Four men who attempted to use what they believed was a loophole in Spanish law to allow them to sell MP3s online legally, along with the company behind the site they ran, have agreed to pay music labels $10.5m to settle the copyright infringement case brought against them by the Recording Industry Ass. of America (RIAA).

The site, Puretunes.com, was set up in May 2003 to sell music download subscriptions. According to one-time Grokster CEO Wayne Rosso, who left the P2P company to join Puretunes, the site was established in Madrid to take advantage of a quirk of Spanish law that the company believed allowed it to sell to the US music licensed through Spanish music publishing agencies but without having to deal with the record labels themselves.

Unfortunately, no such loophole existed. According to Rosso, the company killed the Puretunes.com site when it became clear that this was the case. The site was shut down in June 2003, less than a month after it opened for business.

While it was operational, Puretunes sold download subscriptions, ranging from $4 for eight hours a month access to the site, to $168 for a 12 months' access.

Since the closure, a number of former users have alleged that they never received refunds when the site closed. And an investigation carried out by German IT site Heise Online at the time revealed a number of tracks made available by Puretunes contained ID3 tags added by controversial Russian music site allofmp3.com, suggesting they had been copied.

The RIAA sued four named Puretunes operators - in addition to Rosso, it named Daniel Rung, Michael Rung and Matthew Rung - and the firm that owned it, Sakfield Holding Company SA, in July 2003. It alleged not only copyright infringement but that the defendants had defrauded customers into believing Puretunes had secured licences from RIAA members evn though they hadn't.

A Register investigation at the time revealed the Madrid-based Sakfield was owned by Dutch company Chantik Financing Services, which was then administered by NCS in Amsterdam on behalf of owners Dean Properties on the Caribbean island of Curacao and MTM Group on Bermuda. Dean Properies was at the time administrated by a trust agent in Miami.

The settlement of that suit will see Sakfield pay RIAA members $10m, with Rosso and the Rungs together coughing up an additional $500,000. All of them agree not to undertake any activity that would violate music labels' copyright. ®

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