At issue were two services that introduced earlier this year, Beam-it and Instant Listening. The Beam-it feature streams music to users who have already proved ownership of a CD. This is accomplished by putting the CD in the computer and “beaming” the I.D. information to, after which, the user can hear a digital copy of what they already own, no matter where they are located, as long as they have a Net connection.

The Instant Listening feature calls for participating online CD stores to notify of a purchase. Once notified, will stream an MP3 version of the CD to the user upon demand.

When announced the two new services last January, it said that it had digitized nearly 45,000 popular recordings. The Recording Industry Association of America filed suit a week later. In an open letter to CEO Michael Robertson, RIAA President/CEO Hilary Rosen stated, “As we have discussed, your company’s violation of the copyright law is brazen on its face. Simply put, it is not legal to compile a vast database of our members’ sound recordings with no permission and no license.” has been seen as somewhat of a rebel or outlaw in the online music business. David Pakman, senior VP of business development for told Pollstar that his company wasn’t surprised by the judge’s ruling. “We believed from the beginning in order to build an archive of someone else’s music collection, as a company, you need a license to do so.”

Unlike’s mass digitalization, provides virtual “lockers” for users to store their own MP3 files. Copyright law does allow one to make a personal copy of a protected work, and it is those personal copies that users upload to their lockers on In regards to the MP3 ruling, and the future of online music, Pakman said, “The new music industry will be built in partnership with the traditional record industry. It’s not going to be built by renegade companies that disrespect copyright law.”

The judge said he would explain the reasoning behind his ruling against in a written decision to be issued in the next two weeks. The next phase in court will determine damages and other relief. When it filed the suit, the RIAA was seeking $150,000 per track. Since there is an average of 10 tracks per CD, could conceivably be penalized $1.5 million per CD with a final judgement within range of the $100 billion mark. Upon the judge’s ruling, MP3 stock dropped 4 5/8 to close at an even $7 per share.