US Music Publishers Sue AllofMP3 for $1.65 Trillion

In a move curious only due to its relatively late timing, the major record production labels in the US have filed suit in federal court against Russian online music distributor AllofMP3.com, seeking $150,000 USD for each single violation of copyright infringement for tracks the site posted without authorization.

The lawsuit, brought by Sony BMG, EMI, Warner Music Group, and Universal Music Group - the "big four" - along with Arista Records and Capitol Records, estimates at least 11 million individual intellectual property violations. Thus the publishers are collectively seeking damages equaling the gross national product of many countries.

Their action comes five months after music publishers in Britain sued AllofMP3 in High Court there, and two months after a court in Denmark ordered ISPs in that country to block customer access to AllofMP3.

Last month, special delegates from the US Government met with their Russian counterparts to discuss measures that country must take in order to meet compliance standards for entry into the World Trade Organization. An agreement between the two nations last month specifically mentioned AllofMP3.com as one site that the Russian government must make an effort to keep under control.

In a statement last September before the US Chamber of Commerce, US trade representative Susan Schwab pointed to AllofMP3 as one of a mere handful of principal obstacles Russia must clear if it is to formally join the global economy.

"So far, the Russian authorities have allowed this site to operate with impunity," said Schwab. "We have made clear to Russia that improved protection for intellectual property is critical to its joining the WTO and we have specifically raised our concerns with allofmp3.com, the drafting of a new section of the Civil Code, and other key issues. We are very supportive of our industries' concerns in Russia and we are working to achieve better IPR protection and enforcement there."

For its part, Russia has pledged to pass laws by June of next year that would render AllofMP3's activities officially illegal.

Unlike P2P proprietors, which have defended themselves by saying they're only responsible for the networks their technology facilitates, and not the traffic that passes over them, AllofMP3.com charges subscription fees and/or a la carte costs per album (as opposed to per song), and hosts allegedly unauthorized tracks through its conventional, centralized server. In recent days, however, customers worldwide have found it difficult to pay, with Visa and MasterCard having disqualified AllofMP3 from payment service. The site's director general, Vadim Mamotin, has blasted the credit card services for their disqualification action, calling them "arbitrary, capricious and discriminatory," and adding they "lack the authority to adjudicate the legality of Allofmp3's activities."

While the site has been taken offline for days at a time throughout this year, its parent company, Mediaservices, appears to be enjoying the publicity and is spoiling for a good fight. In recent statements, it has claimed its service abides by current Russian law. It claims to pay royalties to ROMS, the copyright holder service sanctioned by the Russian Parliament, and to FAIR (Rights holders Federation for Collective Copyright Management of Works Used Interactively). Under Russian law, as long as a distributor of music pays 15% of its collection fees to ROMS, it's a legal service.

Yet the Recording Industry Association of America has stated it doesn't recognize ROMS as a legitimate royalties collector, nor do its affiliated labels actually receive allotments from either party. No agreement with record labels outside of Russia has apparently been negotiated with these agencies. Until that time, the Russian government itself could be the direct recipient of AllofMP3's purported royalties.

So the problem that US regulators, diplomats, and US-based music publishers now face is whether any rulings or threats they make - even if the publishers win their case here - will have any bearing upon lawmakers' decisions in Russia, where isolationism has recently one again reared its ugly head. Since 2003, the IFPI - which represents the recording industry worldwide - has been drawing attention to repeated postponements by the Russian Parliament and Russian courts to take any action toward hardening software piracy laws and enforcement.

That spotlight may have unintentionally created a kind of virtual petrie dish for unauthorized distributors such as AllofMP3 to have a base of support from individuals who see the site's very existence as a kind of crusade against organized music. With Russian senior officials acting of late as if they've been missing the Cold War, the kind of "line in the sand" that US officials have been drawing on this issue may not be taken as an invitation of friendship.