Court Orders AOL to Stop Distributing 6.0 Software, 7.0 Debut Hypes Tolkien

U.S. District finds that PlayMedia established the "probable validity" of allegations contained in a $47 million lawsuit filed against AOL. Meanwhile, The AOL Time Warner marketing machine revs up for its 7.0 release.

by Thor Olavsrud & Roy Mark of internetnews.com [November 1, 2001]

PlayMedia Systems, Inc., which develops and markets the popular AMP MP3 audio decoding engine used in Winamp, has won a preliminary injunction against America Online, Inc., requiring AOL to stop distributing AOL 6.0 software containing PlayMedia's software and to notify all licensees of AOL 6.0 of the issuance of the injunction. An AOL spokesperson told internet.com the company would seek a stay of the order and pursue an immediate appeal.

In a decision passed down this week in Los Angeles, United States District Judge A. Howard Matz found that the L.A.-based PlayMedia had established the "probable validity" of allegations contained in a $47 million lawsuit filed against AOL by PlayMedia that its AMP MP3 playback technology was used in the AOL 6.0 Media Player without permission.

"This is just a preliminary ruling and we respectfully disagree," said AOL spokesperson Jim Whitney.

PlayMedia originally licensed AMP to Nullsoft, Inc., in 1999 for use in conjunction with Nullsoft's product, Winamp, one of the more popular MP3 players for personal computers. AMP was permitted to be sublicensed by Nullsoft for "use in conjunction with Winamp only."

The Dulles, Va.-based AOL, a wholly-owned subsidiary of AOL Time Warner (NYSE:AOL), purchased Nullsoft and used AMP in the AOL 6.0 Media Player, a use for which it allegedly was not licensed. PlayMedia sued AOL for copyright infringement on April 17 and moved for a preliminary injunction.

PlayMedia attorney Henry Gradstein told internet.com that PlayMedia originally approached AOL shortly after it purchased Nullsoft and offered AOL a licensing deal for the use of AMP, pointing out to AOL that Nullsoft was only licensed to use the technology in Winamp. According to Gradstein, AOL declined the licensing agreement and proceeded to use the AMP technology in its Media Player software included in AOL 6.0.

Financial penalties
AOL denied that AOL 6.0 software infringed upon PlayMedia's software, and further argued that the issuance of an injunction would cost AOL tens of millions of dollars. According to court documents filed by AOL, the PlayMedia technology was not used in its newest 7.0 version.

"We regret that this matter had to be litigated. Nevertheless, we are heartened by Judge Matz's decision and will continue to vigorously enforce our intellectual property rights to the AMP engine," said Brian D. Litman, PlayMedia's chairman and chief executive officer. "AOL and many foreign affiliates have distributed the AMP software in AOL 6.0 worldwide using vehicles as diverse as leading retail stores to Cheerios boxes. We are currently evaluating the broader implications of the court's decision."

Gradstein estimated that there are at least 10 million users of AOL 6.0. Whitney said AOL does not break out its numbers by version.

"The irony in this case is that historically, AOL claims to support 'strong protection' of intellectual property rights, both online and off, yet the Court's opinion suggests that AOL did not respect the intellectual property rights of our client, PlayMedia," said Gradstein.

PlayMedia's AMP MP3 playback engine was created in 1997 and rapidly achieved fame for its efficiency and accuracy pursuant to the now-dominant MPEG MP3 audio standard. Since then, millions of people around the world have used the technology, through applications including Winamp and Napster, to enjoy digital audio on their personal computers. AMP is also used in other diverse applications such as CD-ROMs, online games, music education applications, digital music jukeboxes and music playback in retail establishments.

AOL Marketing Machine Trudges Onward
Aiming to tap into the hordes of J.R.R. Tolkien fans eagerly awaiting The Fellowship of the Ring—the first film in New Line Cinema's cinematic version of Tolkien's The Lord of the Rings trilogy—to market AOL 7.0, America Online launched a sweepstakes contest featuring trips to New Zealand to catch the December premiere.

The AOL Time Warner subsidiaries unveiled the contest two weeks ago, and said Tuesday that AOL had already received more than 800,000 entries, making it the most successful two-week response to an AOL sweepstakes in history.

"This sweepstakes is an innovative way to celebrate the arrival of AOL 7.0 and deliver exciting benefits to our members, while building anticipation for The Lord of the Rings," said Jay Rappaport, senior vice president and group general manager for AOL's Entertainment and Sports divisions. "We couldn't be more pleased with the response so far."

AOL is offering seven trips for two to the New Zealand premiere on Dec. 19, including round trip airfare, hotel accommodations, tickets to the premiere and customized sightseeing tours. The movie was filmed in New Zealand.

Tolkien fans become eligible for the contest by upgrading an existing AOL account to AOL 7.0, or setting up a new AOL 7.0 account. Once on AOL 7.0, members are prompted automatically to enter the contest. They can also enter at AOL Keyword: One Ring.

The contest is another example of the synergies AOL is creating across its various media properties. Its New Line Cinema subsidiary has already made heavy use of the Web to promote the film with Web-exclusive trailers, downloads, and stills from the movie. It also worked closely with fans online to develop community sites which are able to offer interviews with stars and film-makers and even spoilers. In January, when the studio re-launched its www.lordoftherings.net Web site, the site averaged more than 1 million hits an hour for the first few hours it went live. As of April 10, the company said it had recorded more than 357.4 million hits.

"The success of this re-launch is truly staggering," New Line President of Distribution and Marketing Rolf Mittweg said in April. "Those who are discovering this project online are being treated to an extraordinary Internet experience, and we are very proud of the site and the team that developed it. lordoftherings.net serves as an information clearing house on our film and the Internet remains a key component in our overall strategy of launching this epic adventure trilogy worldwide."

The Web site was launched in 10 languages to build international support for the film. The studio also showed a 30-minute segment of the film to much acclaim at the Cannes International Film Festival.

Marketing magic
Meanwhile, America Online has been aggressively marketing the film on its own network of sites and services. The service has launched a fan destination featuring information about the movie and the trilogy, screensavers, contests and games, video clips and behind-the-scenes interviews at AOL Keyword: Lord of the Rings. Additionally, the Netscape, CompuServe, ICQ, MapQuest, Moviefone and AOL Instant Messenger Service Web properties have been offering an array of information, feature stories, previews and interactive features to drum up interest in the film, including The Lord of the Rings Message Board on Netscape.com and custom The Lord of the Rings community features on ICQ.

"In addition to the sweepstakes, we're also delighted to provide our members and users of our Web properties a very special glimpse into the world of The Lord of the Rings, which will allow them to feel a part of the magic and wonder of the films even before they arrive in theaters," Rappaport said. "This is a great example of the powerful role the online medium can play in marketing movies."

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