay $10 million. Rosso said that company no longer exists.
Two U.S. courts have ruled Grokster cannot be held liable for copyright infringement because it cannot control user behavior and, like a videocassette recorder, can be used for legitimate purposes.
RIAA members include Warner Music Group, Vivendi Universal's Universal Music Group; Sony BMG Music Entertainment and EMI Group Plc.
