Music publishers have filed a class action lawsuit against MediaNet Digital for copyright infringement. Nine publishing companies under the umbrellas of Sony/ATV Music Publishing, Peer International and MBL Music claim that the digital music provider failed to secure licenses to reproduce and distribute compositions after the company was acquired by Baker Capital three years ago.

The publishers, all members of the National Music Publishers' Assn., filed the complaint Feb. 13 in the federal District Court in New York. If the suit is certified as a class action, they will be lead plaintiffs for more all Harry Fox-affiliated publishers whose compositions are allegedly reproduced and distributed by MediaNet without a license.

MediaNet, formerly known as MusicNet, is a business-to-business provider of digital music. It provides and operates a proprietary technology platform that permits customers -- like Yahoo! Music's Y! Music Unlimited, HMV Digital and Synacor -- to offer music to consumers.

MediaNet was originally formed as MusicNet in 1999 by RealNetworks and several record labels, including BMG Music, EMI Music and Warner Music Group, to operate a digital music subscription service. Under a deal struck in 2001 between the RIAA and the Harry Fox Agency, MusicNet was able to secure the right to reproduce and distribute compositions from certain HFA-affiliated publishers through HFA.

In 2005, private equity firm Baker Capital acquired MusicNet, which changed its name last year to MediaNet. HFA and many publishers have since claimed that the newly-acquired company was no longer covered by the RIAA-HFA agreement since record labels no longer held an ownership interest in the company.

According to the complaint, HFA offered a new licensing agreement "modeled on the RIAA agreement" to MusicNet in 2005. Since then, the parties embarked
on a series of failed negotiations.

As first reported by Billboard.biz, HFA sent a letter to MusicNet in December 2006 indicating that it was withdrawing its proposed license for interactive streams for the service. HFA claimed that the Digital Media Assn., the trade group representing MusicNet and others, did not propose a rate for the streams in the pending Copyright Royalty Board proceeding, thereby implying an attempt by MusicNet to avoid paying royalties for the past five years.

At the time, MusicNet claimed that it believed the RIAA-HFA agreement still covered the service, but that the company was undertaking negotiations directly with HFA for a new deal as a sign of good faith.

In the lawsuit, the plaintiff publishers ask the court to declare, among other things, whether MediaNet's actions amount to copyright infringement and whether transmission of a digital file of a composition via a limited download or an interactive stream entails making a digital phonorecord delivery (DPD) under the section 115 compulsory license. A section 115 rate-setting proceeding is currently in trial phase before the Copyright Royalty Board in Washington, D.C.

The publishers also ask for damages for willful infringement up to $150,000 per song.

"This complaint is completely without merit," a MediaNet spokesperson said in a statement. "The suit is contrary to the core beliefs and business model under which MediaNet (aka MusicNet) has operated since its inception. MediaNet and others were licensed by [HFA] to distribute musical works until a final publishing rate was established, and this remains the case... MediaNet, Napster and RealNetworks along with several other companies are all currently in arbitration to set the publishing royalty rate. We are anxiously waiting for this rate to be set so that payments to all appropriate parties can be made."

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