MP3.com could have been liable for 125 million to 250 million dollars in damages under the judge's initial determination. Universal was the last of the major record labels to have reached an agreement with MP3.com on royalties for distribution of its music over the Internet site. The agreement gives MP3.com licensed access to Universal's music library, the two firms said in a statement.

In September, the judge ruled that MP3.com - a website that allows users to listen to and download music in a format developed by the company - willfully infringed the copyrights of Universal Music when it built up its Internet-based CD library. MP3.com has reached out-of court settlements with the other major music publishers - Sony Music, Time Warner Music, Bertelsmann BMG and EMI - on copyright cases, reportedly paying 20 million to each of the four companies.

MP3.com in October also reached a preliminary, three-year licensing arrangement with the 700-member National Music Publishers' Association (NMPA), wherein it will pay up to 30 million dollars to stream some one million musical compositions online. MP3.com said it had sold Universal warrants to purchase up to three million of its shares (less than five per cent of its capital) "at specified prices ranging from 3.75 to 5.00 dollars per share and over terms of one to three years." "If fully exercised, the shares issuable under the warrants will represent less than five percent of MP3.com's outstanding shares," the internet music firm said. MP3.com shares closed at four dollars Tuesday.