A U.S. District Court judge on Monday (7/31) ruled that the damages MP3.com will have to pay to the record labels that earlier this year successfully sued the company for copyright infringement will be based on each copyrighted CD that the online-music site made available rather than each individual song. For MP3.com, the ruling potentially means the difference between a bankrupting judgment totaling billions of dollars and a much less catastrophic outcome.

In January, the Recording Industry Association of America, on behalf of the five major record labels, filed a copyright infringement lawsuit against MP3.com. The RIAA charged MP3.com with making available via its My.MP3.com services copyrighted music owned by the major record labels. The suit sought damages in the form of $150,000 per copyrighted work, the maximum amount allowed.

In April, a judge ruled in favor of the RIAA. An initial decision on how damages to the record companies would be determined, however, was not made until Monday. In the interim, MP3.com has reached settlements and struck licensing agreements with Warner Music, BMG and EMI.

The only two major labels with which MP3.com has not yet settled the lawsuit are Sony Music and Universal Music Group. According to a source at MP3.com, the company is working diligently toward doing so at this time. The source added that the prospect for a settlement has been greatly improved by Monday’s (7/31) ruling.

The potentially vast difference in dollars based on damages awarded on a per-CD basis rather than on each individual song in both Sony’s and Universal’s catalog could likely make both companies more apt to settle out of court with MP3.com.

Should MP3.com fail to settle with the two companies by Aug. 28, a court proceeding to determine actual damages is scheduled to take place on that date.