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IT AllofMP3.com Sued by Record Labels
Marcus Yam (Blog) - December 21, 2006 10:15 AM
Print 45 comment(s) - last by Tyler 86.. on Dec 26 at 5:02 AM
The labels take matters into their own (lawyers') hands

Major record labels, including Arista Records, Warner Bros. Records, Capitol Records and UMG Recordings have launched a lawsuit against AllofMP3.com claiming that the Web site has been selling music in violation of copyright.

The labels claim in the lawsuit that Russia-based Mediaservices, parent company of AllofMP3.com, profits off copyrighted music without paying any royalties to the holders. Instead of paying royalties to the record labels, Mediaservices shares a cut of its revenue with a Russian licensing group, which the company claims is in complete compliance with local laws.

"Defendant's entire business ... amounts to nothing more than a massive infringement of plaintiffs' exclusive rights under the Copyright Act and New York law," according to the lawsuit. The music labels seek a court order against Mediaservices and unspecified compensatory and punitive damages, report the Associated Press.

Mediaservices is having a very rough second half of the year. In July, the British Phonographic Industry sued AllofMP3. In October, AllofMP3 lost its Visa and MasterCard portal, and the company has since had to rely on credit proxy Xrost. Just last month, U.S. government announced a joint program with Russia in an effort to thwart piracy, with AllofMP3.com as a prime target.

AllofMP3.com, however, maintained its stance of operating legally and has yet to alter its business.

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All I can say is....
By Rock Hydra on 12/21/2006 11:23:36 AM , Rating: 2
This is going to be a huge mess.




RE: All I can say is....
By Enoch2001 on 12/21/2006 11:30:18 AM , Rating: 5
Not really. Inevitably it will be shut down and forgotten. Case closed.



RE: All I can say is....
By edpsx on 12/21/2006 11:36:02 AM , Rating: 5
Yeah but its a shame that it will be. As if these record labels dont make enough money anyways they want to shutdown anyone who gets in their way. Just like how oil companies probably help push back the development of alternative fuels by buying people off. I dont see the problem of them selling at lower prices. It just goes to show that the $.99/track Napster is a rip off and they are marking up a product which technically is just a bunch of copies of one item. And last time I checked it doesnt take $1 to make a cd, hell it only cost them probably a penny and they charge at least $15 a cd. Talk about markup.


RE: All I can say is....
By Kuroyama on 12/21/2006 12:05:07 PM , Rating: 3
If you write a book shouldn't you be able to decide its price? If you make a video game shouldn't you be able to decide its price? If you invent a new super duper CPU shouldn't you be able to decide its price?

Just because you don't want to pay $.99 per song doesn't mean the company or person who made it doesn't have the right to charge what they want, whether it be $.99 or $999. No one is forcing you to listen to their music.


RE: All I can say is....
By Targon on 12/21/2006 1:01:44 PM , Rating: 2
In this case though, I bet that none of the record labels have asked the group that collected money from allofmp3 for their cut. That's the real problem here, the labels and RIAA failed to do THEIR homework to collect the money due.

This is really similar to cases where your accountant was supposed to send your tax money in, the check is cashed, yet the state and IRS try to claim you failed to pay them the taxes due. Now, you have to figure that in many cases, it's the fault of the accountant. Allofmp3 is in the same boat.

Allofmp3 DID pay money, but not to the RIAA or record labels. When the labels failed to get their money, they failed to understand that all they needed to do was go to the place Allofmp3 sent it.



RE: All I can say is....
By kamel5547 on 12/21/2006 1:23:45 PM , Rating: 2
Well yes but... the fact you pay a sum for something doesn't mean squat if you don't have an agreement saying you can sell it. To be frank the labels are pissed because there is no DRM involved and they are in all likelyhood getting a smaller cut than other vendors give them.

How would you like it if I sold your home, turned around and gave you what I thought was a fair "share" and walked away with the rest?

Not that I like the music labels much, just that they are well within their rights, allofmp3.com has no agreement and has probably seen this coming for years.


RE: All I can say is....
By Tyler 86 on 12/21/2006 2:28:05 PM , Rating: 2
As long as it was only a copy of my home, well... maybe I'd put up Ads on the walls, but other than that...


RE: All I can say is....
By Tyler 86 on 12/21/2006 7:00:41 PM , Rating: 2
Oh, and I have seen "lossy" copies of my home before, that while nearly identical, the law doesn't let me sue the owners for copyright infringement.

I'm sure if there was a perfect copy of my home somewhere, the law would still not allow me to sue the owner for copyright infringement.

Yes, I know, you just made a bad comparison, and I'm giving you a hard time.

I just found it amusing to speculate.


RE: All I can say is....
By Hoser McMoose on 12/21/2006 2:26:35 PM , Rating: 3
It only took the RIAA about 30 seconds worth of "homework" to realize that the entire setup of AllOfMp3 was complete bullshit and a total scam. Obviously they don't want to collect money from the Russian radio regulatory agency (which is who AllOfMp3 was paying) because that would be seen as validating the scam!

AllOfMp3 DID pay money, but not to the RIAA (obviously, the RIAA is an American organization) or the record labels (who they are legally required to pay) or anyone who would get money back to the artists. They paid money to the Russian radio regulatory agency in order to operate as a radio station. They claimed that they were free and in the clear because they weren't selling the music, they were just PLAYING the music (on-demand) for their customers who would pay a per-gigabyte charge for the right to LISTEN (but *NOT* to buy!) this music.

It was always a total scam and everyone involved knew it. They got away for it for a while because Russian laws had left some loopholes open. Those loopholes were closed in a law passed some time ago and which came into effect in Sept. of this year.

Long story short, the record labels are fully within their right to sue AllOfMp3 and to prevent them from doing business to any customers within the United States (other lawsuits would presumably be required for other jurisdictions). Of course, the fact that they need to do this speaks volumes of the incompetence of Russian law enforcement agencies that should have already shut AllOfMp3 down. They're blatantly breaking the law in Russian and around the world.


RE: All I can say is....
By Tyler 86 on 12/21/2006 2:31:19 PM , Rating: 2
I'm missing your point... acting as a radio station...

So far, it's quite legitimate to me.

Audio transmission by any other carrier is still audio transmission...

Maybe the definition of what constitutes operation of a radio station needs to be revised.


RE: All I can say is....
By JeffDM on 12/21/2006 12:23:15 PM , Rating: 2
I think that is naivé. While I think the price is a little high, the exact cost of the components don't define the final cost of the product. Music production isn't free, studio time isn't free, and marketing isn't free. Distribution isn't free, shelf space, stocking time and checkout time isn't free either.

Running a business is expensive and people that aren't in business don't seem to understand that.


RE: All I can say is....
By Tyler 86 on 12/21/2006 2:41:30 PM , Rating: 2
I always thought the whole "music production" thing was quite cheap, home grown, etc... Sure, guitars, drums, a stage to play on don't come too cheap, but a few audiences with a wallet open and willing to recieve a fresh good tune quickly pick up the tab.

After you make the rounds, don't waste it all on your drug habit, and get picked up by a major label...

The studio time, marketing, distribution, shelf space, stocking time, and checkout time was all big business...

If they think they can make money on something immaterial, yet a very integral part of society, by all means let them do it, but immaterial is as immaterial does, and they can't hold on to it with a CD, a radio wave, or DRM.

They need to change their business practices, not pigeon-hole the other methods of distribution as piracy.

The artists are entitled to whatever royalties they claim on their songs, I agree 100%.

The RIAA and other record lables are getting a little too big for their britches. They need to change with the market.


RE: All I can say is....
By BigLan on 12/21/2006 11:57:02 AM , Rating: 2
While it might one day be shut down, I don't think it'll be because of this lawsuit.

I'm pretty sure that allofmp3 will just ignore it, as I'm guessing it's been filed in a US court which has zero jurisdiction over allofmp3 (or their parent company.)


RE: All I can say is....
By borowki on 12/21/2006 12:35:14 PM , Rating: 2
You seem to have a lot of confidence in the Russian legal system. To settle a business dispute there one needs help from people from the special service and/or the mob. I doubt the labels would risk doing that.


RE: All I can say is....
By BladeVenom on 12/21/2006 2:57:24 PM , Rating: 2
Yes. If anyone had read the source of the story, they would have seen that the lawsuit was filed at a federal court in New York City.

Maybe Allofmp3 should sue all the big record companies in Russian courts.


RE: All I can say is....
By masher2 (blog) on 12/21/2006 3:25:39 PM , Rating: 2
> "Maybe Allofmp3 should sue all the big record companies in Russian courts"

If they thought they had a snowball's chance in hell, they probably would. However, they realize quite well they haven't a leg to stand on, and are simply raking in the cash as long as they can.


RE: All I can say is....
By borowki on 12/21/2006 4:10:15 PM , Rating: 1
The chance of a foreign corporation winning a judgment (and have it enforced) in Russia is probably near zero. The rule of law means very little in the country. One is lucky to avoid expropriation by the state.

The point of the lawsuit isn't to shut down the site--at least not directly. If the labels win, then it'd be clear to western consumers that it's illegal to obtain music from there.


RE: All I can say is....
By bltoha on 12/21/2006 12:36:57 PM , Rating: 2
I really do not understand how can US record companies sue russian company in New York? This russian company doesn't have any business operations in US.

This is NOT going to be a huge mess. US courts do have jurisdiction in US - and only in US. Internet is not under US jurisdiction.


RE: All I can say is....
By Draco on 12/21/2006 1:09:06 PM , Rating: 2
My thoughts exactly. How would this case even go to trial in the US when no one from Allofmp3.com would ever show up in the courtroom?!



jurisdiction is not an issue
By richard1138 on 12/21/2006 4:27:44 PM , Rating: 2
Jurisdiction isn't a function of where your headquarters is located. A coffee shop in Amsterdam can't sell weed in New York. It doesn't matter what the law is in Amsterdam, what matters is the laws where business is conducted.




RE: jurisdiction is not an issue
By gramboh on 12/21/2006 5:57:23 PM , Rating: 2
This is a problem with the internet. Where is the business conducted? Logic would say at the server, so you have American citizens 'travelling' to a foreign location to do potentially illegal business.

I'm sure this has been defined in law by 2006, anyone have any idea?


RE: jurisdiction is not an issue
By Tyler 86 on 12/21/2006 6:51:27 PM , Rating: 2
I don't know, legally...

Physicly, an American client must first commit physical (electronic) interaction to request the material from the Russian based server.

The Russian based server then initializes it's transfer, and requires TCP/IP acknowledgements from the American client during the transfer to continue and complete the transfer.

Technicly, in my opinion, the blame should be on the American client.

However, the transaction is simply generic protocal underlying presentation physicly on the American client...

I'm unsure if "availability" services like the DNS address registration, IP address registration, translation, and the like, existing and exchanged by 3rd parties (to the Russian based server) affect judgement as well, as they could be interpreted as the Russian based server's "contact" on American soil, even if technicly it's completely transparently distributed by 3rd party services under foreign by yet lower-level electronic transactions...

I dislike politics, and as such, my opinion is irrelevant to current law.

I'm aware of the DMCA and it's revision, and several related articles, but none that deal specificly with this sort of distribution.

I'd like to know of laws concerning this type of activity as well.


RE: jurisdiction is not an issue
By Tyler 86 on 12/21/2006 6:55:22 PM , Rating: 2
Oops, I changed "foreign soil by" to "foreign jurisdiction by", selected jurisdiction by double-click (selecting the trailing space as well), hit ctrl+x instead of ctrl+c, and ... blah. Now you know.


RE: jurisdiction is not an issue
By richard1138 on 12/22/2006 12:26:27 PM , Rating: 2
It's not really a cloudy issue. Business is conducted where the company operates and where the customers recieve their goods/services. A coffeee shop might be able to sell weed online in Amsterdam (and they do), but you'd be in trouble if you ordered it in New York. Standing in front of a judge arguing that you electronically travelled to Amersterdam probably wouldn't work.


RE: jurisdiction is not an issue
By Tyler 86 on 12/26/2006 4:48:40 AM , Rating: 2
We're not talking material purchase here... The material being sold, while recieved, and originates from it's origin, it never leaves it's origin... This isn't a lump sum weed exchange, this is streaming audio with advertisements. O_o

It is more like supporting an illegal radio station, and then they play something you want on their illegal radio station... but their illegal radio station, while illegal to listen to on this side of the border, is legal on the other side... add in some anonymous signal bouncers to carry it across multiple borders...

If it's an illegal radio station over here that's legal over there, law enforcement can do one of three things;
1) Forcibly shut them down cross-border (what RIAA is pushing for) and deal with underground networks that spring up
2) Forcibly block all signal bouncers and jam transmission (probably easier) and deal with underground networks that spring up
3) Continue negotiations (what they're doing now), and deal with underground networks that spring up

The RIAA could change their business, or AllofMP3 could change their business, and things could be solved... but it's not going to happen.


RE: jurisdiction is not an issue
By Tyler 86 on 12/26/2006 4:56:07 AM , Rating: 2
It's akin to sending money across the border to help some foreign aid, support some foreign business, support som foreign friend, or hell, even support terrorism, of course, it isn't exactly terrorism... same virtual problem though.

Persecution of this is more difficult than the judgement of this.

It's easy to prevent the majority of law abiding Americans to stop them from buying from it; just cut them out of the DNS records, block all routes to their IP address(es), problem solved.


RE: jurisdiction is not an issue
By Tyler 86 on 12/26/2006 5:02:38 AM , Rating: 2
If the coffee shop sells weed in amsterdam, and you pick it up right on the border, does the coffee shop in amsterdam commit the crime, or do you?

Ofcourse you do... That's not the real problem, is it?
They're gunning for the supplier.


By rushfan2006 on 12/21/2006 2:15:06 PM , Rating: 2
Is everyone is replying on either gut reaction or off pure emotions.

Its easy to say one side or the other is stupid or whatever in this kind of case. We don't know the underlying details of the case...were contracts signed, I'd have to think a professional business arrangement like you'd expect here has some kind of signed agreements or something.

As for the US not having jurisdiction in Russia...while this is true....again...if we "average joe's" can point out that little flaw of jurisdiction in sight of 2 minutes of reading this article....my god you would think that seasoned multi-millionaire business people and their lawyers would of caught that right away to before they even made a filing in any court.

There has to be some gotcha lawyer loophole to the jurisdiction thing, I can't believe for a second on such a simple matter that a professional, experienced corporate legal team wouldn't catch that.

And furthermore, this isn't exactly the most detailed and accurate news site either so if you ONLY base your judgements on stories from this site.....trust me you aren't getting ALL the facts most of the time.





By rushfan2006 on 12/21/2006 2:17:07 PM , Rating: 2
Oh and btw in case a Daily Tech editor reads this....what the hell is up with your site's bandwidth these days? Having to press "post comment" like four or five times to get rid of the "ooops! something went wrong..." website thing is very lame.

What do you guys use "Dollar Store Hosting Company"?



By camped69 on 12/21/2006 6:57:08 PM , Rating: 2
Servers to Sweden.
I doubt this lawsuit will stop allofmp3. Pretty crazy times when the RIAA thinks and just very well might have the power to keep Russia out of the WTO due to allofmp3. Insane and it's all driven by the greenbacks, 500Billion a year. Major lobbying power.

They will never stop piracy. It's here to stay. They should get with the times and drop the drm, pay the artists more per album and sell them cheaper and per track.
The artist are responsible too. If they banded together they could actually be paid what their worth on the music sales. Unfortunately there are many more items for money to be made on other than the actual music. Not to mention the money generated by touring. And with massive amount of exposure that the music companies can ggenerate for a given artist, sales of those items can be huge. It all takes advertising and that is what the real powers of america have. Control of all advertising in every corner of your life.

I put a Sony disc in my pc to make a backup,(Like I always do and will continue to do)and a few days down the road the pc won't boot and upon further investigation it turns out that Sony had a little surprise in the form of a rootkit they installed without my knowledge. The said rootkit opened up a security hole putting my life at risk, caused me to reformat, loss of data, time spent reconfiguring my comp, etc, etc.. Needless to say I truly saw the record companies for what they are, snakes.

The bottom line is this. The RIAA and friends want legal rights and powers that are not even available to law enforcement? All due to Fair Use. It's the content industry's #1 enemy. Hell there even trying to charge you for radio waves. Pathetic.


By Tyler 86 on 12/21/2006 7:09:03 PM , Rating: 2
Is this is a duplicate post of the above?

Oh, I see, you're politicly campaigning.

It's not pathetic, but it's annoying, just like Piracy.

Atleast it's tolerable though, the RIAA sucks.


By camped69 on 12/22/2006 1:41:10 AM , Rating: 2
Campaigning? mmm...no, just a view.

Double posts happen occasionally. Charging for radio waves is pathetic and they know it, that's why they had to rename it HD Radio. About as pathetic as people who sit around while their rights are infringed on. All the while with a smile on their face and believing the right thing is being done.(Patriot Act)

The RIAA is like big oils unmarried pregnant sister in-law.

Down with the man.


offshore
By tacoburrito on 12/21/2006 11:59:41 AM , Rating: 1
wouldn't it be easier if allofmp3 just relocate their entire operatiosn to cayman islands or bermuda?




RE: offshore
By bldckstark on 12/21/2006 12:24:51 PM , Rating: 2
They are located in Russia. A place that has leaner laws on copyright payment. Moving them to someplace like bermuda or the cayman islands is what companies like Kazaa tried to do. Didn't work then, won't work now.

If you read the FAQ on the Allofmp3 site you would see how they believe they are operating within the law, including selling music to people in the U.S. Their interpretation of the law makes sense to me, but I'm not a lawyer. I'm sure there are 50 million ways to interpret it.


RE: offshore
By masher2 (blog) on 12/21/2006 12:30:41 PM , Rating: 1
> "Their interpretation of the law makes sense to me."

It helps to have a few stiff drinks first, then squinting hard while reading it. :p


RE: offshore
By camped69 on 12/21/2006 6:56:09 PM , Rating: 2
Servers to Sweden.
I doubt this lawsuit will stop allofmp3. Pretty crazy times when the RIAA thinks and just very well might have the power to keep Russia out of the WTO due to allofmp3. Insane and it's all driven by the greenbacks, 500Billion a year. Major lobbying power.

They will never stop piracy. It's here to stay. They should get with the times and drop the drm, pay the artists more per album and sell them cheaper and per track.
The artist are responsible too. If they banded together they could actually be paid what their worth on the music sales. Unfortunately there are many more items for money to be made on other than the actual music. Not to mention the money generated by touring. And with massive amount of exposure that the music companies can ggenerate for a given artist, sales of those items can be huge. It all takes advertising and that is what the real powers of america have. Control of all advertising in every corner of your life.

I put a Sony disc in my pc to make a backup,(Like I always do and will continue to do)and a few days down the road the pc won't boot and upon further investigation it turns out that Sony had a little surprise in the form of a rootkit they installed without my knowledge. The said rootkit opened up a security hole putting my life at risk, caused me to reformat, loss of data, time spent reconfiguring my comp, etc, etc.. Needless to say I truly saw the record companies for what they are, snakes.

The bottom line is this. The RIAA and friends want legal rights and powers that are not even available to law enforcement? All due to Fair Use. It's the content industry's #1 enemy. Hell there even trying to charge you for radio waves. Pathetic.


RE: offshore
By Tyler 86 on 12/21/2006 7:06:50 PM , Rating: 2
I'm not in favor of piracy, but Fair Use is where it's at.

Just FYI, Sweden authorities would take down the servers if they were on their soil, because they have no agency exactly like "Russian Organization for Multimedia and Digital Systems" (ROMS) ...


Since when is Russia in New York?
By Spivonious on 12/21/2006 3:24:38 PM , Rating: 2
Violates New York law...that's a good one. Nice job lawyers.




By Tyler 86 on 12/21/2006 7:17:45 PM , Rating: 2
To paraphrase "In Soviet Russia..." in hypothetics;
In Soviet New York, lawyers do do a nice job.

Elsewhere, we're left with the brand displayed here.


Russia is not a part of America
By jediknight on 12/25/2006 9:34:22 AM , Rating: 2
"Defendant's entire business ... amounts to nothing more than a massive infringement of plaintiffs' exclusive rights under the Copyright Act and New York law"

Umm.. who the fuck cares what New York law says? AllOfMP3 is a Russian company.




The laws apply to everyone...
By cornfedone on 12/21/06, Rating: -1
RE: The laws apply to everyone...
By Scorpion on 12/21/2006 1:50:42 PM , Rating: 2
My problem with allofmp3.com, which is why I hope they get shutdown and I'm actually behind the labels on this one, is that they did something worse than just your typical pirating. Your average pirate might download a few free songs and the artist wont be compensated. Allofmp3.com, however, was SELLING music, and a lot of it, to people who thought they were legally buying music and supporting the artists. Allofmp3.com was NOT compensating the artists, and instead were just taking in cash for selling something that costs them NOTHING to make.

Making a profit off of pirated music to me is MUCH worse than getting it for free. I hope they get shut down for good.


RE: The laws apply to everyone...
By alifbaa on 12/21/2006 2:18:20 PM , Rating: 2
I agree with most of the comments above. I just hope that the record companies can learn from the success of AllofMP3.com. Their business model was a huge success -- pay by the MB, choose your codec/bitrate combination, and, of course NO DRM!!! Their products have zero interoperability issues, their store has a massive selection, and very cheap prices. (granted, they are effectively subsidized by not having to pay the record label's fees) The most important lesson I think this company has for the record labels is that offering a wide selection with no DRM will work fairly well no matter how easy the free, pirated sources are. I think the record labels are beginning to learn that.


RE: The laws apply to everyone...
By Xenoterranos on 12/21/2006 3:10:27 PM , Rating: 3
Wrong actually.
Under Russian law, they have to pay a sum to the russian version of the RIAA, and artists (or the record labels that represent them) have to petition that organization for their royalties. The RIAA, however, has refused to petion for the royalties because their lawyers feel that would legitimize AllOfMP3's claims. In reality, the RIAA is not petitioning for their royalties so they look more like "victims" when as they try and get Russia to change it's laws. AllOfMp3 is legal in Russia, the RIAA knows this, and is doing everything it can to change that.

Granted, the royalites AOMp3 pays are probably minimal, and the laws themselves outdated, but that's beurocracy for you. There are lots of Russian artists that get payed through (albeit indirectly through the gov't) AllOfMp3.


RE: The laws apply to everyone...
By Tyler 86 on 12/21/2006 7:11:32 PM , Rating: 2
I wonder what sort of income Russian artistsclaim from ROMS compared to RIAA, audience size adjusted ofcourse...

That'd be an interesting technical aspect of the situation, but probably irrelevant from a political standpoint.


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