Sony BMG Pays $4.25 mil Settlement

Sony BMG Music Entertainment will pay $4.25 million as part of a settlement with 39 states (including Washington DC) to resolve investigations into problems caused by music CDs loaded with hidden anti-piracy software.

Under Thursday's deal, Sony BMG will "reimburse" consumers whose computers were damaged while trying to uninstall the anti-piracy software. It will be interesting to see how this is quantified or proven. Possibly more important is the result that Sony BMG stated it will no longer manufacture CDs with this particular flavor of copy-protection (they did NOT, however, deny themselves the ability to come up with other methods of securing their products.)

Massachusetts Attorney General Tom Reilly took the lead in brokering the multistate agreement, saying "If companies want to use technology to protect their interests, they need to be up front with consumers, and give consumers the opportunity to make informed choices about buying and using these products."

Thirteen states that started the settlement process with Sony BMG will each receive $316,538, while the rest will get $5,000, Reilly's office said.

The agreement/settlement/payoff covers CDs loaded with either of the copy protection schemes used by Sony BMG - MediaMax or XCP. The record label began including MediaMax on some of its discs in August 2003 and introduced XCP in January 2005. Last year, the record company shipped more than 12 million compact discs on 52 Sony BMG titles, each loaded with one of the two programs. About 4 million CDs with the MediaMax software and about 3 million CDs loaded with the XCP software were sold (apparently 5 million are still in stock or were otherwise distributed). No mention of pulling current inventory off the shelves was discussed in the settlement.

Both programs restricted the number of copies of a disc that a user could make, but the programs caused problems for some users when they played the CDs on their computers. The XCP software "concealed" itself to keep computer users from easily locating and deleting it. At the same time, however, it ended up opening a potential security hole on PCs running Windows, making them vulnerable to viruses or other threats.

Some who used certain antispyware software to remove the programs ended up with a glitch that had the unfortunate side effect of disabling their CD-ROM drives. Oops.

In late 2005 blogs and forums begain supposing that the software could be utilized to track consumer activities. Sony BMG maintained it did not use the software to collect personal data about consumers without their consent - an assertion backed up by a company Sony, um, PAID to audit its use of the copy-protection software.

Sony BMG ultimately recalled the discs with XCP in November 2005 and released a way to remove the files from users' computers. It also released a software "patch" to fix a potential security hole from the MediaMax 5.0 program.

Customers will be able to file a claim with Sony BMG to receive refunds of up to $175 each, but claims must include a description of how their computer was harmed and documentation of repair expenses. Any unclaimed money will likely stay with the states, though this hasn't been confimed.

On Tuesday, Sony BMG reached a separate settlement with California and Texas, agreeing to pay $1.5 million to the states and reimburse consumers for PC damage. The company earlier settled a class-action case over the episode.

States that were a party to Thursday's settlement are: Alabama, Alaska, Arizona, Arkansas, Connecticut, Delaware, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming.

See our Why you won't be able to take a picture of your burning laptop using your Sony digital camera article for more Sony lawsuit goodness.