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Judge Howard Matz issued a preliminary injunction order against AOL on 29 October, after finding that PlayMedia had established the probable validity of allegations that AOL stole its MP3 audio decoding engine, codenamed AMP.
PlayMedia sued AOL on 17 April 2001 for copyright infringement. The company is seeking $47m (£32m) in damages.
"This is a preliminary ruling and we disagree with it," said AOL spokesman Jim Whitney. "We are seeking a stay and will pursue an immediate appeal."
The judge ordered AOL to stop distributing AOL 6.0 with any AMP or AMP-derived technologies, and said the company must inform all its licensees about the injunction. Licensees include original equipment manufacturers that load AOL on their hardware and parties that distribute AOL software discs.
According to the court order, AOL has the power to remove the AMP technology from users' computers through a "live update" while they are logged on to the service. The court order also forbids AOL from permitting any AOL 6.0 user to end a session without removing AMP from their software copy.
AOL recently released a new version of its software, called AOL 7.0, which PlayMedia attorney Henry Gradstein said does not contain AMP-based technologies. The company "wisely determined to take it out", he claimed.
Although AOL bought a company called Nullsoft, which had permission to sub-license AMP, those rights were valid only when used in conjunction with Nullsoft's Winamp MP3 player, PlayMedia claimed.
The order also forbids AOL from creating any derivative works based on AMP that are not used in conjunction with Winamp.
In its defence, AOL said it included a slightly modified version of Winamp in AOL 6.0, according to court records.
However, Gradstein said the company included only a small portion of Winamp code, about 8%, in AOL 6.0.
If AOL fails to win the appeal, the case could go before a jury within the next year, Gradstein said. The lawsuit could be widened, he added. PlayMedia will investigate whether the 6.0 version of software distributed by AOL-owned Compuserve also uses AMP technologies.
AOL Time Warner: www.aoltimewarner.com