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Digital Music Provider Can Operate During Court Dispute

BY Jan Wolfe
July 30, 2012

When MediaNet Digital Inc. (then MusicNet) formed in 2001, it billed itself as a 'legitimate' alternative to hubs for illegal downloading. Since then, MediaNet has spent $130 million in royalties to build a library of roughly 15 million songs and counting, which it then licenses to subscription-based music services like MOG and iMesh. Like most 'legit' digital music services, MediaNet has yet to make a cent in profit. In fact, MediaNet offers a fascinating example of the recording industry's struggles to adapt to the digital age.

Given the heavy price MediaNet is paying for the right to sell its licenses, you can imagine its frustration when a group of small music publishers and musicians slapped the company with a copyright infringement suit in federal court in Manhattan last year, claiming that MediaNet has failed to pay 'mechanical royalties' on some of the songs in the sound recordings in its library.

The plaintiffs moved for an injunction that would have shut MediaNet down pending the litigation. But in July 2012, District Judge Paul Gardephe of the U.S District Court for the Southern District of New York rejected the injunction bid, handing the company a key early victory in the case. Judge Gardephe ruled that while MediaNet may be engaging in 'isolated incidents' of copyright infringement, the risk of continued infringement is not enough to meet the requirement for injunctive relief of showing irreparable injury. And in any case, the judge found that the plaintiffs could easily seek money damages based on carefully tracked streams and downloads. Appalseed Productions Inc. v. MediaNet Digital Inc., 11 Civ. 5922.

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