Moscow - In a setback to the U.S. music industry's campaign against a Russian discount MP3 retailer, a Moscow court has thrown out prosecutors' copyright infringement case against Denis Kvasov, the former head of AllofMP3.com parent company Mediaservices, according to reports.

U.S. record labels have charged that AllofMP3.com -- which was shut down two months ago, but quickly resurfaced as MP3Sparks.com -- is not authorized to sell its budget-priced song downloads; the company countered that it pays royalties to a Russian copyright society called ROMS.

"Everybody who uses soundtracks has to pay a certain amount of their income to the rights holders, and this company has done that," said the judge, Yekaterina Sharapova.

"MediaServices has paid a certain amount of money to ROMS… The prosecution did not succeed in presenting persuasive evidence of his involvement in infringing copyright law."

A local official with the International Federation of the Phonographic Industry (IFPI) said the decision will be appealed.

"We are disappointed with the verdict and will appeal," Igor Pozhitkov told Reuters.

Pozhitkov further told the Associated Press that Kvasov only got off because he led Mediaservices between 2003 and 2005, before a new facet of Russian copyright law came into effect in September 2006 that would have made for a different outcome in the case.

Two more cases are pending against AllofMP3.com, including one against current Mediaservices head Vadim Mamotin, Pozhitkov told AP.

Beyond irking record labels, AllofMP3.com has been cited by the U.S. as a sign of Russia's lack of respect for intellectual property, and an obstacle to its accession to the World Trade Organization.

Related Links:
http://tinyurl.com/2wlfqm (AP)

http://tinyurl.com/27p6pl (Reuters)

http://tinyurl.com/2f3wjf (Ars Technica)

http://www.ifpi.org

http://www.mp3sparks.com