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NEW YORK (Reuters) - Online music streaming service Grooveshark could potentially have to pay hundreds of millions of dollars to major record labels after a U.S. judge ruled ahead of its trial starting on Monday that Grooveshark's copyright violations on nearly 5,000 songs were "willful" and made "in bad faith."
U.S. District Judge Thomas Griesa, who will preside over the trial in federal court in Manhattan, said in a court order on Thursday that because of Grooveshark's actions he will tell jurors they can choose to award the statutory maximum of $150,000 in damages per song.
Jurors also could decide to award less. But if the jury awards that amount, Grooveshark's parent company, Escape Media Group Inc, could be forced to pay more than $736 million.
Last September, Griesa ruled that Escape and its founders, Samuel Tarantino and Joshua Greenberg, were liable for the illegal uploads of thousands of recordings by artists such as Madonna, Eminem, Bob Marley and Jay-Z.
Griesa said the defendants had directed their employees to make the uploads in spite of the legal risk. The only question to be resolved at Monday's trial is how much Escape must pay as in penalties for the infringement.
Nine record companies including Arista Music, Sony Music Entertainment, UMG Recordings, and Warner Bros Records, sued Escape for infringement in 2011.
Griesa found in September that Escape's business plan was to exploit the copyrighted content in order to grow Grooveshark and then "beg forgiveness" from the labels.
Escape hopes to limit its losses at trial by arguing there were mitigating circumstances to the infringement, according to court papers. In Thursday's order, Griesa said he will allow the company to present evidence of its attempts to secure licenses from the record labels.
Gainesville, Florida-based Grooveshark describes itself as "one of the largest on-demand music services on the Internet" with more than 30 million users sharing over 15 million files. The company says it has a policy to honor copyright holders' "takedown" requests that comply with the Digital Millennium Copyright Act.
In court papers, the plaintiffs have called Grooveshark a "linear descendant" of Grokster, LimeWire and Napster, all of which had been shut down because of copyright infringement.
A spokesman for Grooveshark said the company had no comment. Representatives for the record labels could not immediately be reached.
The case is UMG Recording Inc et al v. Escape Media Group Inc et al, U.S. District Court, Southern District of New York, No. 11-08407.
Reporting by Andrew Chung; editing by Alexia Garamfalvi and David Gregorio